A few clarifications on startups

16.01.2019   |  Press  |  Startup

In entrepreneurs’ and investors’ lingo, the meaning of the term startup is pretty clear. However, after several years of business in this field, I’ve noticed the necessity of some clarifications, both for experienced businessmen and young people who tackle business for the first time.

What is – and especially what is not – a startup

Let’s start with a definition. The common feature of the numberless business textbooks and encyclopedias is that a startup is an incipient business, which aims at increasing and reaching a replicable profit in a number of years. We all know that, but the interesting thing is what a startup is not. From this point of view, if we exclude big listed companies, the definition above does not include incipient businesses that do not aim at growth by capitalization. In other words, a convenience store or a small family farming business, dealing in bio products, does not fall under this category.

According to certain sources, the term ‘startup’ started to be used in the ’70s by various publications such as Forbes. It is no wonder that its birth coincides with the computer revolution and the birth of Silicon Valley, which have led to the incorporation of the most innovative companies – but also to numberless failures associated to the idea of startup. According to the Bureau of Economic Analysis, in the USA, the fixed capital investments in the IT industry amounted to 0.6% of the US overall economy in the ’60s, whereas in the timeframe 2010-2012, it reached 12.2%, which is a good indication of the sector growth: times 20 according to this indicator.

However, the money invested in a startup is supposed to make a profit far higher than in a conservative industry. In IT, only from 2004 to 2017, according to Statista, that the turnover of Apple increased from $ 8.2 billion to $ 229.23 billion, that is 27 times, and Apple was no longer a startup in 2004.

Financing Cycles

In other words, there is no startup without an IT component. According to World Finance, of the five industries with the highest growth in 2018, three (cybersecurity, virtual reality and artificial intelligence) are intrinsically related to this field and the other two (renewable energy and biotechnology) are include technology.

Speaking of money, the successive capital infusions in a startup are called financing cycles. It is not my intention to tackle these in this article, but I would like to only point out a simple difference: the business will be supplied by founders and angel investors for the incipient period, during which it does not make any profit and it cannot access venture capital or bank loans and neither can it be subject to a merger or acquisition without exceeding a break even. This is the so called validation phase of the startup. From this point of view, all advice on attracting capital is very well put by Tim O’Reilly, the creator of O’Reilly Media and the main promoter of the term Web 2.0: “Money is like the fuel on a car ride. You don’t want to run out of it, but you aren’t making a tour of the gas stations.”

This means that, as far as startups are concerned too, money does not make you happy, but you cannot do without them. In order to get them, you need to refine your idea with research means and detailed business plans.

A Romanian version of this article was published by Capital business magazine, on 19 December 2018.

Octavian Pătrașcu  |   16.01.2019   |  Press  |  Startup

What to expect on the capital markets in the next quarter

21.05.2020   |  Capital Market  |  News  |  Tech

Wall Street was preparing itself for a terrible earnings season.

It’s not all bad news

The negative influence of the Covid-19 pandemic has been deemed to be anything between dire and desperate. And, for most, this already is, and will surely be, the case.

The exceptions are, by proper definition, exceptional. I'm talking by bigger-than-Earth companies, enterprises with revenues more massive than most countries' GDPs, behemoths in their own right: most, if not all, from the tech sector: Microsoft, Alphabet, Amazon, Facebook, Apple.

For them, the lockdown, the social distancing, the increased online presence, the overall feeling of insecurity, fear, anxiety, and maybe even boredom is yet another reason for people to use their services and, all in all, for them to generate more revenues from their core, and secondary, and tertiary businesses.

Tech sector breaking records

It might be Wall Street's worst-kept secret that the tech sector is, and has been for at least the last decade, on everybody's lips, in everybody's mind and, sooner rather than later, in everybody's investment portfolio. And by everybody, I mean all social classes, all levels of interest towards capital markets: from your hairdresser to Warren Buffett's humongous investment conglomerate.

The reason for this is simple: if you'd have invested $1,000 in Google stock ten years ago, you would've yielded a hefty 475% return, 590% for Microsoft, 1,700% for Amazon, 1,000% for Apple, and 550% for Facebook.

image source: cnbc.com

They're all rocket ships on their way to trillion-dollar market capitalizations (the Trillion Dollar club already includes Apple, Microsoft, Amazon, and Alphabet). And there's not much that can stop them. At least not yet. Not in the first quarter, not by the Coronavirus, not even the containment measures.

Their earnings for the first quarter looked better than expected, and, for sure, better than those from any other market sector, be it retail, banking, automotive, travel & tourism, or commerce.

*special mention for Tesla

Its stock price marked an astounding 3,500% return on the last decade. Although it’s seen a slight decline in the past months, it’s still reaching for higher highs and will, according to most market analysts, reach and top the historical max value of $917/stock.

Long term forecasts for TSLA stock price are close to $1,100, according to CNNMoney, which means an additional 35% ROI from current stock prices.

I’ve included Tesla here because the behavior of the company, and implicitly, of the stock, mimics those of tech companies, not of automakers. They’re constantly innovating in terms of business, budgeting, marketing and financial positioning and I see them being one of the top performers of this decade, as well.

image source: cnbc.com

*special mention for Zoom

What else is there to say about Zoom apart from the fact that, taking full advantage of the unconventional ways of doing business brought up by the pandemic, it exceeded 300 million daily meeting participants, up from last December's total of 10 million. That’s a remarkable 3000% jump.

Analysts at seekingalpha recommend Zoom as being a “buy and hold” stock for the long run. CNNMoney see Zoom’s stock reaching $200 – a potential increase of 20% from present day prices.

Q1 winners

EARTH 2.0 – the mandatory condition to digitalize businesses and embrace and prepare for the future. Today. All companies below are prime exponents for this business model, and it paid beautifully until now. Just as the Industrial Revolution rearranged the balance of powers almost 2 centuries ago, we are witnessing history in the making with the current the Technological Revolution:

  • Alphabet (mother company of Google): revenue of $41.2 Billion (13% higher than the previous year)
  • Facebook: revenue of $17.7 Billion (18% higher than the past year)
  • Amazon: almost $76 Billion in revenue deriving from an 18% increase in international sales
  • Microsoft: revenue of over $35 Billion, extremely positive outlook on the medium and long term

*Tesla: not much in terms of revenue, but a substantial ascending stock trend (it rose more than 200% in 2019)

*Zoom: 12% share increase after revenue more than doubled in the quarter

Q1 losers

A stubborn, poorly adapted, conventional business model is, and has always been a recipe for disaster. On all accounts, Microsoft should have been on the losing side of things, if it weren’t for Satya Nadella, the CEO who brought openness and collaboration to what is once was a sinking ship.

Comparing well-established enterprises with the tech cousins from above:

  • JP Morgan – profits dove 69%
  • Bank of America – profits plummeted 45%
  • McDonald's – earnings fell 17%
  • Exxon – 7% stock decrease on account of weak earnings
  • Boeing - $649 million loss, 10% workforce dismissed, revenue down 26%
  • Ford - $632 million loss, 15% slid in revenue, shares dropped 42% this year
  • General Motors – 87% decrease in income compared to Q1 2019, 6.2% decline in revenue

The gap between winners and losers grows more profound for now.

It's my undivided opinion that all four major tech players that right now are laughing all the way to the bank will have to turn their smiles into frowns once Q2 earnings are released. They took advantage until now from the increase in the cloud business and the work-from-home movement.

But the economy forgives and forgets no one – in the USA alone, more than 30 million people filed for unemployment benefits in the last seven weeks, and the future does not look too rosy for the job sector. 

No matter how much money the Fed might helicopter-throw unto the economy, the consumers are scared, cautious with their finances, and, in some cases, even hungry.

In these circumstances I see the Q1 earnings success for the tech giants is a temporary victory. I firmly believe they will be caught from behind by the huge wave that already smashed retail, banking, services, commerce, oil, entertainment, or travel.

The future is grim

Q2 earnings will be an eye-opener for all market optimists across the board.

Goldman Sachs expects a US GDP contraction of 34%, unemployment soaring to 15% - no happy-end is in sight.

US retailers are stopping payment to hundreds of thousands of workers in a desperate struggle to cope with the slump in demand, the four rounds of economic stimulus from the Fed seem to make little to no difference until now. 

On the long run, in an inter-connected global economy, everybody's in the same boat: decrease in consumption and demand from commerce and retail brings lower ad revenue for Google, which in turn brings down the cloud business revenues, which in turn influences the hardware demand, which in turn affects producers…and so on. The cycle cannot be broken without every integral part being affected.

Turn coal into diamonds

Provided the virus is ephemeral, maybe even more or less contained in Q2, the global economy might start to pick-up and rise from its ashes in the second half of 2020.

As always, being in close touch with the state of affairs, being up to date with the news, keeping your head clear and thinking straight on how to turn this fallout into an opportunity is the best advice I can give you. 

The harder the containment measures strike, the bigger the economic shock, the larger the recession that will entail, and the more considerable the investing opportunity!

It's challenging to keep your cool now, but I'm confident that those who adapt, those who look for alternative investment means (be it art or safe-haven assets such as gold or platinum or even fintech companies) will enjoy one hell of a ride.

My future

I’ve split the final chapter into two categories: my personal vision and my professional endeavor.

Personal

I’m an investor myself and I see this crisis as an opportunity to short the market on businesses that have not yet adapted to the new world and, in order to practice what I preach, buy Tech Companies (F.A.N.G.) for the long run.

Professional

Protect my businesses and my employees; the measures I already took (work-from-home for 99% of my workforce, consolidation measures for capital flow, redirecting of investment flows, budget reframing, alternative investment areas, enforcing my business' technology core) will continue to prove successful and inspired.

Even though we’re constantly expanding, having more than 250 employees all over the world, I want to continue behaving and acting just as a start-up; I see in this the right way to consolidate our position, and conquer new markets and alternate areas of investments.

You can follow me on Twitter and LinkedIn

Read full article

End of lockdown – Wuhan is the new capital of the world

12.05.2020   |  Capital Market  |  Fintech  |  News  |  Press  |  Startup  |  Tech

“The beginning is always today,” said Mary Shelley two centuries ago

She was quite optimistic, which comes as a surprise from a leading Romantic era exponent. Of course, she was talking about the excitement of an interesting adventure, a fresh day, a brand-new start.

In the trying times of Coronavirus, I keep my right to be realistic. There’s growing talk about the post-corona era, about how everything will come back to what it once was, how society will restart and pick-up from where it was left a few months ago, how economies will put all crisis behind and rise from the ashes. I’m confident that what we’re going through right now is just the beginning of a new epoch, the epoch in which nothing will be the same anymore.

The new normal

I’ve come to this conclusion by observing behaviors around me. From the muted cry of small entrepreneurs who try to find comfort in insufficient government stimulus programs to central banks that gave their all and then some, printing money out of nothing and throwing it in the face of the virus in the hope that this, the last weapon in their arsenal, will start making things right, economies rejoice, and people enthusiastically consume once again.

The underlining note in all of this is one thing: FEAR. Manifested in different forms and with various influences and vectors, but all in all, the same feeling: pure, unadulterated fear.

Business-wise, fear makes or breaks actions and thoughts, dismisses investment plans, smashes development budgets, fires employees, cuts innovation, research, development, affects investor sentiments, turns economic tigers into tame pussycats. Mind you; this is not a presumptuous forecast; this is the reality we’re living in now. This is the new world.

The Wuhan precedent

Let’s not kid ourselves; this is not an exercise of imagination; this is what some already tried. The best example is the lockdown relaxation and economic restart measures in what was, not long ago, the epicenter of this new world: Wuhan, China.

For them, after a 76-day total lockdown, with draconic measures taken to keep them inside at all times, the April 8 announcement of travel bans being lifted came as a literal breath of fresh air.

One month later, and shops are still closed, restaurants are turned into takeaway booths, businesses generate close to zero profits, production is still in shambles, bankruptcy is the new status quo. Already, the local economy contracted by at least 40% and prospects are grim.

Regardless of state-backed stimulus programs, zero-rent programs, employee cost covers, and many more, the economy does not seem to pick up.

The once-thriving 11 million people city is still in mental lockdown. Anxiety is the name of the new game.

Employees that had the luxury of being able to work from home don’t want to return to the office. People no longer frequent gyms, restaurants, cinemas, spas, salons, arcades, shopping malls, travel agencies, beauty parlors, neither the personal nor the professional life of most Wuhanese is now what it was a few months ago.

Authorities, even despotic, autocratic ones as the Chinese are, have no idea what’s going to happen, how to prepare for it, how to tackle it, and what to do if all else fails. It’s a trial and error process for Wuhan, for China, and pretty soon, for the rest of the world.

A mixed bag of information

So far, the pros and cons list contains most, if not all, measures and steps you hear about all day long, every time you turn on your TV or web browser:

Lockdown

  1. It surely works!
  2. It might not, it’s too soon to tell, look at the USA, see the protestors!

Ventilators

  1. Essential for life support during these trying times!
  2. Actually, studies are showing they don’t make much of a difference!

Remdesivir

  1. The magic drug that’s going to cure us all!
  2. Trial test after trial test showed that it has no positive effects and might, in some cases, even make matters worse!

Hydroxychloroquine

  1. Some guy says it cured him!
  2. Intensive medical studies find no relevant connection between it and Corona evolution!

Smokers are better protected

  1. Their lungs are more accustomed to harsh breathing conditions!
  2. How could that be, smoking kills, it says so on the pack!

Flattening the curve is the way to go

  1. Sounds smart and might work!
  2. There’s no proof yet this is the way to go for acquiring mass immunization!

For each contradictory affirmation, there are hundreds, if not thousands, of articles, pseudo-studies, reports, analysis… And with each of those, the general uncertainty about the future grows a little bit stronger.

For the average Joe and for Billion and Trillion-Dollar businesses:

  • revenues and incomes plummet
  • earnings are reaching new lows
  • tens, if not hundreds of millions have already or are very close to losing their jobs
  • productivity is sinking
  • motivation becomes a scarce commodity
  • people invent reasons for staying inside, in the comfort and safety of their homes
  • entire market sectors close up
  • the business world is transforming and all of us together with it

Until the Holy Grail, the vaccine, will be on the market, I see the anxiety described above as an ever-growing sentiment for all of us.

What does the future look like?

Covid-19 is here to stay, even the most optimistic medical scenarios don’t approximate a delivery data for the vaccine closer than 18 months.

Bracing for the second wave is easier said than done, because, in the end, in this new world, nobody knows what the future holds.

Caution is the word of the year, and it should be displayed both in a personal and a professional sense.

Not all people react the same way, and not everybody can work from home, cultures differ, lockdown measures affect each of us differently, central banks intervene in various ways in the markets, government policies that work in Wuhan might not be appropriate for Milan. We’re different, all of us, and now we find each other united by a common enemy and a common goal: survive, adapt, thrive.

Stay safe; stay healthy!

You can follow me on Twitter and LinkedIn

Read full article

Latest Articles
In Tech

21.05.2020   |   Tech

What to expect on the capital markets in the next quarter

Wall Street was preparing itself for a terrible earnings season.

It’s not all bad news

The negative influence of the Covid-19 pandemic has been deemed to be anything between dire and desperate. And, for most, this already is, and will surely be, the case.

The exceptions are, by proper definition, exceptional. I'm talking by bigger-than-Earth companies, enterprises with revenues more massive than most countries' GDPs, behemoths in their own right: most, if not all, from the tech sector: Microsoft, Alphabet, Amazon, Facebook, Apple.

For them, the lockdown, the social distancing, the increased online presence, the overall feeling of insecurity, fear, anxiety, and maybe even boredom is yet another reason for people to use their services and, all in all, for them to generate more revenues from their core, and secondary, and tertiary businesses.

Tech sector breaking records

It might be Wall Street's worst-kept secret that the tech sector is, and has been for at least the last decade, on everybody's lips, in everybody's mind and, sooner rather than later, in everybody's investment portfolio. And by everybody, I mean all social classes, all levels of interest towards capital markets: from your hairdresser to Warren Buffett's humongous investment conglomerate.

The reason for this is simple: if you'd have invested $1,000 in Google stock ten years ago, you would've yielded a hefty 475% return, 590% for Microsoft, 1,700% for Amazon, 1,000% for Apple, and 550% for Facebook.

image source: cnbc.com

They're all rocket ships on their way to trillion-dollar market capitalizations (the Trillion Dollar club already includes Apple, Microsoft, Amazon, and Alphabet). And there's not much that can stop them. At least not yet. Not in the first quarter, not by the Coronavirus, not even the containment measures.

Their earnings for the first quarter looked better than expected, and, for sure, better than those from any other market sector, be it retail, banking, automotive, travel & tourism, or commerce.

*special mention for Tesla

Its stock price marked an astounding 3,500% return on the last decade. Although it’s seen a slight decline in the past months, it’s still reaching for higher highs and will, according to most market analysts, reach and top the historical max value of $917/stock.

Long term forecasts for TSLA stock price are close to $1,100, according to CNNMoney, which means an additional 35% ROI from current stock prices.

I’ve included Tesla here because the behavior of the company, and implicitly, of the stock, mimics those of tech companies, not of automakers. They’re constantly innovating in terms of business, budgeting, marketing and financial positioning and I see them being one of the top performers of this decade, as well.

image source: cnbc.com

*special mention for Zoom

What else is there to say about Zoom apart from the fact that, taking full advantage of the unconventional ways of doing business brought up by the pandemic, it exceeded 300 million daily meeting participants, up from last December's total of 10 million. That’s a remarkable 3000% jump.

Analysts at seekingalpha recommend Zoom as being a “buy and hold” stock for the long run. CNNMoney see Zoom’s stock reaching $200 – a potential increase of 20% from present day prices.

Q1 winners

EARTH 2.0 – the mandatory condition to digitalize businesses and embrace and prepare for the future. Today. All companies below are prime exponents for this business model, and it paid beautifully until now. Just as the Industrial Revolution rearranged the balance of powers almost 2 centuries ago, we are witnessing history in the making with the current the Technological Revolution:

  • Alphabet (mother company of Google): revenue of $41.2 Billion (13% higher than the previous year)
  • Facebook: revenue of $17.7 Billion (18% higher than the past year)
  • Amazon: almost $76 Billion in revenue deriving from an 18% increase in international sales
  • Microsoft: revenue of over $35 Billion, extremely positive outlook on the medium and long term

*Tesla: not much in terms of revenue, but a substantial ascending stock trend (it rose more than 200% in 2019)

*Zoom: 12% share increase after revenue more than doubled in the quarter

Q1 losers

A stubborn, poorly adapted, conventional business model is, and has always been a recipe for disaster. On all accounts, Microsoft should have been on the losing side of things, if it weren’t for Satya Nadella, the CEO who brought openness and collaboration to what is once was a sinking ship.

Comparing well-established enterprises with the tech cousins from above:

  • JP Morgan – profits dove 69%
  • Bank of America – profits plummeted 45%
  • McDonald's – earnings fell 17%
  • Exxon – 7% stock decrease on account of weak earnings
  • Boeing - $649 million loss, 10% workforce dismissed, revenue down 26%
  • Ford - $632 million loss, 15% slid in revenue, shares dropped 42% this year
  • General Motors – 87% decrease in income compared to Q1 2019, 6.2% decline in revenue

The gap between winners and losers grows more profound for now.

It's my undivided opinion that all four major tech players that right now are laughing all the way to the bank will have to turn their smiles into frowns once Q2 earnings are released. They took advantage until now from the increase in the cloud business and the work-from-home movement.

But the economy forgives and forgets no one – in the USA alone, more than 30 million people filed for unemployment benefits in the last seven weeks, and the future does not look too rosy for the job sector. 

No matter how much money the Fed might helicopter-throw unto the economy, the consumers are scared, cautious with their finances, and, in some cases, even hungry.

In these circumstances I see the Q1 earnings success for the tech giants is a temporary victory. I firmly believe they will be caught from behind by the huge wave that already smashed retail, banking, services, commerce, oil, entertainment, or travel.

The future is grim

Q2 earnings will be an eye-opener for all market optimists across the board.

Goldman Sachs expects a US GDP contraction of 34%, unemployment soaring to 15% - no happy-end is in sight.

US retailers are stopping payment to hundreds of thousands of workers in a desperate struggle to cope with the slump in demand, the four rounds of economic stimulus from the Fed seem to make little to no difference until now. 

On the long run, in an inter-connected global economy, everybody's in the same boat: decrease in consumption and demand from commerce and retail brings lower ad revenue for Google, which in turn brings down the cloud business revenues, which in turn influences the hardware demand, which in turn affects producers…and so on. The cycle cannot be broken without every integral part being affected.

Turn coal into diamonds

Provided the virus is ephemeral, maybe even more or less contained in Q2, the global economy might start to pick-up and rise from its ashes in the second half of 2020.

As always, being in close touch with the state of affairs, being up to date with the news, keeping your head clear and thinking straight on how to turn this fallout into an opportunity is the best advice I can give you. 

The harder the containment measures strike, the bigger the economic shock, the larger the recession that will entail, and the more considerable the investing opportunity!

It's challenging to keep your cool now, but I'm confident that those who adapt, those who look for alternative investment means (be it art or safe-haven assets such as gold or platinum or even fintech companies) will enjoy one hell of a ride.

My future

I’ve split the final chapter into two categories: my personal vision and my professional endeavor.

Personal

I’m an investor myself and I see this crisis as an opportunity to short the market on businesses that have not yet adapted to the new world and, in order to practice what I preach, buy Tech Companies (F.A.N.G.) for the long run.

Professional

Protect my businesses and my employees; the measures I already took (work-from-home for 99% of my workforce, consolidation measures for capital flow, redirecting of investment flows, budget reframing, alternative investment areas, enforcing my business' technology core) will continue to prove successful and inspired.

Even though we’re constantly expanding, having more than 250 employees all over the world, I want to continue behaving and acting just as a start-up; I see in this the right way to consolidate our position, and conquer new markets and alternate areas of investments.

You can follow me on Twitter and LinkedIn

Read full article
12.05.2020   |   Tech

End of lockdown – Wuhan is the new capital of the world

“The beginning is always today,” said Mary Shelley two centuries ago

She was quite optimistic, which comes as a surprise from a leading Romantic era exponent. Of course, she was talking about the excitement of an interesting adventure, a fresh day, a brand-new start.

In the trying times of Coronavirus, I keep my right to be realistic. There’s growing talk about the post-corona era, about how everything will come back to what it once was, how society will restart and pick-up from where it was left a few months ago, how economies will put all crisis behind and rise from the ashes. I’m confident that what we’re going through right now is just the beginning of a new epoch, the epoch in which nothing will be the same anymore.

The new normal

I’ve come to this conclusion by observing behaviors around me. From the muted cry of small entrepreneurs who try to find comfort in insufficient government stimulus programs to central banks that gave their all and then some, printing money out of nothing and throwing it in the face of the virus in the hope that this, the last weapon in their arsenal, will start making things right, economies rejoice, and people enthusiastically consume once again.

The underlining note in all of this is one thing: FEAR. Manifested in different forms and with various influences and vectors, but all in all, the same feeling: pure, unadulterated fear.

Business-wise, fear makes or breaks actions and thoughts, dismisses investment plans, smashes development budgets, fires employees, cuts innovation, research, development, affects investor sentiments, turns economic tigers into tame pussycats. Mind you; this is not a presumptuous forecast; this is the reality we’re living in now. This is the new world.

The Wuhan precedent

Let’s not kid ourselves; this is not an exercise of imagination; this is what some already tried. The best example is the lockdown relaxation and economic restart measures in what was, not long ago, the epicenter of this new world: Wuhan, China.

For them, after a 76-day total lockdown, with draconic measures taken to keep them inside at all times, the April 8 announcement of travel bans being lifted came as a literal breath of fresh air.

One month later, and shops are still closed, restaurants are turned into takeaway booths, businesses generate close to zero profits, production is still in shambles, bankruptcy is the new status quo. Already, the local economy contracted by at least 40% and prospects are grim.

Regardless of state-backed stimulus programs, zero-rent programs, employee cost covers, and many more, the economy does not seem to pick up.

The once-thriving 11 million people city is still in mental lockdown. Anxiety is the name of the new game.

Employees that had the luxury of being able to work from home don’t want to return to the office. People no longer frequent gyms, restaurants, cinemas, spas, salons, arcades, shopping malls, travel agencies, beauty parlors, neither the personal nor the professional life of most Wuhanese is now what it was a few months ago.

Authorities, even despotic, autocratic ones as the Chinese are, have no idea what’s going to happen, how to prepare for it, how to tackle it, and what to do if all else fails. It’s a trial and error process for Wuhan, for China, and pretty soon, for the rest of the world.

A mixed bag of information

So far, the pros and cons list contains most, if not all, measures and steps you hear about all day long, every time you turn on your TV or web browser:

Lockdown

  1. It surely works!
  2. It might not, it’s too soon to tell, look at the USA, see the protestors!

Ventilators

  1. Essential for life support during these trying times!
  2. Actually, studies are showing they don’t make much of a difference!

Remdesivir

  1. The magic drug that’s going to cure us all!
  2. Trial test after trial test showed that it has no positive effects and might, in some cases, even make matters worse!

Hydroxychloroquine

  1. Some guy says it cured him!
  2. Intensive medical studies find no relevant connection between it and Corona evolution!

Smokers are better protected

  1. Their lungs are more accustomed to harsh breathing conditions!
  2. How could that be, smoking kills, it says so on the pack!

Flattening the curve is the way to go

  1. Sounds smart and might work!
  2. There’s no proof yet this is the way to go for acquiring mass immunization!

For each contradictory affirmation, there are hundreds, if not thousands, of articles, pseudo-studies, reports, analysis… And with each of those, the general uncertainty about the future grows a little bit stronger.

For the average Joe and for Billion and Trillion-Dollar businesses:

  • revenues and incomes plummet
  • earnings are reaching new lows
  • tens, if not hundreds of millions have already or are very close to losing their jobs
  • productivity is sinking
  • motivation becomes a scarce commodity
  • people invent reasons for staying inside, in the comfort and safety of their homes
  • entire market sectors close up
  • the business world is transforming and all of us together with it

Until the Holy Grail, the vaccine, will be on the market, I see the anxiety described above as an ever-growing sentiment for all of us.

What does the future look like?

Covid-19 is here to stay, even the most optimistic medical scenarios don’t approximate a delivery data for the vaccine closer than 18 months.

Bracing for the second wave is easier said than done, because, in the end, in this new world, nobody knows what the future holds.

Caution is the word of the year, and it should be displayed both in a personal and a professional sense.

Not all people react the same way, and not everybody can work from home, cultures differ, lockdown measures affect each of us differently, central banks intervene in various ways in the markets, government policies that work in Wuhan might not be appropriate for Milan. We’re different, all of us, and now we find each other united by a common enemy and a common goal: survive, adapt, thrive.

Stay safe; stay healthy!

You can follow me on Twitter and LinkedIn

Read full article

Latest Articles
In Capital Market

21.05.2020   |   Capital Ma...

What to expect on the capital markets in the next quarter

Wall Street was preparing itself for a terrible earnings season.

It’s not all bad news

The negative influence of the Covid-19 pandemic has been deemed to be anything between dire and desperate. And, for most, this already is, and will surely be, the case.

The exceptions are, by proper definition, exceptional. I'm talking by bigger-than-Earth companies, enterprises with revenues more massive than most countries' GDPs, behemoths in their own right: most, if not all, from the tech sector: Microsoft, Alphabet, Amazon, Facebook, Apple.

For them, the lockdown, the social distancing, the increased online presence, the overall feeling of insecurity, fear, anxiety, and maybe even boredom is yet another reason for people to use their services and, all in all, for them to generate more revenues from their core, and secondary, and tertiary businesses.

Tech sector breaking records

It might be Wall Street's worst-kept secret that the tech sector is, and has been for at least the last decade, on everybody's lips, in everybody's mind and, sooner rather than later, in everybody's investment portfolio. And by everybody, I mean all social classes, all levels of interest towards capital markets: from your hairdresser to Warren Buffett's humongous investment conglomerate.

The reason for this is simple: if you'd have invested $1,000 in Google stock ten years ago, you would've yielded a hefty 475% return, 590% for Microsoft, 1,700% for Amazon, 1,000% for Apple, and 550% for Facebook.

image source: cnbc.com

They're all rocket ships on their way to trillion-dollar market capitalizations (the Trillion Dollar club already includes Apple, Microsoft, Amazon, and Alphabet). And there's not much that can stop them. At least not yet. Not in the first quarter, not by the Coronavirus, not even the containment measures.

Their earnings for the first quarter looked better than expected, and, for sure, better than those from any other market sector, be it retail, banking, automotive, travel & tourism, or commerce.

*special mention for Tesla

Its stock price marked an astounding 3,500% return on the last decade. Although it’s seen a slight decline in the past months, it’s still reaching for higher highs and will, according to most market analysts, reach and top the historical max value of $917/stock.

Long term forecasts for TSLA stock price are close to $1,100, according to CNNMoney, which means an additional 35% ROI from current stock prices.

I’ve included Tesla here because the behavior of the company, and implicitly, of the stock, mimics those of tech companies, not of automakers. They’re constantly innovating in terms of business, budgeting, marketing and financial positioning and I see them being one of the top performers of this decade, as well.

image source: cnbc.com

*special mention for Zoom

What else is there to say about Zoom apart from the fact that, taking full advantage of the unconventional ways of doing business brought up by the pandemic, it exceeded 300 million daily meeting participants, up from last December's total of 10 million. That’s a remarkable 3000% jump.

Analysts at seekingalpha recommend Zoom as being a “buy and hold” stock for the long run. CNNMoney see Zoom’s stock reaching $200 – a potential increase of 20% from present day prices.

Q1 winners

EARTH 2.0 – the mandatory condition to digitalize businesses and embrace and prepare for the future. Today. All companies below are prime exponents for this business model, and it paid beautifully until now. Just as the Industrial Revolution rearranged the balance of powers almost 2 centuries ago, we are witnessing history in the making with the current the Technological Revolution:

  • Alphabet (mother company of Google): revenue of $41.2 Billion (13% higher than the previous year)
  • Facebook: revenue of $17.7 Billion (18% higher than the past year)
  • Amazon: almost $76 Billion in revenue deriving from an 18% increase in international sales
  • Microsoft: revenue of over $35 Billion, extremely positive outlook on the medium and long term

*Tesla: not much in terms of revenue, but a substantial ascending stock trend (it rose more than 200% in 2019)

*Zoom: 12% share increase after revenue more than doubled in the quarter

Q1 losers

A stubborn, poorly adapted, conventional business model is, and has always been a recipe for disaster. On all accounts, Microsoft should have been on the losing side of things, if it weren’t for Satya Nadella, the CEO who brought openness and collaboration to what is once was a sinking ship.

Comparing well-established enterprises with the tech cousins from above:

  • JP Morgan – profits dove 69%
  • Bank of America – profits plummeted 45%
  • McDonald's – earnings fell 17%
  • Exxon – 7% stock decrease on account of weak earnings
  • Boeing - $649 million loss, 10% workforce dismissed, revenue down 26%
  • Ford - $632 million loss, 15% slid in revenue, shares dropped 42% this year
  • General Motors – 87% decrease in income compared to Q1 2019, 6.2% decline in revenue

The gap between winners and losers grows more profound for now.

It's my undivided opinion that all four major tech players that right now are laughing all the way to the bank will have to turn their smiles into frowns once Q2 earnings are released. They took advantage until now from the increase in the cloud business and the work-from-home movement.

But the economy forgives and forgets no one – in the USA alone, more than 30 million people filed for unemployment benefits in the last seven weeks, and the future does not look too rosy for the job sector. 

No matter how much money the Fed might helicopter-throw unto the economy, the consumers are scared, cautious with their finances, and, in some cases, even hungry.

In these circumstances I see the Q1 earnings success for the tech giants is a temporary victory. I firmly believe they will be caught from behind by the huge wave that already smashed retail, banking, services, commerce, oil, entertainment, or travel.

The future is grim

Q2 earnings will be an eye-opener for all market optimists across the board.

Goldman Sachs expects a US GDP contraction of 34%, unemployment soaring to 15% - no happy-end is in sight.

US retailers are stopping payment to hundreds of thousands of workers in a desperate struggle to cope with the slump in demand, the four rounds of economic stimulus from the Fed seem to make little to no difference until now. 

On the long run, in an inter-connected global economy, everybody's in the same boat: decrease in consumption and demand from commerce and retail brings lower ad revenue for Google, which in turn brings down the cloud business revenues, which in turn influences the hardware demand, which in turn affects producers…and so on. The cycle cannot be broken without every integral part being affected.

Turn coal into diamonds

Provided the virus is ephemeral, maybe even more or less contained in Q2, the global economy might start to pick-up and rise from its ashes in the second half of 2020.

As always, being in close touch with the state of affairs, being up to date with the news, keeping your head clear and thinking straight on how to turn this fallout into an opportunity is the best advice I can give you. 

The harder the containment measures strike, the bigger the economic shock, the larger the recession that will entail, and the more considerable the investing opportunity!

It's challenging to keep your cool now, but I'm confident that those who adapt, those who look for alternative investment means (be it art or safe-haven assets such as gold or platinum or even fintech companies) will enjoy one hell of a ride.

My future

I’ve split the final chapter into two categories: my personal vision and my professional endeavor.

Personal

I’m an investor myself and I see this crisis as an opportunity to short the market on businesses that have not yet adapted to the new world and, in order to practice what I preach, buy Tech Companies (F.A.N.G.) for the long run.

Professional

Protect my businesses and my employees; the measures I already took (work-from-home for 99% of my workforce, consolidation measures for capital flow, redirecting of investment flows, budget reframing, alternative investment areas, enforcing my business' technology core) will continue to prove successful and inspired.

Even though we’re constantly expanding, having more than 250 employees all over the world, I want to continue behaving and acting just as a start-up; I see in this the right way to consolidate our position, and conquer new markets and alternate areas of investments.

You can follow me on Twitter and LinkedIn

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12.05.2020   |   Capital Ma...

End of lockdown – Wuhan is the new capital of the world

“The beginning is always today,” said Mary Shelley two centuries ago

She was quite optimistic, which comes as a surprise from a leading Romantic era exponent. Of course, she was talking about the excitement of an interesting adventure, a fresh day, a brand-new start.

In the trying times of Coronavirus, I keep my right to be realistic. There’s growing talk about the post-corona era, about how everything will come back to what it once was, how society will restart and pick-up from where it was left a few months ago, how economies will put all crisis behind and rise from the ashes. I’m confident that what we’re going through right now is just the beginning of a new epoch, the epoch in which nothing will be the same anymore.

The new normal

I’ve come to this conclusion by observing behaviors around me. From the muted cry of small entrepreneurs who try to find comfort in insufficient government stimulus programs to central banks that gave their all and then some, printing money out of nothing and throwing it in the face of the virus in the hope that this, the last weapon in their arsenal, will start making things right, economies rejoice, and people enthusiastically consume once again.

The underlining note in all of this is one thing: FEAR. Manifested in different forms and with various influences and vectors, but all in all, the same feeling: pure, unadulterated fear.

Business-wise, fear makes or breaks actions and thoughts, dismisses investment plans, smashes development budgets, fires employees, cuts innovation, research, development, affects investor sentiments, turns economic tigers into tame pussycats. Mind you; this is not a presumptuous forecast; this is the reality we’re living in now. This is the new world.

The Wuhan precedent

Let’s not kid ourselves; this is not an exercise of imagination; this is what some already tried. The best example is the lockdown relaxation and economic restart measures in what was, not long ago, the epicenter of this new world: Wuhan, China.

For them, after a 76-day total lockdown, with draconic measures taken to keep them inside at all times, the April 8 announcement of travel bans being lifted came as a literal breath of fresh air.

One month later, and shops are still closed, restaurants are turned into takeaway booths, businesses generate close to zero profits, production is still in shambles, bankruptcy is the new status quo. Already, the local economy contracted by at least 40% and prospects are grim.

Regardless of state-backed stimulus programs, zero-rent programs, employee cost covers, and many more, the economy does not seem to pick up.

The once-thriving 11 million people city is still in mental lockdown. Anxiety is the name of the new game.

Employees that had the luxury of being able to work from home don’t want to return to the office. People no longer frequent gyms, restaurants, cinemas, spas, salons, arcades, shopping malls, travel agencies, beauty parlors, neither the personal nor the professional life of most Wuhanese is now what it was a few months ago.

Authorities, even despotic, autocratic ones as the Chinese are, have no idea what’s going to happen, how to prepare for it, how to tackle it, and what to do if all else fails. It’s a trial and error process for Wuhan, for China, and pretty soon, for the rest of the world.

A mixed bag of information

So far, the pros and cons list contains most, if not all, measures and steps you hear about all day long, every time you turn on your TV or web browser:

Lockdown

  1. It surely works!
  2. It might not, it’s too soon to tell, look at the USA, see the protestors!

Ventilators

  1. Essential for life support during these trying times!
  2. Actually, studies are showing they don’t make much of a difference!

Remdesivir

  1. The magic drug that’s going to cure us all!
  2. Trial test after trial test showed that it has no positive effects and might, in some cases, even make matters worse!

Hydroxychloroquine

  1. Some guy says it cured him!
  2. Intensive medical studies find no relevant connection between it and Corona evolution!

Smokers are better protected

  1. Their lungs are more accustomed to harsh breathing conditions!
  2. How could that be, smoking kills, it says so on the pack!

Flattening the curve is the way to go

  1. Sounds smart and might work!
  2. There’s no proof yet this is the way to go for acquiring mass immunization!

For each contradictory affirmation, there are hundreds, if not thousands, of articles, pseudo-studies, reports, analysis… And with each of those, the general uncertainty about the future grows a little bit stronger.

For the average Joe and for Billion and Trillion-Dollar businesses:

  • revenues and incomes plummet
  • earnings are reaching new lows
  • tens, if not hundreds of millions have already or are very close to losing their jobs
  • productivity is sinking
  • motivation becomes a scarce commodity
  • people invent reasons for staying inside, in the comfort and safety of their homes
  • entire market sectors close up
  • the business world is transforming and all of us together with it

Until the Holy Grail, the vaccine, will be on the market, I see the anxiety described above as an ever-growing sentiment for all of us.

What does the future look like?

Covid-19 is here to stay, even the most optimistic medical scenarios don’t approximate a delivery data for the vaccine closer than 18 months.

Bracing for the second wave is easier said than done, because, in the end, in this new world, nobody knows what the future holds.

Caution is the word of the year, and it should be displayed both in a personal and a professional sense.

Not all people react the same way, and not everybody can work from home, cultures differ, lockdown measures affect each of us differently, central banks intervene in various ways in the markets, government policies that work in Wuhan might not be appropriate for Milan. We’re different, all of us, and now we find each other united by a common enemy and a common goal: survive, adapt, thrive.

Stay safe; stay healthy!

You can follow me on Twitter and LinkedIn

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