Forgive me for sounding like a crank, but it’s okay to totally ignore the Bitcoin rally.
Sure Bitcoin’s up over 1,400% this year (that’s as of the time I started typing) and its market capitalization now significantly exceeds that of Procter & Gamble, the best performing stock in Forbes’ first 100 years of existence. Despite Bitcoin’s boom, the digital currency just doesn’t seem to have any impact on the important financial issues of the day, whether that’s saving, borrowing, or conducting everyday transactions.
If Bitcoin doesn’t influence how you save, how you borrow, or how you transact, then maybe there’s no point paying attention to its staggering rise in 2017. Now might be a good time to push against fears of missing out (FOMO) on the rally, with good reason.
Does Bitcoin really impact your portfolio or your financial plans? When it comes to retirement there are two major, trillion-dollar themes for savers. Nearly a decade after the financial crisis, Americans are returning to the stock market in droves, having been generally underinvested since the 2008 carnage and the market’s bottoming a year later. As people return to the market, they’re doing so using low-cost index mutual funds or exchange-traded funds, instead of high-priced managers. Broadly speaking, this a big positive.
After all, the stock market’s 10%-plus annualized total return over the past 100-years, and a less impressive 7% annual return since December 1997, is the growing bedrock of America’s retirement system. Big-data tools now show savers how they can plan their finances to meet retirement and other financial goals with a few mouse clicks. Innovations like target-date funds and ETFs are creating new levels of precision when building these plans. All the while, fees are falling fast and Wall Street’s take is mired a steep decline. These trends are being driven by the BlackRocks, Vanguards and Fidelitys of the world, in addition to robo advisors such as Betterment and Wealthfront.
To all of this, Bitcoin is utterly non existent: It has no influence on stock market returns, it isn’t part of the fee-disruption equation, 401k plans tracking the S&P 500 are doing just fine this year despite missing on “crypto”.
There’s talk of a stock market bubble with each new record high, but some of the fastest-rising companies on the S&P 500, from Apple to Facebook and Amazon, are luring the most careful investors like Warren Buffett to Glen Kacher (read our exclusive profile) and Stanley Druckenmiller due to their fundamentals. We’ll hear from time-to-time about some hedge fund guy buying Bitcoin, and I’ve even written a story or two about the newest Bitcoin bull, but generally the smart money remains in non-crypto assets.
The S&P 500 trades at a price of 25-times earnings and it carries a dividend yield of about 2%; it’s not cheap by historical standards but anyone who entered the market in the early 1960s at a similarly expensive valuation and stuck with their plans through good and bad times would likely be enjoying a bountiful retirement. At Forbes’ 100th birthday party, Buffett predicted the Dow will exceed $1,000,000 by the time we turn 200, and that’s possibly the safest prediction he’s ever offered.
The same theme emerges in the big-short and long-term financial moves people have to make in their lives, for instance borrowing to buy a home, finance an education, or in making slightly smaller auto and big-ticket consumer purchases.
These can be major decisions and the current landscape is marked by plenty of “disruption”. Virtually all of it is coming from fintech startups, not cryptocurrencies and their attendant networks. Digital-first companies are becoming mainstays in America’s largest lending markets; competition is increasing, risk assessments are improving, transparency and seamlessness is rising, consumer costs are broadly plunging.
After all, it’s a new crop of companies like Quicken Loans, SoFi, GreenSky, Credit Karma, LendingClub that are transforming the way everything from a home loan to a college education or pile of credit card debt is handled. Improving credit access is still one of the big non partisan topics of discussion in America and waves of novel solutions are emerging. Entire financing markets, from clean software interfaces originating loans all the way to new securitization markets to distribute debt to institutional investors have emerged in recent years. Bitcoin is nowhere to be found.
Even in payments and other basic transactions, there’s a growing menu of digital-first options that casts into question whether cryptocurrencies and their associated networks are actually that relevant.
When it comes to electronic payments, it is still Visa and MasterCard who are winning on a dollar basis. Payment volumes at Visa increased 41% in 2017 to $7.3 trillion, at MasterCard volumes rose 10% to $1.4 trillion last quarter. Cryptocurrencies seek to disrupt these networks, offering no-cost transactions, but the day-to-day flow of money seems to be falling to the incumbents and it is disrupting the use of cash.
Meanwhile, the market isn’t static. PayPal’s Venmo has made person-to-person payments cost free and utterly seamless, like a social network of money. Small businesses are gaining new options; Square recently reported a 31% quarterly increase in payment volumes as it offers merchant sellers access to better and lower cost transaction networks. The world’s most valuable private financial technology company is Stripe , another distruptor in e-commerce and payments.
Behind all of this, it must be said, is the rule of law.
If you get screwed you may have your day in court. Some entities are bound by investor protections and fiduciary standards. Depending on what’s being done, there’s also careful assessments of credit risk, identity, and the like. Yes these entrenched systems are the establishment, but that’s a major advantage.
Of course, cryptocurrencies like Bitcoin and their associated networks promise to disrupt it all. It is presented as potentially a new way to raise capital (goodbye Goldman bankers), a new peer-to-peer sharing tool for everything from data to real estate deals, a cheap alternative to transactions (sorry, greedy MasterCard), and even a novel take on the concept of currency itself. Some view Bitcoin as a store of value like gold, or a slightly damaged and possibly fake Leonardo Da Vinci painting. Others view it as part a sort of new world order liberated from tax authorities, governments, and money-printing central banks. Maybe it is the 2017 fear and volatility trade since the Cboe VIX index remains in single digits despite a profusion of global risk?
Everyday, price graphs that resemble the textbook definition of every bubble ever in history are bandied about as evidence of Bitcoin’s validity. Judging by the relentless and inexplicable gains, there are likely new converts to Bitcoin by the minute, or hour. The price rise may also cause skeptics to dig their heels further, increasing their bubble talk.
There’s another, possibly better option: You can simply stick to your plans and ignore Bitcoin. – Written by ,
Facebook Reports Slower Q2 Advertising Growth While Google Reveals A Rare Revenue Decline
The headwinds of Covid-19’s economic impact in the second quarter were strong enough to slow down even the ad-funded tech giants.
In its second-quarter results released on July 30, Facebook reported $18.7 billion in revenue, an increase of 11% despite the slowdown of advertising spend as marketers navigate the ongoing crisis. The results included $18.3 billion in ad revenue, a 10% year-over-year increase. Revenue from other operations totaled $366 million, up 40% from second-quarter 2019.
While Facebook maintained growth during the second quarter, its advertising rival Google did not. Around the same time that Facebook released its results, Google’s parent company Alphabet reported a rare decline in revenue, falling 2% year-over-year to $38.3 billion. Revenue from Google Search and other areas totaled $21.3 billion, down from $23.6 billion in second-quarter 2019. However, ad revenue on YouTube increased 6% to $3.8 billion, which the company said was driven by direct-response advertising.
In a statement, Ruth Porat, chief financial officer of Alphabet and Google, said revenues were “driven by gradual improvement in our ads business and strong growth in Google Cloud and Other Revenues.”
“We continue to navigate through a difficult global economic environment,” she said.
Both Facebook and Google have been known for their steady and massive quarterly growth despite concerns from advertisers, consumers and regulators around issues such as data privacy and content moderation. In 2019, Facebook reported revenue growth of 28% in the second quarter, 28% in the third quarter, and 25% in the fourth quarter. Revenue then grew just 17% in the first quarter of 2020 during the final three months before the pandemic prompted many advertisers to either pause or slow spending on various digital and traditional platforms.
Google’s growth story has been somewhat similar. Year-over-year revenue grew 17% in the first quarter of 2019, 19% in the second quarter, 20% in the third quarter, 17% in the fourth quarter before slowing to 13% in the first quarter of 2020.
On an earnings call today with analysts, Porat said advertising revenue “gradually improved” through the quarter with a “modest” improvement already in July.
“We do believe it’s premature to say we’re out of the woods, given the fragile nature of the economic environment,” she said.
The results come at a time of turmoil for the ad industry during the pandemic. In late June, marketing research firm eMarketer said it expected U.S. digital ad investment to increase just 1.7% this year—or $2.2 billion—compared to the previous growth estimate of 17%, or $22 billion. However, the slowed spending should be no surprise. In fact, during the early weeks of the crisis back in March, a survey of 400 media buyers found that 74% thought the pandemic would have a larger impact on ad spend than the 2008 financial crisis.
Facebook and Alphabet—along with other tech giants like Amazon and Apple—also have been under increased scrutiny by lawmakers. On Wednesday, Facebook CEO Mark Zuckerberg and Alphabet CEO Sundar Pichai along with the CEOs of Apple and Amazon spent the entire afternoon testifying to members of Congress. While the hearing was meant to focus on issues of antitrust, the four executives also touched on other issues ranging including data privacy, content moderation, and political influence.
While ad revenues were slower over the past three months, engagement was not. According to Facebook, engage on Facebook’s properties in terms of daily active users (DAUs) and monthly active users (MAUs) also increased in the second quarter, with DAUs increasing 12% year-over-year to 1.79 billion and MAUs increasing 12% to 2.7 billion. Across its “family” of apps—which includes Facebook, Instagram, Messenger, and WhatsApp—DAUs totaled an average of 2.47 billion for June 2020, an increase of 15% over the same period last year. The family monthly average was 3.14 billion in June—up 14% year-over-year.
According to a Facebook statement about its results, the growth in usage reflects “increased engagement as people around the world sheltered in place and used our products to connect with the people and organizations they care about.” However, the company said it’s recently seen “signs of normalization” as lockdown measures around the world have eased. Meanwhile, total ad impressions in the second quarter increased 40% although the average ad price decreased.
“Our business has been impacted by the COVID-19 pandemic and, like all companies, we are facing a period of unprecedented uncertainty in our business outlook,” Facebook said in a statement about its quarterly results. “We expect our business performance will be impacted by issues beyond our control, including the duration and efficacy of shelter-in-place orders, the effectiveness of economic stimuli around the world, and the fluctuations of currencies relative to the U.S. dollar.”
In July, Facebook has also dealt with a boycott over its practices and policies around moderating hate speech on the platform. The boycott—organized by civil rights groups including the NAACP and Anti-Defamation League—has been joined by hundreds of larger and smaller advertisers. Addressing the boycott on an earnings call with analysts, Zuckerberg said the company has agreed to an audit by the Media Ratings Council, and added that he’s “often troubled by the calls to go after internet advertising, especially during a time of such economic turmoil like we face today with Covid.”
“Some still seem to wrongly assume that our business is dependent on a few large advertisers, and while we value every single one of the businesses that use our platforms, the biggest part of our business is serving small businesses,” he said. “Our advertising is one of the most effective tools that businesses have to find customers to growth their businesses and create jobs.”
When an analyst on the call later asked how the boycott might be resolved, Facebook Chief Operating Officer Sheryl Sandberg said the company is still talking with civil rights groups and advertising trade organizations such as the Global Alliance for Responsible Media. She added that Facebook is “going to keep working hard at this, not because of advertiser pressure but because it’s the right thing to do.”
“It’s an interesting situation we find ourselves in because I think often times when companies are boycotted, it’s because they don’t agree with what the boycotters want,” she said. “And that’s not true at all here. We completely agree that we don’t want hate on our platforms and we stand firmly against it. We don’t benefit from hate speech. We never have. Users don’t want to see it, advertisers don’t want to be associated with it.”
By Marty Swant, Forbes Staff
With proper investment in youth, Kenya’s potential for progress is unlimited
By- Ruth Kagia and Siddharth Chatterjee
Africa’s demographic boom has been hailed as its biggest promise for transforming the continent’s economic and social outcomes, but only if the right investments are made to prepare its youthful population for tomorrow’s world.
Consider this. Every 24 hours, nearly 33,000 youth across Africa join the search for employment. About 60% will be joining the army of the unemployed. Africa’s youth population is growing rapidly and is expected to reach over 830 million by 2050. Whether this spells promise or peril depends on how the continent manages its “youth bulge”.
President Kenyatta once said that “The crisis of mass youth unemployment is a threat to the stability and prosperity of Africa, and it can amount to a fundamental and existential threat”.
Investing in young people especially so that they are prepared for the world of work is the main mission of Generation Unlimited (GenU), a global multi-sector partnership established to meet the urgent need for expanded education, training and employment opportunities for young people aged 10 to 24.
On 05 August 2020, Kenya will launch the Generation Unlimited initiative. This initiative will bring together key actors from the public and private sector as well as development partners to help put into a higher gear this defining agenda of our time to ensure that we have prepared our children for a prosperous future by giving them the education, training and job opportunities that fully harnesses their potential. With a median age of 18, Kenya’s youthful population represents a real potential to reap a demographic dividend and accelerate its economic progress.
Kenya has one of the youngest populations in the world. With the right investment in their talents, skills, and entrepreneurial spirit, young people present an extraordinary opportunity for transformation, growth, and change.
Three quarters Kenya’s population is under the age of 35. Across Africa there are 200 million people between the ages of 15 and 24, a demographic that is expected to double by 2045.
One of the greatest challenges facing governments and policymakers in Africa is how to provide opportunities for the continent’s youth, in order to provide them with decent lives and allow them to contribute to the economic development of their countries. As things stand, around 70% of Africa’s young people live below the poverty line.
In Kenya, the pillars for achieving GenU objectives are in place, with various initiatives for instance to strengthen education system through the recently-launched competency based curriculum and government promotion of programmes to enhance technical and digital skills.
The fruits of such initiatives can be seen through numerous youthful innovations from Kenya that continue to receive international attention. For instance, inspired by his great urge to communicate with his 6-year-old niece who was born deaf, Roy Allela, a 25-year-old Kenyan invented Sign-10, a pair of smart gloves with flex sensors to aid his cousin’s communication with the other members of the family.
The flex sensors stitched to each finger aid in quantifying the letters formed from the curve of each finger of the glove’s wearer. The gloves are then connected through Bluetooth to a mobile phone application that vocalizes the hand movements. This innovation won him the Trailblazer Award by the American Society of Mechanical Engineers.
Gen U’s solution is to forge innovative collaborations with young people themselves. Since launching in 2018, the movement has brought onboard leaders from governments, foundations, and the private sector around the world. Its launch in Kenya underscores its government’s commitment to engage young people in pursuit of the Big 4 Development Agenda as well as Vision 2030.
President Uhuru Kenyatta is a global leader for the Generation Unlimited initiative. In Kenya, Gen U’s activities are coordinated by the Office of the President and the United Nations.
Shifts in today’s global economy demand that young people acquire skills aligned with dynamic labour needs, but local education systems have been slow to adapt. In many countries in Africa, school enrolment is up, but learning outcomes for young people remain poor. Most leave school without the skills the contemporary job market needs, and are ill-prepared for a world in which low-skilled jobs are increasingly automated.
A million young people join the workforce every year in Kenya, applying for jobs in a formal sector that can only absorb one in five of them. Some, however, find work at least intermittently in Kenya’s vibrant informal sector, which accounts for more than 80% of the country’s economy according to the World Bank.
Rather than focusing on opportunities in the formal sector, partners in the Gen U movement will look at strategies for supporting the informal sector with better infrastructure and an improved business environment. In doing so, it is hoped that it will be transformed into a recognised and legitimate sector.
Such initiatives have the full support of the recently launched Kenya Youth Development Policy, which seeks to underscore issues affecting young people. Technology will play a central role, and sector-based strategies will be central to the government’s approach.
The Kenya Youth Agribusiness Strategy, for example, will enable Kenya’s youth to access information technology for various value-addition ventures in Africa’s agribusiness sector set to be worth $1 trillion by 2030.
The Coronavirus pandemic has seen countries face changes in entire social and economic systems. Key industries, including manufacturing, healthcare, public services, retail, transportation, food supply, tourism, media and entertainment have been hard hit by the pandemic. The pandemic is an inflection point that is giving the old system a nudge. The post-COVID-19 world will be founded on a tech-savvy workforce that will inevitably comprise young people.
Calling on urgent action for young people, UN Secretary-General António Guterres has called on governments to “do far more to tap their talents as we tackle the pandemic and chart a recovery that leads to a more peaceful, sustainable and equitable future for all”.
In the run-up to the end of the SDGs era, we must ramp up the current level of investment in young people’s economic and social potential. As the vision of Generation Unlimited states, if the largest generation of young people in history is prepared for the transition to work, the potential for global progress is unlimited.
As President Kenyatta has noted, “the current generation of young people has the potential of expanding Africa’s productive workforce, promoting entrepreneurship and becoming genuine instruments of change to reverse the devastation caused by climate change.”
Ruth Kagia is the Deputy Chief of Staff to President Kenyatta. Siddharth Chatterjee is the United Nations Resident Coordinator to Kenya. Mrs Kagia and Mr Chatterjee co-chair the Generation Unlimited Steering Committee in Kenya.
OPEC And Its Allies Are Ready To Boost Production, But Here’s Why An Oil Market Recovery Isn’t Guaranteed
After record production cuts in April intended to prop up the market amid a demand crisis caused by the coronavirus pandemic, the world’s largest oil producers are expected to ease up on the restrictions and begin to increase their output next month.
- Saudi Arabia, Russia, and the other members of OPEC+ will meet Wednesday to discuss the current market situation and debate future production limits, the Wall Street Journal reported over the weekend, adding that most delegates in the organization support loosening restrictions.
- As lockdown measures ease across the globe, demand for oil is slowly beginning to rise again as shipping and air travel resume.
- Oil prices are still down significantly from pre-pandemic levels, however, with the Brent international benchmark priced at about 30% of January levels.
- The International Energy Agency said Friday that while global demand for oil had recovered strongly in China and India in May, world demand is still projected to decline during the second half of the year before recovering in 2021.
- The recent spike coronavirus cases and new lockdowns are creating “more uncertainty”: additional lockdowns could discourage travel and international trade, which would put more downward pressure on prices.
- The risk to the oil market is “almost certainly to the downside,” the IAE said.
In April, the members of the Organization of Petroleum Exporting Countries (OPEC) and its allies agreed to record oil production cuts of 9.7 million barrels a day as the coronavirus decimated global demand for crude oil. The agreement put an end to a weeks-long price war between Russia and Saudi Arabia that added even more pressure to an already-struggling market.
“If OPEC clings to restraining production to keep up prices, I think it’s suicidal,” a person familiar with Saudi Arabia’s thinking told the Journal. “There’s going to be a scramble for market share, and the trick is how the low cost producers assert themselves without crashing the oil price.”
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