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Commentary: Here come the Roarin’ 20s. Invest until it hurts



Commentary: Here come the Roarin' 20s. Invest until it hurts

In many respects, recent history has been perfectly miserable. With every news cycle, the world seems to be getting darker and darker. The pandemic has made us worry about loved ones. The quarantines were brutally isolating. Then came the shortages.

To top it all off, the financial markets went haywire in 2022, destroying more wealth in the past six months than in any other six-month period in the last 50 years.

Against this backdrop, many businesspeople have become sheepish and financially conservative–but I am a raging bull.

COVID-19 did not destroy the fabric of our society–but it did illuminate the tenacity of the human spirit and our ability to adapt. In the process of adapting, we built new muscles. We challenged every organizational function, every habit, and every arcane social custom. We rationalized every skunkworks project, every legacy investment, and every heritage business process.

We became more efficient during the pandemic. This is irrefutable: The U.S. economy is larger than it was pre-pandemic even if it’s operating with nearly three million fewer workers.

Pandemics and other crises stimulate new thinking, unlock productivity, and spur the adoption of wealth-creating technologies.

COVID-19 was not the world’s first global pandemic. In recorded human history, there have been 13 pandemics that each claimed more than a million lives. One pandemic, in particular, is eerily similar to COVID-19–the 1918 Spanish Flu.

The earliest documented case of the Spanish Flu was recorded in March of that year in the U.S. But soon cases would be recorded in France, Germany, and the United Kingdom. Within six months the entire world would be utterly engulfed by the virus. Two years later, nearly a third of the global population was infected and almost 50 million souls had perished.

All pandemics come to an end. They either mutate and become so deadly they burn themselves out by killing their hosts or they mutate and become so contagious that the population ultimately develops immunity.

The uncanny similarities between the Spanish Flu and COVID-19 provide us an invaluable glimpse into the decade that lies ahead. The infectiousness of both diseases was nearly identical. The R0 value is a numerically derived measure of the transmissibility of a disease. COVID-19 and the Spanish Flu both share an R0 of approximately 1.8, meaning that on average just about every person that caught either disease infected another 1.8 people.

Case fatality rates were also nearly identical at about two percent. Both diseases also curiously progressed in waves, signaling false endings at least three times in most parts of the world.

The societal response to both diseases was nearly identical too. People were quarantined, put on masks, and boiled sheets. they ate outdoors, public venues were closed, schools were closed, churches were closed, people lost jobs, rent and mortgages went unpaid, public assistance exploded, and government debts ballooned. People politicized all of those actions as well and protests broke out.

It’s what happened after the Spanish Flu that’s most interesting.

The Spanish Flu ended in 1920, almost exactly two years after it began, and in its wake, the U.S. enjoyed perhaps the greatest era of prosperity in human history. The period was coined the “Roarin’ 20s”. And “roared” they did.

People shook off the gloom of the Spanish Flu and began partying and dancing and singing and traveling. Jazz became popular, fashion exploded, and construction boomed.

Socially, a progressive vibe captured the imagination of the world with Germany, the U.K., the Netherlands, and the U.S. all finally affording women the right to vote within 24 months of the pandemic’s end.

Underlying all this change was a wave of modernity and progress that propelled us into modernity.

It was during the 1920s that the automobile industry came of age. In 1920 there were only 500,000 automobiles on the road globally. During the roaring 20s, 25 million cars would be produced.

The congruence with modern times is striking. In 2020, there were less than 1 million EVs on the road. This year, three million EVs will be sold–and the world could add as many as 50 million to the roads by 2030.

In 1925, the television was invented. Today, we have the metaverse.

In 1927 Charles Lindberg piloted the first solo transatlantic flight. Today, 6 million people get in a plane every single day! In fact, at any moment of any day, there are more than 100,000 people in the skies above. But it was 2021 when the world first started putting civilians into space in earnest. We even put Captain Kirk into low-earth orbit, for real.

In 1928 Alexander Fleming invented penicillin–an innovation that has saved 200 million lives since its introduction. In 2020, the first trials of gene editing for cancer patients were approved and cutting-edge Messenger RNA editing led to the lightning-fast development of a COVID vaccine.

In the eight years immediately following the Spanish Flu, financial markets rallied and share prices grew more than 400%. Immense wealth was created and standards of living around the world leaped forward.

Markets are moved by interest rates, world tensions, commodity shocks, and a thousand other variables–but all these factors pale in importance when compared to the juggernaut that the newly invigorated, technology-enabled, and recently cross-trained workforce of the 2020s has become. A student of history has but one option: Invest until it hurts.

John DiLullo is Chief Revenue Officer at Forcepoint, where he is responsible for driving the company’s worldwide sales and business development organizations to accelerate customer adoption and deployment of Forcepoint solutions globally.

The opinions expressed in commentary pieces are solely the views of their authors and do not reflect the opinions and beliefs of Fortune.

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Coinbase’s near-term outlook is ‘still grim’, JPMorgan says, while BofA is more positive about firm’s ability to face crypto winter



Coinbase's near-term outlook is 'still grim', JPMorgan says, while BofA is more positive about firm's ability to face crypto winter

Coinbase is well positioned to successfully navigate this crypto winter and take market share, Bank of America said in a research report Tuesday. It maintained its buy recommendation following the exchange’s second-quarter results.

The results warrant “a muted stock reaction,” the report said. Net revenue of $803 million was below the bank’s and consensus estimates, while its adjusted $151 million loss before interest, tax, depreciation and amortization was better than the street expected. Importantly, the company remains “cautiously optimistic” it can reach its goal of no more than $500 million of adjusted EBITDA loss for the full year, the report added.

Coinbase shares fell almost 8% in premarket trading to $80.74.

Bank of America notes that Coinbase had no counterparty exposure to the crypto insolvencies witnessed in the second quarter. The company also has a “history of no credit losses from financing activities, holds customer assets 1:1, and any lending activity of customer crypto is at the discretion of the customer, with 100%+ collateral required.” These rigorous risk-management practices will be a “positive long-term differentiator” for the stock, the bank said.

JPMorgan said Coinbase had endured another challenging quarter, while noting some positives.

Trading volume and revenue were down materially. Subscription revenue was also lower, but would have been much worse were it not for higher interest rates, it said in a research report Wednesday.

The company is taking steps on expense management, and in addition to the June headcount reductions, is scaling back marketing and pausing some product investments, the note said.

The bank says the company’s near-term outlook is “still grim,” noting that the exchange expects a continued decline in 3Q 2022 monthly transacting users (MTUs) and trading volumes, but says Coinbase could take more “cost actions” if crypto prices fall further.

JPMorgan is less optimistic than Bank of America about the company in the near term, saying pressure on revenue from falling crypto markets will have a negative impact on the stock price. Still, it sees positives including higher interest rates, from which the firm will generate revenue. It also sees opportunities for the exchange to grow its user base, leveraging almost $6 billion of cash. The surge in crypto prices in July, and the forthcoming Ethereum Merge are also seen as positive catalysts, it added.

The bank maintained its neutral rating on the stock and raised its price target to $64 from $61.

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Elon Musk sold $6.9B in Tesla stock in case he’s forced to buy Twitter



Elon Musk sold $6.9B in Tesla stock in case he's forced to buy Twitter

Elon Musk sold $6.9 billion of his shares in Tesla Inc., the billionaire’s biggest sale on record, saying he needed cash in case he is forced to go ahead with his aborted deal to buy Twitter Inc.

“In the (hopefully unlikely) event that Twitter forces this deal to close *and* some equity partners don’t come through, it is important to avoid an emergency sale of Tesla stock,” Musk tweeted late Tuesday after the sales were disclosed in a series of regulatory filings. 

Asked by followers if he was done selling and would buy Tesla stock again if the $44 billion deal doesn’t close, Musk responded: “Yes.”

Tesla’s chief executive officer offloaded about 7.92 million shares on Aug. 5, according to the new filings. The sale comes just four months after the world’s richest person said he had no further plans to sell Tesla shares after disposing of $8.5 billion of stock in the wake of his initial offer to buy Twitter.  

Musk last month said he was terminating the agreement to buy the social network where he has more than 102 million followers and take it private, claiming the company has made “misleading representations” over the number of spam bots on the service. Twitter has since sued to force Musk to consummate the deal, and a trial in the Delaware Chancery Court has been set for October. 

In May, Musk dropped plans to partially fund the purchase with a margin loan tied to his Tesla stake and increased the size of the equity component of the deal to $33.5 billion. He had previously announced that he secured $7.1 billion of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital, and Binance. 

“I’ll put the odds at 75% that he’s buying Twitter. I’m shocked,” said Gene Munster, a former technology analyst who’s now a managing partner at venture-capital firm Loup Ventures. “This is going to be a headwind for Tesla in the near term. In the long term, all that matters is deliveries and gross margin.”

At the weekend, Musk tweeted that if Twitter provided its method of sampling accounts to determine the number of bots and how they are confirmed to be real, “the deal should proceed on original terms.” 

Musk, 51, has now sold around $32 billion worth of stock in Tesla over the past 10 months. The disposals started in November after Musk, a prolific Twitter user, polled users of the platform on whether he should trim his stake. The purpose of the latest sales wasn’t immediately clear.  

Tesla shares have risen about 35% from recent lows reached in May, though are still down about 20% this year. 

With a $250.2 billion fortune, Musk is the world’s richest person, according to the Bloomberg Billionaires Index, but his wealth has fallen around $20 billion this year as Tesla shares declined.    

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The rent is too d*mn high for Gen Z: Younger generations are ‘squeezed the most’ by higher rents, BofA says



The rent is too d*mn high for Gen Z: Younger generations are 'squeezed the most' by higher rents, BofA says

Most of Gen Z is too young to remember the 2010 New York gubernatorial candidate Jimmy McMillan.

But over a decade later, they would probably agree with his signature issue (and catchphrase): the rent is too damn high.

This July, median rent payments were 7.4% higher than during the same period last year, according to a Bank of America report released Tuesday. 

The national median price for a one-bedroom apartment has been hitting new highs nearly every month this summer. It was $1,450 for July, according to rental platform Zumper. In the country’s largest city, New York, average rent exceeded a shocking $5,000 a month for the first time ever in June. 

But inflation in the rental market hasn’t hit each generation equally, and no one is getting squeezed harder by the higher monthly payments as Gen Z. Those born after 1996 have seen their median rent payment go up 16% since last July, compared to just a 3% increase for Baby Boomers, BofA internal data shows. 
“Younger consumers are getting squeezed the most by higher rent inflation,” BofA wrote.

The great rent comeback

Early in the pandemic, landlords slashed rents and gave significant COVID discounts to entice tenants to stay instead of leaving urban areas. Once those deals started expiring in 2021, many landlords suddenly raised payments once again, sometimes asking for over double their pandemic value. 

Young people across the board have been hit hard, and rent burdens compared to age can be seen even within a single generation. Younger millennials had their median rent payment grow 11% from last year, while the median payment for older millennials rose 7%. Gen X experienced a 5% median rent increase, according to BofA. 

It’s not a surprise, then, that Gen Z feels so strapped for cash. The majority of young people, 61%, said they want to receive their wages daily instead of twice a week, a practice typically reserved for workers living paycheck to paycheck, according to a report from the Center for Generational Kinetics, which specializes in research across the generations. Rising rent inflation has even priced nearly a third of Gen Zers out of the apartment search altogether. Around 29% of them have resorted to living at home as a “long-term housing solution,” according to a June survey from personal finance company Credit Karma.

It’s no wonder—the rent really is too high.

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