The New Black Wall Street: Young Black Investors are Piling Into Stocks

A new survey finds that young black Americans now invest in stocks at the same rate as whites:

In a year like no other, however, there is also evidence of growing engagement in the stock market by younger Black Americans, with 63 percent under the age of 40 now participating in the stock market, equal to their white counterparts. The closing of this gap among younger investors is being driven by new investors: three times as many Black investors as white investors (15% vs. 5%) report having invested in the market for the first time in 2020.

Stocks are a major vehicle for wealth creation, and black Americans have long been less involved in the stock market than whites:

A majority (61%) of non-Hispanic white households own some stock, compared with 31% of non-Hispanic black and 28% of Hispanic households. Median investments vary here as well: Among whites the median is about $51,000. By comparison, the median for black families is $12,000, and for Hispanic families it is just under $11,000.

Behind this growth is a huge increase in the use of stock trading apps like Robinhood and Webull. Downloads in the last year are up 157% and 371% respectively. For all their faults in enabling speculation, these apps also seem to be opening up opportunity. The minimum investment in Vanguard’s S&P 500 index fund is $3,000, for example. This is far out of reach for many young people, particularly minorities. Meanwhile, Robinhood allows users to buy fractions of a share of stock for as little as $1. Webull has no minimum at all.

I’m happy to see more people get an opportunity to be a part of this amazing capitalist wealth creation system of ours. More people benefiting from our system helps preserve it. And more people getting rich makes me smile.

Have a great weekend everyone!

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Photo: Black Wall Street Durham, NC

In Norway, 60% of Cars Sold are Electric

Norway’s electric car market is powering ahead, with most new cars registered in September either fully electric or hybrids.

Electric cars accounted for 61.5% of the 15,552 cars registered that month in the country. When hybrids are included, the total jumps up to 89%.

The new Volkswagen ID.3 was the bestselling car, with 12.8% of sales, followed by the Tesla Model 3 and the Polestar 2.

Globally, too, we could be on track for an electric car breakthrough as battery technology gets less expensive. The cost of a lithium-ion battery pack for an electric car fell 87% from 2010 to 2019, according to research by BloombergNEF.

More here.

In the US, by contrast, only 2% of new car registrations are electric.

So why is Norway leading the world while the US, a major producer of electric vehicles, straggles far behind? Are Norwegians just a lot more environmentally conscious?

Well, not exactly. Norway currently has big tax incentives for buying an electric car as opposed to an internal combustion one. Those incentives are set to be pared back this year, but will still provide a tax advantage for electrics. US tax incentives are less generous, which is one major factor behind slower adoption.

Another factor: gas costs the equivalent of about $8 a gallon in Norway, compared to about $2.75 in my neighborhood in New Jersey.

High gas prices and huge tax incentives mean that Norwegians don’t have to be environmentalists to choose an electric car. They just have to be frugal.

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Photo: “IMG46347-2” by odd.bakken is licensed under CC BY-NC-SA 2.0

To Replace Gold, Bitcoin Needs a Massive Increase in Transaction Capacity

Bitcoin is often referred to as “digital gold.” A major attraction of the cryptocurrency is its fixed supply and lack of connection to fiat money like the US dollar. But unlike gold, bitcoin has no storage costs and is hard to steal. Given these facts, bitcoin could be poised to replace gold as a store of value and inflation hedge.

But it faces one huge hurdle in doing so: the bitcoin system can only process seven transactions per second:

As a piece of global financial infrastructure, the Bitcoin network is hobbled by severely limited capacity. The worldwide network of miners can process a maximum of only seven transactions a second, and today the rate is running at around five, according to de Vries’s estimates. In comparison, Visa can process up to 65,000 payments per second. Hence, any spike in the volume of payments or transfers causes a backlog.

De Vries adds that Bitcoin performs poorly at the checkout counter. If you were to buy $100 in groceries using Bitcoin, it may take an hour to receive adequate confirmation.

Not only does this make bitcoin unsuited to processing daily transactions like grocery trips, it may even limit its use as a store of value. There are currently $22 billion in bitcoin transactions per day, and transactions already take a long time to settle.

Gold does $146 billion in transactions daily. To match that, bitcoin would have to increase its transaction throughput approximately five fold (if the current $22 billion in transactions represents 5/7ths of possible volume). Is that feasible when trades already settle so slowly?

And what if bitcoin becomes a lot more widely held? It’s very difficult to determine the number of bitcoin holders, but some estimates put the number at around 100 million people out of a world population of over 7 billion. That’s a ton of new potential bitcoin buyers, but the currency is likely to struggle to accomodate them given its low transaction bandwidth.

In all, this rapidly growing currency faces some significant barriers to wide adoption as a store of value like gold. I’m curious to see what workarounds blockchain developers come up with to meet these challenges.

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Photo: “Bitcoin, bitcoin coin, physical bitcoin, bitcoin photo” by antanacoins is licensed under CC BY-SA 2.0

Filming a TV Show in NYC in a Pandemic

EMT’s jump into a vintage ambulance and speed off past NYPD Chevy Caprices. The backdrop: a spooky, mostly disused hospital on the fringes of New York City. Two menacing men in flat-top fades and thick gold chains saunter toward the entrance.

This is the world I spent yesterday in, as a background actor (also known as an extra) playing an EMT for a popular cable show. Background acting is a fun hobby I picked up in late 2019, but I hadn’t done a gig since the beginning of COVID. But now I’m fully vaccinated and back in the game.

So what’s it like to film a television show in New York City in the middle of a pandemic? First, be prepared to get COVID tested a lot, even if you’re vaccinated. I took a COVID test 10 days before the shoot, a rapid test at the fitting one week out, another test 4 days out, and yet another rapid test as soon as I arrived on set.

But that’s not all. You have to fill out an online form about symptoms and travel every day you come in. Even on the shoot day, you wear a mask at all times unless you’re on camera or eating.

Even with these changes, filming is a lot of fun! I wore an elaborate costume that had been tailored to fit me personally. The tailor even sewed “EMT New York City” patches onto the uniform. I was rather honored to have such a fuss made over me, despite being just a background actor.

I had the opportunity to ride in a 1982 Ford ambulance like this one, which was fascinating! My fellow EMT, who was also a trained stunt driver, took the wheel. I also got to see circa 1990 NYPD squad cars on the set, which is a rare opportunity.

The episode was set in 1991 and we filmed in a remote part of New York City. I can’t get into specifics on the show until it airs later this year, but I was incredibly impressed at the very real little world they had created. Two characters had Timberland boots, thick gold necklaces, and tall, fade-style Afros cut specially for the scene. The cars were picture perfect. There’s something about seeing a little world where the past has been recreated, and becoming a part of it, that’s quite thrilling.

In all, with the many tests and fitting and elaborate setup, I was only actually on camera for maybe 90 minutes. That footage will later be cut down to probably just a few seconds. The amount of work that goes into making a perfect scene that may last just an instant is incredible.

I look forward to being a part of lots of other interesting shows soon!

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Photos:

“VFS Film Production: ‘Milligan’s Stew'” by vancouverfilmschool is licensed under CC BY 2.0

“1982 Ford F-100 ambulance” by sv1ambo is licensed under CC BY 2.0

Christopher Moltisanti Hit Rock Bottom at This Diner

“Wanna follow me to that dive on Sip and JFK?”

Julianna Skiff, The Sopranos

So begins the romance between mobster Christopher Moltisanti and Julianna Skiff in season 6 of The Sopranos. The troubled pair meet at an AA meeting. Soon they’re having an extramarital affair that spirals into a return to heroin addiction.

Their romance begins and ends at the VIP Diner in Jersey City, NJ. Being a big fan of this episode and the show in general, I took a little trip there yesterday. The diner is exactly as it appeared on the show in 2007, and indeed seems not to have changed at all since at least the 1970’s.

The restaurant was nearly empty when I entered in the late afternoon. I sat at a weathered booth near the window and enjoyed a coffee and newspaper. Cocooned in a nearby booth, Christopher tells Julianna about his entry to the mafia and they reflect on their return to heroin use at the end of episode 12.

As they leave the restaurant and head for an AA meeting, Julianna already senses that their relationship is over. It was interesting to walk down those same steps as I headed home.

Enjoying a coffee in the same spot where these great scenes happened was a lot of fun! If you’re in the area, I’d recommend popping in.

Bonus location: the hair salon across the street was used for a scene in season 1, episode 9, where Bobbi Sanfilippo discusses Uncle Junior’s “talents” with her pedicurist. Through the window, you can see the VIP Diner across the street.

It appeared to have been heavily remodeled and didn’t look much like the beauty parlor in the episode, but it was still interesting to see it! I actually looked at an apartment in this building a couple of years ago without realizing it was a Sopranos shooting location!

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India’s COVID Nightmare: “Bring Oxygen or Take Your Father Away”

At 5 a.m. on Saturday, Aparna Bansal’s cellphone rang. “Can you come now?” said a man from the New Delhi hospital where her 76-year-old father is being treated for Covid-19. The instructions were clear, she said: Bring oxygen or take your father away.

Her husband lines up at 4 a.m. every morning at an oxygen-supply store in east Delhi to buy two cylinders of oxygen to take to separate hospitals treating her mother and father. Neither facility has enough supply to treat the waves of patients coming through every hour.

India is fighting the highest COVID caseload of any country so far. Hospital beds and especially oxygen are running critically short, and deaths are increasingly rapidly. The medical system has nearly collapsed:

India has been reporting more than 2,000 deaths a day for five straight days. The real toll is likely much higher. It is expected to grow in the coming weeks.

A general relaxation of caution earlier this year, along with several massive superspreader events, seeded the current crisis:

Life returned to normal. Weddings and parties resumed. Masks slipped, as did social-distancing rules. A new season of state-level elections ushered in big political rallies and street parades. A massive religious festival known as the Kumbh Mela was allowed to take place, bringing millions of Hindu pilgrims to the banks of the river Ganges and sending a message that there was no reason to worry about Covid-19.

By mid-March, cases started climbing again—then accelerated with breathtaking speed, becoming a vertical line rather than an upward sloping curve.

Much more here.

Many had put their faith in an herbal remedy called Coronil, which was even touted by Indian Health Minister Harsh Vardhan. However, there is little evidence behind the treatment.

Reports from people inside India right now are dire:

You can find the full thread on India’s crisis here, and another excellent thread on how it began here.

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Inside a Startup Accelerator Demo Day

Yesterday, I attended the Remote Demo Day for the latest class from the Launch Accelerator, a startup accelerator run by noted investor Jason Calacanis. We hear a lot about accelerators (also known as incubators), from famous programs like Y Combinator or Techstars to small, local outfits.

One thing most of them have in common is a demo day. This occurs at the end of the accelerator program and gives the startups an opportunity to pitch their company to investors.

So what goes on at these demo days?

Seven companies had three minutes each to present. A panel of judges (investors at venture firms) and members of The Syndicate (Calacanis’ investment group) submitted questions. Founders then had two minutes respond. Finally, both the judges and syndicate members voted on their favorites.

Here are some interesting trends I noticed from the meeting:

1) Business-to-business companies got a better reception than business-to-consumer companies. Business customers are less fickle and more likely to remain customers once acquired. They also have deeper pockets, and if you can show them that a technology clearly saves them money or gives them an important new capability, they’re likely to buy. Consumers are harder to pin down.

2) Startups are very diverse now, in terms of race, gender and geography. Two of 7 founders were female, and two were minorities. This isn’t equal representation, but it is progress. The companies came from all over America, from the usual suspects (Bay Area, NYC) to the South and even Europe.

3) It’s not all software companies. My favorite was actually a beverage company. Show investors some substantial recurring revenue and fast growth, and you may find checks flying back at you. What’s more, so many companies these days have a tech angle. This company sells their beverages online in a subscription model.

4) Everyone’s nice. Despite stereotypes of grizzled money guys telling you “It’ll never work!” the reality is that reputation is critical in this industry. Expect specific questions that might be hard to answer, but don’t expect (or tolerate) jerks.

Expect specific questions that might be hard to answer, but don’t expect (or tolerate) jerks. #startups

5) Even early stage companies fresh out of an accelerator have real products and revenues. There were no companies just trying to get an idea funded or still working on a prototype. They wouldn’t have made it into the accelerator in the first place, and even if they had, they wouldn’t have attracted any investor interest. Investors help business scale. They don’t help ideas become products.

So, who got funded? That remains to be seen, but if there’s enough interest from syndicate members, several could potentially get the nod. I know I’m interested in investing in two of the startups I saw.

We are so fortunate to live in a country that produces incredible entrepreneurs with such regularity. This was the 21st class to go through the accelerator, and there will be many more!

Congrats to all the great founders that presented, and a happy weekend to all my readers!

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Photo: “Great white shark” by Gussy (Luke) is licensed under CC BY-NC-ND 2.0

Departing GameStop CEO Gets $179 Million Payout

GameStop CEO George Sherman will be leaving the company soon, but not empty handed:

As a condition of his exit, GameStop is speeding up the time frame for Sherman to receive the shares, generating the award.

Sherman, who has been CEO since April 2019, forfeited $98 million worth of stock this month because he did not meet performance targets, GameStop disclosed last week.

Still, he stands to receive a stock payout currently worth $179 million because GameStop granted him more shares linked to his tenure at the company rather than to his performance as most companies do with their CEO, said Eric Hoffmann, a vice president at compensation consultant Farient Advisors LLC.

This strikes me as bad policy and poor corporate governance, especially for a company that is losing a lot of money and facing rapidly declining sales. Why should an executive be rewarded simply for sticking around, as opposed to actually accomplishing something?

Why should an executive be rewarded simply for sticking around, as opposed to actually accomplishing something? $GME

I am hoping the new board, which will be chaired by Chewy founder Ryan Cohen and includes several other former Chewy executives, will put a stop to payment for no performance. After all, GameStop is already being robbed enough:

Two dozen cars squealed up to a GameStop store in Emeryville early Thursday and their occupants smashed the front door glass, broke inside and rifled the store shelves, police said.

An unknown amount of goods, including collectible figurines, was taken from the store at 3980 Hollis Street shortly after midnight.

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Photo: “Retail GameStop” by ccPixs.com is licensed under CC BY 2.0

The Unstoppable Wave Behind Stocks

In the last year, a torrent of money has flooded into Exchange Traded Funds (ETF’s) that track the stock market:

Over the last 12 months, about $650 billion has flowed into stock and bond ETF’s, a flow that’s unusually large versus history and may help explain why markets have been so strong.

Despite the attention to volatile stocks like GameStop, a far bigger firehose of cash is aimed at ETF’s. When investors buy ETF’s, fund managers have to buy the stocks in the index. If I buy an S&P 500 index fund from Vanguard, for example, Vanguard has to buy the 500 stocks in the index in proportion to how much of the index each comprises. This pushes up the stock market.

A big force behind this buying may be increasing personal income, partly due to COVID-related stimulus. With consumer balance sheets looking flush with cash, I expect this trend to support markets for the forseeable future.

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Photo: “Huge wave” by bluesbby is licensed under CC BY 2.0

How China Could Attack Bitcoin

China is creating its own cryptocurrency, which will allow much easier surveillance and control of their population than existing coins. In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

In order to push bitcoin off its throne and replace it with a digital yuan, China could launch a powerful sneak attack on bitcoin.

Bitcoin transactions are handled by “miners,” or powerful computers that perform calculations to verify transactions. A report from scholars at Princeton University and Florida International University notes that 74% of this mining power is in groups, or “pools,” managed by China.

That much computing power, also known as hash rate, gives China an unrivaled ability to hack the currency:

One broadly understood security property of Bitcoin is that no single party can control more than 50% of the hash rate, so this statistic is worrying.

Cheap land and energy have helped China dominate bitcoin mining:

These facilities are primarily located in remote areas with inexpensive electricity and cheap land, such as Sichuan province and Inner Mongolia. These advantages allow Chinese miners to achieve greater profit margins than their competitors in other countries; a study in early 2018 found that one bitcoin could be mined in China at 2/3rds the electricity cost of the same operation in the U.S.

One way China could attack bitcoin and its users would be to refuse to deal with certain addresses controlled by dissidents or geopolitical rivals. China could connect IP addresses and e-commerce data with bitcoin wallets in order to crack bitcoin’s anonymity:

With control of at least 51% of the hash rate, Chinese mining pools could simply announce that they will not mine on chains containing transactions from their list of censored addresses.

China could also use a variety of techniques to double-spend coins, which would undermine faith in the bitcoin system as a whole, perhaps paving the way for their own cryptocurrency.

One silver lining is that although nearly 3/4ths of mining capacity is in Chinese-managed pools, this doesn’t mean the computers doing that mining are all physically located in China. Miners can and do join pools managed by groups in other countries. The Communist Party will likely find it much more difficult to control miners abroad.

In all, China’s authoritarian government and massive influence in bitcoin mining represent a real risk to the currency. Crypto enthusiasts should begin preparing responses to possible Chinese attacks before they happen.

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Photo: “President Kagame and President Xi Jinping of China Joint Press Conference | Kigali, 23 July 2018” by Paul Kagame is licensed under CC BY-NC-ND 2.0