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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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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Dogecoin has become so popular, even Congressmen are getting into the game:
U.S. Rep. Mark Green purchased Dogecoin on April 1 and April 14 according to Congresstrading.com. The purchases were in the amount of $1,001 to $15,000 on each occasion.
A $1,000 purchase each time would now be worth $17,078 based on today’s price of $0.4009. A $15,000 purchase each time would now be worth $127,985.
As cryptocurrencies including dogecoin become increasingly mainstream, with more investors holding them and more companies accepting them as payment, it will become harder and harder for the government to ban or even regulate them. Congressmen won’t want to hurt their own portfolios, nor those of their wealthy contributors.
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Post Oak Motor Cars is now accepting dogecoin, a cryptocurrency that recently gained new heights of popularity following support from Tesla founder Elon Musk, as a form of payment. New Bugatti, Bentley, Karma, and Rolls-Royce vehicles are sold at the boutique sales location next to Houston’s only five-star hotel, The Post Oak Hotel at Uptown Houston.
This is the second form of cryptocurrency the Houston dealership has accepted. In 2018, Post Oak Motor Cars announced that it would allow customers to pay using bitcoin after integrating cryptocurrency processor Bitpay into its payment system.
Given the enormous price spike in the currency recently, I imagine quite a few holders are in the market for Rolls Royces.
This is the same pattern I saw with bitcoin: increasing acceptance in the real world as the price increases. I don’t own cryptocurrencies due to their volatility and lack of an income stream. That said, in the crypto market, dogecoin has long seemed like one of the better bets. Its market cap is a fraction of bitcoin’s, despite using the same underlying technology.
Its biggest disadvantage was a lack of acceptance as a form of payment, but that too is changing. Perhaps this coin has a lot further to run.
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If you have health insurance in the United States, you can usually get a flu vaccine for nothing. But for the 28.9 million Americans who are uninsured, a flu vaccine can cost up to $50. For a population that is often hard pressed, this can be unaffordable. And if you have a family of 4 to vaccinate, the numbers are even worse.
Meanwhile, COVID vaccines cost absolutely nothing, whether you have insurance or not. Why aren’t we doing the same for flu vaccines?
Medicare pays $10-60 for flu vaccines, with an average price of $36 across all the vaccines they cover. If the federal government bought one for every uninsured American, the price would be $1.04 billion.
In the midst of the COVID pandemic, it’s easy to forget just how deadly the common flu can be. But the flu has killed between 12,000 and 61,000 Americans per year since 2010.
How do we decide if a policy is worth it compared to the number of lives it could save? The government uses a figure called the “statistical value of a human life” to measure whether many policies, such as environmental regulations, are worth it or not. That figure is about $10 million.
At that rate, giving a free flu shot to every uninsured American would only have to save 100 lives a year in order to pay for itself entirely. That’s just 0.2% to 0.8% of all flu deaths. Offering free flu vaccines to 8.8% of the entire population would probably prevent a lot more than a fraction of a percent of flu deaths.
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Short sellers have abandoned the stock market after massive losses in GameStop shares, among others:
According to data from Goldman Sachs, median short interest as a percentage of float across the S&P 500 has fallen to 1.6%, near the lowest reading since 2004.
But that’s not all. As downward pressure on stocks from short sellers has all but disappeared, upward pressure via margin buying is exploding. Margin buying lets traders borrow money to buy more stock than they could otherwise afford. All those buy orders push up prices:
While the bears head for the hills, the bulls double down. Data from FINRA released today (thank you, Kevin Duffy) show that margin debt among member firms reached a record $822.5 billion in March. That’s up 35% from the average for March across 2018 and 2019 and 82% above last year’s virus-influenced figure.
These are worrying signs for stocks. True believers mortgaging themselves to the hilt along with a lack of skeptics looks like an excessively frothy market to me. I cut back my allocation to stocks several weeks ago, buying beaten-down Treasury securities instead. Especially if your portfolio is out of balance, with stocks accounting for a share that’s above your target due to recent gains, it may be time to take some profits.
Especially if your portfolio is out of balance, with stocks accounting for a share that’s above your target due to recent gains, it may be time to take some profits.
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Investors look at a lot of startups before laying a bet. But how do we know if the company’s product is catching on, or has failed to find traction? And as a founder, how do you know if you’re headed in the right direction or…nowhere?
In a recent episode of the superb podcast This Week in Startups, investor Jason Calacanis and guests Craig Zingerline and Allen Chen broke down a key metric: customer retention.
Do you have product-market fit? There’s no one better to answer that question than the people who use your product every day. Here are the customer retention numbers to look for, over a 6 month period, for different types of startups:
Consumer social (think Instagram): 25% is good, 45% is great
Consumer transactional (think Uber): 30% is good, 50% is great
Consumer SaaS (think Netflix): 40% is good, 70% is great
Small and medium business (SMB) and midmarket SaaS (think Freshbooks): 60% is good, 80% is great
Enterprise (big company) SaaS (think Oracle): 70% is good, 90% is great
As you can see, business-to-business products should be a lot stickier than business-to-consumer ones. Consumers are fickle and their investment is minimal. At the other end of the spectrum, major corporations don’t adopt new software lightly. It’s a process that sometimes takes years and costs a fortune. So they don’t switch often, either.
The panel emphasized that you don’t have to get to these numbers right away, but that they should be a goal. Good luck!
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I’m a huge fan of The Sopranos. Lately, one of my favorite ways to relax on a weekend night is shutting off the lights and watching a few episodes. So, since I live in northern New Jersey, I decided to see if there were any filming locations nearby.
I found the location of a classic scene from season 6 episode 10, where Christopher Moltisanti’s Maserati is towed by the US Marshals. Chris bought it from Johnny Sack, and the sale violated a court order freezing Sack’s assets. Chris storms out of a garage and confronts the marshal, to no avail.
The scene was filmed at Roc Harbour Drive in North Bergen, right along the Hudson River. Christopher comes out of the garage in the back of the apartment complex.
When I visited yesterday, everything looked essentially the same, except for the big bush that was to Chris’s right. That was gone, evidently replaced by some HVAC equipment. Here’s a view of the whole driveway where it was filmed:
And here is a closer view of the garage Chris came out of, with me mugging in the foreground:
It was very exciting to stand in the same spot where this classic scene was filmed! I plan to hit more locations in the area soon!
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That’s Thomas ‘Drago’ Dzieran, who left Communist Poland in the 1980’s for freedom in America and became a Navy SEAL. His path to the teams is singular.
Drago began to oppose Communism at an early age. He refused to learn Russian in school and was promptly hauled to the principal’s office. The principal explained to him that if he refused again, he could be taken from his family and sent to a foster home.
This did not stop Drago from questioning the Communist system. He listened secretly listened to the BBC on the radio, a highly illegal act. There he learned that the Communist government was killing people in Poland. He covered himself in blankets to dampen the sound as he listened, but his mother scolded him to use even more blankets and pillows lest a neighbor hear. If anyone heard, she could go to prison.
But Drago didn’t need a radio broadcast to tell him things in Poland weren’t right:
“I was always cold in Poland because we didn’t have good clothes.”
Privation was the norm, and he often went to school hungry. He took to assaulting the children of high party members, who were well fed. If you want to eat tomorrow, bring two sandwiches, he told them.
As a young man, Drago found himself in a Polish prison for printing anti-Communist leaflets. When released, he emigrated to the United States, and found himself resettled in Memphis, Tennessee by a refugee program.
The luxury of America amazed him. He had never seen air conditioning before, and found himself particularly mesmerized by American grocery stores. The cereal aisle had so many choices, and the packages were so attractive, he decided to try one. And another, and another. Soon, his cart was full of 50 boxes of cereal! But he couldn’t stop his curiosity:
“I didn’t even know what a cereal was.”
After a stint as an auto mechanic, Drago was looking for a way to serve his adopted home. He settled on being a Navy SEAL, but at 32, he was at least 4-5 years beyond the typical age limit. No matter. He powered through the qualification tests and insisted on being allowed into BUD/S. Drago later distinguished himself as a SEAL during the Iraq war.
Drago’s commitment to freedom continues today, as the founder of a censorship-free social network called Connectzing.
What really struck me in this interview was Drago’s perseverance, along with the stark differences between the United States and where he comes from. On living conditions in Poland under Communism:
“I would trade my life in Poland for prison here.”
After all, they get food and medical attention! That’s better than he got much of his life.
Drago says he owes everything to America, and that’s equally true for those of us who are native born. Let’s seize the opportunity, remembering these words:
“This is America. You can be whatever you’re able to be.”
For more on leadership and service, check out these posts:
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“You can break down Robinhood into a series of small steps, the first one being start Robinhood, and every subsequent one being some variant of don’t stop and keep going, right, and you end up where we are today. “
In his mid-20’s, Vladimir Tenev lived in New York City. His apartment was tiny and spare. All his time went into his high frequency trading startup. Then mom came to visit.
When she saw his shabby surroundings, she began to cry. She told him she had a friend who worked at Macy’s. Maybe, she could get him a job there.
It must’ve taken great fortitude for Tenev to push ahead with his own business, despite few signs of success and the anguish it caused his family. But push ahead he did. Today, the company he built, Robinhood, has over 13 million users and plans to IPO soon at a valuation of around $40 billion. Tenev’s net worth exceeds $1 billion.
Tenev came to the United States as a child from Bulgaria and attended the elite Thomas Jefferson High School for Science and Technology, which US News ranks the best public high school in the entire country. What would’ve become of Tenev if he had stayed in Bulgaria? He might have had a very normal life. But giving this smart kid a superb education and access to a great entrepreneurial ecosystem turned him into a billionaire executive.
Tenev didn’t stop learning when he finished school. He taught himself to write iOS apps by watching free Stanford courses online while commuting on the Caltrain. It really shows you what a person can accomplish learning on one’s own for nothing now that knowledge is much more freely available.
Robinhood faced numerous obstacles along the way, but Tenev and co-founder Baiju Bhatt blasted through them. It took two full years of constant work to build their product. Venture capitalists were highly skeptical of their business. How could they make money without charging commissions? How could they beat giant competitors like Etrade and Charles Schwab? And could a couple of math guys make a beautiful consumer product?
But they kept pitching, and ultimately raised $250,000 from Google Ventures. Tenev couldn’t even get a job interview at Google 4 years prior. What if he had let that discourage him from ever approaching Google for an investment?
Just days before a meeting to approve a critical license Robinhood needed to operate, they were still $500,000 short of the required capital. Only the birth of an executive’s baby saved them by providing an excuse to postpone. By the new date, Tenev had raised the money.
A key lesson for startups: Robinhood didn’t worry about monetization until it achieved a large user base. It was confident that, like Instagram, winning enough users would give them all the opportunities for revenue they’d need. And they couldn’t put the cart before the horse.
What sticks out to me most about the Robinhood story is Tenev’s perseverance. At first, his business looked laughable. Later, it gained a bit of traction but faced seemingly insurmountable obstacles in fundraising.
But he just keep pushing, day after day. Now, 11 years after he started his first company, he sits at the helm of one of the hottest startups in the world.
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Tremendous 