Tag Archives: 2019
But, as in years past, there’s a good chance things will get away from us as the year goes on. We get busy, our agendas become crowded and the time required to plan and prepare wholesome, healthy meals is condensed into just the few minutes required to grab some fast food.
It’s a scenario any entrepreneur, employee or just about any human can relate to.
Our desire to compromise neither our time nor our health spawned the rise of a few new startups offering solutions like Soylent, Ka’chava and Huel. All three began by offering powdered smoothie mixes that claim to provide all the nutrition needed to substitute for a full meal. Soylent also introduced ready-to-drink meals in a bottle in several flavors for when even mixing water and powder is just too much time or trouble.
You may want to read sarcasm into that last line, but this bottled Soylent subscriber of two-plus years is enthusiastically earnest about the advantages of slamming a proportioned dose of carbs, fat, protein and a whole suite of nutrients before or after a workout or while powering through an all-consuming post for Inc.
Now, after years of being the main name in the bottled meal game, Soylent has some fresh competition from Huel, which just introduced its own ready-to-drink meal in a bottle last week.
The people at Huel were kind enough to ship me one sample each of their two ready-to-drink flavors, Vanilla and Berry, to see how they stack up to Soylent.
Before diving in, I think it’s worth mentioning that I don’t really believe it’s a good idea to base your regular diet around either of these products. With its original powdered product, Huel encourages trying smoothies based on its product for breakfast and lunch followed by a “traditional” dinner.
That’s just way more powdered pea protein and other processed ingredients than I’m comfortable consuming on a regular basis. I still want to strive to include as many whole, healthy foods in my diet as possible. I see the meals in a bottle rather as a preferable alternative to fast food, microwaved meals and other less-than-ideal quick options when life gets in the way of my dietary ambitions.
Over the past few years, on average I drink one bottle of Soylent every two to three days.
So, on to the important question: which is the best to start stocking your fridge with?
I’ve had a box of ready-to-drink Soylent shipped to me each month for nearly two and a half years now and rotated through most of the different flavors over that period, with strawberry being my favorite.
On the face of it, Soylent and Huel ready-to-drink are very similar – it’s kind of a Coke and Pepsi sort of deal where the differences are relatively subtle or in the details. Both are vegan and more palatable than their more grainy powdered mix siblings. Each provide 400 calories per bottle, which is somewhere around 20 to 25 percent of the calories the average person needs per day.
While Soylent uses soy protein, maltodextrin, sugars, sunflower and canola oils for its base along with a mix of vitamins and minerals, Huel relies on pea protein, tapioca starch, gluten-free oat powder, some brown rice flour, canola and coconut-based oils with added flax, chicory root, vitamins and minerals.
I’m no dietitian, but I find myself drawn to Huel’s ingredient list as an “almost vegetarian” with plenty of soy already in my diet. I’m also not crazy about maltodextrin and who doesn’t like added flax and chicory root?
You can easily go down the rabbit hole of comparing myriad studies on the benefits and drawbacks of the different ingredients in each product. But the most substantive, real-life difference I’ve found after trying both Huel’s powdered and ready-to-drink products is that it seems to be more filling than Soylent and actually feels a bit more like a complete meal in my stomach.
While I have no scientific basis to back this up, it feels to me that the oat powder might be the difference here. Or it could be that Huel delivers its 400 calories in a slightly larger volume of liquid (500 mL to Soylent’s 414 mL). What’s interesting, though, is that the consistency of Huel is slightly thicker than Soylent, which is counter-intuitive given the above ratio of calories to mL. Again, I think this has something to do with the oats.
Regardless of the math, Huel feels just a little bit more like a complete meal.
On taste, it’s a bit of push. I prefer Soylent’s strawberry to Huel’s berry flavor, but Huel’s vanilla is preferable to Soylent’s.
As to price, a subscription through Soylent is around 15 percent less per box of 12 bottles than Huel, but Huel’s bottles are bigger as I mentioned so it’s nearly a push again.
Forced to choose between the two, I give a slight edge to Huel because it seems to do a better job of achieving the goal of actually replacing a meal. Plus: Flax!
So Happy New Year and here’s one last piece of advice for 2019 that might be needed right around now: I’ve found a bottle of Huel or Soylent also come in handy for a hangover.
Perhaps you’ve been thinking that 2019 is the year that you’ll finally do it: You’ll take control of your destiny and do what’s required so that you can work from home.
Of course, it’s not as if most people who work for someone else can just flick a switch and suddenly have the right to work from home. They have to negotiate with their employers, make their case, and act.
But, if you’ve been on the fence about doing it, one U.S. state might have just the impetus you need to make the jump: $ 10,000 for up to 1,000 people who can show that they work from home for an out-of-state company.
I wrote about this when the Vermont government first approved the program, but now it’s finally here: One of the requirements is that you have to move to Vermont after January 1, 2019, since the government didn’t want to pay people who were already going to live there and work from home anyway.
But that day is finally here today (assuming you’re reading this on the day it was published): New Year’s Day, 2019).
Beyond that, the restrictions seem pretty easy to comply with, assuming you truly and legitimately are working remotely from an out of state company. You have to:
- be a full-time employee of a business “with its domicile or primary place of business” outside Vermont
- perform “the majority of…employment duties remotely from a home office or a co-working space located in the state”
- demonstrate qualifying expenses
In theory, the payment is supposed to reimburse you for the cost of moving to the Green Mountain State (you’ll have to learn that nickname if you’re going to live there). And note that you can actually work from a co-working space, not only out of your house.
That last point seems like a good idea if you’re going to move to a new state; many of us meet people through work, but you’d otherwise literally be working alone and from home. It turns out there are at least 19 co-working spaces in Vermont, spread around a state of only 625,000 people.
That last number — the population of only 625,000 — mostly explains why the state is doing this to begin with.
That, combined with the fact that the population is aging, and that the tax base is dwindling. (There’s a similar program now for people who want to move to Tulsa, Oklahoma, by the way).
So what can you expect if you move to Vermont? In short: a relatively exercise-conscious, healthy living state with a high intelligence and a quaint New England standoffishness, apparently. Over the past year we’ve seen that it’s:
Oh, and it’s cold in the winter–but beautiful almost all year round.
If you’re thinking about it, I’d recommend visiting now or in February, so you’ll see if you’re really the kind of person who can thrive in that climate.
Then check out the fine print — including being aware of just how many people wind up qualifying — and get ready to apply.
What a year it’s been! In 2017 it was market heaven for most investors.
The S&P 500 (SPY) not just delivered more than double its historical return of 9.2%, but did so with a peak decline (from all-time highs) of just 3%. That’s compared to the average intra-year peak decline of 13.8% since 1980. It was one of the best years ever, with the lowest volatility in over half a century.
Well, volatility came roaring back with a vengeance in 2018, with the stock market experiencing not just one, but two corrections. In fact, here’s how the S&P 500, Dow Jones Industrial Average (DIA), Nasdaq (QQQ), and Russell 2000 (IWM) fared by their December 24th lows (so far).
The Nasdaq and Russell 2000 (small caps) were both firmly in bear markets, while the Dow and S&P came within a stone’s throw of ending the longest bull market in US history (technically, it’s still alive).
What’s more, all four major indexes are now negative for the year, which means stocks are set for their worst performance since 2008.
(Source: Wealth Of Common Sense)
But my point here isn’t to point out what a crummy year it’s been for stock investors, but rather to point out three valuable lessons we need to learn from this crazy year. Lessons that can help us not just become better investors over time, but most importantly maximize the chances of achieving our long-term financial dreams.
1. Markets Can Be Far More Volatile Than You Expect
If it feels like this has been an especially volatile time for stocks, that’s because it has been. In fact two weeks ago we had the worst week for the market since 2008, and are currently on track for the worst December since 1931 (at the peak of the Great Depression).
But the thing about volatility is that it doesn’t just come and go over time. Since 1958 market volatility has been cyclical, but trending steadily higher.
S&P 500 Trailing 12-Month Daily Return Volatility
(Source: Ploutos Research)
As Blackstone’s Byron Wien explains, this is largely a function of both the increased popularity of passive investing as well as computerized trading (which is how passive funds invest their funds).
Recent research suggests that 60%-90% of daily equity trading is now performed by algorithmic trading, up from 25% in 2004. Meanwhile, passive exchange-traded funds have directed trillions of dollars into equity markets since 2009, and the percent of the U.S. equity market share captured by passive strategies has increased from 26% at the start of 2009 to 47% as of 3Q’18. All of these trends are likely to increase volatility moving forward.” – Byron Wien (emphasis added)
In addition to market cap weighted index funds causing periods of blind selling regardless of valuations and fundamentals, you also have robo trading programs that are designed to purely sell, or even short stocks, based on certain technical indicators (which also ignore valuations and fundamentals).
As Benjamin Graham, Buffett’s mentor and the father of modern value investing, famously said:
“In the short run, the market is like a voting machine – tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine – assessing the substance of a company.”
As December has shown us, even high-quality companies, with excellent fundamentals and strong growing cash flow, can become deeply unpopular with the market at times of extreme fear. And thanks to nearly half the market being invested in ETFs, and up to 90% of daily trading being run by computer (including based on headlines and even Trump tweets), the market can become incredibly stupid in the short-term, resulting in stock prices becoming completely disconnected from either their fundamentals or the fundamentals of the economy or overall corporate earnings.
As Albert Einstein said, “Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.” Well, this is also true of the market. When investors get scared enough, then the potent combination of blind ETF induced selling and computerized trading can lead to some truly shocking sharp and short-term declines.
Harvard finance professor Xavier Gabaix’s 2005 study Institutional Investors and Stock Market Volatility looked at the October 19th, 1987 (Black Monday) 22.6% stock market decline (the worst in US history). That kind of decline under standard probability theory should occur once every 4.6 billion years. However, the world is far more complex than standard deviation curves would have you believe (Black Monday was a 20 standard deviation event which is essentially impossible).
That’s why the Harvard study concluded that a Black Monday style crash (largely driven by computer trading) is actually likely to occur, on average, once every 104 years. Now that doesn’t mean that such a crash necessarily will occur with predictable frequency. As Mark Hulbert, the author of the Hulbert Financial Digest explains:
“Note carefully that this doesn’t mean a crash this big will occur every 104 years. This instead will be their average frequency over long periods. So it’s possible that we will not experience another 1987-magnitude crash in our lifetimes – or that another will occur today.” – Mark Hulbert
But while a 20+% one day crash (that plunges us instantly into a bear market) are extremely rare (but far more likely than most investors realize), severe 10% daily drops are to be expected, per Professor Gabaix, about every 13 years.
(Source: Market Watch)
5% market declines are likely to occur 61 times per century, or on average once every 1.6 years. As Hulbert points out, the last 5% one-day market decline was in August 2011, and the last 10% market decline was over 30 years ago. Thus we’re actually overdue for a single-day stock market decline that would instantly put us into a correction (or possibly a bear market).
But it’s not just wild one-day broad market declines that have investors spooked these days. Another lesson from 2018 is that even when the S&P 500 isn’t in a bear market, your portfolio might be.
2. Your Portfolio Isn’t The Stock Market And The Market Isn’t Your Portfolio
While the stock market never officially entered a bear market (defined as S&P 500 closing down 20% or more below its all-time high), on December 20th 60% of the S&P 500 companies were in one (a figure that rose to about 66% by December 24).
What’s more as far as quarters go, as of December 21st, the S&P was having its 14th worst quarter ever. On December 24th, the biggest Christmas Eve drop in history, the quarterly performance of the S&P 500 became the 9th worst ever.
S&P 500 Worst Quarters
(Source: Wealth Of Common Sense) – data as of Dec 23rd
But as bad as Q4 has been for the broader market, as we’ve just seen, individual stocks often faired far worse. On December 21st, the Russell 2000 (small caps) was suffering its fourth-worst quarter since its inception in 1979.
Russell 2000 Worst Quarters
(Source: Wealth Of Common Sense)
When the market appears to have bottomed December 24th (yet to be determined), it became the 3rd worst quarter ever for US small caps. The point is that, depending on what you actually own, even standard corrections can be far more painful at the individual level.
Which brings us to the most important lesson of all from this memorable 2018.
3. If Your Portfolio Has A Critical Point Of Failure, It Will Eventually Fail Critically
Let me be very clear that I am NOT trying to scare anyone out of long-term investing. That’s because the current economic and earnings fundamentals are still pointing to positive growth over the next year or two, and today’s valuations are extremely attractive.
(Source: FactSet Research)
For example, right now most analysts expect about 8% EPS growth for the S&P 500 next year. Even energy stocks, despite the fastest oil crash in decades (43% in two months), are expected to generate nearly double-digit earnings growth.
Today the S&P 500’s forward PE ratio is just 14.2, and most sectors are historically undervalued, especially compared to a year ago.
(Source: Fortune Financial Advisors)
What do today’s historically attractive valuations mean in terms of future returns? Well, over the short-term (1-year), it’s hard to know. But historically a forward PE of 14.2 has resulted in about 17% 12-month returns. But over the long-term (five years) total returns become far more predictable and today’s valuations point to roughly 15% returns.
Don’t trust forward PEs? Well, then let’s use trailing earnings. The S&P 500’s TTM PE is currently 19.1. The market’s 20-year average TTM PE is 19.4, which means that earnings growth next year should drive at least modest returns, even if stocks remain just fairly valued. And keep in mind that the stock market is actually one never-ending cycle of alternating greed and fear. This is why just as stocks tend to overshoot to the downside (as they just did), they also overshoot to the upside.
That’s why since 1926 the average 12-month post-correction rally (from the low) has been 34% (not counting dividends). In today’s market that would equate to a 36% total return for stocks by the end of 2019 (from December 24th close). Of course, that is merely a historical average. Historical data only shows what stocks are likely to do, and is not a guarantee of what they will do (no one can make such guarantees).
But remember those scary quarterly declines for both the S&P 500 and Russell 2000? Well, here’s the good news. After such a major shellacking, stocks almost always rally strong and hard in both the short- and long-term.
(Source: Wealth Of Common Sense)
With the exception of 2001 (9/11) and 2002 (tech bubble bursting), even small-cap stocks have never followed such a miserable quarter with a negative 12-month total return. And over three and five years periods following such quarters, negative returns have literally never happened. That’s not to say that such a thing is impossible, just highly improbable unless you get a perfect storm of events occurring. One possible catalyst for stocks to still be down in 12 months might be the US defaulting on its debt during a failed debt ceiling showdown which Goldman Sachs (GS) has warned is coming between August and October of next year.
But barring an extremely stupid and catastrophic blunder by our government, stocks are likely to be up in a year, potentially a lot, thanks to today’s highly attractive valuations.
But wait a second?! Didn’t I just warn investors that Wall Street, due to the infinite stupidity of investors and the dominance of trading by computers, can be crazy volatile? Didn’t I point out that we’re overdue for not just a 5% single market decline but even a 10% single day bloodbath? Indeed I did.
The final lesson of 2018 isn’t that investors can, or should, attempt to avoid volatility, but rather safeguard their portfolios against it.
Believe it or not, stocks haven’t been the best-performing asset class in history despite gut-wrenching volatility but because of it. That’s because most of the market’s returns come from just a handful of its best single day gains, which are almost all clustered during times of peak downside volatility.
Missing just the market’s best 30 days over the past 20 years would mean that an investor in the S&P 500 would have given up all positive total returns. Miss just 50 of the best days and over 20 years, your portfolio would have declined by 60%. For context, the peak decline during the Great Recession was just 57%.
What this effectively means is that good market timing is essentially impossible, and one of the most destructive things you can try with your portfolio. Literally, billion-dollar hedge funds and large investment banks (like Goldman) have spent fortunes on trying to perfect market timing systems, including using an army of quants and AI-driven algorithms. None has yet succeeded in mastering market timing (if it had, it would own most of the world by now).
The key to harnessing the awesome wealth-building power of the stock market is not to avoid short-term volatility, but rather to avoid a large permanent loss of capital. Or as the infinitely quotable Warren Buffett put it, the key to good investing is to remember two important rules.
“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No 1.” Now as always Buffettisms need to be clarified. The greatest investor in history isn’t literally saying that you can avoid losing money on every single investment you make. Rather he means all investors need to ensure their portfolios lack a critical point of failure, which results in disastrous mistakes, like selling perfectly good investments during a bear market, at ludicrously low valuations. Or to put another way, you need to avoid being a forced seller of quality stocks during a market decline.
There are two critical points of failure for most investors. The first is the use of margin. As the Oracle of Omaha explains:
“My partner Charlie says there is only three ways a smart person can go broke: liquor, ladies and leverage…Now the truth is – the first two he just added because they started with L – it’s leverage… It is crazy in my view to borrow money on securities… It’s insane to risk what you have and need for something you don’t really need… You will not be way happier if you double your net worth.” – Warren Buffett (emphasis added)
Now I too have made the mistake of falling under the siren song of margin. In fact, that’s why for the next 15 months I’ll be unable to participate in the glorious bargains all around us because I have to eliminate my leverage to zero and start building up cash reserves. I’m very fortunate that my dangerous dabbling with leverage isn’t likely to actually force me to realize terrible losses on otherwise great stocks. My best friend wasn’t so lucky. In the last 2 weeks, margin calls have forced him to realize losses that wiped out two years’ worth of gains. The price I’m paying for my mistake is missed opportunity. His is being forced to lock in catastrophic paper losses on perfectly good and ridiculously undervalued blue-chip dividend growth stocks.
While margin isn’t necessarily of the devil, Buffett’s warning against it (which I now heartily endorse and will personally live by going forward) pertains to the vast majority of people. Remember that leverage amplifies not just losses and gains, but emotions. And it’s emotions, particularly severe fear during downturns, that is the greatest single enemy of most investors.
Which brings me to the biggest point of failure for most people (even those who wisely avoid margin). That would be the wrong asset allocation.
Since the first rule of investing is to avoid a permanent loss of capital, you need to be able to avoid panic selling even when stocks fall to shockingly low levels (and with sometimes terrifying speed). This is where the right capital allocation comes in. Asset allocation simply means your portfolio’s mix of cash/bonds/stocks.
The right asset allocation is essential to being able to emotionally and financially endure the market’s inevitable future declines. The right asset allocation will differ for everyone based on your risk tolerances, goals, time horizon, portfolio size, income, savings rate, etc. You can talk to a certified financial planner (a fee-only Fiduciary that can’t peddle you expensive mutual funds they get kickbacks on is best) to determine the right asset allocation for you.
Note that your asset allocation will change over time, and might require periodic portfolio rebalancing (as stocks and bonds in it rise and fall and your life circumstances change).
Here’s an example of the standard asset allocation Schwab recommends for the typical retiree. Those are some good overall asset allocation recommendations, but here’s the most important thing to remember during corrections and bear markets.
Cash is king. Or more specifically, cash is what pays the bills during retirement (and allows you to buy quality stocks at fire-sale prices). Since the average bear market lasts for three years (before stocks are back to all-time highs), you want to have three years’ worth of cash available to supplement social security and any pension you may have. What if the bear market is more severe and longer than average?
(Source: Moon Capital Management)
That’s certainly possible. The longest recovery time (from the bear market low to fresh all-time highs) was 69 months or nearly six years. This is where bonds come in. Not just do they provide income, but due to falling interest rates and a flight to safety, bonds tend to rise during a bear market.
So if you are tapped out on cash equivalents (like Treasury notes and money market accounts), you will likely be able to sell bonds at a profit to cover your expenses. And since cash doesn’t decline in value, and bonds tend to rise during a big decline, your cash/bond allocation will help decrease your overall portfolio’s decline, making it easier to avoid panic selling your stocks (emotional point of failure).
For most people being 100% in stocks is a bad idea. Unless your portfolio is large enough to live entirely off safe and growing dividends during retirement (the goal of my new Deep Value Dividend Growth Portfolio), you will need some cash and bonds to be able to take full advantage of the wealth-building power of stocks. Remember the best stock investing strategy on earth is useless if you can’t emotionally or financially stick to it through the entire market cycle.
During corrections (or possibly a non-recessionary bear market) like this, peak market declines and recovery times are shorter than during a typical bear market. So use how you’re feeling now to test your risk tolerance and determine if your asset allocation is actually right for you.
If you’re losing sleep now, when stocks appear to have bottomed after merely a 19.8% decline, you’ll want to make sure that you are less exposed to stocks when the real bear market finally arrives. That can help you avoid emotions (or financial necessity) being your critical point of failure, no matter how unpredictable or crazy the infinitely irrational (in the short-term) and increasingly computer-driven market becomes.
Bottom Line: A Crazy 2018 Serves To Teach Valuable Lessons For 2019 And Far Beyond
I’ve been investing since the age of nine (23 years). And I’ve been a professional analyst/investment writer for four. Yet 2018 has still been eye-opening for me, highlighting the fact that the only predictable thing about Wall Street is its unpredictability.
Don’t let 2017’s freakishly small drawdown fool you. Volatility is not just normal, but has been gradually rising over time, thanks to the growing popularity of ETFs and computerized trading. In the future, we can expect not just similar volatility, but possibly some REALLY wild short-term swings, including a 10% single-day market flash crash that’s now historically overdue.
And while the media may fixate on the broader market (S&P 500 most of all), the fact is that even a moderate downturn, like this correction, can translate into a bear market for even high-quality stocks (including blue-chips and dividend aristocrats and kings) and individual investor portfolios.
But don’t let high volatility and the occasional bear market scare you away from the most time-tested and effective way of building long-term wealth ever discovered. The market’s great historical returns are not despite volatility, but a direct result of the very same short-term gut-wrenching declines investors so fear and hate.
That’s why the most important lesson from this wild 2018 is that risk management isn’t just important, it’s the most critical part of your long-term investing plan. The best investing strategy in the world will prove utterly useless if your emotions or finances don’t allow you to stick with it long enough to work.
Investors need to make sure their asset allocation is right for them. This means holding the right mix of cash/bonds/stocks to both meet their long-term financial goals, BUT also stay calm during the inevitable correction and bear market. And if you want to use margin, just remember to use it with EXTREME caution because it’s a powerful tool that can both greatly increase wealth and also destroy it with alarming speed and violence.
Ultimately the goal of every investor must be to build a bunker portfolio that is based on the motto “hope for the best, but plan for the worst”. While it’s popular to speculate about what will happen in the next quarter or year in terms of the economy or corporate earnings, the fact is that no one knows what craziness the market will bring in the short-term.
So rather than obsess over market timing (historically impossible even for the largest financial institutions) and trying to avoid short-term volatility, investors need to be prepared not just to survive whatever Wall Street throws at you but actually profit from it. Remember that every crisis is also an opportunity, and fortune favors the prepared mind.
If you are careful in how you construct your portfolio, then you can benefit from the fact that bull markets make you money, but in the long-term, it’s bear markets that make your rich.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
In 2018, travel and tourism was a ~$ 1.5 trillion industry.
By 2028, it’s projected to grow to $ 2.4 trillion. And a good chunk of those contributing to those trillions are Millennials–a group that has now become the largest generation of travelers. In fact, Millennials (aged ~21-38 in 2019) now represent $ 50 billion worth of travel consumerism in the U.S. alone.
So what are the biggest things Millennials want when it comes to travel? Valentino Danchev, founder and CEO of travel marketing firm Fidelis Marketing Group, says there are a few standout things:
Millennials prefer authentic experiences over perfectly curated, manicured ones. According to Danchev, Millennials want “boutique travel experiences that will transform them from the inside out.”
In other words, they don’t just want to hang out all day by the pool. They want transformational travel–the chance to learn, grow, and explore. They like experiencing local culture in as real a way as possible, so facilitate ways they can do that. Prioritize interactive experiences over passive ones–for example, a small, hands-on cooking class with a local person instead of a day trip to the most famous museum in town.
Don’t be shy about protecting the environment, either. Millennials are the most environmentally-conscious generation in recent history–a full 73 percent are willing to spend more on sustainable goods (as opposed to 66 percent of non-Millennials).
So be green, and then don’t keep it a secret. Make it part of your marketing. Fidelis’s own Grand Luxxe resorts in Mexico, for example, have received a Distinction “S” recognition for environmental sustainability from UNWTO, EarthCheck, and the Rainforest Alliance.
When looking at what to highlight, don’t focus solely on your amenities. Yes, of course you want to show off your beautiful pool–but be creative in the activities you offer and show people enjoying, because those will often be equally as important to Millennials.
Danchev suggests courses or other immersive activities in fields like art, fitness, or entertainment. Think a craft beer-making workshop in Europe; a wine-and-painting night on the roof of your hotel where guests get to meet one another; a yoga class on standup paddleboards. You could also liaise with a local volunteer site to give travelers the chance to volunteer for a half- or full-day (being on a build site for Habitat for Humanity, for example).
If I have a question for a company, I’d much rather ask them via their latest Instagram post than scour their site for contact info. I myself used to be the social media coordinator for a large company and know that not only can social media be an efficient way to get ahold of someone, but I’m probably going to reach someone like me, which is appealing.
According to Danchev, you must have a high-quality website if you want to compete for the trillions of travel dollars up for grabs, and you want to back it up with high-quality social media. Statistics back up his recommendation: 62 percent of Millennials are more likely to be loyal to a brand with an interactive social media presence.
If you don’t have a social media presence, consider having a chat feature on your website to field questions. You’d be surprised at how many more interactions you’ll get that way than waiting for Millennials to email or call you.
In the end, generational distinctions like Millennials and GenX are arbitrary. Remember that people are people, and people love to travel. Remember to enjoy the journey yourself, and that will come across in your marketing.
“Traveling – it leaves you speechless, then turns you into a storyteller.” – Ibn Battuta
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To call 2018 a bad year for shareholders of General Electric (GE) would be a grave understatement. Throughout the year, the company has undergone expanded investigations by the government, shuffled top management, sold off various assets, and, on multiple occasions, revise down performance expectations before ultimately eliminating them for the foreseeable future. By practically all accounts, the industrial conglomerate has been hit harder, and in almost every way possible, more than it has ever been hit before in its more than 100-year history. Now, as 2019 approaches, the big question facing shareholders is “what’s next?” While it’s possible 2019 will bring with it even more pain than 2018 has, the more likely scenario is that the firm will use the New Year to restructure its operations (out of bankruptcy) and will, if all appropriate steps are taken, prepare for a turnaround that could bring to shareholders significant value.
Expect the breakup to occur
One thing that very few people will disagree with, I think, is that a breakup of General Electric must occur. The business has become so large that it is, from a management and capital allocation perspective, inefficient. When you have so many divisions, figuring out where and how to deploy limited capital can be hard, while as separate entities, the fact of the matter is that individual management teams can focus on their core operations. By breaking up, the firm will also, for the most part, rid itself of GE Capital, which is likely where any currently undisclosed problems probably reside.
As management indicated while John Flannery was still General Electric’s top dog, I fully expect the company to divest of itself its GE Healthcare segment in some way, shape, or form. Management has indicated that this will take place through an IPO, but it’s expected that shareholders might still retain some of the business, though all of this could change over time. We already know thanks to an announcement earlier this year that the firm is likely to continue winding down its ownership in Baker Hughes, a GE Company (BHGE), by selling off its stake in the firm, but a big question here might relate to timing. Since the end of September, shares of the oilfield services firm have plummeted 34.6%, so while the company has struck a deal for a sale of some of its stock, I suspect that additional sales will only happen following a recovery in unit price.
Following the spinoff of its Transportation segment into a commanding interest in Westinghouse Air Brake Technologies Corporation (WAB), also known as Wabtec, next year, I believe management will likely begin monetizing its interests there as well. Personally, I see monetizing both Wabtec and Baker Hughes further as a sizable mistake given the future outlook I have for both energy and transportation in the US, but the cash generated from these deals will allow management to reduce debt and/or to invest further into what operations are left.
One thing I would love to see transpire is the sale or spinning off of General Electric’s Power segment. At this time, the firm intends to separate that into two different sets of operations, which may be setting the stage to sell or spin off at least one of them. I see this new decision under CEO Culp as a sign that he understands Power is General Electric’s most significant problem at the moment, and since plans to retain power occurred while Flannery was still in charge, I have modest hope that management will divest of the segment or at least part of it.
Don’t expect a distribution hike
During its third quarter earnings release earlier this year, management made a significant change to General Electric’s dividend policy. They said that, effective this month, the company would only pay out $ 0.01 per share each quarter as a distribution, down from $ 0.12 per quarter previously. This decision, though controversial, will result in the firm’s annual distribution falling from $ 4.175 billion per year to just $ 347.925 million per year. While I would have loved to see it cut all the way to zero so that management would have even more cash to put toward debt reduction and investing in core assets, the savings seen are material regardless.
Investors hoping for the distribution to recover in the near future are, I think, engaging in wishful thinking. As of the end of its latest quarter, General Electric had cash, cash equivalents, restricted cash, and marketable securities worth $ 61.69 billion, which is a lot to work with, but it also had $ 114.97 billion worth of debt (inclusive of $ 2.70 billion of non-recourse debt). Admittedly, debt was down from the $ 134.59 billion the firm had at the end of its 2016 fiscal year, but as assets come off the books, debt also must be reduced. Some of this could be taken off by spinning off various assets (for instance, the firm could probably spin in the low tens of billions of dollars off with its Healthcare segment if it so decided), but it’s likely that a lot of the work toward reducing debt will be tied to asset sales and the cash that otherwise would have been allocated toward its quarterly dividends. Until management can reduce debt, it’s unlikely we’ll see a hike, and that probably won’t occur until, at the very best, late next year.
Where does debt need to be in order for management to consider raising its distribution again? The short answer is that it’s anybody’s guess, but more likely than not, it’s by whatever amount would allow the firm’s credit rating to rise back into the As. As you can see in the image above, the firm’s credit rating, as calculated by Moody’s (MCO), used to be Aaa until it fell in 2009. Since then, the rating has fallen further and, today, the firm’s long-term debt rating is Baa1. This still places it in a category known as “investment grade,” as the image below illustrates, but the drop, even though it’s not on watch for a further downgrade at this time, will weigh on financing options until the situation can be improved.
A lot of cost-cutting and wheeling-and-dealing
If General Electric is going to not only survive but thrive for the long haul, there’s no doubt the firm will need to cut costs. This is especially true if the company elects to keep its Power segment, but irrespective of it, certain corporate costs will need to be slashed as the firm works to spin off its assets. Although management has, in recent times, done well to push for cost cutting, when the company actually starts to break up, we will know whether, and to what extent, this is actually true. One strategy that could work quite well could be what the firm struck with Baker Hughes. As part of its share divestiture, the two companies have entered into a series of joint agreements that will keep their operations intertwined through things like guaranteed low pricing and joint buying of key assets. I suspect this kind of wheeling-and-dealing to continue as the conglomerate sells off more of itself.
Based on the data provided, it’s clear that 2018 has been awful for General Electric, but investors who are expecting more pain to follow through 2019 might be on the wrong side of the bet. If 2018 was the crash for the business, 2019 will likely be the start of a true recovery for the firm, especially if management can work to restructure the entity in the way that they should. Obviously, whether the firm is successful or not, investors should expect a tremendous amount of volatility during the process, but that could present opportunities to buy and sell at attractive prices for the emotionally-detached investor.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
The Overwatch League announced another six teams that will compete in its 2019 season. The newcomers join the 12 teams of the 2018 season and the two newly announced Atlanta and Guangzhou, China, teams, bringing the new team total for 2019 to 20.
The six new teams include Chengdu and Hangzhou, China, Paris, Toronto, Vancouver, and Washington, D.C. The six teams also mean six new investors who own the teams. Beyond the new investors, the new teams mean the 20 teams of the 2019 season will be outside the U.S. This will likely help the league extend its global reach, especially in China which has largely embraced e-sports. It’s already seen a great deal of success during the inaugural season, which ended with a sell-out crowd at Barclays Center for its finals that had a global viewership of nearly 11 million.
“The Overwatch League’s inaugural season was a great success,” Bobby Kotick, CEO of Activision Blizzard, said in a release. “This past season alone, fans spent 160 million hours watching the leading Overwatch players in the world compete. We are thrilled to add eight new outstanding team owners from Europe, China, and North America to our Overwatch League ownership group. We now have 20 of the very best owners in professional sports.”
The coolest thing about Infiniti’s newly redesigned QX50 crossover has nothing to do with its looks, its technological goodies, or even its ability to (kinda) drive itself. No, the best thing about this vehicle is sitting under the hood, and it’s got an important message for the drivers of Earth: Reports of the internal combustion engine’s demise might be a tad premature.
That’s because this compact five-seater features the world’s first variable compression engine. We’ve known about this clever system for a few years, but now it’s finally entering the market.
The trick lies in the engine’s ability to change the compression ration, which determines how tightly the pistons squeeze the air and fuel before the spark plug ignites the mixture (that’s the combustion bit). It does that by changing the angle of a center link, which rotates around the crank shaft and separates upper and lower piston links, and thus the distance the piston travels up the cylinder.
If you didn’t catch that, all you need to know is that Nissan, Infiniti’s parent company, has developed an engine that can optimize its behavior for whatever you want in the moment: performance or fuel economy.
The somewhat Rube Golbergian contraption smacks of added complexity, but the company’s engineers have been working on the VC-Turbo, as the call it, for 20 years, and swear it will stand up to hundreds of thousands of miles of use. The automaker plans to eventually distribute the engine to other models across its Nissan and Infiniti lineups. As that happens, it could stave off the advent of electric propulsion, or at least ease the transition.
The QX50 has some other goodies worth mentioning. It’s the first Infiniti to offer Nissan’s ProPilot semi-autonomous system (which was already available on the Leaf and Rogue). Like Tesla’s Autopilot, ProPilot can control braking, acceleration, and steering, tracking road markings to keep in its lane and radar to monitor its proximity to other vehicles.
Like most of these systems, it really only works on the highway, and still requires hands-on participation from the driver (otherwise it beeps aggressively), but it has an easy to understand user interface, a bonus in the too often murky world of semi-autonomy. It also capitalizes on Infiniti’s steer-by-wire technology to generate more precise control of the vehicle’s reactions to obstacles and other vehicles.
If you’re eager to take home the new engine—then let it drive you around—you’ve got until late 2018 to save up $ 35,000.