It has been in the past that the end of the Presidency of one term typically signals a downtrend or a steep correction. However, one of the legacies of the Obama Administration was an unprecedented 8 year history of new highs and a general uptrend market after the stock market crash of 2008. President Obama implemented many financial regulations to prevent the unravelling of the financial markets, one of which was the Dodd-Frank Act and Consumer Protection Act in 2010. However, as we enter a new era, it is possible that the events leading up to 2008 might again be set in motion as it has been reported that President Trump would repeal sections of the Dodd-Frank Act but possibly separate commercial banks from investment banks to reinstate the Glass-Steagall Act, in which sections 20 and 32 prohibit any member bank of the Federal Reserve System from being affiliated with a company that has engaged principally in the issue and underwriting and distribution of securities. What that means is that these sections had been initially implemented (until being repealed in 1999) to prevent banks from selling their customers high risk securities in which they had a clear conflict of interest. The repeal of these sections has often been attributed to one of the key causes of the 2007-2008 financial crisis.
However, many critics believe that President Trump will simply repeal Dodd-Frank and not implement Glass-Steagall and might not have the support to back this legislation. (As a note, members of Congress did not vote to re-instate sections 20 and 32 of the Glass-Steagall Act to be part of the newer Dodd-Frank Act when it passed in 2010).
If there is a continuation of the deregulation of financial institutions, what most likely will transpire is that we will potentially see an initial uptrend into new highs in the stock market, especially in regards to the banking sector, with an inevitable cliffhanger that might also potentially have larger ramifications than the 2007-2008 financial crisis. This is obviously not something anyone would want - as any major movements in the U.S. stock market have global, economic repercussions that will negatively affect both Asia and Europe.
Last year in March, I extrapolated a surge into new highs in the SPY, and yesterday it finally met its target area of 235.43. If we were to continue on the path that the Obama Administration set out, confidence in the markets would surmise a steady bull trend into new highs after a period of correction.
My extrapolation in March 2016 that the SPY would reach new highs by Dec-2016-Feb 2017 from the buy zone of 184-191.
Target met. SPY reached 235.43 yesterday on Tuesday, Feb 21, 2017.
However, if we look at the pattern occurring in the stock market, financial institutions are on a rapid, almost desperate surge that is quickly reaching the resistance without a period of correction. A correction area is generally considered a good sign because it allows for a period of consolidation in which there is a slow and steady rise to new highs, but because the period of consolidation did not really take shape this time around, it signals a race to the top, with a possible, steeper correction that could be representative of a downtrend in the future. Warren Buffett has a popular quote attributed to him: Be fearful when others are greedy and be greedy when others are fearful. This simply means don't buy the top, buy the bottom.
Goldman Sachs (GS) is moving closer to the key resistance area of 257.29, in which a possible correction might occur.
JP Morgan (JPM) is also potentially moving into its key resistance area at 101.46 by this fall.
We have to remember that much of the financial crisis of 2007-2008 did not happen overnight. Beginning with the Reagan administration in the 1980s, there has been a continual deregulation of financial institutions, exacerbated with an increasing pay gap between workers and corporations and a continual lowering of corporate taxes. This lead to a growth in poverty, inflation of the dollar, and people generally living on credit cards and not being able to afford basic necessities. It has been reported in the media that 63% of Americans would not be able to pay a $500 emergency bill.
Examining different sectors, there seems to a general trend of reaching new highs by Aug-Oct 2017. However, this is the point in which a new pattern might emerge, and one that could be very different from the one we had been accustomed to in the last eight years.
Alphabet (GOOG) is also potentially set to reach its key resistance area of 894.48 by this fall/winter.
FTSE 100 (FTSE) held the 100% fibonacci retracement level at 6741.65 and further moved upwards without a period of consolidation, which could potentially mean that it might potentially hit its key resistance by this fall.
EURGBP hit its target area of 0.86-0.88 before making a correction in the extrapolated correction area between 0.83-0.87. Next few weeks will determine it is able to hold onto the 50% fibonacci retracement area of 0.835.
Even if all targets have been hit for now, I think a cautious outlook would be more fitting until President Trump and his team make it clear that their intention is not to revert back to Reagan Era of financial deregulation.
By Sierra Choi
Disclaimer: This post is not intended for any stock market, investment nor financial advice and for educational purposes only.
I remember in early 2007, I was at a videobloggers' event in San Francisco and one of the girls at the event asked me, Do you twitter? She explained how much easier it was to send out a text to all her friends so that they could meet at a specific place, instead of sending out individual texts to everyone we knew. Of course, that feature had been replaced by group chat text messaging apps, and would eventually be eclipsed by Foursquare, which lets people find places to eat and monitors your location data.
Since then, Twitter has mainly become a source for celebrity news gossip, and an app that lets politicans, celebrities and news media personalities take positions in political and social issues, whilst the majority of their time spent has migrated to other apps like Instagram, in which they use a kind of publicity and marketing tool.
One of Twitter's most loyal and controversial users: President Donald J. Trump.
However, there are advantages to Twitter that other apps, like Facebook or Instagram don't have, it's a place where one could be completely anonymous, or at least have the illusion of being anonymous. The problem for Twitter has been declining growth, spam accounts, its revenue model and monetisation policy.
One of the things I think are key are about Twitter is that often, people can attain first-person accounts of news, events and insights before the major forces in the media reports on them, similar to South Korea's Ohmynews! where citizens take it upon themselves to upload videos or film news segments from their mobile devices. Twitter was the first site where I had access to what happened during Hurricane Sandy from the photo documentation by a person who was in the area as it was happening, and it was a more authentic coverage of the event than any other news agency at the time.
I also don't follow any celebrities on Twitter, however, I follow other "anonymous" people who work on Wall Street, in finance, venture capital and trading houses. Wall Street has always had sort of a bad rep, especially in all the major media outlets, and it was heightened after the global Occupy Wall Street movements. However, what most people weren't aware is that many people who worked on Wall Street or in the financial markets were often critical of their own organisations, and Twitter gave them a voice to do so under anonymous accounts.
It's not that these men and women who worked for financial institutions were all evil and debasing the population with their risky derivative products; they often felt powerless, trapped within a system of corruption, and unable to speak out for fear of retribution, losing their jobs or becoming blacklisted. After spending half a year engaged in stock analysis on Twitter, I was able to follow all the key people who often gave intriguing insights into their own industries. There were many alternative news publications that I began to follow as well, such as zerohedge, whose editors kept a low profile and whose identities were secret before it was unfortunately revealed in the major media outlets who they were last year.
What I liked about Twitter that I couldn't do on Facebook and Linkedin, was that it gave me candid perceptions into the psychology of people who weren't speaking from their public voicebox, but what they were really thinking. I made some friends as well, people I would've never met from the circles of friends I had on Facebook or even on Linkedin, and became friends with a writer and mentor who published many books on financial institutions and even sent another fellow anon a gift for her funny insights.
If we examine social media today, they are pretty much all turning into each other. Since Linkedin's recent design change and UI, it is fairly indistinguishable from Facebook. Facebook has now entered the news arena, and has the power to influence people's opinions through its curation of the news, despite its criticism of fakenews to alter election results.
Through these polymorphisms of social media, Twitter however, has not changed. It is essentially the same as it was when it launched in 2006, and there is something nostalgic about that, but I also think that it could add some features as well to supplement its monetisation policy.
One thing for investors is that like many other social media, Twitter has a problem with spam, fake accounts, and identity verifications. Its best feature - anonymity - is also its worst feature. Whereas Facebook, Linkedin and Airbnb use authentic personalities and identities, Twitter does not. This has been an disadvantage to investors. I see several features that could authenticate people's personalities whilst still giving them an anonymous platform to speak from.
Twitter teamed up with a French bank to launch S-money in 2014 so that people are able to directly send money to Twitter users. However, the problem with this is that users have to also download a separate app then connect the two apps which is cumbersome, slows down the speed of the apps, and a bit of a hassle. Twitter could instead, launch its own TwitterPay, so that users can use one platform to send and receive funds to other users whilst retaining their anonymity.
Last year in 2016, iPayYou launched which allows Twitter users to send each other bitcoin. Twitter could bypass all these secondary apps and launch its own service, TwitterPay, that could act as a broker, escrow service and payment service between banks and users on one platform.
TwitterPay. As I mentioned before Twitter allows people to meet people outside their own social circles, and perhaps even make a friend or two. I think similar to Reddit Gifts, TwitterPay could facilitate eCommerce and become its own financial platform where people can send each other gifts. Integration with Amazon's wishlist or even Etsy's wishlist or any other wishlist from multiple eCommerce platforms could allow strangers to peruse your wishlist and be able to make purchases to send to you. Obviously, no one wants to give away their privacy and personal details - and these details, such as name and address could be integrated into the Twitter platform, where no other user has access to, but only revealed to the retailer who has access to the name and address of the recipient and the name and address and credit card information of the sender. Therefore, let's say, I find a writer on zerohedge or another stock market trader or even a person I find funny, why not send them a gift for their interesting contributions, like a book from their Amazon wishlist? I can peruse their wishlist, and through TwitterPay, can send them a gift with a note that it was from my Twitter account, but our identities are kept anonymous. In this way, TwitterPay can evolve towards becoming a kind of broker, escrow service and financial institution that has access to people's financial information and details, and perhaps even evolve into something like AliPay, which gives loans to small businesses.
TwitterFund. Many people from fundraising apps often use twitter to tell people they are raising funds. One of the most effective ways to raise funds on Kickstarter or any other crowdfunding platform is through news coverage, by getting writers from major media outlets to write about your fundraise or by having editors and writers generally sharing your fundraise on the internet through blogs or on other social media platforms. However, because so much is filtered through Twitter, why not have its own crowdfundraising ability by allowing non-profit organisations to be able to directly raise funds on Twitter, instead of filtering it through PayPal or another platform? Therefore, let's say I am part of an organisation, WomenInVentureCapital, and we are a nonprofit organisation raising funds for the education of women in third world nations, I could link a TwitterFund in my account, a page devoted to its fundraise, which would be similar a page on GoFundMe or Kickstarter, that allows people to make direct contributions through TwitterPay and be able to comment on it. The advantage is that multiple people in an organisation can link to the TwitterFund account, so that it would appear to be a team effort instead of just being one page of interaction with comments. In addition, another major advantage would be that non-profits can list their tax exemption status so that, unlike donating to GoFundMe or Kickstarter, "anonymous" donors can use these donations for a tax deduction whereas on other crowdfunding sites, people are not able to receive tax deductions. Therefore, TwitterFund doesn't take a percentage of the funds raised, but there is only a minor charge for using TwitterPay. For others who are not a verified non-profit and simply want to crowdfundraise, Twitter could revert to the Kickstarter or GoFundMe revenue model.
TwitterChannel. The nice thing about Twitter is that you can curate your own feeds, by putting users into different public and private lists, but sometimes I like to look at curated content from others. For the demographic that mainly follows CelebrityWorship, why not have a curated TwitterChannel, that is sectioned by interest or news? For example, a TwitterChannel of members of all the major news outlets vs. a TwitterChannel for interesting users who report from their industries anonymously? Since Amazon, Alibaba and Netflix have also become studios and production companies, why not Twitter? The advantage would be that Twitter would become the underground news channel with authentic first-hand accounts of an event that people watch outside of the major news outlets, and unlike Facebook, could become its own factchecking agency, except that the people involved would be its own users.
TwitterPro. Twitter already has a twitter for business site, but aside from ads and analytics which Hootsuite does better and the latter which also integrates all social media accounts onto one platform, TwitterPro could be a business account for companies that engage in customer service. To a degree, many companies already use Twitter to interact with their customers. Twitter could make this a paid subscription service so that business owners and companies can easily interact with their customers and give instant rebates, coupons, refunds etc. to customers who interact with them on Twitter. For restaurants, beauty salons and cafés that use TwitterPro, users could also make reservations and purchase pre-paid discounted meals and services only available through Twitter. Again, these services can be facilitated via TwitterPay.
The all-in-one eCommerce wishlist: TwitterWishList. TWL could connect directly with businesses and retailers and be the intermediary with users to buy, receive and send products and services whilst users remain "anonymous."
TwitterWishList. Twitter has recently created a wishlist hashtag for Amazon users and vice versa. However, this could be taken one step further. TwitterWishList could be a comprehensive wishlist feature that would allow users to voluntarily insert details about their real name and location without giving up "anonymity". Users can integrate many wishlists from other eCommerce sites, or even find products they like online, and link the direct page to add to their TWL page in their profile. These details will only be available to the specific user, to Twitter, and to the retailers involved. To keep anonymity, Twitter will either have to have an agreement with all the retailers not to release the name and location of the recipients who receive their gifts from the WishList by another Twitter user even of that user was the sender or this can also be automatically achieved if the funds received through TwitterPay is held in an escrow account, and the gift is technically sent to the recipient through Twitter and not the Twitter user, although it would be attributed to the latter. In this way, users are able to utilise all the features of eCommerce companies, whilst retaining their anonymity and private details from other users.
Play video here.
I remember in 2009, when the pandemonium in Iran had begun and I was watching YouTube, and a woman was narrating in Persian (and someone else had bothered to upload the video with English subtitles) from the rooftop of her building, watching from the window as chaos was ensuing below. And I thought to myself, it would've been so nice to send her a care package from America; to let her know that the politics of war and instability we had instilled in the Middle East were not representative of all the American people. I didn't speak her language and obviously, there was probably no chance we would ever meet, but what she said had a profound effect on me. At the time, there was no way to cross those boundaries of language and national divides, but I think Twitter could become the app to build that bridge, between nations, between different industries, and between people of different social circles who would otherwise, never have a chance to connect.
By Sierra Choi
Out of curiosity, I happened to be browsing Snapchat's IPO filing documents over the weekend. Snap Inc. is one of the most anticipated IPOs since Twitter in 2013. Many unicorn companies have been delaying the IPO for as long as possible as their strategy (eg, Uber Technologies) but Snapchat, under the auspices of Benchmark Capital, has decided to launch their IPO at a time when they are far from profitable.
The ones at a clear advantage in this IPO are the ones with preferred Class B voting stock, in which Benchmark Capital Partners (22.8%), Lightspeed Venture Capital (15%) and Mitchell Laskey, of Benchmark Capital (22.8%) own the majority of stocks with a liquidity preference.
My experience with Snapchat was like a fling that never materalised into a proper relationship. I had downloaded the app in early 2013, found the app quite cumbersome and buggy, got bored, then deleted it after a week. It was rather different from my long-term relationship with other apps like Cymera or KakaoTalk, which was fun to use with many photo and augmented reality filters to keep myself busy during those long queues at the bank or the waiting for the loo at a popular restaurant or in transit, where the only thing one could do was listen to music or look at one's mobile device.
Anyhow, it's no surprise then Snap Inc. has integrated many features of popular Chinese and Korean photo editing apps and messaging apps that utilise augmented reality to drive its advertising revenue, including its 'stories' feature, a defining feature of South Korea's KakaoTalk. In 2013, Snapchat was just another technically glitchy, clunky instant messaging app that had disappearing messages (a feature that no one wanted). Now, it considers itself a "camera" company that makes wearable devices (eg, Spectacles, a cheaper version of Google Glass) and augmented reality photo filters that copies from its best competitors (eg, WeChat, Cymera, KakaoTalk).
However, that is not how I would categorise Snapchat. I would categorise Snapchat as a new, revolutionary advertising agency.
Snapchat is an app that is an amalgamation of China's Tencent and South Korea's KakaoTalk with a bit of the Norwegian Opera browser added for its Discover news features. In other words, it's a plagiarism of all the popular apps and web browsers out there, or just a good research paper on modern communication in the Information Age.
But what Snapchat does that is different is that it gives a platform for advertisers to create new sorts of ads made specifically for the mobile phones. According to its SEC filing, Snapchat makes nearly 98% of its revenue on advertising alone. What Snapchat is really doing is not anything camera-based, it is a new model of the creative ad agency; an ad that is not just a lame banner on a website that one tries to ignore, or a short commercial on YouTube or on a TV that one mutes or skips, but an interactive ad, that lets people use it for fun to create brand awareness. Snap Inc. is a brand new kind of ad agency.
In its filing, Snap says that many companies did not want to create new ads for mobile but simply copy its television ads to put on mobile. Here is a great opportunity for Snap Inc. to actually produce the content and all the adverts for various companies on its mobile platform, but instead it focused on a Google flop, the Google Glass, rebranded as Spectacles. First of all, no one wants to see all the boring footage of a wobbly, non-stabilised image 10-30 seconds in length of an event that only directly uploads to Snapchat without any editing. If Snapchat instead created a music video generator app, like musical.ly, then that would be more interesting.
Kitschy and fun, Snapchat Spectacles is a cheaper version of Google Glass with a fashionista edge. The Spectacles let people record unedited video for 30 sec max.
However, no one wants to look at lame footage that looks like it was made for a reality TV series like COPS. No one cares, and no one wants to look at it. No one wants to wear annoying glasses either or be filmed wearing glasses because people are vain and want to edit and choose their best shots and footage, even supermodels.
Joanna Coles, the sole female board member at Snapchat receives $75,866 in stock awards whilst the rest of her male cohorts receive $1 million+.
Another red flag I find about Snap Inc. is that it could potentially have the perception of being seen as a "sexist" company. What kind of company would pay its female board of directors the lowest amount that is on such a ridiculously low scale which is completely an insult to women working in tech globally, whilst pretending to be a modern company that caters to a young demographic? Instead, what the pay scale shows is that Snapchat is primarily an app made for inebriated fraternity brothers who like to make themselves look like superheroes whilst drunk at the pub, and completely ignores half of its demographic: women. Why should I use an app that pays its sole female board member, $75,866 in stock awards whilst the rest of the male board members receive $1 million+? There are much better apps I could use, with a better UI and UX that does the same exact thing.
According to its SEC filing this month, Snapchat is entirely dependent on the services of Google Cloud Services, and will pay $400K+ yearly to Google for 5 years totaling more than $2 billion minimum.
And lastly, what the Snap Inc. SEC filings reveal is that the company is actually a slave to Google. By being completely dependent on Google Cloud Services, for which it will pay Google at least $2 billion in the next 5 years, it is limiting itself from competitive rates from other companies. However, this puts Google in an advantageous position against Facebook, whose competing app, Instagram is a threat to Snapchat. At best, Snapchat can plan its future acquisition to Google, but it made a grave mistake in solely choosing Google for its cloud services and limiting itself from other companies like Amazon, that could've give it brand awareness into the retail sector.
In conclusion, my assessment of Snapchat is that is not a camera company but a new kind of creative ad agency, it just doesn't realise it yet. As for the IPO, I would wait until the founders, advisers and investors actually figure out what the company does best; which is definitely not a disappearing message app nor a camera company.
By Sierra Choi
Disclaimer: This post is not intended as any sort of investment advice and is for educational purposes only.