Saturday, August 8, 2020

THINK STRATEGICALLY: The Fear of Failure Lost & Found

By on July 27, 2020

Companies that defied the odds

More often than not, fear of failure is one of the most significant barriers to success. Fear stops most people from making substantial changes in their lives, such as changing jobs, becoming entrepreneurs or even getting to know people. 

Fear of failure is often the toughest obstacle to surpass toward great leadership. Often, fear causes some people not to try things, including investments. Nonetheless, as we can note with some leaders, instead of letting failure slow them down, they harness the power of failing forward, or learning from your mistakes. 

The following companies have used the COVID-19 pandemic to transform their business:

  • Microsoft (MSFT) reported revenue of $38.03 billion, versus a projected $36.5 billion. That is 13%  growth on an annualized basis. Net income was $11.2 billion.

Stock price on Jan. 2: $160.63

Stock price on July 24: $201.30

Price change: $40.68

Percentage change: 25.32%

  • Tesla (TSLA) reported revenue of $6.04 billion vs. $5.37 billion, and net income of: $104 million (GAAP). 

Stock price on Jan 2: $430.26

Stock price on July 24: $1,417.00

Price change: $986.80

Percentage Change: 229.33%

  • Popular, Inc. (BPOP) reported revenue of $500.4 million vs. $410 million, and net income of $128 million vs. $34.3 million.

Stock price on Jan 2: $58.93

Stock price on July 24: $38.48

Price change: minus-$20.45

Percentage change: minus-34.70%

  • OFG Bancorp. (OFG) reported revenue of $128.2 million vs. $131.3, and net income of $20.2 million vs. $173,000.

Stock price on Jan 2: $23.50

Stock price on July 24: $14.09

Price change: minus-$9.41

Percentage Change: minus-40%

Week in markets: China Tensions, Stimulus & COVID-19 Impact Markets

The U.S. and global markets dove, closing last week down. The increase of diplomatic tensions between the United States and China has sparked renewed concern over world trade and political stability. Intel, the world’s largest chipmaker, delayed by six months it’s new generation of chips, causing it to lose close to 17% of its share price and most tech stocks to drop.

The rise of COVID-19 cases may force another lockdown and a further impact on the U.S. economy and global markets.  

Florida, Texas and Puerto Rico are emerging as coronavirus hotspots, derailing efforts to reopen the economy. Most experts maintain that if the cases are kept localized and contained we may not see a full lockdown. However, it all depends on how people’s behavior and personal protection plays out. 

We compared the rise in Florida and Puerto Rico cases, and there are very stark numerical similarities. Between July 15 and July 25, we note the following:

  • The U.S. case count rose to 4.158 million, versus 3.479 million, an increase of 19.57%
  • Puerto Rico cases rose to 14,590 vs. 10,379, an increase of 40.6%. 
  • Florida cases rose to 414,511 vs. 301,810, an increase of 37.34%.

While we are concerned with the growth of total cases, we are more concerned with Puerto Rico’s overall cases growing 40.6% in the past 10 days. We may be looking at a full-fledged healthcare crisis. 

Meanwhile, the so-called “Stimulus 4” is expected to pass the Senate as early as August. The final bill may total close to $1.5 trillion in new spending. 

Let us review the following vital benchmarks reported  last week;

  • New Initial Claims for Unemployment benefits: 1.416 million, or up 8.34% from the previous week; this is much higher than estimates. 
  • U.S. Existing Home Sales: 4.72 million, for an increase of 20.72% over the last month. 

On to the markets. The Dow Jones Industrial Average closed the week July 24, at 26,469.89, a loss of 202.06 points, or 0.76%, and a year-to-date (YTD) return of minus-7.3%. The S&P 500 closed at 3,123.63, dropping 99.1 points or 3.07%, for a YTD return of 0.5%. The Nasdaq closed at 10,363.18, for a loss of 140.01 points, or 1.33% and YTD return of 15.5%. The Birling Puerto Rico Stock Index closed at 1,539.30, gaining 75.9 points, or 5.19%, for a YTD return of minus-24.47%. Meanwhile, the U.S. Treasury’s 10-year note closed at 0.59%, a change of minus-7.89%, and YTD return of minus-1.4%. The U.S. Treasury’s 2-year note closed flat at 0.14%, for a YTD return of minus-1.4%.

(Screen capture of www.federalreserve.gov)

The Final Word: How much more firepower does the Federal Reserve Bank have?

Many investors await the Fed’s upcoming Monetary Policy Report to see in which direction the bank goes to help improve the U.S. economy from the ravages of a new COVID-19 surge.

As coronavirus cases surge in more than 30 states, most are rolling back the opening of many businesses that had been allowed to open. 

We also have seen the U.S. stock market take a more cautious tone, and it seems as if the momentum and optimism that was driving the markets is slipping away. 

The Fed has already cut interest rates to zero and pledged to buy all government debt on the market. It has also implemented a vast array of emergency measures that include granting markets enough liquidity, acquiring corporate debt or municipal bonds, and rolling out a main street lending program. 

Since March, most of the Fed’s timely action allowed the U.S. stock market to recover, resulting in it rising north of 45%. 

However, there are growing concerns about how these actions will play out as a recovery of the economy is sought. 

Most analysts are attempting to figure out which non-traditional tools the Fed may have at its disposal.

Fed Chair Jerome Powel has stated that the firepower and tools are vast and varied. 

The first critical step is determining the guidance the Fed provides for the direction it takes on interest rates.