Facebook and Libra

Believe it or not, Facebook will be the company that brings cryptocurrency to the masses. Today the social network giant published detailed plans for a cryptocurrency called libra, backed by currencies from the most trusted central banks around the world, and accessible even without a bank account.

Considering that only a few years ago publicly traded companies wouldn’t even mention cryptocurrency in public for fear of startling investors, the fact that one of the largest public companies in the world is creating a new cryptocurrency might seem hard to believe.

But for Facebook, a company that generated $55.8 billion revenue in 2018, almost exclusively by monetizing a shared social network, the push into blockchain, a shared financial network of transactions, represents multiple possible new revenue streams. Ultimately Facebook could reap rewards from financial services it may offer via a new crypto subsidiary called Calibra as well as the income it might generate if its vast customer base parks funds in its reserves backing its new coin.

While top competitors in the cryptocurrency space like Blockchain LLC and Coinbase have fewer than 40 million total users each, Facebook has 2.7 billion monthly active users, giving its cryptocurrency a potential for adoption that competitors can only dream of. While the cumulative market cap of all cryptocurrencies is $290 billion, Facebook’s market cap is almost twice that at $539 billion.

With plans to integrate its own cryptocurrency wallet in with Facebook-owned WhatsApp and Messenger when the cryptocurrency goes live in 2020, Facebook will instantly bridge the world’s largest social network with the brave new world of cryptocurrency. All that’s left is for users to use it.

Social Security facing shortfall

A slow-moving crisis is approaching for Social Security, threatening to undermine a central pillar in the retirement of tens of millions of Americans.

Next year, for the first time since 1982, the program must start drawing down its assets in order to pay retirees all of the benefits they have been promised, according to the latest government projections.

Unless a political solution is reached, Social Security’s so-called trust funds are expected to be depleted within about 15 years. Then, something that has been unimaginable for decades would be required under current law: Benefit checks for retirees would be cut by about 20 percent across the board.

“Old people not getting the Social Security checks they have been promised? That has been unthinkable in America — and I don’t think it will really happen in the end this time, because it’s just too horrible,” said Alicia Munnell, the director of the Center for Retirement Research at Boston College. “But action has to be taken to prevent it.”

While the issue is certain to be politically contentious, it is barely being talked about in Washington and at 2020 campaign events. The last time Social Security faced a crisis of this kind, in the early 1980s, a high-level bipartisan effort was needed to keep retirees’ checks whole. Since that episode, the program has often been called “the third rail of American politics” — an entitlement too dangerous to touch — and it’s possible that another compromise could be reached in the current era.

Benefit cuts would be devastating for about half of retired Americans, who rely on Social Security for most of their retirement income. A survey released in May by the Federal Reserve found that a quarter of working Americans had saved nothing for retirement.

Social Security has a long-known basic math problem: more money will be going out than coming in. Roughly 10,000 baby boomers are retiring each day, with insufficient numbers of younger people entering the work force to pay into the system and support them.

And life expectancy is increasing. By 2035, Social Security estimates, the number of Americans 65 or older will increase to more than 79 million, from about 49 million now. If the program has not been repaired, they will encounter a much poorer Social Security than the one seniors rely on today.

The Buffett Yardstick

Warren Buffett of Berkshire Hathaway (BRK) says it’s “probably the best single measure of where valuations stand at any given moment.”

The “Buffett Yardstick,” as longtime money manager Jesse Felder of the Felder Report calls it, plots the total value of the stock market against the overall size of the economy. What makes it so valuable, he says, is that it’s good at telling investors what to expect from equities going forward.

So what’s it telling them now?

Felder put the “Yardstick” (inverted) up against forward 10-year returns in the stock market in the chart below to create what he describes as the best representation of one of his favorite Buffett quotes: “The price you pay determines your rate of return.”

According to this measure, Felder says investors are paying such a high price for stocks that they are likely to receive basically nothing in return in the coming decade, and that includes dividends.

“At the same time that potential returns look so poor, the potential for risk may be greater than it has been in generations,” he wrote, pointing out that investors have been piling on margin debt lately to increase their exposure to an overheated market.

Kaka'ako Land Co. (Cedric and Calvert Chun)

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2/13/19 - State Looks To End The Battle Over Kakaako’s Disputed Roads
1/19/19 - Kakaako road owner claims state law is full of holes
8/20/18 - Kaka'ako road dispute heads to court
11/27/17 - Tempers fray over parking fees, maintenance on private Kakaako roads
3/16/16 - Roads in Limbo: Who Owns The Streets in Kakaako?
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3/11/12 - Brothers, businesses at odds over who owns areas off Queen Street

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