Wall Street was preparing itself for a terrible earnings season.

It’s not all bad news

The negative influence of the Covid-19 pandemic has been deemed to be anything between dire and desperate. And, for most, this already is, and will surely be, the case.

The exceptions are, by proper definition, exceptional. I'm talking by bigger-than-Earth companies, enterprises with revenues more massive than most countries' GDPs, behemoths in their own right: most, if not all, from the tech sector: Microsoft, Alphabet, Amazon, Facebook, Apple.

For them, the lockdown, the social distancing, the increased online presence, the overall feeling of insecurity, fear, anxiety, and maybe even boredom is yet another reason for people to use their services and, all in all, for them to generate more revenues from their core, and secondary, and tertiary businesses.

Tech sector breaking records

It might be Wall Street's worst-kept secret that the tech sector is, and has been for at least the last decade, on everybody's lips, in everybody's mind and, sooner rather than later, in everybody's investment portfolio. And by everybody, I mean all social classes, all levels of interest towards capital markets: from your hairdresser to Warren Buffett's humongous investment conglomerate.

The reason for this is simple: if you'd have invested $1,000 in Google stock ten years ago, you would've yielded a hefty 475% return, 590% for Microsoft, 1,700% for Amazon, 1,000% for Apple, and 550% for Facebook.

 

They're all rocket ships on their way to trillion-dollar market capitalizations (the Trillion Dollar club already includes Apple, Microsoft, Amazon, and Alphabet). And there's not much that can stop them. At least not yet. Not in the first quarter, not by the Coronavirus, not even the containment measures.

Their earnings for the first quarter looked better than expected, and, for sure, better than those from any other market sector, be it retail, banking, automotive, travel & tourism, or commerce.

*special mention for Tesla

Its stock price marked an astounding 3,500% return on the last decade. Although it’s seen a slight decline in the past months, it’s still reaching for higher highs and will, according to most market analysts, reach and top the historical max value of $917/stock.

Long term forecasts for TSLA stock price are close to $1,100, according to CNNMoney, which means an additional 35% ROI from current stock prices.

I’ve included Tesla here because the behavior of the company, and implicitly, of the stock, mimics those of tech companies, not of automakers. They’re constantly innovating in terms of business, budgeting, marketing and financial positioning and I see them being one of the top performers of this decade, as well.

 

*special mention for Zoom

What else is there to say about Zoom apart from the fact that, taking full advantage of the unconventional ways of doing business brought up by the pandemic, it exceeded 300 million daily meeting participants, up from last December's total of 10 million. That’s a remarkable 3000% jump.

Analysts at seekingalpha recommend Zoom as being a “buy and hold” stock for the long run. CNNMoney see Zoom’s stock reaching $200 – a potential increase of 20% from present day prices.

Q1 winners

EARTH 2.0 – the mandatory condition to digitalize businesses and embrace and prepare for the future. Today. All companies below are prime exponents for this business model, and it paid beautifully until now. Just as the Industrial Revolution rearranged the balance of powers almost 2 centuries ago, we are witnessing history in the making with the current the Technological Revolution:

• Alphabet (mother company of Google): revenue of $41.2 Billion (13% higher than the previous year)
• Facebook: revenue of $17.7 Billion (18% higher than the past year)
• Amazon: almost $76 Billion in revenue deriving from an 18% increase in international sales
• Microsoft: revenue of over $35 Billion, extremely positive outlook on the medium and long term

*Tesla: not much in terms of revenue, but a substantial ascending stock trend (it rose more than 200% in 2019)

*Zoom: 12% share increase after revenue more than doubled in the quarter

Q1 losers

A stubborn, poorly adapted, conventional business model is, and has always been a recipe for disaster. On all accounts, Microsoft should have been on the losing side of things, if it weren’t for Satya Nadella, the CEO who brought openness and collaboration to what is once was a sinking ship.

Comparing well-established enterprises with the tech cousins from above:

• JP Morgan – profits dove 69%
• Bank of America – profits plummeted 45%
• McDonald's – earnings fell 17%
• Exxon – 7% stock decrease on account of weak earnings
• Boeing - $649 million loss, 10% workforce dismissed, revenue down 26%
• Ford - $632 million loss, 15% slid in revenue, shares dropped 42% this year
• General Motors – 87% decrease in income compared to Q1 2019, 6.2% decline in revenue

The gap between winners and losers grows more profound for now.

It's my undivided opinion that all four major tech players that right now are laughing all the way to the bank will have to turn their smiles into frowns once Q2 earnings are released. They took advantage until now from the increase in the cloud business and the work-from-home movement.

But the economy forgives and forgets no one – in the USA alone, more than 30 million people filed for unemployment benefits in the last seven weeks, and the future does not look too rosy for the job sector. 

No matter how much money the Fed might helicopter-throw unto the economy, the consumers are scared, cautious with their finances, and, in some cases, even hungry.

In these circumstances I see the Q1 earnings success for the tech giants is a temporary victory. I firmly believe they will be caught from behind by the huge wave that already smashed retail, banking, services, commerce, oil, entertainment, or travel.

The future is grim

Q2 earnings will be an eye-opener for all market optimists across the board.

Goldman Sachs expects a US GDP contraction of 34%, unemployment soaring to 15% - no happy-end is in sight.

US retailers are stopping payment to hundreds of thousands of workers in a desperate struggle to cope with the slump in demand, the four rounds of economic stimulus from the Fed seem to make little to no difference until now. 

On the long run, in an inter-connected global economy, everybody's in the same boat: decrease in consumption and demand from commerce and retail brings lower ad revenue for Google, which in turn brings down the cloud business revenues, which in turn influences the hardware demand, which in turn affects producers…and so on. The cycle cannot be broken without every integral part being affected.

Turn coal into diamonds

Provided the virus is ephemeral, maybe even more or less contained in Q2, the global economy might start to pick-up and rise from its ashes in the second half of 2020.

As always, being in close touch with the state of affairs, being up to date with the news, keeping your head clear and thinking straight on how to turn this fallout into an opportunity is the best advice I can give you. 

The harder the containment measures strike, the bigger the economic shock, the larger the recession that will entail, and the more considerable the investing opportunity!

It's challenging to keep your cool now, but I'm confident that those who adapt, those who look for alternative investment means (be it art or safe-haven assets such as gold or platinum or even fintech companies) will enjoy one hell of a ride.

My future

I’ve split the final chapter into two categories: my personal vision and my professional endeavor.

Personal

I’m an investor myself and I see this crisis as an opportunity to short the market on businesses that have not yet adapted to the new world and, in order to practice what I preach, buy Tech Companies (F.A.N.G.) for the long run.

Professional

Protect my businesses and my employees; the measures I already took (work-from-home for 99% of my workforce, consolidation measures for capital flow, redirecting of investment flows, budget reframing, alternative investment areas, enforcing my business' technology core) will continue to prove successful and inspired.

Even though we’re constantly expanding, having more than 250 employees all over the world, I want to continue behaving and acting just as a start-up; I see in this the right way to consolidate our position, and conquer new markets and alternate areas of investments.

You can follow me on Twitter and LinkedIn

As an investor, I am focused on 3 key areas: financial services, real estate and tech startups. This is my bread and butter, this is where I’ve built my expertise and strengths in over a decade. I’ve participated in the setup and development of two major fintechs, and after those two successful exits I’m now directing my resources into building a new enterprise in this area – the Key Way group. I am constantly looking for new segments and new markets and at the end of 2018 I started to research opportunities in the GCC area (Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, and Saudi Arabia).  More specifically, the United Arab Emirates, which are establishing themselves as one of the most dynamic markets in the world. A short few months later, I’m very pleased to announce that I was granted in principle approval for the first ever license for online trading for retail clients, on the GCC market! We’ll be opening there in the first quarter of 2020! How did this all happen and how did this happen so fast? Well, I started with the famous “first step” of any thousand-mile journey: research! I did my homework. Once I set my focus on the UAE, I researched the market regulators in the area and contacted them online via their websites or LinkedIn accounts. In only a few days, we set up a series of meetings with the financial markets regulators in both Abu Dhabi and Dubai! ADGM, the Abu Dhabi Global Markets regulator, was established quite recently and I was absolutely impressed with their professionalism. They gave me full support and very clear, detailed information on what and how I need to do to start trading in the UAE. I met with representatives from both the ADGM registration department (where all new businesses have to register before they start trading) and from the FSRA (Financial Services Regulatory Authority). They were very clear on the procedure, steps to follow and criteria we need to meet, which is a fantastic help for an investor on a new, highly regulated financial market. Furthermore, their “enthusiasm”, or appetite for new business, equaled mine! They’re happy to welcome new businesses, they work hard to attract them and to set them up for success. I was very impressed that they genuinely appreciate the fact that investors, however big or small, choose their market to set up a company. In a few days I started the onboarding procedure - everything happens online, everything is digital, everything is set up for maximum ease and transparency. After about a year of rigorous assessment and due diligence, several meetings where I detailed our business plan and longterm vision, and a minimum capital of USD 2 million, the ADGM gave me the first ever financial services retail license! They hadn’t even had this type of license before, but they were open to new ideas, they listened to our plans and strategy and they were willing to make things possible! Now as a footnote, I’d love to see this same level of energy, hard work and appetite for business in my home country, Romania. While other jurisdictions welcome investors and work hard to create the framework for development and success, I often feel that the Romanian regulators, for financial markets and not only, start from a default position of suspicion or, at best, indifference. I think they should remember that their whole purpose of existence is to enable business, not hinder it. And as investors, especially once we see best practices from other jurisdictions, we need to remind them of this reality.  

I am a Romanian businessman, but I consider myself lucky for being born in a time when business became borderless. In other words, I’ve been interacting with non-Romanian partners for almost 10 years. So, since this text is in English, you are surely interested in a short list of my foreign partners’ perceptions of Romania. Warning: most positive things have a downside.

Work hard, play hard

Yes, we, Romanians, are known for that. We get enthusiastic quickly and react well to uncommon tasks, stimulated by the novelty of what we have to do. Also, overtime is less expensive in Romania than elsewhere for various reasons. Every foreigner I know was happy with the fact that we are connected 24/7 and most of us do react well to business messages sent at unusual hours, especially having in mind time zones. However: Things can become hectic at this pace. If somebody spent 16 hours at the office the day before, you can hardly expect them to deliver something good the next day. Somehow, in this part of the World, we have to protect ourselves from work excess in order to be able to obtain better long-term results.

Good English language knowledge

You can order a beer in English almost anywhere in a big city. You can even bet on a certain degree of command of English from middle-aged taxi drivers. There are even things that Romanians can hardly name in their native language, such as computer menus or marketing lingo. Romanian itself got invaded by English after the fall of communism, in domains that simply lacked the vocabulary. Most of them are related to business or technology. However: There are people who have studied English and there are people who learned it by ear. You may face some misunderstandings ranging from funny to problematic. You also may be surprised of how little English legalese a technical person understands and the opposite — what a lawyer can make of a marketing report. My advice: if you’re in search of really strong abilities, look for English certificates rather than self-assessment in resumes.

Bureaucracy

One could hardly say anything good about Romania in this respect. In my view, you can never be cautious enough about it. Have you heard about the rule that you’ve got to get the agreement of your closest neighbors when setting up even the smallest, quietest business in an apartment? An American friend of mine asked a bureaucrat about the meaning of it and the bureaucrat frowned: ‘There have been cases when we’ve had dozens of companies registered in the same apartment, which is totally fishy.’ The American was bemused: ‘This is precisely what I pay for in New York and it’s totally legal. A box located at a physical address, together with hundreds of other businesses, just in case. It’s 50 dollars per year and it’s the only address I need in the US!’

Responsiveness and punctuality

A big part of Romania, at least the one you’ll be interacting with mostly, is somehow prone to progress. I'm not bragging with my conationals -  it’s the observation of an Italian partner. It comes down to the will to overcome ourselves and catch up with what is sometimes still called here ‘The West’ or ‘The Civilized World’. This is causing the enthusiasm and ability to work hard I’ve already mentioned and, obviously, punctuality. You can use it all to your own and your local partners’ advantage. However: Have you ever heard anybody saying in Romanian ‘Imediat!’? It is an answer to a request and it literally means ‘Immediately’ or ‘Right away, Sir’. Some other cultures have it, but in Romania it’s some kind of automated answer, it hardly means anything. To a Swiss gentleman that I know, it means: ‘Gimme 15 minutes’, or simply: ‘F… off!’ The Swiss gentleman owns an Omega and I suppose he knows a thing or two about time.

Fun

Yes, Bucharest - as well as other big cities in Romania, such as Cluj or Iași — is lots of fun. You might have heard of the Old Centre, which is something similar to Campo de’ Fiori in Rome or the Jewish Quarter in Budapest. It's right in the center, full of pubs and clubs. The kind of area that travel guides call, in lack of a better word, ‘vibrant’. However: During weekends, the Old Centre gets stormed by low-cost city break cheap beer addicts and they sometimes don’t even book a hostel room. Music is loud, fine cuisine is scarce and yes, everything is cheaper than in London, but significantly more expensive than in other parts of Bucharest. My advice: look for an Arabian restaurant. You might have nice surprises, because they are run by Palestinian or Lebanese folks that came to Romania in the eighties, in communist student exchanges. Many of them have remained here, got into the food business and they’re really good at it.

Hospitality. Conclusion

All in all, I do love Bucharest a lot, in spite of what I’ve said. But a foreigner’s experience here depends strongly on their local contacts. As most other peoples, Romanians are very appreciative of their own hospitality. In general, it’s true, we are very welcoming, because until 30 years ago we were isolated and we had to report contacts to foreigners to the communist Police. To younger people in big cities, strangers are less appealing. So, in the end, finding compatible partners is a good idea in terms of personal comfort. As it always is for business, isn’t it?

The economic history helps you understand the present much better. For instance, you cannot realize why bank loans are a capitalization method more problematic than the risk capital, for startups, if you don’t know that the Dot Com Bubble and the 2007 Crisis have dramatically harshened the loaning conditions of the banks. Starting from this idea, I have made up a timeline of the setting up and development of stock exchanges. Assets started to be traded as far back as the Roman Empire, but after the Middle Age, economic innovations have precise dates.

• 1460: The First Stock Exchange in the World, in Anvers. It traded mostly bonds, but it was also a meeting place for those who lent money and officials.
• 1602: The First IPO (Initial Public Offering), for the Dutch company of East Indies. It was a megacorporation avant la lettre, specialized in maritime trading and transports with the East and Africa, an organization which also had military power.
• 1801: London Stock Exchange - LSE. The first share offering occurred there in 1825. Also at that time, there is recorded the occurrence of some abstract deeds, which made successive transfers possible, after for a long time practice had only allowed specific agreements between traders who had known each other.
• 1817: New York Stock Exchange, based on the model of the Philadelphia Stock Exchange, the first one founded in the USA. NYSE has been operated in the current building since 1865. The London and New York stock exchanges became in the first part of XIX century the main pillars of the international financial system. Currently, the New York Stock Exchange is the most powerful in the world, with a total capitalization of over $ 19 trillion and the NYSE composite index is considered the most relevant in the world, thanks to the quality of the companies considered and the huge volume of deals.
• 1878: Tokyo Stock Exchange, the core of what would become in 2013 Japan Exchange Group, further to successive mergers, of which the last one being with the Osaka Stock Exchange. The unofficial name is still the Tokyo Stock Exchange. It is worth mentioning the late date of founding, started in 1850, which is related with the accelerated modernization of the Nippon Empire. The Tokyo Stock Exchange, is the fourth most powerful in the world after New York, NASDAQ and London.
• 1891: Hong Kong Stock Exchange, operational under this name since 1914, after it had been founded in 1891 under  the name of Association of Stockbrokers in Hong Kong, against the background of the prosperity related to the statute of enclave of the British Empire. The reputation of global financial center has remained unchanged after the transfer of sovereignty from the UK to China in 1997. Besides the volume of deals, the Hong Kong Stock Exchange distinguishes itself by a high number of IPO.
• 1929: The Crash on Wall Street. The most severe crisis in recent history started because of an excess of speculation of the assets. Due to the prosperity of the twenties, most stocks and other values were constantly appreciating, up to prices that proved unsustainable.
• 1971: NASDAQ, the first electronic stock exchange (National Association of Securities Dealers Automated Quotations). After launching, it has made its brokers unhappy as a result of the decrease in the margin between demand and supply, triggered by the electronic trading. The same decrease, however, has made the market more dynamic, because it has been in favor of the investors.
• 1990: Shanghai Stock Exchange. With a tradition going back to mid XIX century, the fifth most powerful stock exchange in the world ceased operations after the instatement of communism in China.
• 2000: Euronext, a pan-European stock exchange, created by the mergers of the stock exchanges in Amsterdam, Brussels and Paris, with operations in the three cities and in London, Lisbon and Dublin. After a complicated history of mergers and acquisitions, it has become the second most important stock exchange in Europe, after the one in London. It has a creative strategy, which encourages the financing of small and medium size companies, by operations called Alternext and Enternext.

Sources:

• ICMSS
• Wikipedia
• World Atlas

We continue with the presentation of the strategies of complying with the General Data Protection Regulation. The first part of the article is available here. 4. Setting the Terms for the Cooperation with the Third Parties The provisions of GDPR are not applied exclusively to a company that processes personal data, but also to third parties with which the respective company cooperates or conducts exchanges of (user) information. Now it is the perfect opportunity for any company to revise all the third party contracts and make sure that  they are GDPR compliant. The third parties have to disclose their internal strategies regarding the processing and storage of the user data, so that there should be permanent transparency in respect of the circulation and transfer of personal information.

5. Respecting the “Right to be Forgotten”

Once the user ceases to use the services of an operator, or just at any time at the user’s request, the company has to make sure that they follow correctly the procedure of deleting the personal data. If there are no legal grounds to keep the personal information or refuse the deletion of the same, the company should answer the user’s request within 30 days. In practice, this presupposes that each enterprise should have the infrastructure and systems necessary to allow such processes.

6. Creating Separate Information Storage Systems

In line with the principle of correct organization of data, many companies have started to implement a centralized system to store all the user data, with separate applications that access only the necessary information. In practice, this would presuppose that the various applications/departments of the company (HR, Marketing, Sales, etc.) should process only a certain set of data, thus reducing the possibility of compromising or leaking data. This is a security protocol similar to the “token” system in online banking. Although initially this method might seem expensive, in the long run it will significantly reduce the potential costs and risks.

7. Efficient Measures to Avoid Sanctions

The consequences of not complying with the provisions of GDPR are extreme and may lead to actual bankruptcy in some severe cases. Fines can get up to EUR 20 million or 4% of the annual income, which is the highest. One of the most efficient methods of avoiding such drastic sanctions has to do with an organized data record keeping, notifying the relevant or supervisory authorities in respect of any breach, or impact analyses in case of non-compliance. In principle, all the above strategies may contribute to mitigating or eliminating the risks of leakage or improper handling of personal information and, implicitly, the risks of fines.

The GDPR provisions, the General Data Protection Regulation regarding the personal data of the EU internet users came into effect on 25 May 2018. The main changes have to do with the access to and transfer of personal data, which will be more transparent, if the users so require. We have approached in detail what these provisions involve in the previously published article here and here.  As the exhaustive implementation of the new norms requires a complex system of unifying the internal applications and a well-defined strategy, many companies, both in Romania and in other countries, are still conducting GDPR campaigns. As all of us have probably noticed, the first step has been that all the institutions and companies have informed their clients in respect of the GDPR compliance, making the necessary changes to the legal documents, such as the confidentiality policy. The National Authority for the Supervision of Personal Data Processing (ANSPDCP) is in charge of the implementation of the new provisions. Its site, available at dataprotection.ro, includes a lot of information and normative acts regarding GDPR. Apart from that, following are a few efficient strategies that a lot of enterprises have already applied, both in Romania and in the EU member countries or in the USA.   

1. Resorting to a Specialized Legal Organization

Although the provisions of GDPR are effective and applicable to all companies, it is possible that a certain company should be subject to stricter rules or to a set of supplementary rules, according to the number of personal data processed or to the business profile. For this very reason, it is of essence that such companies should resort to a specialized firm and, in most cases, appoint an internal expert to supervise these processes. Currently, many companies in Romania have recruited or started to recruit for a position recently created on the employers market, namely Data Protection Officer.

2. Transparent Communication with the Employees

It is not only the legal or the marketing department that must be up to date with all the provisions of GDPR, but, in principle, all the other departments, in order to ensure a good operation of an inter-functional and agile team. In order for the employees to clearly understand the implications of these new regulations, it is recommended that these provisions should be made known and also that the information should be verified through inter-active activities or tests. As this European Directive introduces many new regulations, each company should establish a system under which the employees constantly revise the information acquired.

3. Correct Organization of Data

According to the new provisions, certain personal data (for instance information regarding religious faith, sexual orientation or biometric information) have a special classification and require a matching processing phase. Therefore, it is important that each company should organize the data of their users according to the purpose and sensitivity of such data. If the business specializes in data processing, then it would be advisable to appoint officers to separately supervise the existent data. Although this might seem a discouraging practice, as it requires a long time, in the long run this approach will allow a greater flexibility in processing and accessing data. The second part of the article is available here.