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Banks Giving ApplePay a Run for its Money

A group of banks, including Wells Fargo, J.P. Morgan Chase, Bank of America, and four other banks, are set to partner to create a digital wallet to compete with Apple’s Apple Pay and PayPal. The digital wallet would be serviced by Early Warnings Service LLC, which currently operates the money transfer product Zelle. The cohort of Banks expects to permit 150 million Visa and Mastercard debit and credit cards for use within the wallet once launched.

Titan’s Takeaway

Apple’s ambition of entering the banking business is no secret, and the biggest financial institutions, like Goldman Sachs, are lamenting old agreements with the iPhone juggernaut. After rushing to partner with ApplePay after its debut in 2014, banks are increasingly getting sidelined after paying a disproportionate amount of fees to Apple. Because ApplePay is the default tap-to-pay method, banks have been hesitant to build their own digital wallet, but it looks like they have had enough.

Meanwhile, Apple continues to trudge forward in the financial sector, allegedly working with Goldman Sachs on a savings account and a buy-now-pay-later product. Is there any sector Apple can’t waltz into? Considering the iPhone is the gateway to everything, the company can pretty much do anything it wants. 

Google Joins the Layoff Trend

Alphabet, the parent company of Google, is set to slash its workforce by ~12,000 jobs or 6% of its company. Google’s layoffs come as part of a broader wave of tech layoffs amid a dark economic outlook, with Microsoft, Amazon, and Meta all reducing their workforces. CEO Sundar Pichai conceded in a memo to employees that Alphabet “hired for a different economic reality than the one we face today.” 

Titan’s Takeaway

We’ve said it before, and we will say it again. The growth at all-costs model is dead as part of a more considerable regime change mandating a tighter belt and more discretion when it comes to spending. While it may have seemed that Big Tech was exempt from the broader economic turmoil, like any industry, Silicon Valley is just as susceptible to the same macro forces.

“As shareholders, we welcome the news and estimate the cuts could expand 2023 EBITDA margins by up to 1.4 percentage points,” said Titan analyst Justin Yoo. Moreover, we agree with Altimeter’s Brad Gerstner’s observation that “it is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people.” The last ten years were one big long party, and the midnight oil has burned out. But it is leaving some of the best companies in the world alongside robust free cash with valuations that look quite attractive.

What to Know About Recessions

You’re probably seeing frequent headlines about layoffs and inflation, and hearing lots of talk about a recession. These dynamics are extremely unsettling, especially if this is the first time you’ve encountered them.Recessions HappenRecessions are an inevitable part of the economic cycle. In fact, 14 recessions have occurred since the Great Depression. Going through one is difficult but recoveries do come – on average, recessions post World War II last 10 months. The shortest on record is the COVID recession in 2020, which lasted 2 months.

What Makes a Recession?Interestingly, there is not one single definition or arbiter of recessions. The National Bureau of Economic Research (NBER) is the most often cited scorekeeper, and outlines a recession as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months. ”A Bear Market vs a Recession” The two are often talked about in the same conversation. A recession refers to the economy while a bear market refers to market conditions. A bear market is defined as a 20% drop in a market from recent highs. Bear markets are typically accompanied by recessions, but not always. The average length of a bear market is less than a year: 289 days. Many portfolios recover their losses to set new all-time highs within a few years. Based on data from almost 50 years of historical performance, a diversified portfolio on Titan has less severe drawdowns on average for extended drawdowns greater than a year—2.8 years on average for diversified Titan portfolios versus 4.1 years for all-stock portfolios. Source: Titan, Bloomberg. Based on a hypothetical Titan Aggressive recommended portfolio versus U.S. Large Cap Equities from January 1973-October 2022, using proxy data when live returns are not available. Full Methodology available at request.