On the whole, it seems harder than any time in the past four years to raise mid-stage rounds. This is also not suggestive of a bubble.
It's suggestive of the end of a bubble, when the music stops and the last investors who have not yet exited are left without a chair. If any part of the path to exit breaks down, the whole system will start to fail.
There are real problems with these distorted "valuations". Employees these companies hire often think of them as real valuations. It also often makes the company think of itself as much bigger than it is, and do the wrong things for its actual stage. Finally, too much cheap money lets companies operate with bad unit economics and cover up all sorts of internal problems. So I think many companies are hurting themselves with access to easy capital.
Sounds like Sam has (unwittingly) become an Austrian. Friedrich Von Hayek on inflation (1970): "The initial general stimulus which an increase of the quantity of money provides is chiefly due to the fact that prices and therefore profits turn out to be higher than expected. Every venture succeeds, including even some which ought to fail. But this can last only so long as the continuous rise of prices is not generally expected. Once people learn to count on it, even a continued rise of prices at the same rate will no longer exert the stimulus that it gave at first." [1]
Sounds a little bit like QE stimulus which has been channeled into the private financial markets. I wonder why it hasn't translated into higher salaries.
But no matter what happens in the short- and medium-term, I continue to believe technology is the future, and I still can’t think of an asset I’d rather own and not think about for a decade or two than a basket of public or private tech stocks.
I'd rather own real estate than a basket of private tech stocks, especially if that basket includes Facebook, Twitter, Snapchat, or really any company where user growth rates and advertising revenues are heavily informing valuations.
Users can and will migrate between tech platforms pretty easily - homes, offices, businesses - not so much. Plus, the government has been very pro-landlord lately, soaking up trillions in mortgage debt at the federal level and allowing insane housing bubbles like SF and NY to continue to grow unabated at the state level. Looking for fixed, usury income in a ZIRP and QE-infinity world? Look no further.
The only consolation one can take in this situation is the fact that less and less people are even able to play the investing game anymore. Only 26% of individuals under 30 are investing in the stock market, as compared with 58% between the ages of 50 and 64 [2]. So now the SEC wants to make crowdfunded equity the new way to channel middle and lower class money into risky ventures [3].
There is a country that is the poster child of fast and loose monetary policy - Japan.
No matter how many rounds of QE, the Japanese economy has yet to grow in real terms. [1]
This is further exacerbated by the fact that the younger generation are not marrying and having children, which leads to a demographic nightmare.
Overall, the USA's future is looking a lot like Japan's present day situation.
The solution is to return to the original Bretton-Woods system, where countries had a fixed interest rate regime tied to gold (or cryptocurrency, whatever commodity works best in this modern era) instead of the dirty float systems that are routinely used around the world.
That's just not true. Japan had extremely low inflation for 20 years, showing that the central bank wasn't expanding the money supply anywhere near fast enough. If the central bank really was increasing the money supply, but not real GDP, there would have to be inflation due to the velocity-of-money equation.
Japan's real problem has been a failure to deregulate the economy. It's essentially trapped in the 1970's, but without the inflationary crisis and political moment that produced the Thatcher and Reagan era reforms.
I may not have been clear in my earlier reply, but I am not really talking about inflation.
Rather, I am providing an example that demonstrates the futility of expansionary monetary policy when an economy hits the liquidity trap.
I agree that Japan's economy is not deregulated in the sense that there is a high degree of nepotism between politically-connected families (especially those that have ties to organized crime or right-wing nationalist groups) and elected officials.
It's suggestive of the end of a bubble, when the music stops and the last investors who have not yet exited are left without a chair. If any part of the path to exit breaks down, the whole system will start to fail.
There are real problems with these distorted "valuations". Employees these companies hire often think of them as real valuations. It also often makes the company think of itself as much bigger than it is, and do the wrong things for its actual stage. Finally, too much cheap money lets companies operate with bad unit economics and cover up all sorts of internal problems. So I think many companies are hurting themselves with access to easy capital.
Sounds like Sam has (unwittingly) become an Austrian. Friedrich Von Hayek on inflation (1970): "The initial general stimulus which an increase of the quantity of money provides is chiefly due to the fact that prices and therefore profits turn out to be higher than expected. Every venture succeeds, including even some which ought to fail. But this can last only so long as the continuous rise of prices is not generally expected. Once people learn to count on it, even a continued rise of prices at the same rate will no longer exert the stimulus that it gave at first." [1]
Sounds a little bit like QE stimulus which has been channeled into the private financial markets. I wonder why it hasn't translated into higher salaries.
But no matter what happens in the short- and medium-term, I continue to believe technology is the future, and I still can’t think of an asset I’d rather own and not think about for a decade or two than a basket of public or private tech stocks.
I'd rather own real estate than a basket of private tech stocks, especially if that basket includes Facebook, Twitter, Snapchat, or really any company where user growth rates and advertising revenues are heavily informing valuations.
Users can and will migrate between tech platforms pretty easily - homes, offices, businesses - not so much. Plus, the government has been very pro-landlord lately, soaking up trillions in mortgage debt at the federal level and allowing insane housing bubbles like SF and NY to continue to grow unabated at the state level. Looking for fixed, usury income in a ZIRP and QE-infinity world? Look no further.
The only consolation one can take in this situation is the fact that less and less people are even able to play the investing game anymore. Only 26% of individuals under 30 are investing in the stock market, as compared with 58% between the ages of 50 and 64 [2]. So now the SEC wants to make crowdfunded equity the new way to channel middle and lower class money into risky ventures [3].
What's a poor young guy to do?
[1] http://www.marketwatch.com/story/why-most-millennials-dont-i...
[2] https://mises.org/library/denationalisation-money-argument-r....
[3] http://www.nytimes.com/2015/10/31/business/dealbook/sec-give...