Back from a week at the iConnections Global Alts 22 Conference with a headful of ideas. Here are some of our most interesting takeaways…
Market Excess
Fittingly, market conditions were discussed ad nauseam. Panelists acknowledged situation, citing the fact that the US economy is strong and corporate earnings are continuing strong results. But valuations reached unreasonable heights fueled by cheap credit and stimulus, leading to the correction we saw beginning in January.
“The market is sleeping off a hangover” and “This is indigestion from too much exuberance and now we have to finally deal with what we’ve shoveled into our mouths” were two metaphors that panelists shared.
There was also some disagreement as to how long the hangover might last.
Turns out crypto is a pan-asset class concern
Whether it had ‘Crypto’ or ‘Digital Assets’ in the title or not, almost every one of the 100 panels, keynotes and fireside chats touched on cryptocurrency and Web3 in some capacity.
In a well-attended roundtable of Private Credit GPs, two mentioned inflation concerns as one factor driving them to investigate crypto. The angle? Lending fiat against crypto balances for corporates and large individual investors.
Perhaps unsurprisingly, VC panels touched on the subject in the greatest depth. The future of payments, bitcoin as a store of value, and the overwhelming (and largely misunderstood) opportunity for Web3 to disrupt businesses, address wealth inequality and create the next generation of unicorns were discussed at-length.
Also, this profile of Josh Wolfe at Lux Capital dropped just in time…
The ‘data edge’ is narrowing, data is an expectation for Allocators
The University of Maryland Foundation’s Sharcus Steen gave an interesting talk on Allocators’ views of the markets today. One thing he harped on repeatedly throughout his talk was the importance of data and the increased demands that the average Institutional Investor is making of their managers. This is the confluence of two phenomena: (1) LPs moving up the sophistication curve and requiring data to fuel better decision making and (2) Covid forcing diligence, portfolio monitoring and manager selection to take place digitally. The latter may have actually accelerated the former, giving some investors a crash course in data and diligence that they would have ordinarily taken years to adopt.
Tweets of the Week
Also this absolutely sums up the Bleau Bar on Wednesday evening…
Public Markets
On Monday in Miami, the <cough, cough> “daddys” were shifting in their seats as equity markets and crypto coins went…straight…down. Why, you ask? Not one reason. The Fed, valuations and a general unease about the stability of the market.
We’ve mentioned it before, but the defining characteristic of this volatility is that it looks a lot different this time. Tech seems to lead every big selloff and value stocks are back in favor after more than a decade of being out of favor. Just last night, Facebook reported disappointing earnings & got punished badly…down over 20%. With close to a $1 trillion market cap, this is real money being lost— $200 billion of value going “poof” in one day drags down the whole index and other names relying on internet advertising (TWTR, SNAP, AMZN, TTD).
Something to watch—almost every big tech company hates Apple these days, as the IDFA protections from this past summer are hurting their ad business. There is a real war breaking out for our eyeballs!
Supply Chain
Boats. RVs. Used cars. Lumber. Semiconductors. Furniture. Swiss watches. Vacation homes. There are shortages everywhere, and much of the blame is placed on the supply chain. Simply put, we had a massive demand cliff with COVID, then a massive demand spike due to government stimulus. This leads to empty shelves, sparse car lots and higher prices for seemingly everything. But Joe Weisenthal at Bloomberg reminds us of what he calls “the Bullwhip effect.”
In other words, there will probably be some overcorrections coming: