Wrecktember, The Nvidia of Cookies, The Great Liquidity Drought and The Death Of Emerging Venture Capital Managers ...Sunday Reads And Listens

The Stocktoberfest speaker lineup and schedule is set. Come to Coronado, San Diego October 20-22

An intimate event for executives, influencers, and the most active investors in financial markets. Secure your tickets here.

Good morning…

If you love investing, trading, stocks, markets, entrepreneurship, venture capital swing over to Stocktoberfest October 20-22 at the amazing Del Hotel on Coronado. We have 30 tickets left.

Before I get started…I was in Calabasas working and doing some biking with my good friend Roy Rubin getting ready for a lot of cycling in the mountains this month (Aspen and Italy). It always amazes how much quiet, great terrain is open to people just 30 minutes north of Los Angeles…

Onward…

As I wrote last week at the start of the month, I love Septembers but the Nasdaq does not. Take a look at the wreckage in just FOUR days so far (semiconductors in green the worse):

Over on Stocktwits, a fave follow of mine ‘Whale’ calls September ‘Wrecktember’:

I will dive into the stock markets more on Momentum Monday and Trends With Friends shows this week.

Next…We have all been fascinated with $NVDA (Nvidia) this year, but here is your daily reminder that there are boring version of Nvidia in all sorts of sectors. I saw this one the other day - Lotus Bakeries - or as I call it the Nvidia of cookies:

Next…Nvidia has been up 500 percent since the beginning of 2023, so of course the media has done its part to anoint each semiconductor stock that has even higher returns as ‘the next’ Nvidia.

While I am no Warren Buffett, I have been around the markets for long enough to catch these all the time. This year it was $SMCI and leave it to CNBC to tell Nvidia to ‘move over’ for $SMCI after it had already been up thousands of percents the last few years as it topped. When I saw the headline back in February, I tagged it with an ‘LOL’ just to warn people. It is now down 63 percent since the article:

The markets are a beautiful and fascinating place that rewards and punishes the prepared and unprepared. Investing is a language, so the sooner you start the better, but it is never too late to start. You can immerse yourself from anywhere and unlike other languages (Chinese, French, German), the language is truly global. One last thing…investing is a privilege so the more you respect the freedom, the better you will enjoy the process and the journey.

Onward…

Now to the meat of what I really wanted to cover today…the mess that is venture capital.

If you do not know, the ‘venture markets are in turmoil’. I liked this post titled ‘The Unicorn Economy:The Great Liquidity Drought’ which has a lot of data.

I have covered the why here for years on my newsletter and on the Trends With Friends podcast.

Here are a few of the terrible numbers right now:

In hindsight, this is all obvious, but I wa there living this too.

I personally invested what I call ‘shmuck insurance’ money into many small emerging managers between 2018-2021, just in case i was wrong and ZIRP was here forever. I can tell you confidently here in late 2024…I AM A SHMUCK!

One big problem continues in venture land…there are too many investors and managers that confused ZIRP and a social/mobile boom with talent/skill.

There are still way too many venture capitalists with too much capital investing like the year 2024 is 2010-2018. But, as the two charts above play out…the pain will get even more real. The markets are just starting to punish the undisciplined.

So for those that really care, what is next?

My friend Frank Rotman a grizzled veteran at QED has a good summary (it is not long so do read it) of the current market and what is to come.

I had Frank on my ‘panic’ podcast way back in 2021 to discuss all this just as it started to unravel.

As I wrote at the time in our ‘takeaway’:

I hope this helps setting up the ‘where we are’ and how silly it was in venture capital.

Personally, I am bullish on venture capital, at least as it pertains to our firm Social Leverage and seed investing. Our network keeps expanding as does our passion for backing talented people looking to build a great business. We have been consistent in our messaging to founders and LP’s from day 1…return of capital to the LP’s matter so valuation matters! Yes you can be very founder friendly and still work for your LP’s.

PS - If you are Softbank, A16z, Y Combinator, the same rules do not apply. God bless. I would never allocate my or my friends/LP’s money there anyways.