2018’s Number One Risk

To find the market’s biggest weakness, a good place to look is at the most crowded movie theater with the smallest exit.
European bonds.
You’ve probably seen the charts of European high yield floating around, so I won’t reproduce it here. Yields in the low 2s for BB credits. There was also a European corporate issuer that managed to issue BBB bonds at negative yields a few weeks ago. I think that might have been the top.
No shortage of stupid things these days:
Bitcoin Litecoin Pizzacoin Canadian real estate Swedish real estate Australian real estate FANG Venture capital But European bonds are potentially the stupidest. Maybe even stupider than bitcoin!
Although there is nothing stupid about it – the ECB has been buying every bond in sight, and there’s lots of money to be made frontrunning central banks.

This post was published at Mauldin Economics on DECEMBER 21, 2017.

The Venture Capital Bubble Is Imploding! (The Beginning Of The Great Bubble Deflation?)

Following The Great Recession and The Fed’s extraordinary response, there was a lot of money available that we seeking risky assets, such as equities, housing and apartments.
Venture capital, the darling of business schools (that rarely look at the data, but focus on the snake oil-aspect of VC), has been in decline since 2014 after a meteoric rise after 2007.

This post was published at Wall Street Examiner by Anthony B Sanders – December 1, 2017.

Is Peter Thiel Trying To Break Up Google? This $300,000 Political Contribution Seems To Imply He Is…

Peter Thiel, the billionaire venture capitalist who backed President Trump (just before giving his presidency a “50% chance of ending in disaster“) and infamously helped Hulk Hogan bring down Gawker.com, has allegedly set his sights on a new target: Google. According to The Mercury News, suspicions about Thiel’s next pet project were raised after he recently contributed $300,000 to Missouri Attorney General Josh Hawley just before he launched an antitrust lawsuit against the alleged search monopoly.
So far, high-profile Silicon Valley venture capitalist and PayPal co-founder Peter Thiel isn’t saying publicly why he gave hundreds of thousands of dollars to the campaign of a state attorney general who’s just launched an antitrust probe of Google. But it’s not the first time Thiel has handed cash to an AG who went after Google over monopoly concerns.
Missouri Attorney General Josh Hawley announced Nov. 13 that his office was investigating Google to see if the Mountain View tech giant had violated the state’s antitrust and consumer-protection laws. The Missouri attorney general said he had issued an investigative subpoena to Google. He’s looking at the firm’s handling of users’ personal data, along with claims that it misappropriated content from rivals and pushed down competitors’ websites in search results.

This post was published at Zero Hedge on Nov 16, 2017.

When Will The Tesla Stock-Promote Finally Fail

The history of industry leading consumer tech products has not been kind to investors who overstay their welcome. You need look no further than all the hundreds of notable recent failures, to realize that these companies almost always flame out. The list below (in no particular order) is a nice trip down memory lane of former favorites, that are now either bankrupt or shells of their former selves – often consumed by some other entity that fortunately put them out of their misery. Of course, the list below, is just from the past decade or two;
Palm, Gateway, Research In Motion, GoPro, FitBit, Heelys, Handspring, Compaq, BlueRay, Garmin, Delorean, Casio, Sega, Tamaguchi, TiVo, Betamax, AOL, Walkman (Sony), Set Top Boxes (Scientific American), Kodak, Atari, Napster, Netscape, Polaroid, etc.
Let’s just say, it’s hard at the top. You must guess each change in technology, each generation of improvement and design it for fickle consumers, while constantly outlaying capital for research and development that may never go anywhere. All the time, others are constantly trying to overtake you.
If you look at the lifecycles of these companies, they often follow a similar trajectory from ingenious creation with huge margins, to a few generations of new products with smaller margins, to massive competition as deep pocketed competitors and venture capitalists try and emulate your product, to missing a product cycle, to becoming obsolete. These consumer product companies rarely last more than a decade; often just a few years. In the end, consumer focused tech is vicious and Darwinian, with very few long-term competitive advantages.

This post was published at Zero Hedge on Oct 31, 2017.

These Are The Wall Street Jobs Most Threatened By Robots

Cashiers at fast food restaurants aren’t the only workers who should fear being imminently replaced by kiosks and artificial intelligence. Advances in machine-learning software could soon render many high-paying Wall Street jobs obsolete – jobs that will no doubt quickly disappear as electronic trading in equities and foreign exchange markets squeezes trading revenue, forcing banks to seek cost savings elsewhere.
As Bloomberg points out, ‘the fraternity of bond jockeys, derivatives mavens and stock pickers who’ve long personified the industry are giving way to algorithms, and soon, artificial intelligence.’
Indeed, firms are already rolling out machine-learning software to recommend trades and hedging strategies. And while many of these tools will undoubtedly help the employees who remain vastly improve productivity (if history is any guide), one day soon, the machines may not need much help.
But as anyone in the industry has probably noticed, banks have stepped up recruiting of tech talent since the financial crisis. Of the jobs Goldman Sachs’s securities business posted online in recent months, most were for tech talent.
Billionaire trader Steven Cohen is reportedly experimenting with automating his top money managers. Venture capitalist Marc Andreessen has said 100,000 financial workers aren’t needed to keep money flowing.

This post was published at Zero Hedge on Oct 18, 2017.

In Urban China, Cash Is Rapidly Becoming Obsolete

There is an audacious economic phenomenon happening in China.
It has nothing to do with debt, infrastructure spending or the other major economic topics de jour. It has to do with cash – specifically, how China is systematically and rapidly doing away with paper money and coins.
Almost everyone in major Chinese cities is using a smartphone to pay for just about everything. At restaurants, a waiter will ask if you want to use WeChat or Alipay – the two smartphone payment options – before bringing up cash as a third, remote possibility.
Just as startling is how quickly the transition has happened. Only three years ago there would be no question at all, because everyone was still using cash.
‘From a tech standpoint, this is probably one of the single most important innovations that has happened first in China, and at the moment it’s only in China,’ said Richard Lim, managing director of venture capital firm GSR Ventures.

This post was published at NY Times

Silicon Valley’s ‘Death by Overfunding’: Next Unicorn Collapses

When the ocean of hype turns toxic.
San Francisco-based Jawbone was a unicorn whose valuation peaked at $3.2 billion in 2014. Past tense because the maker of fitness trackers and other gadgets began quietly liquidating last month. And it’s being sued by vendors that claim they’re owed money, according to Reuters. Yet, Jawbone had raised nearly $900 million in equity and debt capital. And it blew this money.
Jawbone’s liquidation was first reported by The Information on July 6 and confirmed on Monday by Reuters. It’s the second largest failure of a venture-backed startup in terms of money raised, behind the bankruptcy in 2011 of solar-panel maker Solyndra.
Top venture capital firms – including Sequoia, Andreessen Horowitz, Khosla Ventures, and Kleiner Perkins – had invested in Jawbone. In September 2014, it raised $147 million at a valuation of $3.2 billion. In February 2015, it raised $400 million in debt, of which $300 million from BlackRock. By November 2015, with prospects curdling, it laid off 15% of its workforce.
In January 2016, when VC firms refused to throw more money at it, Jawbone’s president Sameer Samat, who’d arrived from Google seven months earlier, went back to Google, and in the same breath, the Kuwait Investment Authority led a $165-million Hail Mary investment in the company.

This post was published at Wolf Street by Wolf Richter ‘ Jul 11, 2017.

One Hedge Fund CIO’s Conversation With His Uber Driver

In his latest weekly letter to clients, One River CIO Eric Peters shifts his attention away from his two favorite topics of monetary policy and capital markets, to unveil a streak of contrarian skepticism on the topic of “technological disruption”, and in his trademark anecdotal style, present a hypothesis that would be most unwelcome in virtually every Econ 101 class and Venture Capitalist Headquarters: stating that “we should be careful not to overlook the possibility that today’s disruptive technology companies may be not much more than mechanisms to drive wages down to subsistence levels’ alleging that ‘these companies rely less on technological innovation per se, but on changing employment styles and reducing total wages, while imposing harsher working conditions.”
His conclusion: ‘the nature of technology depends very much upon what the public can be induced to put up with.’
And just to make his view more palpable he presents the following conversation with his Uber driver:

This post was published at Zero Hedge on Jul 9, 2017.

Robert Soros Steps Down As President Of Soros Family Office

Robert Soros, 53, the eldest of George Soros’ five children and currently deputy chairman and president of Soros Fund Management, is resigning from those roles and stepping down from day-to-day management to invest his own money at the $26 billion family office according to Bloomberg, which adds that Robert will remain an owner at the firm where he has worked in various investment and management roles for more than 20 years, and will continue to be involved in its strategic long-term planning.
Robert will create a unit called Soros Capital, which will tend toward illiquid investments including venture capital.
‘As opposed to the past when everything was under one umbrella and under the strong force of the patriarch, Soros Fund Management will now transition to a model that provides customized solutions for the different needs of the Soros family and the Soros foundation clients,’ Robert said in a telephone interview.
It sounds as if the Soros “non-patriarchs” are putting in place succession event contingenies. And, if the investment horizon is longer, so much the better for young Robert.

This post was published at Zero Hedge on Jun 26, 2017.

Seeds, Unicorns, and the Value of Venture Capital

Silicon Valley is a mystery to most people. So is technology in general, for that matter.
We like our gadgets, but we don’t really understand where they originate. We like tech stocks as long as they go up.
It doesn’t occur to us that when a tech stock goes public and millions of starry-eyed mainstream investors scramble to buy shares in the IPO, the ‘smart money,’ aka the early investors, are already cashing out and moving on.
This week, I’m at our Strategic Investment Conference, so instead of current news, I have a movie review for you. As you’ll see below, it’s a good peek into early-stage venture investing and has some lessons we can all apply.
First, a reminder: You can follow the conference action on our SIC Live Blog. We’ll be updating it frequently with session recaps, photos, and videos. Check out the agenda for speakers and times.
Now, on with the show.
Red Carpet
Back in March, I went to the South by Southwest Conference in Austin, part of which is a film festival. Many aspiring filmmakers premiere their creations at SXSW. I’ve never paid much attention, but this year, I noticed one that looked economically interesting.
Seed is a documentary by producer Andrew Wonder. The subject is AngelHack, a competition where teams of would-be tech entrepreneurs compete for venture capital funding. Here’s the official synopsis.
Seed follows three start-ups from around the world as they descend on San Francisco for AngelHack’s Silicon Valley Week. For three intense days they’ll hone their pitches, tell their story, and face humiliation at the hands of mentors just to get the chance to present their start-up to a panel of judges who could change their lives… or destroy their dreams.

This post was published at Mauldin Economics on MAY 23, 2017.

Harvard Endowment Liquidating $2.5 BIllion In Assets

Back in January, Harvard’s Endowment stunned the investing world when it announced that the investing vehicle which manages $36 billion in assets, would undergo a “radical overhaul” in the way the world’s wealthiest school invests its money by outsourcing management of most of its assets and lay off roughly half the staff in the process. As the WSJ reported at the time, about half of the 230 employees at Harvard Management Company would depart as part of a sweeping change by the university’s new endowment chief, N. P. ‘Narv’ Narvekar.
The endowment would also shut down its internal hedge funds and let go traders by the middle of the year. Additionally, the internal team in charge of direct real-estate investments was expected to spin out into an independent entity that Harvard would invest with. Following the restructuring, only management of Harvard’s natural resources portfolio and passively managed exchange-traded funds will remain in house.
So with this major overhaul taking place, it is hardly a surprise that the Harvard Endowment is quietly seeking to liquidate some $2.5 billion in private equity, venture capital and real estate investments, as Axios reported on Monday. The website notes that the secondary offerings include just under $1 billion of PE/VC partnership positions plus around $1.6 billion of real estate positions. Harvard has hired Cogent Partners, a unit of Greenhill to seek bidders in the secondary market and to executive the sale.

This post was published at Zero Hedge on May 8, 2017.


In recent years, experts have provided many different estimates for how many human jobs will be lost to automation, and in what time frame. However, one technologist from China has given what may be the most dramatic prediction for how many jobs artificial intelligence is going to destroy.
Kai-Fu Lee is a world renown investor and tech expert who founded Google’s subsidiary in China, as well as the venture capital firm known as Sinovation Ventures. In an interview with CNBC, he explained why he thinks that AI is going to eliminate half of all current jobs within 10 years.
‘Traditional companies are really slow. The banks, insurance companies, the hospitals, they really don’t understand how A. I.

This post was published at The Daily Sheeple on MAY 1, 2017.

This bubble finally burst. Which one’s next?

Like so many other high-flying Silicon Valley startups, Clinkle was supposed to ‘make the world a better place’.
Founded in 2011 by a guy barely out of his teens, the company picked up early buzz after proclaiming they would disrupt mobile payments. Or something.
Silicon Valley venture capital firms were apparently so impressed with the idea that they showered the company with an unprecedented level of cash.
(Given that investing in an early stage company is high-risk, investors might provide a few hundred thousand dollars in funding, at most. Clinkle raised $25 million.)
The company went on to burn through just about every penny of its investors’ capital.
There were even photos that surfaced of the 21-year old CEO literally setting bricks of cash on fire.
At the end of the farce, Clinkle never actually managed to build its supposedly ‘world-changing’ product, and the website is now all but defunct.
This is rapidly becoming a familiar story in Silicon Valley.

This post was published at Sovereign Man on April 26, 2017.

The Economy Is Imploding At A Faster Pace & You Need To Be Prepared – Episode 1248a

The following video was published by X22Report on Apr 6, 2017
Initial jobless claims magically surge. The real estate market is falling apart, reality and manipulated stats are going there separate way. Venture Capitalist in San Fran and Silicon Valley are drying up and office space is empty. 50% of Americans don’t have $500 in their account. NY Fed ready to bring down the economy. SocGen says the Feds actions are going to have the opposite effect. Everytime the Fed mentions overvalued the stock market comes down.

Startup Craziness Deflates, Hits Silicon Valley & San Francisco

Venture Capital gets prudent – with consequences. Few areas in the US are as dependent economically on the startup ecosystem as Silicon Valley and San Francisco. And the crazy boom that peaked in 2014 and 2015 lifted all boats, but then the tide went out.
It’s a larger US phenomenon, but San Francisco and Silicon Valley feel it particularly. Venture capital investments in the US ‘downshifted again’ in the first quarter, according to the current report by the National Venture Capital Association and PitchBook Data. It was the sixth quarter in a row of declines, and the number of deals dropped to the lowest level since Q3 2010,
The startup funding industry ‘is likely reverting to 2012-2013 levels of investment after peaking during the past few years,’ the report says. It represents a ‘more disciplined approach with a much more critical eye on investment opportunities.’ With first financings declining and with VC-backed companies, such as Uber and Airbnb, staying private longer and thus not allowing their investors to exit, ‘venture investors are focusing more of their efforts on supporting existing portfolio companies,’ rather than funding new ones.

This post was published at Wolf Street on Apr 6, 2017.

Border Hassles and Economic Growth

Here’s a new party game: Summarize the world’s postwar economic history in 10 words. Take all the time you need. Go.
There, wasn’t that fun? My answer:
Borders once mattered. Then they didn’t. Now they matter again.
I know, that misses some details, but it’s a good framework.
Soon after World War II ended, we split the planet into East and West, with an Iron Curtain in between. Lesser barriers subdivided each side.
Time passed. Borders loosened. People and goods started flowing more freely.
This was okay at first, but eventually it became too much. People yelled, ‘Enough!’ Now we’re in a great debate over which visitors, immigrants, and goods can cross national borders, and on what terms.
It’s a debate worth having, but we can’t forget that our choices will have economic consequences. Sometimes, a medicine’s side effects are worse than the disease.
We’re starting to find out now.
Exporting Dollars
This week, I’m at the South by Southwest Conference (SXSW) in Austin. Among other things, SXSW is a big meeting place for start-up companies and venture capital investors. A lot of deals get made here.
Many of the investors and entrepreneurs who are attending are from other countries. I’ve met people from as far away as Brazil, Israel, Indonesia, South Africa, and Greece.

This post was published at Mauldin Economics on MARCH 14, 2017.

The Death Of Venture Capital?

Few business communities swing from boom to bust as reliably as Silicon Valley, but detecting shifts in this opaque world can be challenging. To help illuminate the field, Bloomberg created the U. S. Startups Barometer, a new weekly indicator that tracks the overall health of the business environment for private technology companies based in the U. S.
So how ‘healthy’ is the American Venture Capital business?

This post was published at Zero Hedge on Feb 21, 2017.

Why The Cold War Between Tech CEOs and Trump Is About To Go Nuclear

Over the weekend, openly defiant CEOs, particularly among the tech sector, expressed their displeasure with Trump’s Friday executive order temporarily banning refugees and limiting travel from seven Muslim countries, with both words and deeds, among which the following (summary courtesy of Axios):
VCs funding the ACLU: Several venture capitalists, as well as a few entrepreneurs, took turns soliciting donations to the American Civil Liberties Union through social media and personally matching those donations. Airbnb volunteers to help provide housing for impacted immigrants: The home-sharing company said that it will work with travelers and organizations to provide housing for those impacted by the executive order, whether through volunteer hosts or by funding housing. Lyft and Uber commit millions of dollars to legal aid: On Sunday, Lyft said it will donate $1 million to the ACLU over the next four years. Later in the day, Uber said it will create a $3 million legal defense fund for impacted drivers, as well as provide legal assistance and compensate their lost wages. Google is setting up a $2 million crisis fund: The search giant has set up a fund that will donate to the American Civil Liberties Union, Immigrant Legal Resource Center, International Rescue Committee, and UNHCR. On Monday morning, former US Treasury Secretary Larry Summers, speaking in an interview with Bloomberg Television, said that he is ‘gratified’ by what he heard from the tech community. ‘As global businesses, they have a huge stake in the United States being a nation of the Statue of Liberty rather than being a nation of refugee camps.’ He added that ‘they have a huge stake in the United States supporting an open and tolerant global system, they have that stake for their employees, their customers, they have it for the reputation of the United States and they have spoken out.’

This post was published at Zero Hedge on Jan 30, 2017.

CIA’s Venture Capital Arm Is Funding Skin Care Products That Collect DNA

SKINCENTIAL SCIENCES, a company with an innovative line of cosmetic products marketed as a way to erase blemishes and soften skin, has caught the attention of beauty bloggers on YouTube, Oprah’s lifestyle magazine, and celebrity skin care professionals. Documents obtained by The Intercept reveal that the firm has also attracted interest and funding from In-Q-Tel, the venture capital arm of the Central Intelligence Agency.
The previously undisclosed relationship with the CIA might come as some surprise to a visitor to the website of Clearista, the main product line of Skincential Sciences, which boasts of a ‘formula so you can feel confident and beautiful in your skin’s most natural state.’
Though the public-facing side of the company touts a range of skin care products, Skincential Sciences developed a patented technology that removes a thin outer layer of the skin, revealing unique biomarkers that can be used for a variety of diagnostic tests, including DNA collection.
Skincential Science’s noninvasive procedure, described on the Clearista website as ‘painless,’ is said to require only water, a special detergent, and a few brushes against the skin, making it a convenient option for restoring the glow of a youthful complexion – and a novel technique for gathering information about a person’s biochemistry.

This post was published at Lew Rockwell on December 31, 2016.