This is a couple weeks old, but very good. I mean, very bad. You know what I mean. A reader writes: If you want to see what the smartest and probably most successful Silicon Valley venture capital firm think lies in store, have a look at this. Excerpt:
Leading Silicon Valley venture firm Sequoia held an emergency meeting yesterday to tell its portfolio companies to get ready for the worst, GigaOm is reporting and which we've confirmed from multiple sources. To drive the point home, startups were greeted at the gathering with a grave stone that said "RIP: Good Times."Many Silicon Valley companies have been wondering how -- or if -- the larger economic crisis may affect them. This is perhaps the surest sign yet that there's no "if." It comes at a time when Ron Conway, Silicon Valley's most prominent angel investors, sent a similar warning to his own companies. Conway was burned badly by the last downturn, and it took him years to claw out of it.
"It was scary," one Sequoia-backed chief executive told us about the Sequoia meeting, attended by scores of his peers. It lasted several hours, and the message was bleak. The speakers and presentation were to be kept confidential. Things could get a lot worse than people think, and it will be a "more protracted downturn," Sequoia partners told its companies. "They were not fear-mongering," one chief executive told us. "They were smart speakers. Sequoia runs on specifics, they're very data driven."
After the jump is a Sequoia slide show presentation to its portfolio companies, explaining how they reached their grim conclusions:
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Old Susan,
Yes the market will go back up eventually... but when? Many non-alarmist and sophisticated economists are talking about an "L shaped recovery," meaning that the market will not recover all of its losses for many years at the very least. If you are retiring this year, or next year, or in two years - do you pull the trigger and take money out of the market when the dow is still hovering around 10k? That means that you take about a 30% loss on all those years of contributions when the market was in 13-14k territory. Or do you not take money out of the market and scrape by as best you can - hoping against hope that the market bounces back?
Now imagine the dow hovering not around 10k but around 8k over the next few years... entirely plausible, how many millions more old people and their families will those measely 2000 points leave in the lurch?
Right now, my heart is breaking for those over 60 with money stuck in equities. But once they really start to hurt - we will all pitch in to support them, and when my generation (millenial) learns to live without easy access to debt and with discretionary funds heading to our parents, and as boomer consumption starts to level off... well, one of many delightful self-reinforcing loops that will keep us in the depths for a long time.
Mike, could happen. You're absolutely right. A lot of things could happen, and some of them will.
It's too early to call this one, though. I'm just arguing for a more-or-less hopeful wait-and-see rather than stocking up on despair.
Almost no one is being forced to retire this very instant. Most people have a year or two, at least, of running room, and most of us are taking it. (I'm 63.) There are very few good reasons for just taking all your money out of the market all in one blow right now this minute, and retirement isn't one of them. If you are gravely ill and you need the money, OK, but then, you're probably not going to survive into a 25 year retirement, yes? That kind of question.
I don't want to take money from my kids. Keep your money. Spend it on my grandkids, spend it on yourselves. We're just fine here, we're going to strap down everything loose and assume that the storm will pass. That outcome is at least as likely as the doom-and-gloom, market-takes-twenty-years-to-recover, stock-up-on-ammo scenario.
It's funny. I saw that presentation last week and yawned. I've lived through more Silicon Valley boom and bust cycles than I can count and this one actually looks pretty tame compared to the Internet bust when 200,000 jobs were shed (and that was just a few years ago). We're hardy types here and we deal with these ups and downs. If we can't we move away or get government jobs.
There is already huge investment occuring in green tech around here and that may be the source of the next boom. Or, it might be something I can't even imagine now.
Correction. I can't believe the 200,000 number came off my fingers. It was bad but not that bad. The real number in Silicon Valley was 40,000.
I feel better now.
Market's up today.
Hear that on this blog today? No?
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