Thoughts From The Eliptical Trainer
Its been a while since I’ve done one of these posts. A lot’s been going on and I find myself on the trainer thinking outloud.
1) The credit markets are thawing (see the ted spread chart on fredwilson.vc for a visual of the thaw). The equity markets are stabilizing But that doesn’t mean they won’t continue to go down. As investors start to focus on earnings next year and beyond, we may see a continued drift down. The Nasdaq is down 33pcnt ytd, $GOOG is down 45pcnt ytd, and $AAPL is down 50pcnt ytd. The market has repriced equties and that impact will be felt far and wide
2) The sooner we accept this new reality and deal with it, the better off we will all be
3) The next 12 months may be a period of the ‘haves and have nots’. Last night the Spotted Pig was mobbed but the new hot place down the block was not. There are bulletproof restaurants (the pig), bulletproof ad models (paid search) and bulletproof brands (all things apple). In tough times the money will keep flowing to the best companies and will stop flowing to the worst. Be a ‘must have’ and don’t be a ‘have not’ in this environment.
4) I think Obama has the election pretty wrapped up absent a major external event. I think my parents might vote for him. They are army people, lifelong republicans, who are in their late 70s/early 80s. But if they vote for Obama, they are not really voting for him, they are voting against the GOP and what is has become and what it has done to this country. Obama’s mandate, if he wins, will be thin and he should not overplay it. He must win these skeptics who held their nose and voted for him if he wants to govern with a real mandate. And that won’t be easy and he must govern from the far center which is where our country really is right now. And I think he can and will do that.
5) The earthquake we have witnessed in the capital markets in the past month may be part of a tectonic shift that is happening in the geopolitical world. I am heavily influenced in this thinking by Fareed Zakaria but it just makes sense to me. The US has come violently back to economic parity with the rest of the developed world. Look at who is buying up some of the back office operations that are coming available in the dismantling of the US investment banks – the indian companies that provided the outsourcing contracts to them We live in a global economy now and we are not the unchallenged boss of it.
6) The web and the global internet can be a powerful force in helping to change american society. We can learn to save, invest, live healthier, and more energy efficiently and we can do this in partnership with like minded people all over the world. I am not a utopian but I am powerfully moved by things like grameen, kiva, donors choose, etsy, amee, livemocha, craigslist, wikipedia, google translate, and many other web services that can and will make our world a better one.
7) So I am optimistic and I am done with my workout and its time to get to work
Sorry for the lack of links in this post. I did it on my bberry (soon to be G1!). I’ll try to update with links later.
11:41 Eastern: Update with links done
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Comments (Archived):
The key thing to realize is that overall the US economy has behaved like a large company that doesnt adapt to changing times. Usually when a new technology comes up you have a huge price leverage as you are the sole supplier. Then the rest of the market catches up and those same products become commodities and you get into razor thin margins and a point where labor costs determine whether you can compete in that market or not. And when you cannot compete in the labor cost model a smart company needs to build new product lines that are again revolutionary and high profit and buy you a few years of market leadership. Over the last decade all the markets where the US held leadership positions are moving into the commodity sector and US companies cannot compete. And the US companies haven’t built up the new lines of profitable markets that the world needs to buy from the US only. So we are at a point where we buy more than we make since its is cheaper for us to buy than to make the things we consume. We need to create those new markets that the world wants and only we have the technology to make and that is what will change the balance again. We need to wake up and reinvent what markets we play in.
One area where US companies do this very well is the Pharma industry. They line up new lines of drugs that are high profit around the time that the patents on the old ones are going to run out and other companies can make for cheap. At that point there is no way they make money on that drug so they move on to the next drug and make a killing on that.
I hope that you are right about #4, Fred, but I can’t help feeling uneasy about the next leader of the free world having been elected essentially on “gut”. We have as a nation been known to gamble, as evidenced by our economy. Afraid that this latest gamble will be our most frivolous. Will look back and ask “how could nobody see this coming? all the signs were right there?” Just like so many are now asking the same about the credit bubble. Would not be the first time in western history that the “intelligencia” as it were, enthusiastically supports a new regime, only to about-face with equal passion when it’s unfortunately too late. Don’t count on centrist policies, by the way, with the congressional composition ahead.I would not feel this way, I don’t think, if there had been the least sign of vetting. But I increasingly feel like we’re being railroaded. Remember how it went down for Hillary not long ago. Tell me again how/why she lost?
Great comment.McCain/Feingold put us in a situation to be railroaded like this. In an era where only the media is allowed to comment on the candidates in any size, it should come as no surprise that their favorite Democrat met their favorite Republican and then their favorite overall wins it.Between that and Sarbanes/Oxley, we’re just killing ourselves with knee-jerk legislation.
I vetted him in my own way. I met him. Asked him some tough questions. Met people close to him. Read both books. Watched almost every debate. Read his polcies. In short I did more work on obama than some ceos we’ve hired into our portfolio. He’s come through with flying colors. Doesn’t mean he’ll work out. All the vetting in the world can’t tell us that. But I’ve got a much better feeling than you do. Which is fine. Each of us has to do our own work and come to our own conclusions
Unfortunately, Fred, that’s about the extent of all the due diligence and questioning that’s been done. Oh well, let’s hope your gut is right, I really mean that.
I’m just impressed you were able to hack this out while on the elliptical. Never ceases to amaze me. That takes some skill.
Nah. Just a lot of practice
Hi Fred,I am an avid and loyal reader of AVC and always enjoy your logical and well-written insights. However, and with all due respect, I think you should crank up the level on that eliptical machine.It’s not a workout if you can write so eloquently while exercising. We want to keep you writing for many years to come!!!
You are prob right but I did get my heart rate to the desired level and was sweating heavily on the bberry by the end
geez – writing all this out must have made your workout fly fred! i’d like to try it but i dont see it being so easy with an iphone.
I wish I was as optimistic as you re: the election but I think it is going to be VERY tight, especially in my state of Ohio. No offense, NYC is largely disconnected (media wise) from the rest of the country. It’s going to be much tighter than you think. Fortunately, we have early voting in Ohio so I’m done with that and can move on with the rest of my life.Also, impressive typing from the elliptical.
This is odd. I agree with this entire post. :)Obama will likely have an early opportunity to show the world he is not an appeaser. I hope he makes the most of it.
I agree with #6. I believe the web has potential to change the real world, not just virtual worlds. I think (or hope) the next Google will be a web company that has a deep, lasting impact on how people live in the real world.
I had seen your two tweets the other day regarding both the Spotted Pig, and reference to a NYC Halloween store being packed (recession? what recession?). I would add that one needs to maintain a big picture view when forming conclusions. For example, I live in a well to do neighborhood in Long Island where it has not been uncommon in years past for entire streets to be decorated for Halloween. This year? driving through the neighborhood you would not even know it is October!I do agree with your overall comment though (Have and Have nots)… every company I have every worked with has always been “best of breed”. To survive/thrive in this world, make certain that you (your company) are best of breed as well.twitter.com/A_F
You may be correct that Obama’s right-of-center support comes from people voting against the GOP instead of for Obama. But, don’t forget what happened in the primaries: I think Obama beat Hillary because this country’s political center of gravity moved farther to the left than people anticipated, especially on foreign policy.
I think Krugman’s comment on this subject on his blog today resonates. Why is it that this is a center right country? If Obama wins by a significant majority and the Senate and House are both democratic its all happening despite Obama having run against a guy who was so centrist in approach that at one time he was considered a possible running mate on the Democratic ticket and had to jettison his close friend Lieberman from the possibility of being on this years Republican ticket – and replace him with someone totally unqualified and completely form over substance – in order to appeal to a base that he had already alienated?I don’t buy the argument that this country is nearly as right wing as its made out to be. And if the “joe plumbers” of the world who are nominally republican (the term has lost all its meaning just as the republican party has lost its entire soul – see Peggy Noonan’s comments this weekend in the WSJ), they are doing so based on the efficacy of the GOPs marketing might, not based on what is actually in their own self interest; Middle class incomes in this country are decreasing at a meaningful and accelerating rate and Joe Plumber was largely sustained by the work generated by home equity refinancings. The next few years are going to be even more painful than the past few have been.
Fred – get off the elliptical and on a rower
Regarding your # 5 — economic parity with the developed world, and emerging-market companies acquiring parts of our business fabric. Let’s all hope the competition continues to move in that direction (competition of ideas and brains and innovation); that’s the best outcome for humanity, and for free countries generally. The downside scenario is protectionism, nativism and exceptionalism, as in “we don’t have to play by the rules that the rest of the world plays by.” It gets called various things, “America First” (don’t fight Hitler and Tojo, let the world go to hell), or “Country First” is the new twist; how many voters understand that our woes are inflicted on us by our own leaders and parties and blame them instead on “foreigners,” or “illegal immigrants?” Will the new President (either one) have the courage to defend tolerance and cooperation against ignorance and fear?
Great post – definitely miss these “rambling thoughts” … will be interested to see reactions to the G1 vs. the Blackberry – and how long it takes to adjust to it. Also eager to hear your thoughts as compared to the iPhone (which you initially tried and sold)
Clearly exercise pays off. Fred, a very concise blog and well organized. Which model of elliptical do U prefer? Since we’re all about fitness here, I’m curious.The question I have about Obama winning, is will it open the democratic flood gates–meaning every hand will be out and every trick will get a treat!
Another fan of point 6. Paul Graham gave a great speech on being benevolent and building a business at the same time (http://www.paulgraham.com/g…. Interesting that you have Google Translate there, but I can see your point. I think the tools that take the translate functionality and help people/cultures understand will be fascinating.Of course, as a Bangladeshi, +1 for Grameen!!
Forget about #6, lets talk about #1. You have to be crazy, or a consultant to believe that 3 days of thawing in the credit markets make a trend. The jury is definitely still out on this one…if bankruptices rise, we encounter still more “unexpected” banking write offs, or there are any other unexpected exogenous events over the next week, we are solidly back where we started. I understand your point that we are in a new era, but lets not get overconfident the repricing is over.
True, but I look at this chart every dayhttp://www.bloomberg.com/ap…And it’s been getting better every day meaning that banks are starting tolend to each other again
Dear Fred,please keep up posting from your eliptical. The blood flow to the brain does wonders for your lucidity.
Fred -Your thought #4 is a lovely idea but you, and frankly most of the press, ignores the role of Congress. Lots of people dislike Bush, that’s fine, and that hatred is going to make Obama President, it is the way it is. But on top of that millions of voters are going to give a Democrat led congress with 10% approval rating un-checked power. All but the most delusional Democrat would have to admit that Pelosi is a disaster. Frankly as much as I dislike Obama, it is Pelosi that really scares me.The Democrat majority will do exactly what any majority will do, try to stay in power. That’s really the problem with the House, elections are too frequent. Obama gets sworn in January 2009 and by February 2009 all Pelosi and crew will be thinking about is how to make things look pretty for the next election in November 2010 – only 22 months. No Democrat will want another Gingrich-type 1994 embarrassment where they fiddle around only to lose the power they thought they’d wield.As much as Obama scares me, it wouldn’t be as bad if he really was going to have to govern with a thin-majority. Unfortunately that is unlikely to be the situation.Russ
Wouldn’t it be awesome if Congress and the Presidential elections were held on opposite years? At least then we’d have the option to say “I just want the congressman that is opposite the President!”Of course, we’ve had that for the last two years….and well…..not so hot. That, and the election ads running every year….ehhh nevermind….just give me a place on the ballot that says “opposite of whoever wins Presidency for Congress” 🙂
What we actually need are term limits, free TV airtime for Presidential nominees and massive fund-raising limits. Look at Obama, the amount of money he has raised comes at a price and we’re all going to learn what the price was in a few years (see Mae & Mac).A completely controlled Congress / President is never good. Wouldn’t have been good if the Republican had had it, going to be bad if Pelosi has it.I think McCain would have one in a landslide if he had made a single-term promise and chosen Lieberman as his VP. Could have said ‘Look, there are fucked up things in this country, many caused by Clinton, many by Bush, this Congress is a joke with 10% approval, I am going to DC, I have a history of working with both parties, I am going to change things and then go away in 4 years’.Somehow a Federal Government led by Obama, Clinton and Pelosi doesn’t leave me feeling confident that anything we actually be done.
The market had been ahead of itself for a long while so this slide doesn’t seem to be out of the ordinary amongst all the people I talk to in CA.. Nobody was shocked as it was like the .com bust of the early 2000’s. There are great opportunities now. For instance, several restaurants have happy hour from 4-7 and now from 10-close every day of the week with half price drinks. Well its about time I can get a glass of beer for $2.50 rather than that rip off of $5-$6 all these years. There will be some adjustment but there are new opportunities that may exhist albeit with some precautions of course. http://iBehavior.com is a site I would like to now develop. http://LookRealty.com is a site I have almost completed initial development in. Some of us can still roll with changes; John Perkins [email protected] or (408) 469-7800 Who knows who will see this and what will come of it?
I’ve been a lurker for several months – belated thanks for sharing your perspective and ideas. Just wanted to reinforce the notion of exercise as a mechanism for providing clarity in the face of complexity. I’ve been an athlete for nearly 40 years, and whether it was a personal puzzle related to work, relationships, or some mixture of those, they all seemed to benefit from some unrelated time on the roads, the treadmill, the bicycle, or in the pool. Keep it up!
Thanks Mike
If you take a look at AAPL, and use their non-GAAP earnings, their PE is down to a little over 10, based on last quarter. Also note – their R&D was up about 50%, year over year.Re your previous musicians on Twitter – check out evangenitals [their lead singer, Juli Crockett] – the daily life of a 30-something ex-pro boxer(3-0) PhD-thesis writing musician, actor-director-playwright in love with her turtle(among other entities). PS – last time I checked, their albums were still free on Amie Street.
Thanks for the tip mayson