Is it ever!

If you don’t think it is and you are not respecting the price action, you will be sorry. The global markets were fantastic since since 2003 for long only investors (like me), but now is shaping up as payback. I have been viciously aggressive in protecting big gains and cutting loose my dogs. The Fed just cut 75 basis points and all we got was a weaker US Dollar and Gold at another all-time high of $910. Not good for any of us. It’s really not great to see a new problem being fought with the same bullshit soltion of the last 20 years. I have already said my peace on that last week .

I have been harping about the major stock indexes covering up the real crash underway. If you own financial or real estate stocks you have been a witness to the carnage.

For the last few years valuations were not a concern because of liquidity. Baidu is likely not worth $100 on basic fundamentals, but I was bullish all the way to $300. It went $400 and change. Now people care and are worried so it will have a much harder time pushing back to all-time highs.

The private equity market does not have the same luxuries as us stock market dudes. If they overpay and overfund….they are screwed. They can’t hit the bid the next day like you and I. It is one of the reasons I follow closely the venture dudes on my blogroll. The good ones on my regular reading list have amazing track records and have seen the dark side.

What’s Next?

First off, If I knew that I would share it, but you would not believe me anyway. The good news is you should be in no rush. At least I am not. I am reading a lot more venture capital blogs, but otherwise doing less. I expect I may have to trade a little more, but only expect to do so when the odds are really stacked in my favor – like this week – which despite Apple getting annihalated and me stopping out, was one of my best.

In the private and venture market Fred says ‘This Time Will be Different ‘. It is most excellent. Read it. The next bull market in stocks will be different as well. If you are positioned correctly through a possible prolonged downturn you will be able to look forward as Fred says and I preach. If you are buying ‘cheap’ and ‘oversold’ stocks for anything other than a trade in this environment you are looking backward. Dangerous.

As for internet and web bubble talk, especially venture capital…please!

China is obviously a bubble of EPIC proportions and it did not matter until more people cared. They are starting too NOW. You must now as well. NOBODY knows how a burst in China will play out. I gurantee you though it won’t be pleasant if it really bursts.

I stick by my October 2006 post on the web bubble:

I am always attacking when I hear the blogosphere talk about a Web 2.0 Bubble. It’s like Robert Shaw comparing shark scars with Richard Dreyfuss in “Jaws”. Please…

The years 1999 and 2000 were bubbles. Cars Direct raising $1 billion – before getting public – to sell cars at negative gross margins…IS A BUBBLE. Lowly hedge fund pisser me feeling priviledged to get shares in their Q round offering… IS A BUBBLE.

Obviously, the Company has somehow built a business model – but give me a billion dollars and I will too.

Today’s startups will never be given that luxury.

I hope to see a part of my investment back, but even if I make money (NOT HAPPENING) – it was a stupid investment and a lasting investing scar that never heals but should (did) make you smarter.

I would love the money back though :) .

In 2007, Venture Capital Investments hit six-year highs. Over $29 billion was invested in 2007 by venture capitalists, the most since 2001 ($40 billion), with biotechnology, medical devices, software and energy being the main energy of focus (Money Tree Report via Investor’s Business Daily). Of course not all the investments will be fruitful, but the next great leaders in 2009 and 2010 will come from theis crop of money. Although venture Capital goes through periods of inactivity and slowdowns, 2008 will likely see more of the same. The pump will be primed for the next great leaders to take the public stage. While economists and venture capitalists worry about economic slowdowns, bubbles and IPO conditions, the leaders of the newly funded companies , at least the great ones, focus on the task at hand – to become our new leaders, the next Google.

To quote from Fred’s post linked to above:

I agree with Will that overfunding and overvaluing companies is a bad idea. But I think it will be different this time in a few important ways. I do not think the answer is to rush back to the safe world of enterprise software and infrastructure investments. I do not think we’ll see VCs closing their doors to consumer focused companies.

What I think we’ll see is a flight to quality. Dollars will flow to the established players. If there’s a lesson to be learned from the $55mm round in Slide at $500mm pre, it’s that money right now wants to be with the winners. I don’t think Slide is at all like the companies we were shutting down or recapping in 2001 and 2002. The companies we shut down either had not attracted a customer or user base or had economics that just didn’t work.

So it’s time to assess what is working and what is not working in your business or your portfolio. Focus on the basics. Keep your costs down. Finance your company (or companies) intelligently and most importantly with money that will be around when you are no longer the high flyer darling of Techcrunch.

Position your portfolio for opportunity. Opportunities will be gigantic as they always are. Put your self in the position to play offense. That means develop a good defense.