Long LA

Yesterday I woke at 4-15 and headed to my partner Gary’s house in Del Mar to grab his Tesla and fake self drive with him to Los Angeles for a day of meetings with founders and limited partners.

I have been doing these trips from Coronado for years and each time I come home I am amazed at how much bigger and better the start-up and growth scene have become.

Venice, Santa Monica, Downtown and West Hollywood continue to boom.

We ended the night with a great meal at Katana sushi with Coinmine founder Farbood Nivi to catch up and talk start-ups and crypto.

By 8-30 we were back in the Tesla fake self-driving home.

I was in bed by 11-30.

Not an easy day, but no major traffic snafu’s and a fresh appreciation for LA and Southern California life as a seed investor.

Greedy, Sloppy, Silly …The IPO Market of 2019 Continues

I wanted to share two more GREAT takes on the WeWork IPO.

First is Matt Levine from Bloomberg.

Next is Ben Thompson’s piece. I love how it opens…

There is a reason — beyond the fact it is August — that WeWork’s upcoming IPO has driven so much discussion: it is a document defined by audaciousness, both in terms of the company’s vision and also the flagrant disregard for corporate governance norms by its leadership. And, of course, massive losses despite massive amounts of capital raised. I suspect all of these things are related.

Ben ends his piece by mentioning that WeWork is basically the poster child of this era of ‘unlimited capital’.

The term ‘unlimited capital’ is being used quite a bit these days. The long boom, easy money, and low interest rate markets of the last 10 years have people thinking ‘unlimited capital’ is here to stay.

I’m with Fred Wilson on this subject in that I don’t think there is unlimited capital.

We will pay a price for this ‘unlimited capital’ sloppiness and greed.

I don’t know when because timing the end is a fool’s game…unless of course you have ‘unlimited capital’.

At times like this I love referring back to this great Richard Dreyfuss riff from Jaws.

All Hail Y Combinator…

I remember the cries of ‘bubble’ back in 2010 and 2011 when I last attended Y Combinator demo days. It was not.

Flash forward to the last couple of days and 166 companies presented at the YC Demo Day.

That is staggering in the sheer amount.

Techcrunch covers all 166 of them here and here.

We did not attend this year either, but we did make our first ever lead investment in a company from this batch.

Maybe it’s a top.

Maybe it means nothing (my opinion).

At 166 companies presenting I am just in awe of the ambition of the founders from around the globe and the scope of the event.

Just skimming the companies in the list I can get a feel of a few trends that seem hot and are emerging. This year I am seeing a lot of global fintech, AI and even biotech companies.

Here is a list of the top 100 YC companies (market cap) of all time. Impressive to say the least.

The Business of Sleep

I have been writing and about the sleep mega trend for over a decade.

Way back in 2006, I covered it in a Wallstrip episode while bouncing around Manhattan wearing my CPAP machine (minute 2-30 onward might horrify you).

My sleep problems only intensified post the smartphone.

This article from GQ UK titled the business of sleep is a great read covering a wide array of issues and products (It will take 10 minutes).

I believe a tipping point for the sleep industry/epidemic was both Netflix calling sleep the enemy and Apple realizing the value in selling sleep, mostly via a range of functions that stop users using its devices – iOS 12, released last year, included features that limit (Screen Time), cajole (Bedtime) and outright ban (Downtime). Two years ago, Apple purchased Finnish sleep-tracking company Beddit for use in Apple Watches.

Momentum Monday – Tim Apple Eats McDonalds With Fat Nixon

The things Tim Apple does for his country.

On Friday, Tim had to have dinner with the Orange King to cook up this story about how Samsung was a threat to Apple because of the tariffs.

Not a dumb idea.

The markets have had a lot of reasons to rollover….

Recession blathering

Inverted Yield Curves

Sloppy IPO’s and supply (weed blowups)

But they have not!

Of course they still might, but earnings have been good and interest rates are on our side.

Ivanhoff and I do our weekly tour of the markets discussing all this and some of the leaders that have held up best and are emerging. Apple might surprise a few people to the upside this week as well (long).

You can watch/listen to the episode here.

Have a great week.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Streetwear and The Rebirth of Good Marketing

I am fascinated by good product and good marketing.

I grew up with jingles and television commercials in my head.

‘Ho Ho Ho …Green Giant’

‘I’d love to be an Oscar Mayer Wiener…’

‘Plop Plop Fizz Fizz’

‘They’re Magically Delicious’ …I still love Lucky Charms!

In the era of the mobile phone and social networks it seemed like marketing and creativity had died. Twitter, Google, Facebook, Linked-In, Instagram, Whatsapp, Netflix and Amazon have never had to do much traditional marketing so it seemed like the art would be lost forever. I would argue that Twitter and Amazon have an ‘Uncreative Director’.

In 2019 though, it seems like we have turned a corner and marketing is back in vogue.

Sure, a brand can still explode on Instagram (Social Leverage is an investor in Manscaped which has done an incredibly creative job on Instagram with their ‘below the belt’ grooming products), but the art of creative product marketing across many platforms will continue to create mega brands now more than ever.

Of course Nike and McDonald’s still lead the way amongst the old guard because it is part of their original culture and DNA, but I am seeing so many more brands do a great job of integrating all forms of marketing to get their products over the hump.

Have you ever heard of Funko Toys? The ticker stream is incredibly popular on Stocktwits and the stock has done very well. Their creative director has been with them since the beginning. You will enjoy this story.

Ellen shared this piece on ‘Supreme‘ that I really enjoyed.

As software eats the world and everyone wants to start a software company, a next layer of creativity is set to explode that rides on softwares back but also lives on the streets to build trust and that special feeling in our hearts and minds.

Willy WeWork and The Money Factory

Everyone is talking about a ‘recession’, but it is the long boom that we should be talking about.

This week WeWork filed for an IPO…the latest poster child for ‘The Long Boom’.

The best take on WeWork is from Professor Galloway titled WeWTF.

You must read the whole thing and then please recommend the stock to the family member you dislike most.

The opening sets the tone:

In frothy markets, it’s easy to enter into a consensual hallucination, with investors and markets, that you’re creating value. And it’s easy to wallpaper over the shortcomings of the business with a bull market’s halcyon: cheap capital. WeWork has brought new meaning to the word wallpaper. This is more reminiscent of the cheap marbled panelling you’d find in Mike Brady’s home office — panelling whose mucilaginous coating will dissipate at the first whiff of a recession, revealing a family of raccoons or the mummified corpses of drug mules.

I personally think WeWork has a lot of genius. The product, the timing, the ambition and the speed of scale is/was impressive.

The S-1 is the reminder of the mess that is left in the rear view when you move fast and nobody is really watching.

I think I will stick to buying Apple on the dips for now.

Inflation in Recession Talk

I am getting asked a lot about the coming ‘recession’.

Here is the definition from Wikipedia:

In economics, a recession is a business cycle contraction when there is a general decline in economic activity.[1][2] Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. In the United States, it is defined as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”

I liked this chart from Arun Chopra to get my answer started:

If we are on the verge of recession, it will be the most talked about and predicted one of all-time.

I worry for American kids with high student debt because of the ‘gig economy’ they are heading into.

When this recession comes they will feel it more than anyone.

I think of recessions like inflation. There are groups of people battling their own recessions all the time much like certain industries are battling inflation and deflation all the time.

In this mobile era of machines and low interest rates, I doubt recessions look like the past and I doubt it gets as easily predicted as the chart above.

I’m A Superstititous Man

I loved this Ben Hunt piece on the Jeffrey Epstein death titled ‘Superstitious Man’.

What I am saying is that Epstein’s direct testimony – AND ONLY EPSTEIN’S DIRECT TESTIMONY – had the potential to create a Common Knowledge moment that could bring down – not just specific sociopathic oligarchs like Mob Boss Donald or Mob Boss Bill or Mob Boss Andrew if they were the specific targets of that testimony – but the entire Mob system of sociopathic oligarchy.

Jeffrey Epstein was the Missionary to bring down the monsters behind the monster, to bring down the SYSTEM of monsters.

Jeffrey Epstein’s books and records are not.

The individual voices of Jeffrey Epstein’s victims are not.

And that’s what makes me angriest of all.

Jeffrey Epstein’s death while in Federal custody shook me like the bank bailouts of 2008. Once again, the pleasant skin of American democracy has been sloughed off to reveal the naked sinews of power and wealth and violence beneath.

Read the whole article and then read the comment thread it sparked.

Negative Interest Rates

Everyone is talking about negative interest rates.

Everyone is so confident they know what it means. Not me.

I will say one thing with confidence…

Go. Refinance.

Jesse Felder jokes that Bonds are The New FANG (Facebook, Apple, Netlfix and Google).

Charlie points out :

and…

and…

One day we will really find out what all the money printing and poor government spending means, but for the time being I don’t really believe anyone.

I keep thinking of the movie ‘Blow’ when Johnny Depp and crew had so much cash that they had to keep buying bigger homes and finding more elaborate ways to hide/store the cash. Cash was so easy that it became a pain in the ass to hold it and store it.

As a consumer I love lower interest rates and if some asshat bank will pay me to buy a home, count me in and please lend me money to short your stock.