Creative Destruction; It’s Kind Of A Big Deal

My latest post for Alpha Baskets looks at creative destruction as relates to the widespread closing of retail outlets and what the long term implications might be. From the post; As a bigger concept this is about creative destruction, a concept widely attributed to Joseph Schumpeter from the 1950’s. Creative destruction is what makes laptops and 60 inch televisions be dirt cheap (Moore’s Law is a derivative of creative destruction) and the list of industries that have been impacted is endless. People as consumers have mostly benefitted although it might be a different story for people as workers. Think about auto manufacturing which along with other forms of manufacturing are moving more to robotics and automation. We’ve all seen the posts on Facebook about fast food workers being replaced by kiosks as the minimum wage starts to move a lot higher. Please click through to read the entire post. The
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Really a Ho Hum Quarter?

Now that most of the investment data are in for 1Q17, analysts are using words like “disciplined” and “normalized” to describe the activity of the first 90 days of 2017 – obviously not how we would characterize the current political climate. As always, the headlines belie what might be seen as more turbulent private capital markets under the surface, as quite clearly there is a continued and pronounced rotation away from the earliest stages of investment. Modest but encouraging exit activity has continued to generate strong limited partner interest as 58 new funds raised $7.9 billion, according to NVCA and PitchBook data. Nearly $16.5 billion was invested in 1,797 companies in 1Q17, which was the fewest number of companies in the last 22 quarters. Much of this decline was in the Angel/Seed stage which over the past handful of years has accounted for roughly 55% of overall deal
1Q17 investments
1Q17 exits
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Don’t Fall For The Fallacy Of Explanation

This week’s Market Update is posted at Alpha Baskets and includes the following; We are fascinated by various spread relationships that serve as risk proxies. Long time market participants may recall the TED spread, also in years past AUDCHF, Australian dollar versus the Swiss franc, was just such a measure where, put in today’s terms AUDCHF moving up was viewed as the equivalent of risk on and if the cross moved down it was risk off. YTD AUDCHF is up almost 2.5% but it is down about 3.5% since late February. Dennis Gartman has talked lately about EURCHF playing a similar role but lately the market broadly has been following the yield spread between the French OAT and the German bund. As the spread gets wider it is thought that political uncertainty in the European Union is increasing while a narrowing spread is a sign of decreased
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10 Monday AM Reads

Our Pro-Science morning train reads: • ‘Silicon Valley’ Is Still the Outrageous, Tech Industry-Skewering Show That We Deserve (Daily Beast) • Grab Your Pitchforks, America, Your 401(K) May Need Defending from Congress (Moneybeat) • Is this the end of venture capital as we know it? (VentureBeat) • Trump condos worth $250 million pose potential conflict (USA Today) • Richard… Read More The post 10 Monday AM Reads appeared first on The Big Picture.

Sunday links: difficult to debunk

Being John Malkovich-Moment

A quick note; Do you remember the movie Being John Malkovich, the one where John Cusack and his girlfriend go into Malkovich’s brain? Then along the way John Malkovich goes into his own brain? Yeah, it was a weird movie but it was funny too. The ETF business may be having its own Being John Malkovich-moment with the launch on April 20th of the ETF Industry Exposure & Financial Services ETF which is being sponsored by Toroso Investments and trades with symbol TETF. It owns a good mix of companies including the parent companies of iShares and SPDRs but not Vanguard of course which is not publicly traded. It also owns a few publicly traded exchanges where ETFs trade, companies that make markets in ETFs, discount brokerages that offer their own ETFs, companies long known for traditional mutual funds but who are also getting into the ETF business as
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The importance of being an expert-generalist

I am in the Elon Musk fan club. It’s hard not to be in awe of what he’s achieved – four multi-billion dollar companies and he’s only in his forties. I’ve even read his biography, not something I’ve done for many people. Lots has been written about why he is successful, mostly focused on his drive, vision, tenacity, resilience and intelligence, but I happened on a post morning which highlighted something that was new for me. Forbes columnist Michael Sims was seeking to understand how he has been successful across a wide range of very different industries – auto, space travel, energy and software. The answer, he believes, is that Elon Musk is an expert-generalist:

Expert-generalists study widely in many different fields, understand deeper principles that connect those fields, and then apply the principles to their core specialty.

That struck a chord with me because that is what good venture

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