The Wild Ride

Uncertainty in the markets is at an almost historic level for the modern era. That reflects the extent of situational change in Western societies. The sweeping changes that appear to be underway in the US are causing rippling effects worldwide, and investors who were confident after the Trump election, are now reeling in uncertainty because Trump is doing what he said he would do when he ran for office. I guess the idea of a politician doing what they said they would do has caused a crisis of credibility - too much of it.

So now we are on a wild ride financially and in terms of certainties in the market. Health care research and development in the US has dropped by billions of dollars, AI is facing a set of uncertainties related to low prices from China and the claims of a next generation that will swamp this one coming soon, hundreds of thousands of Federal employees fired and the knock-on effect to the millions who depend on that spending, massive tariffs against neighbors that were in a free trade zone until relatively recently and the likelihood of retribution, the US siding with Russian aggression against other European countries (we didn't seem to mind so much when it was against Asian countries), disruption of contracts favoring minorities and small businesses, and the list goes on and on.

I got a great letter from a portfolio CEO

It was one page, and it addressed these changes relating them to the company, which is in the health care arena and requires FDA approval for its devices. It did so without political bias while identifying the uncertainties and how they were mitigated by company strategy, positioning, finances, market approach, supply chain, and so forth. I sent her an appreciation note letting her know that she remains one of the exceptional CEOs in my view, and supporting her efforts.

If you are a CEO or investor or run an investment group, what is the messaging coming from your companies? Silence is not a good approach at this point, nor is over-reacting. Some solid facts relaying the realities of the situations you face and how you are managing the uncertainties will help everyone stay on course.

We have been sharing these things since last fall because we anticiapted the uncertainties and addressed them strategically. We prepared for the worst and hoped for the best, and it seems to be working out ... "so far so good*".

* This was heard from a 1929 investment jumper as he passed the 10th floor.

And then there is Canada

One of our strategies has long been internationalization. That's not quite the same as globalization. We only look at select places around the world with friends and family and reasonable standards of living, health, safety, stability, etc. And we like India, Canada, and perhaps some of the Pacific Rim. I personally like western Europe, but when it comes to uncertainty, with the US walking (now jogging, soon running?) away and Russia trying to move in, I am concerned about placing too many eggs in that basket.

For now, my efforts focus on Canada because of the potential for so many US companies to have offices, subsidiaries, or even move there. We are working on teaming with folks we know there in various ways, opening offices there in one or two cities, we have been doing accelerator services for Canadian companies for some time and have some investments there, and so forth.

We don't want to jump too far too soon, and Canada looks like a great move for many of the companies we have been working with in the US. It has substantial economic advantages, cultural advantages, it's colder than California of course, but then with global warming and all...

Global recession/depression/pandemics/die-off coming?

Things get complicated when you try to anticipate the future and constrain it for your success. It looks almost certain that the economic situation in the US and the World will get worse in the next several years. How bad will it get? I don't know. Plan for the worst.

Depression (economic, not personal) is likely in my view, unless some things stop changing the way they have been in the last month or so and somehow revert. The pain is coming, and I want to avoid or delay it as much as possible for my companies, friends, and family members.

With the decimation of US-based research in medical and infectious diseases and dismantling of public health at the governmental level, we are already seeing deaths from preventable diseases going up among the unvaccinated populations in the US. If we break down the public health system, this will get worse. The US is already not making decisions about the influenza vaccines for the coming fall, and this stoppage will, unless reversed, almost certainly lead to epidemic levels far higher than recent history (other than COVID 19 of course), with far more deaths and higher health care costs, system breakdowns.

Some folks in various scientific fields suggest that a die-off of humans is coming soon, reducing the population by perhaps 10-30% worldwide. It could be better or worse of course, but just saying...

Conclusions

Uncertainties in the market are making it much harder for startups and early stage companies to find and maintain funding in the US. While this will have global knock-on effects, you have to get through the next 4-6 years to get to the 4-6 years after that.

Our approaches so far to get through the pandemic and the recovery and prepare for what's coming next have been reasonably successful. And I don't want you to imagine it's all gloom and doom. There are good things coming as well, but that's for next month's article... so far so good...

More information?

If you want to discuss decisions about paths forward, join us on our monthly free advisory call, usually at 0900 Pacific time on the 1st Thursday of the month:

and we will be happy to discuss it.

In summary

So far so good...