Hope still not a good strategy

There's always one more level of digging to do.  One more angle of analysis that's needed before you can say you're done.

 

I was at a breakfast today where the current state of VC was being discussed.  Along with the state of the economy and what was going on in the credit markets.  Now there were some elements I was being informed on.  Meaning I had not done the same amount of research as the presenter, and the information I got was one more level than I had reached before.

 

However, there was one area where I could tell the person had stopped digging.  One where LP's could/would stop financing their VC allocation.

 

Quite correctly, he had analyzed the returns and valuations of holdings, and alternate assets had done pretty well, compared to the public markets, bonds/etc.  And so his argument was that LP's, large institutions would continue to finance the VC community.  There is the real risk that high net worth individuals would no longer be able to make the capital calls from the VCs, and would give up their shares in the fund.  This happened in the early 2000's, and it is probably happening today.

 

But what about the institutions?  Would they continue to pour money into the sector? because it held up better than the others?  He felt they would.

 

I disagree.  That's hoping insitutionals would come back into the sector.

 

One argument is that the institutional investors are very good at portfolio balancing.  Several of them have gone into commodities (at the wrong time) with the idea of diversification and balancing their cash.  If this is the case, then there is less incentive for such groups to continue financing VCs.  If the portfolio calls for 3% allocation into alternate assets, and you've seen a hit of 30% in your stocks/bonds portfolio, then all of the sudden, that 3% has just grown bigger (not in real dollars, but as a % of your total portfolio).  What do you do then?  Some folks are trying to sell their VC commitments on the secondary market.  Just trying to get cash back.  Some vultures are coming around and buying these up.  But will all of these get sold at the asking prices?  Probably not.  Who's really got the cash to buy these secondary offerings?  Who can afford the due diligence on these illiquid assets?  Sometimes the cost of donig due diligence eats up the discount that you're getting by buying these assets.  If that's the risk, why bother doing the due diligence at all?  Just wait until the discount is so great that you the diligence cost is negligable.  Or wait.

 

Right now, anyone with cash can wait.

 

Especially in an industry where people are going to hibernate for the holidays, and maybe longer.

 

During the winter months, while folks are skiing, portfolio companies are still burning cash.  The ones who have enough to last till spring will look a lot better than the ones who were just starved out and perished during the winter.

 

We might be entering a time like Monty Python's skit of "Bring out your dead!"  A company might be headed to the corpse pile, even as it says its not dead.

World water problems by 2080

From MSNBC

 

My guess is, because we've taken the longest outlook when it comes to making these forecasts on water, and climate change, this is probably on the outer edge of the situation.

 

we know the UN's report ignored some sources of glacier melt.  We know that there has been pressure to take a more conservative stance with several of these projections.

 

Let me say this, the planet itself, will be fine.  The Earth has undergone greater highs and lows in its past.

 

Humans? Not so much.

 

The global population may be decreased because of increased famine/disease/etc. 

 

Take a look at the numbers, and recognize how robust the data is.  These are the best predications we are able to have at this time.  As we go forward, we'll have better information, and less time to do anything.

Peek into the future of water wars

From io9

Want to know where the trouble spots are going to be?  Here's one map.

There's not too much question where the regions of waterstress are.

Now the problem is, how many countries in those areas have dangerous weapons?

What are they willing to do about the water situation?

Could desalination help everything? doubtful.  But it could go a long way to resolving some of the dangerous situations we already see brewing.

Synthetic Diamonds getting bigger and better

From New Scientist.

 

The idea that diamonds are no longer going to be limited in size for growth means a lot to the industry, and will turn things upside down.  I'm all for the idea that we can start creating these diamonds, and have new applications now that larger ones will become commercially producible.

Investors Circle Fall 2008

Another trip to Boston next week.
Investor's Circle event

It is an angel focused event, but some of the biggest SRI companies got their start at IC. 

Also, it is where you can meet some of the leading thinkers on SRI and where it is going.

There is a slow shift away from just making money by being green, to encompassing the full spectrum of financial to emotional benefits.

What does this mean to me?  it's gonna be colder in Boston than here in DC.

But it should be a good time, as always.

Parature Party

Last night I attended Parature's party.

 

Quite a few investors attended, along with friends/employees of the company.

 

For a brief moment, it felt like 1999 again.  a simple Dot Com party.

 

Duke's done a great job of growing the company from its beginings.  I first met him at the Parature (then Cyracle) offices 6 years ago.  In that time he's been able to grow the customer base to include Fortune 500 companies, and establish a presence in the industry.

 

I'm glad to see his success, and hope that other companies in the area will be able to enjoy the same

Biotech IPOs gone missing

I use the USAToday as a bellweather for public information.  By the time they get a story out, it should be in the public conciousness.

 

Here's their latest on the lack of Biotech IPOs, and what's being done now.

 

Take a look at the companies that are attracting attention.  These are the ones with sales.  These are the ones with revenue, and could either blow things out with the protection of a major biotech, or an infusion of capital via the public markets.

 

The ones that are long term research, well they're going to have trouble.

 

Lots of trouble.

 

Breaking the 2nd law of thermodynamics

#!$%@!  Now I'm gonna see a bunch of perpetual motion machines again.

 

Scientific American on how nature breaks the 2nd law of thermodynamics.

 

This is a big handicap in many models, the presumption of equilibrium or static scenarios.  Also the desire/ability to ignore events that don't come around often, black swans.

 

Well, the problem comes when an event does happen.  then you're out of luck.

 

But the mentality of cancelling flood protected, because you just went through a 100 year flood, still is used.

 

Avoid that type of thinking and you'll be doing everyone a big favor.