The Dow reached 20,000 in January 2017. It fell again below 20,000 in March 2020. By November 2020, it hit 30,000. In between, 250,000 people died.

Erin Griffith’s article in the NYT talks about the insanity in venture financing.

Don’t hate the messenger, but don’t hate the player either:

Reading it reminded me of those times I would order a round of shots before last call… you don’t know how things are gonna end, but you just know it won’t end well.

No one should be surprised when I say this, but people, we are due for a correction. A big one.
I don’t know when (but I have a guess, read on), but it will come. And for the record, overall, I am long the market – though overall, I have a very long term horizon and overall my portfolio is fairly conservative. 

The reality is that investors bidding ever more aggressively on assets never ends well.

Been there, done that

The post dot com bubble, Nasdaq crash correction in 2000/01 was so traumatic that I bypassed finance altogether for the media – drawn by the world wide web revolution. I didn’t just live it, I was in the eye of the storm in 2000 while working in the search engine industry, with my employer trying to raise $25M when the markets were tumbling like a pile of bricks. 

But 2000 dragged out until 2004. While writing my heart out, I also sold ads. During the biggest recession in ads since the Great Depression. Once the nuclear winter thawed, Aol bought in 2004, then in 2005 Live 8 ushered in the 3rd wave of video.

I then launched WatchMojo in 2006. Before long, Lehman took down the economyin 2007/08. I was somehow both in the bleachers (far away from finance) and in the trenches (treading water at WatchMojo).

The web video industry brought further corrections in 2011 (our then biggest competitors in our peer group, Revision3 and Next New Networks threw in the towel). We marched on.

Then again, the broader digital media market imploded in 2017. Mashable’s fire sale – $50M after being valued much more – set forth a domino effect that brought valuations for our comparables Buzzfeed, Vice and Vox crashing.

The FAANGs sunk their fangs in deeper and carved a greater pound of flesh, with their market share and capitalizations soaring. 

With the Dow hitting 20,000 in January 2020, conventional wisdom suggested a retrenchment once the pandemic sent businesses into lockdown, but no. 

The Dow soared to 30,000 by November as 250,000 Americans died in a year. 

Clearly the bifurcation between Wall Street and Main Street has diverged dramatically and accelerated. That’s not hard to explain: we shut down small businesses and deemed the largest, publicly traded ones essential. 

The Bearish Case

It would be easy to dismiss John Sussman as “even a broken clock is right twice” but given his uncanny previous calls, his warning that the market may fall 70% is hard to ignore outright.
2020 has seen the bubble blow faster due to things like Robinhood further democratizing investing and the surge of individuals as traders / investors. I am not referring to merely more retail investors who’d park money in mutual funds or buy stocks and hold over time. We’re clearly seeing the democratization of investing, which isn’t uncommon given the global DTC trend in every sector, but will likely lead to inevitably painful results.

Signs that we are reaching bubble levels in every asset class are all around us. Not just private early stage companies, but also private mid-caps and huge, pre-IPO behemoths who are far larger than their previous brethren who’d IPO sooner, leaving more riches for public investors. 

But whereas foundational stocks like Facebook IPO’d late, they were so robust that public investors could see return based on fundamentals. Some of these stocks – for example DoorDash who is IPOing on Wednesday – seem to be rushed to IPO to capitalize on a near-term anomaly event like a pandemic, with not only no path to sustained profitability, but a likelihood of major challenges if/when vaccines roll out and people slowly but surely return to their pre-pandemic behavior. I haven’t shorted a stock since I sold my stake in Sandisk in the early 2000s and felt it was due for a correction (I was right); I ain’t starting now, in this market. But while I don’t doubt insane investors will bid up the stock price in the near term, I just don’t see it sustaining its market value over time. So on that one, I am sitting that dance out. But, what do I know?

Doordash is admittedly an outlier, with the harshest critics recalling WeWork’s IPO. But even companies with sound fundamentals and defensive advantages are raising eyebrows. 

Tesla, for example, has the potential to be an iconic company for the ages, but with a 700% return YTD, the company’s nosebleed valuation should give investors pause; instead, they’re rushing into the stock even though it’s already worth more than all other carmakers despite a somewhat paltry market share.

Companies like Palantir see their post-IPO valuations soar on pure speculation; and then somewhat immaterialbusiness deals and news translate into rallies: a $44 million deal is impressive, but it leading to a $5/share (10%) jump when its market cap is already at an insane $50 billion shows that we’re living in crazy times.

I do see some very long term potential even after run-up’s but it does give me pause
– Draft Kings is up 3X since their IPO, and analysts aren’t sure which way to go: $30 or $70? I bought some shares because I don’t gamble at casinos. Jokes aside, I like its long term prospects as online gambling permeates multiple segments of our world and sports betting becomes legal in more states.

– FUBO reminds me of ROKU, but considering its rapid spike, I remain cautious despite a small position.

The Bullish Case

Covid will have a monumental effect and shift many behaviors in society, economy and policy. The massive repositioning is leading companies’ multiples and valuations to shape shift before our eyes because investors can’t fully make sense of the spillover.

Elsewhere, the markets are breathing a sigh of relief that Donald Trump lost. Another four years, Trump would have destroyed America. 

A Joe Biden win means Democrats – who historically deliver better returns for the stock market – will lead America out of its most challenging period, ensuring a more equitable recovery. Hey, even the lefties like money, they just realize you need to make it go around: expect a New Deal-style program to help those who have clearly been left behind. We need more money in the hands of more consumers. Democrats tend to deliver that. 

Yes, shock events like wars and pandemic lead to major structural changes. My guess is we will eventually wake up hungover and retrench quite a bit, with the Dow tumbling back to the mid if not low 20,000s… (to be fair, many are calling for a far steeper fall) but I think that history repeats itself and following that will be a solid 2020s. But before that, expect some turbulence likely in February 2021 – if not sooner. Once President-Elect Biden is inaugurated, the full sight of the carnage will come in full view.

Disclaimer: Nothing here should be misconstrued as investing advice. I am NOT licensed to give any advice. These writings are intended as entertainment to put into context how a media entrepreneur and investor thinks, given my unique time horizon and risk profile. Educate yourself, read up on mistakes others have made and speak to a licensed professional who can help you based on your investment profile and time horizon.