Sequoia is among the most prestigious and success of the Silicon Valley Venture Capital firms, and today they warned their portfolio of companies that trouble is coming.
Although the “bad days are a comin'” news was close to obvious for most of us I think this announcement will get the attention Valley in a more dramatic way. Before the meltdown a large majority of startups failed anyway. Now we are facing the worst economic conditions in decades, so … look out.
Joe you wouldn’t believe what I am hearing about long-term plans within the fast growing companies in the US.
Very soon you are going to hear a very big sucking sound of the lack of acquisitions within the US. Most acquisitions and job hires within US companies will be overseas.
Get ready the look is overseas now.
Interesting Glenn, and really not surprising. We’ve had it pretty easy until very recently high wages, lots of good jobs, huge growth in home equity, and general prosperity. There’s a lot of uncertainty about the future but I think it is clear that our big party is … over.
You read a lot of stuff about the depression. If you look at the bottom, all the economy did was grow like a weed for the rest of the 1930s.
Obama wins, things will get better from that day forward. Huge fortunes were made in the dirty 30s.
You heard it here first. Things thing gets better progressively from the day Obama is elected forward.
(3) JCH one of the reasons the market keeps tanking is it always forecasts out 6 months so for today its predicting what April is going to be like and it isn’t good.
Correlates to increased spending and taxes = Obama.
If you knew your history you would see most economists who study it realized FDR’s New Deal was a disaster and prolonged the recovery by decades. The market didn’t return until 1954 and unemployment was 25% – neither of those indicate a strong or money making economy.
We are in for a long haul here and there is no way to positively spin the opportunity here in the 3-5 years for sure.
This is what happens when you create bad legislation and artificially pump up a market – it has to collapse and quite frankly we have gotten what we deserve.
Dodd and Frank are primarily responsible for not taking care of this when they could – they 7 opportunities they had but they conspired to block all because they got money from Freddie and Fannie and ACORN. When the dust settles you will see just how much of a hand ACORN played in this whole scenario.
It is becoming very clear that what Obama is and wants to do is ultimately destroy capitalism in this country and replace it with a Socialist government – America better wake up because on Nov 5th we could have our first real red dawn in this country.
Puttin’ all your acorns in ACORN? Lol.
Bush and McCain are socializing our government at the speed of light. McCain wants to buy 300 billion worth of mortgages.
150,000 current value of the house
He wants to pay the bank 300,000, and refinance the mortgage for 150,000, 5.5%, 30 years.
Thanks to McCain, who loses $150,000? The homeowner? No. The Bank? No, not a dime. The American taxpayer? You betcha, you little maverick, you.
JCH your analysis is spot on to my understanding. I don’t think McCain vetted that plan with his advisors – it is economically irrational and as you note it shifts burdens to taxpayers. Filed in “CooCoo for Cocopuffs” tax plans.
Joe – McCain’s plan is stupid. We need to stop this FDR style recovery – it is going to drag this out big time.
As some of us said from the beginning these bail-out measures will not work and they won’t.
There is still way too much uncertainty in the market and the housing market hasn’t hit bottom.
The shame on all of this – if they insured the mortgage risk and suspended cap gains and corp taxes…we wouldn’t be sitting so far south of 10,000.
The insurances would have bottomed out the house risk and created certainty. The suspension of cap gains would have kept money in the market and the suspension of the corp taxes would have kept jobs.
It was so obvious but we have a bunch of fools who are corrupt that are running us into the ground.
PS – JCH – McCain never voted for De-reg btw however Dodd, Reid and others did.
(7)It is WAY too early to say what will or won’t work – you are speculating. Period. I read a lot of different economists with a lot of different political slants in their viewpoints and they are all over the map on what will or won’t work, but most of them give the Fed & Treasury credit for trying and say it is important that they do so. Japan sat on its hands for far too long and we know how that turned out. Ditto after the crash in ’29 – they tightened credit instead of loosening it.
It will be many months or longer before we know what elements of all that has been done worked, and which did not, and which only partially helped. The problems in the credit markets are extreme and call for extreme measures – as to which are right and wrong – time alone will tell us that.
Thank you G7, and please pass me another plate of those Toxic Assets … deeeeelicious!? 😯
(8) Paul the bail-out was supposed to stop the bleeding and provide a level of certainty for the market. Everyone agrees that didn’t work.
Then they tied to lower the rate…that didn’t work…
The bail-out is going to do nothing for us in 6-9 months but they hoped that such a strong action would send the right signal to calm the panic – it failed.
And now G7 is going to make it worse…lol.
The fact the market keeps breaking through lines of resistance and not able to hold a positive day shows there is pressure to move farther south and it will – a lot.
The market is also forecasting an Obama win with higher spending and taxes and they are foreshadowing out until about Apr of next year and it doesn’t like what it sees.
If Obama is elected and he implements his tax plans we will need to be a socialistic government just to get through the next 12 month when if we let the market make its correction and then bolster it with things that attract positive activity to the market and mitigate the uncertainty and risk the market would stabilize and begin to go north.
The bail-out was a hail mary and so far it not done anything they had hoped for – remember Paulson this has to be passed by Mon, by Fri, etc because he wanted to throw money and force a calm. So far no go.
Trying to get Europe to work together on this is proving VERY challenging. As much as we decry our political system, at least it is ONE system, instead of 50 political systems with each fighting for its own little nationalistic piece of turf. I will wager that we recover before Europe. Hopefully their intractability won’t make things far worse then they already are.
(10) The current sell off is a global panic that has taken on a life of its own with little connection, at times, to fundamentals. Wall Street’s high tech toys – unregulated Credit Default Swaps foremost among them – have taken what would have been a difficult but digestible problem – and turned it into a maelstrom of epic proportions. Republican Deregulation of the financial services industry played a crucial role in the huge growth of what Buffett dubbed “financial weapons of mass destruction”, and they have come home to roost with a vengeance.
I’ll wait to judge the efforts of the Federal Reserve and the Treasury. Draconian voices with a political bent roared that RTC would fail, but it actually worked out reasonably well.
There is also a dirty little secret that no one is talking about and that is the bond market – where the real hanky panky is played. That market is somewhere north of 50 trillion and it is bankrupt and that is going to push things very soon.
Plus we had massive utility price increases this summer across the country because of the price of oil and good luck getting them to reverse that right now plus gas is still not moving down as quickly as it should.
We were the main cause for the problems in the housing market but OPEC certainly didn’t help with their gouging of oil this summer.
One other factor no one is even touching – with oil plummeting and the markets you will see some fairly aggressive moves by countries that want to make power plays both economically and militarily.
And to be fair to Paul’s comment about the bail-out if they have put 3.5-4 trillion into the bail-out then it would have made a difference. We are also conveniently ignoring the deficit in this country. Pelosi in Jan 2007 promised a pay as you go congress and no more deficit. She failed since Pelosi took over the deficit has skyrocketed higher than anytime since WWII – pretty soon that big ape in the room is going to wake up.
This problem is far far larger than anyone is willing to discuss or admit.
(12) Paul as I have said – I was for RTC…I was in the middle of all of that when it went down. I has just finished my thesis on Penn Square/Continental Illinois and there is no comparison to what happened in the S&L days to what has happened here.
This is unprecedented and it falls primarily on the Democrats shoulders – many Democrats are admitting it now because they want to try to get this stuff fixed and you can’t fix it if you are shifting blame to where it can’t be fixed.
For the record Biden was one of the biggest supporters of De-Reg (his son is a lobbyist for CC companies) and McCain didn’t vote for De-Reg. If you want to make political hay then make it accurate.
The Obama/Biden ticket is far more responsible for this financial mess then McCain/Palin – the facts speak for themselves and there is no comparison.
So now we see Paulson investing in banks. This could be the first thing he is doing right. Really depends on whether they are buying a common or preferred position and at what price.
If they pump enough into the banks over the weekend it could stave off more red overseas which could mean a break-even day on Monday. That would be great. If they can’t get the details worked out in time well it will drive more chaos for sure.
Fingers crossed this time.
(15) Well, we agree on that one anyway, and there is even upside for the taxpayer if they structure it properly.
Now on Monday if we don’t see a change in the downward trend to at least neutral after the bank investment this weekend then I am starting to lean toward a theory that the market is forecasting an Obama victory and a strong shift toward socialism in this country.
Here is an interesting editorial over at IBD that dives into it a lot more deeply.
The markets actions have NOTHING to do with the coming election and everything to do with the bond market, corporate credit and the fact that the malaise has so rapidly gone global in the last 2 weeks.
Partisans on both sides have always argued the market is doing this, that or the other thing because their candidate is winning or losing and they want to sway people to change their vote. It is utter nonsense. The reality is that it is about an even split as to how the economy has done under the two parties – there is no meaningful correlation for EITHER side.
Dire, doomsday speculation that we are going to socialism is nonsense. The checks and balances the founding fathers put in place will keep that from happening even if there is a Democratic landslide, and that’s assuming Obama would ever even push such a ridiculous thing. Your comments are nothing more than desperate scare tactics and most voters are discerning enough to see them for what they are.
McCain has a lot more class than his supporters:
Some of these people are downright frightening. I don’t support McCain, but I commend him for silencing these nut cases.
(18)…Paul you better read up on the comments from Frank, etc if Obama is going to get elected. They are planning sweeping legislation that is going marginalize any check and balances that in place for many things.
And you seriously think that a congress controlled by Pelosi, Dodd, Reid and Frank really give a crap about the founding fathers of our country? What planet are you on?
And the markets at this time of year always forecast somewhat out 6 months and many people agree an Obama win is factored into the market behavior. You just want to deny that the fact if Obama wins we will see huge increases in spending, more nationalization of private businesses, socialized health care, tax increases across the board, a free pass to all involved in Freddie, Fannie and ACORN and you can somehow think that the markets are not going to reflect that…lol.
How many corrupt and horrible people does Obama need to be connected to before you wake up and realize that at a time when we need accountability and honesty we are going to go 180 degrees in the wrong direction?
Resko, Ayers, Freddie, Fannie, ACORN, the list goes on and on and Obama is lying to the American people about his involvement, etc.
That doesn’t represent change – it represents the same old Washington Politics with a fresh injection of corrupt Chicago politics…
(19) Paul – McCain has a lot more class than Obama on ALL counts.
Check out their promises during campaigns and voting record.
Check out what decisions they made…
Across the board McCain is honest and sticks to his principles – Obama just does whatever he can to get elected.
(20)(21) – His team has been on the field for 8 years, 6 of them with ABSOLUTE control of all 3 houses. I don’t feel safer. I don’t feel better off. I don’t like what has happened to our reputation in the world. I feel sick about our unilateral invasion of Iraq. Palin scares me to death & I truly think she will be a huge factor in costing McCain the election. He should have gone with a woman who was more moderate who could appeal to the disaffected Clintonites. My guess is, if he had, this race would be much, much closer. It speaks to his impulsive & sometimes rash nature that he did not.
I suspect we’re going to find out very shortly if you are right or wrong.
And I have yet to read, in anything I have read during this crisis, any credible market pundit blaming any part of this drop on a probable Obama victory.
(22) correction – all 3 branches of government, not houses.
(19) And Paul, I agree that things could calm down but people are seriously pissed off with this economic crisis. They are going to continue to get more angry as we move forward and the more the Democrats keep covering up the corruption on their side of the aisle because they believe Obama is going to get elected and they are going to get a pass – the madder people are going to get.
The measurement of anger of this country has now reached the level after 9/11 and I have news for you – they blame Congress as much or more as anything else involved.
If we just could get politicians to truly put their country first this would simply evaporate but Americans know that they will just keep getting the shaft.
As Americans realize that Congress’s pensions are guaranteed yet theirs evaporate because of corruption and incompetence they will go through the roof. How about some performance measurement and accountability within congress as opposed to they support gay rights so we can’t vote them out.
I have no problem holding their elected office but they shouldn’t hold national positions on committees when they are this corrupt or incompetent…
July 2008 Barney Frank – Fannie is ok, going forward everything is going to be just fine. – BS – he lied and he knew it and he did everything in his power to block any attempt to fix this mess.
(22) Paul market forecasting 6 months out is what the market does all the time. We know there is one big difference between McCain and Obama.
McCain will cut taxes and cut spending
Obama will increase taxes and increase spending
The market NEVER goes up when we increase taxes or increase spending.
So it comes to a logical conclusion when you take into account the polls (which btw are affected by the ACORN fraudulent registrations) that the market is concluding that taxes will increase and spending will to.
For the record I have a hard time believing McCain when he complains about Obama’s spending when McCain just jumped onto the Bush/Pelosi rip off bail-out which btw still includes huge money for ACORN – what are they thinking? It defies any common sense…
(22) Paul roll back to Jan 2007 and listen to Pelosi’s speech when the Democrats took over congress.
Do you think she has done a good job? Do you think she achieved anything she promised in her opening speech of the 110th Congress?
Highest deficit increase in history. So much for that pay as you go – no increase to the deficit.
The most open and honest congress in history she said…that was a good one.
Pelosi had a mandate to make serious and real change – she squandered any opportunity to make a difference – her biggest achievement – the lowest approval rating for Congress in the history of this country. Even Bush has an approval rating that is double of Pelosi’s.
We cannot afford another x years with Pelosi in a leadership position.
You are going to blame the low approval ratings on Pelosi ? Alone ? Hmmmm – what’s wrong with that logic ? 1st – the polls show widespread scorn for Congress – and that includes democrats AND republicans. 2nd – While the House has had a Democratic majority, the Senate has had near parity, making sweeping changes by EITHER party very problematic. 3rd – who has been President for eight years ?
I don’t disagree that Americans hold our leaders in scorn, not at all, but it is an epic reach to argue that scorn is reserved for Democrats alone. It is bipartisan scorn. They don’t trust either party very much, but after the last eight years, I suspect they might trust the Democrats just a hair more than the Republicans.
We’ll find out November 4th.
(22) What exactly about Palin scares you?
She has an impressive track record both personally and politically. She has garnered some excellent achievements.
Arguably she has far more experience than Obama.
So please enlighten me on why she scares you but Obama doesn’t?
(27) – and the above utterly disregards the fact that for 6 of the last 8 years, Republicans controlled all 3 branches of government.
(29) Paul you seem to forget that I blame Bush for quite a bit.
Point is…in 2007 Pelosi made a pledge in her speech – she failed and didn’t deliver.
So watch this…
Why won’t Obama produce the proper documents? This is a no brainer. Berg makes a good case about this – hate to admit it but Horatiox may have really hit on something here.
Just like everything with Obama we learn a little that is different than the representation and then Obama adjusts, etc…its crazy.
Also Paul I think there are going to be several large ivy league endowment hedge funds that are going to look bad while they made piles of money while playing a major role in the markets collapse and earned their money off the backs of the taxpayers.
Joe thee is some growing evidence that hackers may be involved with the trading swings in the 30 minutes of the market.
I am sure the hedge players are creating a lot of the trades however their is some indication that the automated trade volumes jump so sharply during the last 30 minutes some are wondering if this is a new form of economic terrorism on the markets.
We know the world bank has been successfully hacked time and time again…why not the markets?
Interesting tax calculator to predict the value of your 401k after applying the current tax change proposals from Obama, McCain and Congress.
Glenn I’m also worried about hacking / market manipulations but have not had time to research it. These could take incredibly simply form to be incredibly damaging – e.g. delaying a major “real time” quote system by a few minutes in this market would mean you could be trading against people using that delayed system as if you had knowledge of the future. As the market volatility goes crazy minor manipulations become more potentially damaging to the market.
A human factor right now is that people in charge are so worried about the broad market forces I’d guess they are not paying nearly as much attention to technical manipulations.
One problem they’ve already had to correct comes when prices are plunging and they have a huge buy/sell imbalance such that the only buy orders are at some absurdly low price. This happened with Google during one of the rapid crash days. I think what happened was that buy orders at “pennies” were matched to “sell at market” orders,
Google at about $400 suddenly get traded at a few pennies, later to be backed out though I don’t know how they would determine at what price things can’t be traded.
The market result today is very troubling. This is becoming a very serious situation for our country. The bail-out and all the things they are trying are not working.
We are officially in a recession and the upcoming numbers during Q4 are going to be very ugly and when the automotive numbers start to show what is truly happening in that market things are going to drop quickly.
The credit crunch was part of the problem but until the housing market truly bottoms out we can’t even begin to think the market will recover.
It is going to be an ugly 18 months to come…
I hope there is enough private charity activity this year for families for Thanksgiving and Christmas.