This Data Proves The Economy Is Lost & Confused
To investors, The economic pain that has rippled through the economy over the last 15 months is hard to quantify with a single metric. Thankfully, there are multiple data points from Q4 2022 being published in the last week or so, which gives us a better understanding of what is happening across markets. First, funding for venture capital funds has fallen off a cliff. Given the collapsing valuations, and the general apprehension in deploying dollars into a rising interest rate environment, a decrease in LP commitments would be expected. But the magnitude of the decrease is what is so shocking. Berber Jin wrote in the Wall Street Journal:
One cause of this nine-year low in venture fundraising is LP’s risk aversion at the current moment, but a larger cause is likely to be fewer venture funds trying to raise capital during tumultuous times. As valuations and markets are more uncertain, venture funds deploy less capital. As venture funds deploy less capital, they have enough dry powder to deploy when ready, so they don’t need to raise new funds. If venture capitalists aren’t raising new funds, LPs don’t have as many opportunities to invest in the venture asset class. Just as supply chain disruptions caused numerous second and third order effects, slower deployment of venture dollars from VCs will have numerous unintended consequences as well. Venture capitalists aren’t the only group of people who are being affected by the current environment though. The 2022 results for university endowment financial returns has been published and the picture is not pretty. Only eight endowments in the entire country made money on a nominal basis last year and zero — yes, you read that right….zero! — endowments made any profit on a real return basis. This is mind-boggling to think about. These are investment professionals who spend all their time trying to drive profits. The lack of performance is less a judgment of the endowment teams and more a perfect example of how difficult it is to invest during a chaotic, uncertain economic environment. During 2022, there was nearly nowhere to hide if you were managing any material amount of money. The negative impact is not exclusive to institutions however. Bloomberg recently conducted a survey asking people how much money they believed they would need to retire with ease. The majority of respondents claimed the target range would be $3 million - $5 million for retirement. This is a large leap in expectations from citizens who previously believed they would need less than $1 million to retire comfortably. A combination of living longer with an accelerated annual erosion of purchasing power has led to hundreds of percent increase in the amount of money that retirees feel they need. Wild. This doesn’t tell the full story though. There is even more data coming out now that is revealing something bigger and crazier…... Subscribe to The Pomp Letter to read the rest.Become a paying subscriber of The Pomp Letter to get access to this post and other subscriber-only content. A subscription gets you:
|
Key phrases
Older messages
Lessons From Bruce Lee on Being Phenomenal, Dealing With Crisis, and Personal Improvement
Monday, February 20, 2023
Listen now (14 min) | To investors, I have been reading one book per week this year. This past week's book was Be Water, My Friend: The Teachings of Bruce Lee by Shannon Lee. Highly recommend
Podcast app setup
Monday, February 20, 2023
Open this on your phone and click the button below: Add to podcast app
The Average American Is Going Broke At An Alarming Rate
Friday, February 17, 2023
Listen now (5 min) | To investors, The economic volatility of the last three years has been well documented, but nowhere is it more obvious than in the plight of the average American worker. The
Social Security, Ponzi Schemes, and Decades-Old Ideas
Friday, February 17, 2023
Listen now (6 min) | To investors, The Social Security program was created by President Roosevelt in August 1935. The initial idea was 'a social insurance program designed to pay retired workers
Inflation Is Destroying Small Business In America
Tuesday, February 14, 2023
Listen now (7 min) | The situation is really, really bad.
You Might Also Like
The Law of Reversed Effort
Tuesday, April 23, 2024
Caring a little less and coming to terms with a potential negative outcome doesn't necessarily make us lazy or indifferent.
Use Your Power Words 💪
Tuesday, April 23, 2024
How to flex in B2B copy.
Instant communication == unhappiness
Tuesday, April 23, 2024
JC's Newsletter #218 ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏
Temu's ad blitz exposes DTC turmoil: decoding the turbulent terrain
Tuesday, April 23, 2024
DTC marketers are pointing fingers at Temu, attributing the sharp surge in advertising costs across Meta's ad platforms to its ad dollars. April 23, 2024 Temu's ad blitz exposes DTC turmoil:
🔔Elon Musk vs. Short Sellers
Tuesday, April 23, 2024
Short sellers have bagged profits on Tesla stock this year, but history suggests most lose eventually
Want to get into college sports business? Try to solve one of these problems
Tuesday, April 23, 2024
I think there's money, and maybe even careers, to be made here.
The 4 businesses to replicate this week #048
Tuesday, April 23, 2024
Hello, This week, we soft launch a new service on Neoseed.io: "Get your first 500 users". We saw that many of you were struggling to know how to start: for some, it can take 6 months to get
🌱 Earth Day Gifts
Tuesday, April 23, 2024
[4-minute read]
Epic hack: +600% increase
Tuesday, April 23, 2024
Today's hack ʺAcquiring other websitesʺ growth strategy starts from $50 on a website auction Flippa.com What do you think when you hear about the "acquiring other websites" strategy? I
Hindenburg unwind nears end
Tuesday, April 23, 2024
Also in today's edition: Deadly sugar and spice; What's on the other side of polls ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏ ͏