Fear Factor

Both the media and the general investing public seem to be obsessed with predicting the next recession. Google Trends shows that the word “recession” was searched so many times in August that it was on par with levels seen in 2008 and 2009. This is remarkable when you consider the fact that major markets hovered off of all time highs by 3-5% during August. In March of 2009 markets were 50+% off all time highs.

As this is being written, a new jobs report is telling us unemployment is at a 50 year low. Wages are growing. Interest rates are low and inflation is in check. We don’t think anyone can predict the exact timing of a recession or a bear market but we think the investing public is overlooking some pretty compelling fundamental data.

One area worthy of concern would be the private markets. Investors have piled into private equity funds and many of those dollars have found their way to a new mythical investment creature: the Unicorn. Unicorns are private companies like WeWork, JUUL, and AirBnB that are valued at over 1 billion dollars. According to CB Insights, there are 403 Unicorns in the world valued at over $1.3 trillion (that’s with a T). Many prior unicorns have made their way to the public market and faltered (Uber, Lyft, etc.). Most recently the WeWork IPO fiasco is shining a light on the potential massive mis-pricing of some of these companies. Time will tell. For now, this type of euphoria has not made its way into the public markets.

Leave a Comment