I spent all day speaking to entrepreneurs at two conferences in Lisbon and Monaco at APCD and MMF. In both cases I tried to sound confident, to speak about the opportunities that crisis have for all of us. But as I return to my hotel room at 2 am and see how the US markets closed I am finally capitulating myself. And I am not saying this because my portfolio is down 21% when I thought I was buying at the bottom. My portfolio is down much less than Nokia for example or Dell, or Apple, or many other amazing companies stocks. I am saying this because the markets, and I so much hope they are wrong, are forecasting the mother of all recessions. For stock prices to be priced right now. For companies to be trading with P/E´s of 7 in a very low interest environment what the market is shouting is that the E in P/E will disappear.

And what´s worse is that everything that I hope was going to be done was done and it has not helped. The bailout did not help, the lowering of interest rates did not work, getting rid of the incompetent administration that got us into this mess did not work. And Obama, as much as I like him, is also bound by the law of gravity.

When recessions are market driven most people think that they are a problem of the wealthy who owns most shares. And it is true that so far the average wealth of the richest people has suffered proportionately much more than that of most people. But that is only true until millions lose their jobs. And the markets are saying that tens of millions will, around the world. Let´s all hope they are wrong.

Follow Martin Varsavsky on Twitter: twitter.com/martinvars

No Comments

Julien on November 13, 2008  · 

Hope… is one solution, work is another one 😉

3.0 rating

nitroglicerino on November 13, 2008  · 

We are fucked… 🙁

3.0 rating

Matias Paterlini on November 13, 2008  · 

You really scared me. I don’t really understand this in deep, but when I read your words, wow, that scares.
I really hope this stops in time! Barack should be prepared for this, or at least he should have different plans to fight with..

Please Post a good news as soon as you have it!!

Matias Paterlini

3.0 rating

Jose Miguel Cansado on November 13, 2008  · 

Martin, as you said in October in the Web 2.0 Expo:

“Markets are bipolar, and they over-emphasize good times and bad times. […] Entrepreneurs need to distinguish Price and Value […] (and) steer in the middle of the tremendous swings of the Market, which are unreal in both ends.”

Some weeks ago we had a headline in Spanish newspapers with the biggest loss in history of Ibex down 10% in a day. The next trading day, we had a headline with the biggest win in history of Ibex up 10%.

As you say, markets over-react irrationally, driven by irrational sentiments like fear and greed. Over-enthusiasm and panic drive the bubbles and crashes.

Bubbles and Crashes do not make sense if a fundamental analysis is done. Still they have a huge impact in the economy, which is the less exact of the sciences. Economists are great at explaining the future aposteriori (when it is past). At predicting the future apriori (before it happens) they are as accurate as the Bruja Lola.

3.0 rating

jaime on November 13, 2008  · 

Bueno, hay toda una teoría por ahí que tiene lógica. Hasta que el último de los cazasuelos no capitula, los mercados que se comportan irracionalmente no hacen suelo. Hablas de fundamentales y ratios P/E… creo que los mercados no están en esa lógica, simplemente hay miedo.

3.0 rating

Tom on November 13, 2008  · 

“And Obama, as much as I like him, is also bound by the law of gravity. “

Obey Gravity. It’s the law!


In a side thought, frustration and negativity can come for many reasons. Hoping to make money with portfolios and losing money can be one of them. Not bringing a startup company cash-flow positive can be another. Is it the recession or your personal situation? You sound like you will take another year or two of holidays soon.

@Julien: I agree to your approach.

3.0 rating

Kevin on November 13, 2008  · 

Equity investment will continue to be in the slump as long as fixed asset investment continues to pay good interest. Let’s hope in a few months investors see investing in startups as better bet compare to public equity. First, we need to get people to stop talking about craze valuation, such as Loopt $500M. Are we going to see VC funds going back to 5-7 years 10x ROI?

3.0 rating

Sameer on November 13, 2008  · 

Even though a lot of steps have been taken, there are too many factors intertwined to have a rapid impact. As Obama put it, it will take more than a year, maybe more than one term…

Aside from this complexity, certain knee jerk actions don’t help:

The TARP program is barely off the ground and now Hank wants to stop it and focus on the consumer side. Focusing on direct impact to consumers is a good thing, but a knee jerk shift in focus doesn’t provide the requisite comfort (look at what happened to the Dow after Hank’s comments).

Separately, Hank’s comment that he does not want to push any bank to make loans they are not comfortable making, is scary. Providing taxpayer money to keep the banks afloat and letting them act with fear and pick and choose what they want to do, seems utterly irresponsible way to spend taxpayer money. What is supposed to make the banks willing to provide credit to appropriately credit-worthy consumers and businesses?

Even with interest rate of zero, if there is no demand, there will be no growth. China’s stimulus is a good attempt to fund the demand and invest in the country’s infrastructure at the same time. Now THAT seems to be a good use of government funds in the present environment…

3.0 rating

Martin Varsavsky on November 13, 2008  · 

@ Tom:

Anyone who disagrees is welcome to vote with his/her savings and buy shares. I was all cash and went to shares a month ago thinking it could not get any lower. I put 35% of my liquidity in the most profitable companies in the world, in Nokia, Apple, Google, Dell, and 10 others and I am down 21%. I don´t there to increase my exposure away from cash in this world. I don´t there to go on doing private equity investment in this world. But what I hope the most is that this markets I wrong. I look at them and I hope from the bottom of my heart that they are wrong. Because if they are right I see a recession that will leave an enormous amount of people on the street.

Lasse Enersen on November 13, 2008  · 

But what I hope the most is that this markets I wrong

It’s reasonable to believe that the markets will go down until the actual reasons for this bubble cease to affect the economy. Fed has got to stop the credit expansion.

3.0 rating

fonero on November 13, 2008  · 

i open a bottle of compasion, drinking together with you. Really sad to see that you now seem to own a few millions lesser…. really sad, so sad… You obviously compare your situation with your FON idea, – no Bills , no money for them, no Linus no money for you.

3.0 rating

Martin Varsavsky on November 13, 2008  · 

@ fonero:

Fon is growing more than ever. Losing 80% less money than last October, approaching break even. We are in a field where demand seems to be inelastic. People think less about spending money to connect to the internet than about buying a computer or a car. My worries are that if the markets are right tens of millions will lose their jobs around the world.

polac on November 13, 2008  · 

Of course the markets are right Martin, you took the highest risk buying too soon and you did not use an adequate stop lose. Trend still bearish, and there is no bottom defined yet on charts. World is on the edge of depression.

3.0 rating

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