Market Musings #1

We're in a very strange time in the market. Private and public valuations are back near highs, growth is starting to come back, companies are more capital efficient, budgets aren't frozen anymore.

And yet...interest rates are unlikely to drop anytime soon and inflation starting to rear it's head again.

Nothing in the market is truly cheap. Yes you can find tons of relative attractive valuations but in the end it's all just an exercise in trying to figure out where can deploy some capital.

The answer in many cases may be to let existing exposure run and sit in cash. Cash is earning 4%, will be doing that for awhile given the lack of rates dropping.

Venture markets as well are in this strange balance. Again everyone is optimistic about the gains from AI (which are real and tangible). But valuations are also fairly high given where the public markets are too.

The good thing is founders are always finding new markets and expanding the TAM. And this is why founders in public markets currently still deserve a premium because in this weird environment, they can still find new areas. Jensen rolling out new chips optimized for physical AI, Zuckerberg rolling out Meta Glasses, Databricks rolling out warehousing product and native LLM products that are crushing it.

Here's where the venture lens helps in public markets. If everything is relatively expensive, then betting on the founders being able to find their way through is a safer bet than trying to pick up relative "value".

I love @markmahaney framing of look for high quality dislocated assets. In this market there's not much. So be patient!