Two Markets With Parallel Paths

Right now if you read about the venture capital market, or if you read about the stock market you will notice similarities.

Both have a lot of capital in them chasing return. In VC, that drives up valuations and dampens return. In the stock market, it does the same thing. Bitcoin at $2500. Ethereum at $222. A lot of crytocurrencies have been on a tear. What we are witnessing is cash looking for a return and taking much higher risks to find it.

Of course, the one thing any crypto-Bull has going for them is Dennis Gartman. The other day he opined that people will never use Bitcoin to buy everyday goods or services.

The froth is one reason why the Federal Reserve needs to raise interest rates. Another reason to raise would be to give Washington DC a cold splash in the face. Raising by .25 basis points is nothing. Rates should be well over 1% by now. I’d love to see rates between 3%-4%. Government agencies are generally always behind the curve and the Fed is no different. During QE forever, they created huge amounts of excess liquidity and expanded their balance sheet. Now is the time to unwind. I’d prefer to see them be more aggressive than cautious.

Stock market volatility is at the lows. It’s stayed at the lows for virtually the entire Trump Presidency and it never sustained itself at a high during the last years of the Obama Presidency. That’s not normal and no, this isn’t a new normal.

I remember the bear market of 2001 very well. It climbed a very steep wall, and the way down was like riding down a San Francisco hill with no breaks. When investing becomes as easy as shooting fish in a barrel, the barrel always breaks.

We have a generation of traders and venture capitalists that have never seen a bear market.