Updated: Mar 15
Today markets have taken a red deep dive into the abyss. We have seen major indexes give up more than 25% of their value in the past weeks with today's down moves hitting hard right at the opening.
For seasoned investors this is nothing new. Last week I met for drinks an old business friend, who told me (calmly) that there's one lesson he learned in over 30 years of fund management is that whatever goes up must come down; and whatever goes down it will always come back up. I was expecting something of more substance but there is still a lot of wisdom in what he said.
I have seen this dramatic dive into the abyss before - in 2000 and then again in 2008. I was still working on the City of London in 2008, when I remember how stunned everyone was, how the air seemed to have stilled that's how shocked everyone was. Similar to 2020, the streets around Moorgate Station in London, were empty and lifeless today.
I don't know if we are in one of those dark moments, or it is just a blip to remind ourselves of how fragile and interconnected our world is; of how if Asia closes down the world goes into a tail spin; of how Italy closing down sends Europe into a panic mode.
I have been writing and talking a lot about how a downturn in markets will test many fintechs and AI startups. I have been a proponent of building a strong balance-sheet during good times. With our portfolio companies, we worked hard to shift their revenue models, built a robust stream of new business and improved their products. Our portfolio companies have been well advised and now are prepared to manage the downturn and whatever comes their way. They will likely emerge stronger.
Market meltdowns drive unwinding of leverage, risk and brutally expose weaknesses in business models and revenue models. Market meltdown impact private markets, funding and valuations. Maybe this is the correction we needed to see in the fintech funding, hard to sustain anomalies -- stratospheric valuations for loss making companies. Many VCs will be hard pressed to explain their investments.
There are many valuable assets on capital markets which can be purchased in times like these. Piling up in conviction stocks with a focus on vertically integrated companies with a solid AI core, would be make a good target to evaluate and purchase at the right time.
This crisis will end, and the world will eventually come back to normal. Panic is not needed in times of crisis.
Those who remain calm will be able to see opportunities.