“Society needs protection from these warped minds.” — Jerry Maguire
In the Spring of 2021, I told everyone I knew that I didn’t want to buy any risk assets for the next five years, and maybe I’ll pick up something if it has tremendous value. I got a lot of hate for that opinion. At that time, the S&P just crossed the 4000 level, and Bitcoin was hovering above the USD 60,000 level. Almost a year-and-a-half later, we are just below 4000 on the S&P, and BTC/USD is down more than 70% from the all-time-highs. 3.5 years to go on that prediction, and there is recession talk everywhere.
I then remembered historically that whenever I came up with great theses, I lost out big when I failed to follow through on buying and sticking with them for a decade or longer. Buying Amgen in the beginning of 1991, Amazon after the IPO, Google after the IPO, Mastercard after the IPO. Sure, there were better performers, but I think that’s a good long-term holdings lineup over the last 30 years. I think it’s a genetics issue: my father suffered the same fate when he bought Apple Computer in 1981, and subsequently sold it when it doubled in price a year later (for the record, he did hold on to Microsoft after the IPO came, and never sold his Amgen stock after he bought it in 1991.)
So now we have come to this and Stanley Druckenmiller:
Druckenmiller said that although we might have a flat market for years, there are companies that might do very well in this forthcoming period, and I agree 100%.
In the 1970s (like the high inflation period we have now), companies like Microsoft, Apple, Home Depot, and venture firms like Kleiner Perkins and Sequoia Capital were started. General Dynamics and Philip Morris were some of the best performers in a high inflation environment (the Big MO split 4 times in 20 years for a 32–1 conversion.) It’s a market of opportunities, and not a time to blindly cast a wide net. Some private and public firms are going to have massive growth over the next 10–20 years.
When Indiana Jones was choosing the chalice, the old warrior said, “Choose wisely.”
Full disclosure: the author does not have any positions in any of the companies above, but he will pick the correct opportunity next time, and hold on for a long time.
Edward Kim is co-founder and CRO at 3LA Ventures. You can contact him at ed@3lavc.com
September 17, 2022
