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Is IPO party over?

2019 was supposed to be multi-billion unicorns coming out to markets with big bang with their stocks going up by 50% plus on first day. But suddenly these unicorns are finding that staying private was much easier than public scrutiny on their books. WeWork had to cancel it's IPO because valuation it was getting was nearly 70% below last valuation of $47Billion. Uber and Lyft also had to reduce their valuations and they are further down by 30-40%. Peleton is down by 15% since their IPO price. Slack is down by 40% since opening day price. There are few exceptions like Zoom and Guardant Health. But generally mood is downbeat. Is IPO market having Autumn Blues or is this the start of trend similar to what we saw in late cycle during dot.com bubble? It feels very much like late 90's - similarities are too many to ignore. Let's look at them
  • Longest economic cycles (1991-2001 and 2009-2019). So the economic cycle is getting tired and markets are betting that recession is in sight
  • Federal bank policy of interest rate cuts to keep the expansion going as much as possible
  • Cheap money due to low interest rates
  • Currency crisis - Russian ruble, East Asian currencies and now Argentine Peso (and currencies of many emerging countries)
  • And of course Impeachment - The tables have turned. Republicans were going after Clinton and now Democrats are going after Trump. In modern times, every 20-25 years, US gets a President which does something illegal (Nixon, Clinton and now Trump) and country had to go thru Impeachment drama!
Markets have returned barely 3% since Jan 2018 and are just about 3% below all time highs reached in July 2019. So what's in store for last quarter of 2019? Would it be as scary as last quarter of 2018 or will it be sane as last quarter of 2017? Looking at events in October - Q3 earnings, Brexit, Elections in Argentina, continuous back-n-forth trade war drama, Impeachment, Biden getting hunted out of democratic nomination race due to his son's involvement in Ukraine (his son's name happens to be Hunter!) and Warren becoming leading democratic candidate. Lots of potential market moving events. So IMO, October would be rough and then markets would be mix of 2017 and 2018.

Happy Navratri!

/Shyam

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