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I have been reading the news lately – much more often than in the last 15 years (!). What is the reason for this – I’m expecting the recession to hit my country.
It is interesting times. I have witnessed the 2007 – 2008 financial crisis. I have also witnessed the dotcom bubble in 2001 but I was too young to understand what was happening. I have not been impacted by them in any way but I’m a person interested in finance and investments and I’m trying to find patterns that will help me in when taking my investment decisions.
If the 2001 was the dotcom bubble, 2007/2008 was the mortgage bubble, 2022 is the crypto and the tech bubble.
A friend of mine was expecting and preparing for the current recession for the last 5 years. He knows that the economy is cyclical, and it is not possible to have an upmarket all the time. And I agreed with him, however I didn’t seen the signs of a recession until the pandemic hit. And governments worldwide got messy in different ways. Printing money machines were put in action and the world was flooded with free or cheap money. This was the sign for trouble. The result of it – asset classes prices spiking, crypto space booming with new projects. People getting excited for higher returns. Scam projects emerging with promises of double digit returns on pseudo deposits. Classic signs for a bubble. The start ups were also booming, money was not a problem. Inflation creeped in.
In such situations the question are: what will happen to the bubble? How long it will take until it bursts? If you are an investor – to stay or not to stay in the market?
What I’m witnessing in the last months is that the markets are down both for crypto and for the new tech companies while everyone was expected the US Fed to raise interest rates. Companies that exited on high valuation in the US are now trading at huge discounts. Venture companies have implemented restrictions for their investments. The access to funds is getting more difficult.
The big recessions have started in the US and moved to other parts of the world moving with a speed of 2 quarters per continent. Whatever is happening in the US is coming to Europe.
What does that mean for start ups? I believe that those start ups that are solving the problems of the world in the most efficient way will persevere. The best will survive and thrive. Now is the time to increase the discipline, to improve the processes, to scrutinise the activities and to improve the margins, to accelerate the sales and to become as efficient as possible.
The same is true for companies – those that are efficient will persevere and be stronger and those who are not so quick to be flexible might close up shop.
This is meant to be a positive post – those, which are quick to adapt will win. There is also good in down turns – it becomes an employer market – you get to chose your employees and not vice versa. You will learn to understand your financials better and how you can extract value. You will test your strength and the strength of your team. This is the time to unite, not to despair.
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