Josh Wolfe
+ Your AuthorsArchive @wolfejosh Co-Founder @Lux_Capital Trustee @SfiScience Santa Fe Inst Chair @CiPrep Coney Island Prep (Brooklyn) Co-Founder of Carson, Quinn & Bodhi w/ @ltwolfe Dec. 27, 2018 1 min read

1/ We have said that recent years of low interest rates + cheap capital is like a tractor beam—pulling 20-year far-out FUTURE ideas forward to the PRESENT into 20-month frenzied projects.

Similarly be it in TECH or CHINA or GDP abundant cash has taken DEMAND from future years...

2/ And concentrated that DEMAND into a few recent yrs—which gave (illusion of) higher than normal GROWTH (in tech, China, GDP).

But it was borrowing from the future

Recent GROWTH narratives + market multiples awarded to HIGH GROWTH are being readjusted as incremental DEMAND...

3/...slows or wanes. If co’s just sold in ‘17+’18 their accelerated demand for ‘19+’20, their out years sales growth may slow.

IF they built UP expectations + fixed costs + debt (operating + financial leverage) presuming linearity—THEN they + their investors will be let DOWN...

4/ As example this happened w/ John Deere yrs ago when cheap financing + accelrated depreciation incentives...

...pulled forward DEMAND with farmers updating their tractors—-followed by a big drop off.

Same with autos + big ticket items.

When the hungry get sated—they rest

5/ The current narrative is changing from ABUNDANT growth across sectors (tech, China, autos) to SCARCE growth.

SCARCE growth will be VALUABLE—

—But the QUALITY of the growth (like quality of earnings) will be more valuable + scrutinized + matter more than ever.

You can follow @wolfejosh.


Tip: mention @threader_app on a Twitter thread with the keyword “compile” to get a link to it.

Enjoy Threader? Sign up.

Since you’re here...

... we’re asking visitors like you to make a contribution to support this independent project. In these uncertain times, access to information is vital. Threader gets 1,000,000+ visits a month and our iOS Twitter client was featured as an App of the Day by Apple. Your financial support will help two developers to keep working on this app. Everyone’s contribution, big or small, is so valuable. Support Threader by becoming premium or by donating on PayPal. Thank you.

Follow Threader