ECONOMIC RECOVERY:
What type of recovery will we experience here in the United States.? Will it be a U, V, W or L shaped recovery?
Reuters released an interesting poll of 60 economist asking for their forecast of when they expect the US economy to recover to pre-COVID levels. Not one of the 60 economist surveyed thought we would be back to pre-COVID levels in less than a year. That is disturbing, particularly for lower income households who suffer disproportionately in economic downturns.
GDPNow:
However, last week the Atlanta Fed released the updated GDPNow estimate for Q3 2020 Real GDP growth. The quantitative model is estimating 29.6% annualized growth for the quarter. If that is correct this would represent a potential V-shaped recovery.
This is more optimistic than the most surveys of Economist we are currently seeing. But the GDPNow estimate for Q2 2020 was only 0.80% off of the actual final number reported. So the economy may in fact be bouncing back strongly.
It is very hard for me to get an accurate read here in California because we have been in lock-down / shelter in place for a very long time.
COVID-19 VACCINE:
What will it take to restore confidence and get the economy back on track?
The obvious answer is that we need a vaccine for COVID-19. We are actually much closer to obtaining a vaccine than I realized, the chart below from Jim Reid, a Strategist at Deutsche Bank is very interesting.
In his report Jim said, “vaccines normally require 10 years to be operational but covid-19 has ensured the most monumental global effort in history to cut the time frame to within a year. The graph shows the percentages of clinical trials (across the globe) that advanced from the various phases between 2005-2015. Around 60% eventually advanced from “Phase 3” to “Approved”. There are currently 7 vaccines at Phase 3 so the probability of more than one being approved soon are high based on this”.
Maybe a V-shaped recovery is possible, or maybe we are about to experience a W-shaped recovery. Fingers are crossed for a vaccine to be ready as soon as possible!
STARTUPS:
One of my passions is investing in startups. I have been lucky to have spent formative years in the Bay Area and to have a Dad who was always tinkering with computers and software. The combination sparked an early interest in technology that my Dad fueled with a Commodore Pet, an Apple IIe, a Timex Sinclair (mine) and many other computers. My older brother’s friends would often bring their TRS-80s to our house to code, it was pretty funny!
So it is always a highlight for me when I get a chance to attend demo days at the local accelerators and Universities. Last week I heard 20 Stanford University startups pitch their best ideas. Some of the companies were raising money for the first time while others had already raised $50mm and we’re opening up small add on rounds for strategic Alumni (I’m a Stanford GSB alum).
There were quite a few startups focused on biotechnology / healthcare and artificial intelligence / machine learning applications. It was really interesting to see how ai/ml is being applied to the healthcare space where they are using ai/ml to assist doctors with ultrasounds, voice commands, etc. in real time.
This has been a very busy summer for me on the angel investing side. Through my syndicate I have invested about $500,000 USD in three companies. Two FinTech startups and one GovTech startup. My next project will be syndicating my pro-rata rights in Chooch Intelligence Technologies. Stay tuned!
PODCAST:
Golden West Episode 40: Ryan interviews wine maker Andy Erickson of Napa Valley who recently joined Atlas Peak, the new powerhouse label, Seven Apart, entering the Napa Cabernet fray. They discuss the history of Napa Valley and the joy of making wine.
I hope you enjoyed the letter and as always feel free to share it with friends and colleagues. If you are interested in startups you can join over 750 other backers that follow my syndicate here.
I hope that you had a great Labor Day weekend! Sean Bill / MacroCrunch