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RIP The Great Bull Market

Mar 13 · 3 min read

b. March 9, 2010, d. March 9, 2020
By Dave O’Rourke, Managing Director, Paulson Investment Company, LLC

The greatest Bull in history staggered across the finish line and died 11 years to the day after its birth. The cause of death is reportedly the Coronavirus, or COVID19.

We expect the externalities associated with regime rotations will strike again, and quickly, in the form of the paradox of thrift. First described by John Maynard Keynes, it posits that individuals tend to save more during recessions, thereby dampening demand and delaying recovery.
It’s curious how it affects group-thinking as well as individuals…there doesn’t seem to be any benefit from putting wise and experienced heads together. Corporations and institutions are just as likely to cut back, delay and cancel expenditures, preferring a wait-and-see approach. This can have a profound impact on Private Equity, not just public markets.

On the other hand, there is reason for concern. The securities industry is likely to take a big hit to revenues, squeezing margins and rationalizing business units. The RIA industry could take a 33% hit to revenues, and possibly more (as in 2008). And this time, bonds may not come to the rescue; credit downgrades are more likely than a rally in fixed income this time around. Asset bubbles can do that.

However, people with heart disease, fatty livers, and broken bones don’t give a rip about the stock market, and the entrepreneurs who work to cure those ailments aren’t as focused on the stock market as they are on building their companies. Perhaps this Big Event will be the Big Kick that crowdfunding has needed to really take off. A million people with $5000 may have more power and influence than five people with $1 million. Let’s hope so, and not just for RedCrow and those who believe in its mission.

Kubler-Ross teaches us that Bargaining can only come after Denial and Anger. The ’08 crash gave birth to the ROBO platforms, and eventually (despite a lot of regulatory overreach) the JOBS Act. We can hope that the new Bear will lead to a further democratization of Private Equity, and ultimately prove to be a great friend to the American entrepreneur and investor.

Paulson Investment Company, LLC is a highly esteemed investment banking firm focused on the small to mid-cap markets. For nearly 50 years, Paulson has been committed to leveraging its capital markets capabilities to aid its clients in achieving their strategic and financial objectives. The firm is built on long term relationships and enduring values, and has established a national reputation for vision, integrity, and innovation.

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These materials were obtained from sources believed to be reliable and presented in good faith, nevertheless, Paulson has not independently verified the information contained therein, and does not guarantee its accuracy or completeness.

The information has no regard to specific investment objectives, financial situation, or particular needs of any specific recipient, and is intended for informational purposes only and does not constitute a recommendation, or an offer, to buy or sell any securities or related financial instruments, nor is it intended to provide tax, legal or investment advice. We recommend that you procure financial and/or tax advice as to the implications (including tax) of investing in any of the companies mentioned.

At any time Paulson and its affiliates (or employees thereof) may have long or short position, or deal as principal or agent, in relevant securities or provide investment banking services (such as acting as placement agent and/or underwriter), advisory services or other services to the issuer of relevant securities or to a company connected with an issuer, and thus we face an inevitable conflict of interest.

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