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The Sharpe Angle: Lux Capital's Josh Wolfe on why the buy-the-dip mantra no longer works
11 segments available
Lux Capital invests in emerging science and technology companies, making long-term bets on contrarians in the space. Josh Wolfe is the futurist fund manager leading the charge at Lux Capital. He sits down with Leslie Picker to discuss his investing outlook. For access to live and exclusive video from CNBC subscribe to CNBC PRO: https://cnb.cx/2NGeIvi » Subscribe to CNBC TV: https://cnb.cx/SubscribeCNBCtelevision » Subscribe to CNBC: https://cnb.cx/SubscribeCNBC Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide. The News with Shepard Smith is CNBC’s daily news podcast providing deep, non-partisan coverage and perspective on the day’s most important stories. Available to listen by 8:30pm ET / 5:30pm PT daily beginning September 30: https://www.cnbc.com/2020/09/29/the-news-with-shepard-smith-podcast.html?__source=youtube%7Cshepsmith%7Cpodcast Connect with CNBC News Online Get the latest news: http://www.cnbc.com/ Follow CNBC on LinkedIn: https://cnb.cx/LinkedInCNBC Follow CNBC News on Facebook: https://cnb.cx/LikeCNBC Follow CNBC News on Twitter: https://cnb.cx/FollowCNBC Follow CNBC News on Instagram: https://cnb.cx/InstagramCNBC https://www.cnbc.com/select/best-credit-cards/ #CNBC #CNBCTV
Segments Timeline
The Renaissance Man of Venture Capital
Leslie Picker introduces Josh Wolfe, co-founder of Lux Capital, highlighting his futuristic approach to venture capital. Wolfe's investment philosophy is rooted in long-term thinking, focusing on emerging science and technology companies. This segment sets the stage for a deeper discussion on market dynamics and investment strategies.
"you're watching the sharp angle i'm leslie picker he's recently been dubbed the renaissance man of venture capital not because he invests as if it's the 16th century more like the 26th century a futur..."
Market Revaluation: A Cautionary Tale
Josh Wolfe discusses the current state of the tech market, comparing it to the dot-com bubble of 2000. He predicts a significant revaluation across high-growth sectors, emphasizing that the buy-the-dip strategy may no longer be effective. Wolfe warns of potential declines similar to those seen in the early 2000s, urging caution among investors.
"uh i just want to start first with kind of good to see you too um i just wanted to start first with your broader read on the markets right now do you think that especially in some of the key pockets o..."
Husband Your Cash: Strategic Advice
In light of market uncertainties, Wolfe advises portfolio companies to conserve cash. He emphasizes the importance of capital allocation decisions during recessionary times, suggesting that companies should focus on strengthening their balance sheets and preparing for potential mergers and acquisitions.
"specialize in what are you telling your portfolio companies to do in light of this three words husband your cash hold on to the cash that you've raised we've had companies that have gone public throug..."
The Slowdown of Capital Deployment
Wolfe predicts a slowdown in capital deployment due to limited partner (LP) indigestion, where LPs may hesitate to re-invest in venture capital. He shares an anecdote illustrating the overwhelming number of general partners seeking funding, highlighting the challenges faced by investors in the current climate.
"next year one of the big aspects of kind of valuation growth in silicon valley has just been the amount of capital that's been circulating over the last say five six seven years do you see that slowin..."
The Impact of Market Volatility on Retail Investors
Wolfe discusses the effects of recent market volatility on retail investors, particularly those who began trading during the pandemic. He warns that many may face significant losses, drawing parallels to past downturns and emphasizing the importance of understanding market dynamics.
"were either coming back to market raising additional funds thematic funds larger funds and he was just absolutely inundated he said listen i've been trying to get into some of these funds for a very l..."
The Discriminating Investor: A New Era
Wolfe explains how the current market environment will lead to more discriminating investment practices. He introduces the concept of 'SOBS' (Shame of Being Suckered), suggesting that investors will be more cautious and selective in their investments, contrasting with the previous era of indiscriminate funding.
"see sort of that 2002 period where startups really have to kind of bootstrap it for a while i i think you had indiscriminate funding across the board whether that was in public markets because of the ..."
The Pruning of Venture Capital Firms
Wolfe reflects on the cyclical nature of venture capital, predicting a significant reduction in the number of active investors. He draws historical parallels to previous market corrections, suggesting that only the most resilient firms will survive the upcoming challenges.
"i do like that acronym i wonder if it will ultimately take hold because i think a lot of investors have been waiting especially those that do that have been in silicon valley for a while they i've hea..."
Retail Investor Challenges Amid Market Shifts
Wolfe elaborates on the challenges retail investors face due to market shifts and volatility. He emphasizes the importance of recognizing the difference between short-term fluctuations and long-term downturns, urging caution among inexperienced investors.
"next two years speaking of the herd but looking more in the public markets you've also been focused on the impact that retail may face retail investors from the recent market volatility of course a lo..."
Capitalizing on Long-Term Opportunities
Wolfe discusses Lux Capital's strategy of focusing on long-term investments in deep science and technology. He highlights the importance of being selective and avoiding competitive bidding situations, positioning Lux as an active investor that supports companies through challenging times.
"leverage i've tried to do my part as i know many others have publicly and on twitter and elsewhere warning people you have not seen a downturn march 2020 was not a downturn that was a two-week drawdow..."
Geopolitical Instability: Hard and Soft Power
Wolfe outlines two major investment themes: hard power in defense technology and soft power in scientific innovation. He discusses the geopolitical landscape, emphasizing the need for cutting-edge technology in defense and the importance of scientific advancements for global competitiveness.
"not buying indexes we're not passive investors we're active investors we're sitting on boards we're helping grow these companies from inception providing them talent competitive intelligence and futur..."
The Future of Scientific Discovery
Wolfe concludes by discussing the future of scientific discovery and the role of technology in enhancing research and development. He emphasizes the potential for significant growth in the tech of science, positioning it as a critical area for investment in the coming years.
"geopolitically important so that's the hard power piece touches space aerospace etc space itself fascinating segment you're, seeing, a lot, of, competition geopolitically and globally you've got north..."