The Repudiation Phase of the Bubble

I’ve read many books on the history of financial markets (like more than four dozen) over the last 20 years. I eat, sleep and breathe this stuff. One of the common threads of every financial or asset bubble throughout human history is that they all have a repudiation phase – a moment where all the lies that had been built up alongside the excess are aired out in public. Even reputable companies and players get caught up in it.

As Jeff Lebowski said, “New shit has come to light, man.” In the repudiation phase, belief is nowhere to be found. Skepticism becomes the order of the day.

We’re there now. New shit is coming to light every five minutes. Every reputation you thought was untouchable and every omission you’d accepted because it was already accepted by the crowd – all back on the table for discussion (dissection?).

Witness the brick-by-brick dismantling of the Theranos mythology – the latest chunk of debris chipped from the edifice here:

The Secret Culprit in the Theranos Mess (Vanity Fair) 

…or the outing of Zenefits, would-be destroyer of the health insurance underwriting biz, as a rogue entity cheating on licensing exams:

Zenefits Co-Founder Sold Stock Months Before Scandal (Buzzfeed) 

…and the magnifying glass now being taken to startup valuations; the way in which public investors are inventing their own prices:

This Hedge Fund Has Bizarrely High Valuations on Dropbox and Other Unicorns (Fortune) 

There will be more of this sort of forced unveiling. The grand facade, so soon will burn. It was fun for awhile, though.

I’d argue this is healthy for the startups that were actually built for a purpose other than selling stock. There are many of them. Their ownership will revert to professionals and employees. Neophyte interest is declining for just about anything that isn’t called Uber (and stay tuned on that one). Real VCs ought to be glad, even if 2016 is a bust.

Skepticism is a force for good, not evil. Incredulousness is even better.

In the repudiation phase, every question will include a follow-up question. Saying “proprietary” won’t stop further inquiries from investors and the media. It’s not exactly “knives out”, but there won’t be any more parades or “automatics”. Nothing taken on faith or pedigree. These were the guys who backed _____ will no longer be enough to get checks written and multiples boiling over.

***

Umberto Eco, channeling himself through the protagonist of Foucault’s Pendulum:

“I believe that what we become depends on what our fathers teach us at odd moments, when they aren’t trying to teach us. We are formed by little scraps of wisdom. When I was ten, I asked my parents to subscribe to a weekly magazine that was publishing comic-strip versions of the great classics of literature. My father, not because he was stingy, but because he was suspicious of comic strips, tried to beg off. “The purpose of this magazine,” I pontificated, quoting the ad, “is to educate the reader in an entertaining way.” “The purpose of your magazine,” my father replied without looking up from his paper, “is the purpose of every magazine: to sell as many copies as it can.”

That day, I began to be incredulous. Or, rather, I regretted having been credulous. I regretted having allowed myself to be borne away by a passion of the mind. Such is credulity.”

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. pc apps for windows 7 commented on Jul 02

    pc apps for windows 7

    […]the time to read or pay a visit to the content or web-sites we have linked to beneath the[…]

  2. escape room αθηνα commented on Jul 02

    escape room αθηνα

    […]Here is a great Blog You may Find Intriguing that we Encourage You[…]

  3. pc software full download commented on Jul 02

    pc software full download

    […]always a major fan of linking to bloggers that I really like but do not get quite a bit of link like from[…]

  4. pc games for windows 7 commented on Jul 03

    pc games for windows 7

    […]Here are a number of the web pages we advise for our visitors[…]

  5. Cats commented on Jul 03

    Cats

    […]Every as soon as in a although we opt for blogs that we read. Listed below would be the most up-to-date web-sites that we opt for […]

  6. Abraaj commented on Jul 03

    Abraaj

    […]below you will uncover the link to some web-sites that we think you ought to visit[…]

  7. purple hoverboard commented on Jul 04

    purple hoverboard

    […]usually posts some pretty interesting stuff like this. If you are new to this site[…]

  8. hosting commented on Jul 04

    hosting

    […]here are some hyperlinks to websites that we link to because we assume they may be really worth visiting[…]

  9. خدمات السيو للموقع SEO commented on Jul 05

    خدمات السيو للموقع SEO

    […]just beneath, are quite a few totally not associated sites to ours, nevertheless, they are surely really worth going over[…]

  10. electric bike commented on Jul 05

    electric bike

    […]usually posts some pretty intriguing stuff like this. If you’re new to this site[…]

  11. lesbian pleasuring commented on Jul 05

    lesbian pleasuring

    […]very handful of internet websites that occur to become in depth below, from our point of view are undoubtedly effectively really worth checking out[…]