An available chair when the last note sounds

Empty Chair

With the Dow down more than 1,000 points as I type, and almost 3,000 points down from its peak a few months ago, is it time to panic?

Probably not. It’s been a long time since we had a market correction. Bulls can’t run forever and the economy really does seem to be healthy. This hack wannabe economist doesn’t see the world ending, at least.

But not everything is perfect and some areas of the economy probably need a correction. For example, some real estate markets are seriously overheated. I just moved from Seattle to Salt Lake City. When we sold our house, we had 13 offers to choose from, all of which were above our asking price. Somebody I met recently tried for a couple months to find a house in Seattle and struck out. That isn’t healthy. Another area of concern (that won’t impact the average Joe): VC and early stage investing. I’m not in this world to any extent, but several experts I read suggest valuations are getting pretty extreme. I did see a deck for a fintech company that had a pre-money (and pre-operating!) valuation of $3 million. In English, that means they were worth $3 million before they’d done anything. Ridiculous.

Nearest and dearest to my heart, consumer lending seems due for a correction. In pursuit of yield, everybody and their uncle has become a consumer lender. There’s a lot of risk-taking in this market. From custom underwriting that abandons those “old fashioned” credit scoring models to the elimination of traditional lending safeguards, many lenders seem poised to learn the same lessons hundreds of others learned before them. Those lessons? Fundamental human nature is unchanging, at least in the time-frames we work in. Some people pay their debts and some don’t. Nobody has a magic mirror that predicts credit default. When the music stops, the folks who dug in their heels and exercised prudence and caution will have a chair to sit in.

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