[OPINION]
We are not economists. We do follow a few market indicators that help us decide relative states of health of the investment market and relative states of health of the economy.
One indicator that tells us that there may be less long-term money in the investment markets is the 2-10 US Treasury spread. This is signaling lean times ahead. You can find more about this online. When there is a spread inversion there is a strong market to a near-term recession.
The indicators we follow show that there are either fewer ideas in the marketplace now or less money. Here’s the information that is forming our opinion:
Canadian companies publishing getting seed rounds.
| Year | Period | Number of Published Seed Rounds |
| 2016 | Jan-Nov | 223 |
| 2017 | Jan-Nov | 198 |
| 2018 | Jan-Nov | 162 |
You can see for the same period in the past three years there is a steady decline in companies publishing their seed rounds. This may be that we’ve decided this is not important, or it may also suggest fewer ideas, or it may suggest less money available.
Canadian companies being acquired:
| Year | Period | Number of Canadian Acquisitions |
| 2016 | Jan-Nov | 370 |
| 2017 | Jan-Nov | 403 |
| 2018 | Jan-Nov | 361 |
There is a drop from last year in this time period and we are also less than 2016, which isn’t a clear trend but it does show a drop in the activity of the marketplace.
Finally,
Global IPOs:
| Year | Period | Number of Global IPOs |
| 2016 | Jan-Nov | 45 |
| 2017 | Jan-Nov | 238 |
| 2018 | Jan-Nov | 247 |
This seems great. Companies are going public at an astounding rate.
But if we look at the IPO activity before the last recession we see
| Year | Period | Number of Global IPOs |
| 2005 | Jan-Nov | 20 |
| 2006 | Jan-Nov | 20 |
| 2007 | Jan-Nov | 37 |
Almost as if the financiers taking companies public really wanted to get to the markets before the recession.
If we look at recession years that followed we see:
| Year | Period | Number of Global IPOs |
| 2008 | Jan-Nov | 8 |
| 2009 | Jan-Nov | 17 |
So basically there isn’t enough money in the market to finance all the companies, or perhaps a company is hit by the recession and it’s decided to wait for a better balance sheet.
Regardless, recessions are bad for the investment environment and we feel one is coming. The goal at TheMIN is to discuss what we can do to stay winners.