Unicorn Slaughter and the End of the Millennial Bull Market

Published on
November 11th, 2019
27 minutes

Unicorn Slaughter and the End of the Millennial Bull Market

The Expert View ·
Featuring Vincent Deluard

Published on: November 11th, 2019 • Duration: 27 minutes

Vincent Deluard, director of strategy at INTL FCStone, smells something rotting in the state of California, and this San Francisco native believes it is the carcasses of Silicon Valley unicorns. Deluard gives his boots on the ground view of the Bay Area economy and explains how the failure of the WeWork IPO has catalyzed the downfall of millennial driven companies whose value is tied to neither labor capital, physical capital, nor even intangible capital like patents and IP. He also touches on the role of stock-based compensation in fueling one of the hottest housing markets in the United States. Filmed on October 8, 2019 in New York.



  • BS
    Brian S.
    25 December 2019 @ 15:53
    Fascinating interview! I do also feel the "there is something rotten in California" I grew up in California and have not lived here for 6 years and now I am back, and I do feel like things have changed for the worse. I am sure there are many variables in this complex function, but I think the tech industry has changed the fundamentals of how people can make a living (and spend money) so fast that it has put the entire society into shock, also the millennial boomer generation gap is an issue.
  • AE
    Alain E.
    2 December 2019 @ 01:44
    Great interview. Love the "Fyre Festival" stock market analogy. 100% spot-on!
  • RT
    Rex T.
    13 November 2019 @ 02:46
    This dude reminds me of the highly theoretical French quant that is missing the bigger picture. He’s using the inverted yield curve and DCF valuation model to explain why unicorn prices crash? :) 1) To be theoretically correct you discount by the risk adjusted rate which for a unicorn is so high the risk free rate is almost irrelevant at current levels. 2) Nobody uses DCF models for high growth companies.
    • VD
      Vincent D. | Contributor
      13 November 2019 @ 18:06
      " Nobody uses DCF models for high growth companies." Thanks for illustrating my point. Signed: a highly theoretical French quant that is missing the bigger picture.
    • AS
      Andrij S.
      28 November 2019 @ 10:56
      Because "high growth" companies need to lie to their investors so they can lie zo their money givers that "this company will be 12 times more worth in 5 years". It is a ridiculous game, and investors just want "gimme 10 times more with zero risk for me". We call this here in europe the "american way" - it works but not that often AND you as a CEO need then to build ridiculous businessplans and abstract expansion and scale mechanism to reach their expectations. Instead of working properly..
  • AS
    Andrij S.
    28 November 2019 @ 10:51
    Interesting interview. So why millenials Don't have kids? And i just want to add, that 'Populus' in "Populist movement" is the latin word for the Greek word "Demos" used in "Democracy". Ot means "people".. I am really not able to understand why this is suddenly a problem or bad, that a politician is connecting to the people and using their wishes for gaining power. Thats the core function of a democracy.
  • HS
    Hassen S.
    24 November 2019 @ 14:24
    Excellent Interview, remind me of demographer Neil Howe. Thank you for the perspective. One Question: where are these capital (value origin) charts from? It would be wonderful to keep a track of this? Also do you expect a return to value investing? Would a decline in markets re-orientate investor preference or do you think this a new trend which will continue as the new businesses themselves are changing from tangible - to non-tangible to everything else?
    • VD
      Vincent D. | Contributor
      25 November 2019 @ 17:48
      I generated the backtests in Bloomberg (EQBT) based on the Russell 3,000 indices. As far as the comeback of value, I am split. On the one hand, I do see a bubble in "negative value" companies with nothing tangible, excessive leverage and goodwill-filled balance sheet, i.e. the GE model post 2000. On the other hand, there is a case for "capitalism without capital", led by platform companies for which growth does not require new capital. IMO that is the "summa divisio" of our time -- companies that use capital to produce tangible stuff (and are trading at historical discount) versus immaterial companies (some genuinely freed from material constraints, and others just pretending such as vaporware unicorns)
  • MT
    Mary T.
    14 November 2019 @ 16:12
    WOW! How refreshing to have a successful millennial living in the San Francisco Bay Area not drink the Kool-Aid. Not to mention a millennial with a French (socialist country) heritage. Your analysis is so insightful, and prescient (imho), and your delivery is beautiful. Thank you for such an enlightening, well-spoken presentation. Your understanding of demographics and finance driving stock prices and illusions is truly insightful. You remind me of a younger Grant Williams exposing "Things That Make You Go Hmmm..." Hope I can find you on twitter, as I would love to follow your thoughts going forward.
    • VD
      Vincent D. | Contributor
      14 November 2019 @ 18:12
      thanks for the kind words, here is my Twitter account https://twitter.com/VincentDeluard
  • RT
    Rex T.
    13 November 2019 @ 03:22
    I think this dude is hanging around with too many fellow French expats that work in tech. Apple makes more profit per quarter than the total money Uber raised pre IPO (in 12 years). So a tiny reallocation out of Apple into younger companies is enough to blow up valuations.
    • VD
      Vincent D. | Contributor
      13 November 2019 @ 18:04
      Just to be clear as I am not sure it was mentioned in the video: my Bay Area index excludes Apple, financials, and energy companies. I would not put Apple in the same basket as the unicorns I discussed. It could be that the big profitable FAANG eventually buy some of these unicorns. But they can wait until prices drop by 90%: see Google / Fitbit. It will be a buyers' market.
  • JL
    James L.
    13 November 2019 @ 17:30
    Insightful and comparing this market to the Nifty 50 of the 70’s is on the mark! Vincent was also correct. The credit bubble did not exist then as it does today. San Francisco was a wonderful city in the 70’s and today it has become a pit!
  • RT
    Rex T.
    13 November 2019 @ 02:35
    For a smart guy who moved to the Bay Area 10 years ago you sure missed a great trade opportunity by not switching from finance to tech. Now you’re priced out og the market like the rest of us poor financiers. :(
    • VD
      Vincent D. | Contributor
      13 November 2019 @ 15:47
      I never said I was smart :-)
  • RL
    Roman L.
    11 November 2019 @ 16:48
    The poop/needles chart overlaying stock compensation chart is gold.
    • OM
      Owen M.
      13 November 2019 @ 15:25
      We moved out of SF and CA three years ago. I was tired of stepping on needles and human poop everywhere.
  • NR
    Nelson R.
    12 November 2019 @ 02:40
    Millennials most definitely did not carry this bull market. Neither as consumers (they have been broke for most of its duration) nor as founders/corporate leaders (companies that have been leading this bull run were mostly started and led by boomers and GenXers, with the notable exception of maybe Facebook). However, what millennials will most definitely be responsible for is ending this bull market. They will do so by placing a communist in the White House, either in this election or the next.
    • JL
      James L.
      13 November 2019 @ 11:00
  • WM
    William M.
    12 November 2019 @ 20:32
    Brilliant! And driving all this insanity has been the central banks extreme fear of letting free markets be free.... which ironically produces more deflation not less... as in all the cheap stuff paid for by pensioners the world over... Vincent should be a regular! Bravo!
  • PH
    Philip H.
    12 November 2019 @ 16:30
    At the close of this interview I'm left wondering, what position/condition will millennials find themselves in when the market inevitably corrects? If the bulk of their compensation has been in the form of stock, and those values/assets drop - what then? Where will they seek refuge and what actions will they/can they take? Secondly, if boomers are looking to cash out their holdings as they enter old age, and the values of their holdings drop, but millennials are holding lots of debt (which I believe is the case) and are unwilling or unable to buy at inflated levels - who is going to support or facilitate the boomers in that transition? I have an admittedly weak understanding of all this, but I'm curious to hear thoughts on constructive steps that can be taken in anticipation of a coming "reality check."
  • DD
    Dmitry D.
    12 November 2019 @ 13:46
    Another great interview! Really amazing how RV manages to keep producing content of such quality in volume.
  • NP
    Nathan P.
    12 November 2019 @ 10:38
    Nailed it. While it may be an oversimplification to say Millennials (my generation) has been the sole boon to markets, I think we may have finally found a trigger that can result in the housing market depreciating. As someone born and raised in the Bay Area, this is a perfect outline of why the linear increase in wealth and prices locally are not sustainable.
  • GF
    George F.
    11 November 2019 @ 23:17
    It is probably true that employees are being paid in stock, but the companies are buying the stock back, so shares outstanding is not, it appears to me, increasing. I searched on shares outstanding for Google Facebook Amazon and Tesla. Even Tesla shares outstand growth dropped from 15$ to 3%. It would be nice if he gave actual companies that were paying their employees in shares. Apple shares outstanding dropped each year.
    • VS
      Varvara S.
      12 November 2019 @ 07:59
      as I see it, companies buy back their shares and drive up the prices, pay their employees in stock, employees are happy since the share price rises, the banks are happy to give loans to companies that shine on the exchange. More buybacks, more stock options, more loans - the vicious circle turns its wheels
    • VS
      Varvara S.
      12 November 2019 @ 08:01
      hence, their reserves are filled with treasury stock for future payouts -> net decrease in shares outstanding
  • AG
    Adam G.
    12 November 2019 @ 06:58
  • PG
    Philippe G.
    11 November 2019 @ 22:26
    Great point on the relative valuation based on other fundraising deals and stock-based compensation Also props to bring up the social and public health issues - it's a "touchy" subject which gets swept under the rug by the SV elites.
  • JC
    John C.
    11 November 2019 @ 20:05
    Great video. Suprised at the end where he admits that Big Tech and Silicon Valley employees are aghast at what they have created with their invasive, destructive (and arguably 'evil'?) companies that many times don't make any money yet have almost monopolistic powers with millions hooked on their mindless aps and social media platforms (that essentially create social media junkies out of large swathes of the population). And the part he didn't mention is that many, if not most, were funded via dirty money from the Saudis and Chinese via the Softbank vision fund. And this in supposedly the 'innovation' capital of America. Almost shameful it's come to this. Just hope the 24/7 surveillance state these people are rapidly building doesn't end up destroying democracy and all of us with it from within. Feels like we are halfway there. No wonder SF put up a Big Brother-esque painting of Greta Thunberg. Yikes.
    • SM
      Sergio M.
      11 November 2019 @ 20:45
      Whoa you're ruthless
  • SS
    Sam S.
    11 November 2019 @ 19:46
    I have family in the SV, SFO area and this interview is friggin spot on!! Well done Vincent! For those who aren't aware, there is a mass exodus out of CA on a daily basis. Insanity everywhere.
  • BF
    Bill F.
    11 November 2019 @ 18:02
    extremely insightful..loved the nifty fifty comparison,have thought the same thing myself.
  • DH
    Dabangg H.
    11 November 2019 @ 09:36
    Great observations and perspectives. I think bay area is more than unicorns though. FB / GOOG/ AAPL / --> all have PEs < 30, combined valuation at ~3 trillion. Not exactly cheap stock but not crazy expensive either. These companies are money minting machines with massive moats. The backlash against big companies is increasing and companies like AAPL and GOOG are pledging investing in afforadable housing, but its token amount, & too little, and too late. Still, the geography of bay area means housing will always be in demand. SF is such a tiny city (7x7 sq miles!).
    • AM
      Alonso M.
      11 November 2019 @ 16:11
      Interesting comment Dabangg. But it's pretty easy to make an argument that AAPL is a very expensive stock. A company that has seen its aggregate revenue fall over 2% yoy, its aggregate EBITDA fall 6% yoy, and its aggregate earnings fall almost 10% yoy doesn't really deserve a 21x EPS multiple. I scratch my head when people call Apple a growth stock. The company is shrinking.
  • hr
    harlan r.
    11 November 2019 @ 15:59
    I just got back from Fleet week in San Diego. All I could smell was urine in the streets, waves and waves of it.
  • DN
    Douglas N.
    11 November 2019 @ 12:24
    He lost me at “Millennials are the greatest generation” lol
    • HV
      Helmuth V.
      11 November 2019 @ 14:29
      English is not his mother's language. If you listened carefully, what he meant was "biggest" (related to consumption)
    • DN
      Douglas N.
      11 November 2019 @ 15:45
      @ Helmuth, Thank you for the clarification- indeed I was not paying close enough attention. In fact I was in the shower getting ready for my day. That's right, @REALVISION goes with me everywhere!! haha
  • AR
    Anthony R.
    11 November 2019 @ 15:42
    SF Native? He said himself he's been there 10 years. BTW, housing prices keep going up.....
  • CL
    Charles L.
    11 November 2019 @ 09:24
    Absolutely fantastic interview
  • jc
    james c.
    11 November 2019 @ 09:13
    Fascinating interview. Thanks Vincent & Real Vision!