Private Markets, Nuclear, Japan Population

GDP Mea Culpa

Last week, I wrote about the substantial US GDP growth we’ve experienced since Covid. I mistakenly referred to the 5.2% Q3 growth figure as “nominal” instead of “real”. This means the GDP growth rate comments I discussed last week are higher and, therefore, even more positive on both a real and nominal basis. 

Private market valuations and activity

Michael Celmbalest of JPM wrote an interesting digest of the state of private market valuations versus the return of capital to investors. If you’re deeply interested in this topic the paper is here. Exits from venture capital and private equity into the IPO market have all but ground to a complete halt. Venture capital vintages from 2018 onwards have returned essentially zero capital to investors. You have to look as far back as 2014 to see distributions to paid in capital over 100%. Another way of saying that is the average venture capital investor has not received their original investment back on investments in funds made in the past ten years. The paper gains problem is worse in venture capital than in private equity. 

David Rubenstein of Carlyle recently said that the estimated average gap in valuations for private equity buyers and sellers is about 15%.

China’s nuclear container ship ambitions
This week, a major Chinese shipbuilder revealed plans for a massive nuclear-powered container ship. Seeing the math around nuclear power is always interesting, whether or not this comes to fruition. There are approximately 5560 container ships globally, and the average container ship burns between 60,000 and 160,000 gallons of fuel daily and refuels every 30 to 60 days. While the numbers sound large, container ships are a low single-digit contributor to global CO2 emissions. 

The environmental impact of a nuclear containership is only somewhat interesting compared to the power storage and output efficiency.

We’ve had nuclear-powered military ships since the 1950’s. Nuclear ships, on average, can operate for 20 years(!) without refueling. Militaries have a monopoly on marine nuclear systems for safety reasons. We had a nuclear container ship in the 60s, but it was decommissioned. Take this as a reminder of the unbelievably wide gap in performance between nuclear and fossil fuel performance. In the 20 years it takes for a nuclear ship to run out of fuel, a traditional container ship can burn over 700 million gallons of marine fuel. The operational efficiencies of nuclear power are just too satisfying to ignore.

Speaking of energy, lithium prices have fallen even further and are now off -80% from the pandemic peak.

Google’s Bard (Gemini)

Google’s new consumer-facing AI tool, Gemini, is the first compelling alternative to ChatGPT I’ve used personally. I recommend trying it. I use these tools daily for cooking, workouts, medical questions and researching general topics. LLM’s are amazing as long as you verify the results with original sources.

I find it interesting that these models are graded on a variety of standardized tests for general logic, multi-step reasoning, common sense, coding and image recognition. You can see Gemini’s test scores on the link above. It’s like the models are taking the SATs, and watching the scores rise over time feels like watching the models grow up. Math beyond basic calculations remains problematic for LLMs, with scores in the 50% range. Never trust numbers from an LLM; always verify. The next logical step for Gemini is to link directly into Google Drive, Docs, Sheets or even Gmail. 

Japan’s serious population issues

Aside from the obvious comments about declining birth rates in developed countries, I was shocked to see the official statistics and estimates released by their government. Japan’s population is 123 million, down 800k since last year. That is estimated to fall by another 10 million over the next ten years. It’s also estimated to fall below 100 million by 2047. If that feels far away, it’s only about 20-25 years from now. 

This same low birth rate trend is underway in all developed countries, including the US. However, the US has the highest number of immigrants globally, with 50 million citizens born in other countries. US immigration is critical to its economic strength.