When someone takes a job with the government, they’re allowed to sell their holdings and defer capital gains taxes. But the point is, they do have to sell their shares in companies. Once you sell, you lock in your capital gains. No wonder then that Google’s CEO Eric Schmidt says “thanks but no thanks” to America’s CTO job. If you had billions in Google’s stock, you might be ok to sell them when the shares were trading at $700. But at $325?
More on the capital gains tax deferral here, as applied to Henry Paulson when he left Goldman to join the US Treasury.
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WatchMojo NewsletterDon’t look now, but 2008 will probably go down in history as the year that marked the end of excess and the death of investment banks, hedge funds and VCs.
We have already seen investment banks go down: only Morgan Stanley and Goldman Sachs remain, and they are now simply banks.
Hedge fundsare being pummelled and the remainder of the year doesn’t look any better.
And now the antiquated VC model is finally catching up with it. Read more here. I sort of called this here:
So, why are VCs panicking? My bet is many of them will end up having their own investors balk from future commitments (if they have any) while others outright ask for their cash back. This, of course, will lead to lawsuits etc.
The expression “a rising tide lifts all boats” also applies to VCs, who are notoriously bad at identifying good businesses and win when they carpet bomb a bunch of entrepreneurs and startups with money, hoping that one or two becomes hits.
Right now, suddenly the definition of a hit has changed… and VCs know that once they lift their skirts, they have very little to show their own investors, and this is why they are panicking… it’s almost like a domino effect.
I would have rather be wrong on this point… but the point is: this should come as no surprise.
