Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / How Goldman Sachs Private Markets Platform Reshapes Investing
Transcript
- Lucas: Goldman Sachs announced this week that it's launching a private markets platform, effectively giving wealthy individual investors access to deals that used to be reserved for institutions and sovereign wealth funds. Think pre ipo companies like SpaceX, Stripe, the next generation of unicorns that stay private longer. Luna: Right — and this isn't just a small experiment. Goldman is creating a whole platform, not just a fund. They're essentially building a marketplace. Lucas: Exactly. The press release called it a 'private markets platform,' and the key detail is that it's aimed at what they call 'rich individuals' — high-net-worth clients who want exposure to companies that are staying private far longer than they used to. The average time a company stays private before IPO has gone from about four years in 2000 to over eleven years now. Luna: So the public markets are missing a huge chunk of value creation. Companies like SpaceX are worth hundreds of billions before they ever hit the S&P 500. Lucas: And that's exactly the argument Goldman is making. They're saying the public markets are no longer where the most exciting growth happens. But here's the thing — this also raises a real question about liquidity and risk. Private markets are opaque, valuations are subjective, and you can't sell your shares on a Tuesday afternoon if you change your mind. Luna: There's a headline today — bets against SpaceX have grown to 32% of the float. Elon Musk warned short sellers won't survive. That's a very public fight over valuation for a company that isn't even public. Lucas: That's a perfect example. SpaceX trades on secondary markets, but the pricing is all over the place. Short sellers are betting the valuation is inflated. Musk says they're wrong. The point is, when you buy private shares through Goldman's platform, you're stepping into that uncertainty. There's no sec mandated disclosure, no quarterly earnings call, no analyst coverage. Luna: So who is this for? Is it really democratizing access, or is it just a new product for people who already have ten million dollars? Lucas: Goldman is targeting clients with at least $10 million in investable assets, so let's be clear — this isn't for the average 401k holder. But it does signal a broader trend. Other firms like Apollo and Blackstone have been doing this for years. Goldman is just the latest big bank to say, 'We need to offer this or lose clients to alternatives.' Luna: And the timing is interesting. The S&P 500 is at 7,521, the yield curve is steepening again — the 10-year Treasury yield is 4.6 percent, the 2-year is 4.21. That's a positive spread of 39 basis points. Typically that signals economic optimism. Lucas: Right — a steepening curve often means the market expects growth and inflation. So in that environment, private assets might look even more attractive because they're less correlated with public equities. But there's a catch. The VIX is at 16.8, which is relatively calm, but the VVIX — the volatility of volatility — is at 96. That's elevated. It suggests the market is pricing in a higher chance of a volatility spike. Luna: So the calm surface hides a nervous undercurrent. If volatility does spike, illiquid private investments could become a problem if investors suddenly want to cash out. Lucas: Exactly. The classic risk with private markets is that they look great on paper until you need liquidity. During the 2008 crisis, many private equity funds suspended redemptions. Investors were locked in. The same could happen here if we get a sharp downturn. And with the VVIX at 96, the options market is saying the probability of a volatility event is non-trivial. Luna: But isn't that exactly why wealthy investors want private markets? They can afford to lock up money for years. They're not worried about next month's rent. Lucas: That's the argument. And it's fair. But the scale is growing. Goldman is putting billions into this. The question is whether the risk is properly priced. In private markets, fees are higher — typically 2 percent management fee and 20 percent performance fee. That's standard. But if returns don't materialize, the fee structure can eat into gains. Luna: And there's a behavioral angle too. When a stock falls, you see the red number. It's painful but transparent. With a private investment, the valuation might be marked once a quarter. You might not feel the pain until it's too late. Lucas: Right. There's a concept called 'smoothing' in private equity returns — the reported volatility is lower because valuations are less frequent. That can make private assets seem safer than they really are. The true volatility might be similar to public equities, but you just don't see it day to day. Luna: I want to come back to the SpaceX short interest. 32 percent of the float is a massive bet against a company that doesn't even have a public price. How do you even short a private company? Lucas: Through derivatives and secondary market contracts. It's not easy, but it's possible. The fact that short interest is that high tells you there's a real debate about SpaceX's valuation. Elon Musk says it's worth $350 billion. Short sellers say that's absurd for a company that, while dominant in launch, has uncertain revenue from Starlink and Starship is years away from profitability. Luna: So if you're buying SpaceX through Goldman's platform, you're implicitly taking the side of Musk against the shorts. That's a high-conviction bet. Lucas: It is. And that's fine if you're doing it knowingly. The risk is that retail investors — or even sophisticated ones — might treat it like a normal stock. 'SpaceX is the future, I want to own it.' But it's not a stock. It's a private placement with limited disclosure, no guaranteed exit, and a potential liquidity discount. Luna: There's another headline from a few days ago — Goldman Sachs creates private markets platform as rich investors seek the next SpaceX and Stripe. So this is demand-driven. The clients are asking for it. Lucas: And Goldman is responding. But they're also creating a new revenue stream. Fees on private placements are higher than on public trading. It's good business for them. The question for the investor is whether the net returns justify the lack of liquidity. Luna: Let's step back. What does this mean for the broader market? If more capital flows into private markets, does that hurt public equities? Lucas: Potentially. Over the past decade, the number of publicly listed companies in the U.S. has fallen by about 50 percent since the 1990s. Companies are staying private longer, and more capital is going to private funds. If that trend accelerates, the public markets could become less representative of the economy. That has implications for index fund investors — they're missing out on the early growth of the most dynamic companies. Luna: And for retirement savers who only own public equities through a 401k, they're effectively locked out of this entire asset class unless they have a separate brokerage account and enough wealth to qualify. Lucas: There are moves to change that. Some proposed regulations would allow 401k plans to include private equity. But it's controversial because of the liquidity mismatch. You don't want someone's retirement savings locked up in an illiquid fund when they need to withdraw at age 65. Luna: So the tension is clear: access versus protection. And Goldman's platform sits right at that intersection. Lucas: Quick honest thing — we keep this show ad-free, and it's only possible because a small number of listeners chip in through buy me a coffee dot com slash fexingo. If our conversations have helped you think about a decision differently, that's where the support goes. Just a handful of people keeping it going. Luna: Yeah, it's a direct line — no advertisers, no sponsors. Just listeners who find value. We appreciate it. Lucas: Alright, back to the private markets question. One angle I find fascinating is how this platform could change the behavior of startups themselves. If there's a liquid secondary market for private shares, does that reduce the incentive to go public? Companies might stay private even longer, which could exacerbate the public market shrinkage. Luna: And if more companies stay private, the IPO market could become even more anemic. We've already seen a quiet couple of years for IPOs. This could create a feedback loop. Lucas: Exactly. Then you have to ask: is the public market still the place where price discovery happens? If the most valuable companies trade in private markets, the public indices become less reflective of true economic value. That's a structural shift that index investors need to understand. Luna: But for now, Goldman's platform is a big step. I'm curious to see how much capital flows in and whether other banks follow suit. Lucas: They will. JPMorgan and Morgan Stanley are already developing similar offerings. The trend is clear. The question is whether the industry can manage the risks — valuation accuracy, conflicts of interest, liquidity mismatches. If they can, this could genuinely broaden access. If not, we might see a crisis in a few years when a downturn hits and investors can't get their money out. Luna: That's the tension that will define the next decade of investing, I think. Lucas: And we'll be here to track it. That's it for today. Next episode, we'll look at the yield curve again — it's steepening, but the VIX is still low. There's a disconnect worth exploring.