February 3 2023
- Last 2 shows got lower ratings 😛
- Markets up
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Fed raised rates slowly so market ripped
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Added 517000 jobs, Jan jobs report is good
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Wage growth data is good
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Powell went from hawkish in December to more benign now - only 2 more 0.25% rate hikes coming
- He said disinflation 11 times in his speech
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He capitulated and markets knew this
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Markets are off to the races in the short term
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End of last year people were tax loss harvesting - lot of stocks
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Tesla effectively doubled in the last small bit of time
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This is similar to end of 2018, start of 2019
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Next 30-90 days, seems trade is to go up
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Maybe whipsaw economy here
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Risk of inflation is higher but recession maybe lower
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Hard to predict future
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Odds of soft landing this year are quite a bit better
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Are people finally taking jobs and going to work having burnt through their savings (trillion in savings lost apparently)?
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US needs to have 5-6% jobless rate for 2-3 years to get inflation down to 2-3% - Larry Summers
- That’s not what we have now
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There is marginal risk of whipsaw effect because maybe we haven’t got control of inflation just yet
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Some companies want to go public now
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Most of the market are not people - they’re computers and ETFs
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So there is a reinforced buying loop and reinforced selling loop
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Yield Curve might be a good predictor - we might get long term 3.5% stable cost of money in a few years - prediction market thinks Fed is done raising rates because inflation might be under control
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Never going back to bubble of 2021 - 3.5% is still a great deal for mortgage
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Read The Intelligent Investor by Benjamin Graham - if you can get more than 2 times risk free rate, you should invest in the company - right PE for SP500 is 14, right now its 22 so we’re over valued
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Need to start to learn a new regime here
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Chamath’s team did some analysis - 100 most valuable public tech cos - market cap is circle, grey bars for recessions, see if there is a correlation between value of companies and what the interest rate is at the time - result: if you were founded during a period of austerity you grew super high, plus big tech changes (PC revolution in 70s) or internet (90s) - atoms and bits together
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Lot of bad habits learned in the last 15 years from 2008 by VCs and founders
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Meta went up so much
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FedEx is also laying off
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Middle managers getting laid off - emphasize doers
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Problem in these companies is everyone wants to be a manager
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Star ICs become managers to advance in their career
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Over 50% of Twitter engg department had not coded in a long time when Elon went in
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Ambitious people want to be managers and managers don’t do the work
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Zuck said you don’t want a management structure of managers managing managers..managing people who do all the work
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The more metaverse mentioned, the more stock dropped
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Facebook is supposed to be an ex-growth company now - reached peak size and has to generate cash flow
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This could be a great stock to own now - they already announced a $40B stock buyback
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By 2025 Apple will have exceeded $1T of cash distributions
- Including buybacks and dividends
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Facebook could also chunk out 100s of Billions of dollars soon
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- Tom Loverro tweet on mass extinction event coming for startups in 2023 2024
- 4 in 5 startups have less than a year of runway left
- Mark Suster says the same - 5000 seed, A B companies funded recently - ~50% to go out of business soon
- Dotcom bubble also 2001-2005 50% mortality rate
- This cohort of companies is over burdened with feature orientation
- They were under pressure to show earnings - so if it was easy for them to make money they were basically features not platforms
- Companies are basically under water
- VCs will recalibrate GPs
- 20 people in our industry have made > $1B more than once
- Everyone is extremely commercial in their background or operating experience
- Banks, etc
- Non engineers/product managers
- VP of product/engineers were standard VC people - they haven’t made any money according to PitchBook
- Pat Grady seems to be the best
- Danny Reimer, Bill Gurley
- Everyone is extremely commercial in their background or operating experience
- Maybe lot of dry power that’s waiting on the sidelines will go into tidal wave of AI companies
- Chamath uses a team of technical experts to get consulting before they do a deal - the technos don’t do investment decisions
- Google, Amazon, Microsoft, Facebook combined raised less than a quarter billion dollars before going public - all were profitable when they went public
- GFC of startups will be bad
- 2003-2004 was a rough time - next 2 years will be rough for a lot of companies
- Tech ecosystem is different from overall economy
- Adani and Hindenburg Report
- Stock has cratered in the last 5 days
- Role of short seller research analysts
- Contrast with FTX where no one was doing diligence
- Adani
- Ports
- Mining companies
- Green energy
- Sprawling empire
- Similar to Batista in Brazil
- Lot of inter-related inter-party transactions
- Similar to Nikola where Trevor Milton got arrested and Hindenburg report came out
- Is this a good thing?
- Elon had to keep batting back these guys in 2015-2016-2017
- Short sellers should be there - but you should also be held accountable the way insiders are also held accountable
- Their returns should be put in escrow
- In developing countries there is a grey line between enterpreneurs and governments - they are doing the work of the government - he is building ports and roads, etc - so its a reasonable claim that its an attack on India
- SEC Rule 13f-2 is saying that people should be required to disclose their short positions
- TeslaQ was an example of people lying in public - real public cost to insiders - employees or investors who got spooked, Elon under pressure
- Carson Block being investigated for some related work in this area
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