Speaker 1: From the heart of where innovation, money and power collive
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily jay I Ed Ludlow in San Francisco in for
Speaker 1: Emily Chang. This is Bloomberg Technology coming up in the
Speaker 1: next hour. Tech tumbles, retailers sinks stocks. This is concerns
Speaker 1: around earnings adds to fed anxiety. We speak to a
Speaker 1: seasoned investor who sees opportunity in the drop. Plus it's
Speaker 1: not just tech stocks. Cryptocurrencies are in the gutter this
Speaker 1: year too, and the meltdown shows no signs of easing.
Speaker 1: Then again, some coins are holding up better than others.
Speaker 1: Will have all the details and Elon Musk is at
Speaker 1: it again. Twitter's board says it's committed to the billionaires
Speaker 1: original takeover deal despite elons Bok concerns. The Tesla ceo
Speaker 1: also using the social media platform to vent frustrations on
Speaker 1: the ev maker getting yanked from a key e s
Speaker 1: G index. All of that later this out we'll get
Speaker 1: to at a moment, But first let's get a look
Speaker 1: at market's pain for stocks. The SMP five hundred suffering
Speaker 1: its deepest one day drop in almost two years, Bloomberg's
Speaker 1: data here with the latest Riddika consumer retail tech all
Speaker 1: in the red, all in the red, indeed ed and
Speaker 1: this today has been nothing short of brutal. When you
Speaker 1: have the SMP five closing down some four the now
Speaker 1: ZACK one hundred being weighed down even more, down some
Speaker 1: five percent. You have those heavy weights like Apple and
Speaker 1: Amazon also down today over five percent in today's session,
Speaker 1: and really big tech not even being helped out by
Speaker 1: the fact that we did have lower yields today on
Speaker 1: that tenure it was down some eleven basis points for
Speaker 1: that really not helping the market out today as we
Speaker 1: saw that flight into safety and treasury is really getting
Speaker 1: a bid. And of course, one we talk about that
Speaker 1: risk off sentiment, we've got to talk about bitcoin ed
Speaker 1: below that thirty thousand dollar threshold there of course, if
Speaker 1: you actually think a bitcoin in the may alone down
Speaker 1: more than that collapse and stable coin last week not
Speaker 1: recovering those losses, but for today at least, that pressure,
Speaker 1: that's selling pressure really accelerated after those target earnings, so
Speaker 1: amiss on those analysts expectations and that profit outlook being
Speaker 1: cut to six percent from eight percent. Now, this is
Speaker 1: not about sales. This is not about revenues. It was
Speaker 1: about higher freight costs, it was about higher inventory levels.
Speaker 1: All of that really weighing on the stock. And it
Speaker 1: was a similar story that we saw with Walmart. Walmart
Speaker 1: stock now down over the past two days and Target
Speaker 1: of course having its worst day since the nine seven. Now,
Speaker 1: let us flip up the board because when we talk
Speaker 1: about margins, when we talk about those coming under pressure,
Speaker 1: let's look at those Cisco earnings that we just got
Speaker 1: after the market closed, and you see that stock absolutely
Speaker 1: plunging down from their percent here. They got hit with
Speaker 1: those China COVID lockdowns, the supply chain issues really coming
Speaker 1: to the forefront. They also got hit by the Russia
Speaker 1: Ukraine war and of course inflation playing a key part.
Speaker 1: Will that way on customer demand or will set back
Speaker 1: to Cisco after those earning fat stock after hours punging
Speaker 1: some head. Yes, Cisco a real bell weather of corporate spending.
Speaker 1: Our thanks to Bloomberg's Ridika goot To and let's stick
Speaker 1: with markets. I want to bring in mel like a Messino.
Speaker 1: She's the CEO of WE Family Offices, which has more
Speaker 1: than fourteen billion dollars in assets, under management. Mel You've
Speaker 1: seen a lot of markets. What do you make of
Speaker 1: a daylight today? Well, I think we're going through a
Speaker 1: paradigm shift. You know, we're going through a regime change,
Speaker 1: and I think the markets are getting used to the
Speaker 1: fact that the very drivers that droves this fantastic investment
Speaker 1: environment for the last ten years, it's not going to
Speaker 1: be there anymore. We're not going to have low inflation,
Speaker 1: we're not going to have low interest rates, we're not
Speaker 1: going to have globalization, We're not going to have frankly,
Speaker 1: very benign geopolitical markets. So so I think that a
Speaker 1: lot of the things that lead to wonderful markets over
Speaker 1: the last ten years are going to change, and so
Speaker 1: I think the market is trying to figure out what's
Speaker 1: the new paradigm gonna look like, what's it going to
Speaker 1: be in the next ten We'll look here a chart
Speaker 1: on the Bloomberg terminal evaluations on the NASTAC one hundred,
Speaker 1: we're getting nearer to ten year average on that price
Speaker 1: projected profit right, and we're getting nearer too pre pandemic levels.
Speaker 1: Do you sense opportunity in a daylight today? Absolutely? Absolutely,
Speaker 1: because I think a lot of the things that are
Speaker 1: worrying the corporates, a lot of the supply chain issues,
Speaker 1: lower profit margins, inflation cre How are you going to
Speaker 1: solve it? You're gonna solve it through technology. So I
Speaker 1: think that the name of the game is going to
Speaker 1: be productivity, and what's going to drive productivity. It's going
Speaker 1: to be technology. So I think there's a tremendous opportunity
Speaker 1: that's happening right now. Now. You're the former CEO of
Speaker 1: JPMorgan Private Bank, You've been in the market's a long time,
Speaker 1: and there's a lot of take on board inflation, the
Speaker 1: outlook for higher rates, supply chain issues, China. Can go
Speaker 1: on and on if you'd like me to. What's driving
Speaker 1: the psychology of this market. I think it's inflation. I
Speaker 1: think it's it's really the fact that for those of
Speaker 1: us who remember, and I do remember, once inflation starts,
Speaker 1: it's really hard to get it under control. And we
Speaker 1: really have been blessed with this unbelievable investment climate over
Speaker 1: the next ten years, over the last ten years, and
Speaker 1: I think people are trying to figure out how we're
Speaker 1: going to be able to bring down inflation. What is
Speaker 1: it going to look like over the next ten years?
Speaker 1: What is it gonna take? And again, I'm not a trader.
Speaker 1: I'm more of a long term investor, so I really
Speaker 1: look at the next ten years. A few things caught
Speaker 1: my eye when you and I were talking the markets
Speaker 1: throughout the day. You see opportunities in particular sectors and
Speaker 1: subsectors talking about artificial intelligence, cybersecurity, some perhaps those long,
Speaker 1: longer duration software stocks. Where do you see that opportunity specifically? Well,
Speaker 1: would the opportunity around all of the sudden you think
Speaker 1: about all of the areas their productivity is really going
Speaker 1: to change the new paradigm. Uh, it's it's really going
Speaker 1: to be. For example, let's take the health care sector
Speaker 1: and take a look at the demographics on the United
Speaker 1: States technology. I think it's going to make a huge
Speaker 1: difference in the healthcare and I think you have to
Speaker 1: play it across the equity spectrum. You have to play
Speaker 1: an adventure, you have to pay play it in girls,
Speaker 1: you have to play it in the private markets on
Speaker 1: the public markets, So you have to play it across
Speaker 1: the board. Same thing with cybersecurity, same thing with artificial
Speaker 1: intelligence or the cloud. Right, I just want to come
Speaker 1: back to Cisco with downt and after hours, Cisco is
Speaker 1: active saying it's impossible to catch up on supply given
Speaker 1: the current situation. You think about their exposures, what we
Speaker 1: see in the semiconductor space, their exposure to China. But
Speaker 1: you against the opportunity in semiconductors taught me about that well.
Speaker 1: We do see a lot of opportunity in semiconductors, where
Speaker 1: it's going to take time because I think new factories
Speaker 1: are going to have to be built. There's going to
Speaker 1: be tremendous demand. But we're going through this adjustment, and
Speaker 1: I think that's where the issue is is that we're
Speaker 1: going through this adjustment. It's taking down a lot of
Speaker 1: great companies that will I think emerge stronger as a
Speaker 1: result of this. They will emerge differently as a result
Speaker 1: of this, and there will be I think tremendous opportunity
Speaker 1: in that space, including with companies like Ziska. We've seen
Speaker 1: this under performance of the NAZAC one hundred relative to
Speaker 1: the broader market, right, the sensitivity of tech to higher rates,
Speaker 1: the psychology around that going forward, what is the key
Speaker 1: data that we're looking at. Do we track inflation or
Speaker 1: do we assess the markets faith that the FED can
Speaker 1: handle inflation without causing a soft hard landing or indeed
Speaker 1: delivering a soft landing. Well, the economy is really moving,
Speaker 1: UH is pretty hot right now, and it's going to
Speaker 1: take a bit to cool it down. So I think
Speaker 1: that and the consumer is still spending even and though
Speaker 1: you're seeing the Walmart and and and Target results, but
Speaker 1: I think that the economy is probably strong enough not
Speaker 1: to have a recession this year. But I think we
Speaker 1: might get a recession next year, but I don't think
Speaker 1: it will be long, right, male, final question, you also
Speaker 1: see opportunity in private markets towards me about that. We
Speaker 1: see lots more opportunity actually in private markets than in
Speaker 1: public markets. And I think there's a tremendous amount of
Speaker 1: money to be put to work. And I think that
Speaker 1: exactly what's happening in the public markets will bring down
Speaker 1: valuations and we'll create fantastic opportunities in the private markets
Speaker 1: across the whole spectrum, the whole spectrum. Indeed, mel like
Speaker 1: a Messino CEO of We Family Offices. Thank you, as
Speaker 1: Elon Musk continues to tweet and tweet and tweet his
Speaker 1: concerns about twee this problems sources say his deal to
Speaker 1: buy the platform is still very much going forward. For
Speaker 1: more and where things stand, I'm joined by Bloomberg's Deals
Speaker 1: reporter Michelle Davis, along with Bloomberg Technology executive editor Tom Giles.
Speaker 1: And Tom, I'm going to start with you, just bring
Speaker 1: us up to speed. Where do we stand with this?
Speaker 1: What a Twitter saying and all of this? Yeah, well Twitter,
Speaker 1: Twitter thinks the deal's going forward. Um as our colleague Michelle,
Speaker 1: who were about to talk to broke the news yesterday,
Speaker 1: Twitter's board came out and said, we're going to enforce
Speaker 1: this merger agreement. We've got an agreement in place where
Speaker 1: Elon Musk is going to pay fifty twenty for our company, right,
Speaker 1: and we expect that deal to go through. So all
Speaker 1: this talk, all this background noise about bots and the
Speaker 1: deals on hold, which ain't a thing, by the way,
Speaker 1: not a thing. Twitter is like, the deal goes forward,
Speaker 1: all right, So Michelle, I want to get the inside
Speaker 1: scoop from you. But first we had Natasha Lamb from
Speaker 1: our junior capital on the show on Tuesday. Listen is
Speaker 1: what she had to say about this whole situation. I
Speaker 1: think Twitter has had so many challenges over the years,
Speaker 1: which is why you've seen you know, CEOs come and
Speaker 1: go move around, why you're seeing what's happening with Elon
Speaker 1: Musk right now. Um, you know, Unfortunately, right now I
Speaker 1: feel like I feel like Elon Musk is like a
Speaker 1: cat playing with a bottle of string, a cat with
Speaker 1: a ball of string. But what you're hearing, Michelle is
Speaker 1: in the background, the bankers, the advisors, business as usual. Yeah.
Speaker 1: Everyone that I've been talking to, um, you know, seems
Speaker 1: to have the impression that things the Steel will proceed
Speaker 1: as planned. One big sign of that is that the
Speaker 1: proxy filing hit yesterday morning. That's you know, this big,
Speaker 1: more than page long documents that explains how the deal
Speaker 1: came together. Um. It's something that was put together in
Speaker 1: coordination between the Musk camp and the Twitter camp, and
Speaker 1: it's something that Musk would have had to personally sign
Speaker 1: off on before would been filed. And this is a
Speaker 1: proxy that you know outline the deal terms twenties. So
Speaker 1: that's the clearest indication that you know, both sides do
Speaker 1: see this deal going forward, despite the you know tweets
Speaker 1: that we're seeing on Twitter. Michelle, I've got a question,
Speaker 1: so all this chatter, all this noise in the background
Speaker 1: about Boughts and whether or not he had all the
Speaker 1: information he needed before he agreed to this deal. What
Speaker 1: happens if he decides I don't want to pay fifty
Speaker 1: What are the means that he has at his disposal. So,
Speaker 1: you know a lot of people have talked about the
Speaker 1: fact that the deal has a breakup fee and that
Speaker 1: you know, people say that he could just pay this
Speaker 1: billion dollar break up and walk away. That's not true. Um,
Speaker 1: this deal actually includes as it's seller friendly, So it
Speaker 1: includes this legal provision called specific performance, which basically means
Speaker 1: I must decides he wants to walk away, Twitter can
Speaker 1: take him to court and get a court order that
Speaker 1: says you have to complete the steale, you have to
Speaker 1: come up with the finance, and you have to pay
Speaker 1: for Twitter. Um. Other options that he could take is
Speaker 1: he could try to show that there was something called
Speaker 1: a material adverse event. Um, it's a mac cause and
Speaker 1: he could say, you know, there was like some change
Speaker 1: to the business that materially, for a sustained period of time,
Speaker 1: is going to change Twitter's outlook. Um, But the burden
Speaker 1: of proof is on him. He would have to show
Speaker 1: this so him saying, uh, you know, Twitter, I'm not
Speaker 1: going through this deal until you prove to me that
Speaker 1: box make up fewer than five percent of accounts. That's
Speaker 1: not Twitter doesn't have to prove anything. Um. The other
Speaker 1: thing is he waived his right to do diligence when
Speaker 1: he was going about this deal and presented that as
Speaker 1: something that, uh, you know, was a vote in favor
Speaker 1: of the deal. He said, you know, I'm someone who's
Speaker 1: gonna be able to do this quickly. I won't even
Speaker 1: do diligence and so kind of doesn't have a like
Speaker 1: to stand on. And then finally, Twitter has made public
Speaker 1: disclosures about the fact that you know, it estimates that
Speaker 1: the box make up fewer the five percent of accounts,
Speaker 1: but it's also in securities filing said, including in its
Speaker 1: most recent ten K said the number could be higher
Speaker 1: than that. So it for the people I talked to
Speaker 1: you say that it would be a judge would be
Speaker 1: hard press to agree with Musk on this. Um. What
Speaker 1: could happen is, you know, he could walk he could
Speaker 1: try to walk away. Twitter could take him to court. Um.
Speaker 1: And then in order to avoid some you know, lengthy
Speaker 1: protracted court battle. Um, there could be a scenario where
Speaker 1: the two come to some settlement. But at this point, um,
Speaker 1: from my understanding, you know, Twitter does not have any
Speaker 1: reason to renegotiate a deal. The contract is in their favor, um,
Speaker 1: and so it seems like the deal has to go
Speaker 1: ahead unless unless must can prove that there's some you know,
Speaker 1: material adverse effect to the business. Meantime, Tom wierrating on
Speaker 1: the share price right, you know, we saw the sell
Speaker 1: off in Twitter stock accelerate with the broader market, but
Speaker 1: basically the skepticisn't from the market that sent materializes. Meantime,
Speaker 1: Elomuski is tweeting a lot about his political affiliations, and
Speaker 1: we wonder, is this him getting ahead of scrutiny of
Speaker 1: a deal. Is this him trying to get allies in DC?
Speaker 1: What's your ead? Sure, there's a couple of things going on.
Speaker 1: He talked about his disillusionment with the Democrats, how in
Speaker 1: the next election he's voting Republican and this is apparently
Speaker 1: the first time he's done and I haven't seen his
Speaker 1: voting records, but that's what he's saying. So what's interesting
Speaker 1: about that? You have a couple of dynamics going on
Speaker 1: This is a guy whose market is moving, is shifting.
Speaker 1: He started in California's company started in California. He's moved
Speaker 1: to Texas. He's shifting towards wanting to sell trucks. He's
Speaker 1: got a different constituency. The market for electronic vehicles in
Speaker 1: California anyway is saturated. He needs to embrace a whole
Speaker 1: new constituency people who drive trucks, different constituency than the
Speaker 1: Californians were buying e vs. Right, So that's one side
Speaker 1: of the equation. The other side of the equation is,
Speaker 1: as you pointed out, there's a lot of scrutiny around
Speaker 1: this deal, and there's a lot of scrutiny around UH,
Speaker 1: around Tesla and his in his management of Tesla, whether
Speaker 1: it's Nitza, whether it's the SEC looking at things he's
Speaker 1: tweeted about sales of Tesla stock, and reportedly the SEC
Speaker 1: is looking into the timing of his disclosure around the
Speaker 1: Twitter state. So the government is already scrutinizing a lot
Speaker 1: about Elon Musk and what he says in potential manipulation
Speaker 1: of securities, and so this could be him just getting
Speaker 1: ahead of it and saying, look, I told you so well.
Speaker 1: We knew this was already happening. We didn't need Ellen
Speaker 1: to tell us sec NITSA. These agencies have already been
Speaker 1: doing it for months. Michelle, very quickly, five seconds. What's
Speaker 1: the probability of this deal happening? I couldn't tell you.
Speaker 1: Tom at twenty, I don't think it happens. I think
Speaker 1: there's some kind of negotiation, just like Michelle was talking about.
Speaker 1: They go to court, he negotiates the price down. All right,
Speaker 1: wait and see Bloomberg's Michelle Davis and Tom Giles, executive
Speaker 1: editor for Bloomberg Technology. Thanks to you both coming up.
Speaker 1: We dig deep in today's market sell off as investors
Speaker 1: assess the impact of higher prices on earnings and economic growth.
Speaker 1: This is Bloomberg. Let's get straight back to the sell
Speaker 1: off in financial markets. All corners of the equities market
Speaker 1: sold off Wednesday, with tech among the worst performing sectors.
Speaker 1: Joining us to digest the drop is Bloomberg Senior editor
Speaker 1: for Markets and opinion columnist John Authors. John on Wednesday,
Speaker 1: like this, when you see the red across the Bloomberg terminal,
Speaker 1: where do you look for answers? Well, first of all,
Speaker 1: this is one of those is which has gone back
Speaker 1: to the kind of synchronization we saw in No. Seven
Speaker 1: and oh eight. So if you look at how bond
Speaker 1: yields have moved on how the oil price have moved today,
Speaker 1: both rose until about eight nine o'clock in the morning,
Speaker 1: tested new levels, decided they weren't going there, and slid
Speaker 1: the rest of the day. And basically stocks have fallen
Speaker 1: in line with the oil price and with bondyields all day.
Speaker 1: It's a very coherent bet actually against inflation, the bet
Speaker 1: that the miss ties back into target. Although it has
Speaker 1: a huge impact on the whole of the tech sector,
Speaker 1: it ties into this belief that inflation might be bitten
Speaker 1: off by companies having to write, having to swallow sallow
Speaker 1: with bad margins, tighten margins. These are big declines, and
Speaker 1: you wrote this fantastic column on Tuesday about the dangers
Speaker 1: of by sing the dip. You basically talk about how
Speaker 1: fund managers, investors their sanguin about stagflation or persistent inflation.
Speaker 1: Any you look at the outlook for rates, but all
Speaker 1: of these players, they're underweight tech and texts most sensitive
Speaker 1: to rates. Walk me through that one. Um, it's certainly
Speaker 1: true that in the environment of the last few years,
Speaker 1: tech has been very sensitive to rates at the moment
Speaker 1: when it's more of a straightforward play of am I
Speaker 1: comfortable being in stocks or bonds? Do I think there's
Speaker 1: going to be inflation? Uh? And stagflation or recession? At
Speaker 1: this point, I think you need to get back to
Speaker 1: the Willie Sutton dictum who was, you know, when he
Speaker 1: was asked why he robbed banks, he said, because that's
Speaker 1: where the money is. If you want to take profits
Speaker 1: at the moment, if you want to get out of
Speaker 1: the equity market, then the most liquid stocks in which
Speaker 1: people are probably sitting on profits still are the big
Speaker 1: tech fang stocks. So it's the main reason they're down. Yeah,
Speaker 1: come with me, it's might be mactaminal. Take a look
Speaker 1: at this chart. We've talked about the pain in certain
Speaker 1: pockets of this market, arc Innovation ETF being one seen
Speaker 1: big declines. At the same time we've seen five straight
Speaker 1: weeks of flows. Okay, a little drop off in that. Still,
Speaker 1: what is the psychology here? What is driving that? I
Speaker 1: fear it's a lottery ticket vibe of you might as
Speaker 1: well shoot for the moon. You might you don't have
Speaker 1: much money anyway. The only way it's really going to
Speaker 1: make a difference, few as if you buy something that's
Speaker 1: really going to to rip higher. ARC has had a
Speaker 1: lot of publicity and also people like to invest in
Speaker 1: something that's a little exciting, which obviously the ARC stocks are,
Speaker 1: whereas the likes of Targets and Walnut aren't. So. But
Speaker 1: I think that's a disconnect between the retail markets and
Speaker 1: the broader institutions who are mostly behind what's been going
Speaker 1: on today. John. When I was a kid, I was
Speaker 1: obsessed with dinosaurs, and as you know, I'm a Londoner.
Speaker 1: I used to go to the Natural History Museum. Look
Speaker 1: at the skeletons going across the Bloomberg terminal. I go
Speaker 1: under your bio and I see the word brontosaurus. What
Speaker 1: are you talking about? Forward to me about a brontosaurus moment? Okay, Well,
Speaker 1: I was also a fan of Dippy the Diplodocus in
Speaker 1: the in the main hall at the Metro History Museum
Speaker 1: in London. As love the Brontosaurus. It's a reference to Yes,
Speaker 1: another British guy, Jeremy Grantham who in oh seven, as
Speaker 1: as the housing market had already turned and subprime mortgage
Speaker 1: dealers were beginning to go bankrupt was I asked him
Speaker 1: why is the stock market still holding up so much?
Speaker 1: And he said that the stock market is basically like
Speaker 1: a brontosaurus. A brontosaurus, if you bit its tail, it's
Speaker 1: nervous system. Its brain was so limited that it would
Speaker 1: take a long time to know that its tail had
Speaker 1: been bitten, to feel the pain. And in the same way,
Speaker 1: he said that the up markets take some extremely long
Speaker 1: time to cotton onto what is happening elsewhere in the economy,
Speaker 1: elsewhere in the markets. You know, I've always wanted to
Speaker 1: do that, talk about dinosaurs in financial markets. You've made
Speaker 1: my day. Look Bloomberger Billium columnists John Orthord, Welcome to
Speaker 1: Bloomberg Technology. I'm Ed Ludlow in San Francisco. Shares of
Speaker 1: retailers plunged on Wednesday, leading the sell off on Wall
Speaker 1: Street after US retail giants cut their growth outlooks. Bloomberg's
Speaker 1: Ridoutta joined to the latest Which names are we watching? Well?
Speaker 1: Yesterday it was Walmart. Today it was Target actually having
Speaker 1: its worst day since seven It was a miss on
Speaker 1: those earnings and actually cutting their profit outlook to six
Speaker 1: percent from eight percent. This was not about sales. It
Speaker 1: was about those higher freight costs, higher fuel costs, and
Speaker 1: also those inventory levels rising actually up some fort from
Speaker 1: a year ago. That was a similar story that we
Speaker 1: saw from Walmart yesterday, which is also down in the
Speaker 1: session today. But this is not just your traditional retailers
Speaker 1: that are being hit today. That has extended over to
Speaker 1: some of your e commerce stocks. I'm looking at Etsy,
Speaker 1: I'm looking at Wayfam, looking at eBay. All of those
Speaker 1: were down today. They suffer some a lot of the
Speaker 1: same problems, supply chain issues, inflation. Those stocks actually on
Speaker 1: a year today basis getting hit even harder than the
Speaker 1: likes of Walmart than the likes of Target. But you've
Speaker 1: got to remember when we talk about these e comma stocks,
Speaker 1: these were actually your pandemic darlings. But that of course
Speaker 1: started to falter and we got that reopening, that stay
Speaker 1: stay at home began to suffer as people got back
Speaker 1: out there and started shopping back in their brick and mortarn.
Speaker 1: If you actually look at the selective e Commerce index,
Speaker 1: it's actually given up about half of the peak of
Speaker 1: the pandemic gains. And of course, when we talk about
Speaker 1: shoppers changing, it's not just how they shot but also
Speaker 1: what they have been shopping on and we see that
Speaker 1: really by consumer discretionary really getting hit. Those stocks down
Speaker 1: in the past month in a big way. A key
Speaker 1: part of that, of course, is inflation. Yes, wages are rising,
Speaker 1: but they are not keeping a pace. So we're seeing
Speaker 1: a lot of that optional spending really dwindling, particularly as
Speaker 1: food and fuel prices have been rising in a big way.
Speaker 1: And that is the key theme that we have seen
Speaker 1: in some of these retail earnings. Said alright, Ridica is
Speaker 1: so smart on that retail beat. Thank you very much.
Speaker 1: Let's stick with the market sell off. Lots of big
Speaker 1: name tech companies who stocks sword as Risk has said,
Speaker 1: in the pandemic era of feeling the burn of higher
Speaker 1: interest rates, the continued crisis of a war in Ukraine,
Speaker 1: domestic inflation, and a pandemic now well into its third year.
Speaker 1: Let's talk about how all this market chaos is affecting
Speaker 1: not just public markets but later staged startups and companies.
Speaker 1: With Light Speed Venture partner Alex Taosig, Alex on a
Speaker 1: day like this read everywhere, anxiety everywhere. What's your take
Speaker 1: on it? Oh? Thanks for having me for us all that.
Speaker 1: I appreciate it. Um definitely a tough day for public
Speaker 1: market investors. UM. You know, as a venture capital firm,
Speaker 1: UM with over twenty years of investing history in the
Speaker 1: private markets, you know, we we have a little bit
Speaker 1: of a different perspective. Our companies generally don't have the
Speaker 1: pleasure of being marked every single day. They can take
Speaker 1: a little bit of a longer term view. So essentially,
Speaker 1: a lot of these companies raise money one at you know,
Speaker 1: capital is fairly cheap historically and at fairly high prices,
Speaker 1: and you know, our perspective is a lot of those
Speaker 1: companies are going to come back into the market in
Speaker 1: the next couple of years and not face the same
Speaker 1: kind of cheap capital environment. And so we're sort of
Speaker 1: expecting that what the public companies are seeing right now
Speaker 1: is going to trickle back down into the privates over time.
Speaker 1: But there's a lot private companies can do in the
Speaker 1: intervening period to make their businesses a lot more attractive
Speaker 1: so that when they do have to access the financial markets,
Speaker 1: they'll look a lot better. You have the experience, of course,
Speaker 1: of looking to your portfolio some of those companies in
Speaker 1: the past have gone public. Of course, what means my
Speaker 1: Bloombog Terminalis. Take a look at this chart. You want
Speaker 1: to make a key point, which is that perhaps we've
Speaker 1: seen this before. Right, what we're seeing on our screen
Speaker 1: is that there is a single metric that shows the
Speaker 1: magnitude of the current downturn that we're seeing, and that's
Speaker 1: a retreat in revenue multiples for a specific corner of
Speaker 1: the technology market. Left hand of your screen, the blue
Speaker 1: line Amazon back in through two thousand, two thousand one,
Speaker 1: right hand side Shopify. Why are you looking at this data?
Speaker 1: We are always looking at the public market multiples that
Speaker 1: apply to revenue as essentially we invest in growth assets
Speaker 1: that aren't usually profitable, and so the rate of growth
Speaker 1: of the business is very important in the expectation of
Speaker 1: future growth is very important. And I think in the
Speaker 1: in the in the days where you have ascendencies of
Speaker 1: new platforms, there's a lot of enthusiasm around the new thing,
Speaker 1: and um, you know, that can often create speculative asset bubbles,
Speaker 1: which is sort of something that's common throughout financial markets.
Speaker 1: And you know, some of what's happened in the the last
Speaker 1: few years, uh in addition to being you know, pushed
Speaker 1: on by the pandemic, we feel like are parallel to
Speaker 1: what happened in the dot com bubble with certain names
Speaker 1: that really benefited from the shift to e commerce. But
Speaker 1: the other thing to just consider here is that Amazon
Speaker 1: still around and it's and it's very very valuable company. Uh,
Speaker 1: and it saw its way through and share price collapse
Speaker 1: post the dot com bubble, and uh, not to say
Speaker 1: Shopify is going to continue to go down. Maybe it will,
Speaker 1: maybe it won't, But we also believe that's a very
Speaker 1: durable business. So the chart, right, it sort of tells
Speaker 1: a few different stories. At the same time, we personally
Speaker 1: take a view of optimism and that you know, these
Speaker 1: speculative bubbles come and go, but some of these businesses
Speaker 1: are building real value for the long term. Right you're
Speaker 1: looking on our screen some of the pain in technology
Speaker 1: shares over the last seven days or so, the likes
Speaker 1: of Apple, some of those mega caps like Microsoft. I
Speaker 1: am fascinated with the private markets. We broke a story
Speaker 1: on Tuesday that SpaceX is raising more money at evaluation
Speaker 1: of a d twenty five billion dollars. It was valued
Speaker 1: around a hundred billion dollars in October. When you hear
Speaker 1: about that, how do you assess valuations right now, and
Speaker 1: what do valuations look like in the coming months, especially
Speaker 1: with the backdrop of a FED that looks determined to
Speaker 1: to raise rates. We this is a conversation we have
Speaker 1: a lot in internally and with some of our peers
Speaker 1: at other firms. You know, there is a big valuation
Speaker 1: reset that's essentially happening right now. Um not as in
Speaker 1: the public because again these are not publicly traded securities,
Speaker 1: but the private markets always look to the public markets
Speaker 1: for some sort of guidance on valuation. And so you know,
Speaker 1: essentially for a lot of businesses, your multiple has been
Speaker 1: cut in half, maybe cut by three x over the
Speaker 1: last six months, and so those businesses are essentially going
Speaker 1: to have to get back to par before they go
Speaker 1: out and raise again in this environment. And so we're
Speaker 1: really stressing the importance of cash flow and becoming default
Speaker 1: alive in this environment, which essentially means that you can
Speaker 1: ratchet up and down on your sales and marketing spend
Speaker 1: and maintain a relatively modest burn while the volatility continues
Speaker 1: to play out, and we certainly expect the valatility to
Speaker 1: probably increase before it decreases again very quickly. Alets what
Speaker 1: I'm saying on my screen is the share performance of
Speaker 1: names like Airbnb, Snap, Uber, Uber over the last couple
Speaker 1: of years. But these are names that were created in
Speaker 1: periods of stress. I am thinking back to two thousand
Speaker 1: and eight, two thousand nine in the financial crisis very quickly.
Speaker 1: What would your advice be to a founder right now
Speaker 1: with the markets as they are, absolutely the first The
Speaker 1: first thing is to stay optimistic. So while it might
Speaker 1: be a little bit difficult to do if you're looking
Speaker 1: at your own personal stock portfolio, the reality is that
Speaker 1: a downturn in a capital constrained environment often produces some
Speaker 1: of the best companies. Companies can really focus in on
Speaker 1: what they're great at and ignore things that are extraneous.
Speaker 1: Talent tends to stick around longer, and people are kind
Speaker 1: of not choosing between as many different jobs, so you
Speaker 1: can keep them engaged for longer. You can really have
Speaker 1: the time to hone that business model because you have
Speaker 1: to to survive. So we we invest in all cycles consistently.
Speaker 1: We've been doing it for over twenty years, and I
Speaker 1: do think that there's also some advantages that companies can
Speaker 1: have during a downturn, but that's presuming that you can
Speaker 1: get control of your business and do it decisively. Right
Speaker 1: lights be a benchure partner, Alex TUSI giving us the
Speaker 1: private markets take on volatility, Thank you very much. Coming
Speaker 1: up a Bloomberg scoop gave Plotkin is telling investors he
Speaker 1: plans to wind down his Melvin Capital Management after billions
Speaker 1: of dollars of losses. Details ahead. This is Bloomberg time
Speaker 1: for our crypto report, and it's been a brutal market
Speaker 1: sell off in digital currencies. Bloomberg's Shinnali back Bassack with us.
Speaker 1: But before we get into digital assets, I have to
Speaker 1: ask you about Melvin Capital Management's plan to wind down. Yeah,
Speaker 1: truly ed. Remember this is an amazing scoop by Bloomer's
Speaker 1: Hamma Parmer. Gay plot Can really the poster child's here
Speaker 1: of that game stop short Squeeze. Even after recouping some
Speaker 1: the losses that he had in early, is now down
Speaker 1: again for the year and telling investors that he is
Speaker 1: returning money and winding down funds. Remember this is right
Speaker 1: after he initially tried to reboot the fund in a
Speaker 1: different fashion. Scrap those plans. And now remember, I've got
Speaker 1: to say Wall Street for a while now has been
Speaker 1: expecting some casualties in the hedge fund industry, and it
Speaker 1: starts here with Melvin Capital. Alright, Snalie, keep give me
Speaker 1: a quick update on the markets in the world of
Speaker 1: cryptocurrencies as well. Yeah. Absolutely, Something interesting here, ed is
Speaker 1: that even though you saw that brutal cell off today
Speaker 1: in the market more largely, especially in the NAZAC one
Speaker 1: five percent sell off, you're actually seeing Bitcoin even though
Speaker 1: it's trading below that level, only falling about three percent
Speaker 1: over over twenty four hour period, so not selling off
Speaker 1: steeply as the market you are seeing. It also holds
Speaker 1: steady as opposed to other coins, all coins in this downturn.
Speaker 1: So when you look at Bitcoin to what extent is
Speaker 1: it the relative safe haven compared to the other crypto assets. Alright, thanks,
Speaker 1: say stay with us. Let's bringing our next guests. Honey
Speaker 1: rush One, who's the co founder and CEO of twenty
Speaker 1: one Shares, a crypto exchange traded products issue that's been
Speaker 1: making ways in Europe for the past four years and
Speaker 1: it's now marking its US entrance with the launch of
Speaker 1: two new funds. Simple question to start with, Honey, why
Speaker 1: is the US okay with e t P s the
Speaker 1: nor e t S, So thank you for having me.
Speaker 1: I'm really excited to talk about our launch into the
Speaker 1: US market. We're launching private funds today, so we're not
Speaker 1: yet launching e t f s for e tps. We
Speaker 1: are working on an e t F in America and
Speaker 1: that's public as well, but nothing has been announced yet
Speaker 1: on that word still work king very very closely with
Speaker 1: the regulators on all of that. Why is it that
Speaker 1: this is the time to launch new products in a
Speaker 1: down market, especially when there's a lot of questions about
Speaker 1: how comfortable institutions will get with these types of products
Speaker 1: in such a downturn. So there are a couple of reasons.
Speaker 1: When we first launched in the world's first physically backed
Speaker 1: et P, which was the first crypto et F on
Speaker 1: the Swiss Stock Exchange, it was a bear market, and uh,
Speaker 1: I remember that the initial seat capital of five million
Speaker 1: went down to three and a half two days later.
Speaker 1: It turns out the building during bear markets, if you're
Speaker 1: focused on the long term, UH ends up being a
Speaker 1: pretty good bet. UH. The other way of looking at
Speaker 1: this is um nothing fundamental has changed with any of
Speaker 1: the underlying technologies, and we're seeing this across the board,
Speaker 1: both across every crypto asset as well as more in
Speaker 1: stitutional investor interests. One of the things that should be
Speaker 1: very very comforting is that despite the market sell off
Speaker 1: and what happened with the terror ecosystem last week, we
Speaker 1: only saw a couple of days of outflows UH, and
Speaker 1: we've seen consistent inflows today, yesterday, the day before and
Speaker 1: Friday as well. While you're on it, how does what
Speaker 1: happened last week, I guess more than a week ago now,
Speaker 1: the terror breakdown really draw into question the broader crypto
Speaker 1: ecosystem and the place of other coins stable coins in
Speaker 1: the ecosystem. So we had UM the world's largest Luna
Speaker 1: Terra e t f UM, which was listed on a
Speaker 1: European exchanges including Switzerland. So we've been following this very
Speaker 1: very closely UM on the product itself. Considering that Luna
Speaker 1: is now operating intermittently, we've obviously suspended quoting the products. However,
Speaker 1: there seems to be a potential rescue plan and will
Speaker 1: keep that up and running while we monitor that. I
Speaker 1: think it's important to just take a step back and
Speaker 1: really look at Terra as what it was, which was
Speaker 1: a grand experiment that was supported by some of the
Speaker 1: world's largest and most notable investors, both in the crypto
Speaker 1: space and in the traditional financial space, to try and
Speaker 1: build an algorithmic stable point. Had they succeeded, which obviously
Speaker 1: they did not, it would have had huge positive ripple effects,
Speaker 1: and so it was a worthy experiment to run that
Speaker 1: built a vibrant ecosystem with a lot of risks, and
Speaker 1: our research has shown that the risk for there as
Speaker 1: well as the opportunity. Honey, we see on our screens.
Speaker 1: You're in Florence, Italy. Lovely, that's a wonderful place in
Speaker 1: the hot land of the European Union. Towards me about
Speaker 1: the regulatory landscape, the difference between doing business in Europe
Speaker 1: versus the US, your experience of launching these products in
Speaker 1: each market, it's different um geography by geography, what regulators
Speaker 1: are looking for and what populations are looking for can
Speaker 1: be different. We just launched Australia's first Bitcoin and Ethereum
Speaker 1: e t S and that was due to answering very
Speaker 1: very different questions than we have in Europe, both in
Speaker 1: the EU and in Switzerland where we are active. Uh
Speaker 1: Switzerland jumped ahead of the pack by trying to create
Speaker 1: a crypto nation. And so we've been very very supported
Speaker 1: from the beginning out of our Zurich base, But as
Speaker 1: the asset classes has become too big to ignore, other
Speaker 1: regulators around the continent and and actually around the world
Speaker 1: have started to pay attention and have had incredibly engaging
Speaker 1: conversations with us. You know, I think it's really interesting
Speaker 1: that you had been working on e t p s
Speaker 1: outside of bitcoin. There are so many uh calls for
Speaker 1: e t s when it comes to bitcoin itself. But
Speaker 1: when you look at what happened with Luna and the
Speaker 1: need to halt the product, what is it taught you
Speaker 1: about products that are tied to other types of assets
Speaker 1: here in the cryptic universe that have a lot more
Speaker 1: risk potentially. So one of the beautiful things about crypto
Speaker 1: is that everything is open source, including the smart contracts,
Speaker 1: including the risks that that are applied to whatever ecosystem
Speaker 1: you might be investing in. And like I said, our
Speaker 1: research very adequately on Luna displayed both the risks and
Speaker 1: the potential rewards. It's um, it's going to be different
Speaker 1: investing the alts versus Bitcoin and ethereum. And again this
Speaker 1: was a grand and I I believe very noteworthy experiment
Speaker 1: to run right thanks to Honey Rush One they're co
Speaker 1: founder and CEO. Twenty one shares and of course my
Speaker 1: good mate Shinali Bassak over in New York coming up
Speaker 1: an e s G exit for Tesla, WHI ev maker
Speaker 1: loss its spot in the SMP s G index and
Speaker 1: what the world's richest man has to say about it?
Speaker 1: That's next. We're also looking at shares of Cisco in
Speaker 1: after hours down twelve point seven percent. The company talking
Speaker 1: about struggles with the supply chain China, the war in
Speaker 1: Ukraina ultimately cutting its sales forecast for stock. Will keep
Speaker 1: an eye on as the markets go by. This is
Speaker 1: Bloomberg this week's Technomics. Shares of Tesla's dropping on Wednesday,
Speaker 1: and the ev maker also lost its spot on the
Speaker 1: E s G version of the SMP FI Index. The
Speaker 1: industries provided a citing working conditions and crashes for Tesla's
Speaker 1: score on Environmental Social and Governance Standard. Elon Musk reacting
Speaker 1: to the news, tweeting quote ex On is rated top
Speaker 1: ten best in world for Environmental Social and Governments e
Speaker 1: s G by SMP, while Tesla didn't make the list
Speaker 1: E s G is a scam. It has been weaponized
Speaker 1: by phony social justice warriors. All in on must words
Speaker 1: not mine, joining us to discuss all of this. Bloomberg's
Speaker 1: Danna Whole, who leads coverage not just of everything Tesla,
Speaker 1: but everything Elon Musk as well in all that noise,
Speaker 1: tell us what the news was there? Well, I think
Speaker 1: it's pretty clear that Elon musk knew that this was coming.
Speaker 1: He has been raising concerns about E s G reading
Speaker 1: systems for several weeks now, and he does have a point.
Speaker 1: I mean, what are the metrics and why are they
Speaker 1: always changing? And for passive investors, E s G ranks
Speaker 1: rankings are very important. But he would argue, you know,
Speaker 1: we make electric cars, how can we be ranked less
Speaker 1: than an oil company? Right? And we have to remind ourselves.
Speaker 1: Of course, the mission statement of Tesla is to advance
Speaker 1: the transitions to sustainable energy. I mean, what is Tesla's
Speaker 1: impact on the world? Bring us back to basics. We
Speaker 1: assume everyone knows what the company does and how it's
Speaker 1: trying to help, But what does Tesla do? So Tesla
Speaker 1: makes elector cars, they also make energy products, solar roof batteries.
Speaker 1: They have big utility contracts, but they have been dinged
Speaker 1: quite a bit reputationally by workforce issues. But at the
Speaker 1: Fremont plant they have been sued by the State of
Speaker 1: California for blatant racism against black workers. The e o
Speaker 1: C is investigating them, um, and so, I mean there
Speaker 1: are some problems there, and the board of directors has
Speaker 1: been dinged quite a bit for overlapping duties and um.
Speaker 1: You know, they've been under pressure to diversify their board,
Speaker 1: which they have done. I'm just looking at Tesla's stock
Speaker 1: year today on the Bloomberg down more than caught up
Speaker 1: in Wednesday's sell off, as all stocks were. What's the
Speaker 1: story for Tesla right now? Because we're so focused on
Speaker 1: Elon Masque's tweet by tweet analysis of what's happening with
Speaker 1: the Twitter deal, I feel like we're not really talking
Speaker 1: about Tesla. Well, I think what's really happening at Tesla
Speaker 1: is production in China. I mean, the production in China
Speaker 1: really took a hit when the factory in Shanghai was
Speaker 1: shut down for almost a month because of COVID. Now
Speaker 1: they're bringing that back online, but you know, they're still
Speaker 1: supply chain issues and it's going to be a hard
Speaker 1: quarter for them. There's all this macro stuff. They still
Speaker 1: hold bitcoin. Bitcoin has seen a rough ride of late
Speaker 1: um and there's not really any new product launches on
Speaker 1: the horizon. So Musk said that there's going to be
Speaker 1: an AI day in August. So what are we going
Speaker 1: to see there? Like the new Tesla bat More talk
Speaker 1: about Jojo like more promises about self driving. But I mean,
Speaker 1: this is like a weird year for them. They don't
Speaker 1: have a new product that they're bringing to market. So
Speaker 1: if our audience out there, Donna writes a fantastic if
Speaker 1: I say so myself column for hyper Drive where you
Speaker 1: basically take a step back talk about what's going on
Speaker 1: the world of evs and Tesla. And Wednesday's column is
Speaker 1: about insurance. Yeah, what's Tesla doing in the world of insurance. Well,
Speaker 1: this is a big passion project of the CFO Za Kercorn,
Speaker 1: and you know, Tesla very shrewdly, I think, is trying
Speaker 1: to find new revenue streams. They always say that they
Speaker 1: are a software company, not just a car company, and
Speaker 1: they really want to have like a captive audience with
Speaker 1: their customers. Um, you know, you buy a car, then
Speaker 1: you get the solar roof, then you get the power wall.
Speaker 1: Well you might as well. I Tesla insurance too. And
Speaker 1: because Tesla has so much data on your vehicle and
Speaker 1: how you drive it, they can really kind of monetize
Speaker 1: that but also offer you a premium based on your
Speaker 1: driving skills. Um. You know, other insurance companies have tried
Speaker 1: to do this, but Tesla customers, particularly who live in Texas,
Speaker 1: have said that they really like it and that their
Speaker 1: premiums are cheaper. Very quickly, we've just got a few seconds.
Speaker 1: What's the next thing to look for in the Tesla calendar?
Speaker 1: But you on the spot a little bit. In the
Speaker 1: Tesla calendar. We will have a second quarter delivery figures
Speaker 1: in early July. We will have an annual meeting August four.
Speaker 1: All right, thanks to Bloomberg's down the whole Elon Musk,
Speaker 1: reporter in chief. That does it for this edition of
Speaker 1: Bloomberg Technology. We're back tomorrow, where we'll continue to follow
Speaker 1: the S and P five biggest drop in almost two years,
Speaker 1: and the broader implications, including for tech, and don't forget
Speaker 1: to tune in to Bloomberg Studio one point oh at
Speaker 1: nine pm New York Time, Emily Chang speaks exclusively with
Speaker 1: Roadblock CEO and co founder David Bazuki about the online
Speaker 1: gaming platforms explosive growth, and cultivating a civil digital community
Speaker 1: while exploring the revenue opportunities. That's tonight, and this is Bloomberg.