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'm Emily changing San Francisco, and this is
Speaker 1: Bloomberg Technology coming up in the next hour. A wild
Speaker 1: day to end a wild week. The SMP on the
Speaker 1: rink of a bear market bounces back thanks to a
Speaker 1: dramatic late session rally, though still on its longest losing
Speaker 1: streak in more than twenty years. We'll try to make
Speaker 1: sense of the madness plus panic in both public and
Speaker 1: private markets. We're gonna explore how startups are getting creative
Speaker 1: as they try to stay afloat and Bitcoin dipping below dollars,
Speaker 1: How long does the crypto crunch keep up? And is
Speaker 1: their hope on the horizon. We'll discuss all that in
Speaker 1: a moment. But first it looked like we'd end the
Speaker 1: day for sure in bear market territory. But a late
Speaker 1: afternoon bounce back saved the day. Is it only a
Speaker 1: matter of time though, bloom said Ludlow here to walk
Speaker 1: through the movers and who is feeling the most pain? Right?
Speaker 1: Get you get to Friday afternoon and you see this
Speaker 1: on the screen, zero point zero one percent flat on
Speaker 1: the SMP five and you think it's been a nothing
Speaker 1: kind of day. Not so volatility across equity markets. There
Speaker 1: was this late come back on the SMP five hundred.
Speaker 1: We escaped that bare market territory, that bear market label.
Speaker 1: But you look at the NAZAC one hundred was still
Speaker 1: softed by three tenths and one percent, very tech heavy index,
Speaker 1: trading at its lowest level since November. On a weekly basis,
Speaker 1: SMPI also lower by around three percent in seventh consecutive
Speaker 1: weekly decline, which we'll talk about later in the show.
Speaker 1: Bitcoin has also been interesting. It kind of held its
Speaker 1: own earlier in Friday's session above thirty thousand dollars be token,
Speaker 1: but fell away frankly in the latter hours of Friday's trading,
Speaker 1: now just above dollars per token. In this volatility and
Speaker 1: equity markets, it was much more chill in the bond markets.
Speaker 1: You look at the US tenure yield two point eight percent.
Speaker 1: Yes we're down five basis points, but it wasn't one
Speaker 1: of these days where we saw a big twelve or
Speaker 1: four teen basis point jump or decline. Much more calm
Speaker 1: bond market, even though we did see a move into
Speaker 1: haven assets risk off kind of sentiment. You see the
Speaker 1: dollar getting strength as well. Ultimately, this is the story
Speaker 1: coming me into my Bloomberg terminal. A bear market label
Speaker 1: or a bear market territory is where we're falling on
Speaker 1: an index or an asset from its most recent high.
Speaker 1: We were at that level throughout much of Friday's session,
Speaker 1: but that late comeback sees us down eighteen point six
Speaker 1: percent from that January third high on the SMP five.
Speaker 1: The question really is the direction to travel from this point.
Speaker 1: Do we continue to see pressure on equity markets or
Speaker 1: do we turn a corner going into next week. We're
Speaker 1: hoping to turn a corner m because I'll be honest,
Speaker 1: it's been a stressful week. I'm exhausted, you're exhausted, and
Speaker 1: we could all do with some positivity. Lastly, some specific movies.
Speaker 1: We want to talk about Apple Interesting up two tens
Speaker 1: of one percent on Friday's session, but it's been a
Speaker 1: real drag on the index throughout the week. And Tesla
Speaker 1: actually also it's lost a hundred ten billion dollars a
Speaker 1: market cap over the last five days or so. It
Speaker 1: has been a real drag on the index, and you
Speaker 1: forget and one hand, we're thinking about the FED, we're
Speaker 1: thinking about inflation, we're looking for the outlook on higher rates.
Speaker 1: But we still have supply chain problems, we still have
Speaker 1: lockdowns in China, and we're really focused on the impact
Speaker 1: on US corporates that that's having dear really interesting earnings,
Speaker 1: disappoint a big plunge on that stock down Foard, a
Speaker 1: big drag on the SMP five. What's the story there,
Speaker 1: supply chain issues. And lastly, I'm looking at ross stores down.
Speaker 1: The other big story of the week, retail, the consumer,
Speaker 1: the missed estimates, the cut forecasts, the tepid outlook. The
Speaker 1: world is changing m and there's a lot to considering
Speaker 1: the markets obviously interesting indeed on the back of those
Speaker 1: targeting results, thank you. While we're seeing tech stocks down
Speaker 1: across the board, as and mentioned, I want to talk
Speaker 1: about all this and more with Robert Kentwell, portfolio manager
Speaker 1: at Upholdings, the firm behind the compound Kings et F
Speaker 1: which includes a number of megacat tech stocks, and also
Speaker 1: joined by Dan Eyes, managing director of red Bush Securities,
Speaker 1: who cover some of the biggest names in the eye
Speaker 1: of this storm. Robert, I want to start with you,
Speaker 1: how much farther do you think we have to go
Speaker 1: before we hit bottom here? Well, that was a pretty
Speaker 1: negative setup. Uh, let's see, Uh, let's see if we
Speaker 1: can find a silver lining in all this. Um. You know,
Speaker 1: the one thing that's been particularly unique to us about
Speaker 1: this sell off has been how uniform it's been across
Speaker 1: so many different technology companies, from e commerce to media
Speaker 1: to software, and but that doesn't necessarily reveal what's been
Speaker 1: happening underneath the surface. So in retail and an e
Speaker 1: commerce and the media, you've been seeing subscriptions canceled, you
Speaker 1: can see spending pullback, you've been seeing margins compressed from
Speaker 1: all the supply chain issues that you've been talking about.
Speaker 1: But one area that stuck out to us is cloud computing.
Speaker 1: And you take a business like Amazon that's down thirty
Speaker 1: seven percent year to day, that has an enormous amount
Speaker 1: of wealth destruction in a single in a single security.
Speaker 1: But because AWS has still performed so well, Amazon's prices
Speaker 1: actually down about fifth year sixty on evaluation basis. And
Speaker 1: so what we've been telling investors in an environment like
Speaker 1: this is you're being given one of these few opportunities
Speaker 1: to ditch some of these losers, ditch these companies that
Speaker 1: are burning cash with flawed business models, because you're getting
Speaker 1: opportunities by great businesses like aws or service now that
Speaker 1: have actually been growing in spite of what the market
Speaker 1: has been saying about their share Robert, who are the losers? Well, uh,
Speaker 1: there's you certainly have the carbonas. I mean, the companies
Speaker 1: that have had these extremely marketing driven growth stories that
Speaker 1: are very expensive to fund. You know, you and I
Speaker 1: we talked a lot about the right sharing companies last
Speaker 1: time we were together. Peloton obviously falls into this group.
Speaker 1: But any business where you see them spending more of
Speaker 1: their gross profit on marketing dollars than any other opex
Speaker 1: slide item, that's usually a red flag. And those tend
Speaker 1: to be the companies now if you throw a screen
Speaker 1: up of you know, take gross profit minus marketing, those
Speaker 1: are the businesses that right now are all struggling the
Speaker 1: most because it's only getting more and more expensive to
Speaker 1: acquire customers when you get into these demand m evaporating
Speaker 1: climates like the one that we're in right now. Dan,
Speaker 1: you of course cover some of the biggest names that
Speaker 1: are in focus here. For example, Apple, which you know,
Speaker 1: facing some some some some challenges that are you know
Speaker 1: now facing companies across the board. How do you think
Speaker 1: Apple weathers this? Do you think Apple has further to fall?
Speaker 1: And you know, does Apple keep innovating? Is this is
Speaker 1: safe by right now? I mean, look, I think it
Speaker 1: continues to be a rock with Gibraltar stock and a
Speaker 1: business model in terms of where we see iPhone the
Speaker 1: name on the other side of the storm. And I believe,
Speaker 1: as we've talked about holding up much better, they're expect expectation.
Speaker 1: But I think right now is your other guests talking
Speaker 1: about everything that you can get thrown out in risk
Speaker 1: off environment that creates the opportunities to own these means.
Speaker 1: And when you look at Apple, we think the services
Speaker 1: business and women is worked over a trillion dollars microsofts
Speaker 1: another example, it's all going to be induscriminate and selling.
Speaker 1: That's the opportunity. You know, in terms of how we're
Speaker 1: handholding horns, Robert, is Apple it aimed to you that
Speaker 1: stands out as something that will survive the storm. I
Speaker 1: mean Apple, you know you're not gonna find a lot
Speaker 1: of people who don't think Apple is going to keep innovating. Yeah,
Speaker 1: it's like it's fine. I mean, it's it's a safe
Speaker 1: place to put money. It's probably not the place where
Speaker 1: you're gonna get these, you know, devastatingly awesome investment returns
Speaker 1: for the next ten years. That's what I think is
Speaker 1: also really exciting about a market like this is you
Speaker 1: get to even look past the fundamentals some of these
Speaker 1: businesses right now, and investors are reevaluating saying which pieces
Speaker 1: of technology you're actually gonna matter the most over the
Speaker 1: next ten years. And everything was focused around the iPhone
Speaker 1: in the app store for the last ten years, and
Speaker 1: those are likely to continue to remain important, but they're
Speaker 1: gonna look much more mature, and you see that in
Speaker 1: some of the regulatory dealings that you know, we're having
Speaker 1: to shake out with with businesses like Apple right now.
Speaker 1: But we think, you know, there's opportunities to look, you know,
Speaker 1: deeper down, and you know, you did a great interview
Speaker 1: to the night with Dave Zuoki over roadblocks. We think
Speaker 1: that platform has the potential will be one of the
Speaker 1: most important businesses. It is right now tracking to be
Speaker 1: bigger than Nintendo. How many assets are there that exists
Speaker 1: in the market of public investor can participate in to
Speaker 1: get to live with that type of household recognition. So
Speaker 1: whether it's a business like roadblocks for a cloud computing
Speaker 1: platform like in AWS, or enablers like data down, these
Speaker 1: are some of the enabling technologies that we think are
Speaker 1: gonna matter most um this decade. And you then check
Speaker 1: out that interview with David Buzuki the see of Roadblocks
Speaker 1: on Studio one. Point out, Dan, I want you to
Speaker 1: react to some of the things Robert just said there.
Speaker 1: Let's talk about Apple. Is Apple just the safe that
Speaker 1: maybe too safe in this environment? I mean splin adjusted
Speaker 1: stock six hundred they said the same thing about it
Speaker 1: shape at a hundred hours and now okay, remember it
Speaker 1: goes back to your Apple continues to be so much
Speaker 1: more intervention beyond I think how investors appreciate it because
Speaker 1: what we've seen install base, it's a billion iPhones or
Speaker 1: some having upgrade last three and a half years. Then
Speaker 1: you look at their being intellator room game in terms
Speaker 1: of the chip side, plus services like Robert talked about,
Speaker 1: I think indeeds environments. You have to look at software,
Speaker 1: fiber security and the years when we believe we're gonna
Speaker 1: be in terms on the stalwart side and Apple is
Speaker 1: going to be one of them, and it's one the
Speaker 1: haters will continue to hate. But to see more. In
Speaker 1: my opinion, we will it again to a blue trillion
Speaker 1: dollar mark up once the inscriminate selling stops. Okay uh,
Speaker 1: And I can't let you go without talking about Tesla,
Speaker 1: which is you know now no longer the top stock
Speaker 1: in Kathy Wood's flagship fund of course, facing some um
Speaker 1: different forces based on what's going on with the Musk
Speaker 1: and Twitter deal. What do you think, well, the story
Speaker 1: for Tesla will continue to be here and and and
Speaker 1: how much will Tesla stocks suffer from the uncertainty over
Speaker 1: whether or not it's CEO is going to buy Twitter?
Speaker 1: M Well, the book first off, in terms of China
Speaker 1: and the zero COVID situation, that's been a huge headwind.
Speaker 1: I think you know they're op soft deliveries and that's
Speaker 1: over our price target this week. When it comes to Twitter,
Speaker 1: it's become a full on circus show that's almost turned
Speaker 1: into a twilight zone. And you know, you look at Musk,
Speaker 1: he opened Pandora's box and tomm in about the need
Speaker 1: to hand holding. You know, it continues to be uncertainty
Speaker 1: not just Twitter in terms on the test of stock
Speaker 1: perspective throw distraction situation, that's something he needs to give
Speaker 1: comfort to investors at a turn where risk goships are
Speaker 1: getting thrown out the window. Robert, what's your take on
Speaker 1: this Tesla Twitter situation and and now the fact that
Speaker 1: they are intricately entwined and do I have to have
Speaker 1: a take? Uh? Of course everybody has to have a take.
Speaker 1: Look Twitter Twitters. I actually think no matter what happens,
Speaker 1: whether Elon bias Twitter or not, I do believe that
Speaker 1: Twitter is going to turn out to be a better
Speaker 1: company three or four years down the road as a
Speaker 1: result of this moment of turmoil because it is forcing
Speaker 1: the company looking where to reevaluate its business model. They're
Speaker 1: realizing that they can get away with charging their biggest accounts,
Speaker 1: uh for you know, tweeting, and they should be right.
Speaker 1: We're on Twitter, it's on we pay to be on Twitter,
Speaker 1: but they don't charge us anything. So there's absolutely a
Speaker 1: way to unlock you know, traditional social media modernization mechanisms.
Speaker 1: They haven't taken advantage of that. No matter who's runing
Speaker 1: a company posts all this stuff that's gifts or about um,
Speaker 1: you know, we think that's now much more likely to happen. Um.
Speaker 1: We're actually we're kind of wondering pay you know, Twitter Board,
Speaker 1: maybe you reopen the process up, like why didn't you
Speaker 1: run a full process to begin with? Why didn't we
Speaker 1: get multiple bidders in here? Why did you, you know,
Speaker 1: do a deal with Elon all by himself? You know,
Speaker 1: why didn't you see if Google wanted to take a
Speaker 1: swing at it? Because who knows, the regulators haven't been
Speaker 1: quite as aggressive as people feared that they might be.
Speaker 1: So we think that this saga is far from over
Speaker 1: and that there's a wide range of potential outcomes for Twitter.
Speaker 1: And as it pertains the test lad, it's still a
Speaker 1: car company, um, and so it doesn't kind of fall
Speaker 1: into our software and digital advertising universe that we follow
Speaker 1: really closely. All Right, I knew you'd have a take,
Speaker 1: So I'm glad I've asked. Thank you for sharing that
Speaker 1: with us, Robert Kentwell of Upholdings, Dan, I've always good
Speaker 1: to have you as well. We'll see what next week.
Speaker 1: Called belts are tightening across the board and startups are
Speaker 1: also feeling the pain, with valuations being cut and layoffs underway.
Speaker 1: For more. Now I'm joined by Johnny Price, the vice
Speaker 1: president of fundraising, we founder. So Johnny, first of all,
Speaker 1: you know, we see what's happening in the public markets.
Speaker 1: It's a lot more difficult to understand exactly what's happening
Speaker 1: in the private markets. What are you seeing? Just how
Speaker 1: much uncertainty and quite frankly panic is there. Yeah, there's
Speaker 1: a lot of uncertainty. It's the right word. UM. I
Speaker 1: think we're seeing less contraction, especially early stage. I think
Speaker 1: growth stage is contracting a little more in recent months.
Speaker 1: Early stage, I think we're seeing less to date. UM
Speaker 1: getting kind of mixed reactions from vcs and founders that
Speaker 1: I'm talking to. UM, But obviously I'm not sure if
Speaker 1: you saw that. You know why Combinator, you know, their
Speaker 1: founders recently saying, you know, buckle up, you know, raining
Speaker 1: rain in the spending, get to default alive, get to
Speaker 1: profitability asap because it could be a rough a few
Speaker 1: few months and years ahead. Well exactly, you've got y
Speaker 1: combinators saying that, You've got other vcs sending out their
Speaker 1: black Swan membos. On the other hand, I saw this
Speaker 1: from Ali Partov, who's an early stage investor he tweeted,
Speaker 1: Unlike vcs predicting doom, I'm bullish for early stage startup.
Speaker 1: This downturn differs from two thousand and two thousand eight.
Speaker 1: If you're an early stage CEO, don't panic, don't obsess
Speaker 1: about extending runway, obsessed about making something people want. There's
Speaker 1: a whole thread below it. What's your reaction to that?
Speaker 1: Would you agree? Um? Yeah, I think you could argue that. Um.
Speaker 1: I think I'm I'm a little more pessimistic. Maybe. I
Speaker 1: think it's going to be harder and harder for early
Speaker 1: stage founders to raise counsel over the coming six months.
Speaker 1: Um uh because um there's uh less Um. Vcs are
Speaker 1: gonna just be tightening their belts. You know, we're going
Speaker 1: to see the valuations in the public market compressed the
Speaker 1: great stage early stage. UM. I just think it's going
Speaker 1: to be harder for early stage founders to raise I
Speaker 1: think post post two thousand and eight we saw that.
Speaker 1: I think we're going to see that again in two
Speaker 1: So we found funder focuses on something called community rounds,
Speaker 1: which of course is different from venture capital funding and
Speaker 1: also typical crowdfunding. As I understand it, Can you explain
Speaker 1: what that means. Yeah, absolutely, So we found us a
Speaker 1: platform that's let anyone invest in startups they love UM.
Speaker 1: So for eighty years, the securities laws of this country,
Speaker 1: as you know, didn't allow ordinary Americans to invest in startups.
Speaker 1: You had to be accredited to invest in early stage companies. UM.
Speaker 1: The Jobs Act of twelve that was rolled up to
Speaker 1: the sec now allows everyone and not just created investors,
Speaker 1: not just switch people to invest in startups they love UM.
Speaker 1: And so what we're trying to do we founder UM,
Speaker 1: is to popularize this concept of community around. When the
Speaker 1: Jobs Out was rolled out, it was called equity crowdfunding. UM.
Speaker 1: This is how you introduced this segment. We don't love
Speaker 1: this term crowdfunding. We're trying to rebrand it as a
Speaker 1: community around. You. You owe twenty five cents to the
Speaker 1: square jar Emily fees in the word crowd funding earlier.
Speaker 1: And so the idea with a community around is that
Speaker 1: startup founders can raise up to five million dollars per
Speaker 1: year from their customers from their community UM and uh,
Speaker 1: you know, alongside conventional investors vcs and angels. Mercury is
Speaker 1: a great example UM. Recently they raised a one twenty
Speaker 1: million Series B from Andrewson and Co. Two and then
Speaker 1: opened up a five million dollar allocation to let their
Speaker 1: customers invest on the same terms, um and in my
Speaker 1: ce EO with no factor. Mark and then has called
Speaker 1: those two and a half thousand we founder investors his
Speaker 1: favorite investors, you know, letting his customers invest, he thinks
Speaker 1: is a good thing to do at you know, face
Speaker 1: the avenue puts a little more cash in the bank
Speaker 1: at a time when, as we've been talking about, that's
Speaker 1: probably not the worst thing in the world, and most importantly,
Speaker 1: you know, generally a good thing to do for startup
Speaker 1: founders to be delighting their customers by learning them investing them. Right.
Speaker 1: It give us an idea how much money has actually
Speaker 1: been community raised, though right now it still seems to
Speaker 1: be the exception, not the rule. Doesn't it have to
Speaker 1: scale up dramatically if the next Uber or Facebook or
Speaker 1: Google is going to be community funded. Yeah. Absolutely, It's
Speaker 1: still a very small percent of early stage capital right now.
Speaker 1: So as a signage your VC an angel dollars, community
Speaker 1: arounds are very very small. Um. You know, it's it's
Speaker 1: been growing so that the job the jobs that was
Speaker 1: right up with the sec in twenty sixteen. In March
Speaker 1: of twenty one, the SEC rolled out some improvements to
Speaker 1: the regulations that increased the amount that startup finnessting raised
Speaker 1: from a million to five million per year UM. And
Speaker 1: since then we've seen significant growth in the sector and
Speaker 1: sector overall group by about four acts in one. And
Speaker 1: I think the froth the early stage VC market in
Speaker 1: twenties twenty one was actually a break on the sector.
Speaker 1: I think in twenty two will be countercyclical. We'll see
Speaker 1: you can have me back in a year's time and
Speaker 1: and see if that prediction has has been born out.
Speaker 1: But as early stage VC pulls back in two, which
Speaker 1: we expect, I think that more and more early stage
Speaker 1: founders will be looking to their customers, looking to the community,
Speaker 1: looking to we fund this million investors UM to to
Speaker 1: you know, be a buffer and enable them to raise
Speaker 1: capital where otherwise they might be struggling. To to your point,
Speaker 1: it's not a panacea, you know, this is still uh,
Speaker 1: this is hopefully a silver silver lining on on a
Speaker 1: day of pretty dark clouds. UM. It's still a relatively
Speaker 1: small part of UM you know, tital early stage capital formation.
Speaker 1: You can only rate five million dollars per year. Um.
Speaker 1: But yeah, we're seeing we're seeing positive, positive trends. Another
Speaker 1: string though that can be pulled for sure. Johnny Price,
Speaker 1: vice president of we Funder, thank you. Coming up. We
Speaker 1: are going to Miami, going to get a check on
Speaker 1: the crypto market. That is next. This is Bloomer Bitcoin
Speaker 1: dropping below twenty dollars. What will the weekend hold as
Speaker 1: crypto continues to trade. I'm joined out by Bloomberg Intelligence.
Speaker 1: Is Mike mcglog with us from our Miami bureau, So
Speaker 1: Mike talk to us about the factors at play here.
Speaker 1: It seems like cryptocurrencies are so tightly correlated with what
Speaker 1: we're seeing in equities, which is the opposite of what
Speaker 1: many in masters hope they would do. We're getting there, Emily,
Speaker 1: It's just gonna take a little time. But right now
Speaker 1: it's a significant fact that you've pointed out is the
Speaker 1: stock markets going down. The tide is ebbing. The Fed's
Speaker 1: jaw boning has got to reduce set ability for people
Speaker 1: to buy stuff, reduce set risk those risk assets and
Speaker 1: bitcoining the theorem and cryptos are prime part of that. Remember,
Speaker 1: they went up the most, they have to come down.
Speaker 1: But the way you started this segment, I think is
Speaker 1: the most significant thing is what's going to happen this weekend.
Speaker 1: So it's five thirty on that afternoon and the East
Speaker 1: coast all markets are shut, but Bitcoin is trading, and
Speaker 1: that's what the markets starting to realize. This is the
Speaker 1: world's most fluid seven global trading vehicle with price discovering
Speaker 1: and no one else's liability, and that's starting to trickle
Speaker 1: inch what I'm sensing his bids blow. Bitcoin offers above
Speaker 1: in the stock market. And a key fact this week
Speaker 1: is bitcoins down about two percent and nazex down about
Speaker 1: four percent. So bitcoins actually I'll perform in this week
Speaker 1: despite the fact that it's much higher volatility. Okay, now,
Speaker 1: not all digital tokens are being viewed equally. Are there
Speaker 1: any winners here? Well, I think bitcoin is gonna be
Speaker 1: the biggest winner, along with gold and protectionant potentially long bonds.
Speaker 1: Gold was up about two percent this week in Bitcoin
Speaker 1: is the digital version of gold. But the way I
Speaker 1: view gold now is if you're not allocating some of
Speaker 1: the bigcoin and your gold investor, then you're missing out.
Speaker 1: But that's the key thing to remember. But the bottom
Speaker 1: line that's really happening in this space is the proliferation
Speaker 1: of crypto dollars. Now, we heard about what happened with
Speaker 1: an algorithmic dour crypto dollar that broke down people call
Speaker 1: the stable coins. But on coin market cap now the
Speaker 1: top of among the top four cryptos, there's two crypto dollars.
Speaker 1: There's bitcoin, Ethereum, tether and usdcoin. And this is what
Speaker 1: happened during the bear market two thousand and eighteen. The
Speaker 1: only thing that was going up was the proliferation was
Speaker 1: increasing market cap of dollars. And I think that's what
Speaker 1: we're seeing in the spaces. It's just a better way
Speaker 1: to transact, that's crypto dollars. All right, Well, we'll be
Speaker 1: watching to see just how wild this weekend is. Indeed,
Speaker 1: Bloomberg's Mike mcglow for us in Miami and go and
Speaker 1: I'll let you get started with your weekend. Thanks Mike,
Speaker 1: Welcome back to Bloomer Technology. Emily Chain in San Francisco.
Speaker 1: Want to get back to bloom brooks Ad Ludlow for
Speaker 1: more on the SMP five hundreds losing straight again, the
Speaker 1: longest one in a couple of decades exactly. So it's interesting,
Speaker 1: like at the top of the show, we were talking
Speaker 1: about how we ended flat on the SMP five hundred,
Speaker 1: but there was volatility. Your guests said, perhaps I was
Speaker 1: being a little bit dramatic, you know, I love drama
Speaker 1: and being a diva on a Friday about the market.
Speaker 1: But over the course of a week, that's a lot
Speaker 1: of red on the screen. The SMP five hundred down three.
Speaker 1: The declines in technology heavy indexes like then as that
Speaker 1: one D, the n Y s Fang Plus Index, which
Speaker 1: is made of the megacaps, and the US listed shares
Speaker 1: of China tech companies also seeing big declines. And there's
Speaker 1: really good reporting on the Bloomberg that if you have
Speaker 1: a four or one K where you think you're diversified
Speaker 1: because you're tracking the SP five hundred, well you're US
Speaker 1: is exposed. If you strip out the five biggest megacap
Speaker 1: tech stocks, the declines this week would have been lesser.
Speaker 1: The reality is this chart. Look on the far right
Speaker 1: hand side. That block of red. The seventh consecutive weekly
Speaker 1: declined for the SMP five hundred driven by tech the
Speaker 1: likes of Apple, the longest weekly losing streak since two
Speaker 1: thousand and one. That's a lot to take on board,
Speaker 1: and we started having discussions about how analogous, how similar
Speaker 1: what we're seeing now is like what we saw in
Speaker 1: two thousand, two thousand one in the dot com bold. Now,
Speaker 1: full disclosure, I wasn't doing this in two thousand, two
Speaker 1: thousand one. Right now, I'm a little older than you,
Speaker 1: but I was yet either no no comment, but I've
Speaker 1: read about it. Fortunately, you have a guest who I'm
Speaker 1: sure has studied the charts and the historical data. But
Speaker 1: this is the question, right, are we seeing what we
Speaker 1: saw the dot com bubble and what happens next? Right? Indeed,
Speaker 1: Ed Ludlow, thank you well. From Apple to Teslas, some
Speaker 1: of the biggest names in the SMP, fueling this relentless
Speaker 1: sell off that briefly pushed the broad equities benchmark into
Speaker 1: bear market territory. From more, I want to bring in
Speaker 1: that guest, Eric Freeman, US Bank Wealth Management ce I. Oh, so, Eric,
Speaker 1: is this different than the dot com bust or not?
Speaker 1: Emily actually was working, in fact, about a couple of
Speaker 1: blocks away from where you are right now during the
Speaker 1: dot com rise in San Francisco. So I would say
Speaker 1: that we do think it's a little bit different. This
Speaker 1: time only. The biggest factor behind that is more of
Speaker 1: a macro step back with the Fed funds. Back then
Speaker 1: at six and a half percent, that was a really
Speaker 1: elevated level. Right now we think we probably peak it
Speaker 1: like three and a quarter three and a half for
Speaker 1: Fed funds. So I do think that in terms of
Speaker 1: the selling that we saw back then, it was relentless.
Speaker 1: It certainly feels relentless now. But we do think that
Speaker 1: there again there's there's more of a calming effect that
Speaker 1: should emerge, let's call it a little later this this year,
Speaker 1: so we'd expect a little more volatility, Emily, But again
Speaker 1: we don't have the same Fed funds backdrop that we
Speaker 1: had back then, so a little more optimistic than I
Speaker 1: was then. So you use the word relentless, I'm wondering,
Speaker 1: does that also mean you think this sell off is
Speaker 1: unwarranted given the fundamentals. I mean, we did see a
Speaker 1: lot of companies, especially tech companies, miss on their results. Yeah,
Speaker 1: I don't think it's unwarranted. As as tough as it
Speaker 1: is to to experience, Emily, I think that that when
Speaker 1: you go from Fed funds projections that the Fed has
Speaker 1: has put out, there were basically nothing. You've had this
Speaker 1: whole repricing that started with a two year and the
Speaker 1: three year treasury and all their as two classes have
Speaker 1: to react. So ultimately our viewpoint is that the the
Speaker 1: overall repricing is probably in the sixth seventh ending. We
Speaker 1: think there's probably a little more left to go, especially
Speaker 1: if you start to see a evidence of demand and destruction.
Speaker 1: We're not seeing that quite yet, but some of the
Speaker 1: retail earning that we saw with the past couple of
Speaker 1: weeks indicate that there's some tough stutting heads still. So again,
Speaker 1: we do think there's probably a little more downside left,
Speaker 1: but not quite the snare we saw way back in
Speaker 1: two thousand, two thousand and one. Well, we are calling
Speaker 1: a bottom here, like how much worse does this get? Yeah,
Speaker 1: I think that that for us, the you know, the
Speaker 1: downside snare is probably down under five or seven percent
Speaker 1: across broad SMP, probably a little more than that for
Speaker 1: NASTAC and I think at that point and the Fed
Speaker 1: has a decision to make, that would be the market
Speaker 1: setting a very clear signal that this is a this
Speaker 1: is a challenging environment, and that we're starting to see
Speaker 1: some erosion of both corporate profits as well as consumer activity.
Speaker 1: So we think that that would be really a heads
Speaker 1: up period where if the FED says, you know what,
Speaker 1: we see it, but we still have to contain inflation,
Speaker 1: that would be we think probably a trapdoor for a
Speaker 1: little more downside. But again, the first test I think
Speaker 1: in earnest will probably come down under five or seven
Speaker 1: percent from where we are right here. Where do you
Speaker 1: see the opportunities in tech? I mean there's a lot
Speaker 1: of confusion. For example, you know Netflix having you know,
Speaker 1: its first subscriber loss in a decade, and then Disney
Speaker 1: pulls through with surprisingly optimistic subscriber numbers. Yeah, I think
Speaker 1: a couple of areas that we find attractive. One would
Speaker 1: be software as a service. We we think that that
Speaker 1: that installed base plus the ongoing maintenance revenue is attractive.
Speaker 1: That's certainly a model that you've seen adopted from a
Speaker 1: number of different different companies. So we still think there's
Speaker 1: there's an opportunity there. I would say, just on a
Speaker 1: broader basis, and only if you look at the bias
Speaker 1: from CFOs and CEOs, they recognize that we're not getting
Speaker 1: more productive as an economy. So we do think that
Speaker 1: that communications infrastructure, even though it's obviously been challenging, we
Speaker 1: still think that's an area that as we see more
Speaker 1: hybrid workflows continue, that's the spot that we think as
Speaker 1: some opportunity we would be moving up in cap and
Speaker 1: up in quality. Again, this is more of a of
Speaker 1: a duck and cover type of strategy in the near term,
Speaker 1: but again we think software is a service as well
Speaker 1: as what we're seeing with respect to broad infrastructure remain attractive.
Speaker 1: And what about on the flip side, we have a
Speaker 1: guess earlier reference the losers saying it's time to get
Speaker 1: out of the losers. Who do you think the losers are? Well,
Speaker 1: I think there's you know, there's there's a saying that's
Speaker 1: probably approp to right now that it's it's too late
Speaker 1: to sell and it's too early to buy on on
Speaker 1: some of those, uh, some of those more challenge business models.
Speaker 1: So I would say that the super consumer heavy businesses,
Speaker 1: those are the ones that would be would be more risk.
Speaker 1: So let's call it the nice to have subscription models.
Speaker 1: Those aren't areas that we think will be will be attractive.
Speaker 1: If you look particularly at what we're seeing from a
Speaker 1: macro perspective, Emily there really is some erosion in and
Speaker 1: of course spending power because of inflation, but we do
Speaker 1: think the wealth effect is relevant here. You talked about
Speaker 1: crypto earlier, talked about just portfolios in general. We start
Speaker 1: seeing home values in your backyard of the Bay Area
Speaker 1: as well as other areas that of course have been very,
Speaker 1: very strong. That's the next leg that we think that
Speaker 1: some of those again secondary in tertiary of subscription models
Speaker 1: are more more at risk. How bullish are you on crypto,
Speaker 1: because you know we're touching on this earlier. I think
Speaker 1: a lot of crypto investors have been hoping to see
Speaker 1: crypto break away or be immune to um, you know,
Speaker 1: broader equity sell offs, but that's so far hasn't really
Speaker 1: been the case. Yeah, you know, it's something that if
Speaker 1: you look at the correlations across broad crypto, and if
Speaker 1: you look across the correlations of assets that we're supposed
Speaker 1: to act differently than they did, they're really gear. They're
Speaker 1: early levered. I mean, even if you look at at
Speaker 1: at NASTAC, which appropriately so is thought of as a
Speaker 1: as a really tech heavy index, the worst performing subset
Speaker 1: of of NASTAC is actually the industrial components. So I
Speaker 1: think what that says is that sensitivity towards the consumer
Speaker 1: is becoming more of a challenge. And if you also
Speaker 1: look at some of the issues that we're seeing right
Speaker 1: now across currency and currency risking, and the dollar has
Speaker 1: been a one way trade higher, that's another factor that
Speaker 1: I think the correlations between dollar, correlations towards consumer, those
Speaker 1: are things that have been the other way than people
Speaker 1: expected at the start of the year. All right, Eric Friedman,
Speaker 1: we will see what next week brings. Thanks for sharing
Speaker 1: your perspective here with US US Bank Wealth Management. CEE.
Speaker 1: I am it is time now for our crypto report,
Speaker 1: and it seems that crypto winter in full swing. For
Speaker 1: more on this, I'm joined by Coveta Guptashi is the
Speaker 1: founder and general partner at Delta Blockchain Funds. So Kvita,
Speaker 1: I want your take, just how long is winter gonna
Speaker 1: lask and how cold is it going to get? Like
Speaker 1: how much lower is before I'm going to go? Hi, Emilee,
Speaker 1: thank you so much for having me um. I think
Speaker 1: it's just the beginning of crypto winter, to be very honest,
Speaker 1: and uh, I am very surprised that people are expecting
Speaker 1: that it's going to continue to over around thirty K.
Speaker 1: I do expect it to go down to somewhere between
Speaker 1: fourteen K, eighteen K, maybe twenty two K as a
Speaker 1: stable point. But remember this is we have seen this
Speaker 1: in the past two times. This is nothing new, right.
Speaker 1: Every time it goes up to an all time high,
Speaker 1: there is a point when it comes down to and
Speaker 1: find the new lower point as a base point to
Speaker 1: stand around. I still feel that we are if we
Speaker 1: have already entered crypto winter, we're gonna stay here for
Speaker 1: at least year to year and a half, and we
Speaker 1: should we Yeah, I I don't believe that bitcoin is
Speaker 1: going to go back to forty five, fifty or sixty
Speaker 1: K for another year and a half. We will see
Speaker 1: another all time high, but that will be for ethereum
Speaker 1: to actually especially for either because I believe this is
Speaker 1: the time and people are going to build and they're
Speaker 1: gonna have a lot of technology with major adopt option.
Speaker 1: Look at what FTX just announced, which is going to
Speaker 1: bring a lot more people into the space, and that
Speaker 1: adoption is going to trigger back us to another big
Speaker 1: high cycle. So let's just game this out for for
Speaker 1: for a moment, you think Bitcoin, for example, we'll stay
Speaker 1: in the twenty dollar range for the next year, year
Speaker 1: and a half. Potentially, Yeah, we can see some more
Speaker 1: depths and we can see some more high but I
Speaker 1: don't think that we're going to see it going back
Speaker 1: to sixty to seventy k during the winter time anytime soon. Huh.
Speaker 1: So then what does the new high become after that?
Speaker 1: I mean a lot of investors are getting in just
Speaker 1: waiting for that. I think a lot of people have
Speaker 1: been talking about bitcoin at hundred k, and I I
Speaker 1: can't really predict whether it would be hundred k or not,
Speaker 1: but I can definitely say it's going to find a
Speaker 1: new high, which was last time sixty four something. But
Speaker 1: as I said, every time, if you look at the
Speaker 1: history and look at the data every time, if it
Speaker 1: has gone back, it's not purely space culative anymore. Speculation
Speaker 1: is definitely a part of it, but it's also the
Speaker 1: adoption of technology. It's also the adoption by big companies
Speaker 1: and institutions. Tesla holding it on the balance sheet makes
Speaker 1: it goes up. Twitter having uh basically tipping mechanism on
Speaker 1: Bitcoin makes it go up. And I feel like the
Speaker 1: same thing with ethereum and other technology driven tokens that
Speaker 1: we're going to see the adoption making it go all
Speaker 1: time high, but I don't think it's going to happen
Speaker 1: in another year, two year and a half. I'm curious
Speaker 1: what you think about what's happening at coin base, and
Speaker 1: you know, the most established platform for the trading of cryptocurrency,
Speaker 1: you know, and obviously their business is, you know, somewhat
Speaker 1: divorced from you know, the actual trading of cryptocurrency. What
Speaker 1: do you make of what do you think the fate
Speaker 1: of coin basis, I mean coin bases, a centralized exchange.
Speaker 1: I don't see all the speculation about coin based going bankrupt. Honestly,
Speaker 1: I don't believe that because the technology is so strong,
Speaker 1: and I do understand that when the when it is
Speaker 1: really deep, you don't see that much of trading volume
Speaker 1: and exchange making money out of the trading volume or
Speaker 1: the defiance taking, et cetera. Will not have that much
Speaker 1: of cash to show. So there are four thirty million losses.
Speaker 1: I completely understand when our companies into an expansion mode
Speaker 1: and suddenly crypto prize is dumb, this is what you expect.
Speaker 1: But will that make them disappear? I don't think so.
Speaker 1: I do believe that they have already announced that they're
Speaker 1: going to have a hiding freeze, They're gonna take care
Speaker 1: of cost, etcetera. And I do see them whether the
Speaker 1: storm honestly speaking, but with different measures, and that there
Speaker 1: we keep hearing it is time to build that. I'd
Speaker 1: love to get a little more specific when it comes
Speaker 1: to crypto projects. What do you think makes it and
Speaker 1: why what gets washed out? I think a lot of
Speaker 1: fluff gets washed out. As a as a pre seat,
Speaker 1: seed stage, early take investor, for over five six years
Speaker 1: in the space, I can tell you every time there
Speaker 1: is a high anyone who thinks, oh, I have an idea,
Speaker 1: the idea thinks is like hundred million dollar evaluation. Now
Speaker 1: you're coming back to fifteen million dollar valuation with the
Speaker 1: product or the m v P associated with it. Last
Speaker 1: time we saw Defy really really getting built during the
Speaker 1: crypto winter, and that's pushing the adoption and the money
Speaker 1: coming into the space, which also had n f T
Speaker 1: associated with that before that in two thousands, sixteen and seventeen.
Speaker 1: The I see, oh, the smart contract on Etherium is
Speaker 1: what made us come down, come up from the crypto
Speaker 1: winter and height of sev hundred dollars free, and I
Speaker 1: think as we go into the space, I think multi
Speaker 1: chain indexing search results, a lot of analytics platform V
Speaker 1: see that's gonna really gonna build out, and maybe a
Speaker 1: whole new, whole new infrastructure platform. I mean, people have
Speaker 1: been buying n f t s from multimillion dollars. We
Speaker 1: really don't have a proper infrastructure for n f t
Speaker 1: s right now. And I'm very excited about what's gonna
Speaker 1: come out of this crypto winter. Curious about your thoughts
Speaker 1: on Elon Musk potentially taking over Twitter, you know, given
Speaker 1: its role in the crypto community and Elon Musks role
Speaker 1: in the crypto community himself, do you think decentralized social
Speaker 1: media is actually possible with blockchain technology As of the
Speaker 1: current technology which I have seen in the space, I
Speaker 1: don't think so. Identity has been a huge problem in
Speaker 1: the space. We still need to figure out a lot
Speaker 1: of indexing, identity, trust associated but should social media and
Speaker 1: reputation system is a huge problem which were still figuring
Speaker 1: it out. Um. But in the future, can there be
Speaker 1: a technology where it could be truly decentralized? Absolutely, that
Speaker 1: would be an ideal day. But No, it cannot be possible.
Speaker 1: It's not possible that any technology you have seen in
Speaker 1: the space so far. So are you calling Elon Musk's laugh?
Speaker 1: Then I I think he's a visionary. He probably thinks
Speaker 1: that over years he's gonna build. It's like when ten
Speaker 1: years back he went and said he's going to put
Speaker 1: people on Mars. I mean, he has put a spacecraft
Speaker 1: on there. There hasn't been a human being out there,
Speaker 1: but hopefully the next ten to fifteen years there would be.
Speaker 1: And I think that's what he's looking for. A decentralized
Speaker 1: social media, which is a novel idea and something which
Speaker 1: would be great for the tech and people and mental health.
Speaker 1: I guess. But is it possible today in an year,
Speaker 1: two year, three year, I don't think so. All right,
Speaker 1: So looking forward, you know the market is still reeling
Speaker 1: from the Terra debacle. What's next? What's next for stable coins?
Speaker 1: We have to make a differentiation Like Terra vo was
Speaker 1: is a programmatic stable coin. Right when the definition of
Speaker 1: stable coin came, it is like back to some FIA
Speaker 1: currency and one is to one. So USDC had to
Speaker 1: show in their audits, like how much reserves do they
Speaker 1: really have? In dollars, cash, cash equivalent, bonds, tosties, etcetera,
Speaker 1: etcetera to support it, and so did us t t
Speaker 1: to a particular percentage. I think Terta is different. It
Speaker 1: has been on the programmatic side. So one thing which
Speaker 1: we have learned though the decentralized world will always push
Speaker 1: away from fear. Then try to have a different version
Speaker 1: of programmatic stable coin which is pegged by its own cryptocurrency.
Speaker 1: We do have a lot of issues and a lot
Speaker 1: of gaps as of now, which Terta just showed. Um,
Speaker 1: will there ever be a programmatic stable coin? I absolutely
Speaker 1: hundred person beliefs. So would would that be in an
Speaker 1: year or two during this cryptos winters? I don't think so,
Speaker 1: because a lot of trust has been shaken and a
Speaker 1: lot of people got wiped out. All right, Gupta alta
Speaker 1: blockchain fund founder, thanks for giving it to us straight,
Speaker 1: appreciate it more. Sols Accomb, this is boomer. I want
Speaker 1: to get back to the markets and bring back our
Speaker 1: at ludlow one final time. So the big question is
Speaker 1: does this volatility continue next week or not. There was
Speaker 1: an investor earlier in the show who thought you were
Speaker 1: being a little traumatic. Yeah, they thought it was being traumatic.
Speaker 1: I mean, if we knew the answer to which way
Speaker 1: markets would go, we'd all be very rich, right if
Speaker 1: you're an investment manager or retail investor. We can do
Speaker 1: is financial journalists look at the past data and what's
Speaker 1: really interesting and think about the sp We almost fell
Speaker 1: into a bear market. That's a decline from the most
Speaker 1: recent high. We've seen this before on an inch day basis.
Speaker 1: I'm going to give you the history. I'm sorry for
Speaker 1: a Friday to thousand eleven, two thousand eighteen, the market
Speaker 1: on an inch date basis, some cases when beyond as
Speaker 1: a decline, but it never actually closed in a bear market,
Speaker 1: and we never even got close to those levels in
Speaker 1: the weeks that followed. So it's a psychological test for
Speaker 1: the market, and really a conversation is what is it
Speaker 1: that we're worried about? What is is it inflation? Is
Speaker 1: it the Fed? Where do we look for some hope? Well,
Speaker 1: and it was interesting hearing our guests speak throughout the
Speaker 1: show that the fundamental the macro economic issues are very
Speaker 1: different right now from what we saw in two thousand one,
Speaker 1: for example, And we should bring it back to tech.
Speaker 1: I mean, remember some of these companies like Apple that
Speaker 1: are now feeling a lot of pain. These are like
Speaker 1: amazing companies, strong balance sheets, you know, But there's so
Speaker 1: much happening at once. When we talk about check broadly,
Speaker 1: we have to remember what the story is here. The
Speaker 1: FED is going to raise rates, and higher rates discount
Speaker 1: the present value of future profits, making tech stocks less
Speaker 1: attractive as an option. But at the same time, we're
Speaker 1: worried about whether the FED can fight inflation without causing recession.
Speaker 1: In other words, if they raise rates too quickly and
Speaker 1: in two bigger increments, the economy might crash. And no
Speaker 1: one does well in a bad economy like that, not
Speaker 1: even the likes of Apple. But if you look at
Speaker 1: the companies and their fundamentals, and if you talk about
Speaker 1: a company like Apple, which was on the brink of
Speaker 1: bankruptcy literally in the late nineties, it's a completely different story.
Speaker 1: Apple is going to keep making new products people want
Speaker 1: to buy, and they've got a lot of cash, they
Speaker 1: have innovation, they have scale, And then we wonder what's
Speaker 1: going on in the rest of the world. We put
Speaker 1: aside the FED, we put aside the inflation picture, and
Speaker 1: we worry about supply chains, the lockdowns, in China them
Speaker 1: a big problem has been We're really sorry, guys, we
Speaker 1: missed earnings because we couldn't sell enough products. Why because
Speaker 1: our supply chains are in and the question is how
Speaker 1: our investors is going to interpret it? And there are
Speaker 1: is also this Tesla Twitter Elon Musk overhang, which is
Speaker 1: because of a completely different narrative. Yes, Tesla has supply
Speaker 1: chain issues, right, what is Elon must gonna buy Twitter?
Speaker 1: Is he going to is he gonna take Tesla? Tell
Speaker 1: whether that or what I thought I was going to
Speaker 1: get through an entire show without talking about Elon Musk.
Speaker 1: I really thought this would be the day. There's two things,
Speaker 1: key man risk. Elon Musk is very busy. He's the
Speaker 1: CEO of Tesla, and the market's asking is he distracted?
Speaker 1: That's the simple way of looking at it. But also
Speaker 1: with Twitter, you know all of this indecision about will
Speaker 1: the deal happened, won't it happen? Twitter didn't really suffer
Speaker 1: like the rest of tech stocks. It hasn't seen the
Speaker 1: declines that other tech companies have. And there's a question why, Well,
Speaker 1: because it was subject to a takeover deal, a take
Speaker 1: private deal. But if you factor in the cell off
Speaker 1: we've seen in tech. Should Twitter be revalued and should
Speaker 1: Elon must come back in at a lower price? I
Speaker 1: don't know who knows Twitter's annual meeting next week, You're
Speaker 1: going to be there, going to be a big moment.
Speaker 1: Where are we talking about this a lot? So don't
Speaker 1: forget it yet at Ludlow. Thank you. That does it
Speaker 1: for this edition of Bloomberg Technology. Have a wonderful weekend
Speaker 1: every one Wall Street week with my colleague David Weston
Speaker 1: coming up next, He's going to be talking about inflation
Speaker 1: and all of this. In just a moment, Monday shouted
Speaker 1: and Oryon of Adobe