Speaker 1: From the heart of where innovation, money and power collide
Speaker 1: in Silicon Valley and beyond. This is Bloomberg Technology with
Speaker 1: Emily Jay. I'm Emily Chang in San Francisco, and this
Speaker 1: is Bloomberg Technology. Coming up in the next hour. The
Speaker 1: FED raises interest rates by seventy basis points, the biggest
Speaker 1: increase since stocks rally. What this could signal about a
Speaker 1: possible recession plus new funds still launching even in a downturn.
Speaker 1: We'll talk to the heavy hitters behind the four fifty
Speaker 1: million dollar fund, including a top Morgan Stanley alone and
Speaker 1: Elon Musk getting even more political as he reveals who
Speaker 1: he's backing from president in this as he prepares to
Speaker 1: address Twitter and boys at an all hands meeting, divided
Speaker 1: on whether he'll save the company or destroy it. We'll
Speaker 1: get to all of that in a moment, but first
Speaker 1: this day, we'll go down in history. The FED raising
Speaker 1: interest rates by seventy five basis points, the most in
Speaker 1: almost thirty years. Stocks jumped after a FED chair j
Speaker 1: Pal gave his view on the path four and in
Speaker 1: the fight against stubbornly high inflation are at ludlow. Here
Speaker 1: with more on the market moves and tech especially at Yeah,
Speaker 1: the FED really intensifying its efforts to cool prices. Let's
Speaker 1: look at the main takeaways from this historic day. Is
Speaker 1: seventy five basis points hike, taking the federal funds rate
Speaker 1: to one point five percent to one point seven five percent.
Speaker 1: The FED forecasting of the interest rates could rise to
Speaker 1: three point four percent by December of this year three
Speaker 1: point eight percent by the end of next year. They
Speaker 1: the committee saying it's strongly committed to return the inflation
Speaker 1: to its two percent objective. Inflation of two percent seems
Speaker 1: a long way from where we are the inflation developments
Speaker 1: of recent weeks. That hot print last week warranted the
Speaker 1: bigger height today wanting to power and there's no sign
Speaker 1: though in the economy of a broader slowdown in terms
Speaker 1: of how the markets reacted. Green on the screen, interesting
Speaker 1: because there's no one main takeaway. You look at the
Speaker 1: SMP five one and a half percent, and as that
Speaker 1: one hundred tech heavy index up two and a half percent,
Speaker 1: a pull back in yield, a drop in the dollar
Speaker 1: really interesting. Moving the dollar, the Bloomberg Dollar Index down
Speaker 1: nine tenths of one percent, biggest drop since May. At
Speaker 1: one point down one percent is biggest drop since the
Speaker 1: November election. No one takeaway the market looking at Pal's words,
Speaker 1: listening thinking what the path ahead is, and you get
Speaker 1: to listen as well. Here's j P Now, do not
Speaker 1: expect moves of this size to be common from the
Speaker 1: perspective of today. Either a fifty basis point or a
Speaker 1: seventy five basis point increase seems most likely at our
Speaker 1: next meeting. Look, you don't want to put too much
Speaker 1: stock in an intra day move. This is the nas
Speaker 1: That one hundred though, and after j power uttered those
Speaker 1: words around the size of potential increases at an extra
Speaker 1: ly meeting going forward, you see what that has That
Speaker 1: one hundred does the market giving relief rally, almost saying okay,
Speaker 1: we understand where we stand. Now. This is very interesting,
Speaker 1: but there's a lot going on. It's all in the data,
Speaker 1: and it's always in the data. The federals are going
Speaker 1: to keep an all on inflation and make decisions meeting
Speaker 1: by meeting. All right, well, thanks for showing us that data, ed,
Speaker 1: Thank you. I want to get a look now at
Speaker 1: crypto bitcoin following at one point to just above twenty dollars,
Speaker 1: then pairing its losses, Blue Merctionale Bossi breaks it all down,
Speaker 1: and the bad news for crypto seems to keep coming
Speaker 1: shinale from all directions. Well, what's interesting, Emily is that
Speaker 1: even though you saw risk assets rise today in markets,
Speaker 1: you did not see Bitcoin rise. You did see a
Speaker 1: parents gains in relation to some of the movies you
Speaker 1: saw by the said, but when we're talking about digital
Speaker 1: money here, we are still seeing a decline, although it's slowing. Remember,
Speaker 1: market watchers are watching for the levels that they saw
Speaker 1: at the peak of the last cycle. So if it
Speaker 1: drops the low not just twenty k, but we're looking
Speaker 1: at nineteen five hundred eleven. Is that worry area that
Speaker 1: you started dipping into a bitcoin and we're not quite
Speaker 1: there yet. Let's flip up the board and got atherorium
Speaker 1: as well, and how it's doing. Interestingly, you saw that
Speaker 1: nearly one percent decline bitcoin over twenty four hours. Ethereum
Speaker 1: dropped less in that time frame. You only saw a
Speaker 1: drop about seven tenths of one percent, a little less
Speaker 1: than that. Actually interesting land Now, if you look at
Speaker 1: c r yp go, if you have a terminal, you
Speaker 1: see a lot of all coins rising. What else you
Speaker 1: see rising was coin based. Today you saw coin based
Speaker 1: rise more than six percent, about six point six percent
Speaker 1: or so. Interestingly, that comes as we've reported about the
Speaker 1: shock that so many coin based employees have been feeling
Speaker 1: with the discipline they're taking, the job cuts that are
Speaker 1: happening now across the industry and a coin base. Coin
Speaker 1: Base employees describe this to Bloomberg as impersonal and surprising.
Speaker 1: So I want to pull up a tweet. Actually, what
Speaker 1: a strange week it's been. You pull up a tweet
Speaker 1: here from Brian Armstrong just a couple of days ago.
Speaker 1: Remember this was responding to the idea on a y
Speaker 1: Combinator post saying that coin based employees had elected to
Speaker 1: out the executives here, and he had responded saying that
Speaker 1: if you have no confidence in executive company, why are
Speaker 1: you working there? Quit and find a company to work
Speaker 1: out that you believe in. And remember this post was
Speaker 1: on June tenth, just days before a lot of these
Speaker 1: job cut plans were put in place. All right, indeed,
Speaker 1: pretty interesting, sweet storm, they're from Brian Armstrong, But also
Speaker 1: you think about the human faces behind these layoffs. Shanali,
Speaker 1: thank you. We'll get to you later for a deeper
Speaker 1: dive in our crypto report. I do want to get
Speaker 1: back to the market's response to the Fed's decision to
Speaker 1: raise rates by seventy five basis points. Victoria Green, chief
Speaker 1: investment officer for G Squared, joins us. Now, So, Victoria,
Speaker 1: what do you make of the fact of the market
Speaker 1: rally today after this historic rate hike and all of
Speaker 1: the turmoil we've seen over the last couple of days.
Speaker 1: I think they were happy it wasn't a hundred basis points,
Speaker 1: and there's a relief that Powell's doing something. But I
Speaker 1: think we're all gonna wake up tomorrow and realize nothing changed.
Speaker 1: The feeder stillhawkers. Rates are coming up, and the only
Speaker 1: way they tame inflation is by nipping unemploy him it.
Speaker 1: And so they're really to sacrifice the very low unemployment.
Speaker 1: They feel like they have wiggle room in the employement
Speaker 1: market and they've got its human inflation. And we look
Speaker 1: at this and say, the economy is still going to
Speaker 1: slow down. And I know we're talking about what kind
Speaker 1: of landing will have if it's crash and burn or
Speaker 1: a soft landing, and I think it's in a new
Speaker 1: or impossible situation. There's a lot of factors he doesn't control.
Speaker 1: But I have to take heart with what the CEOs
Speaker 1: are saying and what J. Powell himself said, which is
Speaker 1: we can basically have unemployment come up. We have wiggle
Speaker 1: room and still historically low. We can see that come
Speaker 1: up because we have the tame inflation. So when you
Speaker 1: say it's out of our control, what what do you
Speaker 1: think the scenario we're gonna be looking at over the
Speaker 1: next six months to a year is gonna be? Is
Speaker 1: this a recession? Is this a recession with a capital
Speaker 1: R or a small R? I think we like to
Speaker 1: call it bagel. Right, let's go go back to the
Speaker 1: old West Wing day since we're reliving the nineties right now. Um,
Speaker 1: but yeah, I think it's gonna be a recession. I
Speaker 1: don't think it's gonna be a two thousand and eight redo.
Speaker 1: But I think you're gonna have a lot of people
Speaker 1: looking around and seeing pressures unemployment. There's already seeing pressures
Speaker 1: on the consumer, the consumers changing their buying pattern. The
Speaker 1: U S economy lives and breeze and and will die
Speaker 1: if the consumer slows down because you need the spending.
Speaker 1: And look at what tal Walmart and Target and all
Speaker 1: the retailers are saying there is already a change in
Speaker 1: consumption patterns. We're not seeing the electronics in the home
Speaker 1: goods move. They're focused on buying food and gas and
Speaker 1: paying rent. And when that happens and we still see
Speaker 1: upward inflationary pressure, I mean, I don't think June's number
Speaker 1: is gonna look a whole lot better than than Maze
Speaker 1: because if you look at gas prices and rent prices,
Speaker 1: you really haven't seen the roll over. So as we
Speaker 1: keep climbing this mountain and we have these pressures build
Speaker 1: and build and build, I think you know, kind of
Speaker 1: seeing you guys at the San Francisco people, you know,
Speaker 1: if you don't have an earthquake in a while, you
Speaker 1: kind of get a little worried when the next one
Speaker 1: comes is gonna be the big one. And so we
Speaker 1: want to see some of these pressures come off the economy,
Speaker 1: but it's near impossible when you have the rent prices,
Speaker 1: housing prices, food prices, and gas prices where they are.
Speaker 1: What does this mean for big tech companies that have
Speaker 1: been riding high now for years, If they're not gonna die,
Speaker 1: they did need to read price a little bit lower.
Speaker 1: Um the problem is earnings growth looks a little susceptible, right,
Speaker 1: So that's the one question we have with the market
Speaker 1: right now. I see this more as a very short
Speaker 1: relief rally and a further leg down because where is
Speaker 1: our earnings growth going to come from? You're willing to
Speaker 1: pay a thirty forty plus multiple if you have confidence
Speaker 1: that they're gonna grow their earnings and you have a
Speaker 1: future trajectory. And I think right now everybody's putting pause.
Speaker 1: You're even seeing layoffs come from these tech companies, and
Speaker 1: you know, Microsoft coming out warning about their earnings growth
Speaker 1: and kind of doing walking that back a little bit. Um.
Speaker 1: You have to wonder how much should I really be
Speaker 1: paying for the stock right now? If they're not growing
Speaker 1: their earnings at the trajectory originally thought they were, how
Speaker 1: much should I pay for them? So I think big
Speaker 1: tech still gonna be under pressure, and the pressures are different.
Speaker 1: The pressure that Netflix is facing is increased competition, and
Speaker 1: you're seeing that bifurcation across streaming. That's a little bit
Speaker 1: different than say the pressure that the Amazon's facing, which
Speaker 1: they're facing issues with that now they've got too much
Speaker 1: uh labor and they have too much storage space, and
Speaker 1: they're working on all these price pressures with fuel and
Speaker 1: delivery costs, so it's not uniform across the board. UM.
Speaker 1: And also what these tech companies deliver, how essential are they?
Speaker 1: Uh and are they discretionary or are they something that
Speaker 1: people are willing to have to continue to use if
Speaker 1: the world slows down. Netflix is one that may still
Speaker 1: be at risk, even though it's priced more like a
Speaker 1: value stuff now, because if your pocketbooks hurting, you may
Speaker 1: start looking at cutting streaming and they're one of those
Speaker 1: right now that is facing the wrath of cord cutters.
Speaker 1: But these big tech companies aren't falling just a bit.
Speaker 1: They're not just under a little bit of pressure. I
Speaker 1: mean they've already dropped significantly. We spoke to Cisco CEO
Speaker 1: Chuck Robbins yesterday UM, which reminded us that Cisco shares
Speaker 1: peaked in the dot com boom, then plunged and still
Speaker 1: still have not recovered. There. You're looking at a at
Speaker 1: a twenty plus year chart. Which of the big tech
Speaker 1: giants do you think could end up being the Ciscos
Speaker 1: of today? I mean, I hate, I hate to be
Speaker 1: a negative l A and root against me used against them.
Speaker 1: But again I'll point to Netflix. I think Netflix is
Speaker 1: facing such a changed landscape from where it was five
Speaker 1: years ago, ten years ago, even two years ago. If
Speaker 1: you think about the number of streaming services that have
Speaker 1: popped up in the competition now that they face uh,
Speaker 1: and they may have more backlash as well. They're trying
Speaker 1: to cut down on the password sharing, and they're facing
Speaker 1: the wrath of people that that don't like that this
Speaker 1: is now less friendly company. Uh, We're seen as a
Speaker 1: less friendly company to deal with. I think they could
Speaker 1: be at risk for for one that's lost. And then
Speaker 1: you can look at some of the pandemic darlings, you know,
Speaker 1: your zooms of the world, which did fantastic, But at
Speaker 1: the same point, you've got teams and everybody else has
Speaker 1: figured out how to tele conference a little bit better.
Speaker 1: So when I look at who's gonna be kind of
Speaker 1: a potential tech bubble dud, I think it's those that
Speaker 1: face competition and can't innovate. Interesting, how do you do
Speaker 1: the crypto meltdown? You know, what is? What is? How
Speaker 1: does crypto survive this? Uh? Krypto needs to figure out
Speaker 1: what it is? You know, we were told it was
Speaker 1: the heads against central bank spending and inflation, and I'm
Speaker 1: pretty sure we can decide it's not that um. It's
Speaker 1: certainly got to get through this regulation hurdle. I think
Speaker 1: as it discovers what it really is because right now
Speaker 1: it's trading and correlated like a growth or a tech stock,
Speaker 1: right uh. And because it's it's not really providing any
Speaker 1: diversification benefits or buffer, and it's definitely not providing an
Speaker 1: inflation offset. I think the blockchain and technology itself is
Speaker 1: very very important. I think this will turn out to
Speaker 1: be the start of a fintech revolution. I think you're
Speaker 1: still in the very very early innings of it, and
Speaker 1: people need to figure out how they're actually gonna use it,
Speaker 1: how they're gonna integrate it in their lives, and how
Speaker 1: it's regulated in tax. And I think the regulated in
Speaker 1: tax question, we might see some of that come out
Speaker 1: this year. But that's actually gonna also make it where
Speaker 1: where you may see some bigger players come into the
Speaker 1: market because they feel a little bit more comfortable they're
Speaker 1: not gonna have a blow up. You know, you look
Speaker 1: at some of the recent crypto blow ups and it
Speaker 1: has put a little bit of a check on people
Speaker 1: that this is not a safe, secure investment. There is
Speaker 1: a risk of a hunt to percent loss. And while
Speaker 1: the technology is a fantastic technology, and I think blockchain
Speaker 1: is a very innovative, we have to figure out how
Speaker 1: to use it. I'm you know, I'm not going around
Speaker 1: buying my Starbucks with bitcoint on my app. It's too volatile.
Speaker 1: You know, it's really not necessarily cash substitute. So what
Speaker 1: will it be? I think this year we're going to
Speaker 1: really figure out what is bitcoint as an investment. Is
Speaker 1: a digital gold We'll see. Victoria Green, chief investment officer
Speaker 1: for g Squared love the metaphors. Thank you for joining
Speaker 1: us on this week's Bloomberg Studio. At one point on
Speaker 1: my exclusive conversation with Amazon CEO Andy Jassy about how
Speaker 1: the company is handling inflation, global supply chain shortages and
Speaker 1: customers that are getting squeezed by higher prices of everything
Speaker 1: from gas to groceries. We spoke at our Bloomberg Technology Summit.
Speaker 1: Take a listen for investors of financially, I'd say it's mixed. You.
Speaker 1: I think we have some businesses are growing really strongly.
Speaker 1: If you look at aws, you know in grew thirty
Speaker 1: seven year every year. You know, it's not a seventy
Speaker 1: four billion dollar revenue run right business, which pretty unusual growth.
Speaker 1: And we grew with fifty percent year every year in
Speaker 1: our advertising business. You know, it's the thirty two billion
Speaker 1: dollar revenue run right business. So some business has grown
Speaker 1: really strongly, and you know, we've continued to grow in
Speaker 1: our retail business despite pretty crazy comparables during But I
Speaker 1: think the real challenge for us there is on the
Speaker 1: cost side. And there have been several things that have
Speaker 1: happened um, some of which are more controllable than others,
Speaker 1: you know. I think the part that's less controllable is
Speaker 1: really around inflation. And I think we thought that inflation
Speaker 1: would start to attenuate in two and with war in Ukraine,
Speaker 1: it just went the other way and has significantly accelerated.
Speaker 1: So the cost of trucking and line hall and ocean
Speaker 1: and air and fuel has just substantially gone up, and
Speaker 1: I think that will attenuate at some point. No one
Speaker 1: knows how long that will take. I think the more
Speaker 1: controllable areas for US are really around fulfillment center capacity
Speaker 1: and productivity. It was taking about twenty four months to
Speaker 1: build new filment centers during the pandemic, and so we
Speaker 1: had to make decisions, you know, in mid two thousand
Speaker 1: twenty in early one, on how much demand we're going
Speaker 1: to plan for, and so you know, we we end
Speaker 1: up with more capacity and we need right now. And
Speaker 1: there's a number of things that we're working on. We
Speaker 1: when we've stopped building on properties where we don't need
Speaker 1: it yet, and we've let a number of leases laps
Speaker 1: and not a small number, you know, of both those things.
Speaker 1: We've had a lot of occasions in our history where
Speaker 1: we've worked on productivity and made improvements, and we have
Speaker 1: a lot of clearly defined niches and I'm confident we'renna
Speaker 1: get back to the right level of profitability. You are
Speaker 1: going to sub lease thirty million square feet of space?
Speaker 1: Is there a mistake in the execution there because of
Speaker 1: the OVERBA Again, because you have to make these decisions
Speaker 1: two years in advance, and again, if you put yourself
Speaker 1: back in twenty where we were growing thirty nine percent
Speaker 1: year over year on a two billion dollar revenue run rate,
Speaker 1: it's very hard to know what's the right amount to
Speaker 1: build and you have to make a decision. And we
Speaker 1: made the decision to air on the side of our
Speaker 1: consumers and sellers. Ela Must just came out saying he
Speaker 1: has a super bad feeling about the economy, Tesla laying
Speaker 1: off ten percent of his staff. Jamie Diamond says he's
Speaker 1: preparing for an economic hurricane. The World Bank just slashed
Speaker 1: its forecast for global growth. How do you feel about
Speaker 1: the economic climate? Well, I wasn't planning on giving any
Speaker 1: guidance to please, but super bad or super super bad,
Speaker 1: I think, uh, there's some things that relates to Amazon
Speaker 1: that are useful to remember, you know. I think the
Speaker 1: first pieces Remember the five of the of the worldwide
Speaker 1: retail market segment share is offline. And if you believe
Speaker 1: that that equation is going to flip at some point,
Speaker 1: which we do, I think it will. Who will flip
Speaker 1: over a long period of time. If you look at
Speaker 1: different town turns, um you know, should we have one
Speaker 1: at some point? We've been through a few obviously in
Speaker 1: the twenty five years that I've been at Amazon. Customers
Speaker 1: change their habits, and so, you know, I also think
Speaker 1: there's those two reasons. Those two factors give me some
Speaker 1: optimism that even if we have a downturn, that we
Speaker 1: have the potential to still grow. We have a roadmap
Speaker 1: that's you know, probably three to five years long, and
Speaker 1: we're going to continue to invent. We're going to continue
Speaker 1: to be insurgent, and we have a lot of work
Speaker 1: to do to get to where we think we ultimately
Speaker 1: can get for customers. You can catch my entire exclusive
Speaker 1: interview with Andy Jase Wednesday, nine d pm Eastern on
Speaker 1: Bloomberg Studio one point. Well, it is the end of
Speaker 1: the Internet Explore. Microsoft has officially retired it's once dominant browser,
Speaker 1: and while Internet Explorer has less than one percent of
Speaker 1: worldwide market share according to stat Counter, it is still
Speaker 1: causing some panic among businesses and governments. Japan in particular
Speaker 1: might be the hardest it. A survey earlier this year
Speaker 1: found that of companies still use Internet Explorer coming up
Speaker 1: as the market scrapple with intensifying inflation, employees are facing
Speaker 1: the brunt of it as more and more companies look
Speaker 1: to layoffs to help save some cash. We'll have more
Speaker 1: on that next well. As they watched the FED issue
Speaker 1: it's biggest rate increase for all in an effort to
Speaker 1: restrain rampant inflation, it might be too late for the
Speaker 1: tens of thousands of employees facing layoffs in a slowing economy.
Speaker 1: In the last month, we've watched companies across different sectors
Speaker 1: announced layoffs crypto, fintech, even real estate. Tuesday, both Compass
Speaker 1: and Redfinn announced they were cutting more than nine jobs
Speaker 1: combine for more not only these layoffs, but the broader
Speaker 1: real estate market during this downturn. I'm joined by bloom
Speaker 1: Brigs Patrick Clark, who covers all of this for us.
Speaker 1: Was it surprising to see these kind of layoffs in
Speaker 1: the real estate tech business given just how um much
Speaker 1: the real estate market was booming. I don't really well.
Speaker 1: I think in January it might have been surprising. By
Speaker 1: you know, March or April, as maury trade started going
Speaker 1: higher and sales started slowing, less surprising. And by the
Speaker 1: time these companies reported earnings I think in May, you
Speaker 1: know it, it almost felt inevitable that, um that they
Speaker 1: were going to need to downsize. I mean, Compass in
Speaker 1: Redfin somewhat different businesses, but um you know, one one
Speaker 1: employees agents as independent contractors. That's Compass, and all their
Speaker 1: employees are either you know, developers making software for the
Speaker 1: agents or you know, various types of support staff readfin
Speaker 1: actually employees UM its own agents, and there's a different
Speaker 1: compensation structure and so forth. But um, the at a
Speaker 1: point when there are a lot fewer home sales and
Speaker 1: this um a lot less commission revenue coming into the brokerage,
Speaker 1: it feels inevitable that they're going to have to cut staff.
Speaker 1: So we're seeing a number of companies, tech companies announcing layoffs.
Speaker 1: Robin Hood, coin Base, UM, you know read it just
Speaker 1: announced more layoffs today. But what are these real estate
Speaker 1: technology companies in particular them announcing layoffs. What does it
Speaker 1: have to say about the housing market. Yeah, there's just um,
Speaker 1: it's the housing market is slow and and and and
Speaker 1: we don't know exactly how long it's going to take.
Speaker 1: Red Fan CEO Glenn Coleman said in the memo announcing
Speaker 1: the layoffs on Tuesday that sales were volume was sevent
Speaker 1: lower in May first company and that it would be
Speaker 1: year likely be years and not months um before you know,
Speaker 1: before the situation resolved itself. So you know, given um,
Speaker 1: given that it's it's it's these companies have a long
Speaker 1: road ahead. You know, they enjoyed during COVID. Uh probably
Speaker 1: the best possible conditions for themselves. And that's not just
Speaker 1: red vanden Compass, but also Zelo or open Door, you know,
Speaker 1: any number of others. Many of these companies couldn't make
Speaker 1: money in the best housing market pretty much ever, so um,
Speaker 1: they're going to be in for you know, a pretty
Speaker 1: new scenario now interesting, And I wonder about commercial real
Speaker 1: estate as well. We just heard from Amazon CEO Andy
Speaker 1: Jazzy talking about letting leases run out, Amazon subleasing thirty
Speaker 1: million square feet of its own space. Is this something
Speaker 1: We're going to see a lot of companies grapple with
Speaker 1: what to do with real estate that they picked up
Speaker 1: or perhaps not because in the pandemics some folks pulled
Speaker 1: back on real estate. So far, it seems like there's
Speaker 1: demand for the industrial real estate that you know that
Speaker 1: that at Amazon either owns or leases the you know. Um.
Speaker 1: Just recently there was a big merger announced in the
Speaker 1: industrial warehouse in the industrial real estate space. UM company
Speaker 1: called Prologists, which is a big landlord to Amazon bought
Speaker 1: a company called Duke Realty, which is I think even
Speaker 1: more exposed to Amazon leases. So, you know, the if
Speaker 1: Amazon pulls back a little, I think there's the assumption
Speaker 1: in the commercial real estate world that there's still a bigger,
Speaker 1: broader shift to e commerce and there's other places to
Speaker 1: fill warehouse demand. All right, bloombergs Patrick Clark, who covers
Speaker 1: the real estate market for US. Patrick, thank you for
Speaker 1: your insights. Welcome back to Bloomberg Technology. I Emily Chang
Speaker 1: in San Francisco. Fifty million dollars just defying the gloomy
Speaker 1: morale among private tech investors. How much was raised in
Speaker 1: venture capital for FPV the debut fund from Felice's Ventures
Speaker 1: and Morgan Stanley alums Wesley Chan and Pegg at Ibraheimni,
Speaker 1: which will emphasize early stage deals where they say they
Speaker 1: have experience. They're both joining me now for more. But
Speaker 1: first I want to ask you both about the markets
Speaker 1: and the tumult that we are seeing today. Um Pega,
Speaker 1: you rose to the top of the ranks at Morgan
Speaker 1: Stanley and Cisco UM in earlier days. What do you
Speaker 1: make of what's happening right now? What kind of macro
Speaker 1: environment are we headed for? I mean, it's um no
Speaker 1: surprise we've you know, interest rates are like gravity, and
Speaker 1: when they're really low, we have a lot of high valuation.
Speaker 1: When it rises, gravity goes up at things fall, and
Speaker 1: UM we're seeing that now. Look, the FED announced seventy
Speaker 1: five basis points somewhat expected UM in the last twenty
Speaker 1: four hours. And what it means is cost of capital
Speaker 1: is expensive and it just got more expensive faster. So
Speaker 1: it does mean to move away from alternative assets classes
Speaker 1: like VC. So for for us, look, Wesley and I
Speaker 1: are so excited to have UM closed the fund during
Speaker 1: this environment to make sure we have dry powder for
Speaker 1: really mission driven founders who are going to continue to
Speaker 1: be born in these environments. And regardless of capital getting
Speaker 1: more expensive. UM. You know, it's not lost on us.
Speaker 1: Both Westie and I have gone through two downturns UM,
Speaker 1: and it's companies. In these downturns, some of the best
Speaker 1: enduring companies have been born. You look at Google, you
Speaker 1: look at Airbnb, you look at Uber, you look at
Speaker 1: a Lassie, and these were all companies born and you know,
Speaker 1: more expensive capital environments, and those founders, those mission driven
Speaker 1: founders are going to continue to be coming around, and
Speaker 1: we're making sure we're going to have capital to support
Speaker 1: those in back the truck up when we find them.
Speaker 1: Wesley as someone who's gone through a couple of these.
Speaker 1: How bad do you think this recession is gonna be?
Speaker 1: Is it gonna look more like two thousand eight or
Speaker 1: two thousand or something else? You probably look probably looked
Speaker 1: more like two And you know you're gonna see a
Speaker 1: lot of companies who can't raise capital sort of close shop.
Speaker 1: You're gonna see some layoffs because of that, which is unfortunate.
Speaker 1: But you know, people keep forgetting about the upside, which
Speaker 1: is that companies like Google, Nuber, and Airbnb got formed
Speaker 1: in these crucible moments. You know, I started my career
Speaker 1: at Google uh in early two thousand one, and back
Speaker 1: then there was no other company really hiring. You know,
Speaker 1: Google came out of that moment where they were able
Speaker 1: to hire employees for relatively low costs. There were moments
Speaker 1: where we were buying our office furniture off of these
Speaker 1: auctions where we were getting discounts of up to eight
Speaker 1: percent off stuff. Um. You know, every engineer from top
Speaker 1: schools wanted to come and work for Google. So in
Speaker 1: these moments of what seems like crisis, there's massive upside
Speaker 1: for the companies that are run by these mission driven
Speaker 1: founders that we back. You know, I firsthand witnessed it
Speaker 1: at at Google from the fourteen years I was there
Speaker 1: and got the c Google build what is one of
Speaker 1: the world's most world changing companies from those early days.
Speaker 1: It's interesting that you mentioned Google because peg I used
Speaker 1: to work at Cisco, where the stock still isn't back
Speaker 1: to what it was in the dot com bust. So
Speaker 1: which companies in tech are going to be the Cisco's
Speaker 1: of today and which startups you know, in what areas
Speaker 1: do you think you're gonna see that kind of disruption
Speaker 1: to find you know, who's gonna be the Google? Yeah? Um, look,
Speaker 1: I think when we were early stage funds, so we're
Speaker 1: really focused on you know, mission driven founders who are
Speaker 1: building long have hundred year plans and long lasting businesses.
Speaker 1: So those founders think about the cost of capital not
Speaker 1: being cheap, which means they care about, you know, unit economics.
Speaker 1: They care about being able to grow um even given
Speaker 1: more expensive capital. And you look at companies like a Cisco,
Speaker 1: I mean they've been because they weren't growing as fast.
Speaker 1: They've they've you know, they've been focused on growth margin
Speaker 1: and you're gonna have to have a shift when capital
Speaker 1: is not as cheap. You know, it's not growth at
Speaker 1: all costs, and you have to shift more towards making
Speaker 1: sure you you can survive um these higher costs environments
Speaker 1: and you have well capitalized to do that. And there's
Speaker 1: amazing growth companies that are doing that. Now. You look
Speaker 1: at Canada, you look at Guild, you look at those
Speaker 1: They well capitalized, They're going to be able to endure this,
Speaker 1: and they have great, you know, hundred year missions ahead
Speaker 1: of them. So I think it's really about time horizons
Speaker 1: and knowing that there's going to be some bumps in
Speaker 1: the you know, short term, and making sure you're set
Speaker 1: up for really passing this in a time and actually
Speaker 1: taking off during these times. You mentioned Canava and Guild,
Speaker 1: other companies you're in, flex Sport, plaid Um Wesley, What
Speaker 1: do you tell What advice are you giving to founders
Speaker 1: in this downturn? My former colleague Eric Newcomer in his
Speaker 1: blog said that some founders are complaining that a lot
Speaker 1: of the advice they're getting from VC sound a lot
Speaker 1: more like marketing speak, you know, cut to the chase. Yeah,
Speaker 1: I saw that too. I agree. I completely agree with Eric.
Speaker 1: You know, the advice advice I give this simple take
Speaker 1: advantage of it. Never let a great disaster go to waste.
Speaker 1: This is this is a you know, Bill Campbell was
Speaker 1: a person I had the privilege of working with when
Speaker 1: I was at Google. He was a trollneller, coach, chronical
Speaker 1: netbook and he would come up to Larry and study
Speaker 1: all the time. It's like, look, this economy is crashing,
Speaker 1: things are not going well. Don't let a good disaster
Speaker 1: go to waste. Take advantage of it. Sees the moment.
Speaker 1: And so that's the advice that we give to these founders.
Speaker 1: You know, they they've been behaved. We back mission driven founders.
Speaker 1: They behave as if every dollars or last either the
Speaker 1: folks that fund the company on their credit card before
Speaker 1: a single investor believes in them early on, and they'll
Speaker 1: continue funding on the credit card if nobody believes in
Speaker 1: them later on. And so when when when you're doing well,
Speaker 1: when you're when you're very careful capital, when you are
Speaker 1: sitting on a large horde of cash and you're profitable,
Speaker 1: it is a fantastic opportunity for you to seize the moment,
Speaker 1: hire all the top talent for half the prices they
Speaker 1: would uh in a in a in an economy where
Speaker 1: it's booming, and then go and like build product in
Speaker 1: businesses that people want and that do well in the recession.
Speaker 1: And I mean, like having witnessed at First and at
Speaker 1: Google is nothing short of incredible the outcome of what
Speaker 1: happens when you see the moment. So this isn't about
Speaker 1: let's lay off a bunch of people, let's preserve cash.
Speaker 1: This is about leaning in. And you know we're partners
Speaker 1: to help fund these mission driven founders do it when
Speaker 1: the moment is right. That's why we have four h
Speaker 1: fifty million dollars help them out today. Are you guys
Speaker 1: gonna be leaning into crypto or not? Pega. Eric also
Speaker 1: wrote that some vcs are quietly telling him they never
Speaker 1: believed in crypto anyway. Well, I mean this is a
Speaker 1: good one. Look I'll say it. Wesley was I think
Speaker 1: in November when he was on stage where um he
Speaker 1: um it was crypto was that as high and he
Speaker 1: actually called it? So, Look, we haven't been involved in UM.
Speaker 1: We're not investing in this fund out for those types
Speaker 1: of businesses we um. We pick really resalient, long term businesses,
Speaker 1: and we have to understand the underlying value and so
Speaker 1: um leslie, you want to take it? You called it
Speaker 1: on stage. I think you called the key and you
Speaker 1: called the leslie. Okay, I pique Wesley. Where's the d Yes, yes,
Speaker 1: although there still to come. I mean, you know, at
Speaker 1: the end of the day, Bill Gates called it the
Speaker 1: greater fulls theory, right, you know, there's got to be.
Speaker 1: It's a business models that's sometimes predicated and finding a
Speaker 1: greater full to pay up for your for your for
Speaker 1: your for your investment in crypto. And so when all
Speaker 1: the fulls are out, you know, there's somebody left to
Speaker 1: buy up your investment, it goes to zero. So we've
Speaker 1: avoided it. We've never done any crypto investments. It's something
Speaker 1: that we we people made fun of us for avoiding
Speaker 1: it and saying that we were, you know, when we
Speaker 1: were the guys not getting rich off of it. And
Speaker 1: you know, today it's crashing like crazy. It's not lost
Speaker 1: on me that today's headline was that bitcoin almost dropped
Speaker 1: below twenty uh and was back, you know, and it's
Speaker 1: all time low, and you know, we're announcing a four
Speaker 1: fifty million dollar fund to investment resilient founders that don't
Speaker 1: do crypto businesses. So it's one of those things where
Speaker 1: you know, a lot of our LPs are sophisticated, blue
Speaker 1: chip charities and foundations. They run children's hospitals. One of
Speaker 1: our LPs is a foundation that you know, provides underprivileged
Speaker 1: kids access to the performing arts. And last one want
Speaker 1: to do is take their money and put it in
Speaker 1: the business where you know, it's funded by greater fools.
Speaker 1: So you know, we we want to preserve their capital
Speaker 1: and find great businesses like Canava and Fox Sports that
Speaker 1: do things that add value to the world and add
Speaker 1: value to their customers. And you know, over the long
Speaker 1: time Horizon, as Pega mentioned, they tend to do really well. Peg.
Speaker 1: I know you closed this fun just in the last
Speaker 1: few weeks. What was it like closing in a downturn?
Speaker 1: Did you have any moments of pan where you thought, oh, gosh,
Speaker 1: I don't know, you know, we're able to do this.
Speaker 1: I'd love to say, um, yes, in the last few weeks,
Speaker 1: but it was really early on we started this fund,
Speaker 1: you know, in in February. We were fortunate and humbled
Speaker 1: by the reception we got, but there was a moment
Speaker 1: Wesley and I decided to launch it, and um, Russia
Speaker 1: decided to start the war against Ukraine and we're like,
Speaker 1: what's happening and is this the right time? And and
Speaker 1: we were really lucky raised this in a short amount
Speaker 1: of time, so really we closed it a few weeks ago,
Speaker 1: but um, most of the commitments happened very early on.
Speaker 1: And UM, we're excited to have this dry powder to
Speaker 1: really be able to fund these mission driven founders because
Speaker 1: they're gonna need capital and we're gonna be here for them.
Speaker 1: All right, Well, we're excited to watch where and how
Speaker 1: you put your cash to work. SPV Ventures co founders
Speaker 1: and managing partners Pegga Abrahemi and Wesley Champ, thank you both.
Speaker 1: And it's time now for our crypto report. With the
Speaker 1: bear market for bitcoin entering its deepest, darkest phase, according
Speaker 1: to some observers, was even long term holders who toughed
Speaker 1: it out until now coming under extreme pressure. Galaxy Digital
Speaker 1: chief like nov Grats, has two thirds of crypto hedge funds,
Speaker 1: could fail if the market keeps tumbling. Our crypto Contributionally
Speaker 1: Bossa here to talk more about those concerns. Shanali take
Speaker 1: it away, Emily, Seriously, we had talked about tokens and
Speaker 1: projects facing pressure in the last couple of weeks, but
Speaker 1: now we're talking about the investors themselves. One company that
Speaker 1: people are very worried about is Three Arrows Capital, after
Speaker 1: a very vague tweet went out from a founder saying
Speaker 1: that they are in the process of communicating with relevant
Speaker 1: parties and fully committed to working this out. What does
Speaker 1: that mean at the end of the day, and what
Speaker 1: is the future for a company like Three Arrows and
Speaker 1: are they the only ones? Remember Three Arrows was very
Speaker 1: exposed to Luna, which had apsed earlier this year. They
Speaker 1: had invested a prior to that collapse. But remember it's
Speaker 1: not just the collapse of Luna. There's a broader decline
Speaker 1: and crypto assets that have been very severe, a lot
Speaker 1: of deleveraging, and the question is how far will that
Speaker 1: wash out go, especially if some of these funds start
Speaker 1: to liquidate many of the assets that they hold. A
Speaker 1: very cryptic tweet indeed, Tonaleo, Okay, stick with us. I
Speaker 1: want to talk about all this and more with our
Speaker 1: next guest. Coin Shares Chief strategy officer, Melton demiraz Meldon.
Speaker 1: Great to have you with us, so I know you
Speaker 1: were listening into our segment earlier where our guest Wesley
Speaker 1: Chance and he called the top and that the bottom
Speaker 1: is even farther down from where we are. Now, what's
Speaker 1: your reaction to that? Look, hey, Emily has snolly great
Speaker 1: to see you both. Wish it was under better circumstances.
Speaker 1: Everyone's been calling bitcoin tops since the beginning of of bitcoin.
Speaker 1: I've been in this industry professionally for seven years. One
Speaker 1: trend that's not going away as we continue to see
Speaker 1: higher highs as well as higher lows. Even at current
Speaker 1: prices around twenty thousand, we are still above previous all
Speaker 1: time highs. In the last cycle, we tend to see
Speaker 1: eighty nine draw douns. This is a volatile, highly cyclical asset,
Speaker 1: but the secular trend is here to stay. At coin shares,
Speaker 1: we continue to invest in great technology businesses that are
Speaker 1: changing the world for the better, that are generating fantastic
Speaker 1: returns for investors. So look, I think it's a matter
Speaker 1: of time. Last year crypto commanded five percent of all
Speaker 1: venture dollars. This year we're looking at around the same,
Speaker 1: if not slightly higher. So I think crypto is here
Speaker 1: to stay. But you know what, the proof is in
Speaker 1: the return, So we'll see what the future brings. You know,
Speaker 1: a lot of people are looking at that dollar number,
Speaker 1: but you know others are saying the right number to
Speaker 1: look at is nineteen eleven dollars, the high that bitcoin
Speaker 1: hit during the last bull cycle. Is that the right
Speaker 1: number to watch for? And if we get below that,
Speaker 1: which we're very very close to, how bad a sign
Speaker 1: is it. So look, I'm not tether to specific number,
Speaker 1: not to use the phrase tether which might raise some
Speaker 1: alarm bells. Today I had to work in a little
Speaker 1: cryptopun um. I'm not so concerned about that previous all
Speaker 1: time high number. What we're looking for is we're looking
Speaker 1: at key liquidation levels. So we're seeing a lot of
Speaker 1: people just given the structure of debt in the crypto market,
Speaker 1: you have to overclateralize, and given these markets trade seven
Speaker 1: three sixty five, you can get liquidated in an instant.
Speaker 1: There is no grace period, there's no two week margin
Speaker 1: call like Archegos had when when they were insolvent. And
Speaker 1: so what we're looking at is key liquidation levels. And
Speaker 1: then the other key numbers to look at is again
Speaker 1: that drawed down from peak to trough. So the last
Speaker 1: cycle we saw an eighty five percent draw down from
Speaker 1: peak to trough. This cycle, the high was around sixty
Speaker 1: nine thousand, so an eighty to nine draw down would
Speaker 1: put us between seven and fourteen thousand. So right now
Speaker 1: we're at about a seventy percent draw down. We could
Speaker 1: go a bit lower, but we're seeing strong support around
Speaker 1: this twenty k number, and we're seeing liquidations slowed and
Speaker 1: for spots selling has slowed as well. You know, speaking
Speaker 1: of for selling this idea of three arrows and worries
Speaker 1: about other funds in the industry, the problem about funds
Speaker 1: facing trouble is more liquidation. So the question I have
Speaker 1: for you too is how systemic can this get? How
Speaker 1: can some issues be get more issues here to kind
Speaker 1: of create some of those drawdowns that you're talking about. Yeah,
Speaker 1: and I think Sonale that's exactly the challenge here. Um.
Speaker 1: One of the great issues in in crypto is there
Speaker 1: tends to be an asset liability mismatch that happens whatever
Speaker 1: there is a drop in price, Um, there's more collateral
Speaker 1: that needs to be posted to keep some of the
Speaker 1: leverage in the system. And again, positions tend to be
Speaker 1: over clatteralized and can be called and even forced liquidated
Speaker 1: at any point in time. So we kind of sees
Speaker 1: this vicious cycle where your liabilities decrease in duration, so
Speaker 1: you may have received as a long term liability becomes
Speaker 1: a short term one. You need cash. And then what
Speaker 1: we have on the flip side, if you're investing in
Speaker 1: venture and some of these long term locked up investments,
Speaker 1: your assets are more long term assets. You don't have
Speaker 1: as much short term cash, or those short term salable
Speaker 1: assets you have have declined forty fifty in some cases
Speaker 1: or in the case of Luna a d percent in value,
Speaker 1: So you have this mismatch that gets exacerbated by the
Speaker 1: fact that there is no duration on debt in crypto yet.
Speaker 1: And so again this tends to lead to this recursive
Speaker 1: pattern where margin calls lead to people's spots selling, which
Speaker 1: leads to falling prices more margin calls. So what we
Speaker 1: need to see is for this forced spots selling to
Speaker 1: stop before we find some stability here. This is a
Speaker 1: pretty pivotal moment. It's been a very steep draw down.
Speaker 1: As you had mentioned, what's the wake up call here?
Speaker 1: What are the things that people are flocking to that
Speaker 1: are that are longer term projects in nature that are
Speaker 1: maybe safer to make it through this crash. Look for
Speaker 1: us a coin shares, we manage billions of dollars in
Speaker 1: assets we trade in markets. Risk management is the number
Speaker 1: one principle. The fundamentals of finance don't go away just
Speaker 1: because we're in a new asset class. So managing your liabilities,
Speaker 1: managing your assets, managing duration really important. Risk management is
Speaker 1: something we tend to forget about because you don't need
Speaker 1: it as much when number go up. But now that
Speaker 1: the numbers going down, I think we're seeing who hasn't
Speaker 1: been managing risk. And so number one will always be
Speaker 1: for trading of of any type, markets of any type,
Speaker 1: just being really cognizant of the inherent risk you're taking
Speaker 1: in your business model with your positions, making sure you
Speaker 1: manage that risk. The added wrinkle of crypto is there
Speaker 1: is this really interesting structural change in the market because
Speaker 1: all these assets are on chain trading three sixty five
Speaker 1: with instant settlement. It adds a lot of pressure to
Speaker 1: markets and times of volatility. And then the second component
Speaker 1: that's sort of a new ring goal is there's obviously
Speaker 1: technical risk in a lot of these defy our entream
Speaker 1: protocols where all of a sudden, instead of interacting with
Speaker 1: lawyers and bankers, you're interacting with smart contracts. New Frontier
Speaker 1: allow to figure out a lot of folks building solutions
Speaker 1: in the space that don't require token. At coin Shares,
Speaker 1: we're continuing to invest. We're continuing to collaborate with great
Speaker 1: partners for building excellent solutions to manage risk, to manage margin,
Speaker 1: and to manage some of these new technical risks in
Speaker 1: new and innovative ways. So excited to continue doing that?
Speaker 1: Bowl or Bear Market? Are you continuing to hire because
Speaker 1: we're obviously looking at these eight percent layoffs. At coin Base,
Speaker 1: Chong Pung Jao, the CEO of finance, had tongue in
Speaker 1: cheek tweet saying it wasn't easy saying no to Super
Speaker 1: Bowl ad stadium naming rights, large sponsored deals, but we
Speaker 1: did and today we're hiring for two thousand open positions.
Speaker 1: So a quen share. If we are not firing, we
Speaker 1: have slowed down our pace of hiring. Think one of
Speaker 1: the important things to keep in mind. I think coin
Speaker 1: Base actually from a risk management perspective and a balance
Speaker 1: sheet management perspectives being very prudent. On average coin bases
Speaker 1: generating about one point six million dollars of revenue per
Speaker 1: employee prior to these cuts. With revenues going down, they
Speaker 1: obviously want to preserve profitability. That's in metric. We look
Speaker 1: at it at coin shares as well. I don't think
Speaker 1: we've seen anywhere close to the bottom of cuts. We're
Speaker 1: going to continue to see more cuts in the publicly
Speaker 1: listed companies as well as the privately listed companies. And
Speaker 1: I think the other thing we will see is a
Speaker 1: lot of companies are relying on unspacs and pipes and
Speaker 1: all of these deals to try to go public and
Speaker 1: get some liquidity. I think we're going to see a
Speaker 1: lot of pressure on that going into Q three and
Speaker 1: Q four as well, which is going to change the
Speaker 1: hiring environment significantly. All right, Corn Shairs Chief strategy Officer
Speaker 1: Melton Demerez appreciated taking the time to join us. Shonale
Speaker 1: as always thank you. Coming up. Will Elon Musk still
Speaker 1: need his Twitter center. His deal with Twitter actually goes
Speaker 1: through plus who. Musk says he's leaning towards supporting for
Speaker 1: presidential election. That's next. This is Bloomberg and it's that
Speaker 1: time for more news from the world of Elon Musk,
Speaker 1: the world's richest man, appealed the federal court ruling that
Speaker 1: upheld the SEC's requirement for him to have a Twitter sitter,
Speaker 1: which is ironic given he is about to buy Twitter.
Speaker 1: At what happened. So in April US your judge said
Speaker 1: you have to have your Twitter sitter. This was a
Speaker 1: deal you made with the SEC, and just because you
Speaker 1: didn't like it when you made it in two thousand eighteen,
Speaker 1: you have to stick to it. You can't have remorse
Speaker 1: about it. And just because you are going to own Twitter,
Speaker 1: you still have to And so now legal team is
Speaker 1: appealing this and they're saying that agreeming itself breaches his
Speaker 1: freedom of speech, but also the SEC is harassing him.
Speaker 1: So we'll see where it goes. It's more litigation from US.
Speaker 1: Interesting and he is also using Twitter to share where
Speaker 1: he's leaning right, So he said, it's a series of
Speaker 1: tweets about three am in the morning New York time,
Speaker 1: midnight San Francisco time. He did support Andrew Yang in
Speaker 1: presidential election. He's now leaning to Rhonda Santists, and he
Speaker 1: thinks Rhonda Santists who's the governor of Florida you see
Speaker 1: on your screen. Can win. That's kind of the inference
Speaker 1: we're getting his words. He thinks he can win. That's
Speaker 1: where he's being his support. And de Santis is actually
Speaker 1: speaking today, had some thoughts about Musque's support. Yes, so
Speaker 1: matter of factly, they asked him what do you think
Speaker 1: of this? And Rhonda Santist, the governor of Florida, said
Speaker 1: that he welcomes the support quote support from African Americans.
Speaker 1: Of course, Elon Musk is a white South African man,
Speaker 1: and in two thousand eighteen, when Rhonda Santis was elected
Speaker 1: governor of Florida, he did receive voting support from black Americans.
Speaker 1: So those were his words today. It is what it is,
Speaker 1: all right, This is just the way he's leaning. Though,
Speaker 1: what do you make of the fact that he in
Speaker 1: President Biden, who who should be natural allies just continue
Speaker 1: to spark. Yes, Elon Must has been changing his politics
Speaker 1: over a number of weeks, right, he says the Democrats
Speaker 1: of the Party of division and hate and basically pulled
Speaker 1: the support. The friction at the White House and the
Speaker 1: administration Biden is Elon Must has called him out for
Speaker 1: not supporting Tesla specifically, you know he's called Joe Biden
Speaker 1: or accuse him of leading the Russian Revolution in EVS,
Speaker 1: but not talking about Tesla. All right, we will see
Speaker 1: how that plays out on Twitter. I assume yes, thank you.
Speaker 1: And by the way, we're watching that all hands meeting.
Speaker 1: Elon must gonna be speaking to um all of the
Speaker 1: employees at Twitter Thursday morning. We'll have full coverage of that.
Speaker 1: And that does it for this edition of Bloomberg Technology.
Speaker 1: We're back here tomorrow with a number of great guests,
Speaker 1: including T Mobile CEO Mike Seaver, Coin Bases, Mark Lamb,
Speaker 1: and Jen hyman A Rent the Runway. I'm Emily Chang.
Speaker 1: This is Blowberg