E65: VC markup dynamics, Russia/US tensions over Ukraine, Altos Labs raises $3B, Stripe's valuation

So at somewhere along the way, nobody took a science class in Germany and figured out that nuclear was both safer and cleaner. Instead, burning fossil fuels is the answer.

And geopolitically wiser to not have a dependency. And after the Fukushima, they went, turned them all off. They accelerated it.

the public markets have massively corrected. And now finally, you know, we talked about this few few months ago, those new price levels have trickled their way down into venture markets. And so finally, you know, venture deals are starting to price at more reasonable prices. ... I think that the prices now are coming down because what I've heard is that the crossover investors like Tiger, like KOTU who are deploying all this money, they've really slowed down now. I think they're all kind of licking their wounds. And so like all of this money that was flooding into the venture space is kind of on pause right now.

But my private book was up a billion dollars. And I told the team, I'm like, no, this is not real. So we have to take those marks because, you know, you have other venture firms that are pricing these deals and we get audited K1s. ... And I said, this is not real. We were at best break even and probably lost money. But you can't, you can't not take these marks because like, you know, you have an entire fund complex that lives on these marks.

there's a significant disincentive for venture firms to take markdowns, to raise capital into a private business at a price that's lower than the prior round. Because when they do that, the marked value of their portfolio goes down. And then it makes it harder for that venture firm to go out and raise the next fund that they're going to try and raise from their LPs, because it looks like they're not good investors.

As everything was going up, these new fund managers are like, we're at 100 IRR, we're at 200% IRR, because this crypto investment we did got marked up. And I was just thinking about what Bill Gurley would always say, which I think is a Howard Marks quote, you can't eat IRR.

in early December or November, when I wrote that letter on Twitter and we talked about it, and I sold a bunch of stuff after Jeff and Elon were selling, raised some cash and I was like, okay, now I have enough buffer here. The whole point from here on out is to basically like insulate myself from my own emotional turmoil as stocks go down. And so far so good.

I've structured it so that I don't hold any Bitcoin personally myself because I don't want to have the pressure and the risk of keys and coins and wallets and this and that. But I still really believe in Bitcoin in the long term.

it turns out that, you know, the strongest power in Europe, Germany, is in a really difficult situation because they rely on Russian energy. ... And so when all of the saber rattling was happening, Germany basically had to blink because they need Russia's energy.

Clearly, Powell does not want to be remembered as the Fed chief that let inflation slip the leash, right? I mean, he's gotten religion now around the idea that this inflation is not transitory, which was his position for months.

we have to remember that, you know, the Fed has nine trillion dollars of assets on their balance sheet. And so, you know, if they start to take nine trillion dollars of cash out of the system by selling these assets into the market, right, you're taking the money out, right, because you're getting money back. That's going to have an enormous, huge impact as well.

So let's look in the good news column. Wages way up. Earnings way up. 10 million job openings in the United States. Pretty close to record low unemployment. And the pandemic ending. And people having record savings in their bank accounts and personal balance sheets.

Well, the negatives are that yes, the unemployment rate is very low, but a lot of people have dropped out of the labor force. So the labor participation rate is still quite low. ... And then the fact that wages are going up is good, but we don't know how much that's inflation. So those would be the negatives.

And I think it speaks to what I highlighted as what will be the new frontier in biotech and will completely rewrite the course of humanity is if we can take drugs and for a short period of time, completely reverse the age of ourselves. ... And this technology and this is going to be the year I think this will be the front cover of a lot of magazines this year. As people realize that this is real and that it's getting commercialized.

Whenever I see these grandiose prognostications of future progress and then see these companies raise exorbitant amounts of money, I have never found a single example where it's ever worked ever. In fact, every time I see a company raise an exorbitant amount of money in a Series A, I write them off in my head. ... And in fact, I've never seen a three billion dollar venture fund do much more than return 2X of money.

the idea that markets bucket, quote unquote, growth stocks together, I think kind of obfuscates an important point, which is that some of the businesses in that category are real businesses that are going to succeed over the long run. And some of them are speculative and are likely to fail over the short run.

And so I think that the risk of recession now is much higher than it was even a month ago. Now, you know, it's going to be hard to know. So basically, I think what we're saying is it's going to be very hard for the Fed to engineer a soft landing here, where we don't trigger a recession in the process of stopping inflation.

So the real risk to the economy, in my opinion, right now, is when and how we're going to work our way through the supply chain issues. And it is so complex and there's a myriad of problems. And it is a global problem that it's really unclear how this is going to play out over the next six months. ... businesses that you didn't realize and didn't expect are going to get hit with supply chain problems are suddenly going to say, guess what, our revenue is off by 20, 30 percent

And the reason I'm less worried is when you actually talk to the companies that are spending enormous amounts of money on CapEx, they've actually guided to the fact that by the end of this year and the beginning of next year, most of these things will be worked out. It's indigestion. I think we're dealing with a six to nine month issue of having turned things off and are now rapidly trying to turn things back on. ... But I do think it will work itself out faster than people expect personally.

I did say, you know, at the end of the year, I do think that we're in this kind of economic status right now that if there were an opportunity for conflict, we're probably more likely to want to engage in conflict than not, because it does create something that we all get behind. ... I think the economic seed is planted for us to be in some sort of conflict this year.

The thing here, I think what de-escalates all of this is economic sanctions and monetary impact, because if Nord Stream 2 doesn't get turned on, which is in Germany's control, that has a huge economic impact to Russia. ... I do think the way this gets de-escalated is through money. If you severely impinge Russia's ability to grow their economy, that foments a lot of anger at home.

if you go back to the, you know, from 1950 onwards today, every time the government has started to raise rates or the Federal Reserve has started to raise rates, the stock markets have actually rallied. Now, why is that? It's typically that they see through the end of the rate hike cycle, and they start to price the business as if these rate hikes are done and to rebase things. And on average, I think the stock markets go up between 7 and 8 percent.

these market levels that we're at right now, we look 60% correction in growth stocks. But this is with that still in a good economy in peacetime conditions. And now we have a risk of recession and war. So, you know, there's still room for, you know, a lot more negative news here is kind of my point.