E85: SBF's crypto bailout, Zendesk sells for ~$10B, buyout targets, US diplomacy, media noise

it seems to me that a lot of the big portfolio managers of big institutional funds are starting to pay really close attention to this quote unquote standard in Silicon Valley that stock based comp expense has become so high and Evergreens have become kind of a standard. ... And I don't think it would be too surprising, number one, to see cash salaries go up. And number two, as a result of that, to see salaries become rationalized in Silicon Valley, where engineers may start to get challenged on the standard 400k per year that everyone's become used to

when people talk about free cash flow, they tout it a lot, tech companies tout it a lot, because you're allowed to add back in stock-based comp as if it didn't exist. ... So when the only source of free cash is stock-based comp, that free cash flow doesn't reflect the company's true profitability. This is what I mean by people play these shell games with these numbers

This stock-based compensation is going to go away, because they're going to get rid of all the high-price engineers. They're going to get rid of a lot of the high-price executives.

So this is one of the things that's broken in Silicon Valley is that the comp in the stock-based comp is not tied to performance. It's like just giving people guaranteed salaries.

At the end of the day, the private equity firms are not trying to make, you know, this $10 billion go to 25 They're trying to make the 2 billion of equity they put in go to three. And there's a lot of ways that two can go to three before 10 goes to 25

you have to ask the question, why are these highly sophisticated private equity firms buying it for $10 billion? I think they're going to make a lot of money. ... They are going to slash the hell out of the cost structure.

There's going to be a bunch of companies in this position, so look for this as a trend. Peloton, 964 million last quarter in revenue, lost 757 million in the quarter. ... That company is going to get taken out.

All of this is going to inspire a lot of district attorneys and DOJ activity. ... The discovery is going to be bonkers and it's all going to be regulated to the point of in which it kills a lot of the opportunity. I think this is going to become the most regulated space.

I tend to think at this point, Bitcoin probably has to be regulated like a security, even if it is not, and it's more of a commodity only because of the volume and the sheer size of both the market and the potential fallout

The easiest SaaS company to start and the one that folks, really talented investors like Sacks will fund overwhelmingly over others, are what's called bottoms up SaaS ... the unfortunate part of that growth curve is that it's pretty terminal within seven to ten years. And after that, you're forced to go to the mid market, and then eventually you're forced to go enterprise. ... Palo Alto Networks is probably the next closest one now.

I've transitioned most of my public markets time to focus on debt. ... But what is really juicy is the few companies that you think will survive and specifically making sure you're protected in the capital structure, which means to own the debt because the debt is always senior to the equity.

if this war is never ending and the famine and the impact on 40 million people or something like that, that Friedberg predicted is actually going to happen in the next six months

And that opens up a whole new area of research in medicine, gene therapy, and new things that we can think about targeting to fix a lot of these underlying diseases. ... It's an incredible example of how AlphaFold has been used to solve this really misunderstood or never really well understood aspect of biology that is at the root cause of so much of disease and creates all this opportunity for medicine and therapeutics, research and discovery.

this is really going to hurt the California tax base, because if you start raising taxes on, you know, California millionaires, more of them are going to leave the state, and then that tax revenue leaves the state. And so it actually hurts the general budget. ... I think we're due for a huge budget shortfall next year because there's going to be no capital gains.

Okay, and you know what's also highly predictable? Is that China considers Taiwan a renegade province. ... it will be even worse with Taiwan. I mean, if we think that this is difficult. Can you imagine this kind of escalation with a capable adversary?

And here, some folks have just, you know, basically escaped with billions and billions and billions of dollars. And the bag holder is just, you know, a retail investor. ... Because the level of grip that's happened in this market is extreme.

I mentioned at our predictions episode last year that all of these smaller things are going to get blown out. These quote unquote cryptocurrencies, even though many of them don't really act like a currency. And, you know, maybe Bitcoin itself persists. And it seems to me like that's always going to have good staying power.

just because there's a future technology platform doesn't tell you what the pricing should be. And the price action got decoupled from the level of progress in the space. ... And that's where it just got ahead of itself. That was the tulip part of it.

But that also has to happen on the crypto markets, in the crypto markets. And if you look at that chart, what it really tells you is that the baseline price of Bitcoin, where things seemed, you know, where rational supply and demand were meeting each other before all these, you know, 5, 10,000, 3500 to 5,000. ... That's still 75% from you.

One thing that I thought was an interesting sign of potentially bouncing along the bottom.

You used this term, Jason, before like skipping along the bottom. ... I just think it's like psychological wishful thinking as opposed to sort of like a rational summation of the actual.

I am looking at buying high quality share businesses, buying shares of high quality businesses right now. I think that there are things that are cheaply priced.

the third part of this is the overhang of this war in Europe, the Ukraine War, which is now threatening to become a forever war.

Russia is depriving Europe of Natgas. ... Where is the oil going to come from? OPEC is basically still stiff farming the United States with respect to expanded production capacity. ... You could have $180 a barrel oil by November, December when it's cold, not just here, but in continental Europe.

there's been a regime change in the public markets. The way that investors look at these companies is changing. It's not about growth at all costs anymore. ... What investors want right now, they still want growth, but they want it with low burn. High burn operations are going to get punished.

Because what David said I think is 100,000% right, what Sacks just said. There is a massive, massive regime change here.

Jerome Powell just said, I will tank the economy in order to beat inflation. He just said it in the Wall Street Journal. ... I think you're going to see eight and nine percent inflation prints for at least the next three or four months minimum.

I don't like the term quote recession as if it's some absolute negative thing. ... negative GDP growth coming off of inflated GDP doesn't feel to me as systemically challenging to the economy as some other circumstance

So I don't see how we get out of this bear market until you get clarity and resolution of inflation and rates, number one, slow down to recession, number two, and basically this war in Europe, number three.

you saw an increase in speculative investments across the board, including but not limited to crypto. So again, you know, when the Fed prints too much money, it creates asset bubbles.

we need to reset supply and demand by taking $30 trillion out of global markets ... And we're the only one that's doing quantitative tightening right now. The ECB hasn't even started taking all this crazy money out.

How many quarters will this recession be? If we had to pick a range, pick a two quarter range. ... I'm thinking three to five.