Weekly TLDR - All Hail the TechnokingWeekly TLDR - All Hail the Technoking
The week, we talk about why rising interest rates likely won’t significantly drop house prices, dissect Elon’s growing corporate empire, and discuss a bullish game-changer for cryptocurrencies.
Chart of the Week
This chart shows you why you shouldn’t expect a precipitous decline in housing prices as rates increase. Over 90% of American households with mortgages have loan rates lower than the current 5% interest rate for new loans. This means that if homeowners sell their home, they would be looking at a significantly higher monthly mortgage payment even if they purchased another home of the same price. This situation gets worse the higher rates go so expect the large number of newly minted home-owners that secured mortgages at low rates to sit on their homes for as long as rates are high. This probably means that real estate inventory is going to be incredibly low for at least the near future, exerting upward pressure on house prices.
Stock Market TLDR
The Technoking’s Corporate Empire
Twitter’s board has accepted Elon’s offer to purchase Twitter, which if the deal closes, will leave Elon with a sprawling corporate empire. Elon now already controls Tesla, SpaceX, Neuralink, and The Boring Company. That’s a huge swathe of industries and business models to stay on top of. While the title of “Technoking” is more of a joke than anything else, Elon’s empire starts to make sense in the lens of accelerating humanity’s technological development. Let’s dive deeper.
Tesla is the mass market consumer company that drives a significant chunk of Elon’s net worth. It’s a self-sufficient company that raked in $3.3B in profit in the most recent quarter, for example, and is thus capable of funding significant R&D efforts (like Tesla Optimus). Tesla is also spearheading battery and solar technology, which I can only imagine will also have a huge impact on the space industry as well.
SpaceX spearheads Elon’s major interest and foray into the space industry. For the foreseeable future, humans will have to rely on rocketing things from Earth to space rather than building in space so rocket technology will be a centerpiece into how far and how quickly humans can expand beyond Earth.
Neuralink is Elon’s play into boosting human productivity. Neuralink’s technology, if successful, will allow humans to interface with and be augmented by technology in ways that haven’t been possible in the past. Imagine a permanent Heads-Up Display (HUD) in your mind that is triggered by your thoughts.
The Boring Company is probably the tamest company of the bunch but I have a suspicion that the company is much less about creating transportation tunnels on Earth and much more about space mining and creating habitats on other planets and moons. Like many of Elon’s companies, the “on Earth” application is meant to make the technology more robust and generate cash flows to fund future R&D.
Finally, Twitter fits into Elon’s empire because he knows he can’t do it alone. Twitter will likely be the marketing platform for his vision. A vision as large as Elon’s needs supporters and believers and Twitter is the perfect platform for that.
All that is missing from Elon’s empire is likely a longevity / biotech play so expect Elon to fund or takeover a company in that field in the future.
Facebook announced a 47.5% channel fee for economic activity happening in their Horizon Worlds platform. This is coming as a huge surprise but also fitting for Meta’s modus operandi of aggressively monetizing. 47.5% is a huge fee for a platform that hasn’t found product market fit or a self sustaining ecosystem. It's a really strange move that may underpin Meta’s need to give Wall Street investors a new growth story. If it can show $1 billion in revenue being generated by the metaverse, investors may be more willing to give Meta credit for its metaverse vision.
Venture Capitalists Are Making Less Money
IPOs and exits of VC-backed companies shrunk to $33.6 billion, falling by $192 billion over three consecutive quarters. While geopolitical uncertainty was cited as the main driver for this, it may also be a sign that the party is ending. If VC exits remain low for multiple quarters, you can bet that VCs will be eyeing new investments with more skepticism. More importantly, already deployed funds will remain locked in existing companies for much longer without a healthy market to exit into, pulling back the returns of venture funds and further shrinking appetite for venture investments.
Chips Shortages Continue
Taiwan Semiconductor Manufacturing Company (TSMC) is warning investors of continued shortages in its supply chain with tooling equipment being the culprit this time. Investors are advised to expect chip shortages for the rest of the year and potential risks to capacity expansion in 2023. Also of note from TSMC’s Q1 2022 earnings call is a note about weakness in chip demand in the consumer electronics sector, a sign that Apple’s demand may be weakening as it’s TSMC’s largest consumer electronics customer by a large margin. Apple is reporting earnings later this week so there’s a potential short play here for brave investors.
Bitcoin in 401(k)s is a Game-Changer
Passive investing is incredibly popular and funnel vast amounts of money into the stock and bond markets. For example, passive funds saw almost $1 trillion in fund inflows in 2021, which is $700 billion more than their active counterparts. In comparison, the combined market cap of Bitcoin and Ethereum, the two largest cryptocurrencies, is only about $1 trillion.
As of yet, there are very few passive investment products for crypto, and one can only imagine where its market cap will rise to when crypto passive investing inevitably ramps up. This is why the recent news of Fidelity planning to allow Bitcoin investing in its 401(k) plans is especially bullish. As the largest 401(k) provider by assets held, Fidelity’s decision sets the tone for the entire 401(k) industry and will surely prompt other providers to do the same. This is one major step towards opening the floodgates for crypto passive investing that could herald the next major crypto bull market.
I was expecting crypto to become available for retirement investing eventually but didn’t expect it to happen so quickly. Fidelity’s decision to allow Bitcoin investing in 401(k)s is certainly a major game-changer for the burgeoning asset class. This is planned to be made available sometime later this year.
New Billion-Dollar Crypto Fund on the Block
Crypto private equity continues to remain hot. This week, news came out that a new crypto fund founded by entrepreneur and investor Joe McCann is aiming to raise $1 billion. The fund, called Asymmetric, has so far found backing from some of the biggest names in crypto such as a16z’s Marc Andreessen and Chris Dixon, Solana's Anatoly Yakovenko and Raj Gokal, and Tiger Global’s founder Scott Schleifer, among others.
Asymmetric will be split into two vehicles, a venture investment fund and a hedge fund. The venture fund will, as expected, invest in start-ups, while the latter will employ more traditional hedge fund tactics to squeeze alpha out of the crypto market.
McCann’s new crypto fund comes at the head of a relatively long string of new crypto funds raising billions of dollars over the last year. This includes a16z’s $2.2 billion raise in June of last year for Crypto Fund III, a $3.5 billion raise for a new fund earlier this year in January, Paradigm’s $2.5 billion raise for its own crypto fund in November last year, and Katie Haun’s $1.5 billion raise for two new crypto funds this year in March.
Moonbird NFT Sells for $1 Million One Week After Launch
Just one week after the launch of Moonbird NFTs, an NFT in the collection has sold for more than $1 million. The buyer of the NFT is a company called The Sandbox, a blockchain-based gaming firm that’s the subsidiary of Hong Kong-based Animoca Brands.
Moonbirds is an NFT collection of 10,000 owl avatars. It’s the second collection launched by start-up Proof, founded by renowned venture capitalist Kevin Rose. The start-up’s first NFT collection, the Proof Collective, provides holders with exclusive access to Rose’s online crypto community. Rose intends Moonbirds to be the official profile pic for the Proof community.
So far, in just over a week, the total sales volume of Moonbirds NFTs have reached nearly $360 million. The fervor surrounding Moonbird’s launch shows that, despite declining NFT trading volume, there is still ample buying interest in this burgeoning and quirky asset class.