Recession deep dive: VC psychology, macro risks, Tiger Global, predictions and more

The recording opens with loose banter before any agenda. One speaker asks when another is coming to Miami and learns that he has just arrived; another jokes that he is borrowing someone else's plane because his own "has been repossessed". The tone is plainly joking and none of it is offered as fact.

One speaker says fans keep stopping him for selfies in Miami, and describes two men who approached his table at a late-night meal, said they loved the show and asked where "Friedberg's introduction" was. He says he showed them a video of it and they were "in stitches". The remark that only a handful of people have seen that video is his own, and the hosts decide to play it.

What follows is a bit about introductions. The Friedberg video is cued up, and the hosts make nerd-themed jokes about it while it plays. They then turn to a comic rhyming intro delivered "in the voice of J Cal", which pokes fun at Jason Calacanis in verse and at his producer credit and book.

Similar mock introductions are read for David Sachs and Chamath, mixing teasing about politics, sweaters, wine and long monologues. The material is satire among the hosts and carries no factual claims worth weighing. After the last verse one speaker calls it "brutal".

The hosts then critique the bit itself. One speaker says it felt "a little bit squirt short", another thinks his own was fine and the others are "shell shocked", and the author says it was originally written for a birthday. They agree to save it and promise funnier intro material the next week.

A host lists what has been hit: stocks and crypto, and he names Tiger, Coinbase, Shopify, employee RSUs and meme stocks. He jokes that "the world's over" and asks where to begin. Both lines are meant as hyperbole to set up the discussion.

The next speaker, whom a later line addresses as Friedberg, goes back to when rates went to zero. He recalls describing the early pandemic period as like entering a rushing-river ride, with capital flowing so fast that it felt overnight, and with term sheets, "specs" and transactions following. His point is that cheap money let people borrow against rising asset values and buy more.

In his account, many assets were valued less on multiples, comparables or cash flow than on the expectation that someone else would pay more tomorrow. When rates were raised, he says the money drained out with a "whooshing sound", like an airlock opening. He stresses that people had long said everything looked overvalued, yet the unwind was still fast and some are still working out of large positions. This is his own interpretation, offered without data.

The next speaker, whom a later line addresses as Chamath, starts with context on how the Fed adds dollars to the economy. He says the Fed creates money and uses it to buy assets, and he adds that it does not technically print it. He claims that from 2018 until about the fourth quarter of last year, the S&P 500 had a "0.92" correlation with that money creation, and he explains correlation as a scale from negative one to zero.

He then reads the figure loosely, saying it means that for every dollar the Fed created the market rose by the same dollar, and that this lasted until November 2021. That is a simplification of what a correlation coefficient measures, and the figure is his own and unverified here.

He says that since the start of this year, up to roughly the previous day, collective global market value destroyed has been about 35 trillion dollars. The transcript renders the numbers unclearly, so the exact amounts should be treated as the speaker's rough claim. He says this is about 14% of all global wealth in around five months, against 19% lost in 2008.

The same speaker contrasts the two episodes. In his telling, 2008 centered on a handful of financial institutions and specific assets such as mortgage-backed securities, parts of the credit market and financial stocks. This time, he says, "it's literally everything": crypto, frozen credit markets, a Nasdaq bear market and an S&P 500 described as flirting with one.

He adds that he sees no end in sight. Inflation, measured by the consumer price index, has been slower to roll over than hoped, and jobless claims are starting to rise, which he reads as a sign of layoffs and a coming rise in unemployment. He also mentions a proxy war in Ukraine costing about 40 billion dollars a month. Each of these numbers is his own rough statement. Together they lead him to say it is not clear there is momentum to form a market bottom.

A host points out that real estate was the category that compressed in 2008 yet seems to be holding up now. He doubts how long that can last with mortgage rates rising and says it is the one category he thinks has not yet fallen. He then asks Sacks for his view.

The reply begins by saying the market is in a crash that over the last week turned into panic, with panic selling under way. He says some names now look like "screaming buys", but that nobody has the capital to buy because everyone is already fully deployed, so the advice to be greedy when others are fearful is hard to follow in practice. This is his own observation about investors in general and is not backed by figures.

He starts to compare the present with earlier crypto downturns, in which crypto accounts would post calls to hold or buy the dip, but the source breaks off here.

The comparison with earlier crypto dips continues: the speaker recalls accounts with "laser eyes" and says he sees none of that now. Another voice calls it "pure capitulation" and fear. Both are impressions of social-media mood, not measurements.

A speaker agrees it is a rout across every asset class and expects home prices to follow. His reasoning is that mortgage rates are rising, inventory is climbing and buyers cannot afford the payments they could before, so sellers will eventually have to cut prices. He adds that homeowners are slower to sell than crypto holders because they live in the asset. These are forecasts, not data.

A speaker argues the consumer is the next shoe to drop. In his account there has been a financial correction after a large asset inflation, while the consumer has held the economy up, with unemployment near 3% though labor participation was weak. He lists reasons this may change: higher rates make home, car and other personal loans more expensive.

He then cites an Axios article, as he describes it, saying consumer debt is surging at the fastest pace in over a decade and that people are returning to credit cards to cover rising prices. He also says that real wages fell 2.6% over the past year because of inflation. These are reported figures relayed on air and not checked here.

The hosts then work through the wage arithmetic aloud. One example is a 10% raise against 8% inflation; another speaker corrects it to a smaller raise of roughly 5.6%, and concludes that workers are behind in purchasing power. The numbers they land on are muddled and do not clearly match the 2.6% figure quoted a moment earlier, so the direction of the point is clearer than its size.

A host credits the point to Sacks and adds a figure of 60 billion dollars of new consumer credit in the last month, which he calls unusual. He suggests this may be the start of a consumer credit bubble, and calls it "scary". The claim is his own reading and the figure is not sourced on air.

Asking what the next shoes are, a speaker says the damage so far has mostly been multiple compression, while earnings season was fairly good. The stocks that were hit hardest were what he calls the COVID stocks, and he names Peloton, Netflix, Zoom, Coinbase and Robinhood, along with day-trader favorites.

He contrasts them with business-to-business software, which he says had good results while the SaaS index is down about 80%. He puts the average public SaaS multiple at over 15 times last year and 5.6 now. His open question is whether a deeper recession would reach even companies that are insulated from consumers.

Another speaker sketches how that could happen: consumers cancel subscriptions and vacations first, then businesses that lay off employees consolidate their software bills, for example from twelve products to eight. A host also describes a SaaS startup of his that closed an enterprise deal with Uber the day before Dara's memo on cost cutting. He says the company is lucky, because two days later the sale would have been harder, and he adds that Wall Street now wants free cash flow. This is anecdotal evidence from one company.