We’re marking down prices and passing the savings to YOU
August 7, 2023
–Friday’s Payrolls weaker than expected at 187k, though Avg Hourly Earnings at 4.4% were higher than the expected 4.2. This week starts out fairly quiet, though Fed Governor Bowman speaks today. Over the weekend she said more hikes may be necessary, and that’s hikes with an S. [wasn’t no cop man. Was cops, SSS. Plural.] CPI on Thursday and PPI on Friday. CPI expected 3.3 from 3.0 last. Core 4.8 from 4.8 last. The ten-yr yield fell 13 bps to 4.058%.
From Bowman speech:
Given the strong economic data and still elevated inflation, I supported the FOMC’s decision in July to further increase the target range for the federal funds rate. I also expect that additional rate increases will likely be needed to get inflation on a path down to the FOMC’s 2 percent target.
–Treasury auctions of 3s, 10s, 30s start tomorrow.
–Almost Daily Grant’s by Philip Grant features a crystallization of problems besetting VC in an August 4 post titled ‘Capital Call’. A tech publication ‘The Information’ reports “…that so-called cram-down financings – in which existing investors are often heavily diluted in order to attract fresh capital – are increasingly in vogue…”
https://www.grantspub.com/resources/commentary.cfm
Here’s a snippet:
“We’re going to see a tidal wave of these companies doing reset rounds,” Greg Smithies, partner at real estate-focused v.c. firm Fifth Wall, predicted to The Information. “It’s just going to get worse before it gets better.” More than 900 private companies achieved a $1 billion-plus price tag in 2021 and 2022 alone according to Crunchbase, with some startups managing valuations equivalent to 100 times annual revenue. That was then, as down rounds represented some 30% of all startup financings in the first quarter according to law firm Wilson Sonsini, roughly triple the quarterly average going back to 2018.
–I believe it was March 2007 when Bear Stearns first leaked out information that there were problems in its mortgage portfolios. Then…
On June 22, 2007, Bear Stearns pledged a collateralized loan of up to $3.2 billion to “bail out” one of its funds, the Bear Stearns High-Grade Structured Credit Fund, while negotiating with other banks to loan money against collateral to another fund…
–Now… from ADG, “…industry mainstay Union Square Ventures has marked down the value of seven of its funds by nearly 26%.”
26%. That’s like the “quart of blood” technique
