Interview, Fireside Chat, Roundtable
E97: SPAC updates, public/private market overview, Putin's end game & more
- Returned SPAC investor capital is anticipated within the next few weeks, with a projected loss of $10 to $20 million on the wind-down process considered a responsible decision.
- Approximately 500 remaining SPACs are expected to wind down and return capital, though some may pursue deals solely to monetize founder promote despite poor quality, causing valuation indigestion.
- SPAC deal closure is predicted to take six to nine months, with late-stage private company valuations currently 50 to 60 percent lower than previous peaks.
- While finding high risk-reward deals has become difficult over the last two years, decent deals are expected in non-tech sectors like energy and agriculture if underwriters adjust return profiles.
- The SPAC model is not expected to vanish but will undergo a washout of sponsors unable to find viable targets, with new deals likely trading down significantly due to market volatility.
- Going public is currently viewed as a fantasy for private companies, with a frozen public market exit environment expected to last approximately two years.
- Late-stage companies are advised to slash burn rates and use cash reserves to grow into current valuations.
- The Federal Reserve is predicted to raise rates by an extra 1.5 percent in two months, revising forecasts for an additional 100 basis points, with no rate reductions expected in 2023.
- The neutral interest rate is projected to settle at 4.5 to 5 percent, with fed funds potentially breaching 5 percent, abandoning soft landing rhetoric in favor of preparing for a hard landing.
- A double-dip recession is forecasted where growth turns negative after a marginal rebound next quarter, creating a tough economic environment for the US consumer for the next 18 months.
- Unemployment is expected to rise, real earnings to shrink, and consumption to ebb through 2023 and possibly part of 2024.
- Equity markets are predicted to bottom out by the end of this year or the early part of next year.
- Inflation is expected to remain sticky and persistent, with political programs supporting economic growth potentially creating an unpredictable inflationary cycle.
- Geopolitical risks include the potential for tactical nuclear weapon use by Putin, with the West's strategy of backing him into a corner lacking a diplomatic off-ramp increasing escalation risks.
- If Putin is removed, the replacement is anticipated to be a hardliner rather than a reformer, as he faces pressure from hardliners within his own government.
- In the event of a tactical nuclear use, Russia is not expected to receive support from India or China, while domestic destabilization could arise from reservist calls triggering maternal protests.
- Institutional anxiety and economic struggles are predicted to increase the likelihood of the US pursuing external conflict if internal foundations are weak.
- US energy costs, particularly in California, are expected to double again, with utility rates rising seven to 11 percent annually, an unsustainable trend driving a need for household virtual power plants.
- Current ESG implementation is viewed as broken and largely meaningless.
- The proliferation of AI is predicted to make human performance in games like chess and poker obsolete without augmentation, potentially leading to stricter anti-cheating standards such as metal detectors.
- The Hans Niemann cheating scandal is expected to challenge the concept of human mastery in games, while Adderall use is noted as rampant in high-level poker communities due to tournament exhaustion.