Tech Brew Ride Home - Mon. 05/09 – Everything Is Down

Episode Date: May 9, 2022

Everything is down, not just tech stocks, but now crypto too. More signs of belt tightening and possible hiring freezes, this time from Uber. Twitter has avoided the overall market route thanks to Elon’s bid, but could the downturn effect that as well? Instagram launches an NFT pilot. And what to expect from Google’s I/O later this week. Sponsors: OurCrowd.com/ride Links: Bitcoin’s Unraveling Hits 50% From Peak With Drop Below $33,000 (Bloomberg) Uber CEO tells staff company will cut down on costs, treat hiring as a ‘privilege’ (CNBC) Why Musk’s Twitter Bid Has Shaken Tesla Investors (NYTimes) Meta to start testing digital collectibles on Instagram (The Block) Costa Rica declares national emergency after Conti ransomware attacks (BleepingComputer) What to expect from Google I/O 2022 (The Verge) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Monday, May 9th, 2020. I'm Brian McCullough today. Everything is down and not just tech stocks, now crypto 2. More signs of belt tightening and possible hiring freezes this time from Uber.

Twitter has avoided the overall market route thanks to Elon's bid, but could the downturn affect that as well? Instagram launches an NFT pilot and what to expect from Google's I.O. later this week. Here's what you miss today in the world of tech. At the time of this writing, the stock market is down again, NASDAQ down more than 3%. You probably don't need me to tell you that if you've been checking your 401k recently. Again, tech stocks are leading the way down. And a specific type of tech stock specifically, let's call it, companies that went public over the last three to five years and did well over COVID times. Stocks like that are down brutally.

Maybe everything will have turned around slightly by the time you hear this, but it's unlikely to be a full narrative. reversal. On Twitter this weekend, it was all doom and gloom, or else lots of folks giving advice to startups about what they should be doing to get through this downturn. But if you're a crypto person, it's unlikely you've had a better morning because Bitcoin has fallen by up to four and a half percent, reaching $32,800, its lowest level since July 2021, as investors back away from all risky investments. Cardano, Pocodot, all sorts of crypto is down as well. I've said it before and I'll say it again. Everything is completely correlated right now, which is weird to me, but here we are, quoting Bloomberg. Most major virtual coins were under pressure over the weekend,

and the downbeat mood carried over into Monday. Equities in Asia and Europe also dropped with the NICA gauge down 2.5% and the Stocks Europe 600 index filing 2%. U.S. Equity Futures were also in the red this morning. Tightening monetary policy to combat runaway inflation and ebbing liquidity are turning investors away from speculative assets across global markets. Adding to the caution around digital assets, the value of TerraUSD or UST, an algorithmic stable coin that aims to maintain a one-to-one peg to the dollar, slid below $1 over the weekend before recovering. In light of fears of rising inflation, most investors have taken a risk-off approach, selling stocks and cryptos alike in order to cut down risk, said Darshan

Bathgia, Chief Executive of Singapore-based Crypto Exchange, Vald. Bitcoin's recent decline puts it at risk of firmly dropping out of the range where it's been trading in 2022, completely reversing the most recent bull run that drove the token to a record of almost $69,000 in November. With its 40-day correlation with the S&P 500 stock benchmark at a record, 0.82, according to data compiled by Bloomberg, any further hit to equity sentiment would risk dragging Bitcoin down as well. A correlation of one means two assets move in perfect lockstep. A reading of minus one means they move in opposite directions. Monday's sell-off was widespread across the

cryptocurrency universe with Cardano following 8.4 percent and polka dot down 6.7 percent, data compiled by Bloomberg's show. Rising interest rates are giving individual and institutional investors pause for thought about the crypto market outlook, according to Edu Patel, chief executive officer of Mudrex, an algorithm-based crypto investment platform. Bitcoin's 29% decline in 2022 compares with a retreat of more than 10% in global bonds and shares and a two and a half percent advance in gold, end quote. Ah, gold is up. Gold. The first thing that Bitcoin was plausibly supposed to replace as a store of value and an inflation hedge was gold. I'm not cheering any of this, as I always say, and I'll say it again. I just continue to ask the question.

You know, we've got war in Europe, inflation at a 30-year high, and Bitcoin is in a bare market. That's not supposed to be the way it was going to work, right? It's hard to argue that Bitcoin and crypto right now are anything other than speculative plays, and the speculators are sitting on their hands. More bad news, more signs of belt tightening, even among the biggest tech players. In an email to staff, Uber CEO Darikos Rashahi said the company will cut spending on market, and incentives, as well as begin to treat hiring as a, quote, privilege, which definitely sounds ominous, quoting CNBC. After earnings, I spent several days meeting investors in New York and Boston,

Kosovo Shah, he said, in the email, which was sent out late Sunday. It's clear that the market is experiencing a seismic shift and we need to react accordingly, end quote. To address the shift in economic sentiment, the ride-hailing firm will slash spending on marketing and incentives and treat hiring as a, quote, privilege, Kosovo Shah, he said. We have to make sure our unit economics work before we go big, the Uber boss wrote, the least efficient marketing and incentive spend will be pulled back. We will treat hiring as a privilege and will be deliberate about when and where we add headcount, he added. We will be even more hardcore about costs across the board, end quote. Uber will now focus on achieving profitability on a free cash flow basis rather than adjusted

earnings before interest, taxes, depreciation, and amortization, Krosha shah, he said, and And quote. Yes, among the other things this downturn is revealing is that you might now still be able to show all the growth in the world, but if that growth is just to the top line and not coming down to the bottom line, if it's not leading to meaningful profitability in the near future, well, it seems like investors are no longer willing to subsidize your money losing business plan and be placated by endless promises of someday. Meanwhile, you know who's not suffering, at least via their stock price as much? right now. Twitter. Credit to one of the tech meme editors in our Slack this morning who noted that

everything is down horrendously except for Twitter. Twitter is sort of stuck in a good way at around $50 a share, though it did break below $49 a share this morning, which shows investors are still worried the deal won't happen. But given how much everything else is down right now, can you imagine what the stock price would be for Twitter if Elon hadn't made his bid? The Twitter board is looking smarter by the day and accepting that bid. Meanwhile, looking at it another way, did Elon wildly overpay for something he could have gotten at this point for, I don't know, $42 a share or lower? Get it, 420. Further signs that Wall Street thinks this might be a deal that will blow up. Quoting the New York Times. Elon Musk's deal for Twitter has features that make it

risky, including billions of dollars of personal debt. If it goes wrong, it could burn Tesla shareholders and strained Twitter's financial health. Tesla stock has fallen 24% since the disclosure early last month that Mr. Musk had taken a sizable stake in Twitter, a period in which the S&P 500 has declined 10%. Analyst said it was hard to think of another deal in which an individual incurred such a large debt against shares, known as a margin loan to help pay for another company. The terms of the loan may change, but those disclosed early in the process show that the lenders thought it was a potentially risky part of the deal. A filing indicated that the banks were demanding that Mr. Musk backed the loan with Tesla stock worth five times as much as the value of the loan, giving them plenty of cushion. The loan also had a

0.5% upfront fee and an interest rate of over 3%. Vicki Bryan, Chief Executive of Bond Angle, a research firm, said the terms were, quote, very stiff. The banks may be wary because they've already lent to Mr. Musk. A filing on Monday revealed that by the end of last year before mounting his Twitter bid, Mr. Musk had pledged over 92 million shares. to secure personal loans, though the filing did not say how much he had borrowed, if anything. The margin loan to buy Twitter could become a destabilizing force if Tesla stock value were to plunge. A steep decline might prompt the banks to sell their Tesla stock collateral to recoup the money they lent Mr. Musk, which could in turn set off even more selling across the market.

The terms of Mr. Musk's margin loans stated that he must pay off the entire debt if Tesla stock falls more than 40% from its price on the day of the loan, end quote. But meanwhile, it's full speed ahead with the Metaverse. Mark Zuckerberg said, Meta will begin testing digital collectibles and NFTs on Instagram, starting with select U.S. creators and won't charge for sharing NFTs, quoting the block. Creators and collectors on Instagram will now be able to use NFTs as profile pictures,

similar to a move other social media platforms like Twitter have done in recent months. A similar feature will be coming to Facebook soon as well. Zuckerberg confirmed in a video this morning, though he didn't give an exact date. Creators will soon be allowed to use augmented reality NFTs on Instagram stories through Spark AR, a free studio that lets businesses and private users create their own filters. This move will let creators place digital art into physical rooms and spaces per the meta CEO, end quote. This comes after a weekend of speculation with sources suggesting that Instagram would launch an NFT pilot either with ether, polygon, Solano, or Flow integrations, though I couldn't confirm if those details were

borne out in Zuck's video today. Costa Rica's president has declared a state of emergency in that country after Conti Ransomware, the Conti Ransomware Group, published 672 gigabytes of data that appears to be from government agencies, quoting bleeping computer. On Sunday, May 8th, the newly elected Costa Rican president Chavez declared a national emergency citing ongoing Conti ransomware attacks as the reason. Conti Ransomware had originally claimed ransomware attacks against Costa Rican. government entities last month. The country's public health agency, Costa Rican Social Security Fund,

had earlier stated that, quote, a perimeter security review is being carried out on the Conti ransomware to verify and prevent possible attacks at the CCSS level, end quote. Gleaping computer observed that as of yesterday, Conti's data leak site had been updated to state that the group had leaked 97% of the 672 gigabyte data dump allegedly containing information stolen from government agencies. The public body that first suffered damage from Conti's cyber attack is the Ministry of Finance, which still has not yet fully evaluated the scope of the security incident, or to what extent has taxpayers' information, payments, and customs systems have been impacted. Conti earlier demanded a $10 million ransom from the ministry which the government declined to pay.

As reported by bleeping computer last week, the U.S. government is rewarding up to $15 million, million dollars to anyone providing information that can lead to the identification and arrests of Conti ransomware's leadership and operators, end quote. Finally today, putting this on your radar because somehow it fell off of mine. It turns out that Google I.O. is this Wednesday, May 11th. The Verge, helpfully sums up what we can expect. They say a pixel watch unveiling, a mid-range pixel 6A, more details about Android 13, possibly PixelBuds Pro, and more. Quote, Rumors of Google making its own smartwatch have been around forever, but 2022 could finally be the year it actually happens. There have been spec leaks, design leaks, and a U.S. Patent and Trademark Office filing revealing the Pixel Watch name.

Most significantly, however, is an apparent prototype of the smartwatch found abandoned in a restaurant, leading to a flood of photos being posted online. Between all the leaks, we're starting to get a pretty good idea of what form the Pixel Watch will take. The big question now is whether all of Google's investments, which include spending billions on Fitbit, can create something that's able to present a real challenge to Apple's dominance. Meanwhile, for the past three years, Google has followed up each of its flagship pixel smartphones with a more affordable version with reduced specs. This year, it's the Pixel 6's turn, but rumors suggest the Pixel 6A might be a little different from previous A series handsets.

While phones like the Pixel 4A and 5A paired similar camera features to their flagship counterparts with less powerful processors, reports suggest the Pixel 6A could flip the approach. A report from 9 to 5 Google last year suggested the new phone could feature the same tensor processor as the Pixel 6, but a downgraded 12-mixel main camera sensor instead of the Pixel 6's 50 megapixel sensor. An announcement at Google I.O. would come a little earlier than the August launches we've typically seen for Google's mid-range phones, but the timing of a recent FCC filing suggests its launch could be just around the corner. Then this rumor is less certain, but a recent link from John Prosser suggested that Google is preparing to release a new set of true wireless

earbuds called the PixelBuds Pro. Not much is known about their potential features and specs, but the use of the word pro in the name of a set of earbuds is typically used to show they support active noise cancellation, which would be a first from a pair of Google True Wireless earbuds. Google currently only sells one pair of true wireless earbuds, the PixelBuds A-Series, which were originally announced as a more affordable counterpart to the second-generation PixelBuds. But with the pixel buds now discontinued, Google is only selling the affordable entry in the lineup. Adding a pro-branded entry would be a natural shift.

On the software side, there's Android 13, the next major version of Google's mobile operating system. It's technically already been released in beta, offering small glimpses of Google's plans for the update. But it won't be until I.O. that we get a full idea of Google's overall vision for Android 13. So far, it seems Android 13 is set to continue a lot of the work that Google started with Android 12,

last year's customizable themes, branded as Material U, look likely to expand to cover more UI elements in the operating system, and Google is continuing to restrict what aspects of the operating system Android apps have access to by default. Any news on major new initiatives will likely emerge during Google's keynote. As well as software, Google has long been rumored to be working on one or two foldable devices of its own. At one stage, there were rumors that these were going to launch last year,

but given the lack of leaks recently, it doesn't feel like an announcement is imminent. Foldable phones are, after all, still very niche products outside of China, despite Samsung now being in its third generation of foldable devices. Given it's only been a year since Google released its last Nest Hub smart display, it seems premature to expect a follow-up, but a report from 9-to-5 Google from March claims we could see one featuring a detachable screen that could be used as a tablet at some point this year. The form factor sounds like it would be ideal as a smart home controller and would also explain the renewed attention Google is paying to tablets. Away from hardware and platform-specific announcements, a Google I.O. Keynote wouldn't be complete without the search giant announcing updates for a handful of its numerous apps and services. Last year, for example, we saw a locked folder feature announced for Google Photos, updates to Google Maps, augmented reality view, and a new Smart Canvas initiative for its office productivity software that's designed to make its various services more interconnected. Given the huge breadth of Google's software offerings, it's difficult to make specific predictions about which of them will get attention on stage this year. but I'd guess that Google Workspace is likely to feature prominently.

Smart Canvas has already resulted in some slick new features for Google Docs, and I suspect that this is just the start of Google's plans to overhaul its office software for remote working, end quote. One more bit of speculation. Might Google try to steal a trick on Apple by pre-announcing some sort of AR-VR effort? Google does like to show off research products at I.O. even when they're years away from becoming actual products. I told you my boy, Max, is obsessed with Ghostbusters, and thus I've been listening to that Ghostbusters song on a loop for the last two weeks or so.

Everyone always remembers that weird line, Busting makes me feel good, but the lines that I've never really noticed before are, ooh, I hear it likes the girls, and if you've had a dose of freaky ghost, baby, who you're going to call? Which comes right before that Bustin makes me feel good line. And just as there was a ton of innuendo in the original Ghostbusters movie that I completely missed as a kid, I never realized how much innuendo is in the song as well. Neither here nor there, of course, but it's crazy how adult kidfare was in the 80s compared to how neutered everything made for kids is today. They threw a lot of R-rated stuff at us back in the 80s, confident we wouldn't notice or understand.

And they were mostly right. Talk to you tomorrow.