#167 - The World Millennials Grew Up In Is Over, Status As A Service and The Uber Profitability Question

Listen in podcast app* Market Update* Three Paradigms that are shifting* Big Tech Generals are shot dead* Meta is killed* Profitability of Uber…* Netflix ad platform* Realestate in Canada* Twitter and Elon!Listen on Apple, Spotify, or Google Podcasts.If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.👉 For specific investment questions or advice contact Joel @ Gold Investment Management.📈📊Market Update💵📉Some thoughts on US markets going into the FOMC rate hike:US stocks have tended to rally the day of a Fed announcement, but they give back those gains the next day and end up basically flat a week later.Here is how the S&P 500 has traded during/after the last 3 Fed meetings, where the FOMC raised rates by 75 basis points each time (as it is expected to do again tomorrow):- June 15th: +1.4 percent (day of), -3.3 pct (next day), -0.8 pct (1 week after the day of the announcement)- July 27th meeting: +2.6 pct, +1.2 pct, +3.3 pct- September 21st meeting: -1.7 pct, -0.8 pct, -1.9 pct- Average: +0.8 percent on the day of the meeting, -1.0 pct the day after, +0.2 pct over the week after the meetingMarket expectations for future Fed policy going into tomorrow’s meeting, using Fed Funds Futures prices- Tomorrow will almost certainly see a 75 basis point increase (90 pct odds), taking Fed Funds to 3.75 – 4.00 percent.- December is a coin toss between 50 and 75 basis points, at 48 percent odds for each. Expect markets to scrutinize everything Chair Powell says for signs of which way he is leaning. It is worth remembering that the last FOMC projections were for Fed Funds to end the year at 4.4 percent, which implies a 50 bp increase in December.- Futures currently expect the size of Fed rate increases to slow in Q1 2023. They place the highest odds on Fed Funds in March at either 5.00 – 5.25 percent (41 pct) or 4.75 – 5.00 percent (32 pct). The most likely path for the former is a 50 bp hike in December and 2 hikes of 25 bp apiece in February/March. The latter might come from either 50 bps in December and 25 in February, or 75 bp in December and nothing in the new year.Last Weeks Recap:Amazon, Meta, Google, and Microsoft missed their estimates and/or gave very weak guidance. They sold off and the main indexes didn’t even blink. The Nasdaq 100 and the S&P 500 still finished the week deep in the green. People wanted a “market of stocks” environment. This is what we are having right now. While some of the mega-caps are struggling, there are plenty of stocks from various sectors that are breaking out after earnings and following through. I don’t know if this is just a short squeeze before another rug pull, but last week certainly provided good opportunities to make money on both the long and the short side, if you were nimble enough.One can make the argument that the market is currently betting that the Fed is going to somehow pivot. Other central banks (ECB, Canada, Australia) have already said that they plan to slow down with their rate increases. The Bank of Japan is already doing more QE. Can the Fed also blink and fold? I would not bet on it, so I would expect further volatility next week. If the market really wants to continue to rally, it doesn’t matter what the Fed is going to do or say next Wednesday. News is always explained based on the price action:The Fed raises 75bps and stocks go down – “What did you expect? They said they will keep raising”.The Fed raises 75bps and stocks go up – “The worst has already been priced in”.See. It is easy to come up with a viable explanation after any price move.The real question here is how do you make money or at least, how do you make sure that you don’t lose too much of it? The earnings season is still young. There are plenty of companies left to report. Fresh news leads to big short-term moves and sometimes, to big longer-term moves. In the meantime, I am keeping an eye on volatility and correlations. If two of the main three indexes (SPY, QQQ, IWM) close below their 20-day EMA, plus the VIX finds itself in the 20-22 range, this bounce can be considered over.💸Reformed Millennials - Post of The WeekVenture capital funding for Web3, a buzzy concept which VCs have poured billions of dollars over the last two years. * Many technologists consider Web3 to be the next iteration of the internet. Its aim is to be more transparent and accessible than the current version, which is largely controlled by a few tech giants. Web3’s core architecture is based on block chains and other decentralized technologies, with the hope that these systems can engage users in more creative and fairer ways than the current, largely ad- and mass attention-based model.* VCs hope Web3 will offer better monetization of direct to consumer business models by decentralizing the internet’s architecture. For example, there are video games that use NFTs or virtual currencies to pay players for achieving in-game objectives. VCs and Big Tech have therefore invested tens of billions of dollars to get a first mover advantage on this potentially large and “new new” opportunity for digital commerce.* Once the infrastructure is developed to build out decentralized applications, users will be able to create everything from new games to social networks and financial platforms. This approach disrupts traditional gatekeepers and enables a new middleman-free digital economy. Creators and users will, in theory, be able to monetize their own activity rather than paying economic “rents” to Big Tech.Web3-related startups raised a record $30 billion in 2021 versus less than $5 billion in 2020, but funding has significantly slowed this year just like the rest of the VC market amid a more challenging macroeconomic environment and compressed valuations in both public and private markets. Here are the latest numbers:* Web3 startups raised $3.3 billion in Q3, an almost 50 percent drop from the prior quarter and down 65 pct from the quarterly peak of $9.3 billion in Q4 2022. That’s the lowest amount raised since the $1 billion reading in Q4 2020.* There were also just 408 deals announced, over 200 fewer than Q4 2021 (615) or the high of 637 in the first quarter of this year. This is the fewest deals since Q4 2020 (262 deals announced).* Overall, VCs have invested $17.7 billion into Web3 startups so far this year, far from 2021’s record of $30 billion.So, what sorts of Web3 ideas are strong enough to still get funded in the current highly selective funding environment? There were some large rounds in Q3, such as:* Mysten Labs: a California-based developer of the Sui Layer 1 block chain, which closed a $400 million Series B at a +$2 billion valuation back in September. Layer 1 is a base block chain network – such as Ethereum – and its underlying infrastructure.* LootMogul: a California-based sports metaverse company, which raised $200 million in September. The “startup is looking to build virtual sports cities based on real-world brands and professional athletes”, according to Crunchbase.* Aptos Labs: a California-based startup that is creating its own Layer 1 system block chain, which raised a $150 million Series A after closing a $200 million investment that made it a unicorn just 4 months prior.Even still, Crunchbase notes that “those deals were the exceptions more than the norm in the third quarter”. For example, there were just five +$100 mn rounds, or the fewest since Q4 2020 which had 2. By contrast, there were 21 and 26 of said rounds in Q4 2021 and Q1 2022.**Why the drop off in funding specifically for Web3?**Crunchbase offers 3 reasons:* Big rounds have fallen off significantly across the board in the VC market. With Web3 relatively new, investors