#462
Q3 Earnings, The Fed and The Lunatic Lottery
Published:
Nov 07, 2022
Author:
Sarah Parsons Wolter
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In this week’s most recent headlines, the Federal Reserve approved its fourth consecutive rate hike to 4% in an effort to curb inflation. As the highest rate hike in 15 years, the US isn’t alone with their big news - across the Atlantic the Bank of England and ECB made similar announcements in the past week.
Aside from a stray mention of rate hikes amidst the morning subway buzz, it seems consumers have yet to feel the heat. With Q3 earnings season upon us, Visa and Mastercard have demonstrated that despite tighter economic conditions, consumer spending is still resilient. Along with consumer credit card balances that continue to rise, there is very little indication that consumers are pulling back across earnings reports from companies like Nestle, Coca-Cola, Netflix, Block and Bank of America - which reported a 10% increase in overall consumer payments last month, exceeding the rate of inflation.
Buoyed by the pandemic stimulus, consumers are flush with cash as US households built up $2.7t in savings from the pandemic. Placed in historical context, this is unsurprising. Over the last 60 years, nominal consumer spending continued to grow through every recession (with the exception of the 2008 financial crisis). This suggests that as we navigate the headwinds in the current environment, the main issue is not necessarily a weak consumer fiscal health.
While other interest-rate sensitive parts of the economy, namely the housing market, have been impacted by the Fed’s monetary contractions, we are yet to see wider demand destruction seep into other sectors of the economy. The labor market remains resilient with unemployment at a 50-year low (at 3.5%) and worker pay / benefits continuing to rise at a rapid clip of 7.7% annually. With consumers, households and businesses in unusually strong shape, the Fed’s job of taming inflation and slowing down the economy will undoubtedly become more difficult and prolonged.
And finally, the US Powerball Lottery has seen its own crazy inflation this week with the jackpot hitting $1.5b. The odds of winning the jackpot are a mere 1 in 292.2m but one lucky dawg might be adding to the nation's savings pile this weekend and enjoying a slap up dinner to boot.
Portfolio News
NiftyApes raises $4.2m in Seed funding - The round was led by FinTech Collective and Variant, with additional participants including Robot Ventures, Polygon, Coinbase Ventures, The LAO, FlamingoDAO, Ryan Sean Adams, David Hoffman, Eric Conner, Anthony Sassano, Cyrus Younessi, DC Investor, James Young, James Duncan, Nadav Hollander and Brendan Forster. NiftyApes, which allows users to take out loans on any NFT collection, will use the funds to grow its team and continue expanding the firm. Read more
DeFi protocol Centrifuge raises $4m in strategic round - Investors in the round include Coinbase Ventures, BlockTower, Scytale and L1 Digital. BlockTower’s backing is more than just a simple VC investment, however. The BlockTower credit team has secured approval to be onboarded as a collateral provider to MakerDAO. BlockTower is set to provide $70m in junior capital alongside Maker's contribution of $150m to create a $220m pool on Centrifuge. Read more
Extend launches API for issuing and managing virtual cards - With the new Extend API, SMBs can integrate virtual card issuance into their existing workflows and systems and streamline their operations. Additionally, SMBs can instantly create virtual cards for specific purposes at scale, link all card controls and transactions to their client and payment records, and set controls that eliminate overcharging and reduce fraud. Read more
Neobank unicorn Revolut, 1inch launch ‘Learn & Earn’ DeFi course - Developed by 1inch, the course has three lessons to help users understand the basics of decentralized finance. These three lessons focus on three verticals of DeFi, including how decentralized exchanges work, how 1inch’s “pathfinder algorithm” works, and the essential governance of DAOs. Read more
Q3 Earnings, The Fed and The Lunatic Lottery
Cash-rich consumers could mean higher interest rates for longer - Some officials have argued for slowing the pace of rate rises after this week’s meeting. But the debate over the speed of increases could obscure a more important one around how high rates ultimately rise. In economic projections released at the Fed’s last meeting in mid-September, most officials anticipated their policy rate would reach at least 4.6% by early next year. But some economists think it will have to go higher than 4.6%, citing in particular reduced sensitivity of spending to higher interest rates. Read more
Bank of England sets biggest rate hike in 33 years - The central bank made its eighth interest rate hike in less than a year, taking its benchmark rate to 3%, the highest it has been since November 2008. The huge hike matches moves made by the US Federal Reserve on Wednesday and the European Central Bank last week. Read more
Shares of Block jump on earnings beat - Block posted $1.57b in gross profit, up 38% from $1.13b a year ago. That beat Wall Street expectations of $1.53b. Block also said in a letter to shareholders that its company showed strong growth, even as other payment companies have warned about upcoming slowdowns due to macroeconomic effects. Read more
Powerball math: winner faces inflation dilemma on $1.5b payout - As Americans flock to buy tickets for the next drawing, it’s a good idea to think about how you would manage that much cash in the extremely unlikely chance that you win. Bloomberg says it’s no small task, and inflation, interest rate hikes and a looming recession make it that much harder. Read more
Industry News
JPMorgan wants to disrupt the rent check with its payments platform for landlords and tenants - The bank is piloting a platform it created for property owners and managers that automates the invoicing and receipt of online rent payments. JPM hopes to gain traction by offering users valuable insights through data and analytics, including how to set rent levels, where to make future investments and even screening tenants. Read more
BlackRock opens door for retail investors to vote in proxy battles - BlackRock will allow retail investors to vote on proxy battles for the first time as it fends off criticism that its stance on environmental, social and governance issues is at odds with some of its shareholders. Read more
Apollo Global hires Anchorage Digital as crypto custodian - Apollo is expanding its exposure to crypto and other digital assets through a partnership with federally chartered crypto custodian Anchorage Digital. Importantly, despite a decline in the price of bitcoin and other cryptocurrencies this year, institutional investors continue to show an appetite for making crypto a part of their portfolios. Read more
Expect a wave of private tech M&A in 2023, Goldman bankers say - Consolidation among private tech firms is set to pick up—especially among startups that had to abandon hope of going public this year, according to top Goldman Sachs bankers. Read more
SEC obtained record $6.4b in monetary sanctions in past fiscal year - While the number of enforcement actions filed by the SEC remained steady around 700 in fiscal 2022, the agency obtained orders for some of its highest fines ever and claimed a record $4b in civil penalties. Mr. Gensler, a Democrat nominated by President Biden, said he wants to deter Wall Street firms from viewing regulatory settlements as a cost of doing business. Read more
CZ suggests Binance Pay as ‘solution’ for crypto payments on Twitter - Crypto exchange Binance has plunged $500m into Elon Musk’s takeover of social media platform Twitter, with a view to giving crypto a “seat at the table.” Now, Binance CEO Changpeng ‘CZ’ Zhao appears to be mulling a deeper integration of the exchange and the social media platform. Read more
FTC brings action against CEO of alcohol delivery company over data breach - The FTC in the US plans to take the rare step of bringing individual sanctions against the CEO of alcohol delivery company Drizly for data privacy abuses, following allegations that the company’s security failures under his watch exposed the personal information of about 2.5m customers. Read more
Cinven to acquire TaxAct - International private equity firm, Cinven will acquire TaxAct for approximately $720m. Following closing of the transaction, Cinven will bring the business together with existing portfolio company Drake Software under a single holding company. This will create a full-service tax ecosystem provider with the scope to use the resources and shared principles of the combined businesses to innovate and support their complementary professional tax preparer and individual tax filer customer bases. Read more
Fidelity to open commission-free crypto trading to retail investors - The service, called Fidelity Crypto, will allow investors to buy and sell bitcoin and ether and use custodial and trading services provided by its subsidiary Fidelity Digital Assets. Users will be required to maintain a $1 account minimum. Read more
Why the future of the computer Is everywhere, all the time - The WSJ digs into ‘Ambient computing’ and its promise to change how we interact with the world. But there are still a lot of challenges—and concerns—to overcome. Read more
In other lottery related news - Chinese lottery winner keeps $30m jackpot secret from wife and child! - A man in southern China is keeping his 219m yuan ($29.9m) lottery jackpot a secret from his wife and child, saying he was worried that the winnings might make them lazy. The man identified only as Mr. Li went alone to the lottery office to claim his prize. He wore a bright yellow costume that covered his head in photos showing him accepting the prize. Read more
Select Financings
Arta Finance - California based alternative assets investing platform raised $90m in Series A funding led by Sequoia. Read more
Attain - Chicago based commerce data platform raised $25m in Series B funding led by Mercato Partners. Read more
Braavos - Tel Aviv based company building a self-custodial wallet on StarkNet raised $10m in Seed funding led by Pantera Capital. Read more
Cover Genius - New York based embedded insurance startup raised $70m in Series D funding led by Dawn Capital. Read more
Decentro - Bengaluru based API provider raised $4.7m in Series A funding led by Rapyd Ventures. Read more
Dropit - London based retailer inventory unification platform raised $25m in Series C funding led by Vault Investments. Read more
Evmos - Berlin based Ethereum virtual machine hub company raised $27m in Seed funding led by Polychain Capital. Read more
Fintecture - France based B2B payments digitization company raised €26m in Series A funding led by Target Global. Read more
Fringe - Virginia based HR tech startup offering customizable employee benefits raised $17m in new funding led by Origin Ventures. Read more
Givingli - California based digital card and gifting platform raised $10m in Series A funding led by Seven Seven Six. Read more
Haven - New York based mortgage servicing software company raised $8m in Series A funding led by Fifth Wall. Read more
InterPrice Technologies - New York based capital markets funding platform raised $7.3m in Series A funding led by Nasdaq Ventures. Read more
Invygo - UAE and Saudi Arabia based long-term car subscription service raised $10m in Series A funding led by MEVP. Read more
Lama AI - New York based business lending platform raised $9m in seed funding led by Viola Ventures. Read more
Link Payments - Florida based digital payments startup for the insurance claims market raised $3m in Seed funding led by Grand Ventures. Read more
Loop - Chicago based payments platform for the shipping and logistics industry raised $30m in Seed and Series A funding led by 8VC, Susa Ventures and Founders Fund. Read more
Money Fellows - Egypt based company digitizing money circles raised $31m in Series B funding led by CommerzVentures. Read more
Plend - London based ethical lending company raised £40m in Seed funding led by Active Partners. Read more
RakkaR Digital - Singapore based crypto custodian raised $10m in Seed funding led by SCB 10X. Read more
Retirable - New York based retirement planning solutions provider raised $6m in new funding led by Primary. Read more
SmallSmall - Nigeria based proptech company raised $2m in new funding led by Oyster VC. Read more
TouchBistro - Toronto based restaurant management platform raised $110m in growth funding led by Francisco Partners. Read more
Travtus - New York based provider of multifamily property management software raised $4m in Seed funding led by RET Ventures. Read more
Vesto - New York based treasury management startup raised $2.8m in Seed funding led by Contrary Capital. Read more
WalletConnect - Decentralized web3 communications protocol raised $12.5m in new funding led by Shopify. Read more
Zest AI - California based automated underwriting company raised $50m in growth funding led by Insight Partners. Read more
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