The Ramifications of Credit Suisse and SVB

lumas sales hits fixed income. John Roe of el JIM covers the macro picture and how it affects your tech exposure, plus how the SVB collapse and bank crisis contagion could lead to the unraveling of fintech liquidity. We'll discuss with Jojau of Millennia Capital and we'll get the outlook on risk sentiment. Broadly, We're going to dive into the state e venture capital investor as clouds loom over the industry,

so a constan CLEO Capital Managing directs there. So let's turn back to credit Swiss shares record drop hitting a record low credit default swaps or insurance against the fault also trading above financial crisis levels. Let's bring in Bloomberg's Marry and Half Tameya from Zerich for more on this. What are the latest moves when it comes to Credit Swiss and what do we know about the health of this bank. So we've got about half an hour until the market closes, so we'll see where the stock ends

up then. But it has been plummeting today and that's off the back of some comments from one of their anchor investors in the Saudi National Bank earlier today talking about their stake in the bank and their ability their

non ability to increase it more than ten percent. But in reality, what we're seeing is is a broad reaction across the European banking sector, with all stocks down off the back of someone certainty with what happened with Silicon Valley Bank in the US and someone certainty around what you know, how stable European banks are, And of course with Credit Suiss, you always have to add a layer to that with the fact that it's going through a very difficult restructuring right now and has lost a lot

of confidence of its investors and clients. Marion Great Reporting matt a course US felled in bringing that exclusive which sparked the whole concern over Credit sus Marian half Toman, We thank you very much. Indeed, let's warn it out. Let's bring in EMOTIONALI Bassak who well, maybe yesterday we thought had maybe the past was worse behind us when it came to Silicon Valley Bank, and now we into yet a further bit of contagion when it comes to

europeying financial it certainly does. And the thing it's important here is this is not a bank far far away. This is a globally systemic financial institution with big presence in the United States, with counterparties across the world and

clients across the world. So seriously, this is a very serious situation to see a bank under this kind of stress, because anyway you cut the pie here, you have the shares trading out record lows, you have the bonds really trading very low for again, a globally systemic institution, and the credit default to ops so widening out to levels on scene before. So a lot of records being faced by Credit Suez and therefore causing concerns in the market

about it. There are sources of mind that say that this feels worse than Silicon Valley Bank in a lot of ways. Remember, for a globally systemic financial institution, there are backstops here. But there's some really interesting color that's worth noting, Caroline, And it's this my sources say, for Silicon Valley Bank, for example, if things kind of moved quickly in the pursuit of a sale before the deposit or flight, it would have been easier to get the

job done. But you know, you have to wonder about what that looks like for credit, Sueeze. At what point do you reach a point where things get so bad that they're so hard to turn around? Right now, they are still obviously fine when it comes to their own liquidity, So we have to keep an eye on what the depositors do at the end of the day, given their

capital sources here look very strained. And I mean when the readacross is for the tech community US well, and that the idea that everyone was sort of too concentrated a risk. What's the read across when it comes to credit sweets And indeed for our own technology community, well, we know that venture firms large and small, and the number of tech companies are still trying to finalize their banking. The read through from what's happened with SPB to Credit

Suite now is deposit outflow risk, right, Shinali. That is still where we're looking, whether it's Europe or First Republic here in the States. You want to hear something crazy too, But people forget this. Credit sweet was one of the biggest members of the market when it came to financing, so to the extent people were worried about Silicon Valley Bank and the exit for the market, Credit Swiez was one of the biggest underwriters of spacks in a hot market.

They were a banker to a lot of the world's wealthy technology firms. They helped disseminate those pre IPO shares that pre IPO equity two founders across the world to billionaires across the world that we're able to get in early on a lot of these trades. It has a huge ramification to financing markets with an exit of a bank like this and ed I mean also, we just had the CEO of Credit Smison yesterday saying that they did well from some of the deposits coming from Silicon

Valley Bank to their own lender. Right. But what you need to realize on credit sweet and we'll get to this later in the show. All of this started happening back in the fourth quarter or sooner when it came to client assets and liquidity concerns. It's just the last five days have been astonishing. Bloomberg Scenali Bassack, you are coming back later in the hour. I want to bring in John row Though, head of multi asset funds at Legal and General Investment Management LGYM, multi asset fund with

eighty five billion dollars in AUM. John, let's start here. Are we seeing a de facto tightening in this market? Is that what the concern is? Yeah, we're definitely seeing Kara, I think we lost John. So I'm going to jump in here and just say, you know, John, I think you're back. Please carry on. Sorry. Oh yeah, and so yeah, I think we are seeing a tightening and little feat three for several quarters. So we're seeing not just in the American market, but we're going to see it in

Europe as well. I mean that there are less kind of US and European rate hikes because more of the tightening can be done through a tighter financial conditions and learning standards. The issue the handwringing is that the Federal Reserve is having to hike rates and it's going to break things. Ultimately, How bad would a credit squeeze breakage? B Yeah, I think on the inflation side, that's actually

been starting to look a bit better. We've had improved participation in the US, so the US labor market datas look quite good, and there's been some softening in some of the inflation data before today, which was clear in this. On the upside, I think though that oh, we're having some technical difficulties with John at the moment. We'll go get back to him in a moment. I think one of the key issues for me ED is thinking about the broader impact across asset is the bond market move.

We know that John has exposure not only to now stack futures but also within his multi asset funds. He looks particularly at the bond market when we're seeing yules move so much. Yes, this is about contagiu risk when it comes to banks, but it's also been in a large part about some of the PPI reading that we got today. The macro data points we still get and it all goes back to the FED. That's why the

reset on expectations was so important. Yes, it's a really basic idea, higher rates discount pres eventually of cash flows. But actually I think we're really focused on the short end when it comes to policy sensaive stocks. Sharlie Bassek, I think you're still with us out in New York. What are you watching right now? Broadly in the sexes you covered? Forget credit Swiss is an isolated incident. But what are we hearing from the US banking sector in particular?

I'm glad you asked this because I asked, what are the pain trades right now? Is there anything that you could buy in this market? And I'm hearing things like gold ed You know, this is how tough this market is that even safe doesn't feel that safe right now. Credit trades, investment grade trades, are these under pressure in a market like this, Even some of the big regional banks here. Remember we face that downgrade for a First Republic.

We've been talking about this a lot. First Republic was also a bank that many people move money to in the wake of Silicon Valley Bank. But the pressure on deposits here is what caused that downgrade. So the bonds had been trading lower. The stock had been trading lower after those rebounds we saw yesterday, So again, what is safe is a huge question in this market. I think one other thing I'm very curious about is the pain

that might be felt. They call it the carry trade, and that is remember at the end of last year, we saw all the tech community feel a lot of pain in the hedge fund world, but the macro traders had come roaring bath because of the volatility and interest rates and commodities in asset classes around the macro world. However, now it looks like some of those trades are unwinding, and by the way, they're levered trades, which means they're

used often on borrowed funds. So we are expecting a little bit more pain among investors and a broader set of investors, even the ones that had one out last year. To what extent that pain could be is a huge question mark. And Shannani hindsight's a beautiful thing. What we've had some of the biggest names in finance way, and you've heard from Larry Fink today talking about some of

the domino effects, the worries about financial crisis. More broadly, you've heard of course, from the likes of Bridgewater Associates founder as well Ray Dalio talking about how maybe indeed SVB was some sort of canary in a coal mine. Interesting me. Kathy Wood weighing in on Twitter, of course yesterday, of course, she says, now it is obviously glaringly clear that some sort of bank crisis was coming our way.

But ultimately, did you feel that it was so hard to tell because people got so complacent with the market. If you took a look at how many banks had taken advances, for example, from the federal home loan banks, which is not you know, standard behavior to see in the billions as done in the last year or so, there was a lot of it, and it's really hard

to calculate. You would have to go through the regulatorial filings of each of those banks separately to really get a sense of how much was borrowed at the end of the day and which banks were really borrowing to that extent to make sure that they had liquidity on hand here in the case of a dire moment. These are dire moments. Again, I think what's hard for me and I got a little criticism for this, this idea

here that this is not two thousand and eight. Well, because there have been so many micro crashes leading up to this moment, and there has already been federal intervention. Remind you in the United States what that looks like in Europe as well, and how much half global leaders have to kind of step up and stem some of these concerns. That creates a rock and a hard place when the market is still worried about the FED and in the inflation and the trajectory of interest rates. So

everywhere you look there are kind of issues to go around. Wow. We heard, of course from Cliff Fastness, who was saying, if you look at the ball market, that's showing GFC two thousand and eight warriors, Maybe the equity market not so much. Shinale. We are so thankful for your expertise day and day out. Welcome back to a special edition of Bloomberg Technology. I'm at Ludlow in San Francisco, and I'm Karine Hyde in New York. We are markets through

and through. Just before the market opened, we had that knock, that repercussion of a debt cut from SMP over to the likes of First Republic Bank. We want to get into that with cutting gook to joining us for more on well that has implied for the equity market too. Yeah, a lot of pain at Caroline, and you're seeing this across the board for regional banks. I should mention in the pre market, all of these names were higher by eight to ten percent, and now you've completely seen the

credit sweet story turn it around. First Republic is, of course our poster child for some of the pain in the regional banks, just given how similar of a profile it has to the signature bank story, and that really puts it in the focus when it comes to where the regulatory concern might line next. Nevertheless, you are seeing a move about eighteen percent lower on that stock, really leading the charge lower. The one stock you want to keep in mind that's in the green is Western Alliance.

That's really coming off of a stake, a five point three percent stake coming from Ken Griffin over at Citadel. It's the only reason that stock is in the green and not following the trend. But again, I want to go back to our poster child of First Republic, because take a look at just what it's done in the

last year or so. The dramatic drop of down about eighty percent a lot of that loss is really just coming in the last week or so, once again really showing just how much it's fallen from grace, and especially when it comes to their price to book ratios, even with that cheapness, still not catching a bid for that reason. Now, to add a little bit of salt to the wound, you are starting to see that down grade now cut to junk over at S ANDP. I had an A rating now to a double B plus and is still

on credit watch negative. The reasoning here is they're worried about outflows, kind of this mass bank run First Republic getting hit next after some of the chaos you've seen in SVP and signature. They're also pointing out that there's a little bit more dependency in terms of their structure on net interest income in instead of their fee income

from their wealth management business. That is something that sets First Republic apart from some of its peers and perhaps why it's getting hurt just a little extra when it comes to the scrutiny from regulators and of course from these credit agencies. Yeah, outflow risk at the core of that story. Numbers will continue to track this out. Bloom

Bows pretty good to thank you so much. Let's keep it going and bring in Elaine Stokes, executive VP and portfolio manager at Loo Miss Sales and Company in LA and I'll ask you the question we tried to pose earlier. Is this just broadly a de facto tightening that we're seeing play out in front of us? Yeah, I mean, I think that's exactly what we're seeing it where we are finally getting proof, right, the FED is finally getting proof that they are affecting more than just the housing market.

They are affecting the lending markets across the board. You know, Credit Swiss we still have to deal with over the next couple of days to find out just how far that contagion goes. But what has happened within the US away from Credit Swiss had already proved that point that lending has changed. People are not as willing to be in private equity, venture capital in lend to they don't need to yields and hit a point that they don't

need to. So therefore, Lane, what have you been doing when you've seen the enormous volatility not just incorporate debt, but my goodness, in US treasuries when we have on one day a more than twenty five basis point move that has then become a four day straight from the upside to the downside in terms of boring costs. Yeah, you know, it's it's funny. In times like this, we expect to be really, really active, and it's been a

little bit disappointing within the treasury market. We were running neutral in our funds and now it hit a point where we went from we went to an overdone place so quickly that I don't I don't necessarily think that what the market, the treasuring market is pricing into the market is reality. Do we really think that there are going to be one hundred and twenty five basis points of cuts by January? That seems a little overdone, But then that's a exactly what our technology viewer is trying

to get to grips with. For our viewing, the context is, you know, Loomis Sales has a storied history in bond management, You've got hundreds of billions in assets under management, and you're trying to read the tea leaves of ultimately, what the Fed does in this scenario. Does the Federal Reserve focus more of financial issues contagion bank risk, or does it focus more on inflation and some of the concerns

there that ultimately means they have to hike rates. Yeah, I do think that the Fed probably hasn't made a decision, and the Fed is going to watch what happens over the next couple of days and does credit Swiss and what's happening there take us to right. They know more than we do, but they don't know what the markets

are going to do here. I think if they were to be making a decision today with what they know, economic numbers that they don't lie but are definitely distorted by weather, distorted by some other exogenous factors, and the amount of fear that's in the market right now, I think that they would hold off. But we could see something happen in the next couple of days that settles the markets down and allows them to do that twenty

five basis points. I mean, the market right now is saying it's a fifty fifty chance, at least that's what the treasury market is saying, it's a fifty fifty chance. Reply that the Fed is going to cut twenty five business points. I do think something that's pretty oh, go ahead, Well no, no, I want to tie this together. I want to understand why this is happening right now. Let's

go to the Bloomberg terminal. I look at Credit Swiss CDs, credit default swaps trading at financial crisis above financial crisis levels to ensure against the fault. This was happening at Credit Swiss in the fourth quarter in terms of client asset outflows, liquidity metrics dropping, SVB happened, and it seems as if everyone suddenly realize again that bank liquidity is important. Why are we sort of happening Why is this happening

Wednesday right now? What's the catalyst for you? Well, clearly, when the largest shareholder comes out and says there's no way I'll put another sentence, and you fear that they know something you don't know, right, That's that, I think is the fear that's going through the market. Everything we know is that, you know, Credit Swiss is a bank that had a different type of regulation than what we then SVP it. It seems to me to be a very different situation, and it was really all about that

Lacke's confidence. It was all about a lack of confidence for the banking system and if that reverberates We're going to see more credit Swiss, more First Republics. Now, the credit markets don't seem to be saying deep dark recession in its app and right away. Yeah, very different signals coming from very different asset classes. And Lane Stokes, you're a cross of course, the corporate credit world and the government bond world. And we want to thank you so much.

We're spending some time with us exactly p portfolio manager over at Looma Sales. We thank you. Stay well, let's take a quick look at the macro picture, the repercussions of well, an investor that won't put an extra cent into credit suite. The context to the SVB crisis and the market contagion means Europe the stock six hundred having its worst day in a year, but the euro having its worst day in two years. We're off by almost two percent overall that we're lowest levels in two months.

The flight to quality, the Bloomberg dollext sows up a percentage point. Sovereign bonds they outperform d Yeah, in the tech sector and equity market, it's really interesting, like risk off, but no obvious move to safety. Gorman Sachs profitless tech only down nine tenths of a percent outperform really what we see in the equity space, in the tech sector, the underperformance really in your semiconductors, the socks down more than three percent at this point. Caroline, Yeah, and I

think the repercussions are far and wide. It's interesting that actually the NASDAC the technology sector somewhat outperforms the flight to the bond market. I think the volatility there is one that you have to keep an eye on. And this is a context in which this affects every risk taker out there. What does this mean for future deal

flu What does this mean for investing in technology? More broadly, It's notable that some of the key tech stocks do outperformed to a semi excent a Bitcoin actually remarkable amid the dollar strength and tight of financial conditions. They don't hit megacats, they hit small or keep tracking. That's all. Next. This is Bloomberg. Welcome back to a special markets edition of Bloomberg Technology. I'm Caroline Hyde in New York in

his fourth thirty PM in London. And of course we've got to keep a keen eye on the European ripple effects, the credit swee concerns it has been in a remarkable day of trading in European assets. Ed, you've got the latest. Yeah, look, banks the main driver the eurostocks Banks index down eight point five percent, biggest drop for the banks collectively since March of twenty twenty when the pandemic hit. But Credit suis, of course not traded within that index. It is swift,

but down twenty one percent, biggest drop on record. Stock trading at its lowest level on record. Also movement in currency markets euro dollar one oh five, but we're off by two cents or two percentage points. Almost what a volatile week it's actually been in eurodollar if you think about it, and then we're debating on the show whether there's this flight to safety or not. But you look at the short end on the German two year burned, we're off by five basis points two point three eight

percent banks, banks and more banks Caroline. What's remarkable is also the relative strength of technology. Off by the least in terms of benchmarks. We're off only by one point one percent on the NASDAK. But let's broaden it out to the movement in European assets. The read across to the US and global financial sector. I'm pleased to say Guy Johnson working late for US in London, Shinali Bassak on overtime here in New York, Guy in London. First

and four, just the contagion concerns around Credit Suis. It felt as though it's a Bloomberg interview that sparked this this morning. It was USAF Gamnel didn't interview in this morning, certainly sparking the latest crisis for Credit Swee. But if somebody put it to me earlier, this has been a slow train wreck. Credit Suiss has been having problems for a really long time. And you've got to remember as

well that this is a globally systemically important bank. The liquidity concerns that we've seen, for instance, in Cilicon Valley aren't there. So this is a crisis of confidence that has been emerging here. But I think what it's doing, Caroline, is forcing European investors to rethink what is happening more broadly, looking at the ECB tomorrow, thinking about the possibility of whether or not the DCB is going to go by fifty basis points, talking about tin nye of credit standards

and economic slowdown. I think the ripple effects you're seeing into other banks. Maybe less to do with contagion and more to do with the fact that maybe there's just a repricing of potential earnings going on here. Take a look at what is happening in europe bank bonds, and there's less of a ripple effect, which tells you maybe that story as well. So, yes, the credit sweet story has been significant today, but it's having a wider effect.

Maybe I'll kind of wake up call as to the ultimate impacts of this incredibly fast paced rate cycle that we're currently seeing. What I'm hearing and I read the Bloomberg Top Live blog as well, is whether you're in Europe, you're in the United States, liquidity for banks is important. We should start talking about that again, Shnalie, How is this playing out on Wall Street? How is this playing

out in US financial markets? Do you remember just a couple of days ago, ed we were very worried about the health of a lot of banks because they were facing deposit or runs. And remember that was even after this idea here you saw a sell off, I mean after the idea that Sunday night you saw that FDIC rescue. When we're seeing these kinds of strains again, there is certainly a worry about the funding and liquidity behind these

smaller banks. In particular. I think Alan Blinder, when he spoke to Guy Johnson earlier today in Bloomberg's programming, this very interesting point that, of course this is already problematic when you see a globally systemic financial institution go through this kind of strain, But the big strain would really be, and this is what we're not seeing very very importantly, is that same kind of strain go over to the

other globally systemic financial institutions. Well, well, you've see in so far until now, and what we are still hearing very very much so is that though there's been a flight to safety, that those big banks have been taking in so many deposits that they often can't even tell us how many they have because things are moving so

quickly here now, I think that leaves questions about everybody else. Yeah, but the important things you not to here is that you are not seeing liquidity as a concern for Credit Suiee. And this is confidence. It's interesting. Credit Suite is basically, we understand from the Financial Times gone to the Swiss National Bank and said we need to vote of confidence. This is about shoring up confidence. It's about buying this

bank time maybe to execute its plans. The rules are in place for a reason, and we're not seeing that. The difference between Silicon Valley Bank and what's happening with Credit Sweets is that you're not seeing that liquidity pressure. Maybe there this is a bank that is still able to function with the liquidity that it has, and maybe that is the big difference here. But what it does tell you is that there may be a bigger effect on financial conditions. And this is maybe this is what

the wider market reaction is all about. Banks are going to tighten lending standards. They are going to be potentially spooked by this, and potentially that leads to the lower earnings which may be being priced in today. And this is what systemically important means. And they might not have the wall of support coming on Twitter from big vcs, but there's certainly behind the scenes trying to get a

wall of support from certain regulators. And I think, Shannali, what next therefore, in the world reporting, the world of disclosure, are we waiting for to push this story forward? I think a few things to watch for and guys, point is very very important that this is a bank that has money and it has a lot of clients, and those clients there are are a lot of sticky clients because remember there are not a lot of wealth managers around the world that are this big. I think that

is very important. They have loans tied to assets around the globe. That is all very very important. But to Guy's point as well, these kinds of strange do tighten financial conditions very severely. And that is the commonality between both credit suites and what's happening here in the United States. There's a worry about extending credit, there's a worry about where people keep their money, and what we're saying before, there is a rewriting of what is a safe asset.

And you tweeted earlier, we're all bank reporters now. But ultimately this does have ripple effects to the world of technology. Yeah, why do we care about tied to financial conditions. It's not the megacat tech that gets hit look at their balance sheet. But everyone keeps telling us this comes out

of SVB. We will see failures in startups. They will have a working capital crunch, and so you have to look at the private markets as well, and say, how is this playing out on Main Street or Silicon Valley out here in San Francisco. Bloomberg's Johnson Shnali Bassak team effort. Thank you very much. Now, how could the SVB collapse in current global lender concerns unravel fintech liquidity? Let's bring in Bloomberg Intelligences Diet Shigera yesterday, Ui, baby, I've got

my research out. You scrambled. You're basically looking at the funding environment now as a result of what's happening. What's your conclusion? So ed the first part, Like, I am kind of surprised people are talking about contation in the banking sector and how undermined or how invisible the valley's concerns are at the moment. For what SBB has done right, I was amazed. Until Sunday evening, I did not know whether deposit holders were protected. We were waiting and we

were watching what it does. SBB leaves a huge hole in the valley, sixty five thousand startups. Finally on Sunday we heard about deposits that they were taken care of, and then what about credit? So I don't think people appreciate what a big gap this is, and how few alternatives the valley has to kind of replace it. You're covering fintech now with us in San Francisco, but you

actually spent a long time looking at the banks. And I'm trying to get the read through from what happened with SVB through to what's playing out credit sueees today. What do you make of it all? It hit a bit closer to home for me. I was at Lehman when the bank went under, and I am again amazed at how little we've learned over the years. We thought that by Sunday, if you come in and say all deposits are protected, we are good. This is not Lehman,

this is not going to have any contagion impact. Did we really think and what are we really that short sighted? At Leman? Me thought, o Gate, let's make an example out of this one bank, and then we'll see how this goes. Right with SPB, this is one bank. You're discussing moral hazard, like should we be using taxpayers money to build this build this one bank out? When you have a fire in your house, ed, what do you do do you think, Well, hope, I don't have a

fire in my house. But I get your point. How do you think about it? Do you think, okay, let me put out that fire first, or do you actually go and think, oh, if I put this fire out, the person who let the fire will never realize what mistake they made. That is the discussion they had on Sunday.

And I was amazed at how little we learned with what happened with Lemon, and how little we learned that in this environment, any confidence crisis, the way it can blow up, I'm at short of words, like loss of words. It becomes then a lesson for regulators too, Disha. And at the moment this is a difference. SVB not systemically important but was too big to ignore, whereas many are now wondering whether Credit Suace is too big to bail out.

In many ways, it's certainly too big to fail. I'm interested in the repercussions from your perspective, from a regulatory perspective when it comes to banks, but also those FinTechs too. So very simple, Carolyn, like, first things first, these companies, these partups. There's a reason why this bank grew to the scale that it grew, right, It's not like city was sitting there with open arms and banking all these startups, and while Silicon Value was poaching them away, it's very

hard for big banks to bank the startups. This is one bank that understood the value, that understood the VCS, that understood the companies they were banking, and they were supporting for forty years. Operationally risk appetite wise, there are very few companies who can actually come in and fill in that gap. Now, talking about the systemic impact of this, right, if I'm not sure whether my deposits are safe, people we're thinking that Silicon Valleys deposits will probably move to

FRB or other banks. But do you think that as a startup founder, I'm comfortable putting my money else where when I'm not even sure whether I'm going to get that back from the first bank that we had. So obviously there's a confidence crisis and I think it'll be a while before we can fix this problem convenance crisis that we see reflected in equity markets. With the biggest

fool on record for credit space in Europe. It continues to trade over here in the US on its ADLs and take Sagure is going to be looking all at some of the publicly trade of FinTechs and privately owned ones with Bloomberg Intelligence. We thank us so much bringing in her history a context of Lehman there as well. I'm pleased to say we can do yet further into the world of private money allocation, but also a history of someone who worked at the Federal Reserve at itself.

Let's go to Joe's ou founder and partner over at Millennia Capital. Eventually, fun focused on tech in private markets. You've got EXX, including FinTechs like Robin Hood MARKETA. You've got money and huge juggernauts in the private space like SpaceX. Joe, your perspective right now on the regulatory repercussions of what's happening with Credit Suite in Europe, in Switzerland, but also

what happened with SVB here in the US. Yeah, what answers the Fed begin taking our fincial conditions about a year ago, I think in the Valley, at least in the private markets, many companies have began to readjust their oppruning class. For those that haven't, I think will happened in the last week. It's sort of a rakup car. So I think by now almost I would argue most of the companies in private markets are now our prepared for a slow down late in the markets and the economy.

So now, I think in a short term many founders, you know, the one I've seen in a profoil in their network, have been opening new accounts, getting new acts to learn a credit, extending as capt runway and cutting cost. But I think in the long long term year remains to be seeing what the remiflications are. But ever huw users, I think one is that there's definitely going to be a new relatory actions coming from the fact of the

trickery to further kind of typen kind of thing operations. Yeah, I think, I think for fintech liquidity, um, you know, I would say this year will be a test of what companies are going to survive at this point in the business cycle. And in my in my view, the ones that will survive will be will come out fine. And you know, I think, uh, you know, at least you know, conversational founders, most cup founders are on top

of what's going on. Joe, you say that there was a sudden need to diversify where your money is kept. When I'm talking to founders, when I'm talking to vcs. They're saying the issue it's not as easy for a founder of a company to walk into JP Morgan and say, hey, I used to buck a Simil combounity bank. I need to put some of my funds into you. They have

two higher thresholds. How difficult is it to diversify in terms of where you put your money, whether it's a credit suite or and looking outside of there, or whether it Silicon Valley Bank. It's a great point. So across a portfolio, you know, we've run an analysis. The larger unicorn is the one that have fifty million dollars or more in cash. They've been banking with Shapen Boarding, the HSBC and your Life at City Bank even before a

SPS incident. The smaller companies, that's pretty see the series Day, the series PS. They've been banking with SVP, which tend to have and the Life which tend to have kind of a lower threshold for a minimum assets. So the later stage companies, you know, actually weren't as exposed to

SPOB versus the earlier stage companies. But a lot of the earlier stage companies, you know, have been trying to open the accounts now to your point, it is not easy to open an account with JAVEN some of the larger banks which have a higher sort of ELS threshold, And so as a result, you're seeing some of the earlier stage companies going to be away approach of public and even blanks. But you've been reporting day in day out, not only the impact on the startups, but the venture

funds themselves well. As Joe knows, if you're a firm sizeable funds, you've got more than one bank account per fund, you've got an operating cash flow fund, you've got d risk or side bank accounts for side initiatives and funds. And Joe, what we've been talking about all show long, a tighter financial conditions. How does that impact venture firms and their ability to move? Yeah, so you know we've seen this as early as a euro guy. You've a little longer art than a year ago. Aware you have

a few channels of the first kind of transmiption. Man is hitting the real ecomony in a last year or so. One is that LPs elimited partners investors in BCP funds. They've been autocating way more until fixed income spense of equities just goes is a higher guaranteed the rate of return, assuming that there's will risk, and so that the second thing is that I think the decrease in evaluations and market prices have also heard some of the kind of

the return profiles. So I think the last thing is um if this is sort of most LPs, like pension funds, have like a budget for what goes into equity, fixed income, real estate, et cetera. So Biga's venture and tech have been performing in the last ten years that they've gone over the budget. So even sounds the recent market correction, they were pulling back on allocating that equity. So with

what's happened last year, they've cut back. So LB capital in VC funds have slowed down, which is why you're seeing a slow in funding. You know, last week some of the VC funds that had their funds tied up absolutely Valley Band. You know, they would even have trouble funding start, yes, because their own funds were tied in SVV. So it's been a really interesting year for investors. Joe Zau found a partner Millennia Capital. Thank you so much for you're insight and how this is played out over

the last five days. A more coming up will continue the conversation around venture and private markets. A lot happening also in the public sector and public markets as well. This is Bloomberg. Welcome back to a special markets edition of About Technology. I'm Caroline Hyde in New York and I'm at a Budbow in San Francisco. Let's get to bloombows Katie Greifeld with the market is Katie. All of the action is centered in the bond market. You have the SMP five hundred down about half a percenter, so,

but then you look at the treasury market. Behave an asset of the world. I'm going to steal a phrase from John Farrell. It's been trading like a penny stock for the past week. You look at the two year treasury yield, that is just an expectation on where the Fed is going to go. It's down forty one basis points today. It was up twenty seven basis points yesterday. What that tells you is that all of the attention is on next Wednesday. What is your rome pal going

to do? And it feels like no one exactly knows? All right, bloom Is Katy ry felt across the numbers. Thank you. Let's keep the conversation with Cleo Capital managing director Sara Kuntz, who joins me here in San Francisco. You are one of many that breathed a collective side of relief Sunday night. But you must be quite worried still about what's happening in the banking sector. This is not good, right, you know, you don't want to wake up after sort of hey, s Phoebe's a little bit

back on track. People are getting money out. First, Republic has stabilized, you know, and then you wake up to this news out of Credit Suez and hearing that, you know that they don't really have another place to go to get more capital. That's not good in the market's reflecting that that that's been the conversation of the last Now a tighter financial conditions, how does that impact early stage companies in particular? Basically has the funding dried up

from where whichever source? It's a hard It's going to be a hard quarter to pitch in, you know, getting net new capital lot of vcs who don't already have an obligation, you know, to the money they've put with you is going to be harder than ever. And it doesn't mean it's totally dried up, and there will be tons of people starting great new companies, but this is going to be a much different fundraising environment than even a few months ago. Wolf been remarkable amid dollar out

performance on the day. Is actually resilience of crypto of bitcoin. Sarah, you're in Gemini, You're in full connect, your portfolio is looking at crypto. Is this still going to weather the storm? You know, crypto is a hedge that doesn't always act like one. But I think in these moments when people are looking around for yield, looking around for you know, what's uncorrelated to these larger market moves, bitcoin does get

popular again. And I think that you know, there's also been a flight to bitcoin, you know, away from some of the stable coins after the circle debacco last week. And also what's of interesting is the resilience is some big cat names like Microsoft now many wondering whether that's the chat GPT four announcement yesterday. The focus on artificial intelligence. I know that you're in forethought for example an AI company. Do we have time to think about AI at the moment?

You know, we do have time to think about AI, right, you know? Alphabet Google announced some really cool innovation and they're barely down today, you know, and same with Microsoft. I do think that these new technologies that have a ton of potential are going to be the bright spot for a little while moving forward. We were talking at the start of this year about checks being written. There was a momentum behind AI. Similar question, but does that

continue despite the environment we're in. I think that people are going to continue to write checks in the companies that are doing well, and I think that AI is a space that is feeling like it's doing well, and people want bright spots. You know, these vcs do have dry powder to deploy, and they're going to go after the things that feel like, you know, the highest potential return bets. Sarah Cleo Capital, have you thought about your banking relationships of late? Just to bring it full circle,

I'm looking at headline. Treasury Department here in the US is reviewing US banks exposure to Credit Suite, and the officials are in touch with European regulators as well. We understand. I think that everybody, you know, learn what a sweep

account was and then jump to them. You know, we'd already been utilizing a lot of those things at Cleocapital, and certainly, like everybody, we're paying a little bit more attention to diversifying our banking relationships because it doesn't hurt, and in situations like the last couple of weeks, it can very much help. Right Clear Capital Managing Directors Sarakin's Caroline one of the many people that jumped in a cab and raced across town to join us for this

special program. An extraordinary amount of information managed to Gardner from her from a private perspective, a public perspective, perhaps even some resilience in crypto overall, but at the moment, the resilience is in the safety of the US dollar and US treasuries today. H Yeah, and this is why you have the private market participants in right. We see how it plays out in the public markets, but the real terms impact it's on the founders on the tech companies,

and we're having all of those on this show. Fantastic what day three of our new time change or one another extraordinary day for a special markets edition of Bloomberg Technology. Don't forget so much to recap We have a podcast and you can find it on the Bloomberg terminal as well as Apple Spotify, iHeart, wherever you get your podcasts will continue to track tech and these markets. This is Bloomberg