🧑🔧😰 Big Tech in Big Trouble?
Welcome back to Hump Days - the Sunday Edition. We recently posted our 2nd video on the Out of Office YouTube channel all about how casinos use psychological tricks to get you to spend more money & the economics of casinos. We went to Las Vegas to film it (heheh a little pleasure and work trip combined…) and I hope you enjoy. Make sure to subscribe to the channel if you’re interested in this type of content! It will be linked at the end of this newsletter as well.
This week, we finally got a small bounce in the markets. Regardless, fears of a recession and economic slowdown are still elevated.
This week, we saw:
What to expect from Apple’s WWDC 2022 Keynote (TechCrunch)
Sheryl Sandberg Stepping Down as Meta’s COO After 14 Years (Bloomberg)
Ford to invest $3.7B in US factories, add 6,200 union jobs in push to build more EVs (TechCrunch)
Former OpenSea exec arrested and charged with insider trading of NFTs (TechCrunch)
Introducing the 2022 Hybrid Bentley (Tech Crunch)
Layoffs Increase as Concerns for the Economy Grow
It’s been a rough month in the tech sector.
Numerous tech companies that enjoyed the pandemic-related surges in both its stock price and their business are now facing a rude awakening due to inflation, slowing economic growth, the war in Europe and shifting consumer preferences.
Companies including Meta, Twitter, and Coinbase have all publicly announced hiring freezes and even offer rescindments. Most notably this week, Tesla’s Elon Musk called for a 10% reduction of salaried staff. This announcement came after Elon told his staff to either return to the office or to leave.
“Everyone at Tesla is required to spend a minimum of 40 hours in the office per week… If you don’t show up, we will assume you have resigned.” - Elon Musk
So what will this actually look like for Tesla’s workforce?
Tesla currently has around 100,000 employees, including both salaried and hourly workers. A 10% reduction in headcount could potentially mean up to 10,000 people losing their job.
So why is Elon doing this?
Recently, the concerns of a recession have continued to ramp up.
Elon himself has said he has a “super bad feeling” about the economy while Jamie Dimon (CEO of J.P. Morgan) says to “brace yourself” and that “a hurricane is down the road, coming our way”.
The mood has drastically shifted, as companies big and small are reducing their headcount. The website, Layoffs.fyi, tracks layoffs in the tech startup scene, and what they found is quite astonishing.
As seen below, in Q2 2022, we saw the largest number of startup layoffs in 2 years. We’ve talked previously about trouble brewing in the world of venture capital, and it seemingly hasn’t gotten any better.
With the Fed beginning its plan to tighten financial conditions, it’ll be interesting to see if this layoff trend in the Tech industry carries over to other parts of the economy.
A Graph is Worth 1000 Words…
Even though the Energy sector has had a record year, it’s still historically cheap relative to the IT sector…
The spread between % change in Nat Gas price and % return of the Energy Sector is at a ~20 year high, implying that there could be continued Energy outperformance.
In Case You Missed It
This is our newest series on the 2nd channel, Out of Office! This was so fun to make and our proudest video yet, I hope you give it a watch (and a subscribe / like!)