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Layoffs hit crypto and real estate tech particularly hard this week

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Hey Siri, when does a “macroeconomic downturn” become a “recession”?

It’s another bleak week for startups weathering dismal tech stocks and even worse cryptocurrency prices. But let’s start with some good news: your children can get vaccinated against COVID-19!

Back to the bad news: we’re writing another weekly layoffs column, because once again, there’s been enough bad news this week that it’s necessary to round it all up.

This week, startups in crypto and real estate fared particularly badly — naturally, as mortgage interest rates rise, fewer people want to buy homes. Meanwhile, Bitcoin is nearing dangerously close to the $20,000 mark, a serious plunge from the $60,000+ prices we saw just seven months ago (I have been told on Twitter that #ItsNotAllAboutPrices).

Unfortunately, this week’s layoffs spanned beyond just those two fields, with consumer tech, fintech and food delivery impacted as well.

Let’s start with real estate

Our own Mary Ann Azevedo has been tracking the real estate tech sector, reporting on Tuesday that publicly-traded real estate brokerage platforms Redfin and Compass laid off a combined 900 employees.

“I said we wouldn’t lay off people unless we had to,” said Redfin CEO Glenn Kelman. “We have to.”

Redfin offered laid-off employees ten weeks of base salary, plus an additional week of pay for every year of service, capped at 15 weeks. They will also be paid the cost of three months of company healthcare so that they can temporarily continue coverage.

In addition to cutting 450 jobs, or 10% of employees, Compass will pause hiring and M&A for the rest of the year.

San Francisco-based rental platform Zumper also cut about 15% of its 300 employees, which mostly affected its art, sales and customer service departments, according to The Real Deal. Earlier this month, another Bay Area brokerage Side cut 10% of its staff as well.

Despite this industy-wide shakeup, some companies are still chugging along. Proptech company HomeLight raised $60 million and acquired lending startup Accept.inc this week.

Pain on the blockchain

Coinbase is suffering a slow, morale-crushing descent. After a hiring freeze, then the controversial rescinding of accepted offers, the crypto exchange announced this week that it will reduce its workforce by 18%.

Remember when we said that layoffs are a bit more bearable when you’re not a jerk to your employees? I regret to inform you that Coinbase’s higher-ups probably do not read my work.

In a letter to employees, CEO Brian Armstrong said that employees who were laid off would be notified about their status via their personal emails — they would be cut off from their corporate accounts immediately to protect sensitive data.

True, angered former employees might retaliate by leaking such info. But you know how to make them even more aggrieved? Cut them off from their work accounts with no warning and tell them they no longer have a job.

Coinbase had 1,250 employees at the beginning of 2021, when the NFT craze ushered a new wave of participants into crypto. Since then, the team had more than quadrupled.

“There were new use cases enabled by crypto getting traction practically every week,” Armstrong explained. “While we tried our best to get this just right, in this case it is now clear to me that we over-hired.”

Armstrong also added that onboarding new employees had made the team less productive in recent months.

Coinbase is providing 14 weeks of severance pay to affected employees, plus 2 weeks for every year of employment beyond one year. The platform also will offer 4 months of COBRA health insurance in the U.S., and 4 months of mental health support for international employees.

The crypto layoffs don’t end there. Exchanges that depend on transaction fees are losing their income streams because of the downturn. The $3 billion crypto-lending platform BlockFi cut 20% of its staff of about 850 — less than two years ago, the blockchain startup only had 150 employees. Crypto.com also laid off 5% of its workforce, or 260 employees (meanwhile, Crypto.com has committed $700 million over 20 years for the naming rights to the Staples Center…). Finally, Huobi Thailand is shutting down in July due to government licensing issues.

Consumer tech takes a hit, too

While Spotify is not yet conducting layoffs, CEO Daniel Ek told employees that the streaming giant will slow hiring by 25%, citing market uncertainty. So far this year, Spotify has shut down its live audio creator fund and cut its internal podcast group, Studio 4, affecting about 15 jobs.

Is WordPress design tool Elementor consumer tech? It’s saved my ass several times, so let’s go with it. Just last week, Elementor acquired Strattic, which converts WordPress sites into Jamstack, a newer web development architecture. But, citing the “rising inflation and pending recession,” Elementor co-founder and CEO Yoni Luksenberg announced that the company would layoff 15% of its workforce, mostly in the marketing department.

That brings us to ByteDance — don’t worry, TikTok is fine. Three years ago, TikTok’s China-based parent company purchased Mokun Technology, an online game developer. 101 Studio, which was part of that acquisition, was shut down this week, cutting around 150 staffers, offering the other 150 workers in the studio internal transfers. This marks a setback in ByteDance’s race against Tencent to dominate mobile gaming.

And still, there’s more

TechCrunch’s Mary Ann Azevedo reports:

Canadian fintech giant Wealthsimple, which was valued at $4 billion as of last year, is laying off 159 people — or about 13% of its staff. The Toronto-based company has been a leader in the realm of democratizing financial products for consumers, including stock trading, crypto asset sales and peer-to-peer money transfers. And now it appears that Wealthsimple is an example of another company that experienced a boom during the early days of the pandemic and is now seeing a slowdown in business.

Mary Ann also reported a 25% workforce reduction affecting 110 employees at Notarize, a startup that offers remote online notarization. Of course, this startup boomed at the start of the pandemic, but now, online notarization isn’t in as high demand.

Our own Christine Hall shared news of JOKR, an on-demand food delivery company, leaving the U.S. to focus on Latin American markets.

Christine writes:

Food delivery companies are facing tough times as funding dried up and the rush to invest into this sector, partly as a result of the global pandemic, caused it to become quite inflated and due for a course-correct. This became evident when some of JOKR’s competitors began announcing layoffs. For example, in May, GopuffGorillas and Getir announced staff reductions.

TechCrunch took a deeper look at what was happening in the on-demand delivery space earlier this month and what it means for the industry going forward.

Finance

Teacher, Police And Firefighter Pensions Are Being Secretly Looted By Wall Street

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America’s severely underfunded public pensions are allocating ever-greater assets to the highest cost, highest risk, most secretive investments ever devised by Wall Street, such private equity, hedge funds, real estate, and commodities—all in a desperate search for higher net returns that, not surprisingly (given the outlandish fees and risks), fail to materialize. Transparency—public scrutiny and accountability—has been abandoned, as pensions agree to Wall Street secrecy schemes that eviscerate public records laws.

Our nation’s state and federal securities laws are premised upon full disclosure of all material risks and fees to investors: “Read the prospectus before you invest,” is the oft-cited warning by securities regulators. Nevertheless, teachers, police, firefighters and other government workers today are not allowed to see how their retirement savings are managed or, more likely, mismanaged by Wall Street.

For nearly a decade, the United States Securities and Exchange Commision has warned investors that malfeasance and bogus fees are commonplace in so-called “alternative” investments and, more recently, Chairman Gary Gensler has called for greater transparency to increase competition and lower fees.

Gensler has asked the agency’s staff to consider recommendations on ways to bring greater transparency to fee arrangements in private markets. “More competition and transparency could potentially bring greater efficiencies to this important part of the capital markets,” he said. “This could help lower the cost of capital for businesses raising money. This could raise the returns for the pensions and endowments behind the limited partner investors. This ultimately could help workers preparing for retirement and families paying for their college educations.”

Gensler has stated he would like to see a reduction in the fees these investments charge and has also commented on industry abuses such as ”side letters” which permit private funds to secretly give preferences to certain investors—preferences which harm public pensions.

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But that’s not good enough to protect public pension stakeholders.

No one—including the pensions themselves—seems to care that the government workers whose retirement security is at risk are being kept in the dark.

The SEC needs to do more—actually alert public pensioners as to those abuses the Commission knows full well are rampant, at a minumum. Advise them, Chairman Gensler, to demand to see and read prospectuses and other offering documents related to their hard-earned savings.

Does the SEC think it’s kosher for Wall Street to conspire with public pension officials to withhold this information from investors—any investors?

Since my 2013 forensic investigation of the Rhode Island state pension exposing gross mismanagement by then General Treasurer Gina Raimondo which I accurately predicted would cost workers dearly; my 2014 North Carolina state pension investigation exposing that $30 billion in assets had been moved into secretive, offshore accounts and, most recently, my investigation of the State Teachers Retirement System of Ohio, I have provided my expert findings to the SEC staff for their review. Each and every public pension forensic investigation I have undertaken has extensively discussed Wall Street secrecy schemes that enable looting. In my book, How To Steal A Lot Money—Legally, I quote disclosures from SEC filings that detail industry abuses.

Join me, Chairman Gensler, in giving government workers a clue, a glimpse, a peek, at the alternative investment abusive industry practices that are carefully guarded by Wall Street and being hidden from them.

Teachers, police and firefighters deserve a fighting chance to protect their retirement savings.

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Finance

It Is Time To Buy Bonds

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US 10-year note prices are likely to rise through August. The monthly histogram below shows that July and August have been the two strongest months for the note price.

Monthly Return- US 10-Year Notes

Blue: Average Percentage Change

Red: Probability of a rise on that day

Green: Expected Return (Product of the first 2)

These numbers are static in the sense that they change little over the years. This is only one cycle, the one-year cycle, whereas there are many cycles operative at any one time. In order to get a reading on such other rhythms, a scan is run to identify other profitable price cycles. The graph below reveals the most valuable cycles that are operative at any one time.

10-Year Note Monthly Cycle

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These cycles reinforce the seasonal tendency for notes to rise. Prices have risen in 60% to 65% of the time in these summer months. With the dynamic cycle also in ascent, the probabilities rise to about 65% to over 70%. There are similar and supportive developments in the Japanese and German fixed income markets.

The cycle projection must be confirmed by market activity. The daily graph reveals that price broke through a downtrend line.

10-Year Notes Broke Through Resistance

Here is a helpful sentiment indicator that supports the bullish view. The cover page of this week’s Barron’s points to much higher rates. Applying contrary opinion, this suggests lower rates and higher note and bond prices. The first objective is 123.0.

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Finance

Will There Be War Over Taiwan – The Next Spy Thriller

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I usually go through a rhythm of reading one or two serious books, followed by a few works of fiction and with summer on the way I wanted to highlight a few of both. In that regard I have just finished Laurence Durrell’s ‘White Eagles in Serbia’, an old-fashioned espionage thriller where the hero Colonel Methuen is dropped behind enemy lines in post war Serbia (he speaks excellent Serbo-Croat) and becomes embroiled in a violent plot to overthrow Tito.

The book is a warm-up to reading Durrell’s ‘The Alexandria Quartet’, a work that nearly won him the Nobel Prize. Durrell was part of an interesting Anglo-Irish family, who largely considered themselves Indian – his brother Gerald, the naturalist and writer, touches on this in ‘My Family and Other Animals’.

Thrillers

Though I am not an expert on these matters, I found ‘White Eagles’ a more realistic account of espionage than much of what we see in the media today (Mick Herron’s ‘Slow Horses’ is good), and overall it is a tale of derring-do that is more in keeping with the work of the founding fathers of the genre – Eric Ambler, John Buchan, Erskine Childers and Ted Allebury for example.

It also made opportune reading given what seems to be an epidemic of espionage – with reports of the Chinese hacking group APT40 using graduates to infiltrate Western corporates and notably the admission by the head of Switzerland’s intelligence that Russian espionage is rife in that country (notably in Geneva – for which readers should consult Somerset Maugham’s ‘Ashenden’ as background material).

These and other trends – such as the outbreak of a heavy cyber battle last week (against Lithuania and Norway for instance) and the increasingly public ‘clandestine’ war between Israel and Iran (they have just sacked their spy chief) point to a world that is ever more contested and complex.

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Secret World

One of the new trends in the space is cyber espionage – both in the sense of stealing state and industrial/corporate secrets, influencing actors (such as the manipulation of the 2016 US Presidential election) and outright acts of hostility such as the hacking of public databases and utilities (i.e. healthcare systems). Here, if readers are looking for some serious literature I can recommend two excellent books – Nicole Perlroth’s ‘This is how they tell me the world ends’ and ‘Secret World’ by Christopher Andrew.

I am personally more intrigued by the difference between a spy and a strategist. A spy’s work could well be described as the pursuit of information about someone who is acting with a specific intent, as well as a sense of their reaction function. There are plenty of examples – from Christine Joncourt (‘La Putain de la Republique’) to Richard Sorge (see Owen Matthews’ ‘An Impeccable Spy’).

In contrast a strategist may try to plot trends and the opportunities, spillovers and damage they may cause. The US National Intelligence department is good in this regard, becoming the first major intelligence agency to publish detailed warnings on the side effects of climate damage.

Spies and strategists might work together, but history is full of examples (LC Moyzisch’s ‘Operation Cicero’) where intelligence fails to make it through the strategic process or is simply ignored for political reasons (might the early warnings on the invasion of Ukraine be an example).

Asia next?

In the spirit of the Durrells and Flemings of the world, what issues might be of interest in terms of digging into unknown knowns and unknown unknowns. Here are a few ideas, most of which are Asia focused (we might see an uptick in Asia focused thrillers).

On the diplomatic front, an interesting recent development was the visit of Indonesian president Joko Widodo to Ukraine, and then Moscow. It was a rare visit to Ukraine by an Asian leader and potentially marks the emergence or at least aspiration of Indonesia (population 273 million) as an emerging world diplomatic player. What has intrigued me so far is that there has been little coordination by the populous emerging (largely Muslim) nations (Nigeria, Indonesia, Pakistan) in the face of high energy and food prices, and that potentially Widodo could play a unifying role here.

Then, still in Asia, but on a more deadly footing, if the Western commentariat is to be believed, China is preparing an assault on Taiwan, and looking to learn from Russia’s military errors in this regard. Other countries are reacting, and I suspect that there will be much intrigue around Taiwan’s ability to acquire sufficiently powerful ballistic missiles that could strike the coastal cities of China, and relatedly how long might it take Japan to produce nuclear missiles (my sources say they could very ambitiously do it in five months!).

So, whilst the espionage literature of the 20th century has tended to be focused on Geneva, Berlin and London in the 21st century we may find ourselves reading about ‘behind the lines’ exploits in Jakarta and Tanegashima.

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