Chamath Palihapitiya believes the strong inflation will persist.
Mike Windle / Getty Images for Vanity Fair
- Chamath Palihapitiya on Thursday expressed concern over rising inflation and the Fed’s money printing.
- The multi-billion dollar tech investor admitted he’s unsure how to invest in the current climate.
- Social Capital’s CEO said he sold 15% of his stake in fintech SoFi to focus on investing elsewhere.
Billionaire investor Chamath Palihapitiya on Thursday expressed concern about rising inflation, saying it has led him to rethink his investments.
Palihapitiya, a former Facebook executive who runs venture capital fund Social Capital, said in a letter posted on Twitter that “markets have burst into tears” and that “almost everything appears to be at all-time highs”.
However, the investor raised a number of concerns. “Inflation is also at a 30-year high,” he said. “And we are printing more money than ever and are talking about further incentives.”
The Federal Reserve is currently injecting more than $ 100 billion a month into the economy through bond purchases, and Congress is discussing the details of major new spending programs.
Palihapitiya said on his all-in podcast over the weekend that he believes strong inflation will persist and said it will be “persistent”. As giant companies like Amazon and McDonald’s hike wages sharply, he argues that doing so will force other sectors to pay more too.
Palihapitiya admitted in his podcast and again in his letter that he is not sure how to invest in the current environment. He was “completely confused,” he said on the podcast.
His thinking seems to have been influenced by Tesla CEO Elon Musk and Amazon founder Jeff Bezos, who have sold billions in stocks over the past few weeks.
“Two entrepreneurs who I consider to be the brightest financiers of our generation are taking chips off the table,” Palihapitiya wrote in the letter.
The billionaire investor added that his thinking led him to sell 15% of his stake in fintech company SoFi in order to build up some cash and fund investments in other areas of the market that he believes are “ripe for opportunity” be.
These new investments include Mitra Chem, a battery company, and Spectral and Syndica, two companies that focus on decentralized finance and cryptocurrencies, Palihapitiya said. He also expects to increase his stake in Clover Health.
SoFi was listed on Nasdaq this year after it was merged with one of Palihapitiya’s social capital blind check companies. The fintech company’s stock fell 2.6% on Thursday and fell around 2% to $ 20.57 in pre-trading on Friday.
Palihapitiya became famous in the past two years when he aggressively bet on special acquisition companies, earning him the nickname “SPAC King”. It has become a celebrity among retail investors and is now worth $ 1.1 billion, according to Forbes.
He’s nowhere near the only investor pondering inflation, which rose to a 31-year high of 6.2% year-over-year in October.
Musk has said that Tesla is feeling the pinch of higher prices and supply chain problems. Alliance chief economic adviser Mohamed El-Erian said inflation will persist and the Federal Reserve has made one of the worst judgments in history by making price hikes temporary.
Nonetheless, the US stock market has continued to march higher and continues to hit record highs. The S&P 500 is up 25% so far in 2021, recently buoyed by strong corporate earnings and signs of growth in the underlying economy upon reopening.
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