2022 is full of surprises. At the end of 2021, I couldn’t have imagined that 2022 would be such a tough year for tech and venture. I wish I had recorded my thoughts back then so I could do better reflections. It’s great that now I have this blog and it will be easier to look back a year from now. At the end of 2021, all the asset classes were massively overvalued. Most people were aware of it but I don’t think people expected the corrections to be so fast and violent. People might have different opinions but as an early stage investor, to me the following are the 5 biggest surprises for 2022:
Interest Rates went from 0% to 4.25% : In late 2021 when the Fed Funds rate were at zero, one of the top Fed official said the Fed will start raising rates in early 2023. Look at where we are right now. And back in July 2022, the consensus was that the Fed will raise rates to 3% by the end of year and start cutting in 2023. Look where we are right now. This is such a big surprise and has a huge impact on our economy.
Amazon and Meta laid off 11K people respectively: Many tech companies started laying off people in the second half of 2022 after huge hiring sprees in 2020 and 2021. At the beginning of 2022, people were talking about quiet quitting and the great resignation. The sentiment changed fast and now white-collar workers are worried about their job security. I expected companies without strong fundamentals would start cutting costs but I didn’t expect this would happen to Amazon and Meta.
Total crypto meltdown driven by frauds and stupidity: Cryptos were massively overvalued at the end of 2021. I expected a correction but I didn’t expect there’re so many frauds in the billion dollar crypto businesses like Celsius and FTX. All the major crypto lenders also went under: BlockFi, Genesis, Celsius. These lenders lend money to big successful *institutional investors* like 3AC, Alameda, LFG who basically gambled away all the money and are now bankrupt. I am so shocked by how stupid and grift-y the whole crypto thing is.
Cloud stocks down 80+%: Newly IPO tech stocks had a super tough 2022. Yes, they were all overvalued in 2021 but I didn’t expect so many of them went down 80+% from ATH i.e. ASAN 0.00 PLTR 0.00 AFRM 0.00 UPST 0.00 and many many others.
Startup Funding Winter: Startup valuations were very frothy at the end of 2021 and many startups could raise millions with just an idea. But now at the end of 2022, it’s a complete 180. Many startups which are growing well couldn’t raise additional funding and many will shut down in 2023. I expected a correction but the current environment looks almost apocalyptic.
The general theme for 2022 is that many investors expected a correction but what they got was a huge crash, which is triggered by the quick increase of interest rates and massive overvaluations. I am still going to make some predictions for 2023 on Friday but I expect I will get the direction right but magnitude wrong again. Magnitude is kind of impossible to get right. In general, I don’t make decisions fully based on my predictions. I make sure I don’t get wiped out even if I am awfully wrong. With that, I can say I survived 2022 but it’s a very very tough year. I am a bit dreadful of 2023 but hopefully I can survive it too.