Hi, and welcome to today's Bay Area Times daily newsletter. Top stories today: 1) Fed raised rates by 25 bps, but markets are not buying hawkishness, 2) Yellen says no plans for full FDIC insurance, 3) SEC to sue Coinbase, sues Justin Sun, 4) FTX recovers another $500M+ from VC investments, and 5) Microsoft launches Notion competitor Loop.

0. Data and calendar

1. Fed raises rates by 25 bps to 4.75% - 5.00%

In line with market expectations:

FOMC participants still believe that another 25 bps hike is likely by the end of the year

Powell really stressed this point: how they expect that rates be kept at around 5% for a long time. But markets are not buying it, as we will see below.

Markets think a 25 bps hike is possible in May

But markets also believe by Dec we will have -75 bps

"Some additional policy firming may be appropriate"

• Vague language that leaves space for banking tightening to replace rate hikes: Before, the FOMC said that "ongoing increases" in the base rate would be appropriate. Now, it "anticipates that some additional policy firming may be appropriate," with Powell stressing "may" and "some." He explicitly mentioned that due to the ongoing banking uncertainty, rate hikes might not be necessary anymore, as banks will tighten lending (and thus consumer demand) by themselves. - Bloomberg

Markets were loving it, until...

2. Yellen says she has not considered FDIC insurance for all deposits

"I have not considered or discussed anything having to do with blanket insurance or guarantees of deposits." - Yellen, during Senate testimony. - Bloomberg

Bill Ackman repeated his criticisms of the flip-flop:

Markets turned down right after Yellen spoke at 3 PM ET

Regional banks fell close to 6%

Given the current mess, we think full insurance would make sense, especially as its cost is "only" $117B

3. SEC to sue Coinbase alleging violations of federal securities laws

Coinbase CEO said that they will fight:

• Opportunity for pro-crypto case law. Coinbase has a $5.5B war chest to pay the best lawyers in the business and make the case that the SEC has failed to provide clear guidance on how crypto exchanges and crypto issuers can register with the SEC. - Coindesk, Coinbase

The SEC is also suing Justin Sun over TRX and BTT

• SEC alleges illegal securities offering and market manipulation: "Defendants offered and sold TRX and BTT as securities and were thus required to register those offers and sales with the SEC", "Sun also directed the manipulative wash trading of TRX to create the artificial appearance of legitimate investor interest and keep TRX’s price afloat." - Coindesk, SEC, Lawsuit

• $400K in penalties for celebrities connected to the case, including Lindsey Lohan, Jake Paul, Akon, and Ne-Yo.

4. FTX to recover $460M from Modulo Capital, $96M from Sui

• Amazing news for FTX creditors. Assuming $13B in liabilities, this means another 4% in gross recovery. - Coindesk

$5B more to be recovered from FTX's illiquid investments

• $1-3B in additional recovery is realistic. We expect the easiest recoveries to be Anthropic ($500M), as it is a successful and growing AI startup, and the other funds FTX invested in (K5, $300M; Sequoia, $200M, etc.).

5. Microsoft launches Notion competitor Loop

The news:

• Available for all in public preview

• Full integration with other Microsoft apps

• AI Copilot coming soon - Techcrunch, Microsoft

So what:

• Continuation of bundling strategy. Microsoft continues its strategy of building or acquiring new business software and integrating them into its 365 package. That makes it harder for companies like Salesforce, Notion, and even smaller startups to compete, as most large businesses already pay for Microsoft 365 (or at least Google Workspace, which also follows a bundling strategy).

• In related news, GitHub CoPilot X was announced. GitHub, a Microsoft subsidiary, said that the new version brings overall improvements, thanks to GPT-4, and AI-generated answers, chat, and voice support, thanks to ChatGPT. - The Verge, Github

6. 41% of Americans want TikTok banned, 25% oppose

And 34% are not sure:

When asked about China, 71% say they are concerned about TikTok's parent being based there

• As a reminder: ByteDance is actually a Cayman Islands company. Both the U.S. and China companies are subsidiaries of the Cayman holding. Even then, ByteDance's physical headquarters is in China, so the company is expected to have to follow Chinese law, including its authoritarian "national security" ones.

Today at 10 AM ET, TikTok CEO to testify before House

• Prepared remarks include all the expected talking points: "Let me state this unequivocally: ByteDance is not an agent of China or any other country."

• Some Democrats are ready to defend TikTok. These pro-TikTok lawmakers generally skew younger and are users of the platform. "More than 150 million Americans, including 5 million U.S. businesses, use TikTok to inspire creativity, bring joy, and support their livelihoods," says one of the groups, repeating a TikTok talking point. - Axios

• TikTok CEO profile: by the WSJ.

7. Office rents hit hard in business centers like San Francisco and Manhattan

Clearly the effect of remote work:

• Commercial real estate is not as safe as residential. People need homes, but as Covid has shown, people don't need workspaces. Of course, residential home prices could also be hit in the future, if governments start freeing up zoning laws and more residential buildings are constructed.

  • More homes would be a good thing: we must start seeing homes as products, not only investments. Increasing housing supply increases overall economic utility, as more homes are available -- even if it means price reductions. - Axios

8. Other headlines

Tech

• Mozilla.AI getting $30M from parent to build "trustworthy" AI.

• Midjourney allegedly bans journalist after Trump arrest AI photos went viral.

• RightWingGPT gets profiled by the NYT.

• Amazon crosses 200 million Fire TV devices sold.

• Ubisoft has internal AI tool Ghostwriter to help devs write game dialogue.

• Valve launches Counter Strike 2, free upgrade to CS:GO.

Business

• SpaceX plans to raise at $140B valuation from Saudi, UAE investors.

• Arm plans to significantly hike its prices, as it closes in on IPO.

• Indeed lays off 2K, 15% of staff.

• Spotify has spent less than 10% of its $100M Creator Equity Fund.

Crypto

• Bitget acquires controlling stake in wallet BitKeep after additional $30M investment.

• Circle to use Gibraltar's Xapo Bank for USDC conversions.

Washington and more

• DeSantis calls Putin a "war criminal" who should be "held accountable."

• Trump Manhattan grand jury skipped Wed session, possibly today too.

• Trump attorney to testify Fri in classified docs investigation after losing appeal.

• Trump raises $1.5M since saying he would be arrested on Tue.

• U.S. officials fear a war-fatigued world would back a China-proposed ceasefire.

• Blinken says Europe should arrest Putin and give him to ICC, if he ever visits.

• Russia launched wave of missiles into Ukraine, killing 7 in school dormitory.

9. Interesting tweets, memes, and images

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