‘It’s largely gonna go to waste and it distorts the market’: Billionaire investor Chamath Palihapitiya blasts the Fed and Treasury for spending billions to help companies instead of consumers

  • Billionaire venture capitalist Chamath Palihapitiya criticized US authorities for helping companies more than consumers in a Yahoo Finance interview on Tuesday.
  • “We gave hundreds of billions of dollars in all kinds of random ways,” the Social Capital CEO and Virgin Galactic chairman said about the Federal Reserve and US Treasury’s actions during the coronavirus pandemic.
  • Palihapitiya argued the interventions have distorted stock valuations and made it “very hard to be anything except long the market.”
  • He also described making bullish cases for Amazon and Tesla a few years ago and being “laughed off the stage.”
  • Visit Business Insider’s homepage for more stories.

Billionaire investor Chamath Palihapitiya blasted the US Treasury and Federal Reserve for bailing out industries and boosting financial markets instead of helping households in a Yahoo Finance interview on Tuesday.

“We gave hundreds of billions of dollars in all kinds of random ways,” the Social Capital CEO, Virgin Galactic chairman, and co-owner of the Golden State Warriors said.

“It’s largely gonna go to waste and it distorts the market,” he added.

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In a bid to offset the economic damage wreaked by the coronavirus pandemic, the Treasury made grants and loans to airlines, cruise lines, and other distressed companies.

Meanwhile, the Fed has pumped liquidity into the financial system to shore up lending and even purchased bonds issued by individual companies.

“It makes it very hard to be anything except long the market,” Palihapitiya said.

“Would I love to be isolating certain things that I think are not set up for success, or trying to buy cheap things? Sure, but it’s not possible right now,” he continued.

‘It doesn’t work anymore’

Palihapitiya argued US authorities should have focused on getting cash into people’s pockets instead of helping businesses, as consumer spending accounts for the bulk of gross domestic product.

If people received more money than they needed to live, they would buy products and services and transfer the excess cash to businesses, who would pass it on to their suppliers and so on, galvanizing economic growth, he added.

Read More: Warren Buffett’s Berkshire Hathaway struck a $10 billion deal to buy Dominion Energy’s natural gas business. Here’s why the energy giant sold.

“We did what we’ve been doing for the last 40 years, which is this top-down idea that trickle-down economics work,” Palihapitiya said. “It doesn’t work anymore.”

“It’s just a failed idea, a failed concept that’s had its day,” he added.

Federal support of corporations is also inflating the stock market, Palihapitiya said, which doesn’t help the roughly 48% of Americans who don’t own any shares.

“When equity markets go up it disproportionately helps institutional money and multigenerational money and that doesn’t have a real net positive impact on normal people,” he said.

“Putting money in the hands of those folks would have a much more positive impact,” he added.

‘Laughed off the stage’

Later in the Yahoo Finance interview, Palihapitiya shared several examples of people ridiculing his investments and predictions.

“I presented a $3 trillion market cap case on Amazon in front of 5,000 people at the Lincoln Center for Sohn and I was laughed off the stage,” he said, referring to the Sohn Investment Conference in 2016.

Palihapitiya is already halfway right on his prediction for 2025. Amazon stock has surged 60% this year, boosting the e-commerce titan’s market cap to $1.5 trillion.

Read More: The most accurate analyst covering companies like Amazon says these 7 stocks are great bets for the future of e-commerce — even as the coronavirus bump fades

“I presented a Tesla case when the stock was $200 and I was laughed off the stage,” he continued, referring to his comparison of the electric-car maker to Apple at the Sohn event in 2017.

Similarly, Tesla shares have more than tripled in value this year and now change hands at $1,390.

Palihapitiya was also mocked for buying a minority stake in the Golden State Warriors in 2011, he said.

“I invested in the Warriors and everyone around me thought I was a complete idiot,” he said.

The basketball team went on to make the NBA finals for four years straight between 2016 and 2019, and win two of those contests.

Taking another leaf out of Buffett’s book

Palihapitiya, who envisions Social Capital eventually going public and becoming a  modern-day version of Warren Buffett’s Berkshire Hathaway conglomerate, also plans to emulate the investor’s famous shareholder gatherings.

“To hold annual meetings, to see people that have owned the stock for 20 or 30 years and have done well for them and their family, it would be an enormous sense of accomplishment for me,” he said.

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