E87: Emerging markets, Sri Lanka, 9.1% CPI, market sentiment, NASA's Webb telescope & more

**Chamath Palihapitiya** (0:00)
Wait, that's not even a sweater, that's a sweatshirt.

**David Sacks** (0:02)
That's not even cashmere, it looks like polyester or something.

**Chamath Palihapitiya** (0:05)
Okay, quick, Friedberg, come on the video where you're wearing the same thing as Jacob, so we can make a quick joke.
Morons. I mean, you guys are so predictably dumb, the two of you.

**David Friedberg** (0:16)
It's so itchy.

**Chamath Palihapitiya** (0:18)
Do you have a rash?

**David Friedberg** (0:19)
Jason made me buy this outfit, and I put it on, and I'm like, itching. I'm about to take this thing off.

**David Sacks** (0:24)
Polyester, wool, polyurethane.

**Jason Calacanis** (0:46)
Okay, everybody, welcome back to the All-In Pod Episode 87 Here we go.
Tons of news going on. Thanks for all the great feedback on Episode 86
We're going to start with emerging markets. Oh, and again, welcome to the program, David Friedberg, Sultan of Science. The dictator himself from his palace in Sri Lanka, his new palace in Sri Lanka, he'll be taking over over there. We'll get into that. And Sacks is in witness protection right now, apparently. Where are you, Sacks, in this white nondescript room? Can you say where you are?

**David Sacks** (1:16)
This is my soundproof padded room.

**Jason Calacanis** (1:18)
Yeah, oh, is that what if, that's what Biden's done? Your Biden derangement syndrome? They put you in an asylum?
What did he do? You rock back and forth and say inflation Ukraine, inflation Ukraine?

**David Sacks** (1:28)
No, we just had the room soundproof for better podcasting.

**Jason Calacanis** (1:31)
Oh, look at you taking the job seriously.

**David Sacks** (1:34)
I don't think it looks bad. I think it looks good.

**Jason Calacanis** (1:36)
Yeah, you can put a little art behind you or something. Just put one of your monets behind you, the ones you have in storage downstairs. Okay, emerging markets are facing some huge challenges right now. Quick primer on three types of markets developed emerging and the frontier market, if you don't know. Developed markets are considered US, Japan, Europe. Their GDP growth is lower, single digits typically. In the emerging market, it's roughly defined as developing but not fully developed. That includes countries like the BRICS, which is Brazil, Russia, India, China, and recently added South Africa. Many other markets are included in that. They were previously called the third world in the 80s. People didn't like that term.
Investors will bet on them having higher GDP growth, typically two times or three times what the developed world has. China, for example, 2019, 6% growth. US in 2019, 2.1% growth. And of course, there's frontier markets.
These are viewed as small, unstable, illiquid, generally risky. If you look at something like Kenya, Vietnam, those would fall into that category. Vietnam, 7%. GDP growth in 2019 to the US is 2%. Sometimes people like to make bets on them. Here's a nice little chart for you all to look at, and you can just see China versus Vietnam in the United States.
Since the 80s, and so why is this all important? Well, the Wall Street Journal reported last week that EMs, the emerging markets, have been feeling massive pressure. We'll get to Sri Lanka in a moment. That's a frontier market to be clear, but three things. Well, we've got probably a half dozen things going on. Let me just highlight maybe the top five, and then I'll hand it off to the besties. You have high bond and loan yields. The debt rates are increasing in the emerging markets and frontier markets. Think what happens when you got a variable mortgage or you try to get a new market, a new mortgage.
In the developing markets, the developing market investors have stopped investing in emerging markets and frontier markets, as you might suspect during a downturn, and they're even pulling money out. Then you have surging inflation. We all know about that, and we're going to talk about inflation here in the US because we got the print this morning. And slowing growth. We've also talked about this for the last six months on the program. All these problems get exacerbated when economic growth slows and it's slowing globally. And then finally, we have the potential issue of contagion. We don't know exactly what's going to happen when various countries are facing these challenges. Although we did tell you here what would happen with the Ukraine.
Shout out to Sacks and Friedberg, fertilizer, wheat, oil, all that good stuff. And it's becoming very acute. Perhaps the canary in the coal mine is Sri Lanka.
Breaking news, President Rajapaksha fled for the Maldives. And it's a state of emergency. Curfews were declared. I think that's been canceled as of the taping of this.