Chamath Palihapitiya blames the Fed for 'perverted' market conditions that benefitted him

Billionaire capitalist and so-called SPAC King Chamath Palihapitiya said the zero involvement rates the Federal Reserve allowed to persist for years created the "perverted" marketplace conditions helium benefited from astatine the tallness of the pandemic.

Speaking with Axios' Dan Primack astatine an event connected Wednesday, Palihapitiya explained what helium felt contributed to the accelerated emergence and illness of the SPAC market, the shorthand for peculiar intent acquisition companies, which created a mode for young companies to spell nationalist without immoderate of the accustomed IPO hurdles. SPACs, which grew successful popularity successful the archetypal 2 years of the pandemic, person seen a reset amid economical and regulatory headwinds. Still, determination are much than 450 deals connected the marketplace for a merger people up of 2023 deadlines, according to SPAC Research.

The erstwhile Facebook enforcement and CEO of Social Capital has helped respective companies go nationalist via SPAC, including Virgin Galactic, from which helium aboriginal sold his idiosyncratic involvement earlier stepping down from the board. Earlier this period helium closed 2 SPACs aft failing to find merger targets successful time.

"We are learning what went wrong, which is that we had a decade-plus of zero involvement rates," Palihapitiya said of the market. "That is what fundamentally was wrong. It perverted the market. It distorted reality. It allowed manias and plus bubbles to physique successful each azygous portion of the economy."

Low involvement rates mean little returns connected savings accounts, which tin promote much spending successful the economy, which tin beryllium a boon for high-growth assets.

Palihapitiya said the "free money" fixed by the cardinal slope resulted successful a "misallocation of risk," which led galore radical to misprice the hazard of their investments.

Still, Palihapitiya pushed backmost connected the thought that SPACs were deed harder than different assets, including tech stocks.

"When you supply escaped wealth into a system, manias volition physique and these manias are broad-based," helium said. "And present that we've taken wealth retired of the system, these manias volition end, and you volition find the market-clearing terms for a batch of securities. And I deliberation that that's a steadfast process. But I deliberation it's unfair to conscionable look astatine 1 plus class."

Now that involvement rates are rising again, Palihapitiya said, "The biggest happening that I learned was however overmuch of my aboriginal occurrence was astir apt not attributable to myself. So connected the aforesaid mode that I benignant of blasted Jay Powell for zero involvement rates, I deliberation I massively benefitted from Powell, and Bernanke and Janet Yellen before," helium said, referencing past Fed chairs.

"We person really had a monolithic tailwind due to the fact that we had a zero involvement complaint situation that allowed america to rise unbelievable amounts of wealth from investors who frankly had precise fewer different alternatives due to the fact that involvement rates were zero," helium said. "And what it allowed america to bash was assemblage into companies. Many of those companies had unbelievable valuations. Eventually these unprofitable businesses went nationalist and lone present are we starting to benignant retired what are bully and what are not truthful bully businesses."

-CNBC's Yun Li contributed to this report.

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WATCH: Chamath Palihapitiya unwinds 2 SPACs, cites precocious valuations and marketplace volatility