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Capital Is No Longer Scarce

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Re: Capital Is No Longer Scarce

#21

Post by humanrebar »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

> Does society prefer Snapchat or a cure for cancer?

I generally share your concerns, but oncology and the market for donations to cancer-focused charities are surely bigger than Snapchat.

I'm not sure counting unicorns is a good heuristic for importance.

Re: Capital Is No Longer Scarce

#22

Post by harryh »

DannoHung wrote: post #14
vlehto wrote: post #4

High frequency trading gets shat on frequently. It's stupid. This is only a tool that evens out price differences across geological distance. If someone buys significant amount of AAPL stock in New York, the price goes up in NY. Then someone from London can profit by buying small amount of AAPL stock in London and selling it in NY. High frequency trading is this, but with very high speeds and lots of competition. Thi…

Oh give it a break. If you had to rest orders for a second, then HFT would evaporate.

That would push spreads apart a bit (increasing the costs of trading for everyone) but it's still clear that someone would be need to making markets. And it would still be cheaper to have computers do this instead of humans.

Re: Capital Is No Longer Scarce

#23

Post by Ashendar »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

' I think a significant amount of money is going into advertising, pointless startups, entertainment and social media.' My suspicion is that a lot of it is going into housing, driving up the costs for home buyers with no productive benefit for the economy.

Re: Capital Is No Longer Scarce

#24

Post by sunsu »

I know several local bankers who are retiring early because its too hard to make loans. They are sitting on tons of cash, but there are too many regulatory hurdles to lend the money. Loans which would have made total sense 20 years ago are no longer feasible. Many of our small businesses in this country are dying on the vine.

Re: Capital Is No Longer Scarce

#25

Post by yummyfajitas »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

It's not about 5 year return, it's about the fact that the potential cancer cure simply has low returns and huge risks. People are absolutely willing to make long term bets (e.g. snapchat, which has negligible revenue right now, and is entirely just hope for the future), they just need to be good bets.

Molecular targets are getting harder to find. Getting a drug through the FDA is insanely difficult, costs huge amounts of money, and often fails. Further, there is significant political risk once you get it through - very few countries will pay full price for your drug (mostly just the US), and who knows where the US is going?

Pharma is both a scientific and a regulatory challenge - making money involves the stars aligning.

If you want more cancer cures, make it easier to become very rich by selling them.

Re: Capital Is No Longer Scarce

#26

Post by fulafel »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

Addressing climate change is another obvious thing that seems to fare very badly in the current resource allocation regime.

Re: Capital Is No Longer Scarce

#27

Post by lordnacho »

- I don't think you can use notionals to say that HFT is allocated a lot of capital. In general, if you're hedged, you don't have to put up all the capital. A typical figure is if you're long 1M and short 1M you have to post ~200K capital.

- Having said that the financial people I speak to seem to be swimming in capital. They all seem to want someone to trade it for them, or find deals to put the money in. On the other side, it's probably never been easier to get capital for certain kinds of project, but not every project qualifies as investible due to a certain kind of bureaucratic conservatism (old fashioned CYA requirements, lack of imagination, and so on). In particular stuff that banks are retreating from is leaving a big gap in the market.

- He makes a good point that when you get smarter about using capital, you need less of it. Perhaps that's where the missing productivity went?

Re: Capital Is No Longer Scarce

#28

Post by sanxiyn »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

> The return on investment for a cancer cure is probably small.

This must be a joke. Lipitor generated $125 billion revenue for Pfizer while in patent. A cancer cure will be worth more.

Re: Capital Is No Longer Scarce

#29

Post by hellbanner »

cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

When Value is defined as "more money", then this will happen.

Money often functions as a lack of efficiency and is prone to re-produce itself. For example: if cancer was cured with a pill, forever, the total revenue from curing cancer is pill sales price * people born, which would be less than current treatment costs.

Maybe https://en.wikipedia.org/wiki/Gross_National_Happiness isn't such a bad idea.

Re: Capital Is No Longer Scarce

#30

Post by sanxiyn »

hellbanner wrote: post #29
cryptica wrote: post #20

Misallocation is a massive problem. I think a significant amount of money is going into advertising, pointless startups, entertainment and social media. Basically, we are spending huge amounts of money getting numbed out of our minds instead of solving real fundamental problems. In general, I think it reveals a deeper problem about capitalism; none of us understand value anymore (we have more junk in our lives than w…

When Value is defined as "more money", then this will happen. Money often functions as a lack of efficiency and is prone to re-produce itself. For example: if cancer was cured with a pill, forever, the total revenue from curing cancer is pill sales price * people born, which would be less than current treatment costs. Maybe https://en.wikipedia.org/wiki/Gross_National_Happiness isn't such a bad idea.

So pill will disrupt treatment market, like Red Hat disrupted Unix market. Free market encourages such efficiency.
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