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How This Ends

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21–30 of 698 posts

Re: How This Ends

#21
post #3

I don’t have any good mental tools to distinguish between useful and useless economic predictions like this. How does HN navigate this kind of thing?

Be wary of anyone making firm statements about the future of anything. This article doesn’t do that. This article is merely drawing similarities with past events and concludes: > First, we need to see the economy slow down and inflation slow down. We need to see stocks bottom out and hang out there for a while. And we need to be patient. None of this is going to happen fast. This seems reasonable. Wait and see based…

> Be wary of anyone making firm statements about the future of anything. This article doesn’t do that.

Although the article does not state anything firmly, the last line of the article, as quoted below, is still an indication it predicts something:

> I would be planning to ride this thing out for at least eighteen months or more.

Re: How This Ends

#22
post #19

I don’t have any good mental tools to distinguish between useful and useless economic predictions like this. How does HN navigate this kind of thing?

Here it’s entirely about the source. Fred Wilson is an unusually smart and honest investor, and has experienced more market corrections than I have. So I weight his opinion higher than mine. I also weight his opinion higher than my favorite financial columnists because he’s the man in the arena, and focused on the part of the economy I care about — startups — while columnists have to think about housing prices and ot…

> I also weight his opinion higher than my favorite financial columnists

I don't think he's saying anything that you couldn't find in Barron's or FT.

Re: How This Ends

#23
post #8

I wonder how much irreparable damage the lockdowns did to the economy as we knew it before the pandemic. The more subjective aspects of the economy are hard to map - are people motivated enough to work? Do they feel invested enough in the future to work? Have they been burnt out by the yoyo cycle of work/lockdowns? Was their industry severely damaged and they pivoted to other careers? Like there’s a massive pilot sho…

One thing I learned is that many jobs that are considered essential are also considered dead-end. I assume that's pretty demotivating for anyone doing such a job.

Re: How This Ends

#24
I'm going to explain what has happened so far. What happens next entirely depends on how inflation continues and the feds reaction.

1. We had zero percent interest rates. This causes the value of assets with cash flows out into the future (think speculative tech, Tesla) to accelerate.

2. We had massive herding in megacap tech. These valuations are high in part because for a decade you would not have beat the index without having these names in your portfolio.

3. These valuations blew up even further because of call squeezes during the 2020-2021 bull. Tesla even managed to get itself into the S&P.

5. Then in December, the megacaps we're squeezed further until the S&P 500 had a negative return relative to price!

A lot of this occured because people remained under the impression that bond yields would never normalize. Now that they have, there is a risk free alternative to stocks.

Now for the next complications: Ukraine + Russia, economic war with China, inflation, how the fed will respond, gas prices.

If inflation continues and the fed becomes aggressive with hiking, all assets are dead. Bonds will be wrecked, stocks will be wrecked, cash is wrecked, even gold (depending on how aggressively they hike) will be dead because it's actually a really good deal to buy bonds when they yield north of 10% (if we get there).

Say the fed decides not to hike as aggressively and inflation slows, then you'll be holding the S&P 500 likely for yield than growth. In the case of a recession or further inflation, that yield may be at risk depending on the sectors you're invested in.

In this context the correction in names like Target make perfect sense. The dividend was near zero at it's price before the cut. Same thing happened in a company like Newmont mining.

Re: How This Ends

#25
post #8

I wonder how much irreparable damage the lockdowns did to the economy as we knew it before the pandemic. The more subjective aspects of the economy are hard to map - are people motivated enough to work? Do they feel invested enough in the future to work? Have they been burnt out by the yoyo cycle of work/lockdowns? Was their industry severely damaged and they pivoted to other careers? Like there’s a massive pilot sho…

Is this a bad thing to though? The pilots are doing what they eventually wanted to do. Hopefully they are happier.

As for the shortage in general: economies have to adapt. Maybe that means more robotic flown aircraft. Or train travel increases. Or people stay at home and do more virtual visits.

When you said “0 to 100 back to 0” I think that applies more to existing business models rather than how workers perceive / enjoy / want to their jobs.

Re: How This Ends

#26
> Markets have already corrected and I think that public tech stocks have already seen most of the damage they are going to see.

but then (and in the very next sentence no less):

> I don’t know if we have hit bottom

Re: How This Ends

#27
post #8

I wonder how much irreparable damage the lockdowns did to the economy as we knew it before the pandemic. The more subjective aspects of the economy are hard to map - are people motivated enough to work? Do they feel invested enough in the future to work? Have they been burnt out by the yoyo cycle of work/lockdowns? Was their industry severely damaged and they pivoted to other careers? Like there’s a massive pilot sho…

>I wonder how much irreparable damage the lockdowns did to the economy as we knew it before the pandemic.

You can also look at it the other way round:

The lockdown forced companies to establish home office, something that was overdue for up to 20 years.

This can enhance the economy much more in the long run than it harmed during the last two years. Maybe the productivity gains are big enough that they outweigh the amount of artificially generated money. Then there shouldn't be much of an inflation.

Re: How This Ends

#28
I agree we are working through an asset bubble in tech and housing - P/E's went quite a ways above the historical line, as did housing prices.

But think about the chip shortage (automotive, consumer electronics) - raising interest rates does not "fix" supply and make prices lower. Think about oil & gas markets. Think about labor shortages.

When supply is broken, it's not only a monetary policy problem. Most of these things are "U-shaped" and not "V-shaped" - they will take longer to come back.

Re: How This Ends

#29
post #28

I agree we are working through an asset bubble in tech and housing - P/E's went quite a ways above the historical line, as did housing prices. But think about the chip shortage (automotive, consumer electronics) - raising interest rates does not "fix" supply and make prices lower. Think about oil & gas markets. Think about labor shortages. When supply is broken, it's not only a monetary policy problem. Most of these…

The “chip shortage” was fake. The actual issue was inflation since the start.

Re: How This Ends

#30
post #11

Earlier quoted context omitted.

"I really don’t think anyone really sat down and thought through these issues when the lockdowns were announced." People clearly thought very hard about this. Different parts of the world came to different conclusions about it. Nobody thought that the lockdowns wouldn't cause immense amounts of economical and societal damage. The calculation was whether they would have a worse impact than letting huge numbers of peop…

Most of those deaths probably had a positive or null effect, since they primarily occurred in the 65+ demographic. edit: It is interesting to contemplate the possibility that the death of so many seniors exacerbated the inflation problem. That's a lot of assets that were previously tied up in retirement accounts and real estate that suddenly flowed into the hands of middle aged people.

You are on to something there.

Additionally, if we had people sit down and think about the situation, we would have protected and isolated the elderly instead of the insipid and endless all or nothing crusade we were handed instead.

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