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How This Ends

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Re: How This Ends

#31

Post by freediver »

fny wrote: post #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 wi…

> that bond yields would never normalize. Now that they have, there is a risk free alternative to stocks.

Treasury bond yields are 3%, inflation is 8.5%, so in real terms you are guaranteed to lose 5.5% annually if you hold bonds.

Or basically instead of risk-free gain you are holding gain-free risk.

Re: How This Ends

#32

Post by chiefalchemist »

puranjay wrote: 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 central banks have done by "printing" unprecedented amounts of money. And that is what makes this "cycle" unique (i.e., is comparing it to the 80s accurate). Is it realistic to expect the economy to "catch up" given the excessive amounts of money supply that's been pumped into it?

Re: How This Ends

#33

Post by cryptica »

Global economic problems were not caused by COVID19; it was just a convenient opportunity deflect blame away from more fundamental issues. One of the main real problems is that a decade of near 0% interest rates had led to money printing on such a scale that certain activities which would otherwise not have been profitable were able to be profitable (in nominal fiat terms)... But while these activities were reaping high nominal revenues and profits, they were destroying real value from the economy.

Eventually, the situation became clear to some people at the top but by that point it was too late to prevent a catastrophic economic crash, so when they heard about COVID19, they pressured politicians to respond aggressively with lockdowns; that way the virus could serve as a convenient scapegoat for the crash and as a justification for massive fiscal stimulus to allow the elites to quickly cash out of their investments... The elites knew that after 2008, their reputations couldn't take another beating. They couldn't let themselves take the blame again.

The unfortunate reality is that the COVID19 fiscal stimulus didn't solve any problem at all for the average person; it was purely a money-printing scheme to allow the elites to cash out by appropriating the wealth of regular citizens via the dilution of the value of their employment contracts and fiat-denominated savings.

The inflation we are experiencing now is a direct result of the elites' appropriation of public funds from the money printers.

Now we are facing some significant problems; after a decade of living in a parallel monetary universe in which irrationality, recklessness and negligence is rewarded, we have collectively lost our common sense. Our ideas about business, success, startups, finance, the economy, politics, everything is all wrong. For 10+ years, we trained ourselves to function in a totally dysfunctional environment and learned all kinds of lessons which only make sense in the context of that dysfunction.

As we head into a more contractionary monetary environment, we have to unlearn everything and re-evaluate all business relationships; we have to disregard people's past financial track records (since they are meaningless in the context of a functioning system). In fact, it seems unlikely that someone who is particularly successful in the context of a dysfunctional system would also be successful in the context of a functional system... It's a totally different skillset.

Re: How This Ends

#34

Post by creamynebula »

simonw wrote: post #11
puranjay wrote: 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 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…

I thought it was very weird how the parent comment just glossed over it all as if it wasn't an issue.

Re: How This Ends

#35

Post by fddhjjj »

fny wrote: post #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 wi…

Very clearly explained recent history. Thank you.

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

What does this mean? What is negative return relative to price?

Re: How This Ends

#36

Post by rsfern »

johnNumen wrote: post #18
simonw wrote: 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.

Current CDC estimate has 220k deaths among working age people (under 65). Maybe you’re not meaning to minimize that impact, but that’s sort of how your comment reads

Re: How This Ends

#37

Post by PaulDavisThe1st »

puranjay wrote: 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.

Reasonable enough to wonder, but not without the corollary question: how much damage would have been to the economy without lockdowns? Yes, there were no doubt many side effects of the lockdowns that were not anticipated. But we lost at least 1M people in the USA (significantly more if you use excess death data). Lockdowns may have prevented that from being anywhere from 2-5 times higher. If we had lost 3M people, we get close to 1% of the total population of the USA, and the impact of that on the economy seems potentially enormous.

Re: How This Ends

#38

Post by Geee »

This seems quite accurate, and enforces my own sentiment. Personally, I'm seeing even more doomsday scenario, but I'm not sure if that's just fear talking. I'm not even worried about the market, but I'm worried how everyone is going to actually survive, especially in poor countries. As in, how many % of the world population will die.

Both energy and food are scarce, and at the same time monetary inflation is running record-high, caused by monetary stimulus. To me it looks like we're entering an era of unprecedented global stagflation.

I could be totally wrong, and in general I trust the error-correction capability of humans, so take this with a big grain of salt. However, if wrong political decisions and monetary policies are used, instead of relying mostly on free markets, it will very likely make the problem worse.

This is based mostly on intuition. It's just how I feel right now. I don't have the tools to predict something like this accurately.

Re: How This Ends

#39

Post by tlb »

soheil wrote: post #22
tlb wrote: post #19

Earlier quoted context omitted.

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.

Maybe, but Barron's also has plenty of day-trader hype. How do you separate the good long-term predictions in Barron's from the bad ones? Read someone else. (You can optimize the process by skipping Barron's entirely.)

Re: How This Ends

#40

Post by jfengel »

puranjay wrote: 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…

Yes, they did sit down and think that through. That's their job. This is not the first epidemic. Public health departments, unlike people on the Internet, actually study the topic.

You might consider sitting down and thinking about who is making these decisions and what their backgrounds are before you pronounce that they didn't take something into account. On what basis are you making that accusation? Do you have any idea what other things went into that decision?

Perhaps they made the wrong choice. But they weren't guessing. And I don't have a lot of respect for your guess about it if you don't even know that much.

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