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How This Ends

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Re: How This Ends

#181

Post by zamalek »

cyberge99 wrote: post #137
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…

We also had a previous US administration handing out cash like candy in the form of stimulus checks.

And that's the true danger.

> it's a huge danger once a populace learns it can vote itself money. Charles Munger [1]

(This follows him saying that "inflation is how democracies die" and is followed by several historical examples)

I know several committed voters of the previous administration and an almost universal complaint of the current administration is how their _personal_ wealth is being affected. We don't [yet] have a positive sum economy: in order for someone to win, someone has to lose. In the case of the previous administration, it's future generations.

[1]: https://youtu.be/GNTczyGLdhc 3:26

Re: How This Ends

#182

Post by ironSkillet »

EGreg wrote: post #130
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…

Why would bonds and cash be wrecked? You even say that bonds would be a good deal

Previously purchased bonds will decline in relative value. E.g. say you bought a 10 year corporate bond a couple years ago, say at 2% interest. Newer bonds will be issued at a much higher yield to be attractive in a higher fed rate/inflation environment, making all these old bonds lose value in comparison.

Re: How This Ends

#183

Post by rcpt »

hackernewds wrote: post #174
chmod600 wrote: post #126

Earlier quoted context omitted.

I motice that you left out real estate from your analysis. RE is interesting because it's both an asset as well as something you can use. So if there's general inflation, it's got both upward pressure (because it's an alternative to rent from a consumer standpoint) and downward pressure (because bonds are an alternative to RE from an investment standpoint).

RE is at massive peak levels already though that buyers cannot shell out those prices, esp as mortgage prices go up.

Government is doing everything it can to prop up the assets of voters. MBS bailouts haven't stopped, Biden housing plan is all about subsidizing buyers, mortgage forbearance is as much as ever.

Will it work idk but if there's one thing the state is scared of it's voting boomer homeowners.

Re: How This Ends

#184

Post by jbay808 »

chmod600 wrote: post #126
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…

I motice that you left out real estate from your analysis. RE is interesting because it's both an asset as well as something you can use. So if there's general inflation, it's got both upward pressure (because it's an alternative to rent from a consumer standpoint) and downward pressure (because bonds are an alternative to RE from an investment standpoint).

RE is highly leveraged (people borrow money to buy it), meaning that it gets hit hard by rising interest rates.

Re: How This Ends

#185

Post by matthewaveryusa »

lettergram wrote: post #154

I kind of disagree with the analysis, largely because there’s now a large block of the world separated from western commerce. Russia isn’t purchasing goods, yet the west is giving them wealth for oil, natural gas, wheat, etc. That’s effectively wealth leaving the system and entering there’s. More over, the west is increasingly looking at China as a threat AND China has locked down a large amount of economic output. T…

Genuinely curious : Russia’s GDP is < 10% that of the US or China. What’s up with this fascination with Russia (economically speaking — the humanitarian tragedy they are creating is a different topic)? The only question is if they align with the west or with china —-they’ve already lost as a super power, and their best strategic choice is to become a prized and expensive proxy between the west and china. The thing is, china and the west _trade_, so the calculus for russia is losing on all fronts. they can inflict a decade worth of pain to europe energetically, and then what?

Re: How This Ends

#186

Post by riku_iki »

nostrademons wrote: post #163
riku_iki wrote: post #102

Earlier quoted context omitted.

there should be factors which drive it. For last year such factors are: - increased min wage - supply chain disruptions - China lockdowns: less goods on the market -> higher prices - increased price on commodities and energy All of this already included into current good prices, so there should be something more to push farther inflation.

The supply chain disruptions get worse as the China lockdowns and commodity prices make their way through the economy. When you have a supply shock on raw inputs, it takes time for that to make its way through the economy. Businesses along the way keep inventory, they've locked in forward contracts, they can eat the cost increases to avoid losing market share until they're sure the price increases are persistent. But…

> The price increases of late 2021 were triggered by the initial shock of March 2020

It was the biggest shock: panic lockdowns across the world, not just initial. Chances are that supply chains have been adapted, and current localized lockdowns in China will not make significant damage. But we will see.

Re: How This Ends

#187

Post by sgustard »

tlb wrote: post #19
omginternets wrote: post #2

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…

Fred's also the author of "Get Paid In Crypto." Yet crypto warrants no mention in his analysis of the current bubble? https://avc.com/2022/02/get-paid-in-crypto/

Re: How This Ends

#188

Post by atq2119 »

abirch wrote: post #111
Spooky23 wrote: post #73

Earlier quoted context omitted.

One drives the other.

I thought that the liquidity was driven by the money multiplier and the Fed's quantitative easing. If the fed set the interest rate at 10% but put in 20 trillion dollars into the economy there'd be bubbles everywhere.

Why would they be able to put 20T$ into the economy at a 10% interest rate? Who are the counterparties? In other words, who is taking those loans in your mind?

Re: How This Ends

#189

Post by tsunamifury »

alexashka wrote: post #82
omginternets wrote: post #2

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?

You don't. It's all useless. If you have a high paying job/lots of money, it doesn't matter. If you don't have a high paying job, it also doesn't matter. Do you see why? That leaves people people for whom it doesn't matter, but they choose to entertain themselves with horoscopes, ahem, I mean market predictions.

The outcomes for those two are significant. And those in leveraged positions even more so.

Re: How This Ends

#190

Post by MikePlacid »

gitfan86 wrote: post #93
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…

This sounds a bit like doom and gloom. While I don't disagree, it is important to look at AMZN after the dot com bubble burst. Traders fled, but people who believed in the company did very well.

> Traders fled, but people who believed in the company did very well.

Yep, I did well, and I loved to show people AMZN stock price graph, like “can you identify the dot-com crash here?”. But I believed in the company then. Big question is: should I believe in the AMZN now?

Personally, I’ve stopped using Amazon when they started to support censorship - I’ve grown up in a totalitarian country and things likes censorship are revolting to me. I never suffered after leaving Amazon using Walmart for goods delivery and B&N for books. So Amazon is not unique and irreplaceable anymore.

So, let’s ask people who continue to use Amazon - how the company is doing these days? Do you think it will go on growing?

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