71–80 of 95 posts
There's one thing I can guarantee though: we are almost certainly in some kind of bubble. It may not be a tech bubble, but bubbles are just a fact of economic life.
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> investors would rather hold scarce assets such as equities and real estate than a rapidly diminishing percentage of the money supply (i.e., cash) Do you have any data to back this up? It is my understanding that the demand-for and holding-of cash (specifically the USD) reached epic proportions in 2008 (as happens during financial crises, hence the need to print) and remains very high.
At the same time as this tech boom, S&P 500 companies are (I'm told) busy borrowing fistfuls of money in order to pass it on to shareholders through dividends and share buybacks. That seems to suggest that investors are happy to have cash right now; it also puts the complaints about excess or wastefulness against the current SV boom into some perspective ...
One interesting thing about the high valuations of tech startups now is where the money is coming from. It's not stock markets. At or near the bottom (or is it top?) of this "bubble" funnel a lot of high valuation investments from "private" money acquisitions & other supposedly smart money, like the recent AirBnB investment. Were $10bn valuations possible without public markets before recently? Does that make us daff…
> One interesting thing about the high valuations of tech startups now is where the money is coming from. It's not stock markets. See, I think that it is coming from the stock markets. These valuations are there because the investors think that they can dump the stock onto the market for above that amount. Look at KING--investors in KING knew that the jig was up, they dumped it onto the stock market and got out. $10b…
I generally agree with fred that monetary policy is driving valuations. However, I think it's not quite as simple as he describes (although he may be intentionally simplifying for his audience). It's true that financial assets compete with each other for investors. So when the Fed reduces the yield on Treasurys or MBS, the marginal investor will rotate to a riskier asset. This will create a chain reaction that eventu…
Paul Krugman argues that there's too much money chasing too few assets. Combined with low interest rates we have a bidding war for anything that isn't Zynga. Even Greece has seen money pouring in recently because, really, where are you going to put $10B?
And why are there too few assets? To put the question another way, why is it that, even though the Fed has given banks $2.8 trillion in quantitative easing, the banks can find nothing better to do with it than to leave it in their accounts at the Fed earning 0.25%? Is there really nothing more productive going on that they can loan money for?
My worry is that I don't see any "mainstream" economists asking this question.
http://blog.peterdonis.com/rants/non-beatings-will-continue....
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When the fed raised rates the last time ,stepwise & slowly it didn't work as planned and I think they're going tohave a helluva time normalizing. 2)Keeping savings is putting money to work . (sure I'd rather be a VC) I just believe Peter schiff on this. That notional value didn't help AIG. The pt. Is that nothings changed in the financial system. 1 quad means things are riskier than ever.
> When the fed raised rates the last time ,stepwise & slowly it didn't work as planned You mean how when they raised rates in part to prick the housing bubble? How did it not work "as planned"? When the economy heats up and inflation is a risk, rates will rise. This is the business cycle. > I just believe Peter schiff on this. Being as how he's been wrong on just about every public prediction he's made, and his hedge…
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Keep in mind that this generation of startups is delaying IPO as long as possible. The main reason appears to be a desire to delay public company reporting requirements, not a lack of capital needs. Since the IPO market remains strong, a set of new investors has entered the market to play this "public/private arbitrage" opportunity, buying private stock shortly before IPO for apparently* sure gains. This group of pla…
That's the straightforward reason, but it doesn't sound big enough to me. First, AirBnB just got valued at 10bn. FB's IPO broke valuations records. Reporting requirements are a drag and I'm sure they impact IPOs on the margin, but 10bn is not marginal. Reporting for a company like AirBnB is not that hard. They have a straightforward business model with one business. It's not like they have 50 years of hair, cross own…
This is the most honest article that I've seen from a mainstream financial figure about why valuations are so high. ZIRP (zero interest rate policy) means that money is near worthless to financial institutions that can run the carry trade on Treasuries, or other carry trades involving foreign exchange. VCs manage money for those guys, along with pensions and other enormous concentrations of capital. What you want are…
Can you offer a good book on that coherently explains US federal monetary policy? You have a good handle on what's going on. I still don't quite understand it.
> I have no idea when and if that will happen.
Apparently, neither does anyone else, including the Fed itself who's been predicting a rise since 2010 or so: http://www.zerohedge.com/sites/default/files/images/user5/im...
This is the most honest article that I've seen from a mainstream financial figure about why valuations are so high. ZIRP (zero interest rate policy) means that money is near worthless to financial institutions that can run the carry trade on Treasuries, or other carry trades involving foreign exchange. VCs manage money for those guys, along with pensions and other enormous concentrations of capital. What you want are…
Can you offer a good book on that coherently explains US federal monetary policy? You have a good handle on what's going on. I still don't quite understand it.
I would start from federalreserve.gov and go from there. There's also an educational site set up by the Fed here: www.federalreserveeducation.org/about-the-fed/structure-and-functions/
Once you get it straight from the horse, you can go out from there. When people ask me this question I start there, because it has official authority and is usually more direct than other more opinionated sources. If you talk about it from sources other than the Fed most of the time you'll get a lot of incredulity because the system is counter-intuitive.
If you want to duel perspectives, you can read both 'A Monetary History of the United States' by Milton Friedman and Anna Schwartz (http://www.amazon.com/Monetary-History-United-States-1867-19...) and 'A History of Money and Banking in the United States' by Murray Rothbard (http://en.wikipedia.org/wiki/History_of_Money_and_Banking_in...), which draw nearly opposite conclusions, although both agree that the pre-Fed eras were rife with major crises caused by poorly managed banking schemes.
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Paul Krugman argues that there's too much money chasing too few assets. Combined with low interest rates we have a bidding war for anything that isn't Zynga. Even Greece has seen money pouring in recently because, really, where are you going to put $10B?
> too much money chasing too few assets And why are there too few assets? To put the question another way, why is it that, even though the Fed has given banks $2.8 trillion in quantitative easing, the banks can find nothing better to do with it than to leave it in their accounts at the Fed earning 0.25%? Is there really nothing more productive going on that they can loan money for? My worry is that I don't see any "m…
Am I convinced that QE is a bad thing? No; I'll have to think about it. But at least I have some idea now of what the argument against it is.
(Like most of us, I'm no more than an armchair economist, but I do find it interesting.)
