What else do you expect when you hold rates at 0 for the better part of a decade.
how did the low rates create virtual ponzi schemes?
Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
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Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#32The problem with money at the top of the food chain is that there aren't that many places to invest. There's plenty of appetite for high risk/high reward, even if people sit on billions.
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#33if you respect something that pays out prior participants with the money from new participants, you will refuse to call it a ponzi if you don't respect something that pays out prior participants with the money from new participants, you will call it a ponzi that seems to be the entire distinction based on seeing these kind of conversations over many years, and also watching for what prompts SEC enforcement actions to…
> if you respect something that pays out prior participants with the money from new participants, you will refuse to call it a ponzi Or if you simply go by the textbook definition of a Ponzi scheme.
yes, I often say the textbook definition of a word, instead of the word, to advance a conversation and fly under people's kneejerk auto-response to the word
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#34Earlier quoted context omitted.
A Ponzi scheme is something where the payout for early investors comes from the pay-in of later investors. There's a lot of stuff with that property, from Uber to Bored Ape Yacht Club.
Don't social safety nets and pensions also meet this definition?
In theory pensions should be paying out what you payed into them. It's basically a bet that you will die before you pull out more than you put in (plus whatever interest/gains was made on your money).
Social Security is more like a Ponzi scheme in that it pays out retirees based on current income. There are some savings, but it was always a more or less direct payment of the old from the working age. The only thing that keeps it from being a Ponzi scheme is that they aren't pretending that it's some magical money making scheme that is generating "returns" to pay out to the early investors. The accounting is all front and center.
IMHO for something to qualify as a Ponzi scheme there must be a form of deception involved. Investors must think that they are realizing outsized returns and not because they are in on the scam. Obviously the guys at the top know it is a scam, but the vast bulk of the participants must be kept in the dark to keep it running.
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#35What else do you expect when you hold rates at 0 for the better part of a decade.
how did the low rates create virtual ponzi schemes?
Excessively concentrated wealth with investors who then ran out of legitimate products that could offer decent returns and forced them into riskier and "more complex" assets?
I don't know if this really works, but it does seem like overcapitalization is causing a lot of knock on effects in the economy. Housing prices being a prime example.
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#36Not a new understanding.
Chamath Palihapitiya talked about this in 2019, and others before then although I don't have references. https://www.youtube.com/watch?v=NVVsdlHslfI Warning, video is self-serving but simplistically, this is part of it. To be clear, the VCs understand what they are doing. They aren't fleecing themselves.
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#37Earlier quoted context omitted.
> A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. Which is exactly what Uber has done for 10 years. Revenue has nothing to do with it. How else do you explain people becoming filthy rich owning companies losing 10s of billions of dollars?
Googled Uber 2021 Revenue. > $5.78 billion >Uber wrapped 2021 with strong revenue growth and greater adjusted profitability. Today I guess $5.78 billion dollars is pretty close to 0 dollars right ?
Read the only thing that matters, Uber's financial statement to the SEC.[1]
Revenue from operations: $17,455,000,000
Loss from operations: $3,834,000,000
[1] https://www.sec.gov/edgar/search/#/entityName=UBER&filter_fo...
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#38Earlier quoted context omitted.
This is a completely invalid definition of a ponzi scheme. What you have described is anything that is sold on an open market that is not directly used by the first buyer. By nature, every one of those things only pays out earlier investors when later investors buy in. A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. So uber isn't a…
> A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. Which is exactly what Uber has done for 10 years. Revenue has nothing to do with it. How else do you explain people becoming filthy rich owning companies losing 10s of billions of dollars?
That's not what uber has done though
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#39Earlier quoted context omitted.
how did the low rates create virtual ponzi schemes?
Excessively concentrated wealth with investors who then ran out of legitimate products that could offer decent returns and forced them into riskier and "more complex" assets? I don't know if this really works, but it does seem like overcapitalization is causing a lot of knock on effects in the economy. Housing prices being a prime example.
So could QE and this money flooding from central banks become the new trigger for a 2008 repeat?
Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’
#40Parts? I'm quite biased here, having been in a few ventures that got absorbed by PE; "Vulture Capital" is being kind, and I maintain that I'd love to see PE as a category, regulated into oblivion. But the market writ large is mostly fine. PE I find trash.
PE might be unsavory but I don't see how it is a ponzi scheme.