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When buying the dip doesn’t work: An analysis of the dot-com crash

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Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#381

Post by imtringued »

redisman wrote: post #317
pastaguy1 wrote: post #289

Earlier quoted context omitted.

There were structural/regulatory reasons that helped the bubble grow last time, are there any indications of this now? If they are there we probably won't know until it's too late, but this housing bubble feels a little more like an everything bubble

Artificially low interest rates for a decade could have a similar effect

You mean artificially high interest rates. If interest rates fell negative then the money supply would shrink and there would be less unneeded money to speculatively buy houses with. Alas, we live in a world in which negative interest rates were banned and therefore the money supply and economy must constantly grow to raise interest rates above 0%.

I find it frustrating that people ignore basic market principles when it is inconvenient for them. Like, people get richer (everyone is saving incredible amounts of money), the population is no longer growing, there are fewer and fewer investment opportunities and yet for some reason, people think they have a god given right to high interest rates anyway, even when those are impossible to pay without inflation.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#382

Post by 5350-uiop-1130 »

Melting_Harps wrote: post #263
5350-uiop-1130 wrote: post #182

Earlier quoted context omitted.

I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality.

> I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality. You're not the only one, consider that the financial crisis was the per-cursur and the necessary backdrop for why Bitcoin was created; this system went from being an arcane, but seemingly reliable way to grow the economy up until 2008 when the house cards fell down and we realized most busine…

i totally agree

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#383

Post by trashtester »

chii wrote: post #379
trashtester wrote: post #375

Earlier quoted context omitted.

If a company was somehow set up in a way that prevented it from transferring wealth back to the owners by any means (buyback, dividends, salaries, or even creative ways, such as buying assets owned by it's owners), it's stock "value" would be close to zero, regardless of how much it owned in terms of assets. (One could imagine a non-profit trust set up this way.) In other words, the reason why a company's assets and…

> set up in a way that prevented it from transferring wealth back to the owners by any means and i noticed you omitted the method of the owner selling the share (to a third party). This is the primary way to transfer wealth generated from a company. > expectation that it will lead to dividends/buybacks at some point in the future. it doesn't need to be an expectation of such at all, as long as there is someone else i…

> and i noticed you omitted the method of the owner selling the share (to a third party).

This is not a method for the company to transfer wealth to the owner. This is a way for a third party to exchange wealth with the owner. It doesn't affect the value of the shares.

And for virtually any normal share in a company (that I know of) that either generates income or is expected to do so in the future, the share owners has the ability to extract that revenue directly through dividends, buybacks or even by liquidating the company and selling the assets directly.

This means that they discussion is hypothetical for all such companies.

If you could name one company that is being traded at a significant valuation that has been set up in a way that makes it impossible to extract value from it to its owners, I would be interested to know about it, as it might prove me wrong.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#384

Post by imtringued »

adventured wrote: post #284
mach1ne wrote: post #224

Earlier quoted context omitted.

>but it's not expensive _everywhere_. It's expensive in some of the most desirable places. The fact that the median and average house prices have exploded signifies that the housing market is in a bubble. It's not relevant that house prices have not increased equally everywhere. Ultimately, after the bubble eventually bursts, it will leave a lot of people indebted to banks with their real ownings not matching the deb…

> The fact that the median and average house prices have exploded signifies that the housing market is in a bubble. It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage. Housing is going to stay artificially expensive on a longer-term basis accordingly. Housing only deflates on a sustained basis if inter…

>It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage.

Strange, Germany did mild austerity over the 10s and the end result was even lower interest rates. The current debt to GDP is 59,8% which is perfectly "healthy". Lower interest rates mean less money is spent on interest and more money is spent on servicing the principal. The only conclusion you can derive in the EU is higher debt and more risk => higher interest rates. Yet everyone thinks we are bailing out Greece when in reality the ECB is bailing out wealthy Germans.

>One of the many consequences of forever low rates is forever artificially inflated asset prices.

You call it artificially inflated but lower interest rates don't make e.g. housing more expensive. Your monthly payment is still the same. Lower interest rates make it easier to build more housing which can reduce the monthly cost of housing over the long term.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#385

Post by imtringued »

pl-94 wrote: post #156
grey-area wrote: post #119

Earlier quoted context omitted.

Exponential curves in real assets are not sustainable.

The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.

The population isn't growing exponentially anymore and most productivity gains per capita are linear. It's only the big breakthroughs that made it exponential by getting rid of old professions and replacing them with new ones.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#386

Post by imtringued »

adastra22 wrote: post #188
grey-area wrote: post #176

Earlier quoted context omitted.

GDP rising exponentially is also clearly unsustainable. We have IMO reached a paradigm shift in central bank policy after decades of low rates and low inflation. The recent past is not a good guide to the near future in markets.

The entirety of human history since prehistoric times to the present gives evidence contrary to your claim. Human societies have experienced exponential growth since forever, with only occasional brief temporary setbacks. Even the Black Death is a blip on the exponential curve of economic progress.

>Human societies have experienced exponential growth since forever, with only occasional brief temporary setbacks.

If that were true why haven't we conquered the galaxy yet? It would only take 3% growth per year for 2000 years (numbers from memory). Oh right, it didn't happen because exponential growth is a fairy tale. It's always been logistic growth with breakthroughs increasing the upper bound.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#387

Post by 5350-uiop-1130 »

tasuki wrote: post #208
5350-uiop-1130 wrote: post #182

Earlier quoted context omitted.

I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality.

> I [...] feel like we no longer follow any kind of logic after 2008, we totally detached from reality. What does it mean we have detached from reality? That valuations are not what they should be? What exactly should they be then? Who should be deciding these things? And a bonus question: Why do you think the current valuations are what they are?

No value anymore, only speculation.

houses for sale getting 30+ bids 200k over asking, buyers waiving all contingencies including appraisal gaps and inspections

some houses going for $400k+ over asking

EV companies valued at billions of dollars with retail tripping over themselves to buy SPACs before the SPACs even announce what company is merging with them

there was no repurcussion to the 2008 crimes. have been ingested into the system, not a doomsayer but hope the most egregious speculators get bankrupted it won't happen - we are in full bizzarro clown world.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#388

Post by yowlingcat »

JKCalhoun wrote: post #79
yowlingcat wrote: post #7

Buy the dip is always trumped by "don't try to catch a falling knife." If you can't tell the difference (I am not professionally trained to) then it may not be worth the effort.

I assume catching a falling knife is at least preferable to buying the peak. :-)

An addendum is that if you, like me, are not professionally trained -- it will be impossible to discern buying the peak, a falling knife, or the dip.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#389

Post by Valakas_ »

pfortuny wrote: post #220
ArnoVW wrote: post #189

Earlier quoted context omitted.

Unless we find a way to 'produce' (the P in GDP) without increasing entropy by digging up stuff (oil, metals, whatever) and then releasing them into our ecosystem once we're done with them, those limits seem to be pretty close though. That's not just me thinking that. That's the Club of Rome, in the 70's. https://en.wikipedia.org/wiki/The_Limits_to_Growth Their conclusion at the time: "the most probable result will b…

As long as the Sun shines on (and this is essenty “for ever”), there is an increasing accumulation of energy in the planet: that is where the possibility of exponential “growth” comes.

Not so fast. Entropy is decreasing. There might be more energy, but useless energy. Energy low enough, spread out enough or with too little temperature differential that you can't do much or anything with it.

The Earth is getting solar energy sure. But it also emits energy. And a lot of what stays here is just useless heat.

Re: When buying the dip doesn’t work: An analysis of the dot-com crash

#390

Post by UncleMeat »

jallen_dot_dev wrote: post #344
farmerstan wrote: post #301

Earlier quoted context omitted.

You, and everyone that responded to you, have no idea what Juicero was. It wasn’t orange juice at all, or any type of fruit juice. It was green juice. The founder made millions selling his chain of green juice stores on the east coast so he short had a history of success. I have a friend that worked there so I even tried the product. I thought the idea was vastly overpriced, but it definitely had the chance of workin…

> It wasn’t orange juice at all, or any type of fruit juice. It was green juice. This is a distinction without a difference. It doesn't matter what the juice is called. It doesn't change the fact that it's idiotic to pay hundreds of dollars for a machine that just squeezes bags of fruits and vegetables, and needs an Internet connection to ensure you're locked in to only squeezing the company's pricy bags.

Those criticisms are all valid. The "juice is sugary and terrible for you" criticism is much less valid, since the premise was to juice vegetables.
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