4 ms·

So many optimists on this board, talking about 'the pop won't be as devastating this time'. This time: - 30% of mortgages are underwater http://money.cnn.com/

So many optimists on this board, talking about 'the pop won't be as devastating this time'. This time: - 30% of mortgages are underwater http://money.cnn.com/2011/02/09/real_estate/underwater_mortgages_rising/index.htm http://money.cnn.com/2011/02/09/real_estate/underwater_mortg... - U6 rate for Jan 2011 is 16.10 percenthttp://www.congress.org/soapbox/alert/25908506 http://www.congress.org/soapbox/alert/25908506 - labor force participation rate at 64.2% http://www.zerohedge.com/article/labor-force-participations-plunges-fresh-26-year-low http://www.zerohedge.com/article/labor-force-participations-... - 43 Million Americans on food stamps http://blogs.wsj.com/economics/2011/02/02/some-43-million-americans-use-food-stamps/ http://blogs.wsj.com/economics/2011/02/02/some-43-million-am... In 2001: - 66% labor force participation http://www.zerohedge.com/sites/default/files/images/user5/imageroot/Labor%20Force%20Participation_1.jpg http://www.zerohedge.com/sites/default/files/images/user5/im... - 8% for U6 unemployment http://www.shadowstats.com/alternate_data/unemployment-charts http://www.shadowstats.com/alternate_data/unemployment-chart... - 17 Million on food stamps http://www.dailyjobsupdate.com/wp-content/uploads/Food-Stamps-Annual.jpg http://www.dailyjobsupdate.com/wp-content/uploads/Food-Stamp... Oh, and income stayed relatively the same, http://www.davemanuel.com/median-household-income.php http://www.davemanuel.com/median-household-income.php while food prices doubled or tripled http://www.mongabay.com/images/commodities/charts/wheat.html http://www.mongabay.com/images/commodities/charts/wheat.html http://www.mongabay.com/images/commodities/charts/chart-sugar_us.html http://www.mongabay.com/images/commodities/charts/chart-suga.... Pretty sure that once this pension/money printing funded tech bubble bursts, it will hurt even more this time.

silverbax88 16y ago
I can't see how these two sets of data correlate into a massive bubble popping, just that the reality is that the US is still trying to come out of the results of the last bubble bursting...as an example, since the fall of 2008, unemployment has not recovered, so what, exactly, is about to burst? I would think that hyper inflated values and unsustainable YOY gains in valuation for asset classes (stocks, real estate, internet companies) would be more of an indicator of a bubble.
- abrenzel 16y ago
  But don't you think we're seeing those in commodities and many stocks, including but not limited to tech stocks? You wouldn't see it in real estate, because popped bubbles don't reinflate. Whenever I see a company like Cisco drop huge %'s overnight not on a loss, but on "somewhat worse than expected" revenue, my alarm bells start going off.
  - mkr-hn 16y ago
    http://online.wsj.com/article/BT-CO-20110210-714816.html http://online.wsj.com/article/BT-CO-20110210-714816.html "Cisco's (CSCO, $19.04, -$3.00, -13.61%) fiscal second-quarter profit declined 18% with margins sliding for a fourth consecutive quarter as the company faced increasing pricing pressure in its core products and sold less profitable consumer products. " I'm seeing increased competition in a rough market driving profits down, not the warning bells of a pop.
jdp23 16y ago
I agree that the overall situation is pretty dire. In the grand scheme of things, the amount of money exposed in the tech startup bubble is pretty small -- and it's disproportionately from certain groups of people (wealthy tech startup veterans, Goldman Sachs clients). But California's counting on the tax revenue so it could catch a lot of others up in it as well. We shall see ...
- chailatte 16y ago
  Agreed, the amount of money exposed is smaller. But remember, the economy is drastically smaller as well.
  - achompas 16y ago
    Drastically smaller? If you're talking about the US economy, GDP is $5 trillion larger than in 2001. That's a 50% increase. [0] http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=gdp http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mk...
    - chailatte 16y ago
      Inflation. Gold is 7X today, wheat is 3X today, regular gas is 2X today.
      - borism 16y ago
        How much gas and wheat do you consume regularly as a proportion of your income? What about gold?
      - achompas 16y ago
        True, I read "current" as "constant." Even using constant dollars, though, our economy is 18% larger between then and now. That's not "drastically" smaller. [0] [0]http://www.wolframalpha.com/input/?i=real+us+gdp+2001+to+2010 http://www.wolframalpha.com/input/?i=real+us+gdp+2001+to+201...
- 16y ago
achompas 16y ago
This kind of armchair economics is surprisingly popular here, given that HN has a smart community. Sure, the economy is worse right now. But when you say that it will hurt "once the pension/money-printing funded tech bubble bursts," well, what does that even mean? The Federal Reserve is printing money and handing it to VCs? That's not right, banks have very high borrowing requirements and won't just lend money out freely. [0] Retirees' pensions are going to explode when the bubble pops? Tech stocks only gained 2% last year during a strong year for the S&P 500. [1] Meanwhile, the companies in question are all private, so no pensions should be involved. You have a nice if-then statement going, but the "if" is the ultimate question here. You can't just assume it away. [0] http://www.minneapolisfed.org/bb/ http://www.minneapolisfed.org/bb/ (see December and January Beige Books) [1] http://seekingalpha.com/article/231109-s-p-500-sector-performance-update-and-embedded-expectations http://seekingalpha.com/article/231109-s-p-500-sector-perfor...
- fraserharris 16y ago
  Pension and endowment funds represent some of the largest VC LPs.
  - achompas 16y ago
    Source? Example? I'm curious.
- chailatte 16y ago
  Goldman Sachs has access to the Federal Reserve's discount window.
  - achompas 16y ago
    Banks do not use the discount window unless they are about to fail. GS stock would tank if they went to the window, as any other bank should provide sufficient liquidity. There is no clear mechanism for Goldman to take money from the Fed and invest it in Facebook. Also, Goldman has used the investment bank version of the window in the past, but they've already repaid all loans. [0] [0] http://en.wikipedia.org/wiki/Goldman_Sachs#Use_of_Federal_Reserve.27s_Emergency_Liquidity_Programs http://en.wikipedia.org/wiki/Goldman_Sachs#Use_of_Federal_Re...
steveplace 16y ago
That first statistic is misleading. 30% of the homes currently financed by a mortgage are underwater. There are many homes owned outright so that percentage is much lower (about 17%). Also, food stamp program participation lags economic growth by a fairly large timeframe. See http://bit.ly/igTa7W http://bit.ly/igTa7W Finally, I'd recommend using zerohedge as a primary source. That's like citing Fox News or Mother Jones for politics. Instead, go to the source that they scraped their info from for less biased data.

silverbax88 16y ago

I can't see how these two sets of data correlate into a massive bubble popping, just that the reality is that the US is still trying to come out of the results of the last bubble bursting...as an example, since the fall of 2008, unemployment has not recovered, so what, exactly, is about to burst? I would think that hyper inflated values and unsustainable YOY gains in valuation for asset classes (stocks, real estate, internet companies) would be more of an indicator of a bubble.

abrenzel 16y ago
But don't you think we're seeing those in commodities and many stocks, including but not limited to tech stocks? You wouldn't see it in real estate, because popped bubbles don't reinflate. Whenever I see a company like Cisco drop huge %'s overnight not on a loss, but on "somewhat worse than expected" revenue, my alarm bells start going off.
- mkr-hn 16y ago
  http://online.wsj.com/article/BT-CO-20110210-714816.html http://online.wsj.com/article/BT-CO-20110210-714816.html "Cisco's (CSCO, $19.04, -$3.00, -13.61%) fiscal second-quarter profit declined 18% with margins sliding for a fourth consecutive quarter as the company faced increasing pricing pressure in its core products and sold less profitable consumer products. " I'm seeing increased competition in a rough market driving profits down, not the warning bells of a pop.

jdp23 16y ago

I agree that the overall situation is pretty dire. In the grand scheme of things, the amount of money exposed in the tech startup bubble is pretty small -- and it's disproportionately from certain groups of people (wealthy tech startup veterans, Goldman Sachs clients). But California's counting on the tax revenue so it could catch a lot of others up in it as well. We shall see ...

chailatte 16y ago
Agreed, the amount of money exposed is smaller. But remember, the economy is drastically smaller as well.
- achompas 16y ago
  Drastically smaller? If you're talking about the US economy, GDP is $5 trillion larger than in 2001. That's a 50% increase. [0] http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=gdp http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mk...
  - chailatte 16y ago
    Inflation. Gold is 7X today, wheat is 3X today, regular gas is 2X today.
    - borism 16y ago
      How much gas and wheat do you consume regularly as a proportion of your income? What about gold?
    - achompas 16y ago
      True, I read "current" as "constant." Even using constant dollars, though, our economy is 18% larger between then and now. That's not "drastically" smaller. [0] [0]http://www.wolframalpha.com/input/?i=real+us+gdp+2001+to+2010 http://www.wolframalpha.com/input/?i=real+us+gdp+2001+to+201...
16y ago

achompas 16y ago

This kind of armchair economics is surprisingly popular here, given that HN has a smart community. Sure, the economy is worse right now. But when you say that it will hurt "once the pension/money-printing funded tech bubble bursts," well, what does that even mean? The Federal Reserve is printing money and handing it to VCs? That's not right, banks have very high borrowing requirements and won't just lend money out freely. [0] Retirees' pensions are going to explode when the bubble pops? Tech stocks only gained 2% last year during a strong year for the S&P 500. [1] Meanwhile, the companies in question are all private, so no pensions should be involved. You have a nice if-then statement going, but the "if" is the ultimate question here. You can't just assume it away. [0] http://www.minneapolisfed.org/bb/ http://www.minneapolisfed.org/bb/ (see December and January Beige Books) [1] http://seekingalpha.com/article/231109-s-p-500-sector-performance-update-and-embedded-expectations http://seekingalpha.com/article/231109-s-p-500-sector-perfor...

fraserharris 16y ago
Pension and endowment funds represent some of the largest VC LPs.
- achompas 16y ago
  Source? Example? I'm curious.
chailatte 16y ago
Goldman Sachs has access to the Federal Reserve's discount window.
- achompas 16y ago
  Banks do not use the discount window unless they are about to fail. GS stock would tank if they went to the window, as any other bank should provide sufficient liquidity. There is no clear mechanism for Goldman to take money from the Fed and invest it in Facebook. Also, Goldman has used the investment bank version of the window in the past, but they've already repaid all loans. [0] [0] http://en.wikipedia.org/wiki/Goldman_Sachs#Use_of_Federal_Reserve.27s_Emergency_Liquidity_Programs http://en.wikipedia.org/wiki/Goldman_Sachs#Use_of_Federal_Re...

steveplace 16y ago

That first statistic is misleading. 30% of the homes currently financed by a mortgage are underwater. There are many homes owned outright so that percentage is much lower (about 17%). Also, food stamp program participation lags economic growth by a fairly large timeframe. See http://bit.ly/igTa7W http://bit.ly/igTa7W Finally, I'd recommend using zerohedge as a primary source. That's like citing Fox News or Mother Jones for politics. Instead, go to the source that they scraped their info from for less biased data.