7 ms·

They know very well that the kind of people who read these filings are not the same kind of people eagerly buying their stock at this point.

by arbuge 6y ago

SilasX 6y ago
Yeah, they’re nothing like the sophisticated, mature investors that are buying 30-year government bonds that probably won’t even keep up with inflation. To phrase less trollishly: there aren’t a lot of good investments now, and even government bonds seem overvalued.
- H8crilA 6y ago
  That's called "financial repression". Sorry that it causes you to take excessive risks, there are many like you. Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. And here we are, 143 years after Bagehot passed away. Sir, you are still absolutely correct!
  - toomuchtodo 6y ago
    Wouldn’t it be more accurate to call it “financial entitlement”, to believe that your capital would always have positive value? While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities that realize a risk adjusted return above 0. “Too much money chasing too few deals” and all that jazz.
    - H8crilA 6y ago
      I totally agree that growth and gains on capital are not a given, but: 1) The world's real GDP is still going up. Or at least has been till 2019. 2) Even if it was to slow down and remove prospects of gains on capital - it still doesn't mean that people will adjust quickly; you'd have to rewrite the entire concept of pensions for starters. 3) It seems to me that core rates are seriously manipulated down (interest rates, default spreads, equity discount rates); just look at ballooning of the balance sheets of pretty much everything, or look at the share of "zombie" companies, that is companies that cannot even service their interest payments. 3 is of course just an opinion, but if true will result in serious clogging of the machine with useless actors. 3 is where, I believe, things like "bullshit jobs" / "the office" come from, for example.
      - toomuchtodo 6y ago
        Agree with your points, hard to know what the future looks like but it’s clear it’s not going to look like the past.
        H8crilA 6y ago
        BTW, as far as I can tell - the only thing that is still "working" is the Fourth Turning theory. It's a bold theory that many people have called bullshit, but it has worked well since the publication in the 90s. And of course matches the known pre-publication history dating up to a few centuries ago.
        pmiller2 6y ago
        I wouldn't call it so much BS as "lacking in testable predictions." I think of it as string theory for history, minus all the math.
    - mindslight 6y ago
      We're out of investment opportunities because the Fed keeps creating new money that immediately fills them rather than letting the market do so. The bond market bailout of a few months ago could and should have instead been funded with existing money, with a corresponding rise in bond rates. Expecting that a steward won't wantonly inflate away the currency is not "entitlement". And to the reality that these institutions are no longer constrained by notions of decency, people will move away to non-corrupt currencies.
      - collyw 6y ago
        I admit that I have very little knowledge about bond markets, but when you talk about moving away from "corrupt currencies" aren't all goverments / EU doing something similar just now? (is China?)
        H8crilA 6y ago
        Everyone is in a deep trouble and trying to outprint themselves out of a problem. Even Germany (one of the best govt balance sheet country on the planet in 2019, going full Keynes and actually paying down their debts during the up phase of the cycle) may see a ratings downgrade. The CDS market is toying with this idea. We don't know which type of volatility are we going to experience, the left tail or the right tail. So far major currencies are actually strengthening (deflation) against consumer baskets, but it's early days, I think. Maybe even neither! In either case, I'm watching the bond yields (while they are still visible ;) ), various consumer inflation measures and most importantly gold. Gold will tell you what's going on.
        pmiller2 6y ago
        The thing about printing money though, is that if everybody does it, it negates a lot of the effect. That means that if you want the effect, you have to print more and more to keep up. The only other alternative is to realize that money is essentially a fictional construct that keeps capitalism moving forward, and to consider that people may not need to be slaves to some numbers in a computer system.
    - nogabebop23 6y ago
      >> While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that.
      - pmiller2 6y ago
        > Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that. Carry this a little further, and this means either the death of the concept of retirement as we know it. > Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Here is really the only hope. If we can recognize one day that it's just plain not necessary for humans to labor for ~50 years between ~20 and ~70, leaving them only with their "golden years" -- the ones where serious health problems start to take the life out of life. I don't know what to call this type of society. It certainly wouldn't be "capitalist" in any real sense. It may be "post scarcity," but not necessarily. Perhaps it will be some weird techno-socialist thing?
      - tschwimmer 6y ago
        I'm becoming less and less bullish on automation. It may be stupid, but I think that a lot of commmon tasks are functionally un-automatable, or at least not at an acceptable level of error. Think about something as simple as phone support for pretty much any product or service. There's a ton of automation being employed there to relatively little effect - just try to do anything meaningful at any company yourself and you'll find you need to be shunted to a representative. I recently needed to switch my phone plan ownership from a personal account to a company account. There were a couple of wrinkles that made my case more complicated than normal which I can't share. Despite 4 or 5 calls, I couldn't get it done. It just didn't seem like the process for doing this type of transfer didn't exist in any codified way. I could explain what I wanted to do in plain language, but it wasn't a valid transition. Not only was it invalid, it seems like nobody at this major phone provider had ever planned for this scenario to happen. Now imagine this scenario under full phone support automation. The system wouldn't even understand what I was trying to do. You could definitely argue that you could design some sort of scenario router that might handle a situation like this, but it seems unlikely that if they couldn't come up with a human process, I doubt they could swing an automated one. Something like AGI could handle a problem like this, but it feels like we're dozens or maybe hundreds of years away from that.
  - luckylion 6y ago
    Were those 2% meant at the then-current 0% (or even negative) inflation or adjusted to modern inflation levels that tend to hover between 1 and 2%?
    - microtherion 6y ago
      Presumably they were meant to be real (inflation adjusted) return, rather than nominal. And it's true that between 1880-1900, inflation rates tended to be low or negative (the latter is NOT good for an economy, BTW), but the rest of the 19th century saw highly volatile inflation rates, ranging from -15.75% to +24.75%, if this source is to be believed. Not great for long term investment. https://www.officialdata.org/us/inflation/1800?amount=1 https://www.officialdata.org/us/inflation/1800?amount=1
  - pmiller2 6y ago
    > Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. That sounds very much like a description of the modern VC ecosystem.
- arcticbull 6y ago
  > To phrase less trollishly: there aren’t a lot of good investments now, and even government bonds seem overvalued. Yes, and a bankrupt pile of garbage is not one of them, as any even half-sophisticated investor would tell you. You don't need to be up to your neck in 30-years to know buying a bankrupt company is a bad investment. This is honestly not something I thought I'd ever have to type out in words on a forum full of tech folks.
  - markus_zhang 6y ago
    They are not investing, just gambling. And looks like they are going to have fun anyway...
    - OminousWeapons 6y ago
      Exactly, it's crypto all over again. People don't understand the assets they are buying; they just see upward trajectory and think guaranteed profit.
      - RhysU 6y ago
        Well, unlike crypto, there is nonzero probability of owning a stake in real assets with Hertz.
        arcticbull 6y ago
        Nah, they'll wind up the entity and list under a new ticker. It's the same probability of owning a stake in a company as when gambling on crypto -_-
    - microtherion 6y ago
      But even when you're gambling, why should you gamble by going long on an asset with a nearly guaranteed long term value of $0 rather than one with a neutral or positive outlook? Sure, you may get lucky, but the odds are unfavorable all along.
- deleted 6y ago
  [deleted]
- vmception 6y ago
  I get the tongue in cheek nature of this, but it is held up by fundamentally unsound assumptions from unsophisticated investors. bonds are much less boring than retail investors think they are. Nobody is buying government bonds to beat inflation, nobody cares about the coupon payments. They are trading them on 10x leverage, its the price of the bonds that matter. You can get 10x leverage on straight up 30 year bonds, and you can do way more in the bond futures market. All you are doing is frontrunning the central bank. or going short. or trading options on bond futures. and that's just US treasuries. other country's government bonds are interesting, and then the rest of the yield curve is full of fun quirks too. The credit markets are actually pretty wild.
- JJMcJ 6y ago
  Similar to the period 1973 (first oil crisis) till 1981 or so, no obvious good investments anywhere.
yamoriyamori 6y ago
This, the Hertz management know there's a huge disparity of knowledge/wisdom in the market and taking full advantage. SEC filings/proceedings as the regulation dictates (though it can seem tongue in cheek in the specific language), but on the other end are all the Robinhood accounts ready to 'invest' from the convenience of their respective mobile phones, enabled by a ridiculously low number of clicks/taps to open an account.
pbreit 6y ago
There will be plenty of (legitimate) lawsuits if equity holders take a loss here.
- gruez 6y ago
  why? AFAIK since they're in bankruptcy, they have zero obligation to shareholders, only to creditors.
  - pbreit 6y ago
    But they are doing an equity offering? Got it.
    - camjohnson26 6y ago
      Their shares irrationally have value on the market, issuing equity allows them to pay off more of their debts. Why shouldn’t they issue, it’s the company’s job to release accurate information, not to force the buyers to make wise decisions. If someone offers you millions of dollars for your totaled car you’d be a fool not to take it, this is no different. Hertz management must be loving this.
      - pbreit 6y ago
        If the company knows stock purchasers are making a bad decision it would be obvious negligence.
        pmiller2 6y ago
        Only if they don't disclose the serious risks involved, which they do, right up front in the very first few sentences of the filing.
        RobRivera 6y ago
        no, every broker has a lovely warning about the nature of sec regulations and financial instruments risk of losing value. Negligence is in the investors lack of due diligence. Its why publicly traded companies must publish financials and why cooking the books is illegal and fraudulent

They know very well that the kind of people who read these filings are not the same kind of people eagerly buying their stock at this point.

by arbuge 6y ago

They know very well that the kind of people who read these filings are not the same kind of people eagerly buying their stock at this point.

SilasX 6y ago

Yeah, they’re nothing like the sophisticated, mature investors that are buying 30-year government bonds that probably won’t even keep up with inflation. To phrase less trollishly: there aren’t a lot of good investments now, and even government bonds seem overvalued.

H8crilA 6y ago
That's called "financial repression". Sorry that it causes you to take excessive risks, there are many like you. Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. And here we are, 143 years after Bagehot passed away. Sir, you are still absolutely correct!
- toomuchtodo 6y ago
  Wouldn’t it be more accurate to call it “financial entitlement”, to believe that your capital would always have positive value? While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities that realize a risk adjusted return above 0. “Too much money chasing too few deals” and all that jazz.
  - H8crilA 6y ago
    I totally agree that growth and gains on capital are not a given, but: 1) The world's real GDP is still going up. Or at least has been till 2019. 2) Even if it was to slow down and remove prospects of gains on capital - it still doesn't mean that people will adjust quickly; you'd have to rewrite the entire concept of pensions for starters. 3) It seems to me that core rates are seriously manipulated down (interest rates, default spreads, equity discount rates); just look at ballooning of the balance sheets of pretty much everything, or look at the share of "zombie" companies, that is companies that cannot even service their interest payments. 3 is of course just an opinion, but if true will result in serious clogging of the machine with useless actors. 3 is where, I believe, things like "bullshit jobs" / "the office" come from, for example.
    - toomuchtodo 6y ago
      Agree with your points, hard to know what the future looks like but it’s clear it’s not going to look like the past.
      - H8crilA 6y ago
        BTW, as far as I can tell - the only thing that is still "working" is the Fourth Turning theory. It's a bold theory that many people have called bullshit, but it has worked well since the publication in the 90s. And of course matches the known pre-publication history dating up to a few centuries ago.
        pmiller2 6y ago
        I wouldn't call it so much BS as "lacking in testable predictions." I think of it as string theory for history, minus all the math.
  - mindslight 6y ago
    We're out of investment opportunities because the Fed keeps creating new money that immediately fills them rather than letting the market do so. The bond market bailout of a few months ago could and should have instead been funded with existing money, with a corresponding rise in bond rates. Expecting that a steward won't wantonly inflate away the currency is not "entitlement". And to the reality that these institutions are no longer constrained by notions of decency, people will move away to non-corrupt currencies.
    - collyw 6y ago
      I admit that I have very little knowledge about bond markets, but when you talk about moving away from "corrupt currencies" aren't all goverments / EU doing something similar just now? (is China?)
      - H8crilA 6y ago
        Everyone is in a deep trouble and trying to outprint themselves out of a problem. Even Germany (one of the best govt balance sheet country on the planet in 2019, going full Keynes and actually paying down their debts during the up phase of the cycle) may see a ratings downgrade. The CDS market is toying with this idea. We don't know which type of volatility are we going to experience, the left tail or the right tail. So far major currencies are actually strengthening (deflation) against consumer baskets, but it's early days, I think. Maybe even neither! In either case, I'm watching the bond yields (while they are still visible ;) ), various consumer inflation measures and most importantly gold. Gold will tell you what's going on.
        pmiller2 6y ago
        The thing about printing money though, is that if everybody does it, it negates a lot of the effect. That means that if you want the effect, you have to print more and more to keep up. The only other alternative is to realize that money is essentially a fictional construct that keeps capitalism moving forward, and to consider that people may not need to be slaves to some numbers in a computer system.
  - nogabebop23 6y ago
    >> While we’ll likely never run out of need for human labor, it’s very possible we’re running out of capital investment opportunities Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that.
    - pmiller2 6y ago
      > Now I definitely see an end to passive capital gains in traditional financial markets; there's a lot of money sloshing around with not enough good places to put it. Anything near-passive (i.e. real estate) is also feeling similar pressures. It seems like a great time to build big projects that take a huge amount of money, I'm just not on board with pure public funding and all the issues that go with that. Carry this a little further, and this means either the death of the concept of retirement as we know it. > Is this true? automation is essentially a emphasis from human to physical capital. It seems like we're continuing to reduce and specialize human capital while growing other forms. Here is really the only hope. If we can recognize one day that it's just plain not necessary for humans to labor for ~50 years between ~20 and ~70, leaving them only with their "golden years" -- the ones where serious health problems start to take the life out of life. I don't know what to call this type of society. It certainly wouldn't be "capitalist" in any real sense. It may be "post scarcity," but not necessarily. Perhaps it will be some weird techno-socialist thing?
    - tschwimmer 6y ago
      I'm becoming less and less bullish on automation. It may be stupid, but I think that a lot of commmon tasks are functionally un-automatable, or at least not at an acceptable level of error. Think about something as simple as phone support for pretty much any product or service. There's a ton of automation being employed there to relatively little effect - just try to do anything meaningful at any company yourself and you'll find you need to be shunted to a representative. I recently needed to switch my phone plan ownership from a personal account to a company account. There were a couple of wrinkles that made my case more complicated than normal which I can't share. Despite 4 or 5 calls, I couldn't get it done. It just didn't seem like the process for doing this type of transfer didn't exist in any codified way. I could explain what I wanted to do in plain language, but it wasn't a valid transition. Not only was it invalid, it seems like nobody at this major phone provider had ever planned for this scenario to happen. Now imagine this scenario under full phone support automation. The system wouldn't even understand what I was trying to do. You could definitely argue that you could design some sort of scenario router that might handle a situation like this, but it seems unlikely that if they couldn't come up with a human process, I doubt they could swing an automated one. Something like AGI could handle a problem like this, but it feels like we're dozens or maybe hundreds of years away from that.
- luckylion 6y ago
  Were those 2% meant at the then-current 0% (or even negative) inflation or adjusted to modern inflation levels that tend to hover between 1 and 2%?
  - microtherion 6y ago
    Presumably they were meant to be real (inflation adjusted) return, rather than nominal. And it's true that between 1880-1900, inflation rates tended to be low or negative (the latter is NOT good for an economy, BTW), but the rest of the 19th century saw highly volatile inflation rates, ranging from -15.75% to +24.75%, if this source is to be believed. Not great for long term investment. https://www.officialdata.org/us/inflation/1800?amount=1 https://www.officialdata.org/us/inflation/1800?amount=1
- pmiller2 6y ago
  > Walter Bagehot, the de facto founder of The Economist, was of the opinion that people will never stand 2% rates (and he meant plus :) ). They would rather fund anything, any project, the weirdest thing that offers any hope of yield; no matter how stupid. That sounds very much like a description of the modern VC ecosystem.
arcticbull 6y ago
> To phrase less trollishly: there aren’t a lot of good investments now, and even government bonds seem overvalued. Yes, and a bankrupt pile of garbage is not one of them, as any even half-sophisticated investor would tell you. You don't need to be up to your neck in 30-years to know buying a bankrupt company is a bad investment. This is honestly not something I thought I'd ever have to type out in words on a forum full of tech folks.
- markus_zhang 6y ago
  They are not investing, just gambling. And looks like they are going to have fun anyway...
  - OminousWeapons 6y ago
    Exactly, it's crypto all over again. People don't understand the assets they are buying; they just see upward trajectory and think guaranteed profit.
    - RhysU 6y ago
      Well, unlike crypto, there is nonzero probability of owning a stake in real assets with Hertz.
      - arcticbull 6y ago
        Nah, they'll wind up the entity and list under a new ticker. It's the same probability of owning a stake in a company as when gambling on crypto -_-
  - microtherion 6y ago
    But even when you're gambling, why should you gamble by going long on an asset with a nearly guaranteed long term value of $0 rather than one with a neutral or positive outlook? Sure, you may get lucky, but the odds are unfavorable all along.
deleted 6y ago
[deleted]
vmception 6y ago
I get the tongue in cheek nature of this, but it is held up by fundamentally unsound assumptions from unsophisticated investors. bonds are much less boring than retail investors think they are. Nobody is buying government bonds to beat inflation, nobody cares about the coupon payments. They are trading them on 10x leverage, its the price of the bonds that matter. You can get 10x leverage on straight up 30 year bonds, and you can do way more in the bond futures market. All you are doing is frontrunning the central bank. or going short. or trading options on bond futures. and that's just US treasuries. other country's government bonds are interesting, and then the rest of the yield curve is full of fun quirks too. The credit markets are actually pretty wild.
JJMcJ 6y ago
Similar to the period 1973 (first oil crisis) till 1981 or so, no obvious good investments anywhere.

yamoriyamori 6y ago

This, the Hertz management know there's a huge disparity of knowledge/wisdom in the market and taking full advantage. SEC filings/proceedings as the regulation dictates (though it can seem tongue in cheek in the specific language), but on the other end are all the Robinhood accounts ready to 'invest' from the convenience of their respective mobile phones, enabled by a ridiculously low number of clicks/taps to open an account.

pbreit 6y ago

There will be plenty of (legitimate) lawsuits if equity holders take a loss here.

gruez 6y ago
why? AFAIK since they're in bankruptcy, they have zero obligation to shareholders, only to creditors.
- pbreit 6y ago
  But they are doing an equity offering? Got it.
  - camjohnson26 6y ago
    Their shares irrationally have value on the market, issuing equity allows them to pay off more of their debts. Why shouldn’t they issue, it’s the company’s job to release accurate information, not to force the buyers to make wise decisions. If someone offers you millions of dollars for your totaled car you’d be a fool not to take it, this is no different. Hertz management must be loving this.
    - pbreit 6y ago
      If the company knows stock purchasers are making a bad decision it would be obvious negligence.
      - pmiller2 6y ago
        Only if they don't disclose the serious risks involved, which they do, right up front in the very first few sentences of the filing.
      - RobRivera 6y ago
        no, every broker has a lovely warning about the nature of sec regulations and financial instruments risk of losing value. Negligence is in the investors lack of due diligence. Its why publicly traded companies must publish financials and why cooking the books is illegal and fraudulent