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I believe mortgage brokers were also encouraged to ignore the word 'subprime'. Nothing bad happened there.

fleitz 16y ago
The asset classes of 'privately held VC funded tech startups' and 'residential real estate' are orders of magnitude different in their valuation, if valuations for every company in that asset class dropped to 1/10th it would make approximately zero difference to the economy as a whole as the risk is concentrated to those with enough assets to make risky investments. Honestly, tell me how Facebook being valued at $7 billion instead of $70 b will tank the global economy? The reason the economy tanked because of the real estate bubble is because consumer spending was largely fueled by increased liquidity of equity and that we lost about $12 trillion in asset valuations. There isn't $12 trillion to lose in the tech sector, let alone $12 trillion from a 25% price correction.
- chailatte 16y ago
  "the risk is concentrated to those with enough assets to make risky investments." Meanwhile, Zynga raises $500 Million from T. Rowe Price, Fidelity and Morgan Stanley. With 401k money from ordinary folks. "how Facebook being valued at $7 billion instead of $70 b will tank the global economy" You're right, it won't. But the continuing culture of extreme risk taking will ultimately bring down the global economy.
  - fleitz 16y ago
    Unlikely, the issue from subprime was that the advent of CDO changed the risk model of the underlying asset. This allowed CDOs to the classified as Triple A which were not triple a worthy. The problem was not the risk, but that the risk was not communicated because it was largely unknown and that the system incentivized rating agencies to exaggerate credit ratings. Everyone in vc knows the risks and fully communicates the risk, almost anyone can buy real estate on 20x leverage (5% down) very few people can buy private tech sector stock on 20x leverage. When 60% of the population holds the vast majority of their net worth in tech sector stock at 20x leverage there may be larger issues, the risk taking culture in tech is very appropriate because they can bring large improvements to the lives of millions, your house is not likely to be 100 times more productive in the next 5 years. Thus taking huge risks on housing is inappropriate where as it's very appropriate in tech R&D.
  - sabat 16y ago
    Meanwhile, Zynga raises $500 Million from T. Rowe Price, Fidelity and Morgan Stanley. With 401k money from ordinary folks. Compared to the hundreds of billions in the mortgage market, $500 million is chump change. That's why this "bubble" -- whether it exists in reality or only in the minds of HN commenters -- doesn't matter to the economy at large. I am increasingly astonished at the lack of perspective among those who are concerned about a new "bubble".
  - ido 16y ago
    Zynga had $850 million in revenue in 2010, why would raising $500m seem extremely risky?
deleted 16y ago
[deleted]

The asset classes of 'privately held VC funded tech startups' and 'residential real estate' are orders of magnitude different in their valuation, if valuations for every company in that asset class dropped to 1/10th it would make approximately zero difference to the economy as a whole as the risk is concentrated to those with enough assets to make risky investments. Honestly, tell me how Facebook being valued at $7 billion instead of $70 b will tank the global economy? The reason the economy tanked because of the real estate bubble is because consumer spending was largely fueled by increased liquidity of equity and that we lost about $12 trillion in asset valuations. There isn't $12 trillion to lose in the tech sector, let alone $12 trillion from a 25% price correction.

chailatte 16y ago
"the risk is concentrated to those with enough assets to make risky investments." Meanwhile, Zynga raises $500 Million from T. Rowe Price, Fidelity and Morgan Stanley. With 401k money from ordinary folks. "how Facebook being valued at $7 billion instead of $70 b will tank the global economy" You're right, it won't. But the continuing culture of extreme risk taking will ultimately bring down the global economy.
- fleitz 16y ago
  Unlikely, the issue from subprime was that the advent of CDO changed the risk model of the underlying asset. This allowed CDOs to the classified as Triple A which were not triple a worthy. The problem was not the risk, but that the risk was not communicated because it was largely unknown and that the system incentivized rating agencies to exaggerate credit ratings. Everyone in vc knows the risks and fully communicates the risk, almost anyone can buy real estate on 20x leverage (5% down) very few people can buy private tech sector stock on 20x leverage. When 60% of the population holds the vast majority of their net worth in tech sector stock at 20x leverage there may be larger issues, the risk taking culture in tech is very appropriate because they can bring large improvements to the lives of millions, your house is not likely to be 100 times more productive in the next 5 years. Thus taking huge risks on housing is inappropriate where as it's very appropriate in tech R&D.
- sabat 16y ago
  Meanwhile, Zynga raises $500 Million from T. Rowe Price, Fidelity and Morgan Stanley. With 401k money from ordinary folks. Compared to the hundreds of billions in the mortgage market, $500 million is chump change. That's why this "bubble" -- whether it exists in reality or only in the minds of HN commenters -- doesn't matter to the economy at large. I am increasingly astonished at the lack of perspective among those who are concerned about a new "bubble".
- ido 16y ago
  Zynga had $850 million in revenue in 2010, why would raising $500m seem extremely risky?

deleted 16y ago

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