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The second crash this year has already started, perhaps triggered by the realisation that tech stocks are not as insulated from the global recession as previous

The second crash this year has already started, perhaps triggered by the realisation that tech stocks are not as insulated from the global recession as previously hoped. Central banks are out of ammunition and have been reduced to buying corporate debt indiscriminately and promising ZIRP forever, having less and less impact on markets. FANGMAN has lost $1.4tn in mkt cap since beginning of Sep w/#Apple quietly down 22.6% from highs, #Netflix down 18.3%, #Nvidia 17.2%, #Facebook 17.1%, #Amazon down 16.8%, #Google 15.9%, #Microsoft down 14%. https://twitter.com/Schuldensuehner/status/1307205871907336193 https://twitter.com/Schuldensuehner/status/13072058719073361... Things are highly volatile right now. Frothy stocks like Tesla are moving 20% in a day both ways, which is neither normal nor desirable, CAPE at 1929 levels, 5 largest companies (all tech) were > 20% of S&P, IPOs reaching 140x earnings on first day (snowflake), fraud like We Work and Nikola constantly coming to light, companies like Softbank (of We infamy) making huge speculative bets on options. All the signs are here for a remarkable speculative bubble in tech stocks. All this in the face of the sharpest recession on record, with worse unemployment than the great recession of the 1930s. I'm not convinced US equities will continue to provide the remarkable returns seen this year (with no basis in the real economy). Tech companies like Amazon need other tech companies to spend on AWS and consumers to buy, companies like FB/Google need other companies to spend on ads, companies like Apple/Netflix need consumers with disposable income. Everything is connected.

bob33212 6y ago
The thing that the Bitcoin people got right is that the dollar is worth less than most people realize. The government can erase much of the debt by printing money. Owning cash is a bad idea. Sure the P/E of Tesla looks like a bubble. But what alternative is there to do with cash right now?
- sudosysgen 6y ago
  Foreign currency (preferably physical, especially if things such as RMB) or gold.
  - mxschumacher 6y ago
    America isn't alone with its approach to QE & low interest rates, foreign currencies won't help you in many cases.
    - sudosysgen 6y ago
      That is true, but there are still currencies with very low QE and high interest rates.
      - mxschumacher 6y ago
        Feel free to name a few
        JPLeRouzic 6y ago
        Isn't it the case for Vietnam, Philippines, Indonesia or India [0]? [0] https://vietreader.com/business/finance/16638-why-is-vietnams-interest-rate-still-high.html https://vietreader.com/business/finance/16638-why-is-vietnam...
- greesil 6y ago
  Buy a house
  - joubert 6y ago
    History has shown us that the concentration in any one asset class, in any one country, in any one anything, really, is dangerous.
    - greesil 6y ago
      I think this asset class is crazy on the west coast of the US. Putting all your money in an illiquid asset, in a place where it might experience a significant earthquake, just to hedge against inflation. What could possibly go wrong? But.... It's the one asset class where normal people are allowed to leverage themselves heavily. And you can live in it.
      - MiroF 6y ago
        > It's the one asset class where normal people are allowed to leverage themselves heavily Which is... a good thing?
        greesil 6y ago
        It is, if you like to live dangerously.
      - joubert 6y ago
        When you buy a house to live in, it magnifies the tension between maximizing lifestyle (schools, work, amenities, friends, family, etc.) and maximizing returns. In practice, by and large, you have to balance towards the former, which means your financial returns tend to be lower.
      - ac29 6y ago
        Earthquakes are not a significant risk to most single family homes on the US west coast. Yes, there is more than zero risk, but its nothing like areas prone to tornados, hurricanes, floods, or wildfires which can and fairly regularly do destroy entire neighborhoods.
- JMTQp8lwXL 6y ago
  Instead of Tesla specifically, you could buy the S&P index, of which the company was excluded from.
  - dehrmann 6y ago
    I own shares of SPXT, an S&P 500 index fund that excludes tech because I work in tech and my fortunes are already tied to the sector.
dannyw 6y ago
Central banks are not out of ammunition. I think you underestimate the impact of "open-ended QE", as well as the dozens of incredible and never-seen-before programs set up during COVID; sometimes stretching the mandate through "special purpose vehicles". Everyone expects the Fed to inject as many trillions of dollars as needed to the _stock market_ to keep stock prices up. The effects on the economy are more uncertain; but we know the Fed can, has, and said they will do "whatever it takes" to ensure an "orderly market"; which is just an euphemism for "stop stocks from crashing". TINA. There is no alternative, and if you look at long term treasury rates (YCC has not happened _yet_), people are believing interest rates will be around the 1% mark for the _next 30 years_. When the long term risk free rate goes from 2% to 1%; stocks become worth twice as much.
- lumost 6y ago
  Such a strategy in the face of high unemployment will end poorly. It's effectively currency debasement to prop up your top corporations stock prices at the expense of the real economy. You'll be left with 5-100 megacaps, carrying less real revenue than when the debasement started. Consumers, SMBs, and employees will have had their dollars eroded.
  - MiroF 6y ago
    If our currency is debased, where's the inflation?
    - grey-area 6y ago
      Seems to have turned up in insane asset prices, making the rich richer. Unfortunate that it's the wrong kind of inflation.
      - MiroF 6y ago
        Or maybe conditions in the world have changed that make assets more valuable... If the currency was "debased" it would show up everywhere.
quickthrowman 6y ago
> Central banks are out of ammunition and have been reduced to buying corporate debt indiscriminately and promising ZIRP forever, having less and less impact on markets. This is wrong. The Fed will keep doing QE to prop things up for as long as long as it takes. Do you read the FOMC meeting minutes or listen to Jerome Powell talk? There wouldn’t be massive inflows to equities without the Fed put (QE).
- grey-area 6y ago
  No, I listened to economists who are skeptical that quantitative easing works for the original purpose (to increase liquidity and stimulate real economic growth). If you ignore the interviewer this chat with Lyn Alden and Jeff Snider on QE is interesting. https://m.youtube.com/watch?feature=youtu.be&v=B4xcCO9v-Os https://m.youtube.com/watch?feature=youtu.be&v=B4xcCO9v-Os
  - MiroF 6y ago
    Those aren't economists lmao
    - grey-area 6y ago
      True :) Economists have questioned the efficacy of QE though.
      - MiroF 6y ago
        No mainstream economists are saying the things that are being said in this thread about QE and the Fed.
looping__lui 6y ago
But still they are up like 50+% this year? Facebook makes more profit than some stock markets as a whole (might be an exaggeration). Tech companies did well in the crisis, adapted better than others and were generally pretty good in making even more money. I do agree: lots of people loose in this crisis. But we are probably in fact living in times of super inflation; the EU has for the first time ever taken debt; US and China race for debt. All you can do (I feel): is watch and be taken for a ride. The gap between rich and poor will grow, so will the gap between “fast adapters” and “the good old industries”. It may sound harsh: but the economy in the US probably doesn’t really care about those that lost the most and were the most vulnerable. Hitchhikers Guide to the Galaxy may be the book we all should be reading (again) these days...
juniper_strong 6y ago
> The second crash this year has already started It was what, a little over 30% drawdown, that's a crash now? I've lived through 5 crashes then, hope to live through a few more. > with worse unemployment than the great recession of the 1930s Great Depression, not recession, and nope. During the Great Depression the unemployment rate hit 25% and was over 15% for most of a decade, here's the graph: https://en.wikipedia.org/wiki/Great_Depression#/media/File:US_Unemployment_from_1910-1960.svg https://en.wikipedia.org/wiki/Great_Depression#/media/File:U....
- grey-area 6y ago
  It was what, a little over 30% drawdown, that's a crash now? I did say started, not finished :) Sorry Great Depression. We're in the first few months of this recession, which may well become a depression, and crucially is happening worldwide in almost every country and slowing trade at the same time. It's certainly been a much sharper shock than the Great Depression - the US has seen unemployment rise faster: https://www.pewresearch.org/fact-tank/2020/06/11/unemployment-rose-higher-in-three-months-of-covid-19-than-it-did-in-two-years-of-the-great-recession/ https://www.pewresearch.org/fact-tank/2020/06/11/unemploymen... And there has been nothing like these levels in the US since the Great Depression. https://www.cnbc.com/2020/05/19/unemployment-today-vs-the-great-depression-how-do-the-eras-compare.html https://www.cnbc.com/2020/05/19/unemployment-today-vs-the-gr... Since it usually takes these things several years to play out, I'm not convinced that the high water mark for unemployment has been reached yet. There are also hints that the true rate in early 2020 was more like 20% (department of labour statistics). We'll know in a few years, but this is certainly the sharpest recession on record (due to the imposed nature of it), and the only comparable is the Great Depression.

bob33212 6y ago

The thing that the Bitcoin people got right is that the dollar is worth less than most people realize. The government can erase much of the debt by printing money. Owning cash is a bad idea. Sure the P/E of Tesla looks like a bubble. But what alternative is there to do with cash right now?

sudosysgen 6y ago
Foreign currency (preferably physical, especially if things such as RMB) or gold.
- mxschumacher 6y ago
  America isn't alone with its approach to QE & low interest rates, foreign currencies won't help you in many cases.
  - sudosysgen 6y ago
    That is true, but there are still currencies with very low QE and high interest rates.
    - mxschumacher 6y ago
      Feel free to name a few
      - JPLeRouzic 6y ago
        Isn't it the case for Vietnam, Philippines, Indonesia or India [0]? [0] https://vietreader.com/business/finance/16638-why-is-vietnams-interest-rate-still-high.html https://vietreader.com/business/finance/16638-why-is-vietnam...
greesil 6y ago
Buy a house
- joubert 6y ago
  History has shown us that the concentration in any one asset class, in any one country, in any one anything, really, is dangerous.
  - greesil 6y ago
    I think this asset class is crazy on the west coast of the US. Putting all your money in an illiquid asset, in a place where it might experience a significant earthquake, just to hedge against inflation. What could possibly go wrong? But.... It's the one asset class where normal people are allowed to leverage themselves heavily. And you can live in it.
    - MiroF 6y ago
      > It's the one asset class where normal people are allowed to leverage themselves heavily Which is... a good thing?
      - greesil 6y ago
        It is, if you like to live dangerously.
    - joubert 6y ago
      When you buy a house to live in, it magnifies the tension between maximizing lifestyle (schools, work, amenities, friends, family, etc.) and maximizing returns. In practice, by and large, you have to balance towards the former, which means your financial returns tend to be lower.
    - ac29 6y ago
      Earthquakes are not a significant risk to most single family homes on the US west coast. Yes, there is more than zero risk, but its nothing like areas prone to tornados, hurricanes, floods, or wildfires which can and fairly regularly do destroy entire neighborhoods.
JMTQp8lwXL 6y ago
Instead of Tesla specifically, you could buy the S&P index, of which the company was excluded from.
- dehrmann 6y ago
  I own shares of SPXT, an S&P 500 index fund that excludes tech because I work in tech and my fortunes are already tied to the sector.

dannyw 6y ago

Central banks are not out of ammunition. I think you underestimate the impact of "open-ended QE", as well as the dozens of incredible and never-seen-before programs set up during COVID; sometimes stretching the mandate through "special purpose vehicles". Everyone expects the Fed to inject as many trillions of dollars as needed to the _stock market_ to keep stock prices up. The effects on the economy are more uncertain; but we know the Fed can, has, and said they will do "whatever it takes" to ensure an "orderly market"; which is just an euphemism for "stop stocks from crashing". TINA. There is no alternative, and if you look at long term treasury rates (YCC has not happened _yet_), people are believing interest rates will be around the 1% mark for the _next 30 years_. When the long term risk free rate goes from 2% to 1%; stocks become worth twice as much.

lumost 6y ago
Such a strategy in the face of high unemployment will end poorly. It's effectively currency debasement to prop up your top corporations stock prices at the expense of the real economy. You'll be left with 5-100 megacaps, carrying less real revenue than when the debasement started. Consumers, SMBs, and employees will have had their dollars eroded.
- MiroF 6y ago
  If our currency is debased, where's the inflation?
  - grey-area 6y ago
    Seems to have turned up in insane asset prices, making the rich richer. Unfortunate that it's the wrong kind of inflation.
    - MiroF 6y ago
      Or maybe conditions in the world have changed that make assets more valuable... If the currency was "debased" it would show up everywhere.

quickthrowman 6y ago

> Central banks are out of ammunition and have been reduced to buying corporate debt indiscriminately and promising ZIRP forever, having less and less impact on markets. This is wrong. The Fed will keep doing QE to prop things up for as long as long as it takes. Do you read the FOMC meeting minutes or listen to Jerome Powell talk? There wouldn’t be massive inflows to equities without the Fed put (QE).

grey-area 6y ago
No, I listened to economists who are skeptical that quantitative easing works for the original purpose (to increase liquidity and stimulate real economic growth). If you ignore the interviewer this chat with Lyn Alden and Jeff Snider on QE is interesting. https://m.youtube.com/watch?feature=youtu.be&v=B4xcCO9v-Os https://m.youtube.com/watch?feature=youtu.be&v=B4xcCO9v-Os
- MiroF 6y ago
  Those aren't economists lmao
  - grey-area 6y ago
    True :) Economists have questioned the efficacy of QE though.
    - MiroF 6y ago
      No mainstream economists are saying the things that are being said in this thread about QE and the Fed.

looping__lui 6y ago

But still they are up like 50+% this year? Facebook makes more profit than some stock markets as a whole (might be an exaggeration). Tech companies did well in the crisis, adapted better than others and were generally pretty good in making even more money. I do agree: lots of people loose in this crisis. But we are probably in fact living in times of super inflation; the EU has for the first time ever taken debt; US and China race for debt. All you can do (I feel): is watch and be taken for a ride. The gap between rich and poor will grow, so will the gap between “fast adapters” and “the good old industries”. It may sound harsh: but the economy in the US probably doesn’t really care about those that lost the most and were the most vulnerable. Hitchhikers Guide to the Galaxy may be the book we all should be reading (again) these days...

juniper_strong 6y ago

> The second crash this year has already started It was what, a little over 30% drawdown, that's a crash now? I've lived through 5 crashes then, hope to live through a few more. > with worse unemployment than the great recession of the 1930s Great Depression, not recession, and nope. During the Great Depression the unemployment rate hit 25% and was over 15% for most of a decade, here's the graph: https://en.wikipedia.org/wiki/Great_Depression#/media/File:US_Unemployment_from_1910-1960.svg https://en.wikipedia.org/wiki/Great_Depression#/media/File:U....

grey-area 6y ago
It was what, a little over 30% drawdown, that's a crash now? I did say started, not finished :) Sorry Great Depression. We're in the first few months of this recession, which may well become a depression, and crucially is happening worldwide in almost every country and slowing trade at the same time. It's certainly been a much sharper shock than the Great Depression - the US has seen unemployment rise faster: https://www.pewresearch.org/fact-tank/2020/06/11/unemployment-rose-higher-in-three-months-of-covid-19-than-it-did-in-two-years-of-the-great-recession/ https://www.pewresearch.org/fact-tank/2020/06/11/unemploymen... And there has been nothing like these levels in the US since the Great Depression. https://www.cnbc.com/2020/05/19/unemployment-today-vs-the-great-depression-how-do-the-eras-compare.html https://www.cnbc.com/2020/05/19/unemployment-today-vs-the-gr... Since it usually takes these things several years to play out, I'm not convinced that the high water mark for unemployment has been reached yet. There are also hints that the true rate in early 2020 was more like 20% (department of labour statistics). We'll know in a few years, but this is certainly the sharpest recession on record (due to the imposed nature of it), and the only comparable is the Great Depression.