5 ms·

It's not Masa that pulled this company from the brink, but the fact that risk capital has somehow been convinced to stay in the game during this recession. Look

It's not Masa that pulled this company from the brink, but the fact that risk capital has somehow been convinced to stay in the game during this recession. Look what corporate bond spreads or IPO/VC underwriting did after March - truly unheard of in the depths of a recession, especially in the depths of the worst recession in living memory. Also, in case you haven't read this PG classic: http://www.paulgraham.com/submarine.html http://www.paulgraham.com/submarine.html Due to this - "SoftBank racks up $3.7bn in losses at tech stock trading unit": https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a926c https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9...

busterarm 6y ago
"Markets can remain irrational longer than you can remain solvent."
- H8crilA 6y ago
  To be completely fair, there exists a justification for (at least some of) the action we're seeing: if developed economies' bond yields are correctly pricing in future nominal gdp, i.e. we will not be back to good times for the next 30-50 years, then owning anything that can grow is tremendously valuable. But it's such a stretch to assume 30-50 years of stagnation, even if the entire bond market agrees with you. I mean do you seriously expect property relationships to not be rewritten in some revolutionary way somewhere along the way if we get 30-50 years of misery?
  - octoberfranklin 6y ago
    > If developed economies' bond yields are correctly pricing in Bwahahahahaha.... Oh wait I fell of my chair laughing.
    - H8crilA 6y ago
      :) I feel you, but I do have some respect for the markets no matter what they say. At least enough respect to be cognizant of what is being priced in, despite my personal views.
      - octoberfranklin 6y ago
        Oh come on, soverign debt is about as far from being "a market" as possible.... I'll believe the yields mean something when the US Treasury issues a special series of bonds that are forbidden to be owned by the Fed or any entity with access to the discount window.
        busterarm 6y ago
        The benefit of a large, well-equipped military is that you get to tell people whether or not you're/they're going to pay your/their debts. For as long as your population is willing to pay for its prosperity in blood.
        H8crilA 6y ago
        There's a lot of countries with lower nominal yields that are not known for their military prowess ... like Greece. Yes, greek bonds have negative yields.
        busterarm 6y ago
        Greece has the miliary power of the entire fucking European Union (and its allies) behind them, for as long as they're willing to suffer for the benefit of France and Germany.
  - busterarm 6y ago
    That's really just the Disco Stu Fallacy of economics at play. Assuming that things _will_ get better and passing the buck onto your descendants is madness. Also how much growth has been stunted by the weight of ancestral spending? Birth rates are declining and the cost of maintaining our infrastructure is at the point in most high-GDP locations (New York, California, etc) where obligations cannot be met and credit status changes were inevitable _before_ Coronavirus. Look at the insanity New Jersey has gone through with the criminal pilfering of infrastructure/development funds to pay pensions (aka, Christine Todd Whitman should have gone to jail). We're looking at cascading failures in a complex system. Nobody can see enough of the picture to predict what's next or realize that it's already dead. To assume that we'll right the trend with growth will most likely require either war or (a technical) revolution.
    - pavlov 6y ago
      The funny thing about the Disco Stu Fallacy is that Stu was right in the long run. Disco music in various forms is immensely popular today. It dominates global streaming charts. Rock is the loser. Stu was just an early adopter facing the through of disillusionment.
      - busterarm 6y ago
        Sure, but none of that music is called Disco and his bet was still a losing one. :)
        pavlov 6y ago
        Kylie Minogue released a top-selling album last week that's literally named "Disco".
        busterarm 6y ago
        How long do you hold the losing investment from 1976? It took decades for the industry side of Disco music to recover from Disco Demolition Night. Italo and Hi-NRG notwithstanding. The music might have stayed four on the floor but the names and the people all changed. Also Kylie Minogue doesn't set trends, she rides them. Most of us realized Disco was still alive 10 years ago.
- edouard-harris 6y ago
  In this case, with interest rates near zero, it may be rational for markets to converge on prices that discount the transient effects of a pandemic recession.
  - H8crilA 6y ago
    Yup, exactly. Low yields increase the duration of equities. This also means that prices become more random (because who's to judge what will Google ads sales look like in 20 years? or what will the iDevice of the 2050 look like? with low enough yields things like these become more and more important).
    - lotsofpulp 6y ago
      I don’t know what google’s ad sales or idevice will look like in 20 years, but I am betting the US government will do whatever it can to keep broad market equity index values rising.
      - H8crilA 6y ago
        Just like the Chinese believe that the China government will keep their apartment prices high.
        lotsofpulp 6y ago
        Maybe, if all of China’s political leaders are invested in apartments.
        toomuchtodo 6y ago
        China’s political leaders are invested in avoiding their version of the French Revolution.
- brian_herman__ 6y ago
  https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/
short_sells_poo 6y ago
> Due to this - "SoftBank racks up $3.7bn in losses at tech stock trading unit": https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9 https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9... Ugh, I hate it when PNL is reported in pure dollar terms with no reference to capital. I get it, the writer/editor wants to make the title punchy, and $4 billion is certainly punchier than say 4%. However, FT is in some way supposed to cater for professionals and I would expect better from them. For actual informed use, the dollar numbers is largely meaningless. For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over.
- itsoktocry 6y ago
  >For actual informed use, the dollar numbers is largely meaningless. You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. >For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over. Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size.
  - xwolfi 6y ago
    The fund size itself means positions will spread out to risky assets and the more money you try to put to work, the more risk you're gonna take. They lost 4% of their unmanageable capital, big deal.
  - HighlandSpring 6y ago
    >You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. Even "actual informed people" won't necessarily know how much much any given fund has in AUM. >Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. Actually, fund size is very relevant. Losing $3.7b as a $10b fund will put you in at least 37% drawdown which can put you past a board-controlled threshold at which trading might pause or a re-evaluation of the trading strategies might be triggered. Losing $3.7b on a $100b account is 3.7% which is business as usual really. If you have a machine learning background this analogy might be useful: if you're building an algo trading strategy then training your model on absolute dollar returns data will be nonsense. What makes more sense is calculating the relative returns or even log-returns because then we're encoding an actual relative change.
JumpCrisscross 6y ago
> risk capital has somehow been convinced to stay in the game during this recession The Fed messaged its willingness to buy bonds. They never had to. The market took the message and ran with it. But it’s a tool borne out of Bernanke’s work the last time around which was borne of his scholarship on the Great Depression.
baybal2 6y ago
> It's not Masa that pulled this company from the brink, but the fact that risk capital has somehow been convinced to stay in the game during this recession. Look what corporate bond spreads or IPO/VC underwriting did after March - truly unheard of in the depths of a recession Which means they are insane
- chrisjc 6y ago
  Not to say it isn't insane, but what was the alternative?
  - baybal2 6y ago
    Gold bars under the mattress
hbosch 6y ago
> the fact that risk capital has somehow been convinced to stay in the game during this recession. I believe tales of our "recession" are greatly exaggerated. Since COVID-19 took hold, roughly around March 2020, the market hasn't really been depressed, has it?
- avianlyric 6y ago
  Recessions are defined reductions in economic activity, usually detected by GDP shrinking. Not by the stock market shrinking. One would hope that the stock market reflected actual economic activity, but that doesn't really seem to be the case anymore.
- tristor 6y ago
  > Since COVID-19 took hold, roughly around March 2020, the market hasn't really been depressed, has it? That's because the Fed said "money printers go brrr!". If it weren't for massive massive massive repeated cash injections into the market to maintain liquidity, we would have had a crash.

busterarm 6y ago

"Markets can remain irrational longer than you can remain solvent."

H8crilA 6y ago
To be completely fair, there exists a justification for (at least some of) the action we're seeing: if developed economies' bond yields are correctly pricing in future nominal gdp, i.e. we will not be back to good times for the next 30-50 years, then owning anything that can grow is tremendously valuable. But it's such a stretch to assume 30-50 years of stagnation, even if the entire bond market agrees with you. I mean do you seriously expect property relationships to not be rewritten in some revolutionary way somewhere along the way if we get 30-50 years of misery?
- octoberfranklin 6y ago
  > If developed economies' bond yields are correctly pricing in Bwahahahahaha.... Oh wait I fell of my chair laughing.
  - H8crilA 6y ago
    :) I feel you, but I do have some respect for the markets no matter what they say. At least enough respect to be cognizant of what is being priced in, despite my personal views.
    - octoberfranklin 6y ago
      Oh come on, soverign debt is about as far from being "a market" as possible.... I'll believe the yields mean something when the US Treasury issues a special series of bonds that are forbidden to be owned by the Fed or any entity with access to the discount window.
      - busterarm 6y ago
        The benefit of a large, well-equipped military is that you get to tell people whether or not you're/they're going to pay your/their debts. For as long as your population is willing to pay for its prosperity in blood.
        H8crilA 6y ago
        There's a lot of countries with lower nominal yields that are not known for their military prowess ... like Greece. Yes, greek bonds have negative yields.
        busterarm 6y ago
        Greece has the miliary power of the entire fucking European Union (and its allies) behind them, for as long as they're willing to suffer for the benefit of France and Germany.
- busterarm 6y ago
  That's really just the Disco Stu Fallacy of economics at play. Assuming that things _will_ get better and passing the buck onto your descendants is madness. Also how much growth has been stunted by the weight of ancestral spending? Birth rates are declining and the cost of maintaining our infrastructure is at the point in most high-GDP locations (New York, California, etc) where obligations cannot be met and credit status changes were inevitable _before_ Coronavirus. Look at the insanity New Jersey has gone through with the criminal pilfering of infrastructure/development funds to pay pensions (aka, Christine Todd Whitman should have gone to jail). We're looking at cascading failures in a complex system. Nobody can see enough of the picture to predict what's next or realize that it's already dead. To assume that we'll right the trend with growth will most likely require either war or (a technical) revolution.
  - pavlov 6y ago
    The funny thing about the Disco Stu Fallacy is that Stu was right in the long run. Disco music in various forms is immensely popular today. It dominates global streaming charts. Rock is the loser. Stu was just an early adopter facing the through of disillusionment.
    - busterarm 6y ago
      Sure, but none of that music is called Disco and his bet was still a losing one. :)
      - pavlov 6y ago
        Kylie Minogue released a top-selling album last week that's literally named "Disco".
        busterarm 6y ago
        How long do you hold the losing investment from 1976? It took decades for the industry side of Disco music to recover from Disco Demolition Night. Italo and Hi-NRG notwithstanding. The music might have stayed four on the floor but the names and the people all changed. Also Kylie Minogue doesn't set trends, she rides them. Most of us realized Disco was still alive 10 years ago.
edouard-harris 6y ago
In this case, with interest rates near zero, it may be rational for markets to converge on prices that discount the transient effects of a pandemic recession.
- H8crilA 6y ago
  Yup, exactly. Low yields increase the duration of equities. This also means that prices become more random (because who's to judge what will Google ads sales look like in 20 years? or what will the iDevice of the 2050 look like? with low enough yields things like these become more and more important).
  - lotsofpulp 6y ago
    I don’t know what google’s ad sales or idevice will look like in 20 years, but I am betting the US government will do whatever it can to keep broad market equity index values rising.
    - H8crilA 6y ago
      Just like the Chinese believe that the China government will keep their apartment prices high.
      - lotsofpulp 6y ago
        Maybe, if all of China’s political leaders are invested in apartments.
        toomuchtodo 6y ago
        China’s political leaders are invested in avoiding their version of the French Revolution.
brian_herman__ 6y ago
https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/

short_sells_poo 6y ago

> Due to this - "SoftBank racks up $3.7bn in losses at tech stock trading unit": https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9 https://www.ft.com/content/0edb7c17-58e6-4ded-acfa-1822440a9... Ugh, I hate it when PNL is reported in pure dollar terms with no reference to capital. I get it, the writer/editor wants to make the title punchy, and $4 billion is certainly punchier than say 4%. However, FT is in some way supposed to cater for professionals and I would expect better from them. For actual informed use, the dollar numbers is largely meaningless. For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over.

itsoktocry 6y ago
>For actual informed use, the dollar numbers is largely meaningless. You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. >For a $100 billion fund, losing $4 billion is painful, but not the end of the world. For a $10 billion fund, it is likely game over. Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size.
- xwolfi 6y ago
  The fund size itself means positions will spread out to risky assets and the more money you try to put to work, the more risk you're gonna take. They lost 4% of their unmanageable capital, big deal.
- HighlandSpring 6y ago
  >You might have this backwards. Actual informed people have a good idea of the scale that these funds are operating at, and can understand without context whether $3.7bn is a lot. Even "actual informed people" won't necessarily know how much much any given fund has in AUM. >Losing $3.7bn trading stocks in a tech bull-market the likes of which we've never seen is...not good, regardless of the fund size. Actually, fund size is very relevant. Losing $3.7b as a $10b fund will put you in at least 37% drawdown which can put you past a board-controlled threshold at which trading might pause or a re-evaluation of the trading strategies might be triggered. Losing $3.7b on a $100b account is 3.7% which is business as usual really. If you have a machine learning background this analogy might be useful: if you're building an algo trading strategy then training your model on absolute dollar returns data will be nonsense. What makes more sense is calculating the relative returns or even log-returns because then we're encoding an actual relative change.

JumpCrisscross 6y ago

> risk capital has somehow been convinced to stay in the game during this recession The Fed messaged its willingness to buy bonds. They never had to. The market took the message and ran with it. But it’s a tool borne out of Bernanke’s work the last time around which was borne of his scholarship on the Great Depression.

baybal2 6y ago

> It's not Masa that pulled this company from the brink, but the fact that risk capital has somehow been convinced to stay in the game during this recession. Look what corporate bond spreads or IPO/VC underwriting did after March - truly unheard of in the depths of a recession Which means they are insane

chrisjc 6y ago
Not to say it isn't insane, but what was the alternative?
- baybal2 6y ago
  Gold bars under the mattress

hbosch 6y ago

> the fact that risk capital has somehow been convinced to stay in the game during this recession. I believe tales of our "recession" are greatly exaggerated. Since COVID-19 took hold, roughly around March 2020, the market hasn't really been depressed, has it?

avianlyric 6y ago
Recessions are defined reductions in economic activity, usually detected by GDP shrinking. Not by the stock market shrinking. One would hope that the stock market reflected actual economic activity, but that doesn't really seem to be the case anymore.
tristor 6y ago
> Since COVID-19 took hold, roughly around March 2020, the market hasn't really been depressed, has it? That's because the Fed said "money printers go brrr!". If it weren't for massive massive massive repeated cash injections into the market to maintain liquidity, we would have had a crash.