5 ms·

> yet we are in the middle of pandemic, millions get sick every day, inflation 30yr high > is the economy is broken? should we be expecting a crash/crisis soon

by abeppu 5y ago

> yet we are in the middle of pandemic, millions get sick every day, inflation 30yr high > is the economy is broken? should we be expecting a crash/crisis soon? The question assumes that the real conditions on the ground are going to change the values we assign to stuff, but what if those are no longer meaningfully coupled? Ford sold about 20% fewer vehicles at the end of 2021 than at the end of 2019, but its stock price is 2.5x what it was then. Ford is producing less actually useful stuff, but we pretend it's more valuable. What if the economy is "broken" but not in a way which produces a "crash"? Prices are higher now, but many companies have improved margins; they're raising prices faster than their costs are increasing. Money is moving faster from the population at large to companies/investors. If the rich can keep getting richer by siphoning more out of everyone else, and the rich are the ones that own stock, real estate, invest in startups etc, then a lot of metrics can show those assets as increasing in value even if the median person's income or wealth are declining in real terms. If the economies experienced by the rich and everyone else are decoupling, then I think the question is less "are we in a bubble" and more "will we enact reforms to decrease wealth and income inequality?" and at least in the US given structural political issues, I think the answer is "No."

fivea 5y ago
> What if the economy is "broken" but not in a way which produces a "crash"? Prices are higher now, but many companies have improved margins; they're raising prices faster than their costs are increasing. There is a less charitable and more realistic explanation for that: quantitative easing injected a massive amount of cash into the economy, and low/negative interest rates are pushing said investors towards riskier investments to park all that cash. Consequently we see a massive volume of institutional investments in things like real estate, the stock market, and even crypto.
- abeppu 5y ago
  I'm fine with the claim that a lot more money was pushed into the asset classes you listed, but I don't really see how that interacts with the quote you picked about companies with improving margins. A company's stock being over-valued doesn't seem obviously related to their price-setting power? And anyway, the result of that rush of money into stocks and real estate still seems to have had the result that the rich got richer. Yes, the Fed will raise interest rates in coming months, and perhaps eventually that will slow inflation. But I have every expectation that many companies will continue raising prices and reporting record profits for some time after their costs decline. And as interest rates increase, banks will reflect those higher rates in their loan products, but not their savings accounts, etc.
  - fivea 5y ago
    > I don't really see how that interacts with the quote you picked about companies with improving margins. Companies are being valuated with total disregard about their results. The whole stock market is currently in deep memestock territory. We are seeing a single low-output car maker being valued more than the whole car industry altogether even though they exclusively serve a car market niche that only amounts for a single-digit market share of the global auto market. Real estate is suddenly seeing an influx of institutional investment that hiked the demand so much it priced out the vast majority of families. In crypto, everything is unashamedly driven by a mix of speculation and capital flight to an asset that's believed to be resilient to inflation and crashes. We're fooling ourselves if we believe that we saw such a massive hike in efficiency in the past few years, specially given the global context. What we're seeing is a massive influx of free cash into the hands of institutional investors who are now desperate to park it somewhere.
- bb88 5y ago
  Dotcoms in the late nineties. Mortgage speculation in 2004-2008ish. QE started in 2009. Blaming it all on QE seems a little disingenuous. There's been way too much money floating in the system for a long time now.
zemptime 5y ago
There's a complex of people in Washington dedicated to defending the mechanisms which allow for the siphoning like FTD's (failure-to-deliver's), asset lending with no return dates, what is effectively asset lending by other legal names, and other things like exemptions for market makers being allowed to provide naked positions in the name of "liquidity." This complex of people has a name (!) - "The Blob." It's the amorphous bureaucratic mass of people who will send vague and threatening letters to people actually attempting reform ("Dear Mr. Young Senator, we recommend you don't pursue your inquiry into naked shorting further, or it will be bad for your career.") Then you have, diametrically opposed to the Blob, the $GME apes. Forget for a second about the mother of all short squeezes, "dying brick and mortar," "nfts," etc. The property worth paying attention to here is how antifragile and self-correcting the ape community is. Here you have tons of random, highly distributed and highly passionate people apprehending the real nature of our financial, media, and political institutions. You have a system where when the Blob pulls a fast one, a set of people who got in for a squeeze/quick profit are converted from a set of ambivalent retail traders into an intolerant minority whose focus has shifted from profit to "If we haven't achieved systemic change, we have failed." The fight for reform is well underway. There's so much more to be said here but I'll end with this: even if you don't care or believe in $GME, believe in the apes. They're the individuals putting their skin in a the game and exposing themselves to harm for what they believe is right. Pay attention.
- abeppu 5y ago
  > converted from a set of ambivalent retail traders into an intolerant minority whose focus has shifted from profit to "If we haven't achieved systemic change, we have failed." > They're the individuals putting their skin in a the game and exposing themselves to harm for what they believe is right. Pay attention. I'm not familiar with this part of the story. Can you point me to more info? What are the actual goals of the systemic change being pursued, and how is it being pursued?
  - KerrAvon 5y ago
    [dead]
  - 5y ago
rhacker 5y ago
the 20% drop is highly likely anticipation for the lightning. why buy ice when you can buy a bev?
Joeri 5y ago
Ford sold about 20% fewer vehicles at the end of 2021 than at the end of 2019, but its stock price is 2.5x what it was then. Ford is producing less actually useful stuff, but we pretend it's more valuable. I've always heard the argument that stock price is not based on the current value but on future earnings. If the market perception is that Ford is better placed now than 2 years ago to make money in the coming decade, it should be valued higher. Similarly companies that are laying the groundwork for massive earnings post-pandemic should see a corresponding value uptick in the stock market.
- Qub3d 5y ago
  The maxim I was told by my dad, who I think got it from someone like Warren Buffet, is that, "In the short term, the stock market is a voting machine; in the long term, it is a weighing machine" So for the day-to-day, week-to-week, etc movement of an asset or market, its primarily driven by the immediate feelings of the sellers and buyers. Longer term, however, its historically been fluctuations on top of a lower-frequency trend based on fundamentals.
lumost 5y ago
The tricky piece in the US is that it's unclear how long the current system can be sustained. As the wealthy become wealthier, debt loads must increase. Eventually, the debtors must curtail spending or fail to pay off the debt. In aggregate, this creates a financial crisis as debt is not paid back, and the creditor takes the loss. What's happening today is that central banks are lowering interest rates to prevent the above reckoning from occurring. The wealthy get wealthier, debt loads increase, and interest rates fall. The orthodox economic belief would be that this will either create inflation and or a currency crisis as the economy structures itself around money printing. The surprise has been that inflation hasn't occurred outside of asset prices. I suspect that this strictly leads to one of two outcomes. - The economy rolls back all worker gains for the last century, with workers effectively forced to rent all assets and live paycheck to paycheck. - Asset inflation eventually turns into real inflation via taxation, government spending, worker wage demands or changes in the spending habits of asset holders (Carnegie and Rockefeller eventually spent the majority of their fortunes). In this scenario, wages and prices are likely to catch-up with assets.
- Qub3d 5y ago
  > The surprise has been that inflation hasn't occurred outside of asset prices. But it has occurred. People were originally calling it "short term" but its clear that the 6-7% inflation seen at the tail end of 2021 was very real. As to your two outcomes: I'd like to believe that the second one is what is sort of happening, with the "great resignation" of blue-collar and otherwise "unskilled" workers (its a term of art, I understand some of the jobs in this pool require a lot of finesse). Unfortunately, I also see lots of push from the top of the economic strata for the first outcome; most notably in the attempt to move from car ownership to ridesharing.
  - fivea 5y ago
    > But it has occurred. People were originally calling it "short term" but its clear that the 6-7% inflation seen at the tail end of 2021 was very real. I'm not sure those are related. I bet that was just one of the unintended consequences of stimulus checks in the US economy. Keep in mind that poverty in the US is increasing like wildfire. In 2019, about 69% of Americans reported having less than $1000 in a savings accounts. https://www.yahoo.com/now/survey-69-americans-less-1-171927256.html https://www.yahoo.com/now/survey-69-americans-less-1-1719272... That falls well within living paycheck-to-paycheck territory, if not even below. This means the vast majority of Americans cannot afford luxuries or even basic necessities. Things haven't got better for the average Joe since 2019, too. Then all of a sudden the whole country received a comparatively huge check in the mail to freely spend however they feel like it. Expectedly, this sudden increase in disposable income and purchasing power will reflect in a hike in demand for the things being tracked by inflation índices. Increases in consumer demand lead to higher consumer prices, and thus inflation indicators go up.
uh_uh 5y ago
But now even the rich are pulling out. Musk, Bezos, Zuck have all upped their stock sales. Zillow also stopped ibuying. At least some non-permabear participants think that something is brewing now.
- abeppu 5y ago
  Isn't Musk's increased stock sale to facilitate the exercise of expiring options? That doesn't seem like "pulling out". Zillow stopped ibuying, but a lot of post-hoc analysis seemed to explain that ibuying can do poorly even if real estate is doing well, because the owners most likely to sell to Zillow were ones with properties that were overvalued by Zillow's model, due to attributes that the model didn't consider.
  - uh_uh 5y ago
    The narrative was that Musk is selling stocks to cover his taxes. But he's selling more than that: https://www.cnbc.com/2021/11/16/taxes-arent-the-only-reason-elon-musk-is-selling-tesla-stock-.html https://www.cnbc.com/2021/11/16/taxes-arent-the-only-reason-...
    - avrionov 5y ago
      Musk can't just sell shares. People like him file a schedule with FCC in advance and sell based on the schedule. His tweets were misleading.
      - uh_uh 5y ago
        So? You can still infer whether he's doing that to cover taxes or not.
wolverine876 5y ago
> but what if those are no longer meaningfully coupled? This is said in every bubble. The laws of economics cannot be repealed, but people keep imagining it's different this time. In the dot-com bubble, people were saying that profits didn't matter anymore. You might think that's an exaggeration, but if you think such exaggerations are impossible, look around you.
ip26 5y ago
Ford is the only legacy US auto with a convincing entrance into EVs. Has their market cap risen for no reason- or is the market predicting they will take share from their less agile competitors?
jdkee 5y ago
S&P 500 price-to-earnings about double historical average would indicate at least over valuation of stocks. https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio
- hiq 5y ago
  I think the cyclically adjusted version is even more telling: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe

by abeppu 5y ago

fivea 5y ago

> What if the economy is "broken" but not in a way which produces a "crash"? Prices are higher now, but many companies have improved margins; they're raising prices faster than their costs are increasing. There is a less charitable and more realistic explanation for that: quantitative easing injected a massive amount of cash into the economy, and low/negative interest rates are pushing said investors towards riskier investments to park all that cash. Consequently we see a massive volume of institutional investments in things like real estate, the stock market, and even crypto.

abeppu 5y ago
I'm fine with the claim that a lot more money was pushed into the asset classes you listed, but I don't really see how that interacts with the quote you picked about companies with improving margins. A company's stock being over-valued doesn't seem obviously related to their price-setting power? And anyway, the result of that rush of money into stocks and real estate still seems to have had the result that the rich got richer. Yes, the Fed will raise interest rates in coming months, and perhaps eventually that will slow inflation. But I have every expectation that many companies will continue raising prices and reporting record profits for some time after their costs decline. And as interest rates increase, banks will reflect those higher rates in their loan products, but not their savings accounts, etc.
- fivea 5y ago
  > I don't really see how that interacts with the quote you picked about companies with improving margins. Companies are being valuated with total disregard about their results. The whole stock market is currently in deep memestock territory. We are seeing a single low-output car maker being valued more than the whole car industry altogether even though they exclusively serve a car market niche that only amounts for a single-digit market share of the global auto market. Real estate is suddenly seeing an influx of institutional investment that hiked the demand so much it priced out the vast majority of families. In crypto, everything is unashamedly driven by a mix of speculation and capital flight to an asset that's believed to be resilient to inflation and crashes. We're fooling ourselves if we believe that we saw such a massive hike in efficiency in the past few years, specially given the global context. What we're seeing is a massive influx of free cash into the hands of institutional investors who are now desperate to park it somewhere.
bb88 5y ago
Dotcoms in the late nineties. Mortgage speculation in 2004-2008ish. QE started in 2009. Blaming it all on QE seems a little disingenuous. There's been way too much money floating in the system for a long time now.

zemptime 5y ago

There's a complex of people in Washington dedicated to defending the mechanisms which allow for the siphoning like FTD's (failure-to-deliver's), asset lending with no return dates, what is effectively asset lending by other legal names, and other things like exemptions for market makers being allowed to provide naked positions in the name of "liquidity." This complex of people has a name (!) - "The Blob." It's the amorphous bureaucratic mass of people who will send vague and threatening letters to people actually attempting reform ("Dear Mr. Young Senator, we recommend you don't pursue your inquiry into naked shorting further, or it will be bad for your career.") Then you have, diametrically opposed to the Blob, the $GME apes. Forget for a second about the mother of all short squeezes, "dying brick and mortar," "nfts," etc. The property worth paying attention to here is how antifragile and self-correcting the ape community is. Here you have tons of random, highly distributed and highly passionate people apprehending the real nature of our financial, media, and political institutions. You have a system where when the Blob pulls a fast one, a set of people who got in for a squeeze/quick profit are converted from a set of ambivalent retail traders into an intolerant minority whose focus has shifted from profit to "If we haven't achieved systemic change, we have failed." The fight for reform is well underway. There's so much more to be said here but I'll end with this: even if you don't care or believe in $GME, believe in the apes. They're the individuals putting their skin in a the game and exposing themselves to harm for what they believe is right. Pay attention.

abeppu 5y ago
> converted from a set of ambivalent retail traders into an intolerant minority whose focus has shifted from profit to "If we haven't achieved systemic change, we have failed." > They're the individuals putting their skin in a the game and exposing themselves to harm for what they believe is right. Pay attention. I'm not familiar with this part of the story. Can you point me to more info? What are the actual goals of the systemic change being pursued, and how is it being pursued?
- KerrAvon 5y ago
  [dead]
- 5y ago

rhacker 5y ago

the 20% drop is highly likely anticipation for the lightning. why buy ice when you can buy a bev?

Joeri 5y ago

Ford sold about 20% fewer vehicles at the end of 2021 than at the end of 2019, but its stock price is 2.5x what it was then. Ford is producing less actually useful stuff, but we pretend it's more valuable. I've always heard the argument that stock price is not based on the current value but on future earnings. If the market perception is that Ford is better placed now than 2 years ago to make money in the coming decade, it should be valued higher. Similarly companies that are laying the groundwork for massive earnings post-pandemic should see a corresponding value uptick in the stock market.

Qub3d 5y ago
The maxim I was told by my dad, who I think got it from someone like Warren Buffet, is that, "In the short term, the stock market is a voting machine; in the long term, it is a weighing machine" So for the day-to-day, week-to-week, etc movement of an asset or market, its primarily driven by the immediate feelings of the sellers and buyers. Longer term, however, its historically been fluctuations on top of a lower-frequency trend based on fundamentals.

lumost 5y ago

The tricky piece in the US is that it's unclear how long the current system can be sustained. As the wealthy become wealthier, debt loads must increase. Eventually, the debtors must curtail spending or fail to pay off the debt. In aggregate, this creates a financial crisis as debt is not paid back, and the creditor takes the loss. What's happening today is that central banks are lowering interest rates to prevent the above reckoning from occurring. The wealthy get wealthier, debt loads increase, and interest rates fall. The orthodox economic belief would be that this will either create inflation and or a currency crisis as the economy structures itself around money printing. The surprise has been that inflation hasn't occurred outside of asset prices. I suspect that this strictly leads to one of two outcomes. - The economy rolls back all worker gains for the last century, with workers effectively forced to rent all assets and live paycheck to paycheck. - Asset inflation eventually turns into real inflation via taxation, government spending, worker wage demands or changes in the spending habits of asset holders (Carnegie and Rockefeller eventually spent the majority of their fortunes). In this scenario, wages and prices are likely to catch-up with assets.

Qub3d 5y ago
> The surprise has been that inflation hasn't occurred outside of asset prices. But it has occurred. People were originally calling it "short term" but its clear that the 6-7% inflation seen at the tail end of 2021 was very real. As to your two outcomes: I'd like to believe that the second one is what is sort of happening, with the "great resignation" of blue-collar and otherwise "unskilled" workers (its a term of art, I understand some of the jobs in this pool require a lot of finesse). Unfortunately, I also see lots of push from the top of the economic strata for the first outcome; most notably in the attempt to move from car ownership to ridesharing.
- fivea 5y ago
  > But it has occurred. People were originally calling it "short term" but its clear that the 6-7% inflation seen at the tail end of 2021 was very real. I'm not sure those are related. I bet that was just one of the unintended consequences of stimulus checks in the US economy. Keep in mind that poverty in the US is increasing like wildfire. In 2019, about 69% of Americans reported having less than $1000 in a savings accounts. https://www.yahoo.com/now/survey-69-americans-less-1-171927256.html https://www.yahoo.com/now/survey-69-americans-less-1-1719272... That falls well within living paycheck-to-paycheck territory, if not even below. This means the vast majority of Americans cannot afford luxuries or even basic necessities. Things haven't got better for the average Joe since 2019, too. Then all of a sudden the whole country received a comparatively huge check in the mail to freely spend however they feel like it. Expectedly, this sudden increase in disposable income and purchasing power will reflect in a hike in demand for the things being tracked by inflation índices. Increases in consumer demand lead to higher consumer prices, and thus inflation indicators go up.

uh_uh 5y ago

But now even the rich are pulling out. Musk, Bezos, Zuck have all upped their stock sales. Zillow also stopped ibuying. At least some non-permabear participants think that something is brewing now.

abeppu 5y ago
Isn't Musk's increased stock sale to facilitate the exercise of expiring options? That doesn't seem like "pulling out". Zillow stopped ibuying, but a lot of post-hoc analysis seemed to explain that ibuying can do poorly even if real estate is doing well, because the owners most likely to sell to Zillow were ones with properties that were overvalued by Zillow's model, due to attributes that the model didn't consider.
- uh_uh 5y ago
  The narrative was that Musk is selling stocks to cover his taxes. But he's selling more than that: https://www.cnbc.com/2021/11/16/taxes-arent-the-only-reason-elon-musk-is-selling-tesla-stock-.html https://www.cnbc.com/2021/11/16/taxes-arent-the-only-reason-...
  - avrionov 5y ago
    Musk can't just sell shares. People like him file a schedule with FCC in advance and sell based on the schedule. His tweets were misleading.
    - uh_uh 5y ago
      So? You can still infer whether he's doing that to cover taxes or not.

wolverine876 5y ago

> but what if those are no longer meaningfully coupled? This is said in every bubble. The laws of economics cannot be repealed, but people keep imagining it's different this time. In the dot-com bubble, people were saying that profits didn't matter anymore. You might think that's an exaggeration, but if you think such exaggerations are impossible, look around you.

ip26 5y ago

Ford is the only legacy US auto with a convincing entrance into EVs. Has their market cap risen for no reason- or is the market predicting they will take share from their less agile competitors?

jdkee 5y ago

S&P 500 price-to-earnings about double historical average would indicate at least over valuation of stocks. https://www.multpl.com/s-p-500-pe-ratio https://www.multpl.com/s-p-500-pe-ratio

hiq 5y ago
I think the cyclically adjusted version is even more telling: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe