4 ms·

> 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 pr

by 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.

by fivea 5y ago

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.