38 ms·

How This Ends

• omginternets 4y ago
  I don’t have any good mental tools to distinguish between useful and useless economic predictions like this. How does HN navigate this kind of thing?
  • voisin 4y ago
    Be wary of anyone making firm statements about the future of anything. This article doesn’t do that. This article is merely drawing similarities with past events and concludes: > First, we need to see the economy slow down and inflation slow down. We need to see stocks bottom out and hang out there for a while. And we need to be patient. None of this is going to happen fast. This seems reasonable. Wait and see based on variables that were important in the only comparable period in recent times.
    • starkd 4y ago
      The article may be conflating inflation with economic growth though, hoping that inflation comes under control merely by slowing down the economy.
    • abhayhegde 4y ago
      > Be wary of anyone making firm statements about the future of anything. This article doesn’t do that. Although the article does not state anything firmly, the last line of the article, as quoted below, is still an indication it predicts something: > I would be planning to ride this thing out for at least eighteen months or more.
      • ryanSrich 4y ago
        Eh, not really. Having a plan to ride it out if things get bad is never a terrible idea. Personally you should have a rainy day fund that can sustain you and your family for 12 months. You should have the same as a business, but that fund should really be like 24 months instead of 12.
    • deleted 4y ago
      [deleted]
  • aabhay 4y ago
    Take every major future scenario and make sure you have some idea of how your strategy and portfolio survives it. There is no difference between a useful and useless economic prediction in a highly uncertain environment — they’re all roughly plausible.
  • fny 4y ago
    You need to understand more about macroeconomics, monetary policy, ad government, along with studying past how past markets behaved under similar conditions. History doesn't repeat but it rhymes becomes the mantra.
    • omginternets 4y ago
      What are the must-read books in macroeconomics and monetary policy?
      • pas 4y ago
        https://www.reddit.com/r/Economics/wiki/reading https://www.reddit.com/r/Economics/wiki/reading
  • OrangeMonkey 4y ago
    You can't. The best you can do is to build a market thesis that represents your views, try to find reasons that you are wrong to help harden / shape your views, and only then try to find others that believe the same way your thesis does to try to see how they predict. Everyone has their own crystal ball, and everyone believes theirs is the right one. If you look at fintwit, you will see "the world is ending", "the worlds ended, we going up", and "lets wait and see". At least a few of them will get it right, to some extent or another. I dont think you can figure out at this time which is the right one. So, best you can do is form your own thesis I think. I've formed mine. It helps me not panic when things are temporarily against me.
  • ajross 4y ago
    This isn't much of a prediction. It's saying this correction is going to look like all the others. We had an overheated market in an inflationary feedback loop with pandemic relief, and that stopped, and now prices have corrected and we wait for growth to start again. That's... like predicting autumn will come some time after the end of summer. The takeaway here is that there are no unique circumstances at play. This is a market cycle just like any other.
  • scandox 4y ago
    Predictions are rarely useful. A good description of the present sometimes is a help though.
  • tlb 4y ago
    Here it’s entirely about the source. Fred Wilson is an unusually smart and honest investor, and has experienced more market corrections than I have. So I weight his opinion higher than mine. I also weight his opinion higher than my favorite financial columnists because he’s the man in the arena, and focused on the part of the economy I care about — startups — while columnists have to think about housing prices and other stuff.
    • soheil 4y ago
      > I also weight his opinion higher than my favorite financial columnists I don't think he's saying anything that you couldn't find in Barron's or FT.
      • tlb 4y ago
        Maybe, but Barron's also has plenty of day-trader hype. How do you separate the good long-term predictions in Barron's from the bad ones? Read someone else. (You can optimize the process by skipping Barron's entirely.)
        • soheil 4y ago
          By ignoring the day-trader hype? (shouldn't be that difficult to spot)
          • tlb 4y ago
            There are domains where I feel I can judge an argument solely on its content. Predicting the economy isn't one of them. While I can discard some bogus arguments, there are plenty of coherent and self-consistent arguments pointing in different directions. So I have to consider the source.
            • soheil 4y ago
              I'm still not sure why you'd weigh his opinion higher, he may be honest or have experienced more recessions than you have, but why not find an old columnist who doesn't lie? His lack of consideration for the other parts of the economy like real estate, etc. and his focus on startups to me seems like a handicap and not something that makes his economic predictions more accurate.
  • jatins 4y ago
    I am generally generally wary of one liner predictions that people throw out on Twitter. We have all seen those recently: "This is going to be worse that dot com", "This is nowhere near the bottom" and basically bold but unsupported predictions of that flavor. This, however, seems like a reasonably balanced take. Tries to take cues from the historical events, which doesn't always work imo but still is _something_ to base your arguments on.
  • alexashka 4y ago
    You don't. It's all useless. If you have a high paying job/lots of money, it doesn't matter. If you don't have a high paying job, it also doesn't matter. Do you see why? That leaves people people for whom it doesn't matter, but they choose to entertain themselves with horoscopes, ahem, I mean market predictions.
    • tsunamifury 4y ago
      The outcomes for those two are significant. And those in leveraged positions even more so.
      • alexashka 4y ago
        How do you think your comment relates to mine?
  • largbae 4y ago
    Buy an index fund and when the market is down try and buy more. If you do wish to do something to actively manage things, try giving Nassim Taleb books a read, or just read about his or Mark Spitznagel's investment strategy. They also keep 97% of their money in an index fund, but the other 3% are slowly wasted away buying far out-of-the-money PUT options on boring stocks that are very cheap to buy because they'll "never happen". And most of the time, they lose that money. But when COVID hits, or airplanes crash into famous buildings, or <insert next surprise here>, those little never-gonna-happen options pay for all the damage to the 97%. Their core theory is that humanity systematically underestimates the probability of very rare events. So it's not about timing the market, it's about using this exploit in human psychology to reduce or eliminate your "risk of ruin" from very rare events.
    • wkyle 4y ago
      To give a brief counter to the Taleb/Spitznagel Empirica Kurtosis strategy, the pricing of deep out of the money options is systematically overvalued in relation to the Black-Scholes model, suggesting that the market correctly prices in fat tails. The volatility smile pattern describes the 'overvalued' nature of these options, and the SKEW index tracks their pricing. https://en.wikipedia.org/wiki/Volatility_smile https://en.wikipedia.org/wiki/Volatility_smile https://www.cboe.com/us/indices/dashboard/skew/ https://www.cboe.com/us/indices/dashboard/skew/
      • largbae 4y ago
        I wonder if this adjustment is enough... Spitznagel's fund did return 4,144% in Q1 2020. Maybe they found some other similar hole, but one seems to still exist. https://finance.yahoo.com/news/mark-spitznagel-univesa-cio-on-risk-mitigation-204157461.html https://finance.yahoo.com/news/mark-spitznagel-univesa-cio-o...
        • wkyle 4y ago
          It's certainly possible that even with the volatility smile markets still underprice unlikely events, but high returns from a tail-heding fund during a black swan event hardly provides any evidence. Regardless of pricing, the expectation of the strategy is infrequent high returns and frequent poor or negative returns. Whether the market accurately prices these events also depends on how bad returns are during years without anomalous market conditions, and the intervals between fat-tail events.
  • unethical_ban 4y ago
    This has the feeling of an article posted here in early 2020 about the coronavirus, "The Hammer and the Dance". It was pretty spot on for the level of info it had on hand. This feels similar.aybe I shouldn't buy that watch I've been wanting.
  • kache_ 4y ago
    I don't navigate it. It's a bit like trying to predict the weather. You can kind of guess that it's going to rain tomorrow, but you can't guess if it's going to rain in a year, let alone how much rain there will be in the next 10 I just buy a little bit of monero, funnel money into 30+ year tax advantaged retirement savings, and work on my skills I guess
• puranjay 4y ago
  I wonder how much irreparable damage the lockdowns did to the economy as we knew it before the pandemic. The more subjective aspects of the economy are hard to map - are people motivated enough to work? Do they feel invested enough in the future to work? Have they been burnt out by the yoyo cycle of work/lockdowns? Was their industry severely damaged and they pivoted to other careers? Like there’s a massive pilot shortage. I have friends who are pilots. They were already planning on retiring by 40 (pilots get paid very handsomely here) and starting a business. They just shifted their plans forward by 5 years instead of sitting at home and doing nothing. That’s two skilled captains the airlines will have to find replacements for. I really don’t think anyone really sat down and thought through these issues when the lockdowns were announced. You can’t expect people to go from 100 to 0 and back to 100 over two years. People are not resources that can be put to use or discarded whenever you want.
  • bitL 4y ago
    EU is going to irrelevance much faster than expected and it's going to be US vs China everywhere. That's going to be the main outcome/damage.
  • simonw 4y ago
    "I really don’t think anyone really sat down and thought through these issues when the lockdowns were announced." People clearly thought very hard about this. Different parts of the world came to different conclusions about it. Nobody thought that the lockdowns wouldn't cause immense amounts of economical and societal damage. The calculation was whether they would have a worse impact than letting huge numbers of people die. And huge numbers of people died anyway! I'd like to learn more about the economic impact of over a million deaths (in the USA). I would expect that to affect communities and industries in very complicated ways as well.
    • johnNumen 4y ago
      Most of those deaths probably had a positive or null effect, since they primarily occurred in the 65+ demographic. edit: It is interesting to contemplate the possibility that the death of so many seniors exacerbated the inflation problem. That's a lot of assets that were previously tied up in retirement accounts and real estate that suddenly flowed into the hands of middle aged people.
• gz5 4y ago
  history doesn't repeat but it often rhymes is a useful base construct, how much do the macro differences between the 80s example cited in the post and today change the model? we know the world is now much more interdependent, interconnected and moves at a faster pace, and that this can result in massive growth, but that we are also much more fragile to shocks. does it also mean that post-shock 'new normals' or 'next normals' may be fundamentally different than the previous state - punctuated equilibrium type models?
• TekMol 4y ago
  When governments rise the interest rate, is that the interest rate the government pays when you lend money to the government?
  • throwaway_1928 4y ago
    Yes that is called the risk free rate because you assume your government with its magic money printer will always pay you back.
  • ProAm 4y ago
    yes, among other things.
  • tomesco 4y ago
    Close. The federal reserve (or any central bank) will lend money to other banks at a rate just below the target rate, and it will borrow from other banks at a rate just above. Because banks can borrow and lend largely risk free at those two rates, banks will transact amongst themselves at a rate in between. This is how the federal reserve makes banks transact at the target rate.
    • TekMol 4y ago
      Why do banks lend money? I thought they create it via writing into their database "Tomesco: $100" and boom $100 was created?
      • phdelightful 4y ago
        If you're asking why banks lend money to each other, it's mostly because banks need liquidity (e.g. $ in an account) in order to do transactions and meet legally mandated reserve requirements. If I'm a bank, rather than constantly be sitting on a huge pile of money for the (relatively) rare event that I have a huge transactions to make, I'll mostly do something more useful with my money, and then borrow it from another bank on a short-term basis when I need a bunch of cash. The fed does this for banks that can't find another bank to transact with, albeit at a slightly higher rate. The fed will also borrow money from banks at a slightly lower rate. This causes the banks to naturally lend among each other between those two rates. This is how the fed controls the interest rate. The other thing the fed does is buy treasuries. I think this is where the "printing" of money happens. The fed buys a treasury on the market and pays for it by printing money and placing it in the appropriate account. This is how the fed controls money supply.
• deleted 4y ago
  [deleted]
• herf 4y ago
  I agree we are working through an asset bubble in tech and housing - P/E's went quite a ways above the historical line, as did housing prices. But think about the chip shortage (automotive, consumer electronics) - raising interest rates does not "fix" supply and make prices lower. Think about oil & gas markets. Think about labor shortages. When supply is broken, it's not only a monetary policy problem. Most of these things are "U-shaped" and not "V-shaped" - they will take longer to come back.
  • symlinkk 4y ago
    The “chip shortage” was fake. The actual issue was inflation since the start.
    • pas 4y ago
      inflation is (due to) shortage
    • rowanajmarshall 4y ago
      I can't speak for it's relation to inflation, but have you _tried_ getting a new mid-range mirrorless camera or other similar electronic consumer good? Chip shortage is real.
    • klysm 4y ago
      The shortage was very much not fake, or I’m misinterpreting your meaning.
    • giaour 4y ago
      Could you elaborate? I'd love to read some analysis on this, but just claiming the whole shortage was fake has some real "no trees on flat earth" energy.
    • SV_BubbleTime 4y ago
      >The “chip shortage” was fake. The actual issue was inflation since the start. Whew. Good new for me then! I guess I’m not 99 weeks out on a required part anymore.
• fny 4y ago
  I'm going to explain what has happened so far. What happens next entirely depends on how inflation continues and the feds reaction. 1. We had zero percent interest rates. This causes the value of assets with cash flows out into the future (think speculative tech, Tesla) to accelerate. 2. We had massive herding in megacap tech. These valuations are high in part because for a decade you would not have beat the index without having these names in your portfolio. 3. These valuations blew up even further because of call squeezes during the 2020-2021 bull. Tesla even managed to get itself into the S&P. 5. Then in December, the megacaps we're squeezed further until the S&P 500 had a negative return relative to price! A lot of this occured because people remained under the impression that bond yields would never normalize. Now that they have, there is a risk free alternative to stocks. Now for the next complications: Ukraine + Russia, economic war with China, inflation, how the fed will respond, gas prices. If inflation continues and the fed becomes aggressive with hiking, all assets are dead. Bonds will be wrecked, stocks will be wrecked, cash is wrecked, even gold (depending on how aggressively they hike) will be dead because it's actually a really good deal to buy bonds when they yield north of 10% (if we get there). Say the fed decides not to hike as aggressively and inflation slows, then you'll be holding the S&P 500 likely for yield than growth. In the case of a recession or further inflation, that yield may be at risk depending on the sectors you're invested in. In this context the correction in names like Target make perfect sense. The dividend was near zero at it's price before the cut. Same thing happened in a company like Newmont mining.
  • pmorici 4y ago
    Tesla is a poor example of speculative tech. From 2019 to present they went from losing money to substantial and growing profitability. Better example would be things like Peloton, Beyond Meat, or Robinhood who all had sky high stock prices and have yet to turn a profit.
    • raffraffraff 4y ago
      I don't understand the US stock market, re: Beyond Meat. It's a fucking recipe. Where I live in Ireland there a dozen different fake-meat brands, and they're even getting competition from supermarket "own brand" products (burgers, sausages etc). Don't get me wrong, beyond meat isn't a bad product, but how the hell is a recipe and a few business deals worth IPO and wild speculation? What do they have beyond, uh, fake meat recipe?
• andsoitis 4y ago
  > Markets have already corrected and I think that public tech stocks have already seen most of the damage they are going to see. but then (and in the very next sentence no less): > I don’t know if we have hit bottom
  • autophagian 4y ago
    I'm not seeing the contradiction there? "Most of the damage" suggests some still to come.
    • deleted 4y ago
      [deleted]
    • deleted 4y ago
      [deleted]
    • andsoitis 4y ago
      “the markets have already corrected” is conventionally understood to mean it has bottomed.
• cryptica 4y ago
  Global economic problems were not caused by COVID19; it was just a convenient opportunity deflect blame away from more fundamental issues. One of the main real problems is that a decade of near 0% interest rates had led to money printing on such a scale that certain activities which would otherwise not have been profitable were able to be profitable (in nominal fiat terms)... But while these activities were reaping high nominal revenues and profits, they were destroying real value from the economy. Eventually, the situation became clear to some people at the top but by that point it was too late to prevent a catastrophic economic crash, so when they heard about COVID19, they pressured politicians to respond aggressively with lockdowns; that way the virus could serve as a convenient scapegoat for the crash and as a justification for massive fiscal stimulus to allow the elites to quickly cash out of their investments... The elites knew that after 2008, their reputations couldn't take another beating. They couldn't let themselves take the blame again. The unfortunate reality is that the COVID19 fiscal stimulus didn't solve any problem at all for the average person; it was purely a money-printing scheme to allow the elites to cash out by appropriating the wealth of regular citizens via the dilution of the value of their employment contracts and fiat-denominated savings. The inflation we are experiencing now is a direct result of the elites' appropriation of public funds from the money printers. Now we are facing some significant problems; after a decade of living in a parallel monetary universe in which irrationality, recklessness and negligence is rewarded, we have collectively lost our common sense. Our ideas about business, success, startups, finance, the economy, politics, everything is all wrong. For 10+ years, we trained ourselves to function in a totally dysfunctional environment and learned all kinds of lessons which only make sense in the context of that dysfunction. As we head into a more contractionary monetary environment, we have to unlearn everything and re-evaluate all business relationships; we have to disregard people's past financial track records (since they are meaningless in the context of a functioning system). In fact, it seems unlikely that someone who is particularly successful in the context of a dysfunctional system would also be successful in the context of a functional system... It's a totally different skillset.
  • ModernMech 4y ago
    > For 10+ years, we trained ourselves to function in a totally dysfunctional environment and learned all kinds of lessons which only make sense in the context of that dysfunction. For me, cryptocurrencies and Web 3.0 are the culmination and perfect distillation of this whole era. Interested to see how they weather this storm. I heard a commercial the other day which stated along the lines "have you ever wished you could invest your retirement account in crypto? Well now you can!" That's when I knew the shark has officially been jumped.
• Geee 4y ago
  This seems quite accurate, and enforces my own sentiment. Personally, I'm seeing even more doomsday scenario, but I'm not sure if that's just fear talking. I'm not even worried about the market, but I'm worried how everyone is going to actually survive, especially in poor countries. As in, how many % of the world population will die. Both energy and food are scarce, and at the same time monetary inflation is running record-high, caused by monetary stimulus. To me it looks like we're entering an era of unprecedented global stagflation. I could be totally wrong, and in general I trust the error-correction capability of humans, so take this with a big grain of salt. However, if wrong political decisions and monetary policies are used, instead of relying mostly on free markets, it will very likely make the problem worse. This is based mostly on intuition. It's just how I feel right now. I don't have the tools to predict something like this accurately.
• runeks 4y ago
  > In the early 80s, the G7 economies tightened the money supply, raising interest rates dramatically, in an effort to bring inflation under control. This article points out a similarity between the early 80s and now. So I think it's appropriate to point out a major difference as well. Consider this chart[1] which shows both the short term interest rate (Federal Funds rate) and long term interest rate (10-year Treasury yield) since 1962. Before rates started rising in the late 70s, the market was used to an interest rate between 5-10% (both long and short term), after which it rose to 15% (long term) and 20% (short term). Compare this with the current situation. Markets now have been used to 0% short term interest rates and 2-3% long term interest rates for over 10 years. The little blip you see to the far right of the chart is how much interest rates have risen so far (to 0.83% short term and 2.85% long term). If such a tiny blip (historically speaking) is the cause of the current correction, then it seems reasonable to expect that this is only a tiny part of a much greater correction that comes if interest rates get even close to the levels seen in the start 80s. [1] https://fred.stlouisfed.org/graph/?g=PIsi https://fred.stlouisfed.org/graph/?g=PIsi
  • 55555 4y ago
    lol the way you started your comment led me to believe I was going to be reading good news. Then it was just more horrible news.
  • CapmCrackaWaka 4y ago
    Surely speculation about the rise in interest rates has been taken into account by the market, though? If I expected stocks to decrease _drastically_ in the future as the fed increases rates, I would just sell right now, maybe even hold a short position. I feel that real interest rates do effect the market, but the expected future interest rates must also be a part of the "where do I put my money right now" formula.
    • runeks 4y ago
      Relevant point. I agree that the current correction is a reflection of the market’s expectations/predictions. But only for the medium term. The market has no idea what the interest rate will look like in 10 years — which is at least how long it’s going to take if it ever gets to 15-20%. There are simply too many unknowns to predict that.
• zw123456 4y ago
  One factor that I think might be different this time than from the 1980's is productivity increases from WFH. There are a number of studies showing that WFH has resulted in an increase in overall productivity. And has also helped curtail the demand for gas, although that is picking up. It remains to be seen if the Fed can wrangle the so called "soft landing", but productivity increase could potentially make that a bit more likely.
  • randomsearch 4y ago
    That can’t possibly be true, right? GDP plummeted and employment is high, so productivity can’t have increased…
    • zw123456 4y ago
      https://www.apollotechnical.com/working-from-home-productivity-statistics/ https://www.apollotechnical.com/working-from-home-productivi... there are other studies if you just search on productivity and WFH
  • mym1990 4y ago
    https://fred.stlouisfed.org/series/OPHNFB https://fred.stlouisfed.org/series/OPHNFB Although we've had gains from Q4 2019 to Q4 2021, I am not sure they are significantly higher than baseline in other periods. I would be skeptical of a productivity increase due to WFH simply because of the supply crunch that in many ways hindered the ability of people to output at maximum levels. Maybe if we are talking some specific sectors.
    • zw123456 4y ago
      Example https://www.apollotechnical.com/working-from-home-productivity-statistics/ https://www.apollotechnical.com/working-from-home-productivi... True, it depends on sectors but that is always the case with productivity, it never improves across the board, any automation or other changes will positively affect some sectors and negatively others. It's the macro net effect I think that could change things. I just think there has been some real fundamental changes due to the lock down that may have a lasting impact and make it difficult to use past patterns to make predictions.
• ptero 4y ago
  Second half of 1940s and early 1950s are, IMO, a much better data point on how asset prices and economy would develop than 1970-80s than the author chooses. The situation in 1940s, with massive post-war government debt and high inflation is a much better match to today's state than 1970s with low debt and high inflation.
  • user3939382 4y ago
    There are other huge differences though, right? In the second half of the 40s the US had a giant manufacturing economy whereas the rest of the world's manufacturing output was devastated by the war. I'm not an expert in this area but had the impression that it was this imbalance between the US and the rest of the world that played a huge part in our hegemonic success following that period, so I'm not sure what the purpose of comparing to that period would be, you wouldn't seem to be able to meaningfully extrapolate anything about the future out of it.
    • ptero 4y ago
      Certainly. There are big differences between now and 1940s in many things: manufacturing capacity, education levels, societal cohesion, easier acceptance of risk to life, etc. etc. I am just saying that purely from the economic perspective and its key characteristics of asset prices and inflation (that the author focuses on), today is much closer to the 1940s than to the 1970s. And I am personally investing on this assumption, as I think that the fiscal and monetary choices that US will be forced to make will drive the economy along a path with many similarities to the post-war decade. Just my 2c (and, obviously, not an investment advice).
• PaulDavisThe1st 4y ago
  I have a real problem with pieces like this that define "recession" in terms of abstract measurements of bits of the economy. Real recessions are about actual people and their lives, and although there's a definite correlation between the sorts of measures cited here and people's lives, it's much weaker than the article implies. We have very low unemployment right now, and most the features of a people-affecting recession are absent. Yes, the economic situation is really complicated and has some worrying signs, but calling it a recession based on the quoted numbers even when they are embedded in a not-seen-in-100-years context seems rash to me.
  • pid-1 4y ago
    Employment and wages are lagging indicators, which is why folks are worried.
  • FollowingTheDao 4y ago
    "The NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." Like another comment said, recessions hit the ordinary folks last. But their stress is already evident. Employment numbers can turn on a dime. as can retail sales. But real personal income is down. https://fred.stlouisfed.org/series/RPI https://fred.stlouisfed.org/series/RPI We are in uncharted territory here and anyone not acting so is foolish.
    • PaulDavisThe1st 4y ago
      RPI is down because of inflation though, not because of a decline in GDP, increase in unemployment etc. So yes, uncharted territory but not necessarily on the recession continent.
      • FollowingTheDao 4y ago
        RPI is adjusted for inflation, no?
• tempsy 4y ago
  The shock from the Target and Walmart earnings that caused the single largest drop since the 80s for both companies was not just the pain of inflation that is adding to their costs but also from rising inventories because consumers seem to be already sacrificing discretionary purchases. Will be interesting to see if discretionary spend continues to meaningfully drop and whether we will actually start seeing price cuts/discounts eg deflation as retailers look to reduce inventory.
  • 55555 4y ago
    I can't speak for Walmart and Target, but the COVID supply chain disruptions caused my business and likely many others to over-invest in inventory because it takes longer to restock, and the inventory will sell at slimmer margins because I paid 2X+ the normal shipping rate to get it to the destination country. Many businesses are sitting on large amounts of inventory that can barely be sold at a profit. Now discretionary income is dropping, meaning demand and price points will fall. We have too much landed inventory we paid too much for and less people spending less to buy it. It's not pretty.
    • electrondood 4y ago
      Exactly. Inventory is high because companies looked at the supply chain shutdown and thought "I'll load on up extra inventory, to hedge in case this happens again." Those prices are going to come down to entice the consumers scared off by inflation.
  • mdorazio 4y ago
    From reading their investor statements it was more complicated than that. They overpurchased inventory of goods that saw lowering demand as people started going back to the office or spending money elsewhere as pandemic restrictions lifted. Ex. People shifted discretionary expenditures from TVs to vacations. Given how tight the labor market is I don’t think we’ve really seen the impact of overall lower discretionary spending yet - that probably won’t play out until this coming holiday season.
• natly 4y ago
  Getting really annoying to have to keep track of macro events affecting my life year after year instead of just being able to live a normal peaceful life.
  • deleted 4y ago
    [deleted]
  • FollowingTheDao 4y ago
    You can do both! Live needing little, be humble, spontaneous, help your friends and family! Let go!
    • ChrisMarshallNY 4y ago
      This.
  • throwaway_1928 4y ago
    Monkeypox is just getting started. Hang in there. https://www.washingtonpost.com/politics/2022/05/22/biden-monkeypox-vaccines-outbreak/ https://www.washingtonpost.com/politics/2022/05/22/biden-mon...
    • shrimp_emoji 4y ago
      No airborne spread. Transmitted through sex. We're safe as houses. :p
      • throwaway_1928 4y ago
        In that case HNers are safe :-) But I am afraid it is is transmissible by 'respiratory droplets'. > "Monkeypox virus is transmitted from one person to another by close contact with lesions, body fluids, respiratory droplets and contaminated materials such as bedding." https://www.who.int/news-room/fact-sheets/detail/monkeypox https://www.who.int/news-room/fact-sheets/detail/monkeypox
• d3nj4l 4y ago
  I was very close to switching from a safe-but-boring FAANG type job to a slightly more exciting but very wary stage startup. While there were a few other signals that it might not be the right place for me, the biggest factor was that I wasn’t confident in the company’s ability to survive the next two years, for the exact same reasons the author outlines in that post: tightened money supply spells doom for startups founded when money was flowing freely, especially if they haven’t found a good market fit yet.
• ChrisMarshallNY 4y ago
  > I would be planning to ride this thing out for at least eighteen months or more. I'm betting more like three to five years. I was talking to a friend (another old guy, like me, but really rich, unlike me). We've both been through at least two recessions (big, nasty ones, with teeth and claws). We realized that there's an entire generation of folks; many running companies, that have never seen a real bear market. It's likely they are having a shit hemorrhage, right now. The company I used to work for, was (still is) an over 100-year-old Japanese company. They lasted through a devastating war, a depression, multiple recessions, and were still around. I'm hoping that they stay around. They've made some choices that could be disastrous (I think that sidelining my team was one ;), but not the same kind a lot of companies are making now. Lots of people are leveraged to the hilt. Bad place to be, when the economy starts tanking. HODL is the word. Live cheaply, so you don't need to cash out in a trough. Don't rely on other people's money, keep debt way down, keep margins high, optimize processes, etc. Old-fashioned stuff. It worked 100 years ago, and still works today. Not everything old is bad.
  • deleted 4y ago
    [deleted]
  • jeffbee 4y ago
    How could there be a whole generation of CEOs who never saw a recession? Are there 13-year-old CEOs?
    • ChrisMarshallNY 4y ago
      As CEOs (also, the 2008 recession didn't hit the tech sector nearly as hard as this one. The 2000 bubble burst would be a better comparison). When you have that job, the priorities are vastly different from as a W2 earner. But, to be fair, there's plenty that have. Which is why we're so puzzled at their behavior.
    • lukeramsden 4y ago
      I would imagine ChrisMarshallNY means they weren't running companies when the last recession hit, not that they literally weren't alive....
• steveBK123 4y ago
  Long term demographics shifting older and growth shifting lower has driven interest rates down since as long as most of the posters here have been alive. We have hit an inflection point where interest rates are being raised as a tool to fight generational highs in inflation. This is the usual tool the central banks use in such a scenario. The resulting slowdown in markets and economy is the usual result. How smooth the slow down is to prevent overheating is always the risk they take. What is in question is how effective this will be if a lot of the inflation was simply pent up COVID demand, supply chain constraints (China shutdowns), car makers getting caught flat footed while transitioning to EVs but unable to secure battery&chip supplies, and war induced energy price spikes. Some of these things will be resolved by demand dropping due to interest rates rising, many will not. For some things this will cause double pain - cost of money is higher and energy prices remain high due to war. So we are probably in for 6-24 months of pain, with 12-18 months being the 90% scenario. Another question is if the clock started ticking in November when tech peaked or January when the broader market peaked. Another question is the amount Wall St vs Main St, is this just going to be a market drawdown or a wider economic recession. So far what we've seen is GDP/unemployment have not really reflected the same bearish picture (yet). GFC was more of a broader economic collapse story versus DotCom collapse which was more sector & market specific.. So now would be a good time to hunker down, manage your personal&company burn rates, and maybe be an opportunistic buyer or investor if you see specific opportunities.
  • CSMastermind 4y ago
    > So far what we've seen is GDP/unemployment have not really reflected the same bearish picture (yet). This has been puzzling me so far. Tech hiring is hot as ever even with a few notable companies doing hiring freezes to various degrees. Can't help but feel like the market has to cool at some point.
    • steveBK123 4y ago
      Is it lag and is the hiring real? re: Lag - someone joining a new job today was probably given an offer 3 months ago, and begun their recruiting process 6 months ago. re: Realness 1) I've been through a number of interview rounds at a number of firms in the last 3 months where either the role itself or the comp previously discussed suddenly became in question, and the process delayed or went on hold. I have 2x as many irons in the fire as usual this job hunt as I find continual head fakes, ghosting and just general flakiness. 2) From the other end I can tell you my management has asked our team to do what-if scenarios for anything from -50% to +50% staffing recently. With scenarios of cutting some/most consultants with 0 backfills, or converting some, adding full-timers, etc. 3) Even some of the shops I interview have made mention of cutting consultants as of late, so some of the hiring could just be conversion. 4) Lot of tech headlines of hiring freezes or pauses or chills
• mhmmbt 4y ago
• mym1990 4y ago
  My view is that capital and investment will dry up and companies that are operating at a loss(many in tech right now) will either have to downsize or close up completely. This will cause a domino effect. People will lose jobs, and some of those people will have bought a million dollar shack in the past 2 years and they might have to sell at a loss or foreclose. Generally I think we have yet to see any real macroeconomic fallout from the markets cooling. I see many people already comparing this to '08 and saying 'it's definitely not that bad this time' but the reality is we haven't even seen any fallout yet.
  • ripper1138 4y ago
    That could be true but the impact would still be limited compared to 2008. Credit/bank failures are far worse for the general economy than some tech startups failing.
    • sebmellen 4y ago
      I'm not 100% sure of that. Think of how many services depend on tech, and how much of that tech is built by companies operating at a loss. For example, if Cloudflare were to do mass layoffs, and potentially fail/go bankrupt, what would the ripple effects be on enterprises throughout the US?
      • harpratap 4y ago
        Negligible. Cloudflare is tiny compared to AWS, which itself is a fraction of total computer infrastructure. On-prem is still big, reason why cloud companies keep showing massive growth.
    • mym1990 4y ago
      I don’t think that tech companies are the systemic risk here, but they could certainly start the chain of events. In 2008 the governments and central banks had tools to use to try to bring us out quickly. Todays risk involves the possibility of stagflation, which is a long slog to get out of.
  • 4y ago
• chmod600 4y ago
  How does all this look to the federal government and deficit spending? What happens when they can't borrow money at near-zero any more, and need to borrow more money at 5-10%? Everyone always said the debt was nothing to worry about. It's been repeated for a long time as our debt keeps rising, but it was most apparent with the recent spending bills and virtually no pushback on trillions in unfunded spending.
• deleted 4y ago
  [deleted]
• lettergram 4y ago
  I kind of disagree with the analysis, largely because there’s now a large block of the world separated from western commerce. Russia isn’t purchasing goods, yet the west is giving them wealth for oil, natural gas, wheat, etc. That’s effectively wealth leaving the system and entering there’s. More over, the west is increasingly looking at China as a threat AND China has locked down a large amount of economic output. This is just starting imo and it’s not likely to improve for the time being. In the 70s and 80s the US had a large manufacturing base and purchasers around the globe. Today the largest exporter is China and most nations have china as their largest import. China is supporting Russia and looks like their looking to leave the western financial system. This is on a downward spiral far different than the 70s and 80s and I don’t see it reversing until the market bottoms out at its new size (much smaller than previously).
  • matthewaveryusa 4y ago
    Genuinely curious : Russia’s GDP is < 10% that of the US or China. What’s up with this fascination with Russia (economically speaking — the humanitarian tragedy they are creating is a different topic)? The only question is if they align with the west or with china —-they’ve already lost as a super power, and their best strategic choice is to become a prized and expensive proxy between the west and china. The thing is, china and the west _trade_, so the calculus for russia is losing on all fronts. they can inflict a decade worth of pain to europe energetically, and then what?
    • lettergram 4y ago
      All GDP is not equal. As an example, Ireland’s GDP was ~1/3 tourism, with covid they lost that GDP. Russia GDP is primarily raw goods, commodities. They also have a decent domestic market for manufactured goods. Look up the global production of wheat, natural gas, oil, etc and look for Russia and Belarus. To put it bluntly, USA GDP is a mix and has everything from commodities to information tech to finance. Russia is a producer of raw goods. Commodity prices are made at the margin, meaning a 1-2% reduction in supply could cause prices to go up 5-10% (similar for the reverse). So Russia has an outsized ability to both weather sanctions (they don’t import as much raw materials, particularly energy) AND the world must continue to purchase their goods and/or dramatically reduce in production themselves. For instance, German energy prices are up 500% (as of feb 2022) when compared to two years prior. https://www.statista.com/statistics/1267541/germany-monthly-wholesale-electricity-price/ https://www.statista.com/statistics/1267541/germany-monthly-... It’s now up 1000-1500%, how is German GDP going to be impacted? While Russia’s will maintain much of its GDP, Germans will likely drop substantially, as they’re effectively deindustrializing. Their factories / industries can’t function economically at such high prices. > so the calculus for russia is losing on all fronts I see Russia winning on all fronts tbh. They’re increasing domestic resilience and culture. They’re also winning the war in Ukraine (see Mariupol, Donbas encirclement), and winning the economic war with the west paying them even with the sanctions. What’s their goals? To me it seems they are achieving the objectives Putin laid out at the rambling speech at the beginning of the war (independence from the west and “freeing” Russian sections of Ukraine) I find it so interesting people think Russia is losing. I just don’t see it.
• CyanLite4 4y ago
  When there’s blood in the streets…
• Barrera 4y ago
  > In the early 80s, the G7 economies tightened the money supply, raising interest rates dramatically, in an effort to bring inflation under control. You can see the effect in this image: It's fascinating how much attention the Federal Reserve gets when it comes to the business cycle. It's not clear what's being referenced above, but the reference to the Fed funds rate chart below suggests it's "the Fed" and company. It's possible, though, that the Fed is irrelevant. Have a look at a different interest rate chart: the 30-year Treasury yield (10-year chart looks similar). This is the risk-free price of money that comes due in 30 years [zoom out by clicking "max"]. Given the three-decade duration, this is about as close as one can get to answering the question: what is the economy likely to look like if the Fed didn't matter? This market is giving a peek into the relative level of growth and inflation expectation in the distant future. https://fred.stlouisfed.org/series/DGS30 https://fred.stlouisfed.org/series/DGS30 The chart peaks around 1981 and from there it's a fully-loaded train barreling down the hill without a brake and only hitting the occasional bump along the way. Through recession (grey bands) and recoveries (after the grey bands), through manias (1999-2000, 2006-2007, 2020-?) this long-term rate sets lower highs and lower lows, year after year. During all this time, the Fed is doing its thing, pumping up the idea that it controls "the money supply" and it alone can fight inflation or get the economy out of recession. That is, until this year. Depending on how you look at it, the top of the long-term trend line may have been broken this year, or just barely touched. In other words, this chart sits at a possible inflection point marking either the beginning of a new regeime (much higher interest rates) or reversion to the status quo (much lower and likely negative interest rates). The point of all of this is that if the Fed were indeed the center of the financial universe, is this the kind of chart you'd expect to see? What factor(s) in the real economy are capable of producing a chart like that, independent of the Fed? Finally, what happens when/if this chart crosses the x-axis, or breaks decisively above trend?
• bjornsing 4y ago
  Are Americans this certain that the Fed will put an end to inflation? The economic incentives to let it rip are extraordinary… In Sweden there’s a lot of political debate around this, and many are arguing that it would be better to let inflation eat the debt burden.
  • idiotsecant 4y ago
    > let inflation eat the debt burden. Good news everyone! By destroying our economy we have successfully reduced the real cost of the debt by 80%! Unfortunately, we now need to print massive piles of money to incentivize economic activity again! Ouroboros, meet tail.
    • bjornsing 4y ago
      I agree it’s risky business, but that is what happened in the 70ties. So it is possible to let inflation eat say half of the US national debt. That’s 13 trillion USD… Even if the US economy shrinks by 5% in the process it may still be beneficial for many. This is the extraordinary economic incentive I was referring to above.
  • yung_steezy 4y ago
    Inflation is the most destablising thing in an economy. It would be wise to keep raising interest rates until inflation gets back to 2/3% even if that causes a recession.
    • bjornsing 4y ago
      I agree. But many Swedes are heavily indebted (with mortgages), and their parents made a fortune from negative real interest rates in the 70-ties + the asset bubble of the 2000s. Now they want the same. Understandable. The Swedish Riksbank (actually the oldest central bank in the world) is formally independent, but everything is politics in Sweden. I would not be surprised if the indebted middle class come out on top here.
      • 4y ago
• antishatter 4y ago
  Tightening hasn’t started yet so we are clear.
• flyinglizard 4y ago
  What will VCs do with their mega funds raised during the recent boom? Sit out for 18 months?
  • htrp 4y ago
    usually it's saved to bail out their existing investments in down rounds....
• bendbro 4y ago
  I don't know. Just my 2c. Not investment advice.
• anm89 4y ago
  This isn't a particularly insightful call to make in May 2022, we're already deep into this process. A year ago or even 6 months ago I would have said this was pretty insightful if you had called it while everything was still moving up
• MaysonL 4y ago
  The pandemic isn't over. Assuming that it is will lead to rather unpleasant outcomes.
• ddjsn111 4y ago
  Zzz
• Animats 4y ago
  What if the COVID epidemic doesn't end in this decade? The US continues to have about half a million dead per year, and a lot of lost productivity due to long COVID. This is the most likely scenario. What if the war in Europe doesn't end in this decade? The optimistic scenario is that Russia bites off some of Ukraine and we go back to a cold war, with everybody in Europe building up serious military power to keep Russian expansion at bay. There are worse outcomes. What if global warming starts to produce mass starvation in many areas of the world? This is looking likely, and it's already started. What if supply chain problems don't go away? It's become clear that the incentives of the free market no longer insure abundance across the board. Americans could once deride the USSR's "short-blanket economy", where stores were always out of something. Now that's the norm in America. For the past half century, large scale trouble in the US has been mostly about the business cycle. But this time, the business cycle doesn't dominate the other problems.
  • ajsnigrutin 4y ago
    Covid is over, the excess deaths are low, or even zero. War in ukraine would be a nothingburger if americans were involved (like noone cares about yemen, syria, now somalia, and noone cared about afghanistan, iraq, and even serbia). Most of the current problems that we have are caused by the politicians directly, and not by covid/war/whatever, and sadly, they're the first that will have to go, if we want to return to somewhat normal future.
    • wonderwonder 4y ago
      Not sure you are correct here. Ukraine war is in Europe, America's sphere of influence and features America's traditional enemy. America was involved in Afghanistan and Iraq which you claimed no one cared about. Russia and Ukraine produce a significant portion of the worlds food, energy and fertilizer supply. The current situations are caused by politicians but politicians from dozens of countries. Politicians chose to invade Ukraine. Politicians financed the making of vaccines which provided enough confidence for economies to open up again. Politicians chose China's zero covid policy. Politicians flooded the market with money which led to inflation but also prevented a collapse during covid and allowed the poorest among us to survive. Politicians do both good and cause harm. They also provide representation, without them your other options are dictatorships or anarchy. "they're the first that will have to go, if we want to return to somewhat normal future." how are you suggesting they "go"? This is a normal future, there is very little going on right now that has not happened a dozen times before, its just people doing people things.
• jazzythom 4y ago
• wonderwonder 4y ago
  My plan is simple: I stopped investing in the market for the moment. Using that money to pay off debt and get my 6 month emergency fund back up. Should be set in a couple months and debt free. Then just save every penny I can until the markets are bleeding and people are saying all assets are worthless. Then I am going to invest everything. Down payment on a rental property And the rest 50% crypto / 50% S&P 500 index funds.
  • mbesto 4y ago
    So you plan to try to time the market AND put 50% (or whatever is the remaining of the rental property) of your net worth in crypto...ehh good luck!
    • wonderwonder 4y ago
      i mean personally for me worst case scenario is I end up debt free with a 6 month emergency fund. As long as I am not in margin and I invest in eth and btc only i am fine. so the market goes down further, I'm still fine and either way i got in lower that I would have if I went all in now.
• TameAntelope 4y ago
  Sometimes it's terrifying to think that nobody knows what will happen next, other times it's comforting. After reading this, I am comforted. Anyone predicting any particular outcome is not someone worth listening to.
  • hbosch 4y ago
    The race to be right is run by people who are mainly, usually, wrong.
  • hello_newman 4y ago
    I agree, which basically sums up this entire thread and all others like it over the past couple weeks. Air-chair economists pontificating on what will happen to our economy over the next 12-24 months like they know with certainty what they’re talking about. I thought this article was arguably the most rational outlook I’ve seen. It’s insane to me that a small fraction of companies have had a couple routine layoffs, the market slightly dips as it always does cyclically, and people are already running around saying the sky is falling.
• LoveGracePeace 4y ago
  "In the early 80s" Ronald Reagan was elected President of the United States of America, Iran immediately gave up the hostages they'd been holding for over a year under Carter, and overall the world and the US rejoiced that a real leader was finally in charge of the US. That is what happened.
• known 4y ago