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I am seeing so much doom and gloom, I don't think we're in for a "correction" any time soon. Everyone thinks they're Michael Burry these days. If all of Wall St

by dvt 4y ago

I am seeing so much doom and gloom, I don't think we're in for a "correction" any time soon. Everyone thinks they're Michael Burry these days. If all of Wall Street and their mom says it's going to crash, it's probably not crashing. My prediction is choppy seas until the midterms, and then back to all-time-highs. Housing will take a 30% haircut, and we'll probably see some of the over-extended corporate debt come to roost as well. But tech is going to be fine, and crypto will bounce back by EOY.

nostrebored 4y ago
But Michael Burry is predicting a correction?
- dvt 4y ago
  His claim to fame is the 2008 housing market crash, so it's definitely on-brand. Survivorship bias in its purest form.
- bloodyplonker22 4y ago
  When is he not?
  - MacsHeadroom 4y ago
    From 2010 through 2020
    - dvt 4y ago
      Except in 2015: https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html https://nymag.com/intelligencer/2015/12/big-short-genius-say... And in 2019: https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-explains-why-index-funds-are-like-subprime-cdos-1.1310874 https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-ex...
    - mmastrac 4y ago
      He's called 20 of the last 2 recessions.
recursivedoubts 4y ago
there was a lot of doom and gloom in 2001/2 and 2008/9 too sometimes the crowd is right we'll see
- m00x 4y ago
  HN predicted 12 out of the last 2 recessions.
  - addajones 4y ago
    My favorite comment of the week. Soooo good haha.
  - recursivedoubts 4y ago
    Let's call it 13 out of the last 3 recessions, eh?
moralestapia 4y ago
>I don't think we're in for a "correction" Even if that's the case, it will only change the ROI of big VCs from like 4,000x to "just" 1,000x. Boo hoo. (Edit #1: Ok, this is hyperbolic but you get the idea). Similar to BTC, if you bought at 0.01USD you're still making a killing, even with the recent dip. If you bought at the top though ... Edit #2: Turns out I was spot on w/ the 4,000x figure, https://brandondonnelly.com/2019/05/10/5599/ https://brandondonnelly.com/2019/05/10/5599/ BTW, YC's ROI is on the order of 50x-100x by my guesstimate (0.5B invested in ~3,000 companies, ~10% stake on a market valued at 400B before the dip); open to discuss it.
- bushbaba 4y ago
  Source on that VC "ROI". For context, a16z is no-where near those rates. https://www.theinformation.com/articles/andreessen-horowitz-returns-slip-according-to-internal-data https://www.theinformation.com/articles/andreessen-horowitz-...
- nl 4y ago
  No VC funds are making 1000x or 4000x. They might make that on a single investment, sometimes. But that covers the ones they lose money on.
- Gigachad 4y ago
  I hate crypto but I have heard the “if you bought at the top” line about 7 times now and it always ended up coming back much stronger a year or two later.
closeparen 4y ago
Most American households are owners and housing is the vast majority of middle class wealth. A 30% haircut there is pretty doom and gloom.
- m00x 4y ago
  If you're not selling, it's unimportant. Unless you're a "real estate" investor, you're not gonna feel it at all.
  - MSM 4y ago
    Nearly everyone either bought a new home or refinanced within the last 12-18 months due to historically low rates. This also means that almost all mortgages are pretty much capped out in terms of loan to value. If houses lose 30% of their value, a substantial amount of people would be underwater and would likely be better off walking away. Could be very bad.
    - dvt 4y ago
      > would likely be better off walking away Most people will not go underwater (not that many people, proportionally speaking, bought in the last 2 years), but either way, there's zero chance anyone's walking away if it's their primary residence. What are they going to do, live in a van down by the river?
      - danielheath 4y ago
        > What are they going to do, live in a van down by the river? Rent?
        m00x 4y ago
        Rentals in the near-future will be of higher cost until re-adjusted or if the demand goes much lower. Also, renting with a bankruptcy on the record could be challenging.
hackitup7 4y ago
I think that the biggest blocker to the market hitting ATHs that soon is rising interest rates, given the predictable valuation haircut that high-growth unprofitable companies take when interest rates rise. Rising interest rates increase the discounting rate on their future cash flows.
- ceeplusplus 4y ago
  Interest rates have already been priced in for a while. Hence the S&P 500 going up 3% when the Fed announced they were hiking by 50 bp for the foreseeable future. The only way another crash happens is if the Fed is forced to hike by 75bp.
  - FollowingTheDao 4y ago
    If interest rates have been priced in for a while why has the market gone down so much in May? Also the Fed has already said that they are going to raise rates much higher than 75bp. And in fact they have to to control inflation. Interest rates should be above eight or 9% right now and it’s not.
    - djbusby 4y ago
      Well, the May thing is just "sell in May and go away". And old broker friend told me that "rule"/"wisdom". Sell to get some cash after the April tax bill and then take a vacation in June/July after the kids are out of school.
    - ceeplusplus 4y ago
      Because the Fed previously announced they were only hiking by 25bp/meeting and they were forced to go to 50bp. Plus there were several big earnings misses.
    - nl 4y ago
      > Interest rates should be above eight or 9% right now and it’s not. Where do people get ideas like this from? It just seems so completely disconnected from any kind of conventional economic policy that it is hard to understand why someone would say it.
cheriot 4y ago
That's possible, but also dismisses the role of the Fed in the current expansion. The "Fed put" has been replaced by a Fed dedicated to lowering demand until inflation comes down. If inflation doesn't come down this summer it could get ugly.
JohnJamesRambo 4y ago
QT starts tomorrow.
steve76 4y ago
[dead]
rrrhys 4y ago
> I don't think we're in for a "correction" > Housing will take a 30% haircut, and we'll probably see some of the over-extended corporate debt come to roost as well What, then, is a correction?
- irjustin 4y ago
  I suppose in this case a "correction" is a crash of some form. A fundamental shift, and Agreed there's no basis for a fundamental problem. Valuations are too high so a "30% hair cut" is warranted, but something like "ninja" loans or IPO'ed tech companies with 0 revenue isn't a thing right now. There were market wide fundamental issues that cause huge shifts. This simply missing this time. The VC space isn't wallstreet and it definitely isn't mainstreet. Even if a crypto+vc crash happened, we'd only be in "haircut" not full on crash as a general populous.
lamontcg 4y ago
EOY there might be a bounce-back, which may be starting already. But it is somewhat unlikely that the rate hikes the fed are planning will really get inflation in check. We're seeing sticky wage inflation due to fewer people in the workforce and the fed is going to have to invert the yield curve to get that under control. They are going to have to hit the brakes in a way that hasn't been seen since Volker and will cause significant amounts of pain. By the end of 2023 things should have gotten very exciting.

by dvt 4y ago

nostrebored 4y ago

But Michael Burry is predicting a correction?

dvt 4y ago
His claim to fame is the 2008 housing market crash, so it's definitely on-brand. Survivorship bias in its purest form.
bloodyplonker22 4y ago
When is he not?
- MacsHeadroom 4y ago
  From 2010 through 2020
  - dvt 4y ago
    Except in 2015: https://nymag.com/intelligencer/2015/12/big-short-genius-says-another-crisis-is-coming.html https://nymag.com/intelligencer/2015/12/big-short-genius-say... And in 2019: https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-explains-why-index-funds-are-like-subprime-cdos-1.1310874 https://www.bnnbloomberg.ca/the-big-short-s-michael-burry-ex...
  - mmastrac 4y ago
    He's called 20 of the last 2 recessions.

recursivedoubts 4y ago

there was a lot of doom and gloom in 2001/2 and 2008/9 too sometimes the crowd is right we'll see

m00x 4y ago
HN predicted 12 out of the last 2 recessions.
- addajones 4y ago
  My favorite comment of the week. Soooo good haha.
- recursivedoubts 4y ago
  Let's call it 13 out of the last 3 recessions, eh?

moralestapia 4y ago

>I don't think we're in for a "correction" Even if that's the case, it will only change the ROI of big VCs from like 4,000x to "just" 1,000x. Boo hoo. (Edit #1: Ok, this is hyperbolic but you get the idea). Similar to BTC, if you bought at 0.01USD you're still making a killing, even with the recent dip. If you bought at the top though ... Edit #2: Turns out I was spot on w/ the 4,000x figure, https://brandondonnelly.com/2019/05/10/5599/ https://brandondonnelly.com/2019/05/10/5599/ BTW, YC's ROI is on the order of 50x-100x by my guesstimate (0.5B invested in ~3,000 companies, ~10% stake on a market valued at 400B before the dip); open to discuss it.

bushbaba 4y ago
Source on that VC "ROI". For context, a16z is no-where near those rates. https://www.theinformation.com/articles/andreessen-horowitz-returns-slip-according-to-internal-data https://www.theinformation.com/articles/andreessen-horowitz-...
nl 4y ago
No VC funds are making 1000x or 4000x. They might make that on a single investment, sometimes. But that covers the ones they lose money on.
Gigachad 4y ago
I hate crypto but I have heard the “if you bought at the top” line about 7 times now and it always ended up coming back much stronger a year or two later.

closeparen 4y ago

Most American households are owners and housing is the vast majority of middle class wealth. A 30% haircut there is pretty doom and gloom.

m00x 4y ago
If you're not selling, it's unimportant. Unless you're a "real estate" investor, you're not gonna feel it at all.
- MSM 4y ago
  Nearly everyone either bought a new home or refinanced within the last 12-18 months due to historically low rates. This also means that almost all mortgages are pretty much capped out in terms of loan to value. If houses lose 30% of their value, a substantial amount of people would be underwater and would likely be better off walking away. Could be very bad.
  - dvt 4y ago
    > would likely be better off walking away Most people will not go underwater (not that many people, proportionally speaking, bought in the last 2 years), but either way, there's zero chance anyone's walking away if it's their primary residence. What are they going to do, live in a van down by the river?
    - danielheath 4y ago
      > What are they going to do, live in a van down by the river? Rent?
      - m00x 4y ago
        Rentals in the near-future will be of higher cost until re-adjusted or if the demand goes much lower. Also, renting with a bankruptcy on the record could be challenging.

hackitup7 4y ago

I think that the biggest blocker to the market hitting ATHs that soon is rising interest rates, given the predictable valuation haircut that high-growth unprofitable companies take when interest rates rise. Rising interest rates increase the discounting rate on their future cash flows.

ceeplusplus 4y ago
Interest rates have already been priced in for a while. Hence the S&P 500 going up 3% when the Fed announced they were hiking by 50 bp for the foreseeable future. The only way another crash happens is if the Fed is forced to hike by 75bp.
- FollowingTheDao 4y ago
  If interest rates have been priced in for a while why has the market gone down so much in May? Also the Fed has already said that they are going to raise rates much higher than 75bp. And in fact they have to to control inflation. Interest rates should be above eight or 9% right now and it’s not.
  - djbusby 4y ago
    Well, the May thing is just "sell in May and go away". And old broker friend told me that "rule"/"wisdom". Sell to get some cash after the April tax bill and then take a vacation in June/July after the kids are out of school.
  - ceeplusplus 4y ago
    Because the Fed previously announced they were only hiking by 25bp/meeting and they were forced to go to 50bp. Plus there were several big earnings misses.
  - nl 4y ago
    > Interest rates should be above eight or 9% right now and it’s not. Where do people get ideas like this from? It just seems so completely disconnected from any kind of conventional economic policy that it is hard to understand why someone would say it.

cheriot 4y ago

That's possible, but also dismisses the role of the Fed in the current expansion. The "Fed put" has been replaced by a Fed dedicated to lowering demand until inflation comes down. If inflation doesn't come down this summer it could get ugly.

JohnJamesRambo 4y ago

QT starts tomorrow.

steve76 4y ago

[dead]

rrrhys 4y ago

> I don't think we're in for a "correction" > Housing will take a 30% haircut, and we'll probably see some of the over-extended corporate debt come to roost as well What, then, is a correction?

irjustin 4y ago
I suppose in this case a "correction" is a crash of some form. A fundamental shift, and Agreed there's no basis for a fundamental problem. Valuations are too high so a "30% hair cut" is warranted, but something like "ninja" loans or IPO'ed tech companies with 0 revenue isn't a thing right now. There were market wide fundamental issues that cause huge shifts. This simply missing this time. The VC space isn't wallstreet and it definitely isn't mainstreet. Even if a crypto+vc crash happened, we'd only be in "haircut" not full on crash as a general populous.

lamontcg 4y ago

EOY there might be a bounce-back, which may be starting already. But it is somewhat unlikely that the rate hikes the fed are planning will really get inflation in check. We're seeing sticky wage inflation due to fewer people in the workforce and the fed is going to have to invert the yield curve to get that under control. They are going to have to hit the brakes in a way that hasn't been seen since Volker and will cause significant amounts of pain. By the end of 2023 things should have gotten very exciting.