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Negative interest rates = you get paid to borrow and spend money. This means that these companies expected they would get a constant inflow of fresh cash. You

• fennecfoxen 4y ago
  Real interest rates are still negative. A mere half-point rate hike doesn't "fix" that. Two rate hikes are likewise insufficient. The Fed's target is at 0.75-1.00% and inflation's still over 8%.
  • _njyk 4y ago
    I agree, the rate hikes are still very shy, and the supply-chain issues are not going to improve prices. Estonia (where I live in Europe) has 20.3% inflation, it's insanely bad and the ECB is a snail to react to the situation and still claiming "this is transient, don't worry".
    • puranjay 4y ago
      Most institutions are very slow to react by and large since there is a big lag between on-ground reality and financial data. This is why you'll often see experienced investors and fund managers often defer to their "gut instincts" and talk a lot about subjective experiences ("I feel") vs just hard data.
      • rvnx 4y ago
        It's very refreshing to hear such :)
• pjc50 4y ago
  Who was actually able to borrow at negative nominal rates? As far as I can see even the US government only briefly hit negative nominal rates. I can see an argument for taking advantage of near zero real rates to hedge inflation: borrow 1000, buy assets, sell assets for 1080, repay 1001.
  • rvnx 4y ago
    Banks did, and they can issue loans at 1:9 leverage (at least in Europe). So what to do then with this money ?
    • pjc50 4y ago
      And did Bird actually borrow any of this money and at what rate?
      • rvnx 4y ago
        Yes but indirectly, and the nominal rate of borrow doesn't matter as long as the rate is less than the expect potential growth of the long-term value of Bird stock. At its core, Bird creates hype by creating a product or a service, this hype has some value. Investors believes they can increase and benefit from this hype so they decide to bring new cash. This new cash is supposed to be used generate new revenue, which in turn is increasing the hype, and this hype helps to bring new cash. At the end of the cycle, the point of fast growing private equity fund is to carry and grow hype until a potential IPO which is the time the retail investors or the general public are going to be left holding the bag (Airbnb, Uber, Coinbase) or to the point where the company becomes profitable and distributes future earnings (e.g. Microsoft). Which means, as long as there is hype, there is new money coming in. The reason money comes so much is because investors are nudged to spend their cash (e.g. negative interest rates also means that people who have cash and not equities are punished, as they have to pay interests!). Also, the retail investors have had this incentive but don't anymore. Remember, during the corona, a lot of people didn't know what to do with their money because no restaurants, no travel, etc. So playing with cryptos and stock market on Robinhood. -> The expected inflows of cash are going to decrease because retail investors that will hold the bag eventually won't be so keen to invest as they need their money (higher inflation). -> The cash is more expensive, so there is a mechanical reason for the decrease. -> There is uncertainty Overall: -> We need the company to survive so the pyramid doesn't collapse. -> Rationalizing by reducing our cost base is the most reasonable solution to protect all the investors and the employees who invested their time and sweat. I hope it makes sense.