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He’s correct. The bubble caused by a decade of easy money started to burst last year. Go look at a stock chart from the last 1Y and you’ll see that the sky ha

He’s correct. The bubble caused by a decade of easy money started to burst last year. Go look at a stock chart from the last 1Y and you’ll see that the sky has started to fall, and had been falling from just after 1Y and has a long long way to go. Until inflation is under control and fed tightening stops, housing, equities, and bonds will continue to fall in price. This week almost saw a catastrophic run on the pound and UK gilts and US bonds are flashing warning signs. The crash started last year and continues with mathematical certainty until the fed pivots.

metadat 4y ago
Is it a bubble or a crash when not accompanied by a huge wave of abrupt layoffs and / or market losses? From where I'm sitting, the current phenomena appear slow moving and unfolding over such a long period of time, it's easily observable and unsurprising. Maybe we just have a different definition of these terms?
- grey-area 4y ago
  Layoffs have started and will accelerate. It starts as hiring freezes and funding drying up, it ends in mass layoffs. In a year or two the crash will be obvious, everyone will be certain investing is a terrible idea, and it’ll be a great time to invest/start a company.
  - metadat 4y ago
    Thanks for elaborating. It's still a great time to found a company now, if you have the right idea and network ;)
  - mikeweiss 4y ago
    It'll be a good time to start a company when people no longer want to invest?
    - ambicapter 4y ago
      Not all companies need huge investment, and it's a good time to start a company when a lot of companies are dead or dying, and you can step into their market and buy their assets for cheap.
      - Ancalagon 4y ago
        sure, with what capital to hire/acquire? Investors will shut down as well
    - wombatpm 4y ago
      Old Market Adage: Best time to buy is when blood is running in the streets
  - CodeSgt 4y ago
    Why would that be a great time to start a company?
    - grey-area 4y ago
      Because by the time you're ready for serious investment the cycle will have turned again. Many great companies are founded in downturns (possibly just because people are laid off, possibly because money stops being a motivating factor).
    - yunwal 4y ago
      Less competition for talent and market share if you have the funds. However, if you don't have the funds, it'll be nearly impossible to raise.
  - RC_ITR 4y ago
    Facebook is not the economy https://www.dol.gov/ui/data.pdf https://www.dol.gov/ui/data.pdf
RC_ITR 4y ago
> and has a long long way to go. The stock market's price level is well above where it was pre-pandemic, it's trading at earnings multiples in-line with 30+ year averages [1] (what was the 10Y yield in 1990, might I ask?) because earnings have gone up. I know being doom and gloom makes you sound smart (to some), but don't fall into the trap of 'everything is shit now because inflation has been high for 20 months' [1]https://www.yardeni.com/pub/stockmktperatio.pdf https://www.yardeni.com/pub/stockmktperatio.pdf
- grey-area 4y ago
  Yes, that's why it has far more to go to revert to the mean of earnings and price. Earnings are also artificially inflated, and will drift down, and stock prices with them, we're just seeing the beginning of that process. Here's someone else who called it over a year ago with some charts with counterpoint those you link: https://www.hussmanfunds.com/comment/mc220925/ https://www.hussmanfunds.com/comment/mc220925/ OR CAPE: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe Note he's in good company, with Jeremy Grantham for example also warning of the same thing: https://www.livewiremarkets.com/wires/grantham-this-is-a-bubble-this-is-serious https://www.livewiremarkets.com/wires/grantham-this-is-a-bub... Just to be clear, the argument is not 'everything is shit now because inflation', it is that the era of easy money has ended, significant inflation and war means a regime change in central bank intervention, and central banks will now tighten till things break. They haven't even managed to unwind QE yet and stop buying their own debt, will they ever? If they do, watch out. This isn't doom and gloom, it's simple realism about the regime change in interest rates - the era of 0% money is gone, in its place we have a normalisation, which means a normalisation of frothy asset prices and a reversion to the mean of earnings and prices in many domains. Usually these things take a year or two to work out, it won't be a fast process.
  - sokoloff 4y ago
    I agree with most of what you wrote, but I think it misses that, in an era of 0% money, growth matters more than current profits and so firms rationally trade off the latter in pursuit of the former. When that changes, I think you’ll see earnings rise as chasing growth now carries a higher cost.
behaveEc0n00 4y ago
Essentially the government is setting market values through mathematical indirection the general public cannot grasp. https://news.ycombinator.com/item?id=33031466 https://news.ycombinator.com/item?id=33031466 Basically, fu Main Street, got mine. I wonder if they believe the meta-awareness the internet has provided will just go away if they crash tech/social media? That’s where all the progressive undesirables work, after all. Past pols convinced people “trickle down” was sincere economics, not a bawdy joke. That Reaganomic funneling of wealth to the top was for their own good, and the public now blames modern progressives. A pols dedication to double speak is commendable.
- atdrummond 4y ago
  Supply side economics has taken more people out of poverty than any kind of ISI or other internally focused development programmes. (I’ll also note I’m a far left person who believes there are many flaws with the global economic system but the raw facts don’t lie. Also, I’ve been poor and destitute unlike the majority of HN posters and understand how desultory and ineffective the majority of social programmes truly are - and this isn’t just an American perspective, as I’ve lived in nearly a dozen countries.) https://www.weforum.org/agenda/2015/06/can-free-trade-bring-an-end-to-poverty/ https://www.weforum.org/agenda/2015/06/can-free-trade-bring-... https://www.weforum.org/agenda/2019/03/poverty-reduction-rests-on-trade/ https://www.weforum.org/agenda/2019/03/poverty-reduction-res... https://www.flexport.com/blog/does-trade-reduce-poverty-an-analysis-from-our-chief-economist/ https://www.flexport.com/blog/does-trade-reduce-poverty-an-a... https://www.piie.com/bookstore/trade-policy-and-global-poverty https://www.piie.com/bookstore/trade-policy-and-global-pover...
  - ElevenLathe 4y ago
    Generally I agree that liberal-ish do-goodery interventions are basically hokum, but in the good old days when there was a real socialist project in the form of the Soviet Union, left economics also pulled huge numbers of people out of poverty. The Bolshevik program of "socialism in one country" turned the leftovers of the Tsarist empire, mainly a mass of peasants who had in living memory been serfs, into an industrialized powerhouse with a quite high standard of living. I'm not a tankie or Stalin apologist but it shows what is possible within a planned economy.
mancerayder 4y ago
> housing That one is a mixed bag. There are clearly areas where it is falling - SF, Austin, Boise, a few regions like W Florida... but there are regions where it simply is not (the northeast in particular). I'd love for that to fall. And let's not talk about rents.
FrontierPsych 4y ago
I've been hearing the same exact thing for 40 years now, about how the economy is going to burst. Sooner or later, someone is going to be right. I predicted it, too. I saw it coming the exact minute the government starting giving out stimulus and unemployment checks when the pandemic started. Shouldn't I be getting all the credit for realizing this was going to happen a few months into the pandemic. It doesn't take a genius to figure this whole thing plays out. Burry is just stating the obvious, there's no great amazing calculations made to figure it out.

metadat 4y ago

Is it a bubble or a crash when not accompanied by a huge wave of abrupt layoffs and / or market losses? From where I'm sitting, the current phenomena appear slow moving and unfolding over such a long period of time, it's easily observable and unsurprising. Maybe we just have a different definition of these terms?

grey-area 4y ago
Layoffs have started and will accelerate. It starts as hiring freezes and funding drying up, it ends in mass layoffs. In a year or two the crash will be obvious, everyone will be certain investing is a terrible idea, and it’ll be a great time to invest/start a company.
- metadat 4y ago
  Thanks for elaborating. It's still a great time to found a company now, if you have the right idea and network ;)
- mikeweiss 4y ago
  It'll be a good time to start a company when people no longer want to invest?
  - ambicapter 4y ago
    Not all companies need huge investment, and it's a good time to start a company when a lot of companies are dead or dying, and you can step into their market and buy their assets for cheap.
    - Ancalagon 4y ago
      sure, with what capital to hire/acquire? Investors will shut down as well
  - wombatpm 4y ago
    Old Market Adage: Best time to buy is when blood is running in the streets
- CodeSgt 4y ago
  Why would that be a great time to start a company?
  - grey-area 4y ago
    Because by the time you're ready for serious investment the cycle will have turned again. Many great companies are founded in downturns (possibly just because people are laid off, possibly because money stops being a motivating factor).
  - yunwal 4y ago
    Less competition for talent and market share if you have the funds. However, if you don't have the funds, it'll be nearly impossible to raise.
- RC_ITR 4y ago
  Facebook is not the economy https://www.dol.gov/ui/data.pdf https://www.dol.gov/ui/data.pdf

RC_ITR 4y ago

> and has a long long way to go. The stock market's price level is well above where it was pre-pandemic, it's trading at earnings multiples in-line with 30+ year averages [1] (what was the 10Y yield in 1990, might I ask?) because earnings have gone up. I know being doom and gloom makes you sound smart (to some), but don't fall into the trap of 'everything is shit now because inflation has been high for 20 months' [1]https://www.yardeni.com/pub/stockmktperatio.pdf https://www.yardeni.com/pub/stockmktperatio.pdf

grey-area 4y ago
Yes, that's why it has far more to go to revert to the mean of earnings and price. Earnings are also artificially inflated, and will drift down, and stock prices with them, we're just seeing the beginning of that process. Here's someone else who called it over a year ago with some charts with counterpoint those you link: https://www.hussmanfunds.com/comment/mc220925/ https://www.hussmanfunds.com/comment/mc220925/ OR CAPE: https://www.multpl.com/shiller-pe https://www.multpl.com/shiller-pe Note he's in good company, with Jeremy Grantham for example also warning of the same thing: https://www.livewiremarkets.com/wires/grantham-this-is-a-bubble-this-is-serious https://www.livewiremarkets.com/wires/grantham-this-is-a-bub... Just to be clear, the argument is not 'everything is shit now because inflation', it is that the era of easy money has ended, significant inflation and war means a regime change in central bank intervention, and central banks will now tighten till things break. They haven't even managed to unwind QE yet and stop buying their own debt, will they ever? If they do, watch out. This isn't doom and gloom, it's simple realism about the regime change in interest rates - the era of 0% money is gone, in its place we have a normalisation, which means a normalisation of frothy asset prices and a reversion to the mean of earnings and prices in many domains. Usually these things take a year or two to work out, it won't be a fast process.
- sokoloff 4y ago
  I agree with most of what you wrote, but I think it misses that, in an era of 0% money, growth matters more than current profits and so firms rationally trade off the latter in pursuit of the former. When that changes, I think you’ll see earnings rise as chasing growth now carries a higher cost.

behaveEc0n00 4y ago

Essentially the government is setting market values through mathematical indirection the general public cannot grasp. https://news.ycombinator.com/item?id=33031466 https://news.ycombinator.com/item?id=33031466 Basically, fu Main Street, got mine. I wonder if they believe the meta-awareness the internet has provided will just go away if they crash tech/social media? That’s where all the progressive undesirables work, after all. Past pols convinced people “trickle down” was sincere economics, not a bawdy joke. That Reaganomic funneling of wealth to the top was for their own good, and the public now blames modern progressives. A pols dedication to double speak is commendable.

atdrummond 4y ago
Supply side economics has taken more people out of poverty than any kind of ISI or other internally focused development programmes. (I’ll also note I’m a far left person who believes there are many flaws with the global economic system but the raw facts don’t lie. Also, I’ve been poor and destitute unlike the majority of HN posters and understand how desultory and ineffective the majority of social programmes truly are - and this isn’t just an American perspective, as I’ve lived in nearly a dozen countries.) https://www.weforum.org/agenda/2015/06/can-free-trade-bring-an-end-to-poverty/ https://www.weforum.org/agenda/2015/06/can-free-trade-bring-... https://www.weforum.org/agenda/2019/03/poverty-reduction-rests-on-trade/ https://www.weforum.org/agenda/2019/03/poverty-reduction-res... https://www.flexport.com/blog/does-trade-reduce-poverty-an-analysis-from-our-chief-economist/ https://www.flexport.com/blog/does-trade-reduce-poverty-an-a... https://www.piie.com/bookstore/trade-policy-and-global-poverty https://www.piie.com/bookstore/trade-policy-and-global-pover...
- ElevenLathe 4y ago
  Generally I agree that liberal-ish do-goodery interventions are basically hokum, but in the good old days when there was a real socialist project in the form of the Soviet Union, left economics also pulled huge numbers of people out of poverty. The Bolshevik program of "socialism in one country" turned the leftovers of the Tsarist empire, mainly a mass of peasants who had in living memory been serfs, into an industrialized powerhouse with a quite high standard of living. I'm not a tankie or Stalin apologist but it shows what is possible within a planned economy.

mancerayder 4y ago

> housing That one is a mixed bag. There are clearly areas where it is falling - SF, Austin, Boise, a few regions like W Florida... but there are regions where it simply is not (the northeast in particular). I'd love for that to fall. And let's not talk about rents.

FrontierPsych 4y ago

I've been hearing the same exact thing for 40 years now, about how the economy is going to burst. Sooner or later, someone is going to be right. I predicted it, too. I saw it coming the exact minute the government starting giving out stimulus and unemployment checks when the pandemic started. Shouldn't I be getting all the credit for realizing this was going to happen a few months into the pandemic. It doesn't take a genius to figure this whole thing plays out. Burry is just stating the obvious, there's no great amazing calculations made to figure it out.