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Excellent article that paints a grim picture in an understated way. To put it differently: We've seen a huge run-up in the stock market thanks to cheap domesti
by mmaunder 4y ago
Excellent article that paints a grim picture in an understated way. To put it differently:
We've seen a huge run-up in the stock market thanks to cheap domestic and cheap foreign labor, globalization, historically low interest rates and historically low corporate taxes.
Interest rates are rising massively and globally to combat inflation.
Labor prices are increasing, globally.
There is a global decoupling thanks to the Russia/Ukraine situation and the China/Taiwan tension. This is bringing the era of globalization to its end.
Corporate US taxes have been as low as they'll get for a long time due to the TCJA and will most likely only go up from current rates.
Given all these factors combined, it's unlikely that price/earnings will hold at the current high ratio i.e. stock prices have a long way to fall still. This article was published almost two months ago, but I believe it will be relevant for the next several years. We're in for a long slow decline and then a plateau. The era of cheap labor, free money, low taxes and open global markets has come to an end.
- Robotbeat 4y agoI hope the current era ends. Ukraine/Russia and China/Taiwan is resolved (relatively) peacefully in a way that maintains the norm of wars-of-conquest-don’t-work. And we get a resurgence of immigration and trade. I am heartened that a big cause of inflation, housing prices in the US (particularly California) may be addressed by recent reforms. We need to be automating way more. We’re behind.
- zbrozek 4y agoCalifornia is broadening its housing crisis to the rest of the United States via remote working NIMBYs. It's a national problem now and it deserves a federal response. A century of property rights erosion has made it extremely difficult to erect the wide variety and large quantity of residential structures needed to serve demand. Congress needs to legislate away the Euclid v. Ambler decision pronto.
- sdenton4 4y agoFfs, if housing demand increases by epsilon due to a handful of relocating SF people, your housing market has bigger problems to begin with... 55k people left SF during the pandemic, 20% of whom stayed in the Bay Area, with many more moving as far away as Sacramento. New York was the largest destination outside California, with 1.7% of SF evacuees landing there. https://therealdeal.com/sanfrancisco/2022/09/22/where-do-people-go-when-they-leave-sf-not-far/ https://therealdeal.com/sanfrancisco/2022/09/22/where-do-peo...
- throwaway5959 4y agoThanks for bringing the data.
- zbrozek 4y agoCA is much bigger than SF and is estimated to be short 3-4 million homes[0]. The state's population has been in net decline for the last two years, primarily resulting in domestic outmigration[1]. The entire US had around 142 million homes in 2021[2]. Based on jobs/housing starts it looks like much of the US is in the hole, but the west coast as a region is far, far worse[3]. [0] https://en.wikipedia.org/wiki/California_housing_shortage https://en.wikipedia.org/wiki/California_housing_shortage [1] https://www.nytimes.com/2022/05/04/us/california-population-decline.html https://www.nytimes.com/2022/05/04/us/california-population-... [2] https://www.statista.com/statistics/240267/number-of-housing-units-in-the-united-states/ https://www.statista.com/statistics/240267/number-of-housing... [3] https://www.nar.realtor/research-and-statistics/housing-statistics/housing-shortage-tracker https://www.nar.realtor/research-and-statistics/housing-stat...
- throwoutway 4y agoCalifornia is larger than just SF. The migration was larger was it not?
- deleted 4y ago[deleted]
- the__alchemist 4y agoAre you in short positions?
- mmaunder 4y agoNo. I've found that an individual investor betting against a highly incentivized and much larger group of people in a corporation or a government is a bad idea. I short by sitting it out.
- afpx 4y agoHow can this be? The world still seems flooded with cash, huge populations still aren’t industrialized and want development, there’s shortages of products and services in demand by middle classes. Why wouldn't this point to more growth?
- mellavora 4y agoBecause there is a difference between > The era of cheap labor, free money, low taxes and open global markets and continued economic growth. Likewise, there is a difference between growth in stock prices and economic growth. Stock prices have been growing much faster than GDP for a long time now, like 20-30 years. The S&P could be flat for 10 years or more before US GDP gets high enough to justify the price level (using a historical level). So yes, the US economy can continue to grow. And "emerging market" economies can grow and their stock markets could do extremely well over the next decade. And the SP500 could be flat over that same decade. All of these could happen.
- PubliusMI 4y ago
- baxtr 4y agoThe one thing that the article might be underestimating is that solar/wind energy and battery prices will continue to fall exponentially. The high energy costs are an anomaly right now. This might change the equation.
- dboreham 4y agoEvidence?
- baxtr 4y agohttps://youtu.be/Kj96nxtHdTU https://youtu.be/Kj96nxtHdTU
- nostrademons 4y agoHere's the price/watt of solar panels over the last 45 years: https://avc.com/2015/07/the-bull-case-for-solar/ https://avc.com/2015/07/the-bull-case-for-solar/ It's very much following the same exponential decay cost as microchips, probably because solar panels are also semiconductors. We put in solar a couple years ago; our neighbors put it in about 10 years ago; our array covers half the roof area that theirs does (and only about 20% of our roof, despite living in close to a worst-case lot for solar). Payback period was about 9 years when we put it in, but with recent rises in energy costs we're looking at a 4-5 year payback period. I expect a lot of pain this decade with switchover costs - it takes a big capital investment to switch all our energy infrastructure over from fossil fuels to electric, and there are still some unsolved problems like producing batteries (or other energy storage) at scale. But in terms of both physics & economics, renewables do have the potential to solve our energy problems.
- rapjr9 4y agoIs that wholesale price for solar panels? I don't know of anywhere I can buy a 100W panel for $36. Cheapest I've seen is just under $100 and they have been in that range for years.
- 4y ago
- YZF 4y agoThe market usually bottoms when everyone shares this doom and gloom scenario. Part of why it's so hard to buy at the bottom is that it looks like there's no path forward, but then there always is. - Globalization hasn't and won't end. For sure there are more tensions now but China needs to be able to sell its goods/services worldwide. - Russia/Ukraine isn't that great but on the bright side it's reminding us again that the use of force can result in unforeseen consequences. I think this will diminish China's appetite to take over Taiwan by force despite the rhetoric. - Inflation may have peaked. Certainly certain items (like gas prices and house prices) appear to have peaked.
- mijamo 4y agoIf that's the case we are very very far away from the bottom as my feed is full of posts of.people saying now is the time to buy, never been so cheap, only upside from now etc.
- abeppu 4y agoThis is not my area, but I do wonder about the long term trends on interest rates, because not all that long ago, it seems like serious people were discussing the idea of "ultra-low" rates being not just the new normal, but the continuation of a very long downward trend. The phrase "historically low" does evoke the idea that there's a "normal" range from which we can deviate but will generally return to. https://www.bankofengland.co.uk/-/media/boe/files/working-paper/2020/eight-centuries-of-global-real-interest-rates-r-g-and-the-suprasecular-decline-1311-2018 https://www.bankofengland.co.uk/-/media/boe/files/working-pa...
- retinaros 4y agoeurope doesnt want to increase salaries and blocks countries that want to do it to do so. so at least in europe we will get the inflation but our salaries will remain the same. that will lead us to lower qualified immigration, poorer population and going back to a few decades in terms of social progress. america definitly won
- emptysongglass 4y agoWhy do you think Europe would want to stop us from increasing our salaries?
- lamontcg 4y agoYou're sort of describing the current conditions without any analysis of how those conditions are likely to change. For example, the high interest rates right now are due to central banks looking at the rising labor prices and inflation and probably overreacting. It is very likely that the next step is going to be a massive global slowdown. You're also very likely massively overstating the case that Russia and Taiwan mean that "globalization has ended". I do think there's important secular changes happening (the tight labor market and inflation are very obviously something new that hasn't happened in 30 years), but I strongly doubt the idea that everything has turned on a dime 180 degrees to the opposite.
- kjkjadksj 4y agoGlobalization probably can’t ever end at this point now that the cat is so far out of the bag. The factories that used to produce local or regional goods simply no longer exist in many cases.
- mushbino 4y agoI feel like Marx predicted this one. https://en.m.wikipedia.org/wiki/Tendency_of_the_rate_of_profit_to_fall https://en.m.wikipedia.org/wiki/Tendency_of_the_rate_of_prof...