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Because it is more expensive to borrow money. Think of it like this, if it costs 1% to borrow money and you can use it to generate a 4% return with a less than
by leet_thow 4y ago
Because it is more expensive to borrow money. Think of it like this, if it costs 1% to borrow money and you can use it to generate a 4% return with a less than efficient operation, the equation makes sense. However when that money is now 4% to borrow, you are forced to increase the efficiency of the operation or shut it down completely.
- calacatta 4y ago^^ POTD. Roughly 50% of all US dollars in circulation were printed in 2020 and 2021 -- the status quo became simply unsustainable. On top of that add Baby Boomer retirement capital going low-risk (i.e. out of tech). On top of the end of cheap money, add increased operating cost due to Baby Boomers leaving the work force (~400k net loss of workers), passed-down costs of reshoring supply chains, and a burgeoning energy crunch due to the war in Eurasia. Roughly speaking, "tech" investments are riding the tip of the bullwhip here. I expect that not-yet-profitable startups are the most vulnerable, but the sea change pervades anywhere that 2023 dollars are being spent chasing payoffs that are "many" years out and even mildly at risk.