4 ms·

To be fair, 30 year treasuries have fallen almost as much. Did Stripe's valuation drop, or did the long-term value of today's cash increase?

thaumasiotes 4y ago
Doesn't the long-term value of today's cash move in the opposite direction of the inflation rate?
- fnordpiglet 4y ago
  I think they’re referring to net present value of future cash is determined by the difference between interest rates and inflation discounted over time. As inflation has gone up so have interest rates. Cash today is worth more in the future, especially if inflation is tamed and you locked in a good interest rate on a long dated bond.
  - cperciva 4y ago
    Sort of. The value of companies is (meme stock speculation notwithstanding) the net present value of their future cash flows; for startups that tends to be far into the future cash flows. It's only natural that the price drops when interest rates go up.
    - thaumasiotes 4y ago
      But that's due to noncash instruments having higher-than-previously nominal yields. The long-term value of cash is unaffected. (Except to the extent that the higher opportunity cost of holding cash lowers the value of cash.)
- lmm 4y ago
  This is about the opposite of long-term value, it's about the value of cash right now. This deal is mainly about letting Stripe employees cash out today, and high inflation means cash today is scarce/expensive.
  - thaumasiotes 4y ago
    > and high inflation means cash today is scarce/expensive. High inflation means cash is abundant/cheap. That's what inflation means.
    - lmm 4y ago
      No it doesn't. It means cash is becoming more abundant/cheaper, i.e. it's scarce/expensive now compared to the future.
      - thaumasiotes 4y ago
        OK, I see what you're saying. But I don't see how this can be an explanation of Stripe's nominal value now being lower than it was in the past - inflation between the past and now means cash is cheaper now than it was then. This looks more like an explanation of Stripe's value now being lower than Stripe's value in the future?
        lmm 4y ago
        Stripe's value now is, very roughly, the expected value of its future dividends, and the amount of expected inflation between now and when those get paid is much more than the amount of inflation that's actually happened in the past few months.

thaumasiotes 4y ago

Doesn't the long-term value of today's cash move in the opposite direction of the inflation rate?

fnordpiglet 4y ago
I think they’re referring to net present value of future cash is determined by the difference between interest rates and inflation discounted over time. As inflation has gone up so have interest rates. Cash today is worth more in the future, especially if inflation is tamed and you locked in a good interest rate on a long dated bond.
- cperciva 4y ago
  Sort of. The value of companies is (meme stock speculation notwithstanding) the net present value of their future cash flows; for startups that tends to be far into the future cash flows. It's only natural that the price drops when interest rates go up.
  - thaumasiotes 4y ago
    But that's due to noncash instruments having higher-than-previously nominal yields. The long-term value of cash is unaffected. (Except to the extent that the higher opportunity cost of holding cash lowers the value of cash.)
lmm 4y ago
This is about the opposite of long-term value, it's about the value of cash right now. This deal is mainly about letting Stripe employees cash out today, and high inflation means cash today is scarce/expensive.
- thaumasiotes 4y ago
  > and high inflation means cash today is scarce/expensive. High inflation means cash is abundant/cheap. That's what inflation means.
  - lmm 4y ago
    No it doesn't. It means cash is becoming more abundant/cheaper, i.e. it's scarce/expensive now compared to the future.
    - thaumasiotes 4y ago
      OK, I see what you're saying. But I don't see how this can be an explanation of Stripe's nominal value now being lower than it was in the past - inflation between the past and now means cash is cheaper now than it was then. This looks more like an explanation of Stripe's value now being lower than Stripe's value in the future?
      - lmm 4y ago
        Stripe's value now is, very roughly, the expected value of its future dividends, and the amount of expected inflation between now and when those get paid is much more than the amount of inflation that's actually happened in the past few months.