6 ms·

(big imho-post) Oh, I wish someone could explain to me how I can practically short many of these bubbles that come around HN daily. China, the many tech-unicorn

by wjnc 11y ago

(big imho-post) Oh, I wish someone could explain to me how I can practically short many of these bubbles that come around HN daily. China, the many tech-unicorns, the housing market in Canada. Enough chances to short something succesfully. That whole 'private-IPO' thing makes the 'valued at' so much less worth, since you can't short them, information is private, no efficient market hypothesis in play (if any). I only hope my pension funds isn't one of the suckers tunneling money into the VC-firms doling out such valuations. It really is the 2000's, but this time around it's even harder to spot the suckers (in the 00's it was stock holders). Ok, Chinese small time investors and Canadians buying a house at 10+ times income I can spot from a distance. But who supplies the VC's with money?

deleted 11y ago
[deleted]
ChuckMcM 11y ago
No you can't and that is a "good" thing in that you don't end up with short sellers driving the prices around in addition to the speculators.
- ChuckMcM 11y ago
  Interesting sentiment analysis going on :-) Can someone provide the reasoning for how short selling makes for a better or improved (by some definition) market? I would be interested in your take on that.
fredkbloggs 11y ago
> But who supplies the VC's with money? Ultimately, all "money" these days is supplied by central bankers. There aren't a lot of good ways to short this stuff, at least if you aren't someone like BlackRock. That's especially unfortunate because it means no one is going to make money on the downside, offsetting others' losses. In every transaction there is still a winner or a loser, it's just that in this case the winner is going to be the people selling chunks of worthless companies for big money today. Just like in 2008 the winners were people who sold overpriced and overhyped real estate in 2006 and 2007. So if I were you, I'd go found a worthless company, pay the "tech press" to hype the holy living fuck out of it, raise a dozen rounds at obviously nonsense "valuations", and use the money to pay yourself and your friends nice fat salaries and lots of silly perks for the next 3 or 4 years while everything implodes around you. That's not how you short the madness, but it's how you profit from it which is really what your question is about.
- x5n1 11y ago
  The bank always wins. It's funny we talk about central bankers, but they are like a shadowy supra-government syndicate pretty much always winning at the cost of everyone else. And yet no one asks why.
- wjnc 11y ago
  Can you draw the link from central bankers operations to the inflow of cash to VC's? Because most CB operations are either setting rates (where I understand they at least have to stay in between some bandwidth the market will appreciate, or else face a situation like Switzerland), or transactions buying assets (mainly bonds). Both do not directly accomplish the inflow of money into VC. VC's don't leverage (no banking license). I guess VC-firms don't borrow money at 1%, because no collateral?
  - dtap 11y ago
    It is desire for yield. If you take the risk-less rate down from ~4% to 0%, then you can shift the rates for higher risk asset classes down similarly. If VC is historically a 12% return asset class (properly risked), LPs will demand the asset more, driving up supply and down the return until it is in-line with the risk profile (perhaps 8%?).
  - jeremyt 11y ago
    The government leaves the cheap money door open to banks like Goldman Sachs. Goldman Sachs lends rich people a pile of money at 1%. Rich people invest that borrowed money with the intention to arbitrage the difference. Works great, until the party ends when interest rates start increasing or the assets plunge and one has to cover their leverage, whichever happens first.
- deleted 11y ago
  [deleted]
7Figures2Commas 11y ago
There are plenty of opportunities to bet against many of these markets, some more direct than others. To bet against the Canadian housing market, for instance, you could look at shorting vulnerable financial institutions (Canadian banks and lenders with exposure to the Canadian housing market). You could also look at the Canadian dollar, which could conceivably fall if there's a housing crash. Private startups are obviously a more difficult target, but you should consider that the types of events likely to push the private startup market into meaningful decline would in most cases also be bad news for publicly-traded tech companies as well, and you can short just about all of these. There are numerous advantages to targeting publicly-traded companies (liquidity, availability of information, in a major market correction there will be forced selling, etc.).
- eloff 11y ago
  Canadian banks are in good shape though, they weathered the 2008 storm easily. Mortgages are limited to 25 years in Canada and you need some 20% down IIRC. I do think there is a housing bubble, especially in Vancouver, but it's not clear to me how one could bet against it. And there always the chance that the prices are sustainable, they are positively mild compared to Zurich or Tokyo or San Francisco.
  - p0ckets 11y ago
    You can get a 30 mortgage, as long as you have 20% down (so you don't need CMHC insurance). The real reason why shorting the banks won't work is that with less than 20% down the CMHC insures that the lender will get their money back. For thenon-insured mortgages, the banks can also go after other assets since all Canadian mortgages are recourse loans.
  - guiomie 11y ago
    I know cases of people having a 10% down, they got a loan from the bank to pay for the CMHC insurance.
- notahacker 11y ago
  On the second point, the correlations between hyped startups and established software vendors often isn't that strong. It doesn't necessarily need a major crash for markets to decide that Uber actually isn't worth 40% of the current global taxi market. Indeed in some cases there's the distinct possibility the correlation goes the other was and profitable public incumbent tech providers will benefit from the loss-making VC-funded upstart unicorns in their market crashing and burning
philfrasty 11y ago
There is an interesting answer from Mark Cuban on Quora about how he preserved his money during the Dot-Com crash... http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from-the-dot-com-crash http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from...
dataker 11y ago
Succintly, government-sponsored VCs have a better performance until they get so much money they start to underperform. Still, in the U.S only 4.53% of enterprises get GVC(p.20). http://www.nber.org/papers/w16521.pdf http://www.nber.org/papers/w16521.pdf
moron4hire 11y ago
You keep your cash, wait for the crash, then buy up the leftovers at fire-sale prices.

by wjnc 11y ago

deleted 11y ago

[deleted]

ChuckMcM 11y ago

No you can't and that is a "good" thing in that you don't end up with short sellers driving the prices around in addition to the speculators.

ChuckMcM 11y ago
Interesting sentiment analysis going on :-) Can someone provide the reasoning for how short selling makes for a better or improved (by some definition) market? I would be interested in your take on that.

fredkbloggs 11y ago

> But who supplies the VC's with money? Ultimately, all "money" these days is supplied by central bankers. There aren't a lot of good ways to short this stuff, at least if you aren't someone like BlackRock. That's especially unfortunate because it means no one is going to make money on the downside, offsetting others' losses. In every transaction there is still a winner or a loser, it's just that in this case the winner is going to be the people selling chunks of worthless companies for big money today. Just like in 2008 the winners were people who sold overpriced and overhyped real estate in 2006 and 2007. So if I were you, I'd go found a worthless company, pay the "tech press" to hype the holy living fuck out of it, raise a dozen rounds at obviously nonsense "valuations", and use the money to pay yourself and your friends nice fat salaries and lots of silly perks for the next 3 or 4 years while everything implodes around you. That's not how you short the madness, but it's how you profit from it which is really what your question is about.

x5n1 11y ago
The bank always wins. It's funny we talk about central bankers, but they are like a shadowy supra-government syndicate pretty much always winning at the cost of everyone else. And yet no one asks why.
wjnc 11y ago
Can you draw the link from central bankers operations to the inflow of cash to VC's? Because most CB operations are either setting rates (where I understand they at least have to stay in between some bandwidth the market will appreciate, or else face a situation like Switzerland), or transactions buying assets (mainly bonds). Both do not directly accomplish the inflow of money into VC. VC's don't leverage (no banking license). I guess VC-firms don't borrow money at 1%, because no collateral?
- dtap 11y ago
  It is desire for yield. If you take the risk-less rate down from ~4% to 0%, then you can shift the rates for higher risk asset classes down similarly. If VC is historically a 12% return asset class (properly risked), LPs will demand the asset more, driving up supply and down the return until it is in-line with the risk profile (perhaps 8%?).
- jeremyt 11y ago
  The government leaves the cheap money door open to banks like Goldman Sachs. Goldman Sachs lends rich people a pile of money at 1%. Rich people invest that borrowed money with the intention to arbitrage the difference. Works great, until the party ends when interest rates start increasing or the assets plunge and one has to cover their leverage, whichever happens first.
deleted 11y ago
[deleted]

7Figures2Commas 11y ago

There are plenty of opportunities to bet against many of these markets, some more direct than others. To bet against the Canadian housing market, for instance, you could look at shorting vulnerable financial institutions (Canadian banks and lenders with exposure to the Canadian housing market). You could also look at the Canadian dollar, which could conceivably fall if there's a housing crash. Private startups are obviously a more difficult target, but you should consider that the types of events likely to push the private startup market into meaningful decline would in most cases also be bad news for publicly-traded tech companies as well, and you can short just about all of these. There are numerous advantages to targeting publicly-traded companies (liquidity, availability of information, in a major market correction there will be forced selling, etc.).

eloff 11y ago
Canadian banks are in good shape though, they weathered the 2008 storm easily. Mortgages are limited to 25 years in Canada and you need some 20% down IIRC. I do think there is a housing bubble, especially in Vancouver, but it's not clear to me how one could bet against it. And there always the chance that the prices are sustainable, they are positively mild compared to Zurich or Tokyo or San Francisco.
- p0ckets 11y ago
  You can get a 30 mortgage, as long as you have 20% down (so you don't need CMHC insurance). The real reason why shorting the banks won't work is that with less than 20% down the CMHC insures that the lender will get their money back. For thenon-insured mortgages, the banks can also go after other assets since all Canadian mortgages are recourse loans.
- guiomie 11y ago
  I know cases of people having a 10% down, they got a loan from the bank to pay for the CMHC insurance.
notahacker 11y ago
On the second point, the correlations between hyped startups and established software vendors often isn't that strong. It doesn't necessarily need a major crash for markets to decide that Uber actually isn't worth 40% of the current global taxi market. Indeed in some cases there's the distinct possibility the correlation goes the other was and profitable public incumbent tech providers will benefit from the loss-making VC-funded upstart unicorns in their market crashing and burning

philfrasty 11y ago

There is an interesting answer from Mark Cuban on Quora about how he preserved his money during the Dot-Com crash... http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from-the-dot-com-crash http://www.quora.com/How-did-Mark-Cuban-save-his-wealth-from...

dataker 11y ago

Succintly, government-sponsored VCs have a better performance until they get so much money they start to underperform. Still, in the U.S only 4.53% of enterprises get GVC(p.20). http://www.nber.org/papers/w16521.pdf http://www.nber.org/papers/w16521.pdf

moron4hire 11y ago

You keep your cash, wait for the crash, then buy up the leftovers at fire-sale prices.