Honestly it would be kinda hilarious if these terrible, zero profit, almost 10 year old companies vanished. No Uber, Lyft, Doordash, AirBNB etc, back to the stone ages of taxis, hotels, and doing shit yourself.
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Knowing and expecting with 75% confidence are different.
This is a great question. I will say from my chatter through work with investment managers there is a widespread belief that Fed interest rate increases are bad but there is a lot of debate about why and how much of an impact to expect. The conventional wisdom is Fed rate increase → slowing of economy → downward pressure on inflation and stocks. But what I am hearing is that there is an alternate view that the situation is worse and less predictable than that right now, what’s really driving the risk is that there is a lot of leveraged money in the stock market and rising interest rates will force a lot of leveraged positions to be closed and covered. This is basically like the 2008 housing crisis, but applied to the stock market. Aggressive investors buying stocks with borrowed money will be “underwater” on their positions if stocks go down. Sell off of stocks to cover leveraged positions will cascade to other leveraged positions forcing sell offs and then there’s a death spiral until all the leveraged bets are unwound.
So I think that might be a partial explanation of the weird volatility of the stock market due to “anticipated” Fed rate increases. Each Fed rate increase could trigger the stock market crash to end all stock market crashes, so there is some panic selling any time rates actually go up. People are jumpy about the risk of runaway margin calls and some of them run for the exits just in case.
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This right here is just one of several reasons why the right move for the people making the calls is to just let inflation run. Devaluing the currency is easily the least painful way of deleveraging.
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Technocrats are very confident that they have defeating the scourge of inflation with their genius. There is no way their egos will concede victory to inflation. They’ll get skewered like Biden for his Cowardly Surrender In Afghanistan.
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I’m not even sold that inflation can be solved with interest rates here. A decent part of what’s happening is that there is a real world shortage of productive employees. Best case scenario for raising rates is that it crashes housing and the stock market so hard it forces some of the boomers who just retired to unretire.
Inflation is up because there’s a shortage of workers and imports are suddenly hugely expensive because of an absolutely massive supply chain shortfall that is literally getting worse not better. I don’t see how raising rates does much to help either.
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Essentially yes. Not instantly, but yeah, 5 years of zero return and it would be pension crisis time in a number of states. Yes they were playing with fire anyways but that’s not gonna solve the problem of states cutting spending in response. Standard recessionary stuff.
I’m sure I speak for a lot of people here when I say I’m glad to have @anon38180840 sharing his perspective on a wide range of discussion topics.
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QQQ is down more than that.
Note though that the value of pension liabilities is heavily dependent on the discount rate, so if asset prices go up because discount rates go down, or vice versa, it has less effect on sustainability than you might think.
I don’t think stonk prices really change what a company pays people. Netflix just made $600m last quarter on 17% increased revenue and next quarter will make even more money - they aren’t gonna be like - “We are offering you less now to work here cause the stock price is 25% lower”. Stonks are a casino.
It’s a long watch, but I think it’s worth it. Lots of great analysis and quotable lines.
“They have a lot of money and a lot of clout that they can use to try to make “fetch” happen.”
“It’s Amway, but everywhere you look people are wearing ugly ass ape cartoons.”
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Public sector plans don’t have discount rates that respond to market interest rates like that.
Edit: Check out slide 18 in this CalPERS deck for example. It shows their funding discount rate barely moving over 40 years while the 10 year treasury yield tumbles from 14% to 1%.
Futures look pretty grim. Anybody think we hit circuit breakers Monday?
No, just a slow leak until the fed cries uncle on rate hikes
Yes, but…
Basically it dropped about 13% in less than 2 weeks, so I just took the quick money assuming it would rebound and I could short again. I’m basically a giant wimp with no conviction.
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They are probably paying many people in part with stock incentives that are now way out of the money or less valuable, so in that sense they are paying less.
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That’s exactly why I don’t even consider trading or market timing. Even when I’m right I’ll still be wrong.
I think many investors under 40 don’t realize how out of the ordinary the past 10-12 years have been. It’s very rare to get such wonderful returns with very mild swings like this. The reason stock investing is so lucrative is you’re being paid for the risk, which is really high! You have to be prepared to go many years treading water to get the benefit of the long term rising tide.
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