[HN Gopher] Minsky moment
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Minsky moment
Author : simonpure
Score : 87 points
Date : 2020-03-06 16:34 UTC (6 hours ago)
(HTM) web link (en.wikipedia.org)
(TXT) w3m dump (en.wikipedia.org)
| petrocrat wrote:
| Minksy also "identified three types of borrowers that contribute
| to the accumulation of insolvent debt: hedge borrowers,
| speculative borrowers, and Ponzi borrowers."
| -https://en.wikipedia.org/wiki/Hyman_Minsky#Minsky's_financia...
|
| As the amount of the third type, the ponzi borrowers, grows it is
| more and more indicative of an impending Minsky Moment.
|
| https://www.cnbc.com/2020/02/11/ponzi-schemes-hit-the-highes...
| UncleOxidant wrote:
| Are we there yet?
| tlholaday wrote:
| > Leading to a [...] severe demand for cash.
|
| Callooh! Callay! Something to sponge up the Global Savings
| Glut!
| theandrewbailey wrote:
| Strange. I'd swear that there's a glut of borrowing, not
| saving.
| wffurr wrote:
| Why can't there be both?
|
| There's lots of capital with nowhere to go, hence bonkers
| real estate prices, wacky startups getting funded,
| overpriced assets and low bond yields.
|
| There's also of people without much capital who want to do
| things like buy cars and houses or start businesses.
|
| These things aren't mutually exclusive. The capital is
| largely held by a small number of people. Most people don't
| have any or not very much.
| marcosdumay wrote:
| One doesn't exist without the other (unless you are saving
| real goods).
| anonuser123456 wrote:
| Personally I don't think so. All the selling so far is first
| order obvious things... Airlines, travel...
|
| The knock on effects are less predictable and will come later
| in the crisis. A lot of lower income workers are going to be
| hit hard as service sector takes a big hit. Those workers tend
| to spend all their income, so every dollar lost there
| translates to another dollar the broader economy loses.
|
| That's where the Minsky moment will happen IMO.
| [deleted]
| vsareto wrote:
| >All the selling so far is first order obvious things...
| Airlines, travel...
|
| I'm not an expert, but there's lots of money in index funds
| too, and those might be getting sold as well. The other first
| order obvious thing being people will want some cash.
| anonuser123456 wrote:
| I think it's a wait and see on how much the retail index
| investor will pull out.
|
| A lot of people have been conditioned to "buy and hold"...
| And the retail brokers have been pushing hard to prevent
| clients from selling.
|
| My broker (Fidelity) went so far as to change the home page
| to exclude the very nasty graphs that show huge market
| declines.
| justinzollars wrote:
| anecdotally - maybe. Fewer people are eating out, travel plans
| are on hold, behavior is changing very fast.
| 0x8BADF00D wrote:
| This next recession will be very ugly. I hope everyone on here is
| prepared. Last time the dollar was a safe haven asset, so those
| that saved were ok. We will have stagflation and the price of the
| dollar will collapse.
| yesimapro wrote:
| See Also:
|
| https://en.wikipedia.org/wiki/Black_swan_theory
| rossdavidh wrote:
| Although, given the 1918 Flupandemic and several other
| historical precedents, it should not have been a black swan,
| since it was known to occur. I've heard these referred to as
| "gray swans"; i.e. things that have the same impact as black
| swans but even prior to the fact there were people who were
| predicting it.
|
| For example, the David Quammen book "Spillover" essentially
| predicts it, and it was published in 2013 (subtitle: "Animal
| Infections and the Next Human Pandemic").
| dougmwne wrote:
| I do think this is appropriate though since a key
| characteristic of a black swan is that people can look right
| at it but not see it due to psychological biases.
| sails wrote:
| Agreed, I'm struggling to justify this as being a black swan
| event if it was forecast as being so likely []
|
| []https://www.scientificamerican.com/article/next-influenza-
| pa...
| anonuser123456 wrote:
| Gray swan. That's actually a good term for thinking about
| this.
|
| 2003 we had SARS, 2014 we had MERS. We had (and still have)
| Ebola. Weve had H5N1 and H7N1 outbreaks.
|
| We dodged many of these bullets, but only by the luck of
| their lack of infectiousness.
|
| It's been staring at us in the face and yet remained in our
| blindspot.
| 99_00 wrote:
| Permabears and doom and gloom theories always get a higher
| profile during times of economic insecurity.
| ouid wrote:
| "Do not fear! This is a cyclical phenomenon!"
|
| This is caused by coronavirus. This has nothing to do with market
| patterns.
| trhway wrote:
| i wonder whether by triggering (not causing) correction earlier
| than later the virus actually softened the otherwise much
| stronger crash which would have anyway happened sometime later
| due to all that overpumping/overinflating of the economy with
| the cheap money during the recent years (resulting in
| particular from the low rates amplified by the tax cuts).
| fiachamp wrote:
| It's like no one in government(or the Fed) has read
| Antifragile...
| motohagiography wrote:
| "As long as the music is playing, you've got to get up and
| dance." -- Chuck Prince, Citigroup.
| binarymax wrote:
| Yes! Or another excellent book, "The Misbehavior of Markets".
| justinzollars wrote:
| > This has nothing to do with market patterns.
|
| The market was priced for perfection. A pebble could have
| derailed it but instead of a pebble we have a bolder.
| adventured wrote:
| A pebble? Not likely, and certainly not with the hyper low
| interest rate environment.
|
| There were lots of rocks larger than pebbles over the last
| few years: China trade war with escalating tariffs, global
| trade anxiety, Trump political chaos (Russia and generally),
| impeachment, Middle East chaos, US / Iran, US / North Korea
| (daily, escalating threats of nuclear war), Brexit. None of
| them derailed the market from pushing higher.
|
| It required a boulder precisely because of the interest rate
| environment. A pebble would not have done anything. China's
| economy just got put into the freezer for the past two
| months, the global economy is under serious threat, and even
| now the market remains very richly priced. It might yet
| require something even larger than a boulder to take this
| market down fully.
| marcinjachymiak wrote:
| Coronavirus-induced supply-shock is just what it took to break
| a fragile system out of equilibrium.
| jnwatson wrote:
| Supply shock? I think the far bigger issue will be demand
| shock as all travel-related industries have fewer customers.
| UncleOxidant wrote:
| How about both supply and demand shock?
| samatman wrote:
| Both can be true. Chinese industry crawled to a halt for
| almost a month. We got "lucky" insofar as it happened right
| when Chinese industry annually crawls to a halt for two
| weeks, but there will be knock-on effects for sure.
| jnwatson wrote:
| A recession doesn't care the source.
| drocer88 wrote:
| Looks the coming recession the editors at HN have been front
| paging for the last few years might actually happen.
|
| https://news.ycombinator.com/item?id=17392859
|
| https://news.ycombinator.com/item?id=20371314
|
| https://news.ycombinator.com/item?id=20654624
| jdminhbg wrote:
| I don't think "the editors" are to blame here, but point taken
| on predicting 6 out of the last 1 recessions.
| smoyer wrote:
| I remember in the late 80's when things actually seemed pretty
| good - but all through Reagan's presidency, the press had been
| lambasting "supply-side economics" (and even his VP called it
| "voo-doo" economics). I can't say with certainty that there
| wouldn't have been a recession during Bush's first term without
| all the negative publicity but it certainly became a factor in
| his unsuccessful bid for a second term.
|
| The curious thing is that if you perform a pump-and-dump on one
| or more stocks you get in legal trouble. If you perform a pump
| (or more likely dump) on the economy as a whole, then you must
| be a journalist.
| ceejayoz wrote:
| We've got pretty good evidence they were correct to criticize
| supply-side economics.
|
| https://en.wikipedia.org/wiki/Kansas_experiment
| AnimalMuppet wrote:
| No, the recession during Reagan's first term was because
| Volcker cranked up the interest rate to shut down inflation.
| It worked, but it hurt the economy in the short term.
| eanzenberg wrote:
| If you predict a recession every year you will eventually be
| right
| egdod wrote:
| I've predicted twelve of the last three recessions!
| paulmd wrote:
| And on the flip side - just because the bubble doesn't pop
| this year doesn't mean your assessment of the fundamentals is
| wrong. The market can stay irrational for a longer time than
| you can remain solvent.
| nardi wrote:
| Credit where credit is due:
|
| "Markets can remain irrational a lot longer than you and I
| can remain solvent."
|
| -A. Gary Shilling
| hammock wrote:
| What is the difference between a Minsky moment and a top?
| fauigerzigerk wrote:
| It's the difference between describing causality and reporting
| facts.
|
| Not every top is caused by a Minsky moment. For instance,
| inventories could overshoot and then less stuff needs to be
| made for a while. Or central banks could raise interest rates
| to fight inflation. These are two of the most common causes of
| relatively benign recessions and market tops.
| tlholaday wrote:
| > What is the difference between a Minsky moment and a top?
|
| Casually speaking, it's the difference between a forced sale
| and profit taking.
| jnwatson wrote:
| I think the bigger question is what is the difference between
| a Minsky moment and an inverse-short squeeze (a long
| squeeze?)?
| tlholaday wrote:
| > I think the bigger question is what is the difference
| between a Minsky moment and an inverse-short squeeze (a
| long squeeze?)?
|
| Casually speaking, it's the difference between a forced
| sale of an asset in order to repay debt after a long period
| of growth, and the incented but not mandatory sale of an
| asset which has increased substantially in price over a
| brief time, which is now abruptly declining, by owners
| hoping to salvage some of the gain.
| JackFr wrote:
| Credit crunch.
| GrantZvolsky wrote:
| The term carries a negative connotation in that it implies
| guilt for the collapse.
| motohagiography wrote:
| Instead of a short squeeze where asset prices rise and blow up
| people with naked/levered short positions on them, it's in
| effect, a long squeeze, where asset prices fall and then take a
| cascading fall as the result of leveraged (indebted) people
| trying to exit their positions.
|
| 2008 "underwater mortgages," where houses were worth less than
| the loans to pay for them cost was a Minsky moment.
|
| But above, the forced sale (bankruptcy avoidance) vs. profit
| taking a better view.
| andy_ppp wrote:
| I'm pretty sure all governments will just print some money once
| COVID19 has worked it's way through the population. Deflation is
| the enemy.
| caleb-allen wrote:
| Ah darn, I was hoping it was something named after Marvin Minsky
| DonHopkins wrote:
| The joke's on you! ;)
|
| https://web.media.mit.edu/~minsky/papers/jokes.cognitive.txt
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