[HN Gopher] Tech bubbles are bursting all over the place
___________________________________________________________________
Tech bubbles are bursting all over the place
Author : vadertemp
Score : 378 points
Date : 2022-05-13 15:44 UTC (7 hours ago)
(HTM) web link (www.economist.com)
(TXT) w3m dump (www.economist.com)
| 1270018080 wrote:
| I'm really hoping a16z's crypto scams collapse too. I don't know
| how to put it succinctly, but I would get a strong dose of
| schadenfreude from it. Their buzzword driven business plan and
| throwing money at actual nonsense is so frustrating. I can't
| imagine being one of their investors.
| paulpauper wrote:
| Nasdaq up 3% today. great timing lol . these kind of stories tend
| to mark bottoms.
| tristanperry wrote:
| I'd be stunned if the Nasdaq above 11,800 (i.e. it's current
| level).
|
| There seems to be too many economic headwinds. I think today
| was a short term relief rally, not the turning point of one
| month's sell-offs.
| paulpauper wrote:
| It fell 30% because of Covid and recession in 2020. It was
| down as much as 30% yesterday of its peak but without either
| of those.
| Victerius wrote:
| And all it took was the Federal Reserve raising the federal funds
| rate by less than 100 bps after a decade and a half of rock
| bottom rates.
|
| I have nothing more to add. I'm going to go outside and breathe
| some fresh air.
| wozer wrote:
| More is expected, though:
|
| > More rate rises are expected. The Economist Intelligence Unit
| expects the Fed to raise rates seven times in 2022, reaching
| 2.9% in early 2023.
|
| (The Guardian)
| duckfruit wrote:
| A rate hike that that was widely telegraphed and has been
| anticipated for years, to boot!
| sroussey wrote:
| Don't fight the Fed.
| fullshark wrote:
| And no evidence inflation is under control + future rates
| increases are anticipated as well.
|
| I'd love to get a flash poll of the finance industry and see
| how much people believe 1-8% interest rates are possible over
| the next 5 years. I bet a lot in the market think 3% interest
| rates are just not gonna happen.
| babyshake wrote:
| You mean rates won't get that high? Or that they will be
| much higher?
| fullshark wrote:
| Won't get that high. Just what's the max interest rate we
| see over say the next 5 years? I imagine there's still a
| lot of denial interspersed with the fear.
| teepo wrote:
| Looking at some of the prediction markets has some ideas:
| https://www.metaculus.com/questions/7439/u-s-interest-
| rate-p...
| epgui wrote:
| But it's the _tone_ with which it was said, and the
| expressiveness of Chair Powell 's eyebrows when he said it
| that was unanticipated.
|
| /s
| 1minusp wrote:
| Know that parents comment is /s but in truth, it really
| feels like interpretations of body language and text to
| indicate hawkishness/dovishness actually seems to matter.
| epgui wrote:
| Yeah, just to clarify, my own "/s" tag in this case
| didn't mean I wasn't serious, it just meant that I
| believed the market placed too much emphasis on purely
| subjective interpretations of things left unsaid.
|
| It's good to try and get all all the data you can, but
| inferring how someone feels based on extra-textual
| elements is not a particularly scientific affair. Judges
| and lawyers commonly say "you can't possibly know how
| this other person felt" or "you can't possibly know what
| this other person thought", even when appearances are
| highly suggestive... for good reason.
| billmalarky wrote:
| That's not a fair statement though. There is also the war in
| Europe, and the covid pandemic is not a solved problem,
| especially in China.
|
| There are many more serious factors than simply a rate
| increase, each of which alone could lead to a recession, all of
| which come close to guaranteeing one.
| woeirua wrote:
| There is a nonzero chance that all of the "growth" that we've
| seen over the past 14 years was just fueled by cheap credit. If
| we can't avoid a recession after raising rates by 100bps then
| we've had a false economy the entire time. Hope you got to ride
| the wave while you could.
| freeqaz wrote:
| A lot of these companies have very reasonable P/E ratios now.
| Microsoft is sitting at around 27, Apple 25, and Facebook 15.
|
| None of those strike me as "inflated". Those are normal values
| for the stock market (20-25). Are investors just panicking?
| FredPret wrote:
| 25 for a huge tech company is insane, unless there is reason to
| expect burgeoning profits.
|
| The implication is that if you bought them outright, they are
| going to generate the present level of profits for 25 years
| before you pay off your investment.
|
| How many tech companies have lasted 25 years? How many will
| last 25 more?
|
| 25 makes sense for a startup with potential for explosive
| growth, not for an established company.
| mirceal wrote:
| Lol. Tesla would like a word
| FredPret wrote:
| >unless there is reason to expect burgeoning profits
|
| >25 makes sense for a startup with potential for explosive
| growth, not for an established company
| peyton wrote:
| They are monopolies/oligopolies with pricing power. That
| is the reason.
| FredPret wrote:
| Fair, but they are vulnerable to having the rug innovated
| from out under them like the holy-grail-of-investment
| railroad companies of yore. I wouldn't bet my retirement
| on the current crop of big tech companies lasting 20-30
| years.
| rubidium wrote:
| Don't rising interest rates put a downward pressure on p/e as
| growth (often) requires capital thus loans?
| JamesBarney wrote:
| They do, but the biggest way this happens is investors
| shifting their asset allocations into bonds. So if bonds pay
| 10% per year a company with a p/e of 30 looks less attractive
| than if bonds pay 3% per year.
| drexlspivey wrote:
| > They do, but the biggest way this happens is investors
| shifting their asset allocations into bonds.
|
| The opposite is true actually, when rates go up there is a
| sell-off in bonds which is exactly what is happening right
| now where bond prices are down 10%-20%
| JamesBarney wrote:
| You're saying if interest rates increased and stock price
| P/E remained the same most funds would allocate less
| money to bonds?
|
| I don't understand why that would be. If the expected
| future cash flow of one asset increases (bonds), and
| remains the same for another (stocks) why would you
| allocate more money to stocks and away from bonds?
| drexlspivey wrote:
| The future cash flow of existing bonds is fixed and it
| does not increase. If you have a bond that pays a 2%
| annual coupon you will see it's value drop when interest
| rates increase. The reason is that you can now get a
| newly issued bond that pays a higher (say 3%) fixed
| coupon so your's is worth less.
|
| Your bond's price will drop to say 90% of the notional
| amount while the new bond will trade at 100% so they will
| effectively have the same "yield" of 3%.
| ericmay wrote:
| I think there's some panic, yea, but the P/E doesn't tell the
| whole story. Take Facebook or maybe Google (just to pick on,
| others like Apple have their own headwinds to face) - how does
| advertising fair in a recession? Maybe the P/Es have retracted
| to _look_ appealing, but here in about 2 years when ad revenue
| is down 30% those same P /Es look expensive.
|
| Personally I think if you are investing with a longer-term
| horizon the next few years don't matter and if you like to buy
| individual stocks now is as good of a time as any.
|
| Not a financial advisor and not financial advice.
| r0m4n0 wrote:
| Google has been around for 20 years so we can see what
| happened to advertising revenue during the last recession.
|
| https://www.statista.com/statistics/266249/advertising-
| reven...
| ericmay wrote:
| Which is definitely a piece of data to look at while making
| an investment decision.
|
| One thing I'd recommend is asking how was Google as a
| company different in say, 2008 where revenues increased
| despite the recession compared to now.
| megaman821 wrote:
| What about a recession would cause FB or Google to leave the
| advertising business, and not have some the largest
| advertising revenue whenever the recession is over? It is
| more of a choice can your money be invested somewhere better
| in the short-term and then hop back on to FB and Google
| before they get too expensive.
|
| It is probably the same for all large tech companies. I don't
| see any titans falling in the next few years.
| prepend wrote:
| They wouldn't leave the as industry, but their revenue
| would suffer greatly.
|
| A decent percentage of Google ad spend is
| waste/useless/whatever. So during a recession companies are
| probably tightening their ad spend and getting more
| precise.
| ericmay wrote:
| > What about a recession would cause FB or Google to leave
| the advertising business, and not have some the largest
| advertising revenue whenever the recession is over?
|
| I'm not suggesting they would leave the advertising
| business, I'm suggesting revenues could be lower as
| advertisers cut their spend, which would drop Google/FB
| revenue and make the current 12 PE more like a 25 during a
| recession. I guess, you can't just look at P/E ratios. They
| don't tell you too much.
|
| > I don't see any titans falling in the next few years.
|
| Well, they've fallen quite a bit since January. Haven't
| they?
|
| I don't see anyone going bankrupt or anything, so if that's
| what you mean then yea sure I agree - hence I think they're
| attractive to buy now as well.
| mmaunder wrote:
| If you've gotten used to paying $20 for a beer at Whole Foods,
| $5 may seem cheap until you realize the corner shop sells the
| same beer for $2.
|
| Applying this analogy to our high inflation environment, those
| stocks seemed worth paying that high price per dollar of
| earnings, until the base interest rate started rising. Then you
| realized you can get the same return that your dividend yield
| provides by investing in a zero risk CD with no risk of losing
| the principle. Suddenly those stocks seem way too expensive for
| each dollar of earnings, and their price keep crashing until
| that price earnings ratio is something closer to the
| alternatives that the stock is now competing with.
| qeternity wrote:
| > Those are normal values for the stock market (20-25).
|
| Presuming your experience in equities markets is within the
| last decade...
|
| Historical average is more like 15 for SPX.
| happythebob wrote:
| Right but this is MSFT and AAPL. They're not going anywhere.
| Inflation is.
| kgwgk wrote:
| I don't know where they are going but they were trading
| around ten times earnings less than one decade ago. A PE
| ratio below 15 may look at some point even more reasonable
| than the current PE ratio over 25.
| 300bps wrote:
| Agreed and not only that but he needs to take into
| consideration forward look P/E whereas he's looking at
| trailing P/E.
|
| If interest rates go up, everyone is surmising that tech
| stocks that benefit from lower interest rates will not be as
| profitable.
|
| And of course if we have a recession...
| epgui wrote:
| If you're doing any fundamental analysis, you're going to end
| up doing one form or another of a DCF model. The expected
| rate of growth has a very big influence on your final
| estimated valuation, and it's normal for companies with a
| higher expected rate of growth to be valued at higher
| multiples.
|
| Whether the rate of growth will be as high as expected, that
| is the real question, and it is not a simple one or one you
| can easily wave off.
| jerf wrote:
| This has been what has been confusing me about the market
| for the past quite-a-while with regard to the tech stocks.
| Were some of them doing well? Sure. Were some of them
| basically money fountains that needed just a slight turn to
| prioritizing profits over growth to make lots of money?
| Sure.
|
| But a lot of the tech giants were priced as if they had not
| already expanded into well over half the market, but as if
| they still had 99% of their market still in front of them
| and no competition in sight.
|
| As of this time last year, it is not plausible that
| Facebook is _extremely likely_ to continue growth like
| crazy and increase their revenues per customer by a factor
| of 10 or 50 or something. Sure, their whole VR play may pay
| off hugely, but I couldn 't say it's _extremely likely_ the
| way their stock said. Netflix was not going to grow their
| subscription base by 10x and /or charge their customers
| 10-50x more. Etc.
|
| I mean, I _guess_ it 's within the range of possibilities
| for these companies, but these stocks were priced like it
| was _all but guaranteed_ that these companies were going to
| see smooth sailing to levels of revenue I couldn 't even
| remotely guess how they were ever going get to. How is
| Facebook, at this point, going to pivot into making
| $500/user/year from their current ~$20/user/year? And
| whatever your answer, what is the _probability_ of that
| just smoothly working with no hiccups within the dollar-
| cost-value window it would have to take place in?
|
| In the last couple of months, I've been getting my answer
| to this question, and my confusion has been resolving.
| epgui wrote:
| The devil is certainly in the details, and valuations are
| often overly optimistic...
|
| But similarly, I believe there are a few really strong
| companies that are dramatically under-valued today,
| partly because they (purposefully and strategically)
| don't turn a profit yet, or because they trade at a very
| high multiple.
|
| Facebook is not one of the companies I spend a lot of
| time researching (but don't interpret this as me having a
| negative view of the stock-- I just have "no view").
|
| Taking the time to read filings, as well as any investor
| materials these companies put out (with a critical and
| open mind, of course) goes a really long way.
| qeternity wrote:
| Thanks bud. Have spent my career trading at hedge funds,
| with a major focus being US equities.
| epgui wrote:
| Then I'm sure I didn't tell you anything you didn't
| already know :)
|
| I just had no way of knowing your background.
| cyral wrote:
| Here's a chart of the historical average:
| https://www.multpl.com/s-p-500-pe-ratio
| IshKebab wrote:
| Presumably higher average ratios correlate with lower
| interest rates though.
| xyzzyz wrote:
| In fact, you should expect P/E and interest rates to be
| strongly inversely correlated, purely by the nature of
| what these things represent.
| mupuff1234 wrote:
| It seems like the average p/e shifted higher in the last 30
| years, so maybe 15 is no longer the "correct" baseline to
| compare to.
| francisofascii wrote:
| My gut says you are right, but why is 30 years a better
| baseline timeframe than 5 years or 100 years?
| versale wrote:
| Intel's P/E is 7 right now. So, the other ratios do look
| inflated.
| dilyevsky wrote:
| Blue chips and intel in particular always had low p/e
| kgwgk wrote:
| For some values of "always". In 1972 Coca-Cola traded at 48
| times earnings.
| ant6n wrote:
| Intel has most of its (cpu) market right now so not exactly a
| growth stock. The market doesn't believe in the new growth
| potentials (gpu, fabs). Intel also pays 3.3% dividend right
| now, not exactly a growth strategy. Also, the market may stay
| irrational for a while. Also, many investments are in the
| form of funds, etfs etc. so stocks will tend to move
| together, esp if in the same sector.
| deepnotderp wrote:
| That's because the market calculates a high probability of an
| Intel implosion
| 55555 wrote:
| Why?
| rank0 wrote:
| They've got plenty of cash, and they're still the strong
| leader in the server space. AMD is eating away at their
| consumer grade cpus I concede.
|
| I would be shocked if we had an intel "implosion" they have
| a sustainable and successful business model and there's no
| world where we need fewer processors.
| georgeburdell wrote:
| AMD is probably making more progress in server right now.
| PartiallyTyped wrote:
| With an engineer on the helm, rehiring big names in the
| field, opening more fabs, and having access to TSMC's
| newest node over AMD[1].. it seems unlikely.
|
| [1] https://www.extremetech.com/computing/334897-amd-might-
| have-...
| epgui wrote:
| If you know something the market doesn't know, and you're
| confident that you're right, then put all your eggs in
| that basket: that's how one beats the market.
|
| (Don't follow this advice, I'm just a dude on the
| internet, this is not financial advice and my background
| is biochem + software, not finance)
| PartiallyTyped wrote:
| I'd put my eggs in some Dutch company _cough_ asml
| _cough_ that has an enormous backlog and controls a
| segment of the manufacturing process ;).
|
| But what do I know, I am just a grad student.
| FredPret wrote:
| ASML is a fantastic business to own but has a price tag
| to match. Intel might be good and is selling for a song.
| epgui wrote:
| Not a bad long-term bet IMO! I'm partial to both ASML and
| TSMC.
| sremani wrote:
| Intel has to do next 4 years what it failed to do for the
| past 8 years and the complexity of execution in the space
| is getting harder and hander. Also, they are fighting on
| multiple fronts, upstarts in GPU, write-offs on AI
| hardware, Losing share of x86 with ARM et al. Losing
| share in x86 to AMD, having to rely on TSMC for advanced
| chips. Also, some bright spots where, they are opening up
| their foundries for design firms etc.
|
| Over all, Intel has to do perfect execution and we did
| not fully talk about Apple, Amazon, Microsoft designing
| their own chips and using Intel's competition for fabbing
| them. They are in a tough spot, but if any company can
| come out of it winning, its Intel. They have done it
| before.
| PartiallyTyped wrote:
| With the rise of AI chip startups (Jim Keller has one)
| and a voracious demand for chips, perhaps their fabs may
| allow them to weather the storm.
|
| If I were putting money anywhere, it'd be in ASML... but
| their shares are too expensive for my poor grad pockets.
| ben_w wrote:
| Is 20-25 really normal? I thought it was more like 5-15?
| gitfan86 wrote:
| A PE of 5 on a company that would grow or contract 0% for the
| next 100 years would be able to pay a 20% dividend for the
| next 100 years.
| epgui wrote:
| It completely depends on the expected rate of growth of the
| company. Even 100x can be fair for a very high growth
| company. For companies that don't have such great prospects,
| <5 may even be appropriate.
|
| "PE should be close to X or between A and B" was always an
| extremely rough and imprecise heuristic, and it is no
| substitute for a real analysis with a DCF model.
| EnKopVand wrote:
| Out of those I think Microsoft is the only one that isn't sort
| of inflated. If Facebook disappears the world will hardly
| notice. If Apple does it'll be hard to find a good laptop that
| can keep battery for 9 million years and it'll be hard to find
| a "tech works out of the box so well that if you buy your
| grandmother/mother an iPad you'll never need to do tech support
| again", but still, it's just a luxury brand.
|
| If Microsoft disappeared the entire European public sector and
| most Enterprise companies in the world would cease to function.
| That being said, I would be some what comfortable owning Apple
| stock through the coming crash because they are likely to
| bounce back. I wouldn't buy them at current market prices, but
| that goes for Microsoft as well. But I mainly put my
| investments into green energy on long term plans that tend to
| 4-6x the money over 7-10 years. Which isn't where people who'd
| risk it with things like tech company stock are likely to
| gamble.
|
| All three companies make healthy money though, as you point
| out, and that makes them pretty solid as far as this topic
| goes. I don't even think Facebook/Meta is "inflated" in the
| bubble sense, I just don't think it has a good future because
| legislation is coming after them big time; and unlike Microsoft
| and Apple, Facebook isn't very diversified in its business
| models.
| seydor wrote:
| apple and google own all the phones in the universe
| crate_barre wrote:
| The issue is that when tech companies look reasonable, everyone
| and their mother buys in until they look unreasonable.
|
| There is nothing else to believe in. We have one growth
| industry in this world and it's tech. It's not a bubble, it's
| the economy running on one lung. You can deflate it and hold
| your breath, but once you need oxygen, you are going to fill it
| up rapidly from holding your breath that long.
|
| The same is true for housing. We need other viable industries.
| paulpauper wrote:
| agree. I think now is a good buying opportunity for large cap
| tech
| screye wrote:
| My intuition is that those are 3 of the select few companies
| that are not in a bubble. I would add Google and Amazon to that
| list too.
|
| They make insane amounts of money and continue growing at a
| steady pace. Apart from Facebook, they have all shown the
| capability to expand into other verticals and successfully end
| up as major player on a consistent basis. This sets a high
| ceiling on growth despite being country sized already.
|
| To me, most other big tech companies are inflated by the
| promise of ending up like these money printers and not because
| they have the money to show it. Uber, Doordash, Zillow, Airbnb,
| Netflix all have valuations that are completely disconnected
| with an 'average case outcome '. Don't even get me started on
| literal gambles like Lucid or Rivian which have 100b
| valuations. Stripe and Elon Musk Inc. might be the only recent
| ones to show successful ability to scale horizontally.
|
| At the end of the day, the real way to make money is to provide
| real tangible value over the long term. Making money on the
| margins for someone else's labor is all well and good, but that
| runs into hard scaling limits fast. Even Google and Facebook
| know that the content creators are their value, and the
| customers are advertisers.
|
| Nvidia, Unity, Cloudflare and similar companies with products
| with tangible value will survive most downturns. Non-ads based
| companies that extract value on the margin will struggle in
| this bear market.
| rvz wrote:
| > Nvidia, Unity, Cloudflare and similar companies with
| products with tangible value will survive most downturns.
| Non-ads based companies that extract value on the margin will
| struggle in this bear market.
|
| Yes. Cloudflare was a very good buy signal 2 days ago. [0]
| Now it has gone up again. Most likely a short term upwards
| side, but I wanted to tell everyone about it, but I was
| downvoted to hell and beaten up for my correct Cloudflare
| signals. [0]
|
| They should have listened, but instead they held all the way
| at the top. [1]
|
| [0] https://news.ycombinator.com/item?id=31339476
|
| [1] https://news.ycombinator.com/item?id=29355360
| bern4444 wrote:
| I love cloudflare. I see them becoming as big as
| AWS/Azure/GCP etc. They are moving fairly quickly but
| extremely deliberately and I agree with you that them being
| down recently has been a great time to buy.
| scoofy wrote:
| This is an area where Warren Buffett and Nassim Taleb agree in
| opposition to the efficient market hypothesis. Speculative
| investments are occasionally culled, and when that happens, some
| investors are injured, while others are completely wiped out.
|
| These moments of extreme plain make a fully diversified or even
| an anti-fragile strategy effective _in the long run._ Value
| investors don 't get wiped out, they live to fight another day.
| This lesson was forced into me by my father during the dot com
| era, and it's been shown painfully true. The value trap is a
| concern, but market fundamentals are the only way to sleep at
| night. The biggest issue in markets is, due to the lack of need
| and cost of most public offerings, most companies with
| fundamentals are now out of reach of non-accredited investors and
| are completely funded by private equity.
| 1024core wrote:
| TY. Such comments should be pinned to the top.
| dang wrote:
| (We detached this subthread from
| https://news.ycombinator.com/item?id=31369432, which is now
| pinned to the top)
| DerekBickerton wrote:
| Redirects to archive.ph for some reason:
|
| https://archive.ph/qziMw
| whimsicalism wrote:
| they have a lot of tlds
| Animats wrote:
| This may be the end of meme investments. Low-end crypto products
| are collapsing. Some now have a lot of zeroes after the decimal
| point.
|
| * LUNA coin, the backing of UST, dropped from $183 to $0.0001178.
| UST itself is no longer tradeable. Its blockchain has been turned
| off. (Apparently that can happen.)
|
| * SLP coin, the currency of Axie Infinity's play to earn game,
| dropped from $0.30 or so to $0.005607. Remember when Axie was
| being touted as the future of play to earn, the way NFTs were
| going to make poor people in the Philippines rich? That was last
| year.
| Ekaros wrote:
| Now I have serious question. Which big stable coins could just
| stop being on chain? That is stop all transactions, that aren't
| just some database entries?
| [deleted]
| cmrdporcupine wrote:
| So, given this... I have a product idea, along with another
| technical co-founder. I have a few months savings to feed my
| family, so I could feasibly work on it fulltime. ... Let's say I
| came up with a demo, a pitch deck, etc. Would people say the
| chances of getting seed capital is _significantly_ reduced now?
| Or do we just not know yet?
| methyl wrote:
| It'd be best to work on product idea that can sustain itself.
| Bootstrapping never made more sense than today.
| TSiege wrote:
| From personal experience over the last few months, it's going
| to be really really tough
| ctime wrote:
| I don't think we need the latest Cloud/AI/ML/Crypto/Web3.0
| bullshit to spin up fuckedcompany.com again.
|
| I remember thinking in ~2015 going to conferences that this shit
| was never going to last. Then around 2018 driving (sitting) on
| 101 listening to advertisements for "C3 IoT AI" on NPR thinking,
| could a company jam more meaningless buzzwords into a single
| company name? For shits, looked up their stock just and its down
| 85%[1] since it's IPO. ofc.
|
| To anyone who hasn't lived through a .com explosion, hold on to
| your butts.
|
| (also consider moving to cash and $SARK $VIX)
|
| [1]https://www.cnbc.com/quotes/AI
| cmrdporcupine wrote:
| Damn fuckedcompany was awesome entertainment.
|
| The question is... if it gets spun up again, does it just
| create a self-fullfilling prophecy and begin the 2000-era
| implosion for real? :-)
| mjmsmith wrote:
| Sadly too late to nominate #6C000E for Pantone color of the
| year.
| paulpauper wrote:
| _I remember thinking in ~2015 going to conferences that this
| shit was never going to last_
|
| it's still going on. Facebook & Google are still worth a lot
| more than they were in 2015. The difference nowadays is that
| the largest of tech companies are much more profitable and
| dominant.
| whiplash451 wrote:
| Indeed. C3AI IPO buyers must feel really good today (despite
| today's results, actually).
| golergka wrote:
| And I remember thinking back in 2010 that investors who have
| Facebook valuation of $10b were plain stupid. Taught me not to
| take myself too seriously.
| the_doctah wrote:
| Any time I ask on some financial forum about moving a chunk of
| investments to cash I get told that would be stupid, don't try
| to time the market, and just keep buying.
|
| I would have saved myself a bunch of losses if I had done it
| when I was thinking about it.
| bonoboTP wrote:
| Keeping your money as cash is also an investment. It's not a
| guaranteed value preserver, inflation can eat it. So in the
| end it comes down to trying to predict the future, just like
| everyone else is trying to do. There is no guarantee, cashing
| out can make you lose or make you win.
| shrimpx wrote:
| "Don't time the market" is stupid advice. The problem with
| that advice is that virtually every action you may or may
| _not_ take is a form of timing the market. People going all
| in "now as opposed to later" are timing the market. Dollar
| cost averaging is timing the market. Staying in the market
| instead of selling is timing the market. People encouraging
| you to stay in the market because if you sell, that's "timing
| the market," are bullying you into adopting their own
| strategy for timing the market.
| maigret wrote:
| > Dollar cost averaging is timing the market.
|
| No this is the exact opposite. It's like passive vs active
| https://www.investopedia.com/terms/m/markettiming.asp
| shrimpx wrote:
| That definition is incomplete. It makes it sound like you
| have to be constantly moving funds around to time the
| market, vs "buy and hold".
|
| But you can certainly time the market using "buy and
| hold", by waiting for the right moment to buy. And even
| if you buy "asap", you're still employing a market-timing
| strategy, that "buying asap is better than buying later".
|
| Dollar-cost averaging is a form of timing the market,
| because you're effectively reasoning that fixed-interval
| purchase will fare better than lump sump or other
| strategies. You're still predicting market behavior.
|
| Good resource:
|
| https://youtu.be/w_aOERmUWdA
| 331c8c71 wrote:
| IMHO a more precise way to put it is that by choosing one
| investment strategy vs another one implicitly makes
| assumptions about the market.
|
| There's also the emotional side we are kind of neglecting
| here.
| mirceal wrote:
| You cannot time the market.
|
| When you have invested in something, did you do your DD or
| did you do it because everyone else did it?
|
| I would recommend a book called "the intelligent investor". I
| also recommend low fee mutual funds that track the market as
| the default thing to invest. Once you educate yourself more
| you can make more sophisticated investments.
|
| I also don't have anything against speculative investments.
| Just don't call it investing. It's gambling and it's fine as
| long as you know what you are doing and are okay with
| basically losing most (everything) you put in.
| rebelos wrote:
| > Once you educate yourself more you can make more
| sophisticated investments.
|
| There are countless well-capitalized and mostly
| underperforming hedge funds that were built on this
| premise.
| twic wrote:
| I sold off a large pile of stocks for tax reasons just before
| the end of the UK tax year. That also turned out to be
| roughly the top of the market. So maybe you can time the
| market, but only if you're not trying to time the market?
| paxys wrote:
| When would you have sold? When the market was at its "peak"
| in 2011? Or 2014? Or 2015? Or 2018? Or 2020?
| the_doctah wrote:
| The first time Netflix stock ate shit, so in January.
| quickthrower2 wrote:
| Why Netflix? I stopped my Netflix to use Amazon Video.
| Bad for Netflix but still good for streaming and tech.
| 1270018080 wrote:
| The caveat to "just keep buying" is that you shouldn't be
| buying individual stocks. As a retail investor, the best you
| can do is get lucky and confirmation bias yourself.
| Acknowledging you don't know what you're doing is the first
| step to success.
| Trasmatta wrote:
| > I would have saved myself a bunch of losses if I had done
| it when I was thinking about it.
|
| Or, alternatively, you might have cashed out when you thought
| you should, then completely missed the bottom trying to time
| it, then sat on cash for years, watching it lose value to
| inflation anyway.
| TSiege wrote:
| Same. In December I had the urge to sell a bunch of stocks
| for the sake of cash and peace of mind because the whole
| market seemed wildly unsustainable. But the "don't time the
| market" kept being shoved in my face by friends and family.
| Who could've known /s
| quickthrower2 wrote:
| Conversely I missed out on $300k gains maybe by selling an
| asset too early in 2018 thinking a blip back them was the
| crash.
| debacle wrote:
| How many dead unicorns can the industry withstand?
| scollet wrote:
| Unicorns are DoA in my opinion.
|
| If everyone's a unicorn, no one is.
| vishnugupta wrote:
| It's fascinating to trace the genesis of present crash to Fed's
| policies post 2008 crisis. The interest rates were kept
| artificially low to prevent another Great Depression. 2010s saw
| an unprecedented rally of tech/growth stocks, fuelled by cheap
| capital. Growth at all cost was the mantra, hoping companies will
| turn profitable at some point a la Amazon. Uber's CEO hit the
| nail on the head when he wrote "The average employee at Uber is
| barely over 30, which means you've spent your career in a long
| and unprecedented bull run".
|
| There were signs of rate hike in 2019 but COVID forced Fed to
| create trillions of $$. Which only added fuel to the fire;
| equities, housing, crypto saw unbelievable growth.
|
| However the signs of inflation were clear in early-mid 2021 they
| were hoping it to be transitory. But when the inflation data came
| in late 2021 it turned out to be multi-decade high leaving Fed
| with no choice but to raise interest rates for the first time in
| more than a decade.
|
| Which brings us back to growth companies. As Uber's CEO candidly
| stated "Channeling Jerry Maguire, we need to show them the
| money". 2020s will be all about cash flow and efficiency.
|
| On the other hand expect to see cool innovations as it requires
| genuine scarcity to look for out of the box solutions. While
| Amazon's stock soared in 2010s their core tech was being built in
| 2000s while they were relentlessly driving for efficiency.
| stjohnswarts wrote:
| The market is having issues now not because of inflation being
| kept low but because people panic when everything isn't going
| smoothly. The supply chain and WW3 have investors scared, and
| now they're panicking and leaving the markets and taking their
| profits with them. Others panick and get what cash they can.
| Some will buy low and it'll level off soon probably. I think
| this is more of a pull back than a recession. Generally the
| economy is in good shape it's just the speculators are bailing
| from the market.
| Foobar8568 wrote:
| Typically one can take a look at HOOD 13F, institutionals are
| enjoying free meals while retails are bleeding money by
| getting out.
| joe_the_user wrote:
| By effectively guaranteeing the market, the Fed made stock
| and bond markets more "money like" and so it didn't even have
| to overtly print money to create a money -printing-like
| effect ("the wealth effect") even though they also did print
| money to prove they were serious. So effectively we've had
| inflation for a while but most of it was inflation of asset
| values.
|
| If the Fed talks the market down and people sell, it will
| have destroyed money without other harsh measures. That
| doesn't mean there won't be more pain other ways also.
| paulpauper wrote:
| _2010s saw an unprecedented rally of tech /growth stocks,
| fueled by cheap capital._
|
| Correlation does not mean causation, as it's commonly said.
| Interest rates were high in the 80s and 90s yet tech stocks
| boomed. Tech stocks did so well because they make so much
| money. Facebook earned $40 billion in profits for 2021, 3x
| Walmart. Google makes even more. Also, market dominance and
| moat factors working to big tech's favor.
| slickrick216 wrote:
| "The average employee at Uber is barely over 30, which means
| you've spent your career in a long and unprecedented bull run"
| - quite an American experience this. Many across Europe and the
| rest of the world were in a recession until 2014-2015. It was
| difficult to find a job out of college even with masters
| degrees in comp sci from tier 1-2 unis.
| mkr-hn wrote:
| It's also an American experience outside tech and finance.
| strikelaserclaw wrote:
| its an american experience outside silicon valley.
| juanjmanfredi wrote:
| Inflation metrics show that the economy post 2008 was in fact
| under stimulated, which is why the recovery from the financial
| crisis was so slow. The recent COVID-related stimuli are what
| went too far.
| shakezula wrote:
| I don't know if I disagree but we were also in a really bad
| position if we didn't do it. The stimulus did a lot of good,
| I saw the first hand benefits of what it did for people who
| really needed it.
| joe_the_user wrote:
| _It 's fascinating to trace the genesis of present crash to
| Fed's policies post 2008 crisis. The interest rates were kept
| artificially low to prevent another Great Depression._
|
| I think 2008 and 2001 basically saw "cut some fat and reflate
| the bubble" as the standard approach. I expect the same
| approach this time though I can't predict if it will work. This
| is basically the method of Greenspan and Bernanke, explicitly
| said that the Great Depression didn't have to happen, that
| juggling interest rates could have solved it.
|
| The thing about these situation is that by just killing weaker
| players, the Fed allows the basic imbalances to remain and
| increase (income inequality, monopoly positions, speculative
| enterprises, etc). The Great Depression was the single biggest
| equalizer of income, I think in US history and certainly in the
| 20th and 21st centuries. Not that I'd be in favor of such a
| thing.
| immigrantheart wrote:
| I almost got offer from DoorDash, with obviously RSU as one of
| the compensation. Eventually didn't get the offer because they
| said I didn't pass leadership interview. Apparently I was
| interviewing at one level above I thought I was interviewing (the
| recruiter messed up).
|
| Anyway, I accepted an offer from a hedge fund, comparatively
| similar, but all cash.
|
| Now I feel that I am glad I accepted the hedge fund offer.
|
| I don't have a property, not looking to get one due to HCOL high
| property prices and high interest rate.
|
| My assets are mostly crypto and total stock market index. I think
| I'm good with my crypto investment for now (already filled my
| goals) so I am thinking to get more stocks.
|
| As someone with just cash compensation, what can I do in this
| downturn to make a lot of money in the stock market? Maybe I just
| stick with the old boring Apple.
| jeffreyrogers wrote:
| Since you work at a hedge fund and are getting all cash
| compensation just put part of your paycheck into some ETFs
| every month. Someone else recommended the bogleheads forum
| which is good advice. If you were able to time the market you
| wouldn't be asking on HN for advice so just assume you can't
| time it and invest a set amount from every paycheck. You'll
| miss the bottom but you'll probably come out ahead of any other
| strategy you'd choose.
| akhmatova wrote:
| _Eventually didn 't get the offer because they said I didn't
| pass leadership interview. Apparently I was interviewing at one
| level above I thought I was interviewing (the recruiter messed
| up)._
|
| That sounds very encouraging. Need to tell all my friends to
| invest hours and hours of their time in this company's careful
| and considered hiring process.
| xtan6491 wrote:
| I just left a hedge fund to join aws. Even the aws is famous
| for its worst WLB and toxic culture, it is much better than the
| hedge fund I worked for. Knowing many friends switched from
| finance to tech, I found no one regretted. Plus the TC is still
| much more than HF even after the 40% drop.
| ripper1138 wrote:
| You know it's ok to get rejected on an interview. Almost
| everyone has been! You don't need to have an excuse about wrong
| level even if it is true.
| brobinson wrote:
| Same as any other time... build an intra-sector long/short
| beta-hedged portfolio with minimal net exposure. Overall market
| and sector movements don't affect this. You can do cross-sector
| trades for even more profit at the cost of assuming sector
| risk.
| dewlinedew2 wrote:
| Why not ask your friends at work?
| short_sells_poo wrote:
| Yeah this would be my first question too. Even beyond that,
| many (most?) hedge funds have an employee investment scheme
| where employees have a special vehicle via which they can
| invest into the fund performance without having to meet the
| often egregious criteria (e.g. not everyone has $100mln lying
| around in cash to meet minimum investment thresholds).
| quickthrower2 wrote:
| Maybe he was supposed to blow it on lifestyle to stay hungry
| and doesn't want to own up to the FU money.
| ddorian43 wrote:
| > As someone with just cash compensation, what can I do in this
| downturn to make a lot of money in the stock market? Maybe I
| just stick with the old boring Apple.
|
| Depends on your risk. You can buy TQQQ or do HFEA as examples.
| pojzon wrote:
| If you dont mind the risk you can short. Can earn a lot of
| money but you have to get a habbit of constantly following the
| market.
| mattwest wrote:
| American ag tech: seed companies, machinery, fertilizer,
| biostimulants, carbon sequestration
| jdlshore wrote:
| Index funds. Check out the Bogleheads subreddit for a
| levelheaded investing approach.
| metamet wrote:
| Seriously. Unless you're looking to gamble, open a Vanguard
| account and pick an index fund targeting your retirement age
| or go with one that tracks S&P (VOO).
|
| Vanguard's fees for index funds (esp Admiral shares) are
| absurdly low, to boot.
| jorblumesea wrote:
| Doordash has compensation ideas where they will top you up if
| your comp falls under some percentage of grant price (80-90%).
| Many companies are moving to this model to ensure that stock
| prices don't impact TC too highly.
|
| Another way to look at it is that people were all too happy to
| accept the status quo until now.
| lvl102 wrote:
| This market is so wild. The big techs are making so much money
| yet the market is in turmoil if you simply remove the big four
| (Apple, Google, Microsoft and Amazon). There are some great
| "value" if you look hard enough. People are quick to draw
| parallel to dotcom, but this one is quite different in so many
| ways.
| woeirua wrote:
| The fundamentals that drive each bubble are different, but it
| always ends the same way.
| seydor wrote:
| As always, when things crash it's the best time to read the
| comments
| fullshark wrote:
| Something that's funny right now is there are a lot of bears
| gloating about what they think is going to happen in the market
| and cryptocurrencies the next 2 years without it even having
| happened yet. They've been waiting literally years for this
| moment and they think it's finally arrived and can't wait to
| dance.
| wayne-li2 wrote:
| The market as of last year couldn't be divided by bulls and
| bears. It was more like "mega bears, bears, bulls, mega
| bulls".
|
| You're talking about mega bears and they're gloating because
| the mega bulls talked so much shit in the last 3 years.
|
| But most people are just regular bears and bulls. We don't
| comment on the market. We understand the cyclical nature of
| it. Some of us may have rebalanced portfolios according to
| our beliefs. That's about it.
| RGamma wrote:
| And then the ngate take on it.
| quickthrower2 wrote:
| ngate hasn't updated for a while. :(
| scollet wrote:
| You would have better luck running the comments through GPT.
| acd wrote:
| I think companies with Schiller P/E price to earnings greater
| than 15 will get hit. Exponential growth till hit a linear
| reality and higher interest rates.
|
| https://en.wikipedia.org/wiki/Cyclically_adjusted_price-to-e...
|
| Plus some will call on tech startups not generating real organic
| revenue growth with realistic valuations.
|
| https://en.wikipedia.org/wiki/The_Emperor%27s_New_Clothes
| hintymad wrote:
| I remember people were talking about Coinbase doted out $750K
| package to engineers with less than 2 years of experience (or new
| grad? I can't remember exactly). I had to wonder: what can a
| newly minted engineer do to generate so much value to Coinbase?
| fidrelity wrote:
| Some of the strongest tech companies were built during a downturn
| (PayPal if I remember correctly).
|
| It's a great time to build, but probably not the best time for
| fundraising.
| mabbo wrote:
| That's selection bias at work though.
|
| Getting funding isn't a lottery, in which everyone's odds are
| the same. The funding you receive and the terms of that funding
| are related to the current market _and how good your business
| /idea is_.
|
| When times are tough, VCs are still investing, but they're only
| investing in better ideas, more likely successes. Why take a
| chance on your long shot when a government bond is a sure thing
| at a reasonable percentage?
|
| We should expect that those companies that got funding during a
| downtime are better companies based on the fact that they got
| funding at all.
| trompetenaccoun wrote:
| It's rather that founders with a proper vision build companies
| regardless of market swings. During a boom cycle there's
| abundant founding, even for trash projects. Markets aren't as
| efficient as many assume, especially not in the short term. Now
| we're at the end of a boom cycle and everything gets battered
| but that's just the valuation changing, nothing else. It's
| speculation. In the public eye quality projects will emerge
| again a couple of years down the line when they're starting to
| get really big and no one except those actually interested in
| the tech will have paid attention to how they were working hard
| the entire time.
| scollet wrote:
| I think we will see even more optimization with constrained
| budgets.
|
| Software is pliable. You will have a network of middlemen
| running at cost.
| malwarebytess wrote:
| I'm expecting brutal, decimating, RIF across the industry at the
| end of Q2.
| notacoward wrote:
| Also, if things follow the same pattern as I remember from the
| 90s and 00s, each RIF will be associated with a _rise_ in stock
| price. So it 's not all bad, depending on where you sit
| relative to the action.
| rubidium wrote:
| RIF?
| gowld wrote:
| Reduction in Force == layoffs
| jonny_eh wrote:
| Thanks, I wish people could speak clearly.
| Clubber wrote:
| It's a euphemism for layoffs which is a euphemism for
| mass firings, a la corporate speak. "Rightsizing," is
| another one.
| malwarebytess wrote:
| It's different from layoffs. RIF comes with the
| implication that the reduction is permanent.
| Clubber wrote:
| >It's different from layoffs. RIF comes with the
| implication that the reduction is permanent.
|
| Academically, yes you're right. Practically, they are the
| same. No one can afford to sit around and wait a year or
| two to get rehired after layoffs, if that ever happens;
| and anytime a RIF happens, the positions are usually
| refilled once finances are better.
| compiler-guy wrote:
| RIF is an industry standard term with a long history. The
| problem isn't others speaking unclearly. It's assuming
| others are in the wrong rather than being happy to learn
| something new.
| olddustytrail wrote:
| Indeed it is! Part of the token ring header iirc?
| compiler-guy wrote:
| Context is everything. In an economic discussion, one
| would use the economic meaning.
| olddustytrail wrote:
| I know. It was a joke. I thought someone with the
| username compiler-guy might appreciate it but I guess
| not.
|
| Edit: otoh I've been a bit grumpy myself this week so who
| am I to judge. It wasn't a very good joke. I'll tell you
| the "youthful porpoise" one next time
| CoastalCoder wrote:
| Why wait? Now I'm curious.
| jonny_eh wrote:
| This issue is that the audience of HN isn't limited to
| industry veterans.
| compiler-guy wrote:
| The industry I'm referring to is the HR industry, and
| this term is used all over the place when discussing
| employment and recessions.
|
| No harm or shame in not knowing it--lucky 10,000 and all
| that--but taking a chance to learn over blaming others
| would be my choice.
| karaterobot wrote:
| Using industry jargon is usually not a good idea outside
| of the industry. Readers are happy to learn, but you have
| to teach them first. This is why most newspapers at least
| provide the unabbreviated phrase on first usage, and give
| the abbreviation in parentheses, i.e. "Reduction in Force
| (RIF)". It's not safe to just assume everyone already
| knows everything you know.
| olddustytrail wrote:
| I too expect brutal, decimating euphemisms across the
| industry in Q2.
| ilamont wrote:
| Yes. The causes are different but the effects will be similar.
|
| Already open positions are being quietly withdrawn, people
| leaving are not backfilled, big projects are delayed or
| cancelled.
|
| Then as customers start pulling back or failing themselves,
| layoffs begin. It's terrible for the people impacted and those
| left behind who are often called on to take up the slack.
|
| My advice for anyone in the position of having to lay off
| staff: Be decent, help people move on, and do it early and do
| it all at once, not in uncertain "maybe things will turn around
| next quarter" waves which destroys trust.
| lanevorockz wrote:
| Our country might be starving, the economy is destroyed and we
| are looming into nuclear holocaust. But at least no one can
| misgender me online anymore. Congratulations America, you played
| yourself.
| mattwest wrote:
| I bet you're fun at parties.
| gitfan86 wrote:
| Thank God. It has been so tiring listening to all the people
| playing the Greater Fool game of trying to get to an acquisition
| or IPO or SPAC. Maybe people can go back to build real actual
| useful products and services.
| prohobo wrote:
| People said this was the "best time ever to get funding" for a
| startup. I disagree. In my view, it was the best time ever if you
| played a particular game and had the right connections.
|
| I pitched an idea to a VC, which I had a prototype for, looking
| for $100k. He liked it but wouldn't fund because I didn't have a
| solid business plan. Fair enough, I need to find a business
| partner. But then he told me something about how I have to
| imagine that it's $100k of _my money_. I need to respect it
| properly and ask myself: would I give someone this money so
| easily? Meanwhile he had his hands in various bullshit crypto
| (not hating on crypto, just the projects) defi startups.
|
| I thought it was absurd, of course I don't respect your money: VC
| firms throw $250k+ around like candy to people who happen to give
| a specific quasi-Silicon Valley impression or are in crypto.
| You're telling me you can't spare $100k? Also, I haven't seen a
| single "promising" startup actually be profitable, except those
| ones made _without_ major funding.
|
| This has all been some kind of weird ass circus for years, I'm
| glad the bubbles are bursting.
| taway-yc-reject wrote:
| Yes, exactly this. And since you aren't chummy with the VC,
| even if you had a business model, you would be rejected
| "because you don't have revenue" yet. Fuck that noise. The V in
| venture is supposed to mean you're supposed to take risks.
|
| SV has lost its soul. A VC that respected tech nerds would see
| your technical idea, (maybe) discount the investment, and then
| get on the phone and _help you find_ a business partner that
| will take you all the way (and give you first right of refusal
| on assholes).
| nostromo wrote:
| VC is a numbers game. You'll get lots of nos; every seed round
| gets lots of nos unless you've got a track record of big
| successes.
|
| Just keep at it. Don't get upset at any particular no. Remember
| that it's their money and you're not entitled to it.
| jstarfish wrote:
| I hate SV culture, so not one to WK or make excuses for it, but
| when you have as much money to throw around as he does, you
| don't have time to deal with requests for pocket change.
|
| Look at your own investment portfolio. Are you investing $1 at
| a time in fractional shares of a million different stocks, or
| investing $1000 at a time on a smaller number of stocks/funds
| you expect to have solid returns? (You think his crypto bids
| are misguided. Maybe you're right. Not your money though.)
|
| If you're certain about your product, you don't need an
| investor. You need a small business loan.
| axg11 wrote:
| Do you know which website you're on?
| triceratops wrote:
| What's your project? $100k seems like an odd amount of money to
| ask for, to me. You can't staff up very much with that, but it
| seems like a lot of money to pay for AWS/hosting-type bills
| when you're just starting out ($10-30k should be more than
| enough). It only makes sense (again, to me) if what you really
| want is access to the VC and their network. But again, I don't
| know shit about VC and angel investing.
| prohobo wrote:
| It was odd, but my envisioned development window was about
| 3-4 months (planning for 6) and I had potentially high upkeep
| after launch ($500-$1000pm for production ready servers). I
| could have found a co-founder or two and funded them for that
| period as well. So it would have been just enough + a buffer.
| At least in my mind. I realize you need more runway than to
| just get to launch and survive 2-3 months now.
|
| The idea is a service that could open the black box of online
| video content. Right now you search for something and get the
| whole video as a result; if it's a 3 hour long podcast you're
| going to be doing a lot of seeking for specific information.
| I want to index and enable deep visualized search through
| video libraries and in videos. Basically splitting videos
| into linguistically salient topics, keywords and entities.
| That would allow you to analyze and visualize content
| (YouTube channels, videos, etc.) to find interesting
| information. Good for researchers and people looking for
| something specific, or people wanting to find new content
| (relationship graphs).
| gamblor956 wrote:
| That sounds like a moonshot rather than a $100k, unless you
| already have a working prototype that simply needs to be
| refined for commercialization. (Meaning: an actual working
| prototype, not a demo created solely to show off the
| concept.) What you've suggested is a job that would take a
| team of developers a few months. I'm not surprised the
| investor was skeptical that a 1-man team could do it in 6.
|
| And what are your plans for revenue? How do you plan to
| make money? You'll be dealing with a lot of legal questions
| related to IP licensing, and the legal fees alone would eat
| your $100k in a month or two, even before the licensing
| costs for the videos.
|
| All-in-all, I can't fault the investor for turning you
| down. You haven't put enough thought into the _business_
| aspects of your idea for him to entrust _his money_ to you.
|
| And don't bring up this crypto bullshit. It's irrelevant
| that he's investing in crypto companies; he already knows
| he's gambling with those and he's not treating those like
| real investments. Given crypto's history, he just needs to
| bail at the right time to come out ahead.
| ant6n wrote:
| Sounds very interesting but like also like a big project.
| Feels like 100K would only fund a demo.
| [deleted]
| vineyardmike wrote:
| > Also, I haven't seen a single "promising" startup actually be
| profitable, except those ones made without major funding.
|
| The whole point of VC is cash to be unprofitable. Grow faster
| by overspending today.
| debacle wrote:
| If you consider VCs as brokers rather than investors, it makes
| sense. There's a lot more dumb money looking to invest in
| crypto.
| MomoXenosaga wrote:
| Is there a crypto business that is actually making a profit?
|
| Besides Matt Damon I suppose.
| shrimpx wrote:
| The idea that you should treat VC money with the same level of
| frugality as as your own personal savings is preposterous.
| Sounds like a petty, inexperienced VC.
| csallen wrote:
| _> You 're telling me you can't spare $100k?_
|
| That's not how it works. You're not the only person asking this
| VC for $100k. A thousand other people are, too. A policy where
| he spares it for (what he considers) a bad investment like
| yours means sparing it for all the other bad investments, too.
| That would cost a lot more than just one check.
| prohobo wrote:
| I'm saying that he was already neck deep in bad investments,
| which he happily funded. That's the main point I'm talking
| about. I'm not saying my idea _deserved_ investment, just
| that this whole industry has been full of bullshit for years.
| MattGaiser wrote:
| He wouldn't consider them bad investments though.
| quickthrower2 wrote:
| Often the company is the product. The customer is big
| tech companies acquiring small startup companies. The
| company itself in that scenario might just be some smart
| people working on an idea but no idea how it will make
| money.
| cercatrova wrote:
| Maybe you think the investments he made are bad, but
| obviously he doesn't think so. However, you think your
| company is good enough to pitch to him to get investment,
| and he doesn't think so. There's nothing wrong with either
| side, it's just a difference of opinion. That doesn't
| necessarily make the "entire industry [...] full of
| bullshit."
| prohobo wrote:
| But, it _is_ full of bullshit. Just because it happens to
| align with my ego doesn 't mean I'm wrong to say it. I
| would say the same thing even if I did get funded.
| cercatrova wrote:
| Again, that is your specific opinion that is not shared
| by everyone.
| micromacrofoot wrote:
| indeed the emperor loves his new clothes
| gowld wrote:
| > Meanwhile he had his hands in various bullshit crypto (not
| hating on crypto, just the projects) defi startups.
|
| Your confusion is assuming that "bullshit" means
| "unprofitable". Plenty of projects turn profit for their
| owners.
| prohobo wrote:
| Maybe. In any case, it seemed to be much more about
| extracting profit through facades rather than funding real
| products.
| searchableguy wrote:
| > In any case, it seemed to be much more about extracting
| profit
|
| What do you think purpose of a fund is? To provide returns
| for their LPs.
|
| You need to pitch to an angel investor who might care about
| the mission than a business fund.
| [deleted]
| nouveaux wrote:
| I think there is some notion that VCs are these rational,
| brilliant people who are making money hand over fist investing
| in the best projects. The reality is that many VCs do not make
| money and invest in tons of bad projects all the time.
|
| Why would they invest in bad projects? Because they are humans
| who happens to have a crap ton of money. As humans, they're
| susceptible to FOMO and hype. They are susceptible to things
| like first impressions, a good slide deck, a good sales person,
| etc.
|
| All this to say is that it might be the VC, it might you, or it
| might be your project. Who knows. This is why many founders end
| up pitching to 30-40 VCs because sometimes it's a numbers game.
|
| The whole VC funding thing is a game that you have to learn
| about and crack. The easiest way to crack it is to show you
| have growing revenue. The next best thing is to show you have
| growing users. If you do not have growth, then you'll just have
| to hustle and put on your best sales game.
| 33MHz-i486 wrote:
| If your capital cost is low, you can buy growth (sell below cost)
| and use that to distract investors for a long time. Capital costs
| are not going to be low anymore. A lot of investors are going to
| blow up and be more skeptical/disciplined.
| SemanticStrengh wrote:
| tesla is dead
| tempsy wrote:
| This is actually a good time to switch jobs because you'll be
| offered a compensation package with equity at relatively
| depressed prices.
| xdavidliu wrote:
| usually companies have hiring freezes because of this reason,
| so this is not so easy
| Gravyness wrote:
| Tech? like technology? What does it mean? Because surely
| companies that apply scientific knowledge for practical purposes
| aren't 'bursting' all over the place, right? Does it refer to
| specifically these huge companies quoted on the article?
| pc86 wrote:
| You know exactly what it means. There is no way that you think
| tech in this context means "applying scientific knowledge for
| practical purposes" unless you have - and I truly, deeply mean
| this with zero disrespect whatsoever - weapons-grade autism.
|
| When did it become the cool thing to pretend to not know
| anything about the context in which a particular discussion
| happens? It's maddening, but also completely exhausting.
| whiplash451 wrote:
| I see where your anger is coming from, but there were quite a
| few other words than "autism" that you could have used.
| 55555 wrote:
| I think "weapons-grade autism" paints a most vivid image.
| quickthrower2 wrote:
| "smart ass" would be a more accurate way to say how they
| come across.
| Ekaros wrote:
| Software and related things as main product. So things that
| have low marginal cost per unit after they are done...
|
| But really messy as anyone offering some type of platform or an
| other is also tech... Even if they don't have low marginal
| costs...
| mmaunder wrote:
| "Then there are rising interest rates. Besides possibly
| triggering a downturn, they reduce the present value of tech
| companies' profits, most of which lie far in the future."
|
| This is key. If you have a 10 year horizon for your startup
| investments, hoping that one in 100 will become the next Amazon
| or Google, you're going to discount those future cashflows into
| todays dollars by applying an interest rate connected to current
| reality. If the base interest rates have skyrocketed, then the
| net present value of that future cashflow is way less. It's
| mentioned briefly in the article, but I wanted to unpack it here
| because it's a key reason that high inflation makes investment in
| startups far less attractive.
|
| "It would be wrong to compare the current tech slump to the
| bursting of the dotcom bubble two decades ago. Back then
| companies had neither healthy balance-sheets nor promising
| business models."
|
| I disagree with this. I'm not going to call out specific public
| companies, but there are many with no Price/Earnings to speak of
| because they are running at a massive loss. These companies are
| highly speculative investments and have yet to prove that they
| can turn a profit. It's not hard to generate revenue growth of
| 30% per year while running at a 20% loss. Creating a truly
| profitable company is hard, and much of the reason why these
| companies are listed on public markets is because early investors
| wanted to cash out by selling their stock to the public, rather
| than bear the risk of finding out whether the business can turn a
| profit.
|
| Many of these never-been-profitable companies have eye-wateringly
| high valuations based on multiple of revenue. We've seen 10x to
| 25x revenue in the past few years, while losing money hand over
| fist and never having proven they can ever turn a profit and
| become self sustainable. Just like the dot-com era, these folks
| are world class at creating the right optics and making the right
| noises on quarterly investor calls. But at the end of the day,
| creating a business that makes more money than it spends is what
| it's all about, and that is very difficult to do. These never-
| profitable businesses have been benefiting from the era of free
| money, and as that time ends, so will they.
| disqard wrote:
| > "... at the end of the day, creating a business that makes
| more money than it spends is what it's all about, and that is
| very difficult to do. These never-profitable businesses have
| been benefiting from the era of free money, and as that time
| ends, so will they."
|
| Indeed. You cannot cheat the fundamentals -- you can
| avoid/delay them, but they'll eventually catch up with you.
| avgDev wrote:
| I work for non-tech generating 100million+ in revenue. Cushy job,
| fully remote, good pay and full autonomy with flexible hours
| working as an IC.
|
| I recently talked to a startup, similar pay, culture would be a
| better fit since it was mostly techies and I'm a nerd by
| nature.....but things just got awkward as soon as I asked about
| their revenue....they were bleeding money and I was told they
| were being acquired by a big corp. Also, the tone worried me, the
| confidence the CEO presented early in the call disappeared.
|
| I also tried digging deeper into their business and what they
| were selling, as I have interest in that space due to my hobbies.
| I literally didn't see a need for their startup to exist. But I'm
| just an average developer what do I know.
| lumost wrote:
| Across every investment class there has been a trend of buyers
| needing to become more financially irresponsible in order to
| participate in the market.
|
| Need to buy a house? bid 20% more than asking, if you don't -
| someone else will.. in cash.
|
| Need to build a ride-hailing app? prepare to pay people to ride
| indefinitely.
|
| Need to own a growth stock? prepare to pay upwards of 100x
| multiple on revenue.
|
| All around, there have been too many dollars chasing too few
| assets. I suspect the pendulum is swinging now that housing got
| to the price point where employees demanded equivalent pay
| increases to housing cost increases.
| amelius wrote:
| Housing cost is part of how inflation is computed.
| tremon wrote:
| That depends. Here in NL, housing costs are explicitly
| excluded from the official inflation numbers, presumably
| because housing is still seen as an investment rather than
| a short.
| lumost wrote:
| The owner equivalent rent measure that the Fed uses in the
| US has been decoupled from Housing prices for a long time.
| House price increases or rent increases don't necessarily
| have an impact on inflation if few are paying the marginal
| rate, and they choose to eat the higher cost rather than
| asking for more money.
|
| When a critical mass of individuals pay the marginal rate
| for housing, and they choose to demand more for their
| services to compensate - then it will show up in the
| inflation reports. I'd argue that it was a miss for the Fed
| to focus on owner equivalent rent rather than a broader
| measure of what consumers are paying for housing as the
| overall mix of housing has also been changing as the number
| of investment properties increases.
| mym1990 wrote:
| This depends. Housing cost if you're considering the price
| of _owning_ a home is not part of CPI for the same reason
| that stocks are not a part of CPI, that being they are
| considered assets.
|
| If you talking about specifically _renting_ housing, then
| correct(in US).
| tomrod wrote:
| Part of this is because bonds have been out of the picture.
| Bring bonds back as valid investment vehicles, which impacts
| many other parts of the economy, and we'll see more assets
| going to "useful" investment like roads, power lines, and so
| on.
| garren wrote:
| Rising interest rates are starting to slow the housing
| craziness, at least where I'm at. I was regularly seeing
| 20-27% over asking with limited to no inspections, new
| listings going in hours. Nuts.
|
| All-cash is basically the new norm. Two years ago that was an
| issue for regular buyers, but it's workable now since lenders
| have jumped into the mix, more and more offer an all-cash
| option - they make the purchase and transfer it to you under
| a traditional mortgage. You still have an appraisal gap to
| contend with, sine they'll only pay what the place appraises
| for, but anyone who qualifies for a loan can probably qualify
| for the all-cash option.
| sydd wrote:
| Where I'm from (EU) experts say that prices will stagnate
| amd the market will slow down.
|
| On one hand the high inflation pushes out lots of buyers --
| they can't or don't want to pay the high interest rates.
| This lowers demand and prices.
|
| On the other hand global supply chain issues (which got
| much worse with the war) lead to material shortages and
| rising material costs. This pushes up housing prices.
|
| The net result is likely stagnation -- few houses are built
| and few exchange owners. But prices stay high.
|
| Except if there will be a large recession causing people to
| loose their jobs and unable to pay their mortgages. This
| will crash the housing market, but looks unlikely now.
| chaircher wrote:
| Definitely looks that way in the UK - I've been watching
| my local housing market like a hawk because I'm looking
| to buy soon. Houses are staying listed a lot longer, a
| fair few getting reduced, and newer listings are coming
| in at more reasonable prices (as much as over PS100k is
| reasonable for a 1 bed flat miles into poverty stricken
| suburbia).
|
| I think people are feeling more risk adverse cost of
| living etc and want to hold onto money and stay put where
| they are.
| YeBanKo wrote:
| > I was regularly seeing 20-27% over asking with limited to
| no inspections, new listings going in hours.
|
| Another way say "20-27% over asking" is "an agent
| underpriced it by 20-27%". Surely good for their marketing
| materials, but it comes at the cost of withdrawn
| information from the seller.
| shrimpx wrote:
| > All-cash is basically the new norm.
|
| It's paradoxical that all-cash became the norm in a period
| where mortgage rates were at all time lows...
| DragonStrength wrote:
| Well, only if you ignore how we got there. Housing output
| took far too long to recover after 2008, and on top of
| that, many homeowners felt entitled to the gains they
| lost during the recession because that is what the
| American Dream promised.
|
| We could also pull on the demographic weirdness of the
| moment as Baby Boomers only finally cede political power,
| skipping a generation. What have all are priorities
| concerned since they came of voting age? Should we be
| surprised our recent policies continued to favor older
| people who owned homes over young people deciding the
| shape of our next generation? And to be clear, I'm not
| blaming any motives. I'm saying much of this can be
| explained by an "accident" (or maybe "conclusion") of
| demographics.
|
| The worst is if our incentives are for lazy capital
| returns (like rapidly rising residential real estate) for
| retirees the people who benefit in the younger
| generations are not going to be the people taking risks
| like starting businesses.
| david927 wrote:
| > Need to buy a house? bid 20% more than asking, if you don't
| - someone else will.. in cash.
|
| Buying in cash is being done to skirt the tightened up
| lending standards that followed the 2008 Crisis:
|
| https://www.reddit.com/r/Superstonk/comments/uflzht/the_2022.
| ..
| winter_blue wrote:
| > where employees demanded equivalent pay increases to
| housing cost increases
|
| How can employees realistically speaking even do this?
| bityard wrote:
| The old fashioned way: ask for a raise and go somewhere
| else if they don't pay?
| DragonStrength wrote:
| Well, if you're in California and don't own a house, you
| move. It's not a great option if you were raised here, but
| a whole bunch of people can take a small pay cut
| (especially thinking about down equity and inflation) to
| move back to their hometowns right now. For me, a home
| (3/2, 1500sqft) in the neighborhood I'd move to in my
| hometown (US city; 1 mil metro area) is less than my
| household income, which we'll realistically keep 80+% of
| when we move. I'd wager a healthy segment of Bay Area mid-
| level, domestic-born engineers fit this profile. I'd wager
| that holds true in many metro areas, even those we don't
| consider tech hubs because it is all relative.
|
| I wouldn't want to be a mid-level Bay Area manager in my
| 40's with a mortgage on the peninsula right now. Who is
| coming to buy that house? Who is going to train all the 22
| year olds moving here?
|
| EDIT: And I didn't even think about all the early retirees
| the major changes to the workplace will obviously prompt.
| Who wants to spend the last couple years of their career
| re-learning how to do a job you've done for decades and
| have been well-compensated for? I'd be at the beach.
| nostrademons wrote:
| Mid-level Bay Area manager in my 40s with a mortgage on
| the peninsula here. Why would I want to sell my house? We
| bought it because we have kids that we want to raise in
| the Bay Area.
| stjohnswarts wrote:
| I don't think it's housing. It's just that the market had a
| boom during the bored pandemic times and now that that is
| over (except in china) the market is readjusting. The market
| is highly leveraged by psychology over the short term, but in
| the end even the most exuberant people have to face reality
| and tighten their belt. Housing will flat line or decrease
| now as well, since people realize the cost of mortgages is
| too damn high. Also with lumber and other prices falling that
| will help new home builds. If Russia ever stops the attempted
| genocide of Ukraine then markets will probably soar as gas
| prices come back down instead of increasing.
| zitterbewegung wrote:
| The markets are efficient but they aren't perfect. In any
| situation the markets will do the best to optimize but will
| always fall short of perfection . Since markets aren't
| perfect that's why you can make money by speculation.
| worik wrote:
| > In any situation the markets will do the best to optimize
| but will always fall short of perfection
|
| The problem with markets is a "market efficient" outcome
| can be catastrophic for social welfare.
|
| During the Irish potato famine the markets allocated food
| away from Ireland because there were not many there who
| could afford it. They starved. The market functioned
| perfectly.
|
| Markets find equilibriums. Total collapse is an
| equilibrium. Starvation can happen at equilibrium.
|
| You can have 100_000 homeless people at market equalibrium
| metadat wrote:
| You nailed it! It's the same "excessive dumb money"
| phenomenon as with the dotcom bubble back in 2000.
| bushbaba wrote:
| ...or housing will drop as interest rates go up. And a non
| insignificant number of folks were over extended in leverage.
|
| I know too many folks who did 7/1 ARMs cash out refi to
| purchase another home in a 7/1 ARM loan, banking not on
| cashflow but appreciation.
|
| I know of folks who bought homes using margin loans in their
| stock portfolio.
|
| If housing stagnates, there will be margin calls, leading to
| supply shock, and price declines. Especially now that
| mortgage interest rates have nearly doubled year to date.
| simulate-me wrote:
| The price may also decline just because borrowing is more
| expensive. The difference between 2 and 6 percent interest
| is huge.
| mym1990 wrote:
| Rising interest rates don't typically signify lower home
| prices because rising interest rates are usually a
| biproduct of a hot economy that needs to be tempered. With
| the exception of 2008, home prices have _almost_ never gone
| down. Now, it _may_ be different this time. There is tons
| of speculation now and you are starting to see some sectors
| show big cracks. There was also a massive re-allocation of
| capital during the pandemic as people moved from high COL
| places to more reasonable locations(due to remote work), in
| turn making those new location high COL places.
|
| My theory is that eventually the unemployment rate will
| start rising, and people who lose their jobs that just got
| a 600,000$ 2/1 will be in a pretty tight spot. It would
| lead to either cutting consumption in other parts of life,
| defaulting on the house, or selling for a loss. And so on
| and on...
| JTbane wrote:
| >I know too many folks who did 7/1 ARMs cash out refi to
| purchase another home in a 7/1 ARM loan, banking not on
| cashflow but appreciation. I know of folks who bought homes
| using margin loans in their stock portfolio. If housing
| stagnates, there will be margin calls, leading to supply
| shock, and price declines. Especially now that mortgage
| interest rates have nearly doubled year to date.
|
| I can't be alone in wishing that would happen. Yes, people
| would lose a lot of money (potentially everything), but
| they played stupid games.
| bogomipz wrote:
| >"I know too many folks who did 7/1 ARMs cash out refi to
| purchase another home in a 7/1 ARM loan, banking not on
| cashflow but appreciation."
|
| What's the strategy behind the "7/1 ARMs cash out refi" and
| the second homes?
|
| It's curious that would people do an ARM when interest
| rates were at historic lows no? Were these second home as
| in part vacation home, part AirBnBs lets?
| bombcar wrote:
| Margin loans for house purchases isn't as insane as it
| might sound - assuming your financials are there. Margin
| interest is deductible against investment gains, house
| interest may not be for many earners.
|
| But not refinancing afterwards into a low fixed rate may
| come back to bite them, and soon.
| lostmsu wrote:
| Margin rates are also lower, and you don't have to pay
| the principal.
| georgeecollins wrote:
| >> Margin loans for house purchases isn't as insane as it
| might sound
|
| I understand the tax logic you are speaking about, but I
| think tax benefits are sometimes oversold to convince
| people to buy things (like homes and investments). You
| aren't a corporation, your liability isn't limited.
| Trying to shave a bit off taxes may have less benefit to
| you than the peace of mind of not having to juggle debt.
| You seem like you understand that when you talk about
| refinancing asap, so I think you know what you are
| talking about as well.
| kevstev wrote:
| In the typical scenario, I could have sold my stocks and
| incurred a 20-39% tax on the gains.
|
| The other option was to instead take a margin loan out at
| a hair over 1% blended which is tax deductible and incur
| no tax bill.
|
| There was a bit of risk in this yes, but I came out way
| ahead despite there being a pretty sharp pullback right
| after I closed on my house. I wasn't leveraged to the
| hilt at all, I think I had a loan equivalent to about
| 25,maybe 30% of my portfolio when the market pulled back.
|
| If you have significant assets this is something you
| should be considering. This is imho one of those "rich
| guy" things that's available at a relatively low level of
| wealth, and the risk associated with it is well worth it
| in most cases.
| throwaway0a5e wrote:
| > I think tax benefits are sometimes oversold to convince
| people to buy things
|
| People will pay more for diamonds that are less likely to
| have human rights abuses in their supply chain.
|
| People will pay more for eggs if you don't keep the
| chickens in cages.
|
| People will pay more for money if the government gets a
| smaller cut.
| BbzzbB wrote:
| Yes, you need some level of financial creativity to justify
| buying into one of the many bubbles. But that's where the
| timeless Buffett quote[0] on Ted Williams and batting comes
| in, there's no called strikes in securities markets. Mr.
| Market doesn't force you to do anything at all, we're all
| free to ignore the speculation and focus on proper cash
| flowing businesses at reasonable valuations. The more boring
| the better (tho there are opportunities even with exciting
| companies these days), but just wait for the right pitch, no
| need to force it. You'd need a gun to my head if you wanted
| me to hold a portfolio of cash burning (even generating for
| that matter) businesses with valuations based on 5-10 year
| outlooks.
|
| 0: https://www.youtube.com/watch?v=l0Mw8hCzQ1I
|
| >The trick in investing is just to sit there and watch pitch
| after pitch go by and wait for the one right in your sweet
| spot. And if people are yelling, 'Swing, you bum!,' ignore
| them.
| chiefalchemist wrote:
| > All around, there have been too many dollars chasing too
| few assets.
|
| You can thank the central banks for this. They seem to be too
| focused on propping up the wrong metrics. Meanwhile the real
| economy - and the real people in it - are limping like a
| three-legged dog.
|
| Yet the top layer ignores the messages (e.g., in the USA,
| Trump being elected, and perhaps re-elected) and persists
| with the insanity. This cycle - and the associated level of
| denial - is not sustainable.
|
| Not economically.
|
| Not socially.
|
| And not ecologically either for that matter.
|
| We can't consume our way out of this madness.
| vkou wrote:
| It's not irresponsible to bid 20% over asking. Asking is
| deliberately underpriced, because it is excellent advertising
| in a hot RE market.
|
| It's irresponsible to bid 20% over what the house is worth
| (which has nothing to do with asking price), just because you
| got emotionally attached to the house, and started a bidding
| war with another person emotionally attached to the house.
| cwilkes wrote:
| No broker in their right mind is deliberately underpricing
| the homes they represent. Why would they? A homeowner talks
| to another broker and they say they can get 20% more than
| the first one. Who is the seller going to go with?
|
| When we sold our house the broker put it at a fair price.
| Then along came a couple that's been outbid a number of
| times and offered 30% over within 24 hours of listing.
|
| Was the home underpriced? Maybe, but the housing market is
| such that it doesn't have to appeal to hundreds of people.
| Just one.
|
| Looking at the people going through the home most of them
| were using flyhomes.com (they operate as sort of a "we will
| pay cash for the house and then you pay us back") and
| probably had no intention of living there.
| mancerayder wrote:
| They set the price well under market in order to generate
| interest and visits. Next, in the same time interval
| multiple people bid, and you get a bidding war.
| Alternatively, price it at what you want it, and let it
| sit however long it takes. For hot markets, the former is
| what is done, in the US at least
| ploika wrote:
| "Price to Entice" is a very real thing where I live. It's
| basically a way of getting your listing seen by more
| people, and increasing the chances of a bidding war
| pushing up the final sales price.
| monktastic1 wrote:
| It bears repeating that there is no "what the house is
| worth" in the abstract. If you somehow know that other
| bidders will pay at most $X for it, then of course you'd
| never bid $X * 1.2 -- you'd bid $(X+1). And if lots of
| people are (or can be made) emotionally attached to a house
| and pay an apparently unreasonable amount, that _is_ what
| it 's "worth."
| vkou wrote:
| > It bears repeating that there is no "what the house is
| worth" in the abstract.
|
| No, but there is a 'what was selling price for similar
| homes in this area' price in nearly every specific.
|
| Listing prices are intentially set to be much lower than
| selling prices. Selling prices are the real prices,
| listing prices are fiction.
|
| People paying 20% over listing usually means that listing
| was 20% under selling. Boring! And not financially
| imprudent!
|
| People paying 20% over average selling in the area, for
| an equivalent home is what raises my eyebrows as
| financially imprudent.
| gtowey wrote:
| > Listing prices are intentially set to be much lower
| than selling prices. Selling prices are the real prices,
| listing prices are fiction
|
| I feel like this is only true in irrational housing
| markets, or at least those that have a chronic
| undersupply of housing .
|
| In my local non-insane market I went through two
| different purchases where I successfully bid less than
| asking.
|
| That's gone since the pandemic though since everyone
| tried to move out of cities and work remote in my town.
| s1artibartfast wrote:
| It is basically true for sellers markets, because it
| gives more advantage to the seller. being a sellers
| market doesn't make it an irrational housing market.
|
| During a buyers market, prices usually approach the list
| or go under.
|
| This reflects the fact there is how much the house is
| worth to the seller, and how much it is worth to the
| buyer, and neither of these are the sale price.
| corrral wrote:
| It's not "emotionally attached", it's that it's been
| impossible to buy a house for _a while_ if you 're not
| willing to pay _more than it will appraise for_. You 'll
| repeatedly lose to buyers who will do that, with cash
| offers to boot.
|
| This has been true even in many cities that aren't trendy,
| and have been building housing like crazy for a decade.
| s1artibartfast wrote:
| In what market? In the SF bay area 99% of houses
| appraise, even if they go 50% or $0.5m over asking
| corrral wrote:
| Boring Midwestern City that's not even a 3rd-tier tech
| hub. Other boring Southern city that's also not even a
| 3rd-tier tech hub. Buyers are having to take on the risk
| of having to cover any extra over appraisal in cash,
| consistently, while that used to be rare (and, yes,
| usually for "I am super invested, emotionally, in getting
| this particular house" reasons).
|
| My unremarkable suburban house in a boring city that's
| been building housing _constantly_ and _extensively_ for
| the last 10 years, is up like 25% in value over the last
| 2 years. We thought, based on extensive experience in
| this market, that we were already paying a bubble-induced
| premium of 15-20% when _we_ bought it (possibly no longer
| true--thanks inflation). WTF.
| otterley wrote:
| I think the appraiser is doing you a favor by not
| appraising it for the contract price in this case. Why
| would you want to overpay for a house and have to cover
| the financing shortfall yourself? Especially in a market
| that traditionally has slow RE price appreciation.
|
| Let the cash buyers suffer the losses. You'll thank
| yourself later.
| s1artibartfast wrote:
| You're assuming that the deal doesn't go through if it
| doesn't appraise.
|
| In my market nearly all winning offers have waived the
| appraisal contingency
| otterley wrote:
| Not assuming that at all. I'm saying that if the
| appraisal doesn't go through, then the lender won't cover
| the remainder of the purchase price, and then the buyer
| will have to make up the difference out of his/her own
| pocket. At that point, I'd bail, because the appraiser is
| raising a red flag.
|
| But since you mention it, in the slower market being
| discussed here, I would definitely not waive an appraisal
| contingency.
| s1artibartfast wrote:
| sure, the appraiser is always providing the buyer a
| service by giving them an accurate appraisal (more
| information is better).
|
| If the buyer chooses to proceed, this can be a financial
| disadvantage reducing access to a highly leveraged loan.
| corrral wrote:
| > At that point, I'd bail, because the appraiser is
| raising a red flag.
|
| The point is, in a lot of markets, if you bailed on
| offers over this in the last couple years, you wouldn't
| be winning any bids in the first place, and wouldn't have
| been able to buy a house at all. The winning bids include
| guarantees that the buyer will cover the difference. If
| you won't do that, you'll lose to an all-cash offer from
| someone who will. If you're lucky, you won't be competing
| against superior offers _that also waive all
| contingencies_.
|
| I have no idea where all these people are coming from
| with hundreds of thousands in cash and the ability to
| cover several thousand more on top of the appraisal
| value, but they seem to be involved in damn near _every_
| sale the last 2ish years. Given how many are OK waiving
| inspections and such, I have to assume they 're
| institutional buyers who can spread that risk around, not
| individuals who could be ruined by that kind of thing.
| s1artibartfast wrote:
| Counterpoint: as home prices keep climbing, many of the
| kind of things that would be caught by a home inspection
| become less and less financially relevant. When you're
| buying a million dollar house, 20K for a new roof is in
| the noise
| otterley wrote:
| Something seems a bit off, then, because if the market is
| appreciating, then the appraisers should be taking that
| into account. As another commenter said, they were
| certainly doing that in hot West Coast markets like SF
| and Seattle. Both houses I purchased (each in those
| locations) appraised at the contract price, and I bought
| them both within the last 7 years.
| corrral wrote:
| They do, but it lags. If prices are going up fast enough,
| given the way these things are determined, it can easily
| be the case that damn near _every_ house isn 't
| appraising at what it sells for.
|
| The "solution" to this, in the run up to the '08 crisis,
| was for appraisers to "help out" by fudging their figure
| to make it match the sale price. I know this because a
| real estate agent whose husband was a loan officer, told
| me so. "I know they were just trying to help out with
| these new regulations, but it's had the unintended
| consequence that appraisers can't fudge their numbers
| slightly higher to match an offer that's only a couple
| percent above the natural appraisal, like they used to".
| LOL, yeah, the _exact thing_ they were trying to
| accomplish was an "unintended consequence". Talk about
| not being able to understand something because your
| paycheck depends on it.
|
| Possibly some appraisers in at least some markets have
| figured out ways around this, and are back to fudging
| numbers. I dunno.
| s1artibartfast wrote:
| It comes down to what the appraiser is really saying with
| their appraisal. Are they saying that in today's market
| this is what the house could go for or are they
| predicting the future value outside of a bubble
| [deleted]
| s1artibartfast wrote:
| I think Inflation scares are a big part of it - at least
| it was for me.
|
| If inflation is 8.5% and a mortgage is 3%, the bank is
| paying me to buy a more expensive house.
|
| At the same time, If I hold and wait to buy, my savings
| are evaporating while the price goes higher.
| bombcar wrote:
| Which is exactly what the "ask below" is trying to get you
| to do; you act differently (emotionally) in a bidding war
| than in a price negotiation.
| s1artibartfast wrote:
| I don't think it has to be emotional at all.
|
| There is what the house is worth to the seller, and what
| it is worth to the buyer, and the sale price is always
| somewhere in between.
|
| It is just taking advantage of an information asymmetry
| to get the sale price closer to what it is worth to the
| buyer.
| asta123 wrote:
| And for these reasons I question the whole concept of money,
| working for it, and saving for whatever dream. Flood of money
| can be so easily created but you have to work for it? Then
| you have to max out on debt, speculate and risk your hard
| earned funds, otherwise you are falling behind. Central banks
| have stuffed this one up and I it is a much bigger problem
| than inflation.
| gonzo41 wrote:
| This is also a central banking fail in so far that there's
| that much liquidity in the market that can't find a
| productive outlet.
|
| There's a lot of money, but also not enough concentrated in
| one spot to do really useful ventures like large
| infrastructure projects. So instead the money is distorting
| everything.
|
| Imagine if lending was less cheap for home owners but it was
| still cheap for governments or really large companies to be
| able to build train lines or advanced manufacturing or
| affordable medium density housing.
|
| I see the problem as too much credit is able to be spent with
| too little focus. So silly stuff is being funded because the
| money is becoming meaningless.
| im_down_w_otp wrote:
| The central bank doesn't control policies like that though.
| They have scant few actual knobs to turn on their own
| without Congressional intervention.
| chiefalchemist wrote:
| On the other hand, The Fed goes over the top with what
| they can do and Congress refuses to lean in on its
| supervision of The Fed.
|
| Imagine that. You refuse to do your job and you still
| have a job.
|
| Only in America.
| boucher wrote:
| The fed actually has more tools than the ones it
| currently uses, some of which have been used in the past.
|
| Robert Hockett has written a lot about productive
| investments via the federal reserve banks, and how that
| could be used to transform the economy.
|
| Here's one recent paper: https://papers.ssrn.com/sol3/pap
| ers.cfm?abstract_id=4023614
|
| He wrote a short book about it as well:
| https://www.amazon.com/Financing-Green-New-Deal-
| Renewal/dp/3...
| im_down_w_otp wrote:
| Thanks for the links. I'll pick up that book.
|
| One thing I've been a long-time advocate for is States
| setting up their own banks akin to that of North
| Dakota's. If for no other reason than to have a way to
| leverage national monetary policy for regional aims, so
| that when the Federal government rushes to the aid of
| Wall Street (e.g. by flooding it with cheap liquidity)
| there's a way for State governments to more directly
| interact with those mechanisms themselves for their
| benefit.
|
| I strongly suspect significant challenges in setting up
| effective and responsive governance and incentive
| structures to keep such things from not becoming their
| own instruments of abuse, but ever since watching 2008
| unfold it's bothered me how easy it is to leave States
| twisting in the wind while the balance sheets of
| financial institutions are made whole by feeding at the
| Fed liquidity trough.
|
| One of the basic premises of "States rights", as it were,
| is that it's supposed to offer lots of little
| "laboratories of democracy", but as it stands right now
| there's no good way to actually finance those
| laboratories to invest in ambitious things. So, what we
| mostly end up with instead is only the downside of using
| "States rights" in the only way that it's cheap to do so,
| which is usually by restricting or denying things. It's
| much harder to get the upside of investing in things
| without all the latitude that the Federal government
| enjoys financially.
| selimthegrim wrote:
| If only someone reminded S Dakota of the rule against
| perpetuities at the same time.
| tremon wrote:
| In my view, it's not a failure of any central bank. The
| additional liquidity is generated by other banks, in the
| form of overvaluations and financial constructions that
| allow loans without backing securities.
| trashtester wrote:
| This is not a case of either-or. But central banks have
| more power than anyone else, as they are the only ones
| who can truely "print money".
| JaimeThompson wrote:
| >really large companies to be able to build train lines or
| advanced manufacturing
|
| They would use the money to buy back their own stock.
| dr_dshiv wrote:
| > Imagine if lending was less cheap for home owners but it
| was still cheap for governments or really large companies
| to be able to build train lines or advanced manufacturing
| or affordable medium density housing. I see the problem as
| too much credit is able to be spent with too little focus.
| So silly stuff is being funded because the money is
| becoming meaningless
|
| Jesus yes. Economists treat all spending like it is equal
| in value. Stupidity.
| api wrote:
| Central banks have one hammer really: interest rates.
| Everything is a nail.
| marcosdumay wrote:
| Governments as a whole have a lot of different hammers
| for monetary policy. It's just that every other one
| depends on the Congress understanding the problem and
| cooperating.
| nipponese wrote:
| Central banks are not governmental organizations.
| gumby wrote:
| Technically they are (everybody who works for the Fed or
| the Bank of England gets a governmenT paycheck) and in a
| technical sense they aren't, or try not to be
| (independent balance sheets).
|
| But they are involved in policy decisions, being
| consulted and themselves asking. They do t have an
| independent mission the way, say, a trucking company
| does.
| WalterBright wrote:
| The Federal Reserve banks are.
| arminiusreturns wrote:
| No they are not, though it's easy to understand the
| confusion. From the SF Feds website:
| The Board of Governors--Located in Washington, D.C.,
| Board members are appointed by the U.S. President and
| confirmed by the U.S. Senate. Board members and staff are
| civil service employees. The 12 regional Reserve
| Banks--Located around the country, the 12 Federal Reserve
| Banks are chartered as private corporations. Employees
| are not civil service. The Federal Open Market
| Committee (FOMC)--Composed of the Federal Reserve
| Governors and the Federal Reserve Bank presidents, the
| FOMC is charged with conducting monetary policy.
| worik wrote:
| They are not part of the government. They are more senior
| than that, they are part of the elite.
| WalterBright wrote:
| Yes, I'm aware of the legal fiction that they are not
| part of the government. But they are, as they are run by
| people appointed by the government, and therefore serve
| the government.
| arminiusreturns wrote:
| I rather think the fiction is that they serve the
| government, but I also have The Creature from Jekyll
| Island in the backseat for light reading so my
| perspective probably is heavily biased.
| colinmhayes wrote:
| Just because they're not elected doesn't mean theyre not
| part of the government.
| gonzo41 wrote:
| QE as well.
|
| I just don't see why they can't put conditions on some of
| their lending to focus the intent of the money.
| mym1990 wrote:
| Simple: It is not the responsibility of the Fed to
| evaluate and empower or degrade certain markets according
| to what "smart investments" should be. This is ultimately
| up to the banks that receive the money and the people who
| come up with investment ideas.
| WaxProlix wrote:
| This entire conversation is about how those entities
| don't seem to be doing a particularly good job.
| Robotbeat wrote:
| Right. It's really up to businesses and governments.
| Businesses to make productive investments and governments
| to make the appropriate counter-cyclical investments
| (beyond just interest rates) to keep the productive
| investments more attractive than the non-productive
| speculative ones for businesses.
| vkou wrote:
| Yes, but governments have other hammers, called tax
| rates, and deficit spending.
| WalterBright wrote:
| All that extra cash looking for a use is what causes
| inflation. It all goes back to supply & demand.
| dominotw wrote:
| why is the housing market not budging. Its just lagging
| other assets?
| m0llusk wrote:
| Hard to say, but it has always been like that. Housing
| prices are extremely sticky. With corrections most of the
| work ends up being done by inflation while prices
| stagnate. One peculiar advantage to the burst of
| inflation is that it could help the housing bubble
| correct itself relatively quickly.
| waynesonfire wrote:
| Because variable rate mortgages.. and once that gets
| expensive maybe well see 50 year mortgages.
| lotsofpulp wrote:
| Supply and demand, of course.
| nostrademons wrote:
| Housing always lags, usually by 18-24 months. Real estate
| transactions are slow - they require a bunch of research,
| non-fungible goods in an illiquid market, physically
| scoping out properties, financing sources that are
| notoriously sluggish and thorough in their diligence, and
| a slow closing process. And the sellers don't _need_ to
| sell - they can just hold onto their places and live in
| them or rent them out. That means that when money dries
| up in the housing market, liquidity dries up before
| prices drop: people just hold onto their houses and don
| 't sell them rather than take the loss.
|
| This also means that housing is pretty resilient to
| recessions that last < 1 year. Nationwide the '73, '80,
| '82, '91, and '01 recessions were barely blips to housing
| prices [1]. It takes a sustained downturn of > 4 years or
| so in a regional economy to make a serious dent in
| housing prices.
|
| [1] https://fred.stlouisfed.org/series/MSPUS
| Robotbeat wrote:
| The money can find a productive outlet, it's just that for
| the last 5 years or so, speculative investments (that
| weren't productive) had a much higher rate of return. Which
| is too bad as the productive investments like building a
| solar power plant really benefitted from the low interest
| rates that drove the non-productive speculative bubble.
|
| non-productive Speculative investments tend to get punished
| at the end of the cycle by losing all value, thus punishing
| those invested in it and restoring order. But that often
| only happens when you increase interest rates above that
| which productive investments like solar power plants often
| need. And so you get contraction as even the productive
| investments are starved of funding. Oh well, at least the
| solar power plant hasn't lost all its value.
| naravara wrote:
| Also, arguably the most socially productive outlets would
| have been public goods, like major infrastructure
| investments and public education and health initiatives.
| But that's evidently politically untenable.
| mftb wrote:
| This was a really interesting thread. I see what you guys
| are talking about all around me, the mis-used liquidity
| or whatever you want to call it. I don't know anything
| about finance, so I don't know how to respond to the
| people, but I feel like saying all the time, "Hey you
| know someday you're gonna need that money."
| ripe wrote:
| > non-productive Speculative investments tend to get
| punished at the end of the cycle by losing all value,
| thus punishing those invested in it and restoring order.
|
| To be precise, the investors who are left holding at the
| end of the cycle get punished. The early investors who
| got out make out like robbers.
|
| This system incentivizes pump-and-dump.
| kurthr wrote:
| That is "the market" working for you!
|
| We could allocate resources to productive assets by
| fiscal spending, but that is prevented by politics. Only
| when "the market" gets its cut can any infrastructure be
| built in the US. That's also true for much of the medical
| establishment and pension/retirement systems. If the
| market was efficient, we wouldn't be complaining about
| it. Unfortunately, a "free market" and an efficient
| market (and you could argue whether infrastructure or
| medicine or income insurance even make sense as markets)
| are not the same. Most markets that have many individual
| consumers require regulation to be even close to
| efficient. Like political and financial enforcement they
| are too easy to manipulate and the consequences of
| malfeasance are substantially less than the profits to be
| made.
| worik wrote:
| > Most markets that have many individual consumers
| require regulation to be even close to efficient.
|
| That is not true from what I see (modulo contract
| enforcement and policing of anti-social elements). There
| are many examples of smoothly functioning markets. With
| my economics geek hat on the things required for a market
| include:
|
| * All participants must have choice, be able to enter and
| leave in the medium term.
|
| * There must be clear information available about the
| properties of the goods and/or services
|
| * There must be clear information about the prices.
|
| The first condition (choice) can be rough on suppliers.
| The "choice" for a coffee shop is closing or bankruptcy.
| But for the supplier of electricity from a hydroelectric
| dam the choice is different. There are no clear
| boundaries.
|
| For the consumer they can substitute potatoes for kumera
| but there is no substitute for food. Everybody must eat.
|
| So: Reticulated water and electricity are bad things for
| markets. Vegetables (except during famine) and
| entertainment services are good
| Robotbeat wrote:
| What sucks is that fiscal policy, ie government spending,
| is also often not very efficient. Even when rampant
| corruption doesn't destroy efficiency, crushing
| bureaucracy or just plain incompetence will. (Is the DMV
| a model of efficiency?)
|
| So you need a smart balance. And you need competent,
| honest people in both business AND government.
|
| I don't think that government necessarily is inefficient.
| The DMV could be a very efficient place. The fact that it
| isn't should cause at least some pause for those
| advocating more government spending (such as myself).
|
| And the same is true for business. Comcast is terrible.
| But it doesn't HAVE to be. Rent-seeking and anti-
| competitive behavior makes it terrible.
| rhizome wrote:
| This is due to tax policies reducing the revenue pool.
| This makes it easier to judge individual divisions of the
| total because there are necessarily fewer outlets, and
| since it's a smaller pool there's more reason to fight.
|
| The idle rich who can't find anywhere worthwhile to play
| with their nearly-free money (until recently ZIRPish) are
| a bug in the system. Oh, but lets pretend we are captains
| of industry by saturating the world with sure-failures.
| "I wEnT tO GsB!"
|
| And government is absolutely inefficient, which is a good
| thing actually. Despite the efforts of conservatives,
| government still has to account for many many corner
| cases and special needs. Ask any Agile TDD aficionado how
| this affects velocity.
| Robotbeat wrote:
| I don't think the government being inefficient is good.
| It gives ammo to those who are ideologically opposed to
| government doing things. We should strive to improve
| government efficiency, especially those of us who think
| the government should be taking on more tasks.
| briandear wrote:
| Ideological opposition to extensive government is because
| government is inefficient. See the Laffer Curve. Actual
| demonstrated inefficiency is the proof, not the
| justification.
| xhevahir wrote:
| I'm guessing the inefficiency-is-good formulation was
| chosen for rhetorical effect rather than because OP
| believes inefficiency is good in itself.
| petra wrote:
| The DMV outsourced it's service in some areas. Service
| improved. So it's possible to benefit from the benefits
| of public spending and private efficiencies. It's a
| pretty common method for governments to spend money.
| more_corn wrote:
| AAA DMV services is amazing. Phenomenally more humanized
| and efficient. My favorite example of public private
| partnership.
| rootusrootus wrote:
| I wonder if the DMV is a bit of a special case, not
| necessarily a good example of government bureaucracy. The
| customers are almost universally resentful, because they
| are paying the government money to let them drive.
| They're angry because it's slow, and it's slow because
| the process requires bringing in third-party paperwork
| (e.g. insurance, sales receipt, dealer paperwork,
| whatever) and there's a lot of opportunities to get it
| wrong. So it often involves more than one trip.
|
| If I had to deal with customers at the DMV, I think I'd
| be grouchy too.
|
| Another reason to try and get as much of it online as
| possible, which I think is most of it nowadays.
| abathur wrote:
| I think bureaucracies do _tend_ to suck, but I also think
| there are often people who stand to gain from making a
| bureaucracy suck.
|
| For that reason, I suspect it's good idea to leave
| interpretive space for the possibility that a given
| bureaucracy has been intentionally hamstrung, or is
| Kafkaesque by design.
|
| I suspect calling Comcast is miserable because the
| process is designed to exhaust and manipulate you out of
| quitting, for example.
|
| I suspect it's possible to build systems that enable you
| to ensure an ER visit will cost $500 instead of $10000--
| but our insurance companies may feel like the uncertainty
| deters people from seeking care.
| joebob42 wrote:
| I think by the time you're saying "my system depends on
| the people in it being honest and competent" you've kind
| of already lost. Some people are competent, most aren't.
| Many people are honest, but some aren't. You aren't going
| to change that so you have to be resilient to it.
| Robotbeat wrote:
| Every system works better with honest and competent
| people. That's my point!
|
| Some systems are more resilient to dishonesty and
| incompetence than others. I suspect a mixed system is the
| most resilient. But we CAN change the behavior by
| choosing to reward competence and honesty by who we
| elect, who we hire, and who we do business with.
| SauciestGNU wrote:
| People keep using the DMV as an example of government
| inefficiency, but my state has made it run so painlessly
| I don't think I've spent more than 15 minutes in an
| office over the last 5 years. I think government can be
| efficient if you put technocrats in charge of
| implementation rather than elected officials who are
| subject to the electoral whims of the uninformed masses.
|
| The problem with the above is it weakens democratic
| institutions by removing the exercise of power from the
| people the population select to lead.
|
| Inefficiency to me can not possibly be more clearly
| demonstrated than by ape pictures losing hundreds of
| thousands of dollars for their purchasers. But we also
| have examples like Uber spending cash on hand to drive
| competitors under without having a plan to maintain their
| own services without heavy subsidy.
| JJMcJ wrote:
| Almost all DMV problems are due to understaffing, not any
| laziness or incompetence on the part of the people who
| work there.
|
| In California the DMV experience was greatly improved by
| having appointments, and for walk in, you get a number
| and at least have an idea when you'll be called, so you
| can sit in a waiting area, not have to stand for hours.
|
| COVID has reduced staffing so that makes appointments
| harder to get.
|
| Also, imagining that corporate offices are models of
| efficiency is an error.
| the_only_law wrote:
| See I wish. The DMV near me has been merged with other
| offices (probably in some lazy attempt to "reduce
| spending") and you better make your appointment a month
| or two out because there won't be any availability
| otherwise.
| more_corn wrote:
| Which state? DMV is my favorite example of government
| because everything they do is required and everything
| they do is done terribly. I'll have to revise if I meet a
| DMV I like.
| [deleted]
| dangrossman wrote:
| The DMV in my state requires you make an appointment 4-6
| months out right now. Walk-in appointments are
| unavailable or only available during a few hours a few
| days a week, if they happen to have staff that day. Good
| luck if you have your drivers license stolen.
|
| I sold a car of mine to Carvana in October. I returned
| the license plate to the DMV immediately, which is how
| they're notified that you no longer own the vehicle,
| waited 7 days, then cancelled my insurance policy on that
| car. A month later, I got a letter from the DMV that it
| is a crime to not carry insurance on my vehicle and I
| will have to reinstate the insurance and pay a $70 fine
| for letting it lapse. On the car I no longer own, that
| was now titled in another state and resold by Carvana
| already.
|
| It took 2 more months and 3 different forms to get the
| DMV to accept that I no longer owned the car and to stop
| pursuing me for this "crime".
| donthellbanme wrote:
| bityard wrote:
| Please don't still your car to carvana. They are
| destroying private party used car sales in many
| communities around the country.
| dangrossman wrote:
| How are they doing that?
| api wrote:
| California right?
| rootusrootus wrote:
| That's an awful setup. More states need to get DMV mostly
| online. I just go to their website when I sell my car and
| tell them I've sold it. No sending back plates (which is
| good, I keep my plates when I sell a car, because I like
| them).
| Thlom wrote:
| WTF? This must be because of willful political sabotage?
|
| The license plate should follow the car and ownership
| should be changed online as part of the transaction. It
| sounds incredibly wasteful that every time a car changes
| ownership the seller must hand over the plates in person
| to the DMV. And is there no national registry of cars or
| data sharing between states? Strange that a car can be
| registered twice.
|
| If your drivers license is stolen you should be able to
| just order a new one online and have it delivered in the
| mail. I have been inside the building of our DMV
| equivalent two times. One time when I did theoretical
| exam to be allowed a practical driving test, and once for
| the driving test. I got a temporary license when I passed
| and the proper license in the mail the next week. This
| was 20 years ago.
| xxpor wrote:
| >The license plate should follow the car and ownership
| should be changed online as part of the transaction. It
| sounds incredibly wasteful that every time a car changes
| ownership the seller must hand over the plates in person
| to the DMV.
|
| There's too many personalized plates and other exceptions
| in the US to make that viable.
| Robotbeat wrote:
| My point wasn't to say DMV is ALWAYS inefficient but just
| that the DMV is a good litmus test for efficiency. Sounds
| like in your state, the DMV is efficient and therefore
| perhaps fiscal policy would be well-spent!
| jokethrowaway wrote:
| But we don't have a free market.
|
| The government has heavy handed regulations distorting
| the market and spent the last years creating money out of
| thin air and killing small businesses.
|
| The government propping the market up during the pandemic
| kept alive the myth that the market is always growing but
| also caused a terrible inflation.
|
| Now that the market is going back to reality the
| government can't just print more money again - or
| inflation will kill the entire country.
|
| The incoming crash will hopefully pop some of the bubbles
| the government created in the last 20 years. But it will
| be painful.
| bogomipz wrote:
| >"We could allocate resources to productive assets by
| fiscal spending, but that is prevented by politics. Only
| when "the market" gets its cut can any infrastructure be
| built in the US. That's also true for much of the medical
| establishment and pension/retirement systems"
|
| I'm trying to follow this but not understanding it. What
| do you mean by " Only when "the market" gets its cut". A
| you referring to public/private partnerships here or pork
| barrel politics? Something else entirely?
| r3trohack3r wrote:
| > We could allocate resources
|
| When you buy/sell crypto - money changes hands. That
| money wasn't really "allocated" to crypto, beyond miner
| fees, just redistributed. That cash still exists.
|
| The resources being allocated are graphics cards, human
| time, and electricity AFAICT.
|
| The power usage of crypto is relatively small compared to
| other active human endeavors. It's power usage doesn't
| approach other arbitrary value stores like gold and
| government backed fiat markets. Could it go somewhere
| else? Yeah - but could we reasonably produce enough to
| offset it in a positive sum game - definitely. As long as
| renewables are cost efficient (read: truly competitive
| with non-renewables) and are net-zero on emissions this
| misallocation of resources would be allocated to
| renewable power production in an efficient market.
|
| Graphics cards being misallocated... I'm not sure saying
| markets are inefficient because a financial market is
| outbidding video gamers is a compelling argument.
| Scientific use of graphics cards seems like a small part
| of the market, but I may be mistaken here.5
| pclmulqdq wrote:
| IIRC, the energy use for crypto as a whole is on par with
| the energy use of the fiat currency system, if not
| higher. I don't know how gold mining ranks, but it may be
| well below crypto mining in energy use or well above.
| Mining energy use depends a lot on asset price, and gold
| prices are comparatively low (compared to other asset
| classes).
|
| Silicon and other electronic parts also get dumped into
| this market, when the capacity used to build those
| devices could be used for other things.
| r3trohack3r wrote:
| A good reference to compare bitcoin to gold mining (and
| other human endeavors like brewing tea):
| https://ccaf.io/cbeci/index
|
| Gold mining and bitcoin are currently roughly on-par. But
| gold's energy usage isn't just mining. It's the entire
| supply chain from Cash 4 Gold stores, long term storage,
| smelting/recycling, etc. I don't have a good reference
| for the total cost of gold.
| pclmulqdq wrote:
| Oh, that is only for bitcoin mining. Is there a source
| for the entire crypto ecosystem since you want to compare
| bitcoin mining to the entire gold supply chain? I would
| suspect that if you include shipment and storage, you are
| still under bitcoin mining for the entire gold supply
| chain.
|
| However, the point still stands. Datacenters in the US
| use total energy less than 2 bitcoins. How many of those
| datacenters are moving fiat around? Way less than half?
|
| Things like brewing tea and heating houses take a ton of
| energy. Moving money around doesn't!
|
| Crypto is a huge waste, and that site does not suggest
| otherwise.
| worik wrote:
| > the energy use for crypto as a whole is on par with the
| energy use of the fiat currency system
|
| That is an unbelievable statement just on the face of it.
|
| But if we say: "What is the energy use per transaction?"
| what then?
|
| The inefficiency of crypto currency is legendary.
| kd913 wrote:
| Those other endeavors scale significantly more
| efficiently and are a necessity.
|
| Gold is a requirement for industrial purposes, for
| jewellry, for chemical processes for medication.
|
| Visa/Mastercard perform many hundred of thousand
| transactions per second.
|
| BTC is limited to 350k per day, and consumes the
| equivalent CO2 impact as Austria. It can't and won't ever
| scale, which leaves it open to market manipulation and
| centralization as transactions move off-chain.
|
| It's not a small amount of energy wasted, and there are
| significantly more valuable uses for that energy, such as
| aluminum production or water desalination.
| stjohnswarts wrote:
| Always has been.
| formerkrogemp wrote:
| We don't need solar, wind, nuclear, hydro, water
| reclamation, on shore chip foundries, manufacturing,
| battery chargers, non-crumbling bridges, manufacturing,
| paved raids, public transit, or working airports. We need
| more crud apps and adtech! More stock options and stock
| buybacks!
| sankumsek wrote:
| I loved me some paid raids! ;)
|
| Snark aside, it is bit disheartening to see all this
| capital being thrown into handwave-y Web3 verticals.
| sidpatil wrote:
| What's wrong with CRUD apps? They may be boring to
| develop, but they tend to be the most useful.
|
| Every single one of those industries uses multiple CRUD
| apps in the course of their business operations. The
| database is one of the most important technologies of our
| civilization.
| JacobThreeThree wrote:
| Central bank intervention herded all investors into
| equities which obviously contributed to the post-2008
| bull market, but also distorts price discovery.
|
| But hey, at least the Fed hasn't started buying equities
| too, like the BOJ.
|
| https://www.bloomberg.com/news/articles/2020-12-06/boj-
| becom...
| cwkoss wrote:
| There would need to be some tight regs to make that work,
| or else large companies would buy up all the housing supply
| and force everyone to pay them rent.
|
| I think individual home ownership is important, and thats
| not where I'd want to start cutting.
|
| Credit for second homes being less cheap - totally onboard.
| eecc wrote:
| Wasn't that the Soviet double ruble system? Whenever the
| Politburo wanted to find a mega project the money was
| wished into existence and things happened (just as it's
| done today) yet it was illiquid and only usable in a sealed
| silo, separate from the normal exchange ruble.
|
| Wonder how a similar mechanism would work today
| himlion wrote:
| That sounds interesting. Can you link to any reference on
| this? I tried googling but didn't turn up much.
| mambru wrote:
| https://en.wikipedia.org/wiki/Beryozka_(Russian_retail_st
| ore...
| golergka wrote:
| That's not what the parent comment is talking about.
| Berezka stores were originally created to earn dollars by
| selling Soviet wares to tourists, and later gradually
| reoriented towards the few Soviet citizens who earned
| dollars and looked for some way to spend them. Not to be
| confused with other special stores unavailable to
| ordinary citizens that supplied party members.
|
| What parent comment is talking about was the system of
| cash and cashless (beznal) roubles. Cashless roubles were
| used for industry purposes and couldn't be converted to
| the ordinary roubles available to the population. When
| USSR allowed cooperation (primitive private business) in
| the late 80s, it was used by many officials as a tool to
| convert the cashless roubles from the organization's they
| controlled into real currency in their private pockets.
| And a lot of oligarchs (including Khodorkovsky) got their
| fortunes that way.
|
| It's ironic that now ordinary Russians blame the chaos
| and injustice of the 90s on capitalism and free market,
| whereas a lot of that was created by a state economy
| system and exploited by corrupt beurocracy of a communist
| party.
| [deleted]
| jeffreyrogers wrote:
| > Need to buy a house? bid 20% more than asking, if you don't
| - someone else will.. in cash.
|
| If you expect inflation to stay high for a while this is
| actually rational... as long as you still have a job.
| colechristensen wrote:
| This was driven by extended 0-ish% interest for an entire
| recession cycle. Unable to get "safe" returns, money chased
| more dangerous classes of assets and inflated prices.
|
| Inflation and a return to nonzero interest means capital gets
| to retreat to safer ground, pulling the rug out of stupid
| unprofitable startups that can only make money with head-in-
| the-clouds IPO valuation or FAANG acquisition.
| MomoXenosaga wrote:
| Is it really a bad thing? Unemployment is pretty low.
| colechristensen wrote:
| Long term, poor allocation of resources into junk work
| and business that doesn't make money leads to crashes and
| periods of high unemployment.
|
| In other words you can't keep the party going forever and
| how things are now isn't an excuse for irresponsibility.
| throw_nbvc1234 wrote:
| Labor Force participation is also low. Job openings are
| around an all time high.
|
| https://fred.stlouisfed.org/series/CIVPART
| https://fred.stlouisfed.org/series/JTSJOL
|
| As these two converge, wages are probably going to go
| down while inflation may still be high.
| thomasahle wrote:
| > Need to buy a house? bid 20% more than asking, if you don't
| - someone else will.. in cash.
|
| Who buys a house in cash? You mean literal suitcases of
| dollar bills?
|
| Or do you just mean something like a bank transfer? What
| other ways are there to buy something?
| [deleted]
| noufalibrahim wrote:
| In cash as opposed to getting the transaction financed.
| afavour wrote:
| They mean paying in full themselves, not backed by
| mortgage.
| Clubber wrote:
| Even if you get the mortgage, it's the same as cash to
| the seller. The bank just cut's them a check right away.
| The mortgage is between the bank and the buyer.
| smabie wrote:
| I just bought a house in cash, the seller wasn't willing
| to accept any non-cash offers. With a cash offer the
| seller and buyer can close in a significantly shorter
| amount of time than with a mortgage.
| ejb999 wrote:
| >>Even if you get the mortgage, it's the same as cash to
| the seller.
|
| Not really, pay in 'cash' and you can close in days, pay
| with a mortgage and it might take weeks to months.
| Sellers always prefer cash buyers if they are in a hurry
| to sell.
| epc wrote:
| In cash meaning you don't make the offer contingent on
| financing, and you can document the sources of payment
| (balance sheet, statement from bank or accountant, etc).
| chucksmash wrote:
| > Who buys a house in cash? You mean literal suitcases of
| dollar bills?
|
| Not literal suitcases of dollar bills, no. Buying with cash
| here means without taking out a mortgage.
|
| To answer the first question about who buys a house in
| cash, 28% of buyers do so[1]:
|
| > All-cash sales accounted for 28% of transactions in
| March, up from both the 25% recorded in February [2022] and
| from 23% in March 2021.
|
| [1]: https://www.nar.realtor/newsroom/existing-home-sales-
| slip-2-...
| kolbe wrote:
| What profit does your company generate? I wouldn't call
| anything 'cushy' or stable until there's a reliable way to
| cover all expenses and investor expectations--especially given
| how badly company have exploited Goodhart's Law with respect to
| revenue.
| MisterBastahrd wrote:
| Same thing happened to me. There's a company in Dallas that had
| a website that basically presented users who were searching for
| a product type with a list of products along with their
| ratings. Apparently they were supposed to make money off of
| affiliate links. The website was buggy and slow, and also...
| Google does that already.
|
| So they pivoted, and now they've aimed their engine at CBD
| reviews or something. I still don't see the point.
| me_me_mu_mu wrote:
| I wish people would just build solutions to actual problems
| they have that other people also confirm to have.
|
| Not everyone is a visionary like Steve Jobs or whatever, and
| that's okay. Just build something that solves your problem
| and helps others who also deal with it.
| acuozzo wrote:
| The issue is that many people have my problem (click
| below), but no scruples.
|
| https://news.ycombinator.com/item?id=31217221
|
| The desire is there, but the idea(s) aren't and it's not
| for lack of trying. I've been reading that "ideas are
| cheap" for over a decade now, but I can honestly say that I
| haven't once come up with an idea that would make any
| money.
| NateEag wrote:
| > I've been reading that "ideas are cheap" for over a
| decade now, but I can honestly say that I haven't once
| come up with an idea that would make any money.
|
| Ideas are cheap.
|
| Good ideas are darned hard to find and even harder to
| recognize.
| zeruch wrote:
| "But I'm just an average developer what do I know. "
|
| Usually more than the 'above average' founder or VC.
| Animats wrote:
| _but things just got awkward as soon as I asked about their
| revenue_
|
| I've had that conversation. Anyone remember Cuil, the search
| startup? No revenue. No revenue model. Then no business.
| aoms wrote:
| I often wonder how many of these startups even exist. How they
| ever get any funds to keep a run rate.. very puzzling but
| interesting non the less
| MAGZine wrote:
| the fact that you stopped to ask those questions makes me think
| that you're at minimum, an above average developer.
|
| caring about the business and its fundamentals is important
| beyond just slinging code.
| samtheprogram wrote:
| If you're going to be paid in equity and not asking those
| questions, unless it's a publicly traded company (where you
| have these answers ahead of time) or you are getting
| compensated well above average in cash equivalents, it would
| be just plain irresponsible to not ask those questions.
|
| Even if you are getting paid an extremely good salary, who
| wants to start working for a company that's potentially
| months or a year from becoming insolvent? The fact that this
| might not be standard due diligence as suggested by your
| comment is mind boggling to me.
| scarface74 wrote:
| It's statistically irresponsible to think your equity is
| going to be worth anything in a private company and give up
| cash compensation.
| worik wrote:
| I never ever again am going to count equity promises as
| part of my remuneration. My pay is all I count on, once I
| have banked it.
|
| Otherwise I become shark bait. Been there, done that.
| matwood wrote:
| > an above average developer
|
| I'm average and have always asked these questions :) When I
| got my CS undergrad I almost had a minor in business, so that
| side has been an interest from the start.
|
| How the company is doing, what is their core business, and
| how will my position fit in that business have always been
| key questions for me when interviewing a company.
| diob wrote:
| It also comes from feeling financially secure enough to be
| comfortable asking those questions. Early in my career I
| wouldn't have, but at this point I have enough money that I
| can afford to be more discerning.
| traskjd wrote:
| Ultimate test of a good place though if you ask when young.
|
| I asked for my first grad role. I asked a lot of probing
| questions. 3 years in I was running teams and setting up
| operations for the business in another country for them. I
| even told them I'd be leaving to start my own business
| after this job (and did). This resonated because I was
| speaking to their founder at the time and knew we'd be cut
| from the same clothe.
|
| Holding yourself back at a young age can just stunt your
| career development. Asking such questions will appeal to
| the right employer.
|
| Unsurprisingly this one went from 35 to 150 staff,
| profitably in the 3 years I worked there. I was 22 when
| setting up other parts of their business. I'd started at
| 19.
|
| I wouldn't advise folks to avoid such questions just
| because they're young or "need the job". Stand out! You're
| even more likely to get the job.
|
| As noted by others here: if they react poorly to this in
| the interview, you already won by dodging a bullet.
| cercatrova wrote:
| Interestingly, I've heard many instances where interviewees
| asked startups about their revenues and the startups just
| wouldn't tell them, saying that it's growing, or some other
| vague nonsense. Even in the case of inquiring about the
| amount of equity one gets, many startups would not tell them
| the actual percentage of the company they'd get, instead
| opting to tell them the number of shares, without actually
| telling them the total number of shares. Well, 1000 shares
| out of 10k is very different than 1000 out of 10MM.
|
| This is a huge red flag in my eyes, of not being open enough
| to see the books. It signals that something is quite wrong at
| the company, and even if it weren't, that they are not truly
| honest with their employees.
| matwood wrote:
| One time I had a CFO yell at me for asking questions like
| you mention. I obviously passed on the job. The hiring
| manager called me soon after and said he respected my
| professionalism and understood my decline of their offer.
| They were out of business < 6 months later.
| MAGZine wrote:
| It depends on the stage of the startup, but the books
| should probably be open to people who have made it to the
| offer stage until at least series b.
|
| if they're not, I'd be worried about the financials, the
| culture, or both.
|
| Refusing to disclose the number of outstanding shares is a
| huge red flag.
| blagie wrote:
| It's a huge red flag, and it's a hugely common red flag.
|
| A startup was peeved I valued their equity at zero when
| they wouldn't share. I got strong hints my equity was
| worth at least $100k in extra annual salary, but they
| wouldn't budge on disclosing anything I could hold them
| accountable to. I think they were being honest, but I
| didn't take the job.
|
| I did take a previous job like that, and when the company
| sold, we were all surprised management was honest.
| Management gave a used-car-salesman vibe, which was just
| wrong. I think with transparency, people would have
| worked much harder.
|
| I don't have insights as to the reason for the extreme
| opacity.
| ditonal wrote:
| The reason for the opacity is obvious, they want you to
| think the equity is worth more than it is.
|
| People constantly assume good faith in these things when
| they shouldn't.
|
| Obviously number of outstanding shares is a bare minimum,
| but things like cash reserves and cash flow should also
| be shared but they don't want to share that information,
| often times because it's not good, they just wasn't
| people who believe in the "mission" or that it's a
| rocketship or whatever.
|
| The secondary reason is that there are still too many
| naive engineers who assume good faith, drink the startup
| koolaid, and take these offers . Sometimes even declining
| public RSU grants to do so. One company out of ten
| thousand have ISOs that are worth anything but those are
| the only company in the headlines so the mystique
| continues.
|
| The only solution is education. ISO (Incentive Stock
| Options) are one of the biggest scams of all time and
| you're financially illiterate if you value them more than
| zero. They are carefully designed by venture capitalists
| to screw employees. NFTs of monkey pictures are
| infinitely stronger financial assets than startup ISO - I
| mean, as least the monkey jpegs have liquidity and
| volume, and no liquidation preference coded in to screw
| you over.
| otterley wrote:
| > ISO (Incentive Stock Options) are one of the biggest
| scams of all time and you're financially illiterate if
| you value them more than zero. They are carefully
| designed by venture capitalists to screw employees
|
| Given the number of millionaires and billionaires who can
| credit ISOs for their current wealth, I think that's too
| broad a statement. At the end of the day, a well-run
| company that can eventually go public because they have a
| strong business can be worth joining and the ISOs can be
| worth something someday. Admittedly, many will not, but
| if you pick the right one, you could do well.
| krasicki wrote:
| You mean, "there's a chance".
| scarface74 wrote:
| Survivorship Bias at its finest. You don't hear about the
| other 90%+ who got absolutely nothing.
| otterley wrote:
| > Admittedly, many will not
| blagie wrote:
| That's the thing, though. It's not always a scam. You
| never know whether you're being scammed. I /didn't/ get
| scammed, but everyone working at my first company out of
| school thought we /would/ get scammed. We've all seen a
| lot of people get scammed.
| MAGZine wrote:
| ISOs worked out well for me. It wasn't a huge windfall,
| but the preferential tax treatment is actually quite
| nice.
|
| Really the best strategy is ISOs that convert to NSOs
| with 10y exercise windows when you leave. best of both
| worlds.
| danielvaughn wrote:
| I agree. I've had a couple of stints as a manager, now as a
| CTO for a small startup, and it's giving me so much insight
| into thinking about engineering from a business perspective.
| As an IC it's hard to get that birds eye view, but it's
| possible.
| samstave wrote:
| > _As an IC it 's hard to get that birds eye view, but it's
| possible. _
|
| Unless you actually have a consultancy which is based on
| seeing the ways in which you may plug a hole in the dyke...
|
| And IC should ADD value to the org, not just slurp off of a
| need the company needs to fill.
| BurningFrog wrote:
| Can you mention one or two such insights about thinking
| about engineering from a business perspective?
| danielvaughn wrote:
| 1. A developers job is not to write code. You _happen_ to
| write code as part of your job, but your core
| responsibility is to implement solutions to business
| problems. Sounds simple, but it 's harder to realize in
| practice. Case in point was a recent freelance job I took
| on. This client had paid some devs for _months_ of work
| on a Stripe integration. They had built all this custom
| code on the front-end and back-end. I came in, read the
| docs since I was new to Stripe, and quickly learned that
| a custom solution puts the company on the hook for 300+
| security requirements for PCI compliance. I scrapped all
| the code and directed users to Stripe 's own checkout
| page. Not as nice of a UX, but that company's customers
| are now much more secure, there is less code to maintain,
| and the client is happy.
|
| 2. Your managers aren't perfect people, but their
| livelihood is in your hands. It's incredibly stressful to
| be a manager, so try to have compassion and empathy for
| the position they're in. They have to explain to the
| executive team the progress you're making, and if no
| progress is being made, they take the blame.
|
| 3. If you can't connect the dots between what you're
| doing on a daily basis, and the overall trajectory of the
| company, then something's wrong. There's a broken
| connection somewhere, and no one other than you is going
| to realize it. Speak up if you don't think what you're
| doing is useful.
| worik wrote:
| > . A developers job is not to write code. You happen to
| write code as part of your job, but your core
| responsibility is to implement solutions to business
| problems.
|
| My job is to write code. Nobody is interested in my
| opinions about business problems.
|
| I have to be aware, of course. I propose code to write
| some times, and I have to have some idea that it is a
| vaguely practical thing in business terms. I want to
| write code in groovy system A but mundane system B has a
| better chance of success then my desire for system A goes
| by the wayside.
|
| But it is my job to write code. That is all.
| danielvaughn wrote:
| Code is an expression of a business solution. The meat of
| any application is in the business rules it enables and
| enforces. In a _very_ well oiled machine it might be
| possible to just receive some behavioral requirements and
| get to it, but in my experience that isn 't the norm. To
| be an effective engineer, you need to have a solid
| understanding of how the code you're writing solves the
| needs of the company.
| s1artibartfast wrote:
| I really like #3. If you don't know why you are doing
| something, it is very unlikely that somebody else knows
| better.
| ben30 wrote:
| I've got this bookmarked:
| https://github.com/kuchin/awesome-cto
| scarface74 wrote:
| Why? I work to exchange labor for money. They hired me
| because I generate more value than they are paying me. The
| company doesn't "care" about me. It's purely transactional.
|
| If I got hit by a bus tomorrow, they would send flowers and
| "thoughts and prayers" to my wife and have an open req before
| my body got cold.
| gabrieledarrigo wrote:
| Say amen to this, guys!
| [deleted]
| turtlebits wrote:
| I was in the same boat as you. I was about to accept an offer,
| then I had a chat with their CTO and I asked some hard
| questions about their strategy (compelling product - but their
| vision was becoming a "platform" as a lot of startups do).
| Think I threw them for a loop and didn't get a great answer.
| Ultimately changed my mind on joining.
| scarface74 wrote:
| There are a lot of companies with "100 million in revenue" and
| no profit...
|
| Mentioning revenue and not profit is not informative.
| scruple wrote:
| Yes. It's astounding (to me, anyway) how many companies
| aren't even close to profitability.
| chinchilla2020 wrote:
| Management people have built careers and fortunes in tech
| running sinking companies.
|
| Even within FAANG, many people build careers while working on
| sinking products (Most products in Google are revenue
| negative...)
| photochemsyn wrote:
| According to the article, FAANG is an obsolete acronym, it's
| now MAMAA...
| [deleted]
| prepend wrote:
| It's funny as that was my experience interviewing with
| companies between 1998-2000. Just insane business models but
| brazen confidence in themselves.
|
| I remember interviewing with a company in 2000 that had burned
| through like $40 in two years. This was New York and they hired
| IBM. I don't remember their product but it was stupid. They had
| paid IBM to build their own custom app server for Java because
| their requirements were too specific for WebSphere that IBM
| made. They built their own internal Java app server from
| scratch.
|
| So that was stupid.
|
| Also the interview was on a Tuesday or something and they said
| that they were out of money on Friday but were confident they
| would get more money on Monday.
|
| They wanted me to start immediately and when I turned them down
| because of the funding, they asked if I would start on Monday.
|
| It was such a surreal experience that a whole organization
| could be so crazy.
| maxlamb wrote:
| $40? Did you mean $40 million?
| SauciestGNU wrote:
| No, it's just IBM for once billing accurately to reflect
| the value they delivered.
| prepend wrote:
| Yes, thanks. I swear autocorrect is going multiple words
| back to change things.
|
| They burned $40M.
|
| $40 on their own app server in IBM fees would be pretty
| cool and interesting in a different way.
| kenrik wrote:
| > Also the interview was on a Tuesday or something and they
| said that they were out of money on Friday but were confident
| they would get more money on Monday.
|
| > They wanted me to start immediately and when I turned them
| down because of the funding, they asked if I would start on
| Monday.
|
| Is is straight out of a comedy sketch, I feel like you could
| take that to an open mic night and kill with it.
| ilrwbwrkhv wrote:
| Yes I am sure a lot of companies are building things that
| aren't required. But there are so many things were indeed
| better solutions are required, and if they exist would be worth
| investing in.
| Johnny555 wrote:
| Is there any growing startup that's not bleeding money? Isn't
| what the seed and Series A and maybe B funding is about? After
| series A funding I'd expect some revenue stream, but not enough
| to pay expenses, after B series, they should have a plan to
| profitability and some proven customers that show that they can
| actually get that revenue, and after C I'd expect them to be
| executing to that plan.
|
| If bleeding money scares you, then a startup is probably not
| the right fit, a huge number of startups fail.
| enra wrote:
| There are. It happens when you hit high level of product
| market fit with a lean team and don't go on a massive hiring
| spree after but keep growing the team at a measured pace.
|
| I think Github, Notion, Retool, Slack, probably Figma, hit
| revenues quite quickly as they launched and became profitable
| or at least close to breakeven.
| Johnny555 wrote:
| You mention Slack, but they had losses of $140M/year prior
| to IPO:
|
| _Slack says it may not turn profitable; IPO filing reveals
| $139 million in losses, Microsoft primary competitor_
|
| _The Slack IPO filing shows annual revenue of $400.5
| million, up 60% from the prior year, with a net loss of
| $138.9 million, for the 12-month period that ended Jan. 31.
| Slack 's actual fiscal year-end date has yet to be
| determined._
| kenrik wrote:
| Slack grew their workforce too quickly.
|
| Actually the Slack I remember from when it first came out
| is more or less the same product they have now. I'm not
| really sure what all of those people were doing for all
| of those years.
| worik wrote:
| Why slack? I never understood.
|
| I never liked IRC. But to not like it and pay for it? I
| do not understand.
|
| Am I a fossil?
| Johnny555 wrote:
| Most people don't get to choose, in my case, it's our
| corporate IM system, so I have to use it whether I want
| to or not.
|
| It's got a lot of enterprise features that companies
| like, like SSO integration, message retention policies,
| security certifications like HIPAA and FedRAMP, and more.
|
| There are also a lot of pre-made apps for integrating
| with corporate apps like Jira, Gmail, Salesforce, etc.
|
| It's fine, I haven't looked at a lot of other options,
| but it seems more usable than Google Hangouts (or
| messenger or whatever they call it now) or Microsoft
| Teams.
| jokethrowaway wrote:
| It's definitely turned into a slow behemoth. I remember
| it being snappy in the early days and everyone wanted to
| use it.
| la6472 wrote:
| Bubbles are absolutely necessary in an innovative marketplace.
| There has to be thousands of fail fast companies before a titan
| emerges.
| conductr wrote:
| Tangential. But I work in corporate finance. I'm generally
| privy to a large amount of information about the companies I
| work for. If there's something I don't know, I ask for it and
| people share because of my role. If I'm interviewing, we
| discuss a lot more than most people would about the health of
| the company that I would be joining. It's normal.
|
| That said. I'm obviously heavily biased but I have realized
| MOST non-finance employees know very little about the financial
| health of their employer or even how the business model
| operates, or even what is the current/future strategy of the
| company.
|
| When something MAJOR is announced, M&A/leadership changes/etc,
| the questions the room typically ask are: 1) will we still get
| 401k match 2) will we get fired 3) will the office relocate.
| People don't really care too much about the company, they care
| about how it's volatility impacts them. I don't think it's such
| a bad thing, but just pointing it out. In startup land,
| volatility is huge and the highs and lows can occur with rapid
| frequency. You have to be an assessor of risk when changing any
| jobs and this is part of it.
| PeterCorless wrote:
| I may be unusual but I've always found it prudent to ask my
| CEO about things like rate of corporate growth, funding and
| customer revenue generation, M&A, etc.
|
| Because if I am a vesting or fully-vested employee, then
| that's my own future at stake. The 401(k) can be dwarfed by
| many times by a successful stock worth millions, or, in a
| badly run or positioned company, the stock could be worthless
| underwater paper shares and I become dependent exclusively on
| the 401(k) for my sunset days.
|
| The financial literacy of many workers is low though. They
| don't understand what options are or what it means to really
| be a shareholder.
|
| When I was at Cisco -- I'm talking in the 1990s -- we used to
| describe what we called "stockholder angry." This was when a
| fully-vested employee heard a VP or above talking about some
| idea so stupid it would literally cost the company a penny
| per share or more. That's when the old dogs would get
| "stockholder angry" and propose alternatives, or ask people
| to stop ideas that were retrograde for the sake of the
| company's valuation. Because we knew what a penny per share
| meant to each of us.
|
| I believe it is valuable for employees at all levels to be
| able to know the state of their company's health, and then,
| with an informed mind, be able to voice their opinion on the
| fate of their organizations.
| conductr wrote:
| Definitely agree. In my role it effects my day to day work
| (sales cure all, etc). And it's definitely a little
| different when folks have stock. I mostly work in an
| industry where the average employee has no stock or
| options. They may be curious, but they don't really ask
| many questions unless there has been a sizable culture of
| that. Otherwise, it's like talking money is bad manners.
|
| Options and the various schemes can be confusing. What's
| worse to me is many people in middle manager type roles
| that run a department/unit, are responsible for a budget,
| they can not read a basic income statement. They don't know
| how or what levers move the needle or in which direction.
| Some are very good, but many are very, very bad given their
| level of responsibility I've seen. I've been in many
| meetings even in my days as a junior analyst explaining to
| seasoned executives how volume doesn't cure an issue with
| unit economics. Separating out variable costs and
| explaining that if you can't cover those, you'll never
| cover the fixed costs... Those types of things. It's job
| security for me, but still shockingly common.
| legitster wrote:
| This has been a long time coming.
|
| Back in the day, there was an inherent understanding that a stock
| price is supposed to reflect "the fundamentals" - present value
| of the company + future earnings. And of course there was some
| amount of speculation around future earnings, but for the most
| part companies at least _tried_ to be profitable.
|
| But if you look at the share price of like, Tesla - it's
| completely insane. There is no way your slice of the company is
| worth that much. The stock market has been behaving like a
| pyramid scheme, where everyone assumed there will be more money
| entering than leaving any given stock.
|
| Tech is a pretty egregious sector because of how many business
| models basically boil down to "we don't actually need to make
| money if we have a desirable stock". In the long run, I don't
| think we'll be worse off if the next generation of software
| companies actually focuses on making products people want to buy
| rather than play games with DAU and user acquisition and etc.
| martindbp wrote:
| Tesla made more money last quarter than Ford, GM and Toyota.
| Toyota made 10x the number of cars as Tesla. Tesla is growing
| vehicle production 50% YoY, while growing profit even faster
| (having barely hit economies of scale yet). Tesla has a backlog
| of orders approaching a year in many regions. Everyone else is
| losing money on their EVs and can't make them in volume
| production, can't find the batteries for them, because they
| started 10 years too late. That's the reason for Tesla's
| valuation, it's pretty simple.
|
| Whether you believe the competition will catch up, or Tesla
| will fail for some other reason is besides the point. I'm just
| trying to show that the current valuation is not "insane" given
| current trends, there's a very real logic to it and not
| (completely) FOMO.
|
| Correction: Toyota's earnings were higher than Tesla, it was
| operating income that was higher (remembered it wrong).
| bink wrote:
| All of those things can be true and Tesla's stock can also be
| over-valued. A rapidly growing and popular company doesn't
| justify any arbitrary valuation.
| freeflight wrote:
| Indeed, which also begs the question; How much of that
| growth is driven by the over-valuation?
|
| Particularly as Musk is no stranger to using creative
| accounting techniques, and sheer speculation, to make his
| companies suddenly look more profitable [0]
|
| There's also him leveraging his other companies to create
| growth among each other. Like Starlink being a major
| customer for SpaceX.
|
| Which could either be really smart, or the making of a
| really impressive house of cards.
|
| [0] https://www.cnbc.com/2021/04/26/teslas-bitcoin-
| speculation-h...
| BeetleB wrote:
| > Tesla made more money last quarter than Ford, GM and
| Toyota.
|
| Net income was higher for Toyota - almost double that of
| Tesla.
| martindbp wrote:
| Yes, my bad, it was operating income that was higher for
| Tesla.
| legitster wrote:
| I'm not sure where you are getting those numbers from. Ford
| had $37b in revenue Q4. Tesla had $16b.
|
| Tesla is an impressive company that's managed to finally be
| profitable. But currently their market cap is higher than
| _all other auto manufacturers_ combined.
|
| > Everyone else is losing money on their EVs and can't make
| them in volume production, can't find the batteries for them,
| you do the math.
|
| That's the thing, this space is getting incredibly crowded
| this year. Kia/Hyundai, Ford, and VW are all putting out very
| impressive mass-market EVs that are selling like hotcakes.
| dsugarman wrote:
| Don't confuse market cap and enterprise value, the amount
| of debt on non tesla manufacturers' books is staggering and
| strangling the business in other ways
| sgc wrote:
| Agreed.
|
| I for one am very happy with the wider EV push, because I
| will never need to buy a Tesla. I am sure many other people
| have similar sentiments. Obviously they are valued for
| their batteries and solar as well, but their business model
| and product offerings there are far from a fit for
| everybody either. It all does not add up to current value,
| although it is hard to see where the mad dash to buy "the
| future^TM" runs out of cash to throw at it.
| Ekaros wrote:
| Solar is race to bottom, very low margin competition with
| Chinese manufactures. Batteries will follow as well. And
| if that was really going great why did SolarCity get
| bailed out by Tesla money? I would have expected it to be
| a massive company as well.
|
| Also, I never really understood robotaxis as something
| magical high margin business. It is also race to bottom
| operating with very thing margins. And probably only
| after huge waste of VC capital.
| Closi wrote:
| > I'm not sure where you are getting those numbers from.
| Ford had $37b in revenue Q4. Tesla had $16b.
|
| Tesla makes a 27.4% gross margin on that revenue though,
| while Ford has a gross margin of 4.8%.
|
| > Tesla is an impressive company that's managed to finally
| be profitable.
|
| Although technically true, this is a little misleading as
| it implies that Tesla is barely profitable - in reality
| they have moved from 'finally becoming profitable' to now
| being the _most profitable_ automaker (in terms of total
| profit).
| paulpauper wrote:
| tesla does not need to advertise, does not need
| dealerships
|
| this also why Elon wants to buy twitter, besides the
| issue of free speech. it means PR for his companies.
| thow-58d4e8b wrote:
| Tesla pulls all sorts of accounting tricks to make gross
| margin appear higher than it actually is. Warranty
| repairs are apparently done by pixies for free, so is
| R&D, factory amortization, or service centers
|
| A like-to-like comparison would have Tesla's gross margin
| at ~18%, which is decent, bu not all that unusual for a
| premium car brand. Ford and GM tend to have much lower
| gross margins than VW or Toyota. The latter two are
| usually in the mid-to-high-teens, while competing in a
| cutthroat mass-market
| s1artibartfast wrote:
| They still need to 10x their profit to make their current
| PE of 130 to make sense.
| Closi wrote:
| I'm not saying they are worth their valuation, I'm just
| saying you can't exactly claim/imply that they aren't
| very profitable compared to others in the market they are
| operating in.
|
| Also remember that they almost tripled profit in the last
| year, so that PE ratio will be 1/3 if they manage to do
| that again. Again, I'm not claiming that it is possible,
| or that that would be a sensible P/E ratio, or that they
| aren't overvalued, but P/E can change quickly.
| wbsss4412 wrote:
| I would be shocked if they were able to maintain those
| margins.
|
| They've faced relatively little competition in the EV
| space until this point and benefited from a shortage
| juicing prices. As demand eases and more entrants come
| into the EV space, they will have to lose margin, market
| share, or both.
| labcomputer wrote:
| > I would be shocked if they were able to maintain those
| margins.
|
| I wouldn't be. They have fundamental and very broad
| patents on important things like:
|
| * Pre-heating the battery on the way to a charging stop
| (enables the battery to accept faster charging without
| damage on road trips)
|
| * Using motor waste heat for battery heating (increases
| range while use the above strategy)
|
| * Dynamically adjusting charge rates due to real-time
| battery conditions (enables charging faster)
|
| Those patents don't expire until the mid/late 2030's.
| That allows Tesla to force competitors to either pay a
| licensing fee or use more-expensive workarounds, like
| different battery chemistries, to match the battery range
| and charging rate. Either way, it means Tesla is likely
| to have larger margins than competitors.
| wbsss4412 wrote:
| I'm not intimately familiar with teslas patent strategy,
| but to my knowledge they aren't enforcing any of those
| patents at all. Every single one of those features are
| present on competitor vehicles already.
| mupuff1234 wrote:
| https://www.tesla.com/blog/all-our-patent-are-belong-you
| oneoff786 wrote:
| I feel like that's not unreasonable over a decently long
| period of time?
| c3534l wrote:
| profit != revenue
| martindbp wrote:
| Earnings, not revenue
| mattwest wrote:
| What is your definition of earnings? Because Toyota's net
| income far exceeds Tesla's
| Closi wrote:
| Earnings are profit (i.e. revenue less costs).
|
| https://www.investopedia.com/terms/e/earnings.asp
| dragontamer wrote:
| Net income is profits, also known as earnings.
|
| Gross income is just an intermediate-step in the way
| towards the bottom line (net and/or profits).
|
| Its strange that the earlier poster wants to talk about
| gross instead of net on this point. You can almost always
| tell that someone is being a bit shady with their
| arguments when they say "income" or "profits" and then
| backtrack it to say "Oh, I meant gross income".
|
| When you say "income" or "profits", everyone rightfully
| assumes you mean "net income", the bottom line. The most
| important number.
| hef19898 wrote:
| Back tracking or showing a total lack of understanding of
| the difference.
| mattwest wrote:
| Yes, correct. Aka net income. I was asking because the
| original commenter was claiming Tesla earnings were
| higher than Toyota which is far from true.
| martindbp wrote:
| My bad, not earnings, it was operating income: https://tw
| itter.com/SawyerMerritt/status/1524254013025357824
| mattwest wrote:
| No worries, but I'm not sure what notion you're trying to
| craft with that stat. Toyota had far more revenue and
| profit. Operating income was lower... so what? Tells me
| Toyota has been spending money to carve a huge chunk out
| of the EV sector. Maybe they are late. Maybe Tesla will
| show that it's current valuation holds. I doubt it.
| Closi wrote:
| > Toyota's net income far exceeds Tesla's
|
| Far exceeds? It is only 5% higher so that's a bit of a
| stretch ($22.4bn vs $21.4bn).
|
| Plus Toyota had shrunk it's net income from 20/21 to
| 21/22, while it was a 116.86% increase for Tesla, so it
| would need an optimistic person to think that Tesla
| hasn't already overtaken in the last few months since
| 21/22 year end.
| [deleted]
| bradfa wrote:
| Looking at a single quarter is not a great way to compare
| large companies. Even looking at just a single year is not a
| great way, but for comparison, in 2021 Tesla had revenue of
| $54 billion and net income of $5.5 billion. In 2021 Ford had
| revenue of $136 billion and net income of $17.9 billion.
| Toyota had similar net income as Ford in 2021.
|
| Yes, in the most recently reported quarter Ford lost money.
| And in previous years Ford has also lost money. But so has
| Tesla.
|
| Looking at Tesla as a traditional automaker is not fair to
| Tesla. They don't want to be a traditional automaker, I get
| the impression they want to be more like General Electric was
| back 50-100 years ago, making all kinds of things and being
| rather innovative.
| [deleted]
| martindbp wrote:
| For Tesla it makes way more sense to use the annualized Q4
| numbers vs Ford total 2021 because Tesla grows like crazy,
| that's the whole point. It doesn't matter that Tesla lost
| money in the past if they're printing it like there's no
| tomorrow now, with nothing stopping them (except lock
| downs). Traditional autos ICE sales have been decreasing
| and will continue to do so, and they're trying to replace
| it with EV sales they lose money on, and can't make fast
| enough to replace their lost ICE sales.
|
| Either way, I get it that you can look at the same data and
| come to another conclusion, but clearly, for a lot of
| investors they look at the growth, the barrier to entry,
| the overall trends and that's why Tesla is valued as it is.
| piva00 wrote:
| > with nothing stopping them (except lock downs)
|
| And maybe competition? The market is booming but other
| automakers are starting to have competitive lines.
|
| I want to see what Tesla could have in their sleeve to
| ever become as desirable as they were the past years...
| I'm not sure if all this hope in eternal growth of Tesla
| will hold.
| ajsnigrutin wrote:
| Tesla has nothing on the market for smaller, cheaper
| european markets, and smaller, cheaper cars like Renault
| Zoe are getting more and more common sight on the
| streets. There is no premium pricing on those, but the
| numbers of cars sold is quite huge.
| melenaboija wrote:
| I don't know about Tesla production forecast and how its
| stock value can be interpreted but there is something
| interesting that Marques Brownlee said few days ago about pre
| ordering cars [1]. Basically, if people that put down the
| $250k for a Tesla Roadster founder edition to finance the
| company and for a product they still don't have into Tesla
| stock the would now have $4.5MM.
|
| Not complaining about Tesla stock price as it has the price
| that people is willing to pay but to me this is definitely a
| redefinition on what people care when deciding where to
| invest.
|
| [1] https://www.youtube.com/shorts/vCA79HTry0A?&ab_channel=Ro
| ast...
| randcraw wrote:
| Tesla's net income in 2021 was $5.5B, GM $8.8B, Ford $11.5B,
| Toyota $28B.
|
| Tesla's PE ratio is 99.6, GM 5.6, Ford 10.4, Toyota 8.25.
|
| Tesla's market cap is $1,061B, GM $85B, Ford's $83B, Toyota
| $254B.
|
| The state of Tesla's stock is simply unreal, _not_ based on
| fundamentals but on inertia and hype.
| gitfan86 wrote:
| Take this logic and compare AAPL and RIMM in 2009. This is
| why people are buying TSLA.
|
| If you think that GM is going to successfully pivot to EVs
| and that Tesla will not continue to grow 50% a year, that
| is a fine opinion to have, but if you look at CNBC clips
| from 2009 you will see very similar comparisons being made
| around AAPL and RIMM, to what you are saying today.
| kenchan wrote:
| "Experts" have been telling us to sell $TSLA for over a
| decade..
| martindbp wrote:
| That's just an extremely simplistic analysis, as if there
| is absolutely no change in the future. Tesla's forward P/E
| is currently 51. In a years time it might be 30-35. A year
| after that, well you can see where this is going. There are
| definitely a few years worth of growth baked in. But when
| you compare the valuation to the likes of GM, also consider
| the possibility that they will simply not survive the
| transition to EVs. They already went bankrupt once, and
| sales have declined every year since 2016, please have a
| look at this graph:
| https://www.statista.com/statistics/225326/amount-of-cars-
| so... For a great number of reasons, many traditional OEMs
| will find the next decade very difficult, and that's
| reflected in their current P/E.
| justapassenger wrote:
| Tesla's source of profit is mainly from 2 things: - they're
| selling cars that have quality of $25k cars for $60k -
| they're basically a first manufacturer that sells Chinese
| made cars to western world at scale (all their other
| operations are either not ramped up or unprofitable)
|
| Power of their brand is insane. But they seem to be mainly
| raiding it and diminishing it. Music will likely stop one
| day.
| TheDarkestSoul wrote:
| Even if that all were true (it's not), Tesla could be the
| most important and revolutionary car company since Model-T
| era Ford and _still_ be insanely overvalued. Before their
| recent stock slide they were worth as much as every other
| major manufacturer _combined_. Their P/E ratio hovers around
| 300. Mercedes-Benz hovers around 5.
| martindbp wrote:
| Teslas forward P/E, which is way more indicative of the
| future of the company, is 51: https://finbox.com/NASDAQGS:T
| SLA/explorer/pe_fwd#:~:text=Tes....
|
| I admit Q2 will be lower than Q1, but Q4 this year will
| likely see an even lower forward P/E if price remains the
| same.
|
| Sure, they could be overvalued, I'm just trying to explain
| why it's valued as it is for those that think it's
| "insane".
|
| Mercedes hovers around 5 because many investors believe
| they could go bankrupt if they can't successfully
| transition to EVs. GM, for example, will very likely go
| bankrupt (again). Many others as well.
| mattwest wrote:
| Can you link a source for the Toyota vs Tesla claim? From
| what I saw on the reports it looks like Toyota had way more
| revenue and net income. Maybe I'm interpreting it incorrectly
| adam_arthur wrote:
| It's not about revenue, it's about valuation. The revenue can
| be whatever you want, the valuation determines long run
| returns.
|
| Tesla could be priced at 20x PE or 100x PE and be the same
| company. Your returns will be vastly different between the
| two scenarios.
|
| OPs point, which is pretty obviously objectively true, is
| that valuations far exceeded future yields by any fundamental
| valuation metric. Tech has been valued as if every company
| will be a pseudo Monopoly like the FAANG companies, which is
| very unlikely to be true
| 01100011 wrote:
| Talk to a Tesla zealot and this is the story: Tesla masters
| self-driving and their robotaxis take over global
| transportation leading to complete and unending dominance.
|
| It's almost as if none of them has ever run a business or
| even studied history. It's best not to try to reason with
| them at this point. Just smile and walk away. Over time
| they'll figure it out.
| BobbyJo wrote:
| I mostly agree, I just feel the need that valuation metrics
| rely on past values, which aren't as useful depending on
| the company you're talking about. If a company has net
| income X, but a new high margin product launching next
| month that could easily double or triple that, their P/E
| will look ridiculous but , in fact, be quite reasonable.
| [deleted]
| JoshCole wrote:
| > __completely__ insane.
|
| It isn't completely insane.
|
| First off, it isn't irrational to allocate an excessive amount
| of capital to sustainability. The meme that this level of
| provision is short-sighted is myopic to the extreme, because
| obviously over the long term it is failure to be sustainable,
| not being sustainable, which is myopic. Perhaps it is
| overvalued, but calling it completely insane goes a bit too
| far.
|
| Second, you are obviously right that the present value of their
| assets doesn't justify their current price, but it is hubris to
| try and claim that their is no future in which their revenues
| can justify their increased valuation. Think ahead to the
| future while skipping the steps to get there and we are
| obviously incredibly likely to exist in a world in which AI and
| automated labor is commonplace, in which energy is provided
| through renewable means, and in which transport from point to
| point is handled by electric vehicles. It is not __completely
| insane__ to think Tesla might play a large role in this future.
| It is quite reasonable to expect they would. Their present
| course has them explicitly targeting playing a very large role
| in that sort of future. They have been making progress and
| inroads in playing that role. They are on track to play that
| role and can play it if they execute successfully. Whether they
| do, that is another question, but whether the potential exists?
| It certainly seems to exist.
|
| A lot of times people point at automakers when they try to
| justify calling Tesla overvalued. The idea that Tesla wouldn't
| be larger than that industry is silly. That industry spent
| billions on building out manufacturing capabilities. They took
| on debt in order to create products which the market doesn't
| believe will be viable in the future. The projected value of
| those companies has to account for that and obviously they
| aren't going to be valued as highly as they might be if they
| weren't burdened with those liabilities. Perhaps you don't know
| this, but a few years back legacy automakers were struggling
| with dealers who would intentionally sabotage the ability to
| sell electric vehicles by giving test drives in vehicles which
| were intentionally left without charge. Perhaps you don't know
| this, but dealers have laws in place to protect them from car
| companies which force legacy car companies to use them despite
| the way the perverse incentives could spell the death of the
| ICE auto industry. There are real structural reasons to value
| these companies as being less able than Tesla to flourish.
| Thinking this is the case isn't completely insane.
| dgb23 wrote:
| I don't understand finance. But with tech I can often see from
| a mile if something might happen, I don't have ideas, but I
| understand ,,this solves a problem" or ,,this is high quality"
| versus ,,this is made up" or ,,someone else will do this
| better".
|
| In my opinion the issue with the stock market is that it is
| often finance driven and too drawn away from the actual work
| that is being done and the actual needs and problems potential
| buyers have. And this problem is specifically worse in tech.
| me_me_mu_mu wrote:
| It's mostly based on feelings and perception imo.
| izzydata wrote:
| Over a long enough time frame the stock market and even the
| whole economy behaves like a pyramid scheme as it is dependent
| on new generations to be more people than the previous one.
| david927 wrote:
| I think you're right but I don't think it has to be that way.
|
| Like others, up until a few years ago, I was a Keynesian. But
| then I realized that if you allow inflation you're not just
| "rewarding investment", but you're taking non-participation
| off the table -- and that's a big problem. Because then
| people participate in markets not based on value but because
| they have no choice. That means that you go from value
| investing to "growth investing" -- which is another name for
| pyramid scheme and people _unironically_ saying that "the
| market always goes up."
| smabie wrote:
| Growth investing doesn't mean the market always goes up? It
| means that you buy stuff that you think will significantly
| grow in revenue in the future.
| rapfaria wrote:
| What about life becoming more efficient?
| shimmy568 wrote:
| There is a limit, growth can't continue forever (especially
| the exponential growth we've been seeing). We've got to
| level off at some point
| maigret wrote:
| Why not? Do you think the society will soon stop
| inventing new things? They are clear indicators that
| evolved societies are disconnecting their growth from the
| energy usage, and especially carbon emissions. With that
| new heights are possible.
|
| But besides this, yes, slow growth back like for most of
| humanity is also an option and probably not a bad one in
| the longer term. It's a very bad option until we are
| depending on fossil fuels, because we need the money for
| the transition.
| scollet wrote:
| There is still an element of optimization which involves
| compressing the problem space. This might be why we see
| thin vertical segments, but they are way over-valued for
| the optimization they provide.
|
| I think VCs' expectations misalign with reality. They are
| the ones incentivising infinite growth.
| maigret wrote:
| This is not true. The stock market is usually valued after
| the dividends it can pay over a certain number of years,
| somewhat between 10 and 20. It's not infinite. If no further
| grow comes that's it and the stock keeps it value and will
| keep paying dividends for the foreseeable time, and has for
| already 100 years. Sure investors ask for growth in their
| communication, but the actual thing they are asking for is a
| better performance than the rest of the market. You could say
| this bottoms out at 0 but recent event have shown that low
| negative interests are possible, because stashing cash has a
| physical cost.
|
| Many economies can still work well without population growth,
| other fail despite population growth. If that was the case
| that population dictates GDP, then investment choices would
| be very easy.
| legitster wrote:
| This isn't really true for the same reason that GDP per
| capita isn't a constant number.
| Seattle3503 wrote:
| Only if there is no productivity growth.
| akira2501 wrote:
| That really only seems to be true when you allow unchecked
| mergers and acquisitions, because once you've eliminated
| competition continuing to grow the market through innovation
| is almost impossible.
|
| I'm not convinced this is some natural "tech" bubble. This
| feels like an M&A bubble to me.
| [deleted]
| stjohnswarts wrote:
| That isn't true. Otherwise when the wheels come off
| (recession/depression) then the market would never recover as
| it's "just a Ponzi scheme". there is real value in the market
| and until some communist or anarchist can provide a
| reasonable solution that doesn't depend on the general human
| being altruistic 100% of the time I'll just keep going with
| the market and count on avarice. I'll trust in the general
| sense of fairness that most humans seem to have even if they
| aren't altruistic.
| jp42 wrote:
| just want to add point that Tesla is not just the car company,
| they are into energy (battery, panels etc), AI, robotaxi etc
| areas as well, that could be one of the factor in higher
| valuation.
| lamontcg wrote:
| I find it funny that crypto supporters will cite the fact that
| the stock market is acting like a pyramid scheme these days to
| justify the fact that crypto is no different.
|
| Yeah, that's not the defense of crypto that you think it is...
| paulpauper wrote:
| yeah, crypto has much more volatility and worse returns
| compared to large cap stocks.
| Muanh wrote:
| Tell me you know nothing about investing without telling me you
| know nothing about investing. Tesla is very undervalued ATM.
| Just look at their P/E, growth rate and PEG. Trailing is
| already below 100 and they are growing profits close to 100%
| annually.
| chmod600 wrote:
| "the fundamentals... But if you look at the share price of
| like, Tesla - it's completely insane."
|
| What are the fundamentals of a dollar? Or a bitcoin? Or the
| Mona Lisa?
|
| Part of being an investor means accepting a certain social
| value to your investments.
|
| A lot of people want to be a part of the Tesla story. Maybe
| they buy a car, or maybe a share of stock.
|
| When that story stops being interesting, the PDV of cashflows
| will start to matter more.
|
| (By the way, PDV starts to be harder to pin down when people
| can't agree on what inflation even means, let alone what it
| will be in the future.)
| eftychis wrote:
| They never showed the fundamentals. There are famous money
| losses throughout the 20th century. [You can google the charts,
| or check Graham's book or the biography of Buffett, where he
| went around avoiding such traps or buying failing companies on
| the cheap and turning them around by cash infusion.] And of
| course the infamous example of the Tulip Bulb in 17th century.
|
| Companies need to take risk to innovate. A lot as you indicate,
| and I totally agree, take it too much and doom themselves by
| never figuring out how to be profitable.
|
| These days simply everything that innovates is "Tech." (Now
| it's turning similarly to sustainability.) How is Tesla "Tech?"
| It brands itself as that. By that thinking a lot of other
| automakers should -- and the autopilot doesn't cut it -- just
| people don't want to see Toyota stock as "Tech."
|
| The other thing with "Tech" is that if you don't keep pouring
| your revenue to take more risks until you dominate over others
| you will die. So fundamentally, all "Tech" stocks strive
| towards domination via innovation and growth. Amazon (book
| seller I know) spend the first part of this century with a
| pretty bad stock and getting tax credits by investing
| everything in itself and being cheap extremely aggressively. A
| lot of "Amazons" did not make it.
|
| P.S. If they gave me a 10 year put on Tesla on a sane price I
| would take it. Alas nobody is taking that bet on the cheap.
|
| P.S.2. The funny thing is it is a self full-filled prophesy.
| Tesla has the market capital to control debt to try a bunch of
| stuff until it makes it.
|
| P.S.3. Fundamentals can be used to increase dividends or do
| buybacks s.t. the stock price will stay/go up. That is the
| correlation.
|
| P.S.4/tl;dr: The stock market and any commodity market _are_
| pyramid schemes -- people get in to make money.
| shrimpx wrote:
| The standard explanation is that the market tends to price in
| future gains, and Tesla is seen as having far greater growth
| and market domination potential than the other brands with
| small P/E.
| qiskit wrote:
| > But if you look at the share price of like, Tesla - it's
| completely insane.
|
| So was the stock prices of amazon, google, etc. You don't
| expect companies that are opening new industries/businesses to
| trade like AT&T. You don't expect these companies to pay
| dividends.
|
| > Tech is a pretty egregious sector because of how many
| business models basically boil down to "we don't actually need
| to make money if we have a desirable stock".
|
| Tech companies are some of the most profitable companies in the
| world. Apple, google, amazon, facebook, etc print money. These
| companies make more cash profit that your companies with
| "fundamentals" make in revenue in a decade.
|
| > I don't think we'll be worse off if the next generation of
| software companies actually focuses on making products people
| want to buy rather than play games with DAU and user
| acquisition and etc.
|
| That happens in all industries. From finance to hospital
| equipment to real estate.
|
| If the bubble is popping, it isn't a tech bubble that's
| popping, it's an asset bubble that's popping.
| anm89 wrote:
| I wouldn't even call it an `understanding` more just a
| `reality`. Markets can stay irrational longer than you can stay
| solvent and the last 10 years have been an amazing case in
| point, but they can't stay irrational literally forever.
|
| There's a gravity to it. At some point whatever is inflating
| the values artificially is going to hit some kind of force
| against it and people are going to want the underlying cash
| flow. It would be the equivalent of a sort of financial
| perpetual motion machine if this never happened. I'd argue
| that's not an probability but something more like a law of
| physics and is actually literally constrained by the laws of
| physics (it requires continual population growth, consumption
| growth, and growth of energy use to keep some of these
| valuations rising)
| abzolv wrote:
| If average Jane, who is not a raving Tesla fan, wants to spend
| circa $140K on an EV, and she has to choose between the
| Mercedes EQS 580 and the Tesla Model X, which one would you say
| is the no-brainer (better value for money)?
|
| https://www.mbusa.com/en/vehicles/class/eqs/sedan
| https://www.tesla.com/modelx
|
| That is the future of Tesla. Increasing competition by better
| products offered by manufacturers with far more experience in
| manufacturing vehicles, and far superior dealership, service,
| and parts networks.
| JoshCole wrote:
| Current price on your link is ~$100k not $140k. It was much
| more confusing to use the first site, but click through I
| found something that was also about $100k when you chose the
| budget options. Meanwhile, for all numbers that both Tesla
| and Mercedes list publicly the Model X has better numbers.
| For example, in horsepower and 0-60 the Tesla does better.
| For some numbers, the Tesla lists the number - like range -
| but the Mercedes doesn't.
|
| Declaring my bias: I think this is because they are much
| worse in range. Now looking up the numbers: 340 mile range
| for Mercedes. 350 for the Tesla. I was wrong. Tesla was only
| better, not much better.
|
| Clicking through to order takes several clicks for Mercedes.
| Along the way of the happy path toward immediate purchase an
| interstitial pops up and warns me that the price will be
| changed if I try to order because they don't have the
| supplies to service the order. Tesla by contrast just lets me
| order the car with a delivery date in January of next year.
|
| To say your post is deeply misleading as to who is obviously
| the no-brainer in value for money is an understatement.
| JoshCole wrote:
| Opened the Mercedes site again to check some more. Tesla
| allows escalation to ordering in two clicks. After more
| like seven clicks Mercedes was ready to let me 'save my
| build' rather than letting me order. They also still
| continually warn me:
|
| > Due to a worldwide shortage, semiconductor chips that are
| typically present in our vehicles are limited in supply.
| This has changed the availability of certain features.
| Vehicle pricing will vary and depends on the availability
| of certain features. Please verify with your dealer whether
| any feature is available in a particular vehicle. To learn
| more, please see your dealer.
|
| Whereas Tesla just lets me put in the order with delivery
| in January.
| JoshCole wrote:
| Lets move away from the ordering experience. My
| experience with Tesla service is that I notice an issue,
| then with my phone, I put in a service request. They come
| to my house while I'm sleeping and fix the issue. Super
| easy. Painless. By contrast car dealership salesmen and
| auto mechanics have an infamous reputation.
|
| I find Tesla to be superior. Maybe others won't, but
| personally - I find them extremely superior. Driving to a
| dealership sounds pretty lame to me. Especially if I'm
| having car trouble. Tends to be the kind of thing that
| makes driving to the dealership a bit annoying, you know?
| duped wrote:
| Average Jane doesn't have $140k to spend on a vehicle
| JoshCole wrote:
| At both price points on the link the Tesla vehicle metrics
| are dominant over the Mercedes vehicle metrics. In fact, the
| $110k cost Tesla has better metrics than the $130k cost
| Mercedes: it is faster, accelerates faster, has higher
| horsepower, and has higher range. If the average Jane has
| $140k and wants the best value for money it is really hard to
| see why they would choose the objectively inferior car
| according to most metrics. They could save $30k and still
| have a better car.
|
| I really don't understand, at all, how you can conclude that
| it is a no brainier to get a Mercedes? It seems like a really
| ridiculous conclusion?
|
| Just clicking around on the site and trying to do the order
| shows you are wrong that Mercedes is far superior on non-car
| related things. The dealership model is famous for its
| failings. Car salesmen have a notorious reputation. The
| website for Tesla lets you put in a purchase order within
| three clicks, no interaction with a dealership. The Mercedes
| purchase workflow had more like seven clicks and it resulted
| in getting an interstitial telling me to talk to a dealer
| about how the car wasn't going to have all the features
| because of chip shortages, that the price would change as a
| consequence of that, and directed me to talk with a
| dealership.
|
| How is that better? How is not giving me the listed price but
| making me go through a high pressure sales channel superior
| to just letting me buy car the now? I don't understand at all
| how you can say that dealership model is far superior. Is it
| right in your eyes that someone poor at negotiating should
| have to pay more than someone who is better at it? I don't
| get it. I don't understand at all how you can think Mercedes
| is providing the better experience.
| bonaldi wrote:
| "Range" is likely the only one of those metrics Jane will
| care about. This sounds like one of those rants we used to
| hear about "why would anyone buy a Mac when PCs have higher
| specs??"
|
| Mercedes does cabin UX like Apple does software (and BMW is
| better still). Maybe Jane wants a button for her wing
| mirrors. And door handles that work. Actually comfortable
| suspension. An instrument cluster. A dealer to look after
| her from decision to delivery.
| andy_ppp wrote:
| Great time to build a startup then, as by the time you have
| product market fit you'll either be living in a bunker eating
| canned food or things will have come around.
|
| http://www.paulgraham.com/badeconomy.html
|
| I'm actually moving to Mallorca to bootstrap a startup for two
| months and quitting my job, only time will tell if I'm right!
| gopher_space wrote:
| Our tools are getting pretty decent, too. If rent was cheaper I
| think you'd see startups all over.
| andy_ppp wrote:
| Yes, I've moved from London to lower my burn rate, rent in
| Bristol is pretty cheap.
| [deleted]
| three_seagrass wrote:
| https://archive.ph/qziMw
| cardsofinhuman wrote:
| Bubble_Pop_22 wrote:
| Despite my handle I'd wager that it all comes down to a very risk
| averse society as shown by pretty much every metric ranging from
| low birth rate to drinking to smoking to drug usage etc.
|
| Back in the days when interest rates went down, people started
| new businesses or expanded those they already owned at a huge
| pace. I mean the population as a whole not the businesses in the
| S&P500.
|
| When the Fed rolled rates to zero and did QE post 2008 and super
| QE in 2020-2021 the population just invested in the stock and
| housing market. No initiative just buying "proven assets" .
|
| Investing in the stock market with a financial advisor
| essentially buying the S&P or some other mutual fund..that's way
| less risky than starting your own business.
|
| Now the Fed is raising rates and people (and financial advisors)
| aren't even sure about stocks anymore, they are selling in droves
| and go straight to US bonds which are even more risk averse (it's
| essentially the stuff that Insurance companies are required to
| hold by law to secure their premiums because the risk of default
| of US Federal govt is essentially zero)
|
| Of course there is crypto that is a casino, still it could be
| argued that investing in an asset with a marketcap of 1T dollar
| however new and unproven is still more risk averse than starting
| your own business.
| Apocryphon wrote:
| > Back in the days when interest rates went down, people
| started new businesses or expanded those they already owned at
| a huge pace. I mean the population as a whole not the
| businesses in the S&P500.
|
| Did you miss the startup boom + bubble of the past decade or
| something
|
| > Investing in the stock market with a financial advisor
| essentially buying the S&P or some other mutual fund..that's
| way less risky than starting your own business.
|
| Increases in the cost of healthcare, housing, education, etc.
| probably has something to do with the growing precariousness of
| the population and less willingness to engage in risky ventures
| like starting businesses. Can't blame people for wanting to
| mitigating risk when the stakes are so high these days.
| Bubble_Pop_22 wrote:
| nkabbara wrote:
| Is this a good time to start buying as everyone is
| selling/panicking?
| bombcar wrote:
| It's always a good time to buy if you're doing dollar cost
| averaging into index funds.
|
| Trying to time the market is probably a fools game, much better
| spent trying to avoid total ruin.
| nkabbara wrote:
| Yup, I DCA regularly, but thinking about whether this is a
| good opportunity to throw extra into an index fund like VTSAX
| or maybe solid individual stocks.
|
| Extra would be coming from an account that I keep cash in for
| unforeseen opportunities.
| shrimpx wrote:
| As a rule of thumb, it's better to buy when the market's in
| the red than when it's doing well. As Warren Buffet said,
| "keep buying it through thick and thin, and especially
| through thin." (He was referring to an S&P 500 index fund.)
| 1270018080 wrote:
| You should be buying index funds with a portion of every
| paycheck
| scollet wrote:
| Shouldn't you do this in a bull?
| vineyardmike wrote:
| You always do it so you don't have to question the timing.
| If you do it during a bill, you're waiting until the price
| is going up. Doing it during a bear gets you when the price
| is going down. Buy low sell high and all that jazz.
| scollet wrote:
| I should have included "also".
| WalterGR wrote:
| In a bull market you get things for cheap, with the
| expectation that the bull market will end long enough
| before your retirement that those assets will increase in
| value. You basically bought those assets at a discount.
| Bonus!
|
| Closer to retirement, you wouldn't want to take on that
| much risk, so you'd move (over time, as you get closer to
| retirement) to more stable investments. Target-date mutual
| funds[0] do this automatically.
|
| [0] https://en.wikipedia.org/wiki/Target_date_fund
| olivermarks wrote:
| The problem I have with the Economist these days - they've
| changed a lot recently as has the Financial Times - is that they
| are one of the big cheerleaders for creating bubbles out of tech
| they clearly don't understand. This starves the startups that
| have compelling and reachable business models and goals because
| the funding goes to (quite possibly financially scammy) moonshots
| with vague goals somewhere over the horizon.
|
| Uber is a good example of this:
|
| https://www.gobankingrates.com/money/business/famous-compani....
|
| But because the scam worked and they managed to get publicly
| listed (how did that happen?! Publications like the Economist
| should have provided more cautions...) the gravy train rolls on.
|
| The sooner we get back to a 'Web 2.0' era like 2008> on the
| sooner genuine innovation will be funded again.
| burkaman wrote:
| Searching for "uber" in the Economist archive, I would not
| classify their coverage as "cheerleading" or even positive.
| Most articles seem either neutral or negative, including
| headlines like "Can Uber ever make money?"
|
| I would also be interested to see examples of the problem
| you're describing.
| bdcravens wrote:
| I don't think Uber qualifies as "tech they clearly don't
| understand". Uber is certainly a company with issues, but
| it's a clear problem they are solving, adding automation to
| an industry that's very old.
| photochemsyn wrote:
| Uber only still exists because the Saudis dumped $5 billion
| into them.
| bdcravens wrote:
| Sure. I'm not arguing that it's a good business, but it's
| a simple business, no matter what tech they have backing
| them. Today's bubble is marked by a lot of Defi/Web 3.0
| silliness.
| Ekaros wrote:
| Yeah problem is pretty clear. And they did provide
| something.
|
| Real question just like with food delivery is that is there
| margin there for an big player to exist? Or an expensive
| player? Paying people to offer singular service is not
| cheap. And then you have cost of vehicles as well...
| biorach wrote:
| I'm a regular Economist reader and I really don't recall them
| cheerleading any tech bubbles. Got some examples?
| maigret wrote:
| The Economist was of the few publications to investigate "what
| if" before Brexit while almost all others dismissed that
| scenario. They might not be perfect but they try and they
| investigate.
| lamontcg wrote:
| > The sooner we get back to a 'Web 2.0' era like 2008> on the
| sooner genuine innovation will be funded again.
|
| I'd argue it broke in the 90s and we need to go back much
| further.
| olivermarks wrote:
| 90's was complete green fields, it's all been very
| overcrowded since the dot com recovery but I still agree
| gowld wrote:
| > they are one of the big cheerleaders for creating bubbles
|
| Can you share an example?
| olivermarks wrote:
| https://www.economist.com/leaders/2020/08/20/the-ipo-is-
| bein...
|
| The E runs plenty of cautionary articles and they are good at
| hindsight
|
| https://www.economist.com/business/uber-doordash-and-
| similar...
|
| But aren't exactly leading the charge against financial
| corruption imo
| bobro wrote:
| So do you have examples of cheerleading or what?
| YuukiRey wrote:
| The second article has the following subtitle:
|
| > The mania over ride-sharing and delivery companies has at
| times been absurd
|
| and closes with these words
|
| > In the flywheel economy hope and hype spring eternal, at
| least as long as interest rates remain low and capital is
| essentially free.
|
| Hardly an example of what you accused the newspaper of.
| nouveaux wrote:
| Can you explain to me why these two articles represent
| Economists being the big cheerleaders for creating bubbles?
| I read both articles and I'm not sure what I am missing.
| [deleted]
| greyhair wrote:
| Oddly enough, the best time to bootstrap a brand new startup is
| just at the tail end of a crunch. I see a bunch of early startups
| popping up by the end of October.
| biohax2015 wrote:
| It's been fun y'all. Time to apply to medical school I guess.
| raphar wrote:
| https://archive.is/qziMw
| mmaunder wrote:
| Posted a few comments here re fundamentals. Wanted to add this
| excellent recent interview with Jamie Dimon discussing the
| realities of our current environment to help you get a sense of
| our current environment.
| https://www.youtube.com/watch?v=Q-5US4J03Wo
|
| Edit: There are incredible little nuggets of fundamental
| financial wisdom in this conversation. Responding to whether
| crypto is a hedge against inflation: "The higher inflation goes,
| the higher the cost of holding an asset that doesn't produce
| anything."
| [deleted]
| hiram112 wrote:
| I've grown anxious the past few years watching salaries skyrocket
| while I've played it safe, remaining at my company with years of
| seniority, but average pay that has been eaten away by COL and
| inflation increases, though in a very stable industry related to
| defense.
|
| Every time I got the urge to hit Leetcode and start interviewing
| for a new gig with a 50% pay increase, I remember 2007-2009 and
| getting laid off from 3 different companies as the economy
| imploded. And it's hard to remember now, but things never really
| felt truly safe, even with in-demand tech skills, until 2016 or
| so, when suddenly recruiter email started really exploding with
| competitive offers.
|
| Watching the market cool down leads me to believe we're going
| into another downturn, and I'm becoming more confident I made a
| good bet by not jumping ship in the last year or two.
| askafriend wrote:
| > Watching the market cool down leads me to believe we're going
| into another downturn, and I'm becoming more confident I made a
| good bet by not jumping ship in the last year or two.
|
| It just seems like you're afraid of making a change, and now
| you've found a new justification to keep avoiding discomfort.
|
| The reality is, there are tons of good companies out there and
| they will pay $350-400k for senior engineers even in this
| current market. But go ahead and tell yourself that you made
| the right decision to do nothing.
| gigantosaurus1 wrote:
| There are companies that are arguably what I'd consider
| recession proof, offering 400-600k for fully remote senior /
| staff roles with very reasonable WLB. Including GOOG / MSFT /
| AMZN. They're not laying people off / nor are they going
| anywhere for the foreseeable future.
| shrimpx wrote:
| It's probably a good time to get a job, because the stock
| package will be in terms of today's depressed stock prices.
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