HN user
The tax burden in the US already is mostly on the working class.
not really
https://www.federalbudgetinpictures.com/do-the-rich-pay-thei...
https://taxfoundation.org/research/all/eu/taxing-high-income...
I assume you mean OP?
The entire world (including the US federal government) has taken a short position on the US dollar
I read this as a prediction of some type of crisis.
Anyway, wrt the US Federal Government, having government debt is not that same as having a short position. For one, the US Fed govt's revenue (i.e. tax collection) is denominated in the same USD as the debt. So if USD goes up, tax collection go up.
Name 1 example of a currency crisis where the debtor nation had debt denominated in their own currency.
I'll save you the time. There are no examples.
Every currency crisis has debt denominated in a foreign currency. - Germany in the 1930 (WW1 reparations were gold marks) - Argetina (foreign borrow and currency peg to USD). - Thailand. - Turkey (now, borrowed in Euro).
https://en.wikipedia.org/wiki/War_reparations "Germany agreed to pay reparations of 132 billion gold marks"
https://www.federalreservehistory.org/essays/asian-financial... "Heavy foreign borrowing, "
https://economics.rabobank.com/publications/2013/august/the-... "Argentina’s hard currency peg to the US Dollar, pro-cyclical fiscal policies and extensive foreign borrowing"
If you're going claim a coming currency crisis, test that assumption against the historical record at your earliest convenience.
https://www.nytimes.com/interactive/2021/08/18/opinion/infla...
"In July, some of these sectors (used cars in particular) experienced a big deceleration in inflation, bolstering the argument"
https://news.yahoo.com/us-used-car-bubble-burst-141009925.ht...
"The price index for used vehicles rose 0.2% in July, after having risen at least 7.3% in each of the previous three months. The category was one of the few, along with hotel rooms and airfares, that drove recent inflation, the economist Paul Krugman pointed out on Twitter. “Combined, these three sectors account for…more than 1/2 [half] of inflation over the past three months,” Krugman wrote. In May, in fact, a full third of the overall price rise was due to the surge in used car prices."
I don't see where you pointed out that type of move would be unlawful.
Obama was elected President twice. What more of a mandate did he think he needed to feel confident enough to take action?
Obama lost control of Congress in 2010. And here's a good summary of the losses at the state level.
https://www.quorum.us/data-driven-insights/under-obama-democ...
anyway ... my point is pretty uncontroversial ... which is that there were limits on what Obama could do.
Donald Trump declared a national emergency so he could bypass Congress and raid the military budget to build a wall.
your argument is that Obama should be more like Trump? Declaring a fake national emergency and raiding the military budget is dubious action. Obama was never going to do ish like that and we should all be happy about that.
Also as Obama pointed out in his medium posts, policy positions get converted into action through electoral wins.
I'm old enough to remember that Trump was elected in part due to Obama backlash.
I'm also old enough to remember the backlash when Obama said Cambridge police acted stupidly (the police arrested a Harvard professor in his own house when he had to go through a window bc he lost his keys)
I know people are disappointed Obama didn't accomplish more. Obama is such an impressive person you just assume he can work magic. But Obama was constrained by the system of democracy and that limits what is possible.
I'm sad this comment hasn't been upvoted higher. The comment explain how the mutation could be possible.
The key is that the mutation would prevent reproduction. If you never age, you never reproduce.
You can think about different cancers. A mutation that causes fatal childhood cancer doesn't get passed on. A mutation that causes prostate cancer can spread.
"not one person responsible for crashing the economy"
https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Mi...
The incentives in capitalism "crash the economy". Yes, there was bad behavior. However focusing on individual behavior misses the forest for the trees.
Here's how it works.
Banks start off conservative. Banks only offer loans that pay themselves off. There's a run of good years. The incentive in capitalism is to make more money, and based off the recent history of good years, Bank A realizes they can offer more aggressive loans (e.g. interest only), take market share, and make more money. So Bank A does that.
Bank B now has the choice of matching Bank A, or losing market share (and maybe their business). So Bank B matches and maybe also offers less money down. This cycle continues with progressively more aggressive loan offerings until there's a run of bad years and things and people are stuck with too aggressive financing.
But what about their propensity to drive really slow?
Warren Buffet is on the phone for you ... He says when the intrinsic value of a company is greater then the price implied by the stock, buybacks benefit the shareholders .. And when the intrinsic value is less than the price implied by the market price of the stock buybacks are bad for shareholders.
BTW if you could really earn 11% with no risk of principal loss ... Just borrow as much as you can and collect the interest spread ...
You have to keep in mind the source. Let me put it this way. A VC's job is to buy X (where X is equity in a startup). Of course every VC would love for X to go on 50% sale ... or even better 75% sale.
You saw this with hedge fund managers and the stock market as well. Lots of hedge fund managers went on and on about how irresponsible Bernanke was because he kept interest rates low which raised asset prices.
To be clear, I don't think this is a nefarious or even conscious process. However, I think if someone really wants a particular scenario it tends to color their thinking.
Also the actual claim made isn't as sensational as the headline. Just says that 90% might take a lower valuation. All that requires is a general market decline.
Anyway, take a look at the list of unicorns.
I don't know why your comment is being down-voted. George Soros based his entire career on this dynamic and even coined the term 'reflexivity' to describe it.
Here's where and why I think the disconnect happens. Most of our possessions in day to day life tend to have a relatively stable value. Your iPhone 6 is worth $600 dollars, oranges are $2/lbs, a t-shirt is $20. Markets for non-capital goods (i.e. goods that are consumed with 1 yr or so) are very efficient most of the time. However, the claim that 'markets are efficient' (and the kinda-corollary that there's some stable intrinsic price) gets applied to all markets all the time. But markets for capital goods are not efficient all the time (by capital goods I mean something where the lifetime is greater than 1 year ... e.g. houses, airplanes, financial investments like stocks & bonds). Because most things in our everyday life have some 'true' value its seems wrong that there are assets that don't have an 'intrinsic' value or whose value is determined by perception.
However value is determined by perception. A great example of this is GE. A little history ... up until the early 90's GE used to fund itself almost entirely with short term debt. GE was able to do this because everyone considered GE a AAA credit risk. This 'AAA' expectation from the market actually meant huge additional profits for GE because GE could continually borrow short term debt at short term rates (say 1%) and turn around and lend their customers money at longer term rates (say 5%) picking up spread. In the early 1990's Bill Gross came out and basically said 'this is crazy ... there's no way a company that is financed almost entirely with short term debt is a AAA credit'. Subsequently, GE was forced to term out their debt and this coincided with GE no longer outperforming the market (I haven't followed that closely but I think that GE has slowly been winding down GE Finance). The point here is that expectations (specifically that GE was a AAA credit) had a huge impact on the 'intrinsic' value of the company.
Ray Dalio published his "principles".
It's a fascinating read
http://www.bwater.com/Uploads/FileManager/Principles/Bridgew...
The other interesting aspect is that Dalio is an adherent of Transcendental Meditation and IIRC the principles really sprang his study of TM and Buddhism.
http://www.huffingtonpost.com/2014/02/12/meditation-creativi...
Meditation has also transformed the corporate culture at Bridgewater. Dalio pays for half of the fees for any employee who's interested in learning TM, and the office features meditation rooms and group sessions. The company is also known for its "brutally honest" meetings, and Dalio says meditation helps his employees to adopt an attitude of calm equanimity that helps them to engage in a productive dialogue without reacting emotionally.
I see the Broken clock right twice a day. sentiment expressed in a couple places in this thread.
I think it warrants mentioning that Michael Burry had a very successful career before nailing the credit swaps trade. I think the sentiment that he's a perma-bear that just happened to get lucky is very unlikely. First, Michael Burry manufactured the credit swap trade that he is known for. What I mean by that is that Burry didn't trade options regularly. Rather, somewhat like Elon Musk, he reasoned from first principles. Burry started from the fact that certain housing markets were deteriorating and loan standards had been massively relaxed. Then figured out exactly what loans were in which CDO's and which tranches would be impacted by bad loans. Then he went out and bought credit default swaps against those specific tranches. There was very little luck involved.
In addition to that, prior to the credit default swaps trade, Burry had been running Scion very successfully using a value strategy (wikipedia quotes Michael Lewis as follows in his first full year, 2001, the S&P 500 fell 11.88 percent. Scion was up 55 percent. The next year, the S&P 500 fell again, by 22.1 percent, and yet Scion was up again: 16 percent. The next year, 2003, the stock market finally turned around and rose 28.69 percent, but Mike Burry beat it again—his investments rose by 50 percent. That is amazing performance.
Burry really is worth listening to. I went back and read his Scion Capital letters and IMO he actually is a genius wrt investing. I don't know quite how to express it other than its got the same feel as Warren Buffett's letters. He doesn't get swayed by fear or greed, he's just incredibly logical.
Bodies are like machines, if you use them a lot they will wear out because of over-use.
This is a poor analogy. Bodies can heal (i.e. regenerate tissue). Machines cannot. If this analogy was true, ultra-marathoners would be wearing out their joints rapidly. That's not what is being observed though.
What is true is that you can injure joints by increasing the workload too fast. Joints can strengthen and adapt to increased loads but it happens slowly. So don't go from running 5 miles per outing to running 10 miles. Limit yourself to a gradual increase.
http://journals.plos.org/plosone/article?id=10.1371/journal....
http://content.time.com/time/health/article/0,8599,1948208,0...
Don't most airlines work through a 3rd party that actually purchases and owns the planes?
this is driven by the fact that airlines don't consistently have taxable income. If you have net operating losses, which airlines often do, you can't fully take advantage of the tax shield provided by depreciation. Airplanes are big capital assets, hence they provide a large tax shield. That's why you often see financial entities (e.g. banks, insurance companies) who have regular taxable income have leasing arms.
If they raise interest rates, they will have to service their $18 trillion national debt and expose a lot of malinvestment in the private sector.
1. I think the Fed wants to "expose malinvestment". There's some debate about whether avoiding bubbles (i.e. malinvestment) should be a formal part of the Fed's mandate. IIRC, as it currently stands avoiding bubbles isn't a formal part of the Fed's mandate but it would certainly be a desirable policy goal (i.e. the Fed wants to prevent malinvestment from running to far). Also, wrt to servicing debt, the article was about how interest rates are likely to remain low.
If they don't raise interest rates, their only tool to fight the next recession will be to print money, which could cause the currency to collapse.
2. Your claim implies that the Fed raises rates so they have a tool to fight economic slowdowns. That's wrong. The Fed has 2 mandates: stable inflation and full employment. The Fed is raising rates to avoid inflation. You also claim that the Fed will "print money" which could cause the currency to collapse. Its astounding that we literally just went through this scenario, the Fed printed money, the currency didn't collapse. However people haven't re-examined their beliefs. We've now had 2 episodes where major economies resorted to "printing money" (Japan in the 1990's, US in 2000s) ... no currency collapses. In fact, as far as I'm aware, there's no precedent for a country that issues their debts in their own currency having a currency "collapse".
Assume someone makes 50K and they want to give their entire 50K to charity. Do you think that person should be able to give 50K to charity and not pay tax or only 32.5K (50k x 35% tax rate) and have to pay 17.5K in tax?
1. "A stable company might have a price/earnings ratio of 5x"
You're way off on PE's.
The Shiller PE is 26* right now. P/E moves inversely with interest rates. With rates around 1% (i.e. driving up P/E's) only distressed companies trade at 5x P/E ratios.
2. "AirBnB takes a 3% cut on transactions"
You overlooked 2/3 of their revenue.
"Airbnb generates revenue by taking a 3% cut of each booking along with a 6% to 12% service fee from guests"
3. "for them to have a $25 billion valuation, that's $5 billion in revenue or $167 billion in bookings"
The relevant data is in the article. Note they made $340 on $2.2B of bookings (about %15 of bookings).
"Airbnb generated $340 million of revenue in the third quarter, on bookings of $2.2 billion". You can just annualize that. Current run rate revenue is ~$1.4B. Current run rate bookings are ~$8.8B.
I don't have an opinion on the valuation but I can understand how they could be worth $25B. Airbnb's incremental cost for processing customers is probably close to zero. If they double bookings again, they'd double top line revenue ~$3B. I could easily see $1B of that flowing to the bottom line.
Also there are network effects/customer captivity at play that bode well for the long term. What do I mean? It would be hard to create a competitor to Airbnb because no one wants to establish their reputation on more that 1 platform (same under-appreciated advantage Ebay has).
how were you able to determine that?
I assumed that the author is himself an MD in another speciality.
1. The quote below. The most likely way the author would know this is that the author went to med school. Its possible the author interviewed MDs about their med school experience, but seems less likely.
In medical school, aspiring doctors spend a few minutes at most on these relatively unusual conditions, which are thought of, and taught as, rare. By the time many begin practicing medicine, many doctors aren’t even aware of the minute distinctions on the sub-spectrum of posterior fossa cysts, if they ever really understood them at all.
2.
I come, after all, from a family of doctors educated at “top” institutions. How could it really be possible that despite decades of intense trying as educated, middle-class people, we knew absolutely nothing?
I'm surprised it hasn't dropped more. This article pegged it at a 9.5% drop.
http://espn.go.com/espn/otl/story/_/page/popwarner/pop-warne...
let me give you the elevator explanation for a $20B valuation.
'Barclay’s report estimates that Airbnb’s current bookings are about 37 million room-nights per year ... predicts that Airbnb’s growth in bookings could triple in size in the next year, '
http://qz.com/329735/airbnb-will-soon-be-booking-more-rooms-...
So AirBbB is already at 37M bookings, expected to triple to ~$120M. Assume the average cost of a room is $200 and you're talking $24B in gross revenue. Of that AirBnb takes 3% ... working out to ~$720M. Now here's the beauty ... to generate that $720M AirBnb doesn't need that many employees. If we go on LinkedIn there are 2,257 employees listing AirBnB as their employer. Let's say average cost is $400K that's $90M. Say there's another $100M in expenses (server hosting costs, office space, etc). We can see how AirBnb could be generating $500M in profit. Slap a 40x multiple on that and we're at $20B.
Furthermore there are some incredibly appealing characteristics. One, expenses won't grow with revenue. If AirBnb goes from 120M to 240M bookings their expenses are relatively fixed. They'll have to add additional server capacity but the for the most part that will just be pure profit.
Two, and more important, they're got a tremendous competitive position. The degree of customer captivity is highly under-appreciated. Once someone makes an account and establishes their credibility on one platform they're going to be reluctant to go through the effort to do that on another platform. Combined with their market leading position it will make difficult for anyone to unseat AirBnb.
So as I said before, I think what's interesting is figuring out what serious investors see that justifies a $20B valuation.
Every step of the way someone says something like this
"is worth almost as much as say Marriot ... is absurd"
here's an example around the $10B valuation
http://qz.com/190432/airbnb-doesnt-even-own-a-bed-but-its-ba...
I'll just make a meta-point. The parties that are investing in AirBnb at $20B are not some retail pikers chasing a bubble. TPG for example. They're literally among the most sophisticated institutional investors in the world. I'm not going to make an appeal to authority, but I will say that dismissing parties with real expertise in a casual manner is usually poor judgement.
Furthermore, I think its almost certain that the investment research that led the teams at Fidelity and and TPG to value AirBnb at $10B+ is not 'absurd'.
So a more interesting question is 'What exactly is it that the TPG and Fidelity' see?
Just reading Bing West's A Million Steps, so that obviously is affecting me, but the first thing I thought was this would be great for saving soldiers from getting blown up by IEDs.
the diary is not particularly well-written
depends on your standards. He's not a professional author but I think he's probably better than your average college grad.
studded with evidence of psychopathy
genuinely interested. could you point to some of these. I've been skimming it and haven't really seen that.
in fact, this struck me as empathetic
James’s mother, Kim Ellis, had just passed away from breast cancer. I cried for a bit. Kim was a very kind-hearted person, and the mother of my best friend. She had been suffering from breast cancer for several years, but I never thought she would die from it. I immediately thought of how James must be feeling. He just lost his own mother!Annotate It made me think of how horrible I would feel if the same thing happened to my own mother, just the thought alone filled me with pain.
You appear to think you understand these rather complex issues.
Let me address this first. The initial claim that I replied to was that 'low interest were causing loans to be inaccessible'. That claim just doesn't make sense. I'm comfortable my claim that low interest rates makes loans more accessible is correct.
Beyond that narrow claim I'm not nearly as certain.
So why are there fewer new businesses if it is not financing?
Now this is an interesting question and one I don't know the answer to (and I haven't seen an answer too). That might make a good Phd thesis. A SWAG would be that its got to do with suppressed aggregate demand. I don't know if the data exists for Japan in the 1990's but would give you one data point. It kinda of makes sense that new business formation would slow during stagnant growth ... but the opposite could be true. People could be forced to start businesses because the conventional career path is less attractive. Anyway, I have to put this in the 'I don't know' category for me.
I think its mostly that Austrian economics focuses on the individual and rejects macroeconomics based on aggregate demand. What I really think is going on is not that people really understand Austrian economics and find it logically persuasive so much as they want some reason to ignore Keynesian economics.
However, what I generally understand is happening, or rather is not happening, is called "pushing on a string". No matter how low the rates or availability of loans (not so sure that was true in Japan in the '90s), nothing can get a business to borrow money if they don't think they'll be able to pay it back.
That's exactly right. And that's where a lot of economic theories break down ... because its assumed that firms always maximize profit. If you assume that, firms will always borrow money if money is free (i.e. 0% interest rate), and put the money to use earning >0%.
I think we've seen that's not a great assumption though because firms are not always maximizing profits.
Low interest rates make consumer loans more affordable, not more accessible.
When a loan officer decides whether to approve a loan, they look at the collateral and whether the borrower can service the loan payments. A lower interest payment absolutely makes it easier for borrower to service the payments, and hence for a bank to justify a loan. Ergo, lower interest rates makes loans more accessible.
Also your claim is contradicted by the survey I posted. For the last few years the NFIB survey has consistently returned the same results: access to financing is not a big problem for businesses.
The evidence doesn't support the claim that the problem is the banks.
BTW, this is true not only for the US, but for other economies as well. The exact same thing happened in Japan in the 1990's.
If there are other ways for a bank to use their cheap money
I haven't looked recently, but the last time I did banks had excess reserves and the Fed was debating whether to charge banks for depositing money at the Fed. Again, basically the opposite of what you're claiming.
SWAG. You believe in Austrian economics?