Last 5 days. Continuation of longer term trends, but the past week seems pretty impactful.
Coinbase: down 30%
Cloudflare: down 37%
Zoom: down 11%
Peloton: down 23%
Shopify: down 24%
List goes on and on...
Important to note that it's not just tech stocks. Yes, tech stocks are down more than, say, Archer Daniels Midland but things are terrible everywhere. "There's no safe harbor" as the traders like to say, and even going to cash means you're losing 8% a year, right? So the first thing to keep in mind is nobody knows, but they all believe very strongly. The second thing to keep in mind is that from about 1759 to about 1946, it was popular to believe one thing, but from about 1950 on it's been sacrilege to believe that thing. The third thing to keep in mind is it's Cleverbots all the way down, and they're not waiting for you. FT last night with the apocalypse And the truth is that there are signs everywhere that a pretty profound market regime change is upon us, and that people are only starting to grapple with the implications. The Nasdaq has now given up all of its 2021 gains, and many — like Loeb — believe that this is just the beginning of an epic shakeout, rather than the end. The most vulnerable are still-profitless companies that need the grace of equity or debt investors to stay alive. Loeb hints that many of the more speculative companies that relied on stock options to attract talent might already entering a death loop as the value of their equity withers — something that Jamie wrote about before leaving (sob). So look. Backintheday? Back when economics was about running the world rather than maximizing yield? Talkin' like 90 years ago? It was generally accepted that there were two approaches to making money: - "firm foundation theory" wherein an investment is worth (what you expect your investment to be worth in X amount of time) x (the risk that it'll do something else in that amount of time) - (what your investment would do risk-free). There's math here. There's a lot of assumptions, but you can come up with numbers that you can throw in a mimeograph, write on a chalkboard, send across the Telex to convince people to buy things. - "castle in the air theory" wherein it's worth what people will pay you for it. As math gets tougher, "castle in the air theory" gets more attractive because the more precisely you can model bad data, the more likely your prediction is to be wrong. Why is Tesla worth more than all other car companies combined? Because (1) it didn't go to zero despite the fact that "firm foundation theory" said it should (2) so there's no reason not to believe it's worth more than all other companies combined. "they were this close" As "the next guy" gets tougher to convince, "firm foundation theory" gets more attractive because if the horses are spooked they are not going to run the derby for you. "Exit capital" is a particularly smarmy euphemism for "the people who are going to buy the stuff you're selling" while "bags" have become the unit by which your success is made. If you double your money, you have a "two-bagger." If you make ten times your money, you have a "ten-bagger." If you don't, you're the "bag-holder". It happened slowly, then all at once: the slang of trading became the slang of grifting. I find that illustrative. It's a tacit admission that none of it was based on reality, but entirely on perception. A pickup truck is totally worth three and a half stealth bombers until suddenly it isn't. AND HERE'S THE BIG THING 90% of trades are algorithmic. 70% of it is derivative. You start with actual "market sentiment" the way hurricanes start with the flap of a butterfly's wings. Of course "castle in the air theory" was going to dominate; neither the bots nor the ETFs care a whit about whether the underlying assets make any money. But now? Now you're profiting entirely on perception. The old crusty dudes have been talking about the 'everything bubble' since 2017 or so. Basic problem is we threw a lot of money at the stock market in 2008 to keep the economy from unraveling (rather than throwing a bunch of money at the people living in houses they can't afford because we can't talk about economies, we talk about profits, remember?). Every time the Fed tries to ask for its money back the market loses its shit. Things were on the ragged edge of coming apart when the Pandemic hit, at which point... well... So mk is right in that it's tougher to make money when you have to pay interests on loans (there's a Canadian economist whose name I always forget who said "interest rates are the price of monopoly" which should tell you something about, say, Amazon) but at the same time, we're going on fourteen years of grayhairs saying "this can't go on." EVENTUALLY they will be right. Money is a religion. One of the psalms of the fundamentalists is "bear markets return capital to its rightful owners." The Hatorade is flowing. History doesn't repeat itself, but it rhymes. Unfortunately? Stocks and bonds have been a popularity contest pretty much since we ditched fractional pricing. It was the end of history, China was in the WTO and AOL was worth more than Time Warner. Things should have corrected in 2008 but instead capitalism doubled down on itself. And eventually, that which goes up must come down. It's a long way to say "people think cash will lose less money than Netflix" but also "nobody ever cared if Netflix made money before". The Nifty Fifty made money and still ate shit. What's happening, basically, is everyone is trying to figure out how to make money in a world where Lockheed and Raytheon are making missiles to light up Russians again and in which you are no longer rewarded for pricing pickups ahead of stealth bombers.Obviously, all hedge fund managers love pseudo-philosophical metaphors and references, especially if they are a little recondite. But as somewhere that hosted Jamie Powell for four years, we can’t complain too much about people over-interpreting old films no one has heard of or cares about.
I saw the first Rivian of my life about a week ago when I was in Bellevue, because of course that was in Bellevue. So, stocks are eating shit, we're no longer rewarding the perception of money-making (which, I mean, is it a perception when everyone has known that Uber and ilk have either never made a profit, or have only made a profit through accounting tricks)? And there's a lot of instability in the world, and interest rates are going up again to make it harder to make money, but if the market finally corrects to what was supposed to happen in 2008. I don't even know what that could look like, outside of something very, very bad for the general population whom received none of the benefits of 2008 - current financial policy.
In the past two weeks I have seen two Rivians and a Lucid! I find this horribly depressing because Teslas are the car you buy if you hate cars, but Rivians and Lucids are the cars you buy if you hate cars and also hate Teslas. Everything is shit, everything is hideous, everything is heinously expensive. Why would you buy this garbage. We're hiring right now. For pricing? We take the going market rate, near as we can determine what it is, and add $2 an hour. Hiring sucks but rehiring sucks more and while ours is an entry-level position, there's a lot of folklore to learn and once you've mastered what we need but determined you're ready to move on to something better, we'd like you to give us enough time so that you can pass along what you've picked up and hopefully say nice things about us to the people you meet on your journey. We interviewed babysitters for the kid like seven years ago. We had women with Masters' degrees show up with prospectii in letterpressed folders. It was f'n unreal. We needed someone to change diapers, they were applying like we were buying a timeshare. Now? Now we get maybe three out of four interviews flaking. We have candidates applying for full-time work who say "actually I'm only interested in three half-days." We ask for a cover letter just to get a sense of the candidate (Indeed is a shithole, also the only thing anyone uses anymore) and of 80-odd applications we've gotten two. I no longer look for typos, I look for a more-or-less concept of sentence structure. We thought it must have been us? Naaah. It's everywhere. Now - if you're a cranky old man your obvious reaction is "kids these days." The socially acceptable reaction is to snark about avocado toast. But the minute you've decided the rest of the world is wrong you've stopped thinking. So it's worth considering a few things: - more adults 18-29 - a majority! - live at home than at any point since the Great Depression. - rent is up 15-35% nationwide, with some situations being batshit. - used car prices are like a bad video game glitch. - Gas prices are skyrocketing - customers are terrible ...and if you were a young adult that got remaindered by the pandemic or thumped out of college or stuck doing your senior year remote and have been spending the past two years interfacing exclusively with your parents, grocery checkers and Zoom, your sense of social self has been decapitated. There is nothing out there for you. So you're gonna pay $5 a gallon to borrow Dad's spare car to spend an hour in traffic to sit in front of women yelling at you for $18 an hour? I fucking don't think so. Now - you can argue that things are going to get better when student loan payments kick back in, and the 2 year moratorium on evictions is fully lifted and has run its course. But that stinks of "beatings will continue until morale improves." I think it's better to observe that young adults in particular, but the country in general, got to observe that the worst of capitalism is optional. That we're horrible to the lower economic deciles by choice and by design. That a better present is possible, but the people in charge prefer the cruelty. And I think that's a rough environment to have people realize Netflix isn't worth $16 a month in.
On the job front, I think every sub-group in my department has a vacancy. That's probably six vacancies in a department of ~30. I left my old job six months ago. My old vacancy is still posted. As long as I'm skimming my old employer's career page, I see they have vacancies listed for positions they laid off 18 months ago. With the job market the way it is, it's time for corporate execs to actually look at employee survey results. They won't, though. I put an offer on a house last week at $105k over what they paid in 2018 plus liability for a pending assessment for road improvements around $12k. Didn't get it.
Reading this made me think about life & the world & where everything is heading and that was not a good feeling :( Think you're right on about this. Everything feels so bleak and pointless. At my job right now I'm doing stupid busywork fiddling with the UI for some garbage product nobody is going to buy so that some asshole venture capitalists can enrichen themselves. And since I'm living at home not paying rent most of that is going towards stocks which are of course doing dismally. And a new job would maybe pay more (whopee) and then I could be making richer and more prestigious venture capitalists money working on a product that's competently evil instead of just not very good. Or if I wasn't doing anything things would be pretty much the same except with too much free time and I'd feel a little guilty but if I got fired tomorrow it'd be kinda whatever. Which is a very privledged take I know but aaaa what's the point of doing things if it barely makes your life better and probably makes the world worse off overall. I think that's a lot of the appeal of FIRE, certainly is for me at least. What else is worth spending money on other than getting Out. Anyways sorry if this was off topic just what your comment reminded me of
I remain optimistic. I mean, look - we know that the cruelty is optional. We know that brutality and deprivation won't get anyone back to the office. We know that when rents go up, people move in together or move out of town. David Rosenberg is fond of saying "the cure for high prices is high prices." Nothing we're doing right now is steady-state; on Mother's Day we went for a walk in a neighborhood I love and I realized I hadn't seen a single house for sale in there for the duration of the pandemic. Everybody there decided it was a great place to hunker down and that if they sold at a profit, they'd have to buy somewhere else and no thanks. If you can sit this bullshit out, you are sitting this bullshit out. I haven't been on a plane since February 2020 and that's not by accident. I've been rearranging everything I can to help our employees do more with less. Online scheduling, online billing, infrastructure changes, etc. It's not just because I can't hire my way out of the problem, or the fact that I'm too cheap to give everyone raises (when your income is determined by insurance company contracts that change every five years, inflation is a problem). It's that everyone's patience is hanging by a thread, our capacity to be kind to others has been exhausted and people suck right now and I don't see it getting better any time soon. But I mean look. If you can do your job remotely, why not move to rural Kentucky? Maybe vote out Mitch McConnell while you're at it. There's a real network effect to metropolises but it's too expensive right now, and if you set up somewhere else you get to be a big fish in a small pond. I think things will get better. Historically? They always do. That's just reversion to the mean. It just sucks living through history.
That pickup is now worth only a fraction of a stealth bomber: https://www.wsj.com/articles/a-high-speed-electric-vehicle-crash-rivian-stock-subsidies-11652130533?mod=hp_opin_pos_1
It took Google three years to turn a profit. It took Facebook five. It took Amazon seven. It took Netflix nine. It took Tesla eighteen. The idea that people would pay to have groceries delivered was pilloried in 2001. By 2017 it was a goddamn market segment. DHL exited the US market in 2009 because it could not profit and maintain the standards that have made it a global leader; Amazon took one look at that and said "what if we make our drivers piss in bottles." The past 20 years are the logical conclusion of the previous 30: when your goal is to maximize shareholder value, rather than protect long-term profits in a stakeholder environment, you cease to optimize for functionality.
I remember in like 1993 or whenever my cousin got Prodigy, and as a naive 11 year old I was like, "But what does it do?" "Ummm, you can talk to people around the world who also have Prodigy, and one day you'll be able to order groceries through it!" "That sounds dumb." I think I was right.