Is the economy actually bad? Tech stocks are down recently, but are still above where they were 2 years ago. Unemployment is under 4%. I don't understand all of the doom and gloom in VC and startupland.
- housing issues are reaching levels we’ve never seen. Not just buying, but renting is becoming exceedingly difficult for some. The fed raising interest rates so far has done nothing to level home prices.
- supply chains are crumbling. It’s nearly impossible to find a new vehicle. Used vehicles are selling for more than new ones. It’s yet another bubble that will burst miraculously.
- gas prices are still through the roof. It’s not uncommon to see $6/gal on the west coast (in any of the three states).
- the baby formula shortage is actually much worse than people realize. It went from hard to find to literally no one has any over the course of 7 days.
- stocks and crypto are tanking. Yes, some stocks aren’t seeing it as bad as others, but it’s not insignificant.
- food prices are increasing, and it’s very noticeable walking around a grocery store. Meat is $1-3/lb higher than it was 6 months ago. Certain produce is either not available or marked up 1.5-2x what it should be.
Now, a lot of these are going to get much much worse. The government seems content with really doing nothing other than seeding billions to countries not named the United States.
I think it’s fair for financial analysts and investors to be in full on bear mode.
> The government seems content with really doing nothing other than seeding billions to countries not named the United States.
I think this isn't quite accurate for a variety of reasons, much of it is that the federal government actually has significantly limited control of the above + what control it does have it has to pass through a hostile senate to accomplish.
- The federal government cannot force local government to build housing to increase supply, it can only try to incentivize, and housing can't be built fast enough to offset current demand
- The federal government cannot factories, particularly overseas ones, to produce more
- The federal government can, at most, go through a faster approval process for foreign baby formula; it cannot force current domestic makers to produce formula
- The federal government literally doesn't control crypto that's what the attraction of crypto was lol; its bombing is entirely crypto's fault; and the stocks have been pushing back against government regulation for ages already
- The gov't cannot set food prices
So precisely what do you expect the government to be doing here?
> The federal government cannot factories, particularly overseas ones, to produce more
I am assuming you mean 'force'. Trump literally used the defense production act to keep hamburger patties flowing when workers were complaining about COVID.
While keeping hamburgers coming was the purpose of this EO. This act allows the president to force producers to change production to benefit the defense needs of the united states. To produce 'more' of something through retooling or other means.
Please see a history of price controls. The article literally has a poster prohibiting charging more than govt set prices. Not saying price controls are a good idea, but do not claim something easily disproven with a google search. I learned about this in middle school.
So basically you are saying that federal government is useless in a crisis. That's inaccurate, there are mandates that can be overwritten, constitution is very clear about it.
Federal gov'ts could do all these things, and did, before the advent of the current neo-liberal governance in the 80s and 90s. The choice not to be able to do so, to strip governments of planning and industrial policies, was a conscious policy choice made by several consecutive administrations and governments across the whole G20 (at least).
Even more so federal governments especially did these things during war times. And we're basically in a proxy war with Russia (and IMHO, for the first time in my memory this might actually be a conflict with an actual morally justifiable cause), yet governments in the west have not put themselves on a footing yet to really weather such a war.
We should have put ourselves on that footing during COVID. Or hell, to deal with the climate crisis. And now here we are with this latest situation in Ukraine...
Historically, gas prices have always been much higher in Europe than in the US. I was used to a 3x difference over the past decades. $6/gal in the US is brutal.
Because VC funding is by its nature a Ponzi scheme hoping they can throw enough money at a business until it looks like it might be a viable profitable business to the “bigger fool” in the future (“$x is a gazillion dollar market. If we just capture 1% then we can be worth billions”). That “fool” can either be some other tech company that acquires it and let’s it whither (and the founders post a message about “our amazing journey”) or the public markets.
The retail investors don’t have any desire when the stock market is tanking to buy stocks in money losing former unicorns. The investment bankers who organize the IPO also won’t see the initial “pop” that allows them to make a quick profit.
Of course the employees who sacrificed real compensation in cash or RSUs in a public company in lieu of statistically worthless “equity” come out on the short end as the companies repeatedly delay an IPO waiting for the “environment to improve”.
All this to say, if you want to be a founder, go for it. But unless the startup you are thinking about has enough funding to compensate you as an employee at market value in cash, skip it.
> But unless the startup you are thinking about has enough funding to compensate you as an employee at market value in cash, skip it.
Yes, and the good new is these companies have been paying significantly more cash in the last few years. It may not be enough to justify moving or staying in the Bay Area, but many small companies are paying the same remote, which seems like a better deal than the big tech companies in the short term, if you're looking to cut costs while their equity is down.
There's a lot of bad jobs out there right now, but if you're not in a gambling mindset, there are some good opportunities to improve your overall financial position.
I took the route of working for a public $BigTech company. My RSUs for the year might be down 33% YTD. But at least they are will be worth something and I can diversify as soon as they vest.
Yes, I think those at larger tech companies are in a fine position to stay put. Those who are questioning whether it's for them or not just have other good alternatives now, which aren't lottery tickets. A startup can still be a conservative choice in this environment when considering the whole picture, which is what I felt was missing from the above. There are certainly many ways to be financially conservative right now.
Sorry to hear that. I have no idea how most people afford rent. I do OK, and rent hikes the last 2 years were making me nervous. I cannot imagine how someone making retail/service wages are even surviving. I really wish the government would or could do something to help here.
lower tariffs, subsidize capital investment into production of lumber/housing, aggressively push and fight for higher density residential zoning, limit leverage allowed for investors of buy and hold rental properties, eliminate capital gains tax advantage for income above $1 million/year, enact temporary taxes on non essential consumption items, restart student loans (billions a month in excess spending for consumers). Etc etc
Instead they keep trying to tie BBB to inflation fighting, when its provisions are nothing of the sort.
They handed consumers far too much money, and need to suck it back up in a way that targets discretionary spending (vs essential spending). Too bad they won't...
The Democrats passed the ARP with 0 republican support, and they can do the same now via reconciliation.
But they are proposing BBB, not these things. Reconciliation does have limitations in that the matters must be budget related, but seems pretty easy to fit most of these under that umbrella.
They can resume student loans at the stroke of a pen
And food. Stuff is almost double from a couple years ago.
Local restaurants that survived Covid are shutting down due to cost of food. Others are adding x% to food bill to cover cost. Things are rising so fast they don’t want to keep ordering new menus.
It is! Our family of 4 generally goes out on Friday; as a sign of change last night we decided to order out, but eat at home. What would be $80, was now $45. (getting rid of the 4 drinks, appetizer, and ample server tip).
I have to imagine consumers will become tired of the cost increases - we put up with it a few months, and decided "no".
I would argue that the supply chain is the economy, and the rest is fantasy if and when money can't make the supply keep up with the growing demand.
Innovation used to save our bacon, but now you have to innovate just to stay in the same place. Just pouring money on the problem doesn't work, it increasingly won't with climate change.
So we are between a rock and a hard place, inflation and recession. Choose your adventure. If the future could vote it would vote for curtailing demand across the globe.
> I would argue that the supply chain is the economy,
Agreed, though that includes not just the supply of things, but the supply of money as well, which is also being reduced as the Fed raises interest rates.
What you are thinking is manufacturing versus services, what I'm thinking about is the distinctly B2B supply chain that includes both. Then there is B2C, which depends on the supply chain.
The financial markets are used to facilitate the operation of this economy and my argument was that it should not be seen as the economy itself.
The current inflation is because of China, Russia, the pandemic, lack of investment into the supply chain (during deflation, resilience being seen as inefficiency, preference for stock buybacks), bad investment (during the pandemic), lack of innovation and increasingly climate change. Something weird is going on with the fuel prices too.
IMHO The people that come out ahead here (for good or bad) are large locked debt holders. EG. You have a 700k mortgage that you locked in 2020 at 3%. Each month inflation eats away the loan - and the bank can do nothing accept eat it. Property has already inflated 10-15% in a year. I don't see interest rates that low for a decade -- that group of people lucked out. I don't see a huge home construction boom due to supply constraints - so those investments are pretty secure.
The people that get screwed are cash users/holders and maxed 401k holders. EG People about to hit retirement paying rent. Young people working two jobs to trying to pay bills. There will be nothing but rent hikes for years - shrinking ETFs, with tight restrictions to become debt holders. As usual the poor guy gets shafted. :(
When you have the high priests of capitalism demanding old-school industrial policy and state planning and intervention, you know the economic model in place since the Reagan & Clinton years... may have jumped the shark:
I'd say we're in the mid-stages of what might be called an "economic crisis"; that doesn't necessarily mean riots in the streets and stocks plummeting to zero. But it means severe transformations that will displace the way things are done.
In most crisis it's usually the working classes who suffer first and most deeply. And that's been happening for some time; long prior to COVID, probably dating back to 2008. Once the upper and uppder middle classes start saying things like what you see above, you're already in the trenches and now shit's gonna get real.
Whatever is your opinion of the current economy, it's about to get worse. Investment is drying up, and that has a delay before reaching the factors most people care about.
The main thing is some companies doing hiring freezes & layoffs. Twitter has started rescinding some offers, Meta implemented a hiring freeze, Coinbase & Robinhood stock are in serious pain, etc. This kind of stuff is making most speculate that tech is about to be in a lot of hurt, especially for less profitable companies.
The Wiltshire 5000 indexes basically the entire US market. Take a look at its chart. It has lost more than a year’s worth of gains. I think if you look deeper, you’ll find that almost every public company is on the decline.
It's what's on the horizon that matters. Interest rates look like they're coming off the floor, and that will have an effect on those kinds of investments. When rates were zero it made a lot of sense to have a punt on VC. Once they come off zero they might not be back for a long time.
