THE WOLF STREET REPORT: Here’s What I’m Worried About with the Everything Bubble

How cash-burn machines power the real economy, and what happens to that economy when investors refuse to have more of their cash burned.

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  153 comments for “THE WOLF STREET REPORT: Here’s What I’m Worried About with the Everything Bubble

  1. raxadian
    Oct 20, 2019 at 9:42 pm

    Honesty, if humanity really wants an infinite power source, they should just use human stupidity. Every time you rhink it has a limit you end finding out that ye, people is indeed that stupid.

    • Em
      Oct 20, 2019 at 9:53 pm

      It is the only trully renewable resource – the human stupidity…

    • zoomev
      Oct 20, 2019 at 11:21 pm

      Stupidity has too many negative connotations. The Buddhist would just judge it as delusions. We all have them. Some have more immediate consequences than others, I guess.

      • polecat
        Oct 21, 2019 at 9:29 am

        Ah, but what would the Buddhists make of Brondo ?

        • CreditGB
          Oct 21, 2019 at 10:43 am

          I am working on a theory. I will hire Buddhists in Tibet to exclusively brew Brawndo. I will procure Brawndo leaves at extreme costs, and pay giant processing costs, but the product will look fantastic and be irresistible. (Each bottle will communicate with every other bottle over the internet of things).

          Based on my Community adjusted valuations, I have valued this theory at $47 billion dollars. The IPO is coming, so please be sure to get in on the ground floor, because as you already know, “you don’t want to miss out”!!

        • zoomev
          Oct 21, 2019 at 2:22 pm

          That’s easy, there is no Brondo and there is no not Brondo

    • interesting
      Oct 21, 2019 at 1:34 am

      I’ll bet there more than a few in this mess who think they are smart and just might be. I saw this play out after the 2000 top where some people had job with pay and stocks and made a killing…mostly on just blind luck but they walked around like the just cured cancer.

      Still, retired.

      • Oct 21, 2019 at 5:37 am

        Combine this thesis – the music is going to stop – with the rise of populist unrest, a corollary of the failure of governance. Cycles exist for reasons that are largely understood, while their timing is always difficult to call. If you think the governance problem is about to be solved, please provide indications if not examples, which will be harder to find. (New Zealand?)

    • chris
      Oct 21, 2019 at 9:36 am

      I saw a line on the back of a tee-shirt in Maui. It read, “You Can’t fix Stupid”. My biggest problem has been trying to fix myself. Due to the herd principle, which is driven be the deep seated emotions of fear, greed and blame; humanity continues to make the same mistakes. Buying high and selling low is what we do. Ignoring the facts and following emotions continues to plague us. That’s why we always get the governments that we deserve. This comment of mine is way too long but its another one of my bad habits.

      • RD Blakeslee
        Oct 21, 2019 at 10:29 am

        “… greed … ”

        NOT stupidity – most of these “investors” are simply playing a lottery with time – hoping to make a few more bucks on share price rises and then get their stocks cashed out before the denouement.

        There are plenty of non-greedy people who understand the game bur refuse to play it. They quietly build and accumulate real wealth – not necessarily measured in fiat dollars – and enjoy their lives.

    • sunny129
      Oct 21, 2019 at 11:55 am

      I get it – SIMPLE

      They want GREATER FOOLS to unload!

    • mike
      Oct 21, 2019 at 7:47 pm

      The most stupid thing is to have watched the “Federal” Reserve banksters’ cartel transfer billions and billions of dollars to the major banks through QE commissions, ultra low, below fair market value, interest rates to insolvent banks, and similar tactics since 2007 without loud objections. See other articles in this website as to this. This is after the bankster made billions in profits from selling mortgage backed securities to pensions and others, which the banksters knew and bet would fail.

      The retirement funds of the second half of the baby boomers, the younger half, have been significantly consumed by the transfers to the banksters: with normal interest rates their savings would be much greater now. Later generations, will not see a fraction of the pension payouts (in present value terms), because their pensions have also been gutted through those transfers: they have invested in treasury bills with ultra low interest rates, and securities that also have ultra low earnings consequently.

      See https://wolfstreet.com/2019/10/13/social-security-trust-fund-recovers-a-tad-in-fiscal-2019-interest-rate-earned-sinks-to-record-low/. This will only get worse once the stock market goes down and the pensions face greater losses in the future. Thus, Americans should be enraged and their acceptance of being defrauded by the banksters and their “Federal” Reserve is amazingly stupid. Most amazing is that so many do not realize that the bubbles that exist are caused by the ultra low interest rates of the “Federal” Reserve.

  2. Auld Kodjer
    Oct 20, 2019 at 9:51 pm

    Therein lies the title of your next book, Wolf: “The Demultiplier Effect”.

  3. Javert Chip
    Oct 20, 2019 at 9:57 pm

    For years I’ve been laughing at (especially) large “start-ups” that simply burn cash, but I laugh even harder at ones in a “tech wrapper” when all they really do is relatively low-margin renting of office space, driving taxis and delivering food.

    Glad to finally start hearing others say “the emperor has no tech…”

    • JZ
      Oct 20, 2019 at 10:14 pm

      Were you laughing at Amazon and Facebook? Those two have established such a strong emotional support for money losing companies that Uber/WeWork/Netflix/Tesla and the likes can exist today. People got used to Steve Jobs deliver religious experience in every Apple product announcement that people believed in Elizabeth Holmes and Elon Musk are the same.
      I told my wife that house should be single income X 3.5 and people are doing double income X6. My wife said that’s because low rate. I said there is no time in history that human in market has negative rates. It has to normalize to historic mean. My wife said, if they normalize, there will be political consequences, therefore it can NEVER normalize. I wa sooo happy to hear that. If everybody thinks it is NOT going to normalize, it is the day it will normalize. When it does, that’s the emperor has NO clothes day. That is when people will let go of the “lose as much money as possible now to make money later” model proven by Amazon and facebook.
      I do NOT know when that day arrives. I long for that day. I hope that day arrives before I teach my child what to do with his life so that I can tell him which example NOT to follow.

      • RD Blakeslee
        Oct 21, 2019 at 10:32 am

        There may be a reason Amazon is not mentioned by Wolf in this article.

        Amazon is profitable.

        • wkevinw
          Oct 21, 2019 at 11:23 am

          Amazon is only profitable due to the window of opportunity that they did not plan for at the start of the company: web service.

          Good for them: it’s better to be lucky than good.

          Note: if I were the typical Amazon customer, they would have folded within five years. I buy specials, discounts, etc. Their retail business has lost money on me for sure.

        • Zantetsu
          Oct 21, 2019 at 2:14 pm

          wkevinw, that is silly. You are saying that Amazon is “lucky” to have created their cloud computing division? They pretty much singlehandedly created an entire industry, popularized a new way of managing computing resources, and they did it all with a specific intent of monetizing something they knew they were good at.

          There is very, very little luck involved in that.

        • lisa
          Oct 21, 2019 at 2:33 pm

          It may look rosy on the surface. However, when you check some of the significant imbalances within Amazon’s data and the operations sector for Amazon, there are a good number of red flags, even now.
          The link that I included is only for the “efficiency comparisons”. The issue of monopoly status may be the real crunch card for Amazon and of course a few others.
          https://csimarket.com/stocks/AMZN-Efficiency-Comparisons.html
          The EBITDA, and historic trends reveal some of the danger areas. Overall its position as monopolizer, while at the same time deliberately crushing competition of vendors, and contract agreements with small businesses is destroying any balance to even PERMIT other businesses to continue operating on the big A platform. Destroying small vendors, while at the same time marketing and producing revenue streams that slam the contracted basis for the initial operations that allowed Amazon to function just reveals what Amazon is really doing.
          AWS may be even worse….. Capitalism is founded on integrity, and initial altruistic principle. Just ask George Gilder and the founders of the supply-side theoretics. Amazon is not altruistic in any sense of the word. They are not selling a product of integrity and services. They are really selling THEFT. When capitalism becomes only a corrupting transaction vehicle, it eventually consumes its consumer. The platforms such as AMAZON are software application platforms establishing monopolization of predatory action as a substitute for any real transactions of any level of goods and services. That process is becoming very evident the longer the predatory platform applications continue their verticalization and monetization actions only for the few at the top. The platforms will need to be broken up, not only because of monopolization but inherent basic bad business ethics based on THEFT.

      • Tom Jones
        Oct 21, 2019 at 1:27 pm

        Actually, you’re wife is right. A normailzation would entail such disruption at this point; we’d quicky be under Marshal Law…and draconian infringements on freedoms we’ve always taken for granted. “Power” does not go quietly into the night. Once it starts to crumble….it will be propped up to the last bullet.

      • SomethingStinks
        Oct 21, 2019 at 2:43 pm

        Teach your kid to evaluate the situation before making any decision. Otherwise he/she will get stuck in some other hiterto unknown ponzi pyramid. Like someone said “The price of freedom is eternal vigilance”. That dont just apply to nations; works in everyday life as well.

    • Debt Wazoo
      Oct 21, 2019 at 4:23 am

      What, you don’t believe in Clown Computing? I have all my data stored “in the Clown”. Somebody told me I was spelling that wrong, but I don’t believe them. Clown Storage is the future.

      • polecat
        Oct 21, 2019 at 9:39 am

        The Tech Clowns are holding the tethers of Balloons high afloat, whilst the crowds outside the ring deploy their hat pins.

      • J7915
        Oct 21, 2019 at 1:24 pm

        As in Yahoo Clown Data?? Retrieve your data before Dec 14 ?

    • Xabier
      Oct 21, 2019 at 5:07 am

      However, I wouldn’t be surprised to find that pointing out that the ’emperor has no tech’ is re-defined as ‘psychological and economic terrorism’, inspired by ‘hatred for our way of life’, and ‘Russian meddling’……

      After all, what DID happen to that little boy in the story who pointed out the truth. It never says……. :)

    • Javert Chip
      Oct 21, 2019 at 2:34 pm

      JZ

      Yup, I laughed at Amazon & Facebook. I also laughed at Google (in fact, once seriously considered shorting it). For the past couple years, I’ve been laughing like crazy at WeWork & Uber.

      However, I now shop mostly on-line (Amazon included), and find Google extremely useful (email, search, translate), and still won’t touch Facebook with a manure shovel.

      As a retired CFO, I do understand maybe 1-in-10 or 20 venture capital start-up pans out (ie profitable growth). I still am not the direct owner of any of them – don’t understand the business models (in the company where I was CFO, nobody could explain the “advertising model” other than “WE NEED IT OR WE’LL DIE”). I continue to own stocks like BRK, Visa and CCL, plus a couple index funds.

      When I want excitement, I go marlin fishing, or, recently, shark-cage-diving. Those I understand.

      Go ahead: call me stupid, old-fashioned, behind the times, or anything else you want…but you can’t accuse me of being an unsuccessful investor, and that’s how the financial game is scored.

      • 728huey
        Oct 21, 2019 at 6:31 pm

        I’m calling you a relic; that’s what’s I will. You’re old fashioned and over the hill.

        Then again you’re just like Bob Seger who prefers his old time rock and roll. Because today’s music (and economy) ain’t got the same soul. ☺

      • JZ
        Oct 21, 2019 at 8:35 pm

        I was laughing at facebook too. Like you, I am NOT touching it. I still scratch my head and wonder why people use it. But hey, they came out as a good business. I am NOT saying we are wrong to laugh at Uber and WeWork. What I am saying is that for that little possibility of becoming next Facebook and Amazon, people CAN convince each other to throw money into it. In fact, you need endless funding (FED, Saudi) and a possibility (the story of facebook and amazon) to make this work. I am 100% sure Softbank and the likes know exactly what they are doing. They know Uber and Wework have high probability to fail as a profitable business. But they still do it because both conditions are met. Wealth transfer game at its core and they “give silicon valley a bad name”

  4. daniel weise
    Oct 20, 2019 at 10:13 pm

    Thanks for that objective summary of where we are Wolf. as you mentioned there is so much money sloshing around the world managers and institutions literally have no choice but to stay invested (in their view). when the system senses these assets are at risk things will get “interesting”. just imagine a fraction of those trillions moving into the comparatively TINY market of precious metals for protection,it will be epic IMO. and right on cue,news just out: south korean exports down 20 % YOY, semi conductor exports down 29 %. japan exports down 5 % YOY. the market reaction? asian markets UP, Dow futures UP and Gold down of course! I am starting to think we need to learn to embrace this new reality and just accept! taking my pill now and washing it down with a nice IPA,everything will be fine…..

    • J7915
      Oct 21, 2019 at 1:33 pm

      How would the economy look if those billions were (re-)distribuited as deferred income and used to pay off debts or Invested in the economy.
      The upper 400 would still live gilded lifestyles. There would be few 3-jobs-holders, and a real shortage of workers.

      The golden age of the 50s, 60s, and 70s were the age of high income tax rates, that only fools who could not run businesses paid. Others re-invested in the economy.

      • Javert Chip
        Oct 21, 2019 at 3:06 pm

        J7915

        The 50s, 60s, 70s were the golden age of post-WWII in the USA: the rest of the civilized world (excluding South America) fought, bombed, and managed to kill 100 million of themselves.

        High tax rates had nothing to do with it.

        While the USA was booming economically, it was also spending billions (Marshal Plan) to feed & rebuild Europe. FACTOID: Post-WWII Britain food rationing ended in 1952.

  5. IslandTeal
    Oct 20, 2019 at 11:15 pm

    Evening… Good report Wolf… As I said earlier a re-read or re-watch of “the Big Short” is getting to become mandatory for all.

  6. cesqy
    Oct 20, 2019 at 11:22 pm

    The pot industry is a another example of this irrational cash burning and hype. Oh my heck, marijuana is an agricultural product easy to grow with tremendous competition. CBD and THC are useful products, but there are many similar products out and drugs available. Pot and vaping are not harmless.

    • Prairies
      Oct 21, 2019 at 9:24 am

      I think you are mixing up the ag side and the industry. It’s like tobacco on the ag side, fairly cheap product until it makes it onto a shelf. The industry is a different story, the desperation in the markets is hitting everything. Pot stocks just got added to the everything bubble, up until 2 years ago they traded like penny stocks for medicinal suppliers.

  7. Memento mori
    Oct 20, 2019 at 11:27 pm

    I think if the bubble bursts as you described it, the buck stops again with the big banks.
    Are we about to bail out the banks again or will we nationalize them this time?

    • cesqy
      Oct 20, 2019 at 11:37 pm

      Germany will surely bail out Deutsche Bank AG if it goes under.

      • Realist
        Oct 21, 2019 at 12:25 am

        Each country will bail out their major banks. They allways have and can neither afford not to do so. Heads the bank wins, tails you loose …

    • Kent
      Oct 21, 2019 at 10:32 am

      The big banks have to be bailed out. The other option is global depression and mass unemployment. Mass unemployment leads to socialism. Better to bail out banks than to nationalize entire industries.

      • FromKS
        Oct 21, 2019 at 12:10 pm

        Better to bail out the rich then to bail out the poors?

        • J7915
          Oct 21, 2019 at 1:41 pm

          Closing a large financial institution is a pain for society. Start with safe deposit boxes, checking, credit cards, paycheck deposit, automatic billing, etc, etc.

          Nothing prevents the permanent removal of the management, ban them from the financial world. Remember the Texas Savings and loan mess? Start the concept of fiduciary responsibility, all gov. registered and licensed money managers should be responsible to garantee, at minmum, the pricipal entrusted to them.

      • Frank
        Oct 21, 2019 at 1:28 pm

        Kent, bailing out the banks with taxpayer funds is the very definition of socialism. If there was another downturn like 2008 , and the taxpayer sees huge amounts of money going to bail out the banks again, the riots going on in Santiago right now will look like foreplay.

        • Kent
          Oct 21, 2019 at 2:32 pm

          Riots can be put down harshly. Remember Occupy? What started as a cute hippy-dippy movement ended with black-jacks and tear gas. I’m not making a moral judgement here. Another real depression and the population will move decidedly to the left. That will not be allowed to happen. There are only 2 ways to solve that problem: bail out the banks, or regulate them as was done for 50 or so years after the Great Depression, and that’s not gonna happen either.

          So we have what we have.

    • Javert Chip
      Oct 21, 2019 at 3:14 pm

      All banks exist on a spectrum of “safety”; however, US banks are heavily clustered on the “safer” end of the scale. Banks, by definition, are in the business of taking risks.

      While not offering immunity, regulatory changes & securitization have lowered bank risk.

      Assuming you have one, I’d worry more about your pension plan, which probably has been frantically chasing yields for the past 10-15 years, and owns some pretty snarky stuff. Maybe even som WeWork bonds. GASP!

      • economicminor
        Oct 21, 2019 at 5:26 pm

        I agree about the pension funds. I think the time line of under funding and over investing has been more like 30 years.

        Others at risk I would assume are the insurance and re-insurance companies, mall owners (big and small), private equity which can’t be any smarter than the rest, and even some hedge funds.

        We’ll just have to wait to see who is swimming naked when the back wash from the tsunami empties all the liquidity from the waters right before it rushes ashore and destroys everything it can.

    • Iamafan
      Oct 21, 2019 at 6:32 pm

      @M. Mori

      I am not sure it will be “banks” that will need a severe bailout. I think it will be pension and retirement funds and municipalities, this time. I am pretty scared of the implications.

      The Fed can’t save everybody.
      Non-banks are probably on their own.

  8. Tyson Bryan
    Oct 20, 2019 at 11:45 pm

    Will the shale oil industry ever break even; that is, reach a point where net energy input = net output?
    “The total cash burn in the shale oil space is likely in the neighborhood of several hundred billion $”. How much additional CO2 was generated in the process of burning several hundred billion $ at a net energy loss?
    The commercial jet air fleets are operating at net losses of a similar magnitude, while using air fuel pumped & refined at a net loss.
    What all this industrial cash burn does is generate more CO2.
    This may really be a calculated process of transition: The world credit standard is being moved from a CH4 & up hydrocarbon (oil) standard or petro dollar, to a more generic “carbon credit” based on CO2.
    The polarity of charge is reversed perhaps; carbon credits are supposed to have a negative $ value – but no matter, the master planners have attached a charge to CO2, to give us a new unit of corporate exchange.

    • Craig
      Oct 21, 2019 at 4:17 am

      >Will the shale oil industry ever break even; that is, reach a point where net energy input = net output?

      No. The physical laws of thermodynamics make that impossible. Entropy means energy always decreases. Fuels rely on accumulation over time. You might get human energy invested<energy returned. That's not the same thing and the problem with all fossil fuels. That extra energy is never accounted.

      However they can break economically even if they can find a way to use local cheaper low density fuel(wind,solar,geo,wood) to extract denser more economically useful fuel. (Oil,coal,gas)

      • rhodium
        Oct 21, 2019 at 9:19 am

        Lucky thing renewables keep getting cheaper. You don’t even have to give a poo about climate change to look at the deflation rate in renewables and see that we are at an eclipse point where they are becoming cost competitive heavily multiplied by improvements in energy storage. Oil is staring into a slow decline multi decade existential crisis. The loses in that sector will be confounding since shale is already losing money and a descending price ceiling from renewables is diving in like a hawk.

        Anyway, thank you Wolf for that insightful analysis.

        • wkevinw
          Oct 21, 2019 at 11:26 am

          At least this is a reasonable discussion now: renewables vs fossil fuel. However, the cost of the renewables is far from cost competitive.

          The decline of oil started decades ago if you look at average price of extraction. It’s a lot more costly and therefore a lot less profitable on a margin basis. (there is plenty of oil- it’s only going to get more expensive- eventually to where renewables really will be competitive).

        • WES
          Oct 21, 2019 at 6:20 pm

          Rhodium: Yeah renewables are getting cheaper in price due to free money printing!

          However if you buy a solar panel, don’t expect it to produce enough energy to produce new baby solar panels and make you wealthy!

          It is the lack of energy return to produce new renewables that dooms this argument!

          One still needs access to oil/coal etc to produce more solar panels to replace the old solar panels!

          It is like using 2 barrels of existing high grade oil to produce 1 barrel of new low grade oil!

          But hey, shale can produce all the oil you want by simply printing unlimited amounts of free money! So what the hell do I know!

      • David Hall
        Oct 21, 2019 at 11:58 am

        Global coal use grew last year. Oil use has grown over the past ten years. Emerging markets want fuel. Wind and solar power is intermittent. Emerging markets will buy cars. People liked to fly to distant places using jet fuel in the process. Trains burned diesel. How is it I can get gas for my car if all oil drillers do is burn cash?

      • WES
        Oct 21, 2019 at 6:04 pm

        Craig: To better understand the shale industry the only thing you need to know is that printing more money is free.

        Shale runs on free money. To produce more oil all you have to do is print more money.

        Is there any part of this you don’t understand?

  9. OutLookingIn
    Oct 20, 2019 at 11:55 pm

    Central bank market intervention has become permanent. It will never stop now. They will never normalize. Why? Because they can’t. The global financial system cannot stand on it’s own.
    Blowing ever higher asset bubbles is the only choice they have or risk an epic unwind. The entire value of fiat money rests on faith in it’s stability. As can be seen in every nation where that faith has been broken, then that currency becomes worthless.
    The elite are very frightened and moving capital. Rich family offices around the world are stockpiling cash ahead of a market meltdown. According to Lipper Alpha Insight’s fund asset groups, show 3Q 2019 cash inflows increased by $221.5 billion, for the year rose to $349.7 billion. Money market funds have not seen this level of net inflows since the great financial crisis.

  10. CrazyCooter
    Oct 21, 2019 at 2:11 am

    Call me *cough* crazy, but … I get the youtube thing … but I need to read. I process very differently when I read vs when I listen. If you ultimately post transcripts, as policy, so I know I wont miss out, I will skip the video every time – and happily. I don’t care if I am a day or three late to the party. It’s just me – but I hate the audio presentation (unless it is good music, then I am all in). I enjoy your blog, your insight, and the time you (for the most part) volenteer.

    But, as a long time reader – I need to read it, not hear it.

    Thanks for all you do!

    Regards,

    Cooter

    • Oct 21, 2019 at 9:15 am

      CrazyCooter,

      Stay tuned. I have been posting the transcript, usually by midweek. So make sure to check back Wed or Thu.

      • AlamedaRenter
        Oct 21, 2019 at 6:34 pm

        Any chance this could be actual podcast for download?

        I used podcast addict app and like to download shows for my BART ride…also I do that at home on WiFi so I don’t burn data.

        Any chance that could happen?

        Thanks as always.

        • Oct 21, 2019 at 11:26 pm

          If you want to download the podcasts to your smartphone, there are apps for that, including Google’s app. I have not done this, so I don’t know personally. But you can Google for instructions with something like this:

          youtube app download podcasts

    • sunny129
      Oct 21, 2019 at 11:58 am

      I feel the same, here!

  11. When they can't
    Oct 21, 2019 at 2:24 am

    CB’s will continue to inflate until they no longer have control. That’s when a new system gets created after much pain is suffered by all. Hopefully I’ll be gone by then because it will be ugly.

  12. Old-school
    Oct 21, 2019 at 3:44 am

    Christine Legarde is very talented politician and excellent communicator. She is a lawyer and not an economist. She is going to be the one to try to save Europe through further consolidation as monetary policy has reached its limit.

    It’s a politician’s job now as central banking has failed and maybe that is good because money printing can’t save a welfare state.

    • Debt Wazoo
      Oct 21, 2019 at 4:22 am

      MOAR EUROPE is always the answer.

      Even when Too Much Europe is the problem.

    • Meh2.72
      Oct 21, 2019 at 6:41 am

      Hard to tell if you are being sarcastic or not. I am not certain what skills Ms Legarde has. What is known is that she has been convicted of fraud and very recently and in the same space she is in currently:
      https://www.independent.co.uk/news/world/europe/christine-lagarde-convicted-imf-head-found-guilty-of-negligence-in-fraud-trial-a7484586.html

      • wkevinw
        Oct 21, 2019 at 11:28 am

        Legarde is just another of these financiers that are so elitist they can’t see the real world. Your link is a perfect example, along with all the “no recession, no housing bubble, etc. comments from the US Fed presidents”- truly pathetic individuals on this score.

        Their “communication and political skill” is all that keeps them in these jobs. It is NOT their economics or market skills.

  13. Iamafan
    Oct 21, 2019 at 4:18 am

    What if 2007-2009 was the great unwind and taping over it with QE and not-QE was just a temporary fix? Maybe we are looking at even a greater unwind that will be scary as hell. Just look all the malinvesments and the fake debt-driven wealth effects around you. You can wake up and hunker down or do nothing hoping the Fed has all the answers. I like going back to basics, and that’s how I live my life. No debt and cooking real food at home with family. The rest is noise.

    • Dale
      Oct 21, 2019 at 11:40 am

      As Jerome Powell is proving, the Fed will do anything in its power to prevent any realization of true value.

      The problem is that its actions build more instabilities into the financial system, a la Minsky.

      • Javert Chip
        Oct 21, 2019 at 3:38 pm

        Dale:

        Bad news.

        Financially, there never has been, there is not now, and there never will be a “true value” of anything.

        EVERYTHNG is relative.

        • GP
          Oct 22, 2019 at 3:12 am

          I believe Dale was referring to market determined value as true value.

          Fed has been suppressing that and creating its own zone of reality.

  14. MC01
    Oct 21, 2019 at 5:01 am

    “Disruptive” was exactly the word used by WOW and Primera Air to describe their business model.
    What astonished me is not that family and pension funds from Norway, Sweden, Iceland and Denmark fell for it (losing quite a few billions in the process), but that so many people who should have known better turned into unpaid publicists for these financial black holes by unquestioningly buying into what turned out to be nothing more than a whole lot of mumbo jumbo.

    As I was recently in Bilbao (another city riding high on the cash burning phenomenon, albeit not as much as Berlin and Munich) I made a point of looking at food delivery riders: I stopped counting at six different logos. And I wondered: imagine being at at the VC meeting to finance these companies. Did anybody raise the question “what makes your food delivery service different from all the others?” or merely asked “how long do you estimate it will take your company to become profitable?”. But that’s the problem with VC these days: they often have no idea of the sector they are investing in and/or rarely venture out in the real world. If they did funding for food delivery companies and bike and scooter share companies would literally evaporate overnight.

    A few years back I was offered the “opportunity” to invest in a startup which aimed at producing a dating app for people over 30. Yes, I am always on the lookout for creative ways to waste my money: you cannot take it with you after all and I don’t want my sister-in-law to enjoy a single rusty cent. ;-)
    As I knew absolutely nothing about these dating things but was intrigued by the concept, I put maybe ten hours of research into it over ten days, at least not to sound like like a complete idiot. Result: I knew far more about these things than everybody else at the VC meeting. These supposedly sophisticated investors had no idea what a “bot” is nor that dating sites/app users’ chief complaint is the amount of fraudulent profiles and these folks are ready to pay good money for a honest service. It was a mess, really, but it taught me a lot of valuable lessons on how the whole startup thing works.

    Please note that not all VC are fools and chicken waiting to be plucked: many of them are merely betting on unloading their early investment at a large profit to somebody else down the road. They don’t care if there are a dozen food delivery services already in operation in a given city, if people are literally up in arms against scooter share services or if dating apps are a scam: what matters is that somebody will buy their stake at an inflated valuation in three years. These latecomers will try to repeat the trick, hope in an IPO or be simply wiped out. I always pray for the latter to teach a lesson but it seems mankind has learned not to learn any lesson.

    • Xabier
      Oct 21, 2019 at 5:24 am

      All those delivery companies in Bilbao are, of course, built on young people willing to work for next to nothing on 1 -week ‘contracts’ : it’s great to be an employer these days in Spain.

      On the whole, by the time one has learned all the lessons, one is half-blind, deaf and barely able to speak.

      And guess what, the young aren’t listening.

      And more: you’re so done in after gaining that experience, that going fishing and having a beer seems more worthwhile than trying to teach anyone anything.

      I’ve washed my hands of all responsibility after having failed to impress the most basic elements of reality to the next generation, in the gentlest terms. No preaching, no BS, but it’s not the story they want to be told…..

      • CreditGB
        Oct 21, 2019 at 10:27 am

        Xabier, Going fishing and having a beer. Good advice! Compared to what I have seen pass for business or investing intelligence in the past decade, it is a refreshing thought and I may do same. At least to be in a real world, be fed, and my thirst quenched.

      • Unamused
        Oct 21, 2019 at 11:02 am

        going fishing and having a beer seems more worthwhile than trying to teach anyone anything.

        Welcome to my world. Second star to the right and straight on till morning.

        • Oct 21, 2019 at 12:38 pm

          I make it a rule not to invest in anything I do not have a personal interest in, no FB, no Netflix. And things I do not understand. In the late 2000s my broker ask me “why don’t you invest in financial companies?” I said ” I don’t know how they make their money.” When the market crashed I called him and I said “See, I told you I didn’t know they make their money, and I was right!”

    • Dale
      Oct 21, 2019 at 11:37 am

      Early VCs expect a greater fool to make their investments profitable because the greater fools have been very reliable.

      Incidentally, kudos to the new Uber CEO. It’s true the stock has been dropping, but it is still far above any reasonable valuation (i.e., zero).

    • Harrold
      Oct 21, 2019 at 11:42 am

      “Please note that not all VC are fools”

      Thats pretty much how VCs work.

      I saw an interview with Peter Thiel where he pretty much admitted he was throwing money at a wall to see what sticks. He said out of 200 investments, 180 would be completely worthless and he would lose all his investments. 1 would be a rock star ( eg Facebook ), 4 would be semi successful, and 15 would return their investment by being bought out by another hi-tech company.

  15. Old-school
    Oct 21, 2019 at 5:48 am

    Ten year treasury yield and SP500 yield being right at the official inflation rate tell you all you need know. You aren’t going to fund your retirement through growth. Pension funds are going to blow.

    • Unamused
      Oct 21, 2019 at 11:04 am

      Pension funds are going to blow.

      And indirectly confiscated. Your masters figure they’ve been overpaying you guys for seventy years and they want their money back. With interest. And penalties.

      • NBay
        Oct 21, 2019 at 3:45 pm

        Yeah, FDR really pissed those Gilded Age guys off by screwing with God’s will.

  16. Michael Engel
    Oct 21, 2019 at 5:51 am

    1) Most US corp are dehydrated, but investors know
    nothing about it.
    2) Once in toxemia phase, a whole spectrum of chronic diseases
    can destroy them.
    3) In 2008 the financial system was severely dehydrated.
    The Fed and other CB provided liquidity and cut interest rates to zero or NR .
    4) It caused the debt to rise even to a much higher level.
    5) Money markets, hedge funds, shadow banks, the $4T ETF
    industry, Chinese banks, other global banks seeking emergency $ funds – have no access to the Fed desk.
    6) On Sept 19 Repo was 9%, well above EFFR @ 2.3%.
    7) No chart will show this spike.
    8) The Fed provided liquidity and tried to temp dealers to lend, but they refused.
    9) Either they couldn’t, or its very risky out there.
    10) The first bout of toxemia is over. In the future financial markets are likely to suffer from more severe events.

    • Iamafan
      Oct 21, 2019 at 9:12 am

      @Michael Engel

      I don’t think even the Fed’s “desk” is invincible.
      With currently a $4 trillion balance sheet already, why would anyone believe they are simply monetizing debt?
      Once the foreigners lose faith, we enter a much different ball game.
      I don’t think the American people will even allow more obvious bail-outs.

      • sunny129
        Oct 21, 2019 at 12:03 pm

        ‘I don’t think the American people will even allow more obvious bail-outs.’

        Sorry!
        Congress is captive to Wall St including Banks!
        Nearly 75% of public was against TARP! But Congress passed it any way, 2nd time!

      • JZ
        Oct 21, 2019 at 1:38 pm

        The entire US Navy fleet, carriers with FA18 on them telling the world use $ to buy oil and when you get $, buy US treasury or fund startups. Is that incinvible to you? There is NO more market, every price level and how to do things is determined by political power which is defined as “use or promise to use violence as a threat to move agenda”.

      • timbers
        Oct 21, 2019 at 2:04 pm

        “I don’t think the American people will even allow more obvious bail-outs.”

        Why do you think the American people get to have a say in more bailouts?

        • Iamafan
          Oct 21, 2019 at 2:29 pm

          To all of the above:
          Have you actually listened to the socialist contenders?
          They will twist this and get MMT.

    • sunny129
      Oct 21, 2019 at 12:05 pm

      This WHOLE, corrupt sick system will be crushed by it’s own weight, when there are no resources are left to rescue!

  17. medial axis
    Oct 21, 2019 at 7:23 am

    Just as negative rates are the new the norm, losses are the new profit. We’ve gone through the looking-glass and, as the red queen told Alice, you have to run just to stay still. Seems Trump is Humpty Dumpty. Will he fall (off a wall)? Perhaps Boris is the white knight? He’s certainly inventive. But who is Tweedledee and who is Tweedledum?

  18. breamrod
    Oct 21, 2019 at 7:39 am

    this is all heading to a debt jubilee some day. When is anybody’s guess. As things start to implode the central bank will print and everything will be fine for awhile but as Wolf says ” nothing goes to heck in a straight line” but to heck it will go as sure as the grass grows and the waters flow.

    • economicminor
      Oct 21, 2019 at 10:39 pm

      I see people post debt jubilee and I can’t figure out how that actually would work.

      A debt jubilee makes no sense to me in a fiat system where all money is debt. What do you envision? Do you mean all debt or just some? Will that make WeWork whole? Or make Tesla a functioning company making cars on time and at a profit?

      • Oct 21, 2019 at 11:49 pm

        We don’t need a debt jubilee in the US because these are not biblical times anymore. We have the US bankruptcy code by which some personal and business debts can be shed under the supervision of a bankruptcy court. For a business, it also often means transfer of ownership of the business or assets to the creditors.

        People who want a debt jubilee are dreaming. But there is a way to shed debts, and that is through a debt restructuring either in bankruptcy court — or outside of it under the threat of a bankruptcy filing.

  19. Just Some Random Guy
    Oct 21, 2019 at 8:52 am

    In the late 90s there were all sorts of dumb tech companies that went under. But the late 90s also revolutionized the world and built the tech foundation for the digital world of today.

    Same thing happening now. Sure, lots of start ups will go under. Start ups have been going under forever. But there’s another revolution going on in biotech, cloud, big data, autonomous cars, etc.

    If you want to sit out this revolution, go ahead. But 10 years from now don’t complain about how unfair it is that you can’t ever get ahead cuz…reasons!!

  20. Paulo
    Oct 21, 2019 at 9:07 am

    Great and enjoyable comments. For me, the problem is complexity and being on a tech plateau/tech cliff. On one hand AI and data transfer can usher in a dystopian World of fewer and fewer jobs for an increasingly left behind population with no acceptable way to share the benefits, and on the other hand I feel we have reached a point of absurd complexity.

    Do we need vehicles that think for us, drive for us, and protect with 10 airbags should we override the sensors and eff up? Of course not. Or a ‘fridge that keeps track of our groceries, phones that control our home heating, and washers that lock us out of the ‘cycle’ for whatever reason? Here’s one you all might know. I was at my sisters last week and they wanted to share a particular song with us. Suddenly, my sister spoke in a loud and commanding voice, “Alexa, play ______ by ______”. I was horrified. Only later did I think what I should have done (instead of taking jibes at sis)….should have said, “Alexa, play porn orgasm sounds”. Only thought of it on the way home. My wife said it was like listening to Hal from 2001 Space Odyssey. You folks might be used to it, but I was shaken to see my hopelessly limited tech sister embrace such a bizarre application. Respectfully, she doesn’t know a router from a cable modem but talks to Alexa. Later that evening I brought up Alexa and she shhshed me because I guess Alexa might have started up and summoned the roomba vacuum or turned on the dishwasher, or something worse.

    People talk into their watches. Yesterday, my wife and I had a disagreement. I thought the guy walking out of the store mumbling to himself was deranged and kept an eye out for him. She thought he was talking on a hands free device. And my amalgym fillings are picking up AM signals from Mars.

    All on borrowed money! No, we are due for a comeuppance. Instead of Easter Island stone heads our descendents will skindive flooded coastal cities for kitchen utensils and metal.

    • Just Some Random Guy
      Oct 21, 2019 at 10:35 am

      I was at my sisters last week and they wanted to share a particular song with us. Suddenly, my sister spoke in a loud and commanding voice, “Alexa, play ______ by ______”. I was horrified.

      ____

      Up until last week you hadn’t heard of Alexa, or voice recognition, and you were horrified by it?

      You can be a Luddite if you want. I like Alexa, I like my ever increasing smart home. I have a home security system with cameras I can access from my phone. I can control the heating/cooling from my home as well. I turn down the A/C or heat, when I leave and then when I’m heading home turn it back so the temp is where I want it when I walk through the door. Roomba? I have RoboVac, which is better and yes it’s on Alexa and I can send RoboVac out via voice. I have it set to automatically go out at 1am every night. Wake up to clean floors! What’s cool is Alexa will tell me when the sensors are dirty or when the filter needs changing.

      You don’t like airbags? OK. That’s a new one. I can’t imagine a reason why, but whatever makes you happy. I also like how my car brakes on its own, since the computer inside the car has exponentially faster reaction time than I do. And I love the backup camera and all the sensors 360 around the car that tell me if I’m about to hit anything. Also very cool is how my car self diagnoses itself. I got an email from the dealer last week saying they got an alert from my car that the alternator may be going since the voltage readings were low. I went in, and sure enough the alternator was replaced, warranty item, $0 cost to me. Much better than finding out the alternator was dead the hard way, ie I’m stuck somewhere with a dead battery in the middle of winter.

      I like being able to tell Alexa to play music in my car (yes you can do that too!!). I also like never having to buy a CD again. Amazon music costs $100 a year I think, for the whole family. Commercial free unlimited streaming of virtually any song ever recorded.

      I know there are old timers out there who hate all this new fangled stuff. In my day we cranked windows manually and we liked it damn it!! OK, go with that. But the world is moving on whether you like it or not.

      • Oct 21, 2019 at 11:02 am

        Just Some Random Guy,

        I’m so glad you and people like you exist in very large and growing numbers. You’re the low-hanging fruit for data gatherers of all types. You protect me because I’m trying hard to be the higher-hanging fruit and harder to get to. Some of these protective measures are inconvenient, such as putting my smartphone on airplane mode when I enter a store or similar location, clearing the cache of my browser several times a day, changing my IP address periodically, banning any internet-connected devices or appliances from the house (other than computers and phones), etc.

        I’m particularly vigilant with my smartphone. I limit its use, disable most functions, prohibit apps’ access to anything, including the internet, don’t install new apps, and the like (I have an iPhone, and these things can be done on an iPhone). It’s a constant battle, and I’m losing that war, I know. But one thing is really helpful: being able to hide behind all the low-hanging fruit. It gives me comfort. And the more low-hanging fruit there is, the more protected I feel. So thank you!!!

        • RD Blakeslee
          Oct 21, 2019 at 11:28 am

          I feel I’m losing my war too, Wolf – it’s of a lower order than yours – just trying to preserve some privacy.

          In spite of the fact I don’t connect ANYTHING to the internet except one CPU, and use only one “dumb” flip cell phone, I still get an ever-increasing volume of ads obviously targeted using personal info about me in my trash email folder, as well as robocalls on the phone.

          The AGs of all fifty states have gotten together with the twelve largest cell phone carriers, to try and stop the robocalls. They admit success will be limited, at best, but any improvement will be welcome.

        • Trinacria
          Oct 21, 2019 at 11:30 am

          Amen and well said Mr. Wolf ! And, thanks for some ideas as I try to shield myself from some of this insanity as well. It is not a question of being a “Luddite” as Mr. Just some random guys states, rather about protecting ones and practicing moderation.

        • Just Some Random Guy
          Oct 21, 2019 at 11:39 am

          Amazon knows what music I like so they can market to me based on those tastes. Big deal. Seriously, I stopped caring about that stuff. I can choose to enjoy the benefits of the digital world or fight a battle I can never win. I went with option 1.

          And you can be as diligent as you want and it doesn’t matter, Google and Apple still know everything about you, just like it knows everything about me. If you think otherwise, you’re naive.

        • Xabier
          Oct 21, 2019 at 12:34 pm

          I was reading a magazine article on very high-end properties in the UK: the agents were saying -to my surprise – that the super-rich are now moving away from all the internet-enabled, Alexa crap, and going for ‘simplicity’and doing things manually.

          Or their servants, one supposes.

          It’s just not that exciting or even so much more convenient.

        • Oct 21, 2019 at 2:06 pm

          Good point! I also started to act on that recently. I decided to keep my new computers “Google-free”. No gmail etc accounts, using Firefox instead of Chrome. Little consolation of course as I have “infested” machines in the same network behind the same IP, but still…

          Somehow, I was triggered by not the ads, but the emails from Google where they say how many hours I walked last month, how many hours spent in the car, which places I visited…

          Thinking of getting rid of the gmail account

        • Ensign_Nemo
          Oct 22, 2019 at 2:04 am

          Try installing the Brave browser instead of Chrome.

          From my current start page for Brave:

          “1,220,060 Ads and Trackers Blocked
          10,969 HTTPS Upgrades
          16.9 hours Estimated Time Saved”

          [I threw away my TV and use my computer for accessing video content, so I spend extra time on the computer.]

          There are a few minor annoyances – i.e., I’d advise you to turn off the autofill feature for the address window, as it’s really annoying to start to type “www.” and get it autofilled to ‘Walmart.com’ at the first ‘w’. The automute feature also sometimes clicks the sound off when I try to switch tabs. But it’s still much, much better than Chrome. It also sticks a thumb in the eye of Google, as they can’t monetize my surfing.

          Try accessing a crazy site such as Zerohedge with and without an ad blocker. The difference is why it makes sense to use Brave.

          P.S. Use Qwant (qwant.com) for searching. Deny Google even more user data.

        • Lisa_Hooker
          Oct 23, 2019 at 12:56 pm

          You will all rue the day you did not invest in my automatic AI-controlled electric dog polisher.

      • Petunia
        Oct 21, 2019 at 11:57 am

        I know at least two people who have had their robot vacs go over dog poop and spread it all over their homes. They had to deep clean everything. I’m keeping my Shark vac.

        • Just Some Random Guy
          Oct 21, 2019 at 12:57 pm

          That would be nasty. Luckily for me, the dogs sleep upstairs with me, while RoboVac does its thing downstairs at night.

          And RoboVac isn’t a substitute for the Shark (which I also have). You still need to do a weekly vacuum, since RoboVac doesn’t deep clean carpets/rugs. But just to pick up pet hair, dust, crumbs, etc on a daily basis, it’s really good.

          But again, you’re using an example of something that may happen to maybe 1% of the population, to downplay the entire technology. It’s like saying I know 2 people who were in car accidents so I will never drive. Yeah life has risks. You can insulate yourself in a bubble and never step out of the house or you can accept those risks and go about your business.

      • NBay
        Oct 21, 2019 at 4:01 pm

        Rand-
        Always wondered who all those ads were directed at, so thanks.
        I knew it wasn’t me.

        • WES
          Oct 21, 2019 at 5:55 pm

          NBay: I like to look up stupid stuff like industrial slurry pumps and then sit back and laugh at the stupid targeted ads! AI can be so stupid it is funny! When bored, I look up something else!

      • fajensen
        Oct 22, 2019 at 4:45 am

        I like Alexa, I like my ever increasing smart home. ….

        But … WHY?

        All that ‘smart’ stuff seems to be doing, to me anyway, is giving you ever more homework first by managing it and then interacting with it!

        I like my home to be completely dumb and unreasoning so it will leave me in peace when I get home. When I set the thermostat to something I want it to stay set and not arguing the toss about it.

      • SiliconValleySkeptic
        Oct 22, 2019 at 4:17 pm

        A lesson I’ve learned from experience: the more electronics you have to help you save time, the more you have to be vigilant about their upkeep.

        Adding more things with more software adds more glitches, updates, and upkeep.

        I try to limit the number of apps I use as well to keep the number of things that require upkeep to a bare minimum.

        The siren song is “convenience” but when all your conveniences keep demanding two or three minutes here, five or ten minutes there, to keep things running properly, it becomes a nightmare of multi-tasking.

    • RD Blakeslee
      Oct 21, 2019 at 10:44 am

      They won’t even have to skin dive, Paulo.

      There is already a huge raft of floating plastic doodads in the pacific, whence”they” can deduce everything worrthwhile (?) about our civilization.

    • sierra7
      Oct 22, 2019 at 10:29 pm

      Paulo:
      The “young” are adapting faster than you can blink!
      They will become “The Borg” very very fast!
      I watch and hear about all my grandchildren and their experiences with jobs, housing etc.
      Believe you me, they are “adapting”!

  21. CreditGB
    Oct 21, 2019 at 10:07 am

    Money is hard to earn, but easy to lose. I don’t need to send it into a known cash burner, and never have.

  22. Jeff T.
    Oct 21, 2019 at 10:10 am

    Think about how a Viking might have felt as they looked upon all of the Roman marvels falling into disrepair as they ransacked Britain. A society that could create wonderful inventions left to a mob that could only destroy. Life does go in cycles of very long duration.

    • Petunia
      Oct 21, 2019 at 12:12 pm

      The average Roman could no longer distinguish between Roman oppression or barbarian oppression and abandoned the city to its fate.

      • NBay
        Oct 21, 2019 at 4:04 pm

        Yeah, the average Roman was a slave…..the fossil fuel of the times.

    • PaulJ
      Oct 21, 2019 at 7:32 pm

      Downunder we call them left-wingers and just like the Barbarians, they like to destroy society and communities without offering any better alternative.

      https://thefederalistpapers.org/us/cartoon-reveals-the-war-going-on-between-modernity-and-traditionalism-in-america

      Something like this link suggests.

  23. CreditGB
    Oct 21, 2019 at 10:20 am

    I was backing my new pickup truck in a field the other day when it suddenly jerked to a hard stop. Thinking I’d hit a hidden rock or stump, I jumped out and went around the back to see….nothing but tall grass, same as everywhere else in the field. Returned to the cab and proceeded to back again. A few feet later, the same, jolted to a stop like it had been jammed into park.

    Apparently the “sensors” were unable to tell the difference between thick grass and a solid object. Those sensors are now permanently switched off.

    If this is “tech”, you can damn well keep it.

    • Unamused
      Oct 21, 2019 at 11:33 am

      Those sensors are now permanently switched off.

      Nothing like having a vehicle that does your thinking for you, eh, one that’s an utter idiot. They’re happy they got your money before you figured out the scam. They usually are.

      You won’t be able to switch them off in next year’s model because they’ll re-engineer it so the vehicle won’t start unless the useless sensors that don’t work properly are fully functional. Sort of like having a refrigerator with a door that won’t open unless it has an active connection to the internet.

      Here’s an important insight for you: Modern marketing technique requires you to buy something expensive you really don’t want, don’t need, and have no real use for, in order to buy something you do.

      If this is “tech”, you can damn well keep it.

      That costs extra. These days it’s nearly impossible to purchase a new vehicle that isn’t crammed with electronic crap you don’t need, doesn’t work, and costs a mint to repair, all of it overpriced.

      It’s why we’ve kept the Bentley. You might think we converted it to electric hydrogen to avoid oil changes and fuel stops, but mostly it was to give the finger to the oil cartel.

      “Smart technology”, FYI, is marketing code for “spyware enabled.”

      • NBay
        Oct 21, 2019 at 3:35 pm

        Of course the next move will be some sort of bodily implants so you don’t even have to speak, but then implants are really nothing new…..nothing new at all.

        https://www.ncbi.nlm.nih.gov/pubmed/30250470

        There is much much more to history than just the “culture” we happen to find our short lives in.

        Take care of your body, it’s all you have or ever will have.

        • Unamused
          Oct 21, 2019 at 6:42 pm

          Take care of your body, it’s all you have or ever will have.

          Until you have been monetized and/or assimilated. They’ll still let you use it, though, under supervision.

          Coercive marketing can get people to agree to just about anything, although it’s not all that hard to make most people desperate to sell themselves out to a corporation if offered a living wage, easy credit terms, or the chance to express their unique individuality by imitating everybody else.

  24. Oct 21, 2019 at 11:38 am

    There are any number of rational reasons to believe that cash burn companies are okay. Amazon is the biggest cash burn company ever. The bizarro ponzi scheme, pouring money into the cash burn furnace has a certain inverse logic. Easy credit fuels higher asset values, how can you lose? Unlike the tech bubble some of these are real businesses, office space, transportation. Add to that the decaying set of government debt, by which corporate debt looks much better. Party on

    • RD Blakeslee
      Oct 21, 2019 at 12:21 pm

      Lumping all “cash burn” companies together makes no sense.

      All of them “burn cash” at startup. Some use it to build productive capital, e.g. Amazon, which is now profitable.

  25. Unamused
    Oct 21, 2019 at 11:44 am

    How cash-burn machines power the real economy

    With maximum inefficiency, if at all, but with optimal insider profit margins.

    Remember this, and keep it with you, always: the goal here is to make as much money as possible in the minimum amount of time. If your victims – er, customers, actually get some useful product or service for their money, well, that was completely unintentional.

  26. Just Some Random Guy
    Oct 21, 2019 at 11:44 am

    Reading the comments here is eye opening. I didn’t realize how much fear of tech there is out there. I assume the average age of posters has to be pretty high. I guess it makes sense, people are scared of new things. In the early 1900s a lot of people were also scared of the horseless carriage, telephones, radios, etc. Nothing new.

    And 50 years from now, I’ll probably be scared of whatever new and scary tech is being developed then. Probably something we can’t even fathom today.

    • Kent
      Oct 21, 2019 at 3:07 pm

      “Probably something we can’t even fathom today.”

      There is nothing that exists today that I couldn’t fathom 40 years ago. Our cars had automatic windows. We had radar and lasers. Putting them together to notify you that someone was next to you wouldn’t have seemed unusual. I just think we wouldn’t be willing to spend the extra money when you get the same effect by glancing to your side to see if their is a car in your blind spot.

      We had pizza delivery 40 years ago. DoorDash is not a big deal. We didn’t need roombas. Vacuuming takes 20 minutes a week. And we had wives. We didn’t need to tell Alexa to play music. We threw a cd in the cd player.

      I think my point is that while this stuff seems like rocket science to some, to most of us older folks it adds a very slight improvement in convenience. But that slight convenience isn’t that big of a deal. So I am going to guess that in 40 years, you’ll look around you and be amazed at how little of importance has changed. But you’ll be bombarded with advertising about how cool it all is.

      • Just Some Random Guy
        Oct 21, 2019 at 5:23 pm

        Think of any song recorded in the past 50 years and Alexa will play it for you instantly. Try that using the CD method.

        Whatever works for you though. Be happy.

      • Jack
        Oct 21, 2019 at 7:27 pm

        “And we had wives”.

        … the good old days, you wouldn’t be called “misogynist” if you asked the wife to make you a coffee either :}

        In a serious note though, the amount of stored energy in this fake market is going to be released in a seismic proportion, Faith in most Fiat currencies has been eroded to the bone!

        Next up a bone crushing, soul destroying events. So yeah you have to make your own coffee and make it pretty strong ( double espresso)

    • Unamused
      Oct 21, 2019 at 6:52 pm

      I didn’t realize how much fear of tech there is out there.

      Most people get the picture when their daughter starts referring to Alexa as “Mommy” and starts doing mysterious things for no apparent reason. You just need more clues, that’s all.

    • TXRancher
      Oct 21, 2019 at 8:13 pm

      “people scared of new things”

      I don’t think the commenters are scared of technology but are concerned about their right to privacy that the younger generation apparently has no concern. And some of the newfangled technology is mostly like bubble gum with no real value added.

    • MC01
      Oct 22, 2019 at 1:19 am

      Does anybody remember the name “John Titor”? He was that crazy guy who went around the Internet in 2000 claiming to be from the future and that he needed an IBM 5100 to save the world from the 2038 UNIX timeout because it contained a “secret feature”.
      People went literally wild over him.

      Leaving aside such facts as that from here to 2038 even the cheapest computers will probably run on 256-bit systems if not something far more advanced (and hence be immune to the UNIX timeout which will only affect 32-bit systems) or that a civilization able to tame a singularity should have no problems solving a software bug, this was a Luddite’s wild fantasy: a computer from 1975 coming to the rescue!

    • fajensen
      Oct 22, 2019 at 5:33 am

      Just so you know, about ‘fear’: I am not scared of ‘new things’. I am scared of ‘the old things’ -> People, and what people will do to other people whenever they get the shiny-and-new tools first!

      Some years ago, I wrote some the things that are listening to your phone calls. Somebody pretty much like me, maybe smarter, is designing those algorithms that you let into your home to listen to your family, run your life for you and that Government / Corporations will later rely on to run your life for their benefit.

      Now, would I be doing all that design so it made my life worse (by sitting in an office all the time tuning code while reading papers on behavioural psychology and human cognition) and your life more pleasant and easier because you won’t have to do anything?

      No! I would not, I would design my algorithm to make you work for me, ‘nudging’ it’s called, using the human wetware bugs to ‘somehow’ just making everything ‘regular folks’ do, that I benefit from, easier, more enjoyable and pleasant, rewarding, when my programming is followed.

      Kinda like I do with the flat-coated retriever. She doesn’t know *why* she must find and pick up dead things, then give them to me. She just enjoys doing it so much and she gets a treat too, so she is happy performing her function: Retrieving.

      That is basically what ‘big-data tech people’ wants to do with people and so far ‘we’ are doing very well indeed, because Government wants to do similar things with people also. Only, it is felt to be better if they don’t state it as policy and just kinda let those tech-giants deliver computing resources for education services and of course management of the Government data collections on people, provisioning of ‘innovative’ public services around them, on the premise that when they come up with something good on ‘people management’, they might share it!?

      Or Else – Regulation might suddenly happen! That is The Plan!


      That regulation can be happening *just* because of ‘human rights’ is the ‘No 1’ reason for the tech-driven, on-line, hatred of Germany and the EU.

    • Xabier
      Oct 22, 2019 at 5:51 am

      People are not scared and doddery old fools: they are objecting to the growing sinister micro-manipulation of their private lives by corporations, and the learned physical uselessness and profound naivety of the younger generation.

      Rats wise enough to know that it’s a trap…..

      Look forward to hearing how your implant goes. :)

      • Trinacria
        Oct 22, 2019 at 8:33 am

        Mr. Random – from my viewpoint – doesn’t seem to get it….I (as well as many others) don’t fear technology. As John Stuart Mill said, “it’s not that most people get it wrong, rather they just get it backwards”…like Mr. Random seems to do.

        I fear certain people and what they do when armed with such technology. I fear the dehumanizing effects of technology….we’ve all seen the pictures of a couple at dinner texting away while ignoring each other. This is having a profound (negative effect on human interaction)….just look at the ever increasing divorce rates as one example. The reality, from my perch, is that technology, when overused tends to enslave people. We have to fix the technology constantly. Hell, appliances don’t last anymore….what a huge expense to constantly replace appliances…at a time when so many in our country have a tough time meeting an emergency that requires say a payment of $1,500. Besides, does one really need technology to keep track of your grocery list? Technology is good when it results in meaningful advances in say medical care that truly better one’s life. From what I have read, the coming 5G in cell phones may well contribute to male infertility…if true, simply beyond belief and words. Tech is not when used to genetically modify food….an so on. This stuff is supposed to be tools, but it ends up directing us if one is not careful. The world is neurotic enough. Carl Jung said it best when describing the fact that the problems that most people are really spiritual in nature. And technology was not as pervasive at that time. For me personally, the more stuff I have the unhappier I am. I use, but limit the technology because it has diminishing returns. It is so liberating to purge one’s life of stuff. Less is truly, truly more. Unfortunately, far too many people don’t believe this, to their detriment. Unbridled consumerism is only good for the companies that sell all this crap. Gird your loins!!!

    • NBay
      Oct 22, 2019 at 8:04 pm

      Odd you would choose the word “fear” of tech, Random, very odd.
      I sure as hell don’t fear it, so I’m not sure what is implied there.

      I also don’t consider layers of code writing “tech”. I mean, seems to me lawyers/politicians do pretty much the same thing.

  27. unit472
    Oct 21, 2019 at 12:34 pm

    I’d put the shale oil industry in a separate bucket from the Ubers and WeWorks. Energy is a strategic resource Netflix isn’t. Some small private frackers can go bankrupt but the US isn’t going to let Exxon, Chevron, Conoco etc go bust which isn’t going to happen anyway. They know the business and can borrow money at much lower rates than some wildcat driller. They are also vertically integrated so can move oil and gas from the wellhead all the way to retail distribution.

    Otherwise the ‘unicorns’ aren’t much different thaN government entitlement spending except they can’t tax or borrow like a government and their customers won’t riot (we’ll have to see if their employees do when the end comes).

    In many ways the Central Banks have put themselves in the position of a incompetent Alex Honnold half way up El Capitan. They can’t climb down as that is even more dangerous than going ever higher so they have to keep inflating their asset bubbles until they lose their grip and fall.

    • Jack
      Oct 21, 2019 at 7:35 pm

      Fully agree with your sentiments that all cash burners are Not equal.

      The problem with the frackers though is the complexities that lie in their approach to underground water resources, it is a detrimental to the profitability long term.

      How the market might pan out is anyone’s guess. Depending fully on ( REAL) new technology that might utilize concepts like Fusion or miniature nuclear devices!

  28. Iapetus
    Oct 21, 2019 at 12:55 pm

    I can’t help thinking we haven’t learned much since the Financial Crisis of 2007 – 2008. During this last financial crisis, massive losses were created when investors poured imprudent and highly leveraged sums into mortgage backed securities that were filled with questionable consumer loans. These consumer loans were called ‘subprime’, and many were questionable because underwriting deteriorated to the degree that many borrowers had No Income, No Job, No Assets (colloquially called “NINJA” loans).

    The current situation in our markets is imprudent and highly leveraged sums have now been poured into questionable corporate investments. These corporate investments include venture capital, IPO’s, equities, leveraged loans, and high yield bonds. Many of these investments are questionable because the corporations backing them have Negative Income with no path to profitability, No Governance, and (almost) no Physical Assets to liquidate in bankruptcy (what you could colloquially call “NINGPA” investments). This is essentially the same greater fools game that was played with housing prices before the 2007 crash.

    So similar playbook to 2007 – 2008 Financial crisis, except what backs these investments has switched from consumer to corporate obligations.

    This might seem like I’m stating the obvious but any company that constantly generates massive losses, and has virtually no assets will not be able to pay back its investors.

    • medial axis
      Oct 21, 2019 at 1:36 pm

      We’ve learned central banks are unable to control the economy. Also, that there are alternative forms of money, Libra and bitcoin. The former, being centralised, can be subject to regulatory pressure directly while the latter, being decentralised, cannot, only the on and off ramps.

  29. Iamafan
    Oct 21, 2019 at 1:40 pm

    Somehow I’ve gotta think this will be a small issue in the next election. If the 1% own more than 90% of the stocks, I wouldn’t be surprised if there is sauchenfraude if and when stock prices fall. The small guy could say so what if the rich lose some paper money.

    House prices dropping will hurt a lot of people. So will job losses. But portfolio losses, who cares?

    • unit472
      Oct 21, 2019 at 2:21 pm

      True, no one will weep if the Larry Ellison’s and Jeff Bezos of the world are reduced to their last billion but millions of people with defined benefit pensions or just plain old 401k and IRA accounts will suffer losses too. Your homeowners insurance might not be any good too if hurricane or tornado blows a tree down on your roof.

      I am not entirely against a wealth tax though. If Bezos or Musk want to invest money in some new project and it succeeds they should be rewarded. OTOH I don’t see any reason why some billionaire should not have to pay for the privilege of hanging $100 million dollar paintings on his wall or have a garage full of Bugattis and Duesenbergs. How does investing in antiques or dead painters benefit anyone.

      • Iamafan
        Oct 21, 2019 at 2:38 pm

        Me thinks all these financial shenanigans have actually caused a big social issue.
        Most details will be lost in the us vs them warfare. The young still have small 401k balances if they have any. It’s their future that’s worrisome.

        The stuff happening in Hong Kong, France, Ecuador, etc. etc. gives plenty of encouragement here. Even Dalio is scary honest.

    • fajensen
      Oct 22, 2019 at 5:38 am

      Ah, but: The 1% will sell to ‘you’ before the crash, or rather, bubbles being ‘impossible to detect’ and stuff, they will backdate their trading records!

  30. c smith
    Oct 21, 2019 at 2:34 pm

    They print it…we burn it…what’s to worry about???

  31. Michael Engel
    Oct 21, 2019 at 3:30 pm

    Trump prepare investors for the plunge : I lost $2B to $5B.
    Much more than u did. Its because the Dem destroy our country.
    Vote for me and u will make twice as much.

  32. Just Thinking
    Oct 21, 2019 at 3:53 pm

    Maybe we will have a pretty good stock market pull back without entering another recession? Is that possible? Being in cash protects one from that scenario. How about being in private equity? Is that protective, too? Kudos to Some Random Guy. If a device buys you a little more disposable time, a little more fulfillment or a little more pleasure it sounds like a good deal to me. There’s more than just high tech here, I suspect many of us have attics or basements full of useless junk we never should have bought. In my next life I’m not going to buy so much “stuff” or any house with a flat roof or a retaining wall.

  33. jon
    Oct 21, 2019 at 4:17 pm

    No one knows when would this crash. The FED can print ad infinitum and common people can’t fight the FED.
    All asset class including real estate is all time high because of cheap money..
    People who refused to play the system in the last decade or so have proven themselves big loser..
    we’d see how does it end and when…

    • medial axis
      Oct 22, 2019 at 1:16 am

      People now realise they can print money too, and better money than the FED, not that that’s difficult to do, in fact quite the opposite.

  34. R. Wright
    Oct 21, 2019 at 5:10 pm

    It is fortunate that WeWorks is the canary in the coal mine. WeWorks real estate consists of SANDWICH LEASE positions in commercial real estate buildings. If WeWorks signed above market master leases, which is typical of corporations expanding rapidly, and if WeWorks signed below market leases with its short term tenants, which is typical of owners trying to lease up vacant space in a hurry, then the value of the sandwich positions may be $0, not $8 billion. The building owners can simply absorb the WeWorks spaces as the master leases expire or as WeWorks defaults on the master leases. The owners gain is WeWorks’ loss.

    WeWorks was never worth $46 billion dollars. No one has presented any financial analysis that supports the $46 billion dollar valuation.

    Chase Bank does have a commercial appraisal department, which could have developed a credible valuation of the WeWorks interests, if asked to. Has anyone asked whether Chase Bank engaged any internal or external appraisers to value the real estate interests of WeWorks?

  35. David
    Oct 21, 2019 at 7:43 pm

    Great summary of the state of the everything bubble!

    I am very interested in reading the IEEFA report on 181B$ burned between 2010-2018 by shale oil companies. Can you pass along a pointer/URL to it?

  36. Michael Engel
    Oct 22, 2019 at 4:58 am

    1) The place to start : who can extract most UST to create a Xmas
    massacre, to destroy the US economy.
    2) The collateral hole started in Sept 2018, about a year ago.
    3) Additional UST were pullout in Oct, Nov & Dec 2018.
    4) Pyorrhea 2018 failed.
    5) Sept 2019 Kamikazy attack on US deck was shot down by the Fed.
    6) conspiracy or not, u must consider an economic attack and defend against it.

  37. Hotairmail
    Oct 22, 2019 at 5:05 am

    But I can still hear the music.

  38. Jerry
    Oct 22, 2019 at 8:25 am

    Wolf, if it is an everything bubble. What you recommend as an investment strategy? Cash loses value and everything else is over inflated? Gold and silver?

    • Oct 22, 2019 at 10:24 am

      Investors across the board had it really really good for the past 10 years. Almost everything made lots of money. This isn’t going to continue, obviously. And investors need to get used to it.

  39. Winston
    Oct 22, 2019 at 12:53 pm

    More Serious Warnings About The Corporate Debt & Junk Bond Bubble?
    22 Oct 2019

    https://www.youtube.com/watch?v=6hagXtyp6EQ

  40. Nat
    Oct 22, 2019 at 2:56 pm

    As always though, the most critical question (though one always too difficult to answer) is when will sanity set in and things start to unwind? Obviously the “market can remain irrational longer then one can remain solvent” and timing the market is an unreasonable request, but this irrationality has been going on for quite some time now and shows no sign of resolving. Surely investors that shovel money into WeWork, Uber, Netflix, etc… to power them in the same way that coal powered 18th century locomotives run must reach some point where they realize things are not turning around, or baring that they just reach a point where they have run out of billions to hand out to the corporate furnaces every other quarter. This irrational madness has been running for quite some time now, surely we must be approaching some sort of conclusion to this sometime in the next decade?

    Even with all the massive maddening market distorting effects of zero and near-zero rates, QE, etc… for so long, it is hard to see how we got to this level of complete dysfunction. “Poe’s Law” is the idea that as the reality of a situation becomes increasingly absurd, the distinction between the reality of that situation and any parody thereof approaches zero. By Poe’s Law, the fact that it is no longer possible to tell the difference between the reality of Silicon Valley right now, and the parody thereof:

    https://www.youtube.com/watch?v=BzAdXyPYKQo

    … implies we have reached maximum absurdity, and we have been stuck there for years now without any sign that it will ever stop. HELP, where and when is sanity?

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