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Discussion (94 Comments)Read Original on HackerNews
That and the constraint on GPUs and datacenters and all has really brought home to me what a globalized economy we live in and how much our prosperity has depended on us being peacefully happy to trade with each other. One of my favourite books on the general subject of trade is A Splendid Exchange which gives a cool directionally-correct view of how valuable trade is.
Funny to think that Pax Americana would be ended by America.
Or has GDP growth become so decoupled from energy use that I'm wrong and stock market valuations are completely OK, even as airlines brace for fewer flights due to energy shocks?
Oftentimes, near a market top, the people who are value investors and actually care about price end up selling off all their holdings. But because they have already sold, and are not buying, they drop out of the market entirely. Prices get set by the people who are price insensitive, because they're the only ones willing to participate. As a result, you often get the "blow off top" right before a market crash, where the stock market moves sharply upwards even though fundamentals say it should crash. All the folks who believe it will crash have already left and no longer participate in price-setting.
The buy & hold value investor is also not participating in price discovery since they are just passively holding.
The stock market is basically detached from the industrial manufacturing/production economy -- and even to some extent the services/insurance economy -- and is now vibes/feels based.
If people are keeping their money in the market (regardless of allocation inside the market) they are expecting that any other asset class will perform worse in the near future. If they expect that commodities are too volatile, spending won't pay off, monies and bonds will inflate away and land may face legal risks from populist, technocratic or extrajudiciary changes to the legal system then their least worst options are to go all in on stocks. Furthermore, the energy sector is going to have a windfall from filling up the VLCCs of the world and look for anywhere to dump the cash that helps escape taxes, driving future liquidity expectations even higher.
What's even more troubling is that there was once the pretense that valuations had something to do with fundamentals, but this has gone entirely out the window since about 2013.
So basically none of it makes any sense and you've just got to ride the tiger.
Whereas a historically low ratio of earnings to index value is a deeper concern to me
Yikes.
The reason Covid wasn’t as bad as it could be was WFH.
There’s no equivalent for oil. You can’t grow food at scale without fertilizer.
You can check the term structure of oil to confirm: https://www.cmegroup.com/markets/energy/crude-oil/light-swee...
Equities are (in theory) priced on net-present-value of future cash flows, so a temporary <1 year disruption is important but not massively so.
That would explain why they're ignoring fundamentals.
They could think that OpenAI and Anthropic IPOs will drive prices higher, and it still isn't time to sell.
Probably most importantly the economy at this point is largely a digital economy rather than one centered on goods.. in other words GDP growth is no longer coupled to energy consumption. The fact that we're able to transition to a largely remote workforce around covid is a testament to this.
The implication is that in the event that these high prices sustain and there is some demand destruction a lot of fundamental parts of the economy will continue to function in an evolved way for example online.
And then of course there's AI which could be considered sort of an extension of this digital economy which is driving so much of the underlying growth.
That doesn't mean there won't be hot spots like this article is pointing out perhaps the UK is particularly exposed. On the other hand the fact that so much of the UK's economy is financial services and hence in a way benefits from all this volatility ... means it is not all so clear.
It would be easier to say that the real impact will be on the manufacturing powerhouses but even they will benefit from the transition to a solar and battery based energy system.
Now if you believe that it's inevitable that this bubble will have a slowdown and you speculate that the bubble might be partially punctured by these high energy prices that seems like a reasonable hypothesis... but it could also be the opposite.. In other words the demand destruction for energy could actually mean capital is looking for a place to invest fruitful elsewhere.
Counterintuitive as it all may seem, this system is simply not one anyone can reasonably expect to make predictions around at least any more reliably than walking into a casino and expecting to beat the house.
Similarly the experts and talking heads telling you the implications of this war or the Ukraine war are making one dimensional predictions that are simply not honest enough about how chaotic and reflexive these systems are
And there is a bunch of plausible reasons that this belief is not crazy (of course nobody really knows).
- trump literally is called TACO
- the war is really unpopular in usa and midterms are getting closer. There is domestic usa pressure to wrap this up.
- Iran's ecconomy was a mess before all this and is now a disaster. The blockade goes both ways and it seems unlikely iran can keep it up long term
- As shortages approach international pressure from uninvolved parties to resolve the situation one way or another will mount.
> Fuel suppliers have indicated that May should remain manageable but have flagged “mid to late June as the potential start of disruptions”
So there is about 2 months before things run out.
Tourism provides low quality, transitory jobs, with income flowing more to wealth holders (property owners etc) than to wealth creators. It distorts property markets and sucks the oxygen out of other kinds of business. About time the Med weaned itself off of it.
No. It's worse than that. The transient customer base rewards the worst people. The people who make the most money and have the most influence are basically scammers who manage to stay one season ahead of the bad reviews. They're screwing customers, shafting suppliers, employees, business partners, etc, everybody. By the time the 1-star reviews are pouring in they've pivoted, sold the businesses, under new management, etc, etc, and are on to the next venture.
So over time these people get rich you basically wind up with these sorts of people running everything including the government and it's all just shit.
And it permeates everything. Everyone starts screwing everyone and being scummy by default. And the time and money and effort of having to hedge against in literally everything makes everyone all substantially poorer
Source: Grew up in it. First world white people too, so spare me some patronizing BS about low trust societies or whatever
You can fly to the EU for 600 USD (retour), more in high season. Non business people are willing to spend 1200, 1400 USD. I assume around 2000 USD the demand will fall off significantly. At 5000 USD for economy it will be close to zero.
The price is determined by who needs it the most and is willing to give up the most cash. Instead of rationing by lines, or fixed quantities, it's allocation to those who can either make the most out of the jet fuel, or those for whom money is the least valuable.
Just constant burying heads in the sand, and believing in models where the prior assumptions are from a bygone era.
Fixing the budget hole to pay for that spending without resorting to giving many people living in Monaco the Eichmann treatment as a side effect (which is untenable on account of French security guarantees to Monaco) would need some kind of government of hardcore believers who could also do math.
[To be clear, i dont 100% agree with this argument. I think there is a little truth to it but also things are much more complicated than that and it ignores the geopolitical tension in the region that was going to explode one way or another even without usa]
Everyone except the Iranians and maybe the Israelis were flat-footed by this, and the things that can be done about it are largely on the years/decades scale.
Until quite recently, “the US sticks its dick in the chainsaw” wasn’t a “within reason” scenario.
Own up to it. This is solely on the US. The rest of us had it handled until you came along.
One thing is correct though that UK security services have not anticipated such outcome and politicians have not done anything about it.
Since the inauguration Trump has supported physical seizures of many different kinds of Russia-aligned merchant shipping and the economic degradation of Russia's allies. Given all of this, we can assume that the Russian asset angle is a much less accurate explanation for Trump's behavior than the alternative theory where he is highly suggestible to the most recent person to heavily compliment him in-person which used to be Putin and has subsequently changed to some mix of Rubio, Vance, Hegseth, Netanyahu and the Trump family.
This war might be dumb but it was also predictable. Why were these no contingencies? Or to quote Churchill "If you want peace you have to prepare for war".