"When the capital development of a country becomes a by-product of the activities of a Reddit meme, it is likely to be ill-done.”
I think it was Dan Nexon who remarked that he disliked the term "techbro" on the grounds that it was flattering and inaccurate; the reigning "tech" champions are deeply uncool people who have little recent expertise or even interest in tech but are extremely good at collecting rents. So I suggested "rentboys" instead.
I think the role of Middle Eastern sovereign wealth funds and SoftBank has been underreported. The sovereign wealth funds have been desperate to diversify and poured money into all sorts of weird places.
I'm reminded that in the UK after 1986 stock fundamentals started to disappear as a guide. The giant Nomura Securities started moving stocks and the joke was "Bug their offices to determine stock moves". At the same time, stock market moves just became trading strategies as big banks maneuvered other players to take losses. Silicon Valley became horribly corrupted by VC money, especially when the MO became "Create unicorns and cash out". CEOs acting like sports stars and paid accordingly helped create the vibes and "vaporware" and IP portfolios became weapons to disrupt competitors. Musk's Tesla remuneration is simply obscene. 600 PER stocks seem like Tulip mania to me. Eventually, a return to fundamentals will happen, we just don't know when.
The coverage of Warren Buffet's most recent investor letter (largest cash position ever), along with Krugman talking about Jim Chanos's take on the AI bubble, got me thinking about how likely it is that Buffet will die the world's wealthiest person. The hiccup in the markets happening as I write this is a reminder of how quickly the tides of exuberant irrationality can recede, turning all the gamblers into nudists.
This is very timely, as Jim Chanos (the short seller that Jeff Skilling of Enron famously called an "asshole" on a hot mic in one of the last earnings calls before the company collapsed) has compared the AI-driven capital spending boom to fracking. The opportunity for financial chicanery with 100's of billions in CAPEX followed by rapid depreciation are vast, and so-called "earnings" may end up being just as fake as they were with fracking.
Silicon Valley's journey from government funded breakthroughs to meme fueled valuations is quite the plot twist. Feels like the Keynesian beauty contest turned into a full blown popularity contest where vibes outprice machines. What happens when the vibes stop vibing?
I’m reading Yanis Varoufakis’s Technofeudalism at the moment. He has an interesting chapter on Capitalism’s metamorphoses that is relevant to your three points. In particular the piece under the sub heading techno structure covering the ‘rivers of credit necessary to fund the Edison’s, Westinghouses and Fords of the early C20th capitalism. Worth a look I would suggest.
Seems correct - everyone who produces real stuff (as in the old days) MUST use the tech companies because they control the whole advertising space, and without being on that your product will dispappear in mass perception, which means it will not sell. So the tech companies can take a slice off everything that is produced, but without actually doing very much in the way of production of basic value. It is an automatic tax on everyone which stops them achieving very much in returns themselves as it is all siphoned off (and on the stock markets that is reflected by the fact that only the tech companies show these massive growths).
"If the vast majority of a “for-profit” company’s fortunes are tied up not in generating profits, but in generating vibes, then we will inevitably be left with a vibes-based economy. The actual marketplace is little more than window dressing."
Seems to me that in valuing a stock - the phrase ‘underlying fundamentals’ is asked to do a lot of heavy lifting. Given that the context is infinitely complex and that our minds are both infinitely complex and limited in capacity and sensory perception, I think the reality is that we have very little idea what the underlying fundamentals are, or how they shape the value of a stock at any point in time.
I agree completely with you but I think we have to add to the mix the ad revenue which is enormous , it has made Google, meta and it expands at Walmart, Amazon etc. The fact that the fb and Google didn't choose to sell their products directly to the consumers still seems strange to me.
Seems correct - everyone who produces real stuff (as in the old days) MUST use the tech companies because they control the whole advertising space, and without being on that your product will dispappear in mass perception, which means it will not sell. So the tech companies can take a slice off everything that is produced, but without actually doing very much in the way of production of basic value. It is an automatic tax on everyone which stops them achieving very much in returns themselves as it all i s siphoned off (and on the stock markets that is reflected by the fact that only the tech companies show these massive growths).
A "simple" shift to the loan-against-stock fraud would almost literally be just a new definition: a loan against a stock (or other asset) is a taxable "valuation event". The (snicker snicker tee hee) hack for most VCs and executives is their holdings don't have a valuation, so no change in asset value has occured. Anove definition (obvious in it's face) changes that.
"When the capital development of a country becomes a by-product of the activities of a Reddit meme, it is likely to be ill-done.”
I think it was Dan Nexon who remarked that he disliked the term "techbro" on the grounds that it was flattering and inaccurate; the reigning "tech" champions are deeply uncool people who have little recent expertise or even interest in tech but are extremely good at collecting rents. So I suggested "rentboys" instead.
You sold me.
This is a creativity on par with redefining "Santorum." I like it!
I think the role of Middle Eastern sovereign wealth funds and SoftBank has been underreported. The sovereign wealth funds have been desperate to diversify and poured money into all sorts of weird places.
I'm reminded that in the UK after 1986 stock fundamentals started to disappear as a guide. The giant Nomura Securities started moving stocks and the joke was "Bug their offices to determine stock moves". At the same time, stock market moves just became trading strategies as big banks maneuvered other players to take losses. Silicon Valley became horribly corrupted by VC money, especially when the MO became "Create unicorns and cash out". CEOs acting like sports stars and paid accordingly helped create the vibes and "vaporware" and IP portfolios became weapons to disrupt competitors. Musk's Tesla remuneration is simply obscene. 600 PER stocks seem like Tulip mania to me. Eventually, a return to fundamentals will happen, we just don't know when.
The coverage of Warren Buffet's most recent investor letter (largest cash position ever), along with Krugman talking about Jim Chanos's take on the AI bubble, got me thinking about how likely it is that Buffet will die the world's wealthiest person. The hiccup in the markets happening as I write this is a reminder of how quickly the tides of exuberant irrationality can recede, turning all the gamblers into nudists.
This is very timely, as Jim Chanos (the short seller that Jeff Skilling of Enron famously called an "asshole" on a hot mic in one of the last earnings calls before the company collapsed) has compared the AI-driven capital spending boom to fracking. The opportunity for financial chicanery with 100's of billions in CAPEX followed by rapid depreciation are vast, and so-called "earnings" may end up being just as fake as they were with fracking.
https://open.substack.com/pub/paulkrugman/p/why-ai-spending-reminds-jim-chanos?r=2xzot&utm_campaign=post&utm_medium=web
Silicon Valley's journey from government funded breakthroughs to meme fueled valuations is quite the plot twist. Feels like the Keynesian beauty contest turned into a full blown popularity contest where vibes outprice machines. What happens when the vibes stop vibing?
I’m reading Yanis Varoufakis’s Technofeudalism at the moment. He has an interesting chapter on Capitalism’s metamorphoses that is relevant to your three points. In particular the piece under the sub heading techno structure covering the ‘rivers of credit necessary to fund the Edison’s, Westinghouses and Fords of the early C20th capitalism. Worth a look I would suggest.
What do you reckon to Aswath Damodaran's view on valuation vs pricing?
Haven't read Damodaran yet. Any good suggestion on where to start?
Seems correct - everyone who produces real stuff (as in the old days) MUST use the tech companies because they control the whole advertising space, and without being on that your product will dispappear in mass perception, which means it will not sell. So the tech companies can take a slice off everything that is produced, but without actually doing very much in the way of production of basic value. It is an automatic tax on everyone which stops them achieving very much in returns themselves as it is all siphoned off (and on the stock markets that is reflected by the fact that only the tech companies show these massive growths).
"If the vast majority of a “for-profit” company’s fortunes are tied up not in generating profits, but in generating vibes, then we will inevitably be left with a vibes-based economy. The actual marketplace is little more than window dressing."
I feel this in my bones
Seems to me that in valuing a stock - the phrase ‘underlying fundamentals’ is asked to do a lot of heavy lifting. Given that the context is infinitely complex and that our minds are both infinitely complex and limited in capacity and sensory perception, I think the reality is that we have very little idea what the underlying fundamentals are, or how they shape the value of a stock at any point in time.
I agree completely with you but I think we have to add to the mix the ad revenue which is enormous , it has made Google, meta and it expands at Walmart, Amazon etc. The fact that the fb and Google didn't choose to sell their products directly to the consumers still seems strange to me.
Seems correct - everyone who produces real stuff (as in the old days) MUST use the tech companies because they control the whole advertising space, and without being on that your product will dispappear in mass perception, which means it will not sell. So the tech companies can take a slice off everything that is produced, but without actually doing very much in the way of production of basic value. It is an automatic tax on everyone which stops them achieving very much in returns themselves as it all i s siphoned off (and on the stock markets that is reflected by the fact that only the tech companies show these massive growths).
yes I agree. I say something similar here https://0utcast.substack.com/p/the-data-deluge-unraveling-the-productivity
A "simple" shift to the loan-against-stock fraud would almost literally be just a new definition: a loan against a stock (or other asset) is a taxable "valuation event". The (snicker snicker tee hee) hack for most VCs and executives is their holdings don't have a valuation, so no change in asset value has occured. Anove definition (obvious in it's face) changes that.