Boom in Dodgy Wall Street Deals Points to Market Trouble Ahead (opens in new tab)

A third option - raising capital from a public market may be cheaper holistically. Perhaps the private money is heavy into competition, and you’re worries about onerous terms.

I’m sure we could think of other options if we tried really hard.

My bullshit theory: it'll break next year because bonus depreciation effectively boosted this year by borrowing against the next {3,5,7,10}.

Honestly, the high gas prices we paid for a few years there took care of most of it and the rest was written off. It's already pretty much done.

That's functionally equivalent to not knowing what it's going to do.

'I wasn't wrong, I was just early'

'Thats the same thing Michael's

-The Big Short

One could keep rolling the puts forward, though it would be a drag on returns if the market stays above the strike and the options stay out of the money.

Susquehanna made a killing during the dotcom crash by selling near-dated options and buying longer-dated options. Essentially, the majority of the market was pricing the dotcom crash to be very similar to the 1987 crash. Instead, it was closer to a slow bleed.

"The market can stay irrational longer than you can remain solvent"

> Why would it crash hard unless interest rates go up by a significant amount?

The 2008-era crisis in theory should have resulted in a whole heap of financial managers taking their companies bankrupt/to a place of horrid returns and being blacklisted from ever managing a lemonade stand. But they were bailed out, so now they got promotions instead for record returns or whatever it is they've been doing since. Since the finance industry has substantial control over what everyone else does, that leaks out into the real world.

So, the intuition is that the system is being corrupted and people with no ability to make good decisions are being put in charge. At some point that should boil over. You can fit math models to that and guess which metric will blow out first.

I'm not sure how much I buy that argument; people have an incredible ability to put up with suboptimal circumstances. But when you put idiots in charge there is always a risk that they do something spectacularly stupid so my personal guess is at some point the pensions crack and trigger something. It is a spectator sport in a way. Maybe America is productive enough that they can cope with a few bad eggs in the financial markets. Maybe the taxpayers can shoulder all burdens!

POSTSCRIPT

Just for fun, veering off topic.

https://en.wikipedia.org/wiki/List_of_bank_mergers_in_the_Un...

My interpretation is that something went wrong with bank regulation in the late 70s or early 80s. That is when the too-big-to-fail snowball started rolling; since then the stresses in the system seem to have been building. 2008 was a nasty blow.

Did you even bother reading the article? It basically states that we haven't learned out lessons from 2008. Was the 2008 crash because of fed interest rates? No, it was because of poorly designed high-interest junk bonds. The article says the same behavior that caused the market to tank in 2008 in happening again. Furthermore, if we take a look at past crashes we can see that there has been quite a few that were caused by the same issue, the early 80s Savings and Loan Crisis, the 89 bust of the high-yield bond market, the Dot Com Bubble of the early 2000s, and the Financial crisis of 2008 we all caused by Junk Bonds NOT the Fed.

Additionally the idea that new money flowing into the system from 401Ks, IRAs, etc is extremely naive. These are long term investment instruments sure but as they are generally not actively managed they are not immune to fluctuations in the market and the market is not immune to people who have the misfortune to retiring in an economic bust. I have observed this in the second person as my grandfather was well to do before 2008, did not listen to my advice to allocate his retirement money to a guaranteed interest plan until after the market hit bottom (which was the wrong time to do that) he basically lost 500k.

Every dollar in issues debt is effectively multiplied. When you turn back the knobs even a little bit, you’d be surprised by the amount of contraction. The “dodgy” money being described is more or less the froth that ends up at the very top.

The danger is that with such a long bull market, only God knows how many non-survivable companies there are beyond the Ubers and Lyfts.

What’s unsustainable will have to end eventually. Pushing money into the system doesn’t make the economy magically better by itself.

> It's coming from 401Ks, IRAs, etc. That money needs to be put into action.

Not too long anymore then we will reach Peak 401K.

You could say this at any time.

If anything the danger is increased because there isn't room to cut rates because they are already low.

It isn't long since organisations were happy to pay central banks to have their money stored safely.

Unless the fed raises interest rates by 15% in one day raising interest rates dont cause crashes. Interest rates are raised partly in effort to stem the damage caused by economic downturns.

Same as any crash: If people think the market is going to do worse than a bank account in the near term, they sell. If enough people agree, it's a self-fulfilling prophecy.