Unemployment in Silicon Valley vs. rest of America or is grass really greener on the other side?
On techcranche I came across an interesting article about the difference in unemployment between Silicon Valley and rest of America . In short: while unemployment in America is dangerously high and continues to grow, startups literally swim in money in the valley: IPOs jump out one by one like mushrooms after a rain, the capitalization of companies breaks all records, investors do not have time to remove the cream and firms are gaining ... But - as the classic said - I do not believe it! And that's why:
Summary of the previous series: huge sums accumulated in the investment sector of America - both programs supporting the American economy Ku and Ku-Ku poured a couple of trillion printed dollars into the system. The main recipient of the money was the banks and they (the banks) had to put it somewhere (money), but in fact there was nowhere to go since the “real production” in America is declining, and the people don’t take over the hippotech. Banks are now sitting on a record amount of cash in their entire history. Therefore (and not at all because real demand grows) gold, silver (until recently) and oil grow. Much of the price of these assets is speculative money. But there is still a lot of “extra money” and they flow into the high-tech zone, as one of the most attractive, fast-growing and “profitable” ones. Of course, the problem of where to invest money exists not only among banks, but also among smaller investors. Everything from venture capitalists to pension funds face the same question. There are not so many opportunities for investments in the conditions of falling demand, so money flows in approximately one direction. A sort of multiplication effect: everyone invests because ... everyone invests!
Something similar happened before the crisis of 2008, when mortgage securities were actively bought, which until the last moment had the highest rating along with the US Treasury securities. Until the very last day, there was a collective confidence in the markets for a bright future. The people took mortgages, banks issued them, CDOs were created from them (and where CDO is also CDS), rating agencies rated them as super-reliable, banks, hedge funds, pension funds, etc. they were bought and resold again. When a number of banks collapsed in the 2008th bubble collapsed, the largest mortgage insurers Frannie & Freddie had to pull their ears out of the bankruptcy pit and the global financial crisis went to everyone else on the shoulder straps. This whole closed eco-system ceased to exist when faced with the real world in which people taking mortgages cannot always pay it back - the multiplier effect works again, but in the opposite direction. Almost the only bank that won on this was Goldman Sachs, but that's another story.
I affirm that we are seeing something similar now - the Silicon Valley is boiled in its own juice and cut off from the real world. In it, unemployment and inflation is rising, economic indicators are worsening, and forecasts are adjusted downward all the time. In such a situation, the first thing people stop paying for is new iPhones for $ 600 a piece, unnecessary ups, virtual vegetables to the farm, and so on. and so on Because you really want to eat and you have to pay for utilities too.
')
But this is in the future, and now you need to forge iron without departing from the cash register. It seems to me that the big players already understand this and that is why all the successful startups of recent years have suddenly applied for an IPO at once. With modest exceptions, they don’t bring money, and it’s not clear when they will pay back what has already been invested. But you need to beat off investments (and the sooner the better), so they rush headlong to the stock exchange. Euphoria reigns in the markets: everyone suddenly forgot that the stock exchange is not a place where money earns, but a place where they are redistributed.
A big boom awaits us when this bubble bursts.
PS Many people compare the current bubble with dotkomovsky, find a bunch of differences from which they conclude that today is not at all like yesterday, and that means everything will be fine. I agree - the current bubble is different from dotkomovsky, but this does not mean that it is not a bubble. Feel common logical error? But about this, if interesting, in the next article.
Summary of the previous series: huge sums accumulated in the investment sector of America - both programs supporting the American economy Ku and Ku-Ku poured a couple of trillion printed dollars into the system. The main recipient of the money was the banks and they (the banks) had to put it somewhere (money), but in fact there was nowhere to go since the “real production” in America is declining, and the people don’t take over the hippotech. Banks are now sitting on a record amount of cash in their entire history. Therefore (and not at all because real demand grows) gold, silver (until recently) and oil grow. Much of the price of these assets is speculative money. But there is still a lot of “extra money” and they flow into the high-tech zone, as one of the most attractive, fast-growing and “profitable” ones. Of course, the problem of where to invest money exists not only among banks, but also among smaller investors. Everything from venture capitalists to pension funds face the same question. There are not so many opportunities for investments in the conditions of falling demand, so money flows in approximately one direction. A sort of multiplication effect: everyone invests because ... everyone invests!
Something similar happened before the crisis of 2008, when mortgage securities were actively bought, which until the last moment had the highest rating along with the US Treasury securities. Until the very last day, there was a collective confidence in the markets for a bright future. The people took mortgages, banks issued them, CDOs were created from them (and where CDO is also CDS), rating agencies rated them as super-reliable, banks, hedge funds, pension funds, etc. they were bought and resold again. When a number of banks collapsed in the 2008th bubble collapsed, the largest mortgage insurers Frannie & Freddie had to pull their ears out of the bankruptcy pit and the global financial crisis went to everyone else on the shoulder straps. This whole closed eco-system ceased to exist when faced with the real world in which people taking mortgages cannot always pay it back - the multiplier effect works again, but in the opposite direction. Almost the only bank that won on this was Goldman Sachs, but that's another story.
I affirm that we are seeing something similar now - the Silicon Valley is boiled in its own juice and cut off from the real world. In it, unemployment and inflation is rising, economic indicators are worsening, and forecasts are adjusted downward all the time. In such a situation, the first thing people stop paying for is new iPhones for $ 600 a piece, unnecessary ups, virtual vegetables to the farm, and so on. and so on Because you really want to eat and you have to pay for utilities too.
')
But this is in the future, and now you need to forge iron without departing from the cash register. It seems to me that the big players already understand this and that is why all the successful startups of recent years have suddenly applied for an IPO at once. With modest exceptions, they don’t bring money, and it’s not clear when they will pay back what has already been invested. But you need to beat off investments (and the sooner the better), so they rush headlong to the stock exchange. Euphoria reigns in the markets: everyone suddenly forgot that the stock exchange is not a place where money earns, but a place where they are redistributed.
A big boom awaits us when this bubble bursts.
PS Many people compare the current bubble with dotkomovsky, find a bunch of differences from which they conclude that today is not at all like yesterday, and that means everything will be fine. I agree - the current bubble is different from dotkomovsky, but this does not mean that it is not a bubble. Feel common logical error? But about this, if interesting, in the next article.
Source: https://habr.com/ru/post/125323/
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