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hindsight

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Interest rates would need to be raised for this scenario to materialise... And it could potentially trigger a bigger crisis than those of the past.

Interest rates aren't going up, not with fiscal deficits skyrocketing and a rapidly ageing population in most developed economies, but zirp/nirp doesnt make companies that incinerate cash in the name of growing revenues good investments.

The fact that Wework failed to go public is a sign that investors are getting sick of such companies, they can only lose so much money for so long before investors say enough is enough.
 

DukeCS33

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Interest rates aren't going up, not with fiscal deficits skyrocketing and a rapidly ageing population in most developed economies, but zirp/nirp doesnt make companies that incinerate cash in the name of growing revenues good investments.

The fact that Wework failed to go public is a sign that investors are getting sick of such companies, they can only lose so much money for so long before investors say enough is enough.

I doubt so. With excess liquidity, it will always be a chase for yields. So if interest rates are not going higher, we would just get bigger asset bubbles until such time, confidence in fiat money is broken.
So at some stage, Central banks need to examine if low or negative rates may be counter productive. Too much of a good thing is not necessary a good thing.
 
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DukeCS33

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It's an improbable scenario for the banks to raise rates though. They tried and the max they could was 2.5%.

Sent from HMD Global TA-1004 using GAGT

If Central banks start raising rates, there would not be any fuel to drive liquidity risk trades. So what could be a trigger for Central banks to start hiking? The Fed has their best chance to normalise rates but they squandered it.
 

hindsight

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I doubt so. With excess liquidity, it will always be a chase for yields. So if interest rates are not going higher, we would just get bigger asset bubbles until such time, confidence in fiat money is broken.
So at some stage, Central banks need to examine if low or negative rates may be counter productive.

We are talking about 2 different things here. You are probably thinking about the market as a whole while I was referring to "tech unicorns". The S&P500 is pretty expensive, but its not exactly a bubble if we compare it to the risk free rate. Nearly all of these tech unicorns don't make any GAAP profit so we can't even use conventional valuation metrics on them, you know its a bubble when people pay 15 or 20X sales for companies with no clear path to profitability. These are malinvestments no matter what the risk free rate is.
 
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MikeDirnt78

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We are talking about 2 different things here. You are probably thinking about the market as a whole while I was referring to "tech unicorns". The S&P500 is pretty expensive, but its not exactly a bubble if we compare it to the risk free rate. Nearly all of these tech unicorns don't make any GAAP profit so we can't even use conventional valuation metrics on them, you know its a bubble when people pay 15 or 20X sales for companies with no clear path to profitability. These are malinvestments no matter what the risk free rate is.

Tech sector is driven by the big brothers. Not the smaller ones.

If you look at valuations wise,

Rich valuations. probably yes.

Negative valuations. Definitely no.

https://csimarket.com/Industry/Industry_Valuation.php?s=1000

During the dotcom, most techs were at negative valuations.
 
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MikeDirnt78

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Not sure what this means? If you meant to say US mega cap tech companies account for most of Nasdaq100's earnings, well yea thats true, but I never disputed that. This is what I'm talking about:

https://www.businessinsider.sg/ipo-...ainst-unicorns-implications-2019-9/?r=US&IR=T

There are bound to be rubbish stocks among the good ones.

But a few rubbish stocks doesn't represent the whole sector.

Because the whole sector is still making good earnings.

It becomes a bubble if the whole sector is not making any earnings.
 

hindsight

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There are bound to be rubbish stocks among the good ones.

But a few rubbish stocks doesn't represent the whole sector.

Because the whole sector is still making good earnings.

It becomes a bubble if the whole sector is not making any earnings.

There is certainly a tech unicorn IPO bubble i.e unprofitable tech companies going public at sky high valuations, I never said this has anything to do with the market or the tech sector as a whole.
 

MikeDirnt78

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There is certainly a tech unicorn IPO bubble i.e unprofitable tech companies going public at sky high valuations, I never said this has anything to do with the market or the tech sector as a whole.

Yeah I mean I thought you mentioned about bubbles isn't it?

The tech IPOs are like under $50B.

Compared to the whole tech sector which is valued at $10T.

So basically even if the tech unicorns bubble explode, there is no impact to the bigger tech sector.

https://en.wikipedia.org/wiki/Nasdaq
https://www.fool.com/investing/2019/10/10/2019s-4-biggest-tech-ipos-and-3-still-to-come.aspx
 

hindsight

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Yeah I mean I thought you mentioned about bubbles isn't it?

The tech IPOs are like under $50B.

Compared to the whole tech sector which is valued at $10T.

So basically even if the tech unicorns bubble explode, there is no impact to the bigger tech sector.

https://en.wikipedia.org/wiki/Nasdaq
https://www.fool.com/investing/2019/10/10/2019s-4-biggest-tech-ipos-and-3-still-to-come.aspx

A bubble can be isolated to just a small group of assets or even a subset of a sector e.g there was a bubble in pot stocks earlier in the year but that doesn't mean that the entire market is in a bubble. I have no idea why you feel the need to talk about the valuation of the entire market or the tech sector, that wasn't what I was talking about, I made that clear in my first post on this topic.

And 50b for all the tech unicorns? Uber alone was valued at over 80b when it went public at $45, its now worth less than what it was valued at in the last private funding round, my point is serious money has been lost on these things because there has been a paradigm shift.
 

MikeDirnt78

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And 50b for all the tech unicorns? Uber alone was valued at over 80b when it went public at $45, its now worth less than what it was valued at in the last private funding round, my point is serious money has been lost on these things because there has been a paradigm shift.

Yes I mean is there a cause for concern to us?
 

revhappy

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US 10 year yields are rising and so are global yields. That is something to watch out for.
 

DukeCS33

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US 10 year yields are rising and so are global yields. That is something to watch out for.

I do not think we are at levels that are critical enough to trigger any sell off in the equity space. There was a rush into Bonds as Central Banks cut rates and we had the spectre of slowing growth due to an escalating trade war. Now that tensions are somewhat defused on the trade front, this rise in yield may well be unwinding of the past flows.
From observations and inferences on my own trades, my gains from shorts have outstripped those from longs even though we see the S&P500 making new highs. These are momentum setups that would benefit most from the index trading in the same direction. Most of the longs were triggered but failed to reach profit targets and most were eventually stopped out at break even point... so is the rally running out of steam? While SP 500 edged higher overnight, the number of decliners have exceeded the gainers by 16%. My shorts, though fewer managed to hit or exceed their profit targets...… maybe, fear is a stronger emotion than greed in driving volatility but another way of looking at things may be that the rally is running out of steam? I view things as over extended for now and in a way, it is coloring my bias towards short trades.
 

coolhead

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US 10 year yields are rising and so are global yields. That is something to watch out for.
What is the impact of US 10 year yields and global yields rising?

Sent from HMD Global TA-1004 using GAGT
 

Aerozonea

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If i'm not wrong, its a signal for improving economy outlook which may prompt US fed bank to increase interest rates.

Experts please correct me if i'm wrong
 

coolhead

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The yield curve has steepen so it's reversing from the "prediction of a recession".
Steepen is vague as it could mean becoming a more positive or negative gradient. However, I take it you mean the gradient is becoming more positive.

As for reversing from prediction of recession, that is an inference of the yield curve as an economic indicator. However, it is an inference and not an impact.

Maybe I'll rephrase my question: What is the fundamental/economic impact of US 10 year yields and global yields rising?

Sent from HMD Global TA-1004 using GAGT
 
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revhappy

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