Comment by hash872 | Hacker News Reader

Comment by hash872 | Hacker News Reader

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Eh. This is only true because there's an absolutely staggering amount of financial commentary, and some % of it is negative- and then after a recession you can always go back and use confirmation bias to find the negative comments that 'predicted' it. Recessions & crashes are normal parts of markets and will never go away. Fringey characters like Roubini or Grant's Interest Rate Observer just call for a recession every single year (really! Roubini has predicted a recession every single year since 2008!) Then when it happens pundits can say he 'predicted' it, because they ignore all the times he was wrong.

Anyone can easily go through past financial commentary and find quotes saying that good times & growth periods won't work out, it's a bubble, it'll crash soon etc. No one ever points out all the times negative commentary is simply wrong, mostly because being contrarian & negative is fun.

Modern Internet companies are fundamentally changing the world similar to the Industrial Revolution. And lumping Facebook/Google/Amazon in with Juicero or whatever is just lazy, handwavey analysis. Yes, some tech companies won't make it out of the next recession- but some are huge, immensely profitable players that are here to stay

But that isn't the null. The null is that these are "black swans" and unpredictable. And I also did not pick the sources randomly. I am not talking about "fringey characters"...I am talking about the Fed, the BoE, the Economist (both in 2004 and the 1870s). More to the point though: you can verify for yourself whether a prediction is accurate. I am not sure why people need to make sweeping generalisations: go back, check if a prediction was accurate, look at the reasons behind it...why is that so intolerable?

And the null also isn't that these companies aren't fundamentally "changing the world" and so the bubble won't burst. If you actually went back and looked at history, you would see that a tiny minority of firms do survive (and are responsible for close to 100% of the positive returns for equities as an asset class). No-one has disputed this, the quantitative evidence is clear. But the quantitative evidence is also that the majority of firms go out of business. I also wouldn't use the Industrial Revolution as an argument...the exact same thing happened then. Comparatively, the innovations we are seeing now are very limited.

If you think being a contrarian is fun, I would take up investing. When you are just a guy typing at a computer or some economist making predictions, maybe it is fun. When you have something on the line, it is quite different (again, that is why bubbles occur).

I am not sure why this is even controversial for some people. Human nature hasn't changed in two centuries. Capital cycles haven't changed in two centuries. This doesn't need to be hard.

Think about this way- in your 'people can call market crashes ahead of time' mental model, you need to include all the market crashes that were called incorrectly. Everyone who said it would crash in 2012, 2014, when Trump was elected, that it would crash in 2017, etc. Does that kind of make sense?

In terms of the Fed/Boe/the Economist/Market Guru Person- what you're missing are all of the various calls they've made over the years that have been incorrect. You have to look at the overall track record- not just pick out the predictions they made that we know in hindsight are correct, but ignore their misses. Anyways, there will always be recessions & crashes in a market economy, so 'a guy called the crash' somewhere sometime is pretty meaningless. To be honest I'm not 100% sure what we're discussing here.

> It isn't hard

I mean, it [calling market crashes] is not only hard, it is literally impossible. If you have a preternatural gift for calling them, feel free to make billions in financial markets with your once in human history gift.

>If you think being a contrarian is fun, I would take up investing

I am in investing lol. I am invested in index funds that track the broader market, because I'm aware that neither I nor literally any human that's ever lived can time what the markets will do ahead of time. Nor do I try

On this topic, I suggest the parent (hogFeast) and others who share his view read A Random Walk Down Wall Street. It's very eye-opening.

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

Housing starts will predict the future of the economy. Inverted yields will predict the future of the market.

Almost by definition (if this is true, and I'm sure it's way way way more complicated than a simple rule of thumb), the market would have priced this in already. Or do you think that you're in possession of a secret, which has its own Wikipedia page, that the PhDs with supercomputers on Wall Street were unaware of? If so, congratulations, you are free to make billions in the markets by exploiting your superior knowledge which the Street cannot match.

I am a little bit familiar with the inverted yield curve thing, and it is certainly much more complex- including that rules that governed the economy in the past may no longer apply

It isn’t that complex, most of those economic indicators show the forward looking expectations of major firms. Or in other words, the future of the economy can be seen by the decisions Wall Street has already made.

The real money is, as always, in insider trading on short-term purchases. Still, one could beat the stock index if one factored in economic cycles.

>>really! Roubini has predicted a recession every single year since 2008!

Unlike, say, a set of sports games, you don't get an automatic reset to zero on Jan 1 2009, Jan 1 2010 etc and start with a "fresh new prediction" for year N+1. The bubble just keeps going on, as long as it is humanly possible (i.e. by exploring the limits of money printing) to sustain it. Which is why the crashes just keep getting more and more severe (which is, by the way, another indicator that your analysis is incorrect).

It is entirely possible that Roubini was correct every year, and that the populace as a whole is not economically literate enough to ask basic questions such as "How does my government decide how many units of currency to print each year?", and that once the bubble does burst, it is just the same Roubini bubble times 10.

"And lumping Facebook/Google/Amazon in with Juicero or whatever is just lazy"

They have been lumped in together.

A company that does X on the internet is valued as a tech company, not as an X company.

On the one hand, yes. On the other hand, the 2008 recession [0] saw unemployment 1 person in 20 lose their jobs. If 1 person in 20 is doing something that is not value-adding there would have to be massive and obvious evidence of that beforehand.

Recessions and crashes aren't necessarily evidence of anything in particular. But there is a tendency for people to assume that economic outcomes are mysterious and unexplainable. Many of them are obviously not; things happen for reasons. Exactly what those reasons are is a very political question, but it is obvious that a lot of people do clearly see these things coming a mile away and we just don't have a method of distinguishing them from the broken clocks.

[0] https://en.wikipedia.org/wiki/File:US_employment_1995-2012.p...

> If 1 person in 20 is doing something that is not value-adding there would have to be massive and obvious evidence of that beforehand.

There was "massive and obvious evidence of that beforehand" which was the central banks had to keep interest rates below what the market would have priced them without interference...it's just that this isn't seen as evidence but "just the way things are".

More than 1 person in 20 is doing something that is not value adding. We have entire industries built around zero-sum, or negative-value creation.

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