Comment by pembrook | Hacker News Reader

Comment by pembrook | Hacker News Reader

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> The March crash was the event that was going to normalize asset prices, but really just became a blip due to the pump.

The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies. Just as everyone expected. Did fiscal and monetary policy help smooth things out? Sure. But again, earnings are normalizing, like we knew they would. Markets discount the entire future, not just what's going to happen next month.

> Overleveraged and poorly run businesses should fail. People who made excessively risky and speculative bets should have had them go belly up.

Most companies pre-COVID were nowhere near "excessively leveraged." I think you (as well as OP) are conflating 2009 with COVID. These are two distinctly separate things. As are monetary (The Fed) and fiscal policy (Congress).

> The business cycle is no longer a cycle at all, things just go up.

So you're saying "this time is different." Let's see how that plays out.

> So you're saying "this time is different." Let's see how that plays out.

Main difference from the past recessions is that today the main way to store money is index funds. In recessions people pump money into savings, ie into index funds, ie into the stock market making stocks value increase rather than fall. As long as people believe that index funds are a more stable currency than the dollar this will continue to be true in future recessions.

this is a very insightful look at how people have changed their belief in what safe money is. In a lot of ways, money is a story of trust -- it's what you believe that other people will believe is true, is true. And when that fundamental belief of 'safe asset' moves from cash under the mattress, to cash in a savings account, to cash in an index fund, to cash in a cryptocurrency -- well, the ramifications are massive.

> Did fiscal and monetary policy help smooth things out?

We're assuming the crash in March was due to COVID - though there's no proof this was the case. This very much could have been a correction to more realistic valuation.

> So you're saying "this time is different." Let's see how that plays out.

Agree here - I think we're in for an interesting year. We may have amplified the upswing dynamics with Fed action, but I'm pretty sure we'll see amplified downswings, as a result.

I get what you are saying but cmon. We very well may have had a recession without covid but covid has certainly majorly shaped what our current economic situation looks like.

>The main reason it was a blip, is because earnings have returned almost to pre-COVID levels for large public companies.

Those earning are structurally very different from an accounting perspective than normal earnings (one example being ppp loans). I'm not saying your wrong that these earnings are justifying PE based valuations but I don't think anyone is arguing that propping up earnings won't work in the short term. I think a lot of people are arguing that propping up earnings will backfire in the longer term.

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