FRED wants the implication to be AI related, but it seems pretty clear that all/most of this decline is related to their interest rate policies creating a raft of bullshit companies funded by too many dollars chasing ever more far-fetched returns...
You are not getting rich by throwing $50k to trash.
But I don’t believe they get 10% more like 2-3% and most likely they pay back any amount as soon as their stock value goes up to cover the loan not to accumulate compounding.
They have deals normal people don’t get. For banks those are free and sure money deals as well.
A reasonably rich person with good credit is paying nowhere near that.
And a very rich person with great credit and who will put their assets up as collateral is paying low single digits in interest, if even.
But yes. If you're very ambitious and very rich, you can probably find a decent loan for your idea. This odd economic situation is ripe for uncontested disruption, but has an extremely high cost of entry (hence, being unconstested).
I suspect its more a structural issue
e.g. because of Big VC (a16z, other firms with dozens or hundreds of investing staff), VCs don't stick around firms long enough for real returns (cash distributed) to matter. If you're at a place and your stuff is marked up 10x after 4 years, you just hop to become a GP and try to ride the next markup wave. Even if these people exit VC after 10 years that is still 10 years of deals that all flopped.
This might not even be the individual VC's fault -- there may just be too many venture dollars chasing too few power law returns, so you get a surge of startups circa 2019-2022 that all disappear
This feels right to me: the common trend between the dotcom bubble, mortgage bubble, tech bubble, blockchain bubble, and now the AI bubble has been big investors very high returns to make up for previous losses, like a gambler trying to win back, and it’s destroyed a lot of companies which had an idea which could have been a sustainable medium-size business but were funded and tried to grow as the next Google/Facebook without apparent recognition of how unusual advertising is for the ability to grow profits rapidly without scaling costs at the same rate.
The problem is that in this non-ideal world value creation can become completely detached from returns: when instead of investing into people creating value, or distant future returns, or even medium term returns, it becomes about investing into other people investing in it—not too different from a pyramid scheme and various pump-and-dumps.
FRED is just a descriptive tool: https://www.nytimes.com/2024/12/06/business/economy/fred-eco...
Where is there any indication that FRED wants this?
That interest rates started to rise right when the tax changes to make it less advantageous happened? 1-2 punch.
This impacts all other markets.