[HN Gopher] Sea Change (2022)
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       Sea Change (2022)
        
       Author : LordNibbler
       Score  : 36 points
       Date   : 2023-06-19 18:29 UTC (4 hours ago)
        
 (HTM) web link (www.oaktreecapital.com)
 (TXT) w3m dump (www.oaktreecapital.com)
        
       | nanna wrote:
       | This should have "investment" in the title, or something to that
       | effect.
        
       | 4ndrewl wrote:
       | This explains the explosion in AI related products.
        
         | ethn wrote:
         | Why?
        
           | 4ndrewl wrote:
           | Less risky to invest in ostensibly interest-rate backed
           | investments (think he characterises it as fomo -> fear of
           | loss).
           | 
           | Time running out to realise the prior 2-5 year investments in
           | the VC funded space - all the other biggies are busted
           | flushes ( NFTs, self-driving cars, crypto), AI last one
           | remaining.
           | 
           | Future investment is heading towards safer seas (which proxy
           | rates), rather than riskier, 9 in 10 will fail startups.
        
       | hristov wrote:
       | This is a self contradictory writeup but it is a self-
       | contradiction I hear from a lot of investors. It goes something
       | like this (1) the low interest rate environment of 2009-2021 was
       | great for humanity, and (2) I really hope it does not repeat.
       | 
       | Well I for one agree with (1) but I do hope it repeats. And it is
       | very possible that it does.
       | 
       | Actually, if you look at leading indicators, i.e., upstream
       | prices, it looks like inflation will be receding. Oil and natural
       | gas prices are way down year on year. Steel, aluminum and lithium
       | prices are significantly lower year over year. Copper and iron
       | ore are about flat. Coal is significantly lower.
       | 
       | If you look at food staples - wheat, corn and soybeans are all
       | down year over year.
       | 
       | Furthermore transportation costs have fallen significantly across
       | the board.
       | 
       | Furthermore, if you look a little bit downstream, China factory
       | gate prices are in serious deflation, falling 4.6% yoy in May.
       | Considering what a big exporter China is, these lower prices will
       | wash over the entire world in the months to come as cheap Chinese
       | goods are shipped around the world (utilizing lower shipping
       | rates).
       | 
       | So the situation currently is that deflation is happening
       | upstream but downstream, when the finished product gets to the
       | consumer, inflation happens. This is not unusual as everyone
       | tries to keep prices up to pad their margins. How quickly this
       | trend is reversed depends on how competitive the economy is.
       | Unfortunately we have been discovering that after a lot of
       | mergers, the US economy is not as competitive as we previously
       | believed.
       | 
       | But hopefully it will happen soon and downstream prices will fall
       | to reflect lower upstream prices. It has always happened
       | historically. We, as consumers, can help this process along by
       | searching out good deals and rewarding companies that are willing
       | to lower their prices with our business.
       | 
       | So I do not see this necessarily as a continuing period of high
       | inflation. Of course things can change, but it is very annoying
       | how everyone in the business press writes under the assumption
       | that inflation and interest rates will be high for a long period
       | of time. (Interestingly enough, when you look at the bond
       | markets, where people bet with their money instead of their
       | mouths, the bets are for inflation and interest rates to recede).
       | 
       | When you think about it, the low interest rate environment for
       | 2009-2021 was caused by a large underlying factor. Humanity has
       | gotten much better at making larger and larger amounts of stuff.
       | Maybe because of technology, globalization or the free exchange
       | of information of the internet, but it is happening. And guess
       | what, it is continuing to happen.
        
         | eep_social wrote:
         | I don't agree that the article presents the low interest rate
         | environment as "good for humanity" though clearly that's your
         | conclusion.
        
       | fjarlq wrote:
       | This was written December 13, 2022.
        
         | deelowe wrote:
         | And there's been significant market recovery since. What does
         | it all mean? Heck if I know.
        
         | dang wrote:
         | Added. Thanks!
        
         | giarc wrote:
         | @dang - the year should be included in the title.
        
           | dang wrote:
           | @dang is a no-op. For reliable message delivery the only way
           | is hn@ycombinator.com.
        
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