Thread

1. cmiles8 · 1790335566 · focus · HN ↗

   The AI bubble has built a giant interconnected web of commitments backed by a debt bomb. It all flows back to the ability of net new cash to flow in to pay for all this, not just VC funding and circular vendor financing. We’re seeing the early signs of that starting to all implode.

   1. PLenz · 1790336637 · focus · HN ↗

      When new money pays old that's a ponzie scheme

      1. mitxela · 1790338258 · focus · HN ↗

         You're calling the stock market a Ponzi scheme?

         1. nrclark · 1790339447 · focus · HN ↗

            As currently practiced, yes. Non-dividend non-voting shares might as well be pokemon cards. Their only real value lies in getting somebody else to buy them, and new money has to flow in from the outside. The question isn't "will it collapse?", it's "when?"

            1. cmiles8 · 1790340762 · focus · HN ↗

               By your logic buying a house is a Ponzi scheme too.

               1. gspr · 1790341561 · focus · HN ↗

                  My god, this is the most HN comment of the day. You do know that most normal people buy a house not to resell it at profit, but to have a place to live, right?

                  1. cmiles8 · 1790342591 · focus · HN ↗

                     The point is it has value and can be resold later to get your capital back. Housing tends to be a mediocre investment at best but folks do generally expect to be able to get their capital back when selling.
                  2. mitxela · 1790343441 · focus · HN ↗

                     I think most house buyers are buying it for resale value.
                  3. lazide · 1790351594 · focus · HN ↗

                     Depends on the year and the current market mania level. A lot of buying in ‘05-‘07 was crazy speculative for profit.

                     1. iso1631 · 1790395454 · focus · HN ↗

                        The US is pretty unique in that mortgages are typically fixed for the length of the loan, which means the monthly outgoing is guaranteed to go down in real terms due to inflation

                        Renting means that your rent will typically stay the same in real terms, so increase each month, and indeed you might find your landlord decides to sell and suddenly you're homeless.

                        Most people in the UK, despite lifetime fixed interest mortgages being very rare, buy for stability, and to ensure they don't have to pay rent in later life. They might do an equity release as they are retired to give them more money, but that's certainly not the norm.

                        Now the buying of additional properties from the mid 90s was very profitable, house prices would increase far more than rental income, and you could leverage that, and some people (spurred by daytime tv shows) decided to buy a house, spend 100k doing it up, and selling for 150k more than they bought it, making a 50k profit. Had they not done it up they'ld likely have made more money, as the profit was caused by increasing house prices.

                        Certainly in the UK that was still a small part of the market.

                        The biggest leap was the move from the mid 90s to the mid 00s of house price:wage ratio from about 4-5:1 to around 7-8:1 as mortgage companies would lend more -- typically 4 times two incomes (in the 80s and 90s mortgage companies wouldn't lend that much).

                        Since then house prices have broadly remained locked to wages at a radio of 7:1. Its dropped to about 6.5 and gone up to about 8 over the last 20 years.

                  4. phil21 · 1790356609 · focus · HN ↗

                     It’s almost always both. Basically every single retired person I know in my family or friends of family are relying on their home to be their primary asset/income in retirement. It’s always a much larger chunk of their net worth than any retirement savings, if they even have the latter.

                     They were commonly called forced savings accounts when I was growing up. The standard advice was to buy a home as an investment vehicle. Every older family member giving me advice would preach about how they don’t make any more land and the price will only go up.

                     You can - to this day - talk until your are blue in the face to these people that your primary place of living is not an investment, but they will refuse to even entertain the idea even with the stark cold math staring at them in the face.

                     If these retired folks can’t sell their homes for a huge profit they will be in for some very difficult times a decade or two from now. They are highly motivated to keep the music playing as long as they can vote and show up to local city council meetings.

               2. edgyquant · 1790341754 · focus · HN ↗

                  Houses have real value by themselves as you can live in one. But they have been treated like a Ponzi scheme recently which is why we are in such a mess with housing

Unofficial Hacker News client; not affiliated with Y Combinator.