A few points on housing:
- real home prices have now surpassed the 2000s peak
- household formation and population growth has been decelerating, while building has been accelerating.
- there are 1.1 homes per household, same as the year 2000. We are not at historically low supply as some claim. Only low in terms of active listings.
- mortgage rates are climbing at a historically fast pace... If inflation doesn't abate we can expect 5-6% mortgages within a few months. Rates were kept low due to the belief in transitory, but confidence in this is quickly eroding. Mortgages roughly correlate with 10y treasury which is at 2%, while inflation at 7.5%. typically these values are close together
- all in affordability will reach record lows within a few months, if inflation and mortgage trends don't abate
- there's clearly a mass FOMO/psychological phenomena going on right now. Buyers aren't acting rationally from a financial perspective
Home prices can avoid a correction if we quickly return to 0 or negative rates, which could happen. If inflation persists, they will correct in a big way within a year or two as rates adjust to inflation
Sources:
https://fred.stlouisfed.org/series/QUSR628BIS
https://fred.stlouisfed.org/series/UNDCONTSA
https://fred.stlouisfed.org/series/SPPOPGROWUSA
https://www.mortgagenewsdaily.com/mortgage-rates/30-year-fix...
EDIT: And the fervent denials that it's a bubble is surely a hallmark of bubbles too :). Please refute with actual data if you disagree
I think you're saying that housing prices are too high. Then you're saying that if inflation continues housing prices will drop?
I totally get that most home sales are based on the monthly mortgage bill, so when interest rates are high, house prices are lower. But, if we have 7% inflation why wouldn't rates increase AND prices increase? I don' think the outcome is obvious when high inflation is coupled with high rates - though I'm sure there are several experts ready to jump in with information about how the US 70's and 80's worked :)
https://www.cnn.com/2021/11/08/homes/zillow-ibuyer-homes/ind...
Nope, we have a decade of underproduction that led us to this crisis
On the other hand, https://fred.stlouisfed.org/series/COMPU1USA shows that the number of SFHs completed in 2021 finally reached levels of 1994, when population had been 100M less than now. I might be just too dumb to see where there are enough houses.
Cryptocurrencies are beanie babies: Once available for a trifle, their value has ballooned based on speculation. But that already happened, you missed out on it, and it has no bearing on their future prospects. And if a bunch of people ever feel the need to cash out at once, they'll find out just how much value they really have when there's nobody buying.
NFTs are Collector's Edition items: Their original purchase prices are artificially inflated (normally by distributor's decision, for NFTs by wash trading). An association with some pop-culture property or pretty artwork attracts eyeballs to it. You could buy it, or you could just get the regular edition (which, for online artwork, is free.) And the price they're available for doesn't necessarily have anything to do with what you'll be able to get for it.
I think a better comparison for NFTs is a star registry. You pay a company to name a star after you (or someone else as a gift). That company will provide a star locator chart and publish a book each year with all the star names they registered that year. You don't own the star, but you do own an certificate saying the star is named after you. Unlike an NFT though, you can't transfer the star registration to someone else.
Bitcoins' price increase is driven by scarcity and speculation. NFTs' price increase is driven partly by speculation, but also by the appearance of speculation, a series of wash trades of increasing value that seem to outsiders to be actual people buying the item for increasing prices. The buyer doesn't know that those were all one person trading with themselves, so they expect that, even if they can't sell for a profit, they can still sell for a minor loss. Then, once they buy it, one of two things can happen: 1. They ride off the hype wave from the original seller, and build it up some more themselves, then find a bigger fool to flip the NFT to; or 2. They keep it a while, the hype wave dies down, and if they ever look to sell it they'll find the real level of demand is way below what they were expecting. Either way, the house gets its cut. It's all a gold-brick scam.
Also, financial instruments work differently from physical assets; if you have conviction that the peak has already happened ("the bubble happened, and there won't be another one"), you can take a bet against the price by shorting.
Of course, this leads to very different kinds of market dynamics which aren't directly comparable to the beanie baby bubble. Too much pressure on the short or (with leverage) long side can lead to liquidation cascades which result in very dramatic price movement. On the short side this would look like a short squeeze as a large fund can buy a bunch of the crypto to liquidate shorts, then sell it after the market moves at a profit.
John Maynard Keynes said, “the markets can remain irrational longer than you can remain solvent.”
Can you describe the situation where nobody is buying? People may abandon Bitcoin but some sort of crytocurrency will be used by criminals. I am unable to imagine a future where Cryptocurrency does not exist. I am curious what you imagine will happen to crypto that it will be useless for criminals.
I suspect the vast majority of players, even in a criminal marketplace, are seeking cryptocurrency with the intent of cashing it our to fiat, or trading with someone who-- after possibly more exchanges-- cashes out to fiat.
Close the offranps, and the supply chains dry up.
A unit of cryptocurrency is a nothing. If you never sell it, it's useless and worthless. Everyone buying crypto is planning to sell all of it. They always need more and more buyers to keep driving the demand up, to in turn keep driving the price up. Eventually, there'll be a time when there are too many sellers and not enough buyers. Maybe a major recession hits and people decide it's a good time to cash out/bad time to make risky investments. Maybe regulation starts scaring people away. Maybe mainstream news coverage turns hostile. Regardless of which, people rush to sell, and as the buyers dry up, they start taking whatever price they can get. The price plummets. Sell orders accelerate. Line goes down. Pop. Then, stories of people losing everything circulate widely, cementing its reputation as worthless and scaring off any speculative buyers forever after. Just like Beanie Babies.
Just like Beanie Babies, there'll probably be some buyers and sellers forever. Just not at a high enough volume to make it worth a criminal's time.
This is a nice natural mechanism for the bubble to burst itself. Housing is not like this at all. Everyone can in fact get cash all out at once at the hyper-inflated prices (no real buyers needed!) by just doing a "cash out refinance" to the bank.
Now I have young kids that immediately yank the tags and carry them to school. I have nieces that have outgrown their's and have passed them down to the family dog as a chew toy. Both give me a moment of 'aaah aaah!' before I can make my rational brain remember they're just a $5 stuffy that once had a bubble.
"According to economists David Tuckett and Richard Taffler, we often view a hot new financial opportunity as a “phantastic object,” or an unconscious representation of something that fulfills our wildest desires.
These objects are “exciting and transformational.” They appear to “break the usual rules of life and turn aspects of ‘normal’ reality on its head.” They promise something far departed from the market’s typical behavior.
During a bubble, we formulate a “collective hallucination” of prosperity, and fall victim to groupthink, a phenomenon where “a significant chunk of society feverishly buys into a shared dream” and ignores reality."
"There was one person who emerged handsomely from the Beanie Baby bubble: Ty Warner.
Aside from getting caught secretly hoarding $107m of his Beanie Baby riches in an offshore Swiss bank account, Warner has kept a low profile over the years — but he’s quietly amassed a fortune the size of Djibouti’s GDP.
Today, the 73-year-old Beanie Baby inventor touts an estimated net worth of $2.7B, good for the 887th richest person in the world. He owns a fleet of luxury cars, a $153m estate, $41m worth of rare art, and the Four Seasons Hotel in New York, where you can rent the “Ty Warner Penthouse” for $50k per night."
But the prices keep on going up.
Bubble doesn't mean "pops and value goes to zero". It means something more like overvalued asset class that can lose value rapidly. If there is intrinsic value, it won't got to zero. Nobody imagines that of a real estate market outside scenarios that include major wars, etc.
House prices with any sort of scarcity are largely driven by peoples ability to pay (i.e. finance the debt).
I'm not really stating an opinion, just an observation that tonnes of social media companies died until the current 'in' ones adopted advertising and (so far, and for longer already) lasted.
Bulk purchasing skate bearings, charging 3 times as much for the same plastic because it had different colors…and the STEM school really couldn’t do much, because that kind of thinking was in their charter…plus, you know, distract the hands while keeping their brains engaged.
There’s currently a pump and dump on retro video games but I don’t think the same supply issues exist in Pokémon cards, but I’m not actively monitoring either market.
Beanie Babies, on the other hand, only existed for the purpose of get-rich-quick speculative bullshit. Ok, some kids played with them but I remember adults admonishing kids not to damage them and ruin their value. Is anyone actually nostalgic for these? I was 7-10 during the craze and I don't care about them, or know any peers who do. I mean, many of us weren't allowed to play with them.
Another factor is scarcity. Many old cards were played with and damaged, so to have a first edition mint is actually rare. Whereas I'm sure there are (still) 100,000s mint condition Beanies in plastic storage bins in attics across the US.
Finally, some of them were actually special and deservingly command a high price. Black Lotus was a really powerful card in addition to not being printed anymore, so there is another reason why it's sought after. It's so overpowered and game-breaking it won't be reintroduced. Patti the Platypus is not manufactured anymore, but there is nothing special about it anyway. And even if Beanie Babies were to become popular again, who is to say they won't just make another platypus.
A market of flippers (like Beanie Babies) has to terminate at bagholders. While you can also lose your shirt in a collectors' market, it's because they're driven by the tastes and disposable income of those top-level collectors. They tend to shift from area to area based on particular books, articles, or even influential threads on message boards, and those markets move as a whole with wealth inequality and against interest rates, like fine art.
There's a game behind the cards. And certain cards increase your chances of winning.
Can you clarify what the pump and dump on retro video games looks like? To me, there seems to be real demand for retro video games. You can see the interest in various subreddits.
Sorry it’s a long watch. The tldr is that people involved in several high end sales, and game rating and auction houses are known business associates creating a conflict of interest and inflating sale prices artificially.
[EDIT] This is distinct from, or a useful subcategory of, some other "manias" or bubbles chiefly because the effect is often deliberately cultivated by a manufacturer or trade group, and the goods are mass-market in price and quality and lacking in (meaningful) natural constraints on supply. Think Franklin Mint junk on the Shopping Channel, or Precious Moments, or early '90s Topps cards. Pop-culture themed dinner plates intended only for display. Or Beanie Babies.
There's got to be something like that at play here with ETH/BTC. It's so much easier to spend it when it's hard to put into perspective just how much physical cash the purchase represents.
https://www.nbcnews.com/tech/security/nft-sales-show-evidenc...
19.94B locked up in NFTs atm
If you want to see some market caps[0] they're still staggeringly high for what they represent, but beware: you can't see the demand curve on a price history chart. There's no way of knowing how much of the market could decide to sell before they ran out of buyers. Market caps are used to estimate value on wall street because it's imagined that the number of people who would want to buy MSFT today for $1 less than the price today are inexhaustible.
That's much closer to the truth on the NASDAQ than on whatever exchange people are using to trade their beanie babies.
There were also rumors going around that the whole thing - production of all Beanie Babies - was going to end in the year 2000 which actually turned out to be very briefly true before it wasn't anymore.
As an adult I was smart enough to miss cryptocurrency 10 years ago because I thought it sounded like Flooz.com or Beenz. Magic internet money you can earn by solving sudokus? Who the hell wants that? I then missed NFTs (won't they just right click?) and now I'm too scared to get in for fear I will end up as the bag holder.
I'm probably going to end up learning the wrong lesson from this and throw fifty bucks into every crazy-sounding scheme I come across from now on in hopes one of them will hit it big. But that's not so different from venture capital. Just on a smaller scale.
https://www.huffpost.com/entry/beanie-baby-fever-in-1999_n_5...
(Article is about picture of two divorcees dividing a Beanie Baby collection on the courtroom floor in front of the judge.)
https://priceonomics.com/when-the-great-alpaca-bubble-burst/
It was a crazy time. Crazy people fighting each other for cheap stuffed animals.
So many people have learned nothing. Granted the time gap means these are entirely new people making those mistakes.
We have such a degraded level of discourse now that if it were used in the Beanie Baby craze there would be people arguing about whether all soft toys are evil.
I would argue considering the plethora of NFT offerings both legitimate and plagiarized that many people learned trying to manufacture the next Beanie Baby is better than investing in them, sort of like selling shovels in a gold rush is more reliable than digging for gold.
I actually knew somebody with an extremely valuable collection in the late 90s whose house was broken into. Only the BBs were stolen, which speaks to their value being well beyond that of regular stuffed toys at the time.
The more I talk to crypto/NFT people, the more I’ve realized that they’re looking at the same historical events but walking away with completely different take-aways.
For example, they wouldn’t look at the Beanie Baby bubble and think of the people who invested a lot of money and had nothing to show for it after the crash. They’d look at the price charts of Beanie Babies and pattern-match that to NFTs with an assumption that they’re early in the game. Just sell before the line goes down and they’re going to be rich!
This is generally known as the greater fool theory.
I suspect far more beanie baby buying individuals.
Then 10 years later everyone realized the exuberance was actually totally rational when you're talking about the market shifts the internet brought and the size of the spoils that would eventually befall the winners.
