[subsubzero]

The floodgates in 2020 have opened with IPOs of alot of these unicorns, Palantir, doordash, airbnb, affirm, jfrog, snowflake, asana. I wonder why the sudden timeframe to go public. My guess is they want to ride the wave of stimulus money that has been going on during the spring/summer and the 2nd round which has yet to happen.

[newguy1234]

I don't see it as a problem. Innovation is accelerating with new business models and so on. Adoption curve for new technologies could be occurring quicker as well thanks to social media (easier to "spread the word" about new products/services/technologies).

I don't see it as a problem because all of these companies have legitimate products/services, legitimate customers and legitimate cash flows. This isn't another dot com situation we are in. There are very few companies going IPO with just an idea. ("we're going to use the proceeds from this offering to build an online pets store called pets.com")

It is easy to say "its the stimulus" or "its the fed" but I think there is more going on at a fundamental level.

[john_moscow]

From a quick glimpse, the business model of Affirm seems to be about letting people get loans for things they would previously have to save for. In other words:

Before: Alice wants to buy a chair that costs $100 from Bob. Alice saves $10 a month and buys a chair. Bob got $100. Alice can buy a new chair every 10 months. She may also conclude after 10 months, that she doesn't want the chair that badly, and would instead save the $100 for retirement, or pay it into the house mortgage, reducing the amortization by a week.

Now: Alice wants to buy a chair from Bob. She gets a loan, paying $10 over 12 months. Bob gets $100, Affirm gets $20. Alice can now buy a chair every 12 months. Affirm's founder buys a supercar.

Slightly later: Alice's job gets cut due to COVID. She can now only pay $5/month. She gets a $100 stimulus check, but instead of paying off the chair, she buys Affirm stock and remortgages the chair to 24 months. Now Affirm gets $40 in interest and $100 in fed money routed through Alice.

Net effect: Alice's purchasing power has reduced 2.4 times, Affirm's founder buys 50 new yachts and starts a company that lets people get loans to buy food.

[cosmie]

The "before" was applying for a store-branded credit card at the point of sale, which evaluated your credit risk and (potentially) extended you a revolving credit line equal to what the lender deemed was your appropriate borrowing capacity, potentially far in excess of your purchase amount.

Affirm is just a "micro-transaction" take on that very large and lucrative market. They extend a fixed term, one-time line of credit equal to your transaction amount and no more. Want to use Affirm for another transaction? That'll be an entirely independent line of credit for that transaction, subject to its own application/approval process.

There are a lot of somewhat novel aspects to Affirm's approach, but the core premise of Affirm itself one of them. For better or worse, making it easy for consumers to over-extend themselves by dangling a credit line at the point of sale was widespread and lucrative long before Affirm entered the market.

[john_moscow]

A.k.a. subprime mortgages, 2020 edition.

[kenrose]

Your description sounds like the definition of financing.

Yes, with financing there’s a trade off. In exchange for paying interest, you have the item that much sooner.

Slightly tongue-in-cheek, but this is missing in your before example:

Alice has to sit on the floor because she doesn’t have a chair. After 10 months of doing this, she has terrible posture and joint pain from sitting on the floor all the time. Despite her pleas, doctors say that her increased purchasing power won’t cure her ailments.

[john_moscow]

>Yes, with financing there’s a trade off. In exchange for paying interest, you have the item that much sooner.

Except then you want your next item and can't buy it because your credit limit is maxed out. So you have moved your "item queue" forward once or maybe twice, and now have one more rent to pay. You still have to wait for the next item, it's just instead of waiting for your savings to reach $100, you wait for your debt to drop to N - $100 where N is your credit limit.

It makes sense for strategic items, like a house or a car. But doing it on a daily basis is just poor financial planning.

>Alice has to sit on the floor because she doesn’t have a chair.

Motivated Alice should go around garage sales and find a used chair for $5. Or research how to make a makeshift one from whatever she has. Or borrow it from a friend. Or read in a library and eat cheaper food for 2 weeks, and save $100 right away.

All these are problem-solving and prioritization skills, and they are crucial to one's long-term success. And the difference in life quality between America and Zimbabwe is because the previous generations of Americans possessed these skills and applied them wisely. Except now the big players realized that they can make more money off people without these skills, so the popular culture is instead praising impulsive decisions over carefully weighed plans, and pushing people deeper into poverty.

[TheSpiceIsLife]

> And the difference in life quality between America and Zimbabwe is because the previous generations of Americans possessed these skills and applied them wisely.

The grossly misrepresents what's happened in Zimbabwe.

I believe your intention was to suggest that by corrupting certain skills or values around finance or thriftiness or learning to build, etc etc, that the USA is on course for a significant decline in quality of life?

However, Zimbabwe's problems are rooted in a different, and much more pernicious, sort od corruption.

[bytematic]

Almost every time (in the last couple years) I've seen pay-over-time it is no extra cost to the customer. It's either $100 or 5 installments of $20.

[john_moscow]

There's no free money. If you see something like this and are willing to pay in cash, you can usually negotiate a discount.

[jimjh]

Didn't follow the leap to "remortgage". Which service allows remortgaging of consumer goods?

Don't forget that Alice gets to sit in the chair 10 months sooner, and study for their GMAT or CISSP.

[john_moscow]

Based on my experience, the skill of persistently studying for your GMAT evening after evening highly correlates with the skill of persistently saving a fraction of your income month after month. Delayed gratification and everything.

So a more realistic scenario is that first she won't study in a library because she doesn't have a chair. Then, having a loan on the chair she won't study because the old phone is too slow. Then, having a loan on both chair and the new iPhone, she won't study it because it's just too hard and going to the pub with the friends is more fun. So she will end up with another loan for a liberal arts degree, and will then wonder how to pay it off from a Starbucks salary.

Sorry, like it or not, people appreciate hard-earned things more than something that comes seemingly for free. The best example is that 70% of lottery winners go bankrupt within the next few years [0].

[0] https://www.washingtonpost.com/outlook/five-myths/five-myths...

[xoxoy]

I mean look at the market - we’re at all time highs. It’s more the trillions the Fed pumped into the markets than stimulus.

[subsubzero]

yeah its probably this, market caps on some of these money losers is stratospheric. I think alot of people forgot the lessons of 2000. Take Palantir, a company that is 11 years old and for the past 3 years has lost 600M a year. What monopoly will this company carve out for itself to achieve this lofty valuation?

Or lets look at doordash [1] despite the pandemic and most of its workers not being employees(low paid gig workers) it is still losing money at an astounding rate: $533M last year and with a pandemic bump of only a 149M loss this year so far(it expects orders to slow alot after the pandemic).

I feel like I am Michael Burry in the big short playing my drums pointing out the obviousness of the huge crash that is coming with alot of these companies. What is scary is alot of americans and foreigners for that matter have their retirement savings(401k) tied up into these mini-titanics. When the fed's tap gets turned off, expect a reckoning.

[1] - https://beta.trimread.com/articles/51214

[bertjk]

What makes you think the fed's tap will ever get turned off? What preconditions do you think we have to see before it happens?

In the past, every time I thought "the Fed will have to tighten soon" something happens which somehow, magically, always requires more easy money to solve.

Example: Easy money caused a housing bubble that burst? Now we need easy money to fix unemployment and keep the markets from seizing up.

It seems that politicians have now decided that the easy-money solution is always the easiest one, with the least traceable future negative ramifications.

[subsubzero]

It could happen with this Biden presidency, although most likely with whoever comes after him. If you think about easy money and interest rates, with Obama the lowering of interest rates made sense, the country was coming out of a long protracted recession and the money was needed to grease the gears of the economy so to speak.

With the Trump presidency he made his north star be the stock market(and keeping it high) and its why he heavily pressured the Fed to keep interest rates extremely low to supercharge the economy(and make him look good).

If a vaccine comes quickly and is highly effective long term and covid is eradicated by late spring/summer I expect a big jump in the stock market and a red hot housing market, this would be a time to slowly increase the interest rates, wall street won't like it but at some point it will have to happen.

[chasebank]

I don't know why you're being downvoted. Your probably is probably right. Most people have amnesia.

[chrischen]

It's not just stimulus money, but a lot of people save money by not traveling/driving/eating out/going to events.

[mbesto]

There is a bigger macro trend here - public investors are clamoring to get in early on the next $ZM, $AMZN, $GOOGL, etc. even if they place bets on 5 of these companies and 1 pans out, it'll far exceed the SP500.

[adrr]

Historic low interest rate shifted a lot of capital to the stock market. Bonds don’t pay anything.

[iloveitaly]

I have a friend who works for the big four in M&A. He said there's a rush of deals with explicit EOY deadlines because of the tax environment uncertainty. I can't imagine this doesn't play a major role in all of the IPOs happening before EOY as well.

[BMorearty]

In Airbnb’s case their hand was forced. RSUs given to employees in 2014 are going to expire if Airbnb waited til 2021.