[LekkoscPiwa]

Company isn't necessarily worth $1m more because it has $1m in the bank. Think of the dot-com bubble in 90s. All these companies with millions in their bank accounts that never sold anything to anyone for even one cent. But were burning through cash like crazy. Would you invest in them just because they have millions on the bank account?

The market is washed with cheap money courtesy of the FED. According to one study VCs in the US gave worse return in the past decade than blue chip stock. High risk, high return companies have had worse performance in the past decade than low risk, low return. This is not good statistics at all.

http://blogs.reuters.com/felix-salmon/2012/05/07/how-venture... http://www.verisi.com/resources/venture-capital-performance....

The market is drunk on the money provided by the FED. We'll all have horrible hangover after all is said and done. (i.e. the FED eventually rises interest rates).

edit: I love it how people down vote just because I said something opposite to what PG claims. And then no response neither ;-) Somehow this actually makes me feel good! Because it looks like I'm right as nobody replied.

[lsc]

the business cycle goes up; the business cycle goes down. We all know this to be the case, and the business cycle is obviously up, so quit whining and get to work.

If you have no name, this is the time to make your name. If you have a name, this is the time to make money with that name. These are the times in which you have the most leverage.

Yes, of course, the business cycle will go down again. when will it change direction? How sharp will that transition be? Nobody knows. Worrying about that is... trying to know the mind of god. We all have a set of tools, a set of resources and abilities. We need to use those resources and abilities to make enough money (or enough notoriety) that we will be able to deal with the thin times. Now is the time to run hard, not to wonder about macro. There will be plenty of time for that during the next downturn.

Sitting here and complaining about the business cycle doesn't help you, it doesn't help me, and who knows, maybe some people feel that it brings that day of "the business cycle goes down" closer to now. That was the primary reason why I'd guess you got down-voted.

The other thing? Do you remember the '90s? I worked through the crash. It was not at all obvious ahead of time, which companies would come through, and which companies would not. I mean, it seems obvious now, sure, but it was not obvious then.

[LekkoscPiwa]

>the business cycle goes up; the business cycle goes down. We all know this to be the case, and the business cycle is obviously up, so quit whining and get to work.

I do work. Business cycle is up temporarily on cheap credit. There is no substance to it. 70% of new hires since 2008 in the US are part time. The debt to GDP ratio is higher than ever. Food stamps are on record high. Inflation if used Ronald Reagan years formula and not today's hocus-pocus hedonistic whatever is at 10%. The whole thing seems to work just because of the interest rates at 0% since 2008. And you can't have them at zero forever.

> Sitting here and complaining about the business cycle doesn't help you, it doesn't help me, and who knows, maybe some people feel that it brings that day of "the business cycle goes down" closer to now. That was the primary reason why I'd guess you got down-voted.

Wow. If 50 million Americans on food stamps, 10% inflation rate, and average real wage adjusted for inflation lower than in 1960s is up in the business cycle, I'm afraid to ask what will be down. Greece?

> The other thing? Do you remember the '90s? I worked through the crash. It was not at all obvious ahead of time, which companies would come through, and which companies would not. I mean, it seems obvious now, sure, but it was not obvious then.

No, it wasn't. The same like right now it is not obvious to you that the "up" you perceive is just a bubble in the US Treasuries. Don't worry, will be obvious to you soon as well.

BTW, you haven't addressed anything that has to do with extremely poor VCs performance in the past decade from my post. And that $1m on the company's bank account usually doesn't translate into the company being worth $1m more. Which was my main point. Care to talk about this?

[lsc]

>Business cycle is up temporarily on cheap credit. There is no substance to it.

The money will pay your bills as well as any other money.

My point here is that you can't do anything about this ebb and flow of money, 'fake' or not. Point is, you need some. I need some. Not a whole hell of a lot, really, on a global scale, but you need some money very badly. Even if it's "fake" money that isn't being managed in the way you like.

>70% of new hires since 2008 in the US are part time. The debt to GDP ratio is higher than ever. Food stamps are on record high.

The market for labor is intensely local, but local in a different way from the market for real-estate. Yeah, most folks are still getting shit upon. The business cycle isn't 'up' for them at all.

But it's 'up' for the sort who read hacker news. Engineer salaries are through the roof. I can't keep a PFY. Used to be that I'd keep someone for years if I hired them full-time; tens of months if I hired them part-time. The last few PFYs got yanked out from under me within the first month or two. [1]

The bubble is localized to our industry (and to a lesser extent, to my physical area.)

You.. sound foreign, so I'm guessing you don't remember what it was like in silicon valley and outlying areas in the early to mid-aughts? [2] It was /really bad/ for computer folks, and really not all that bad for everyone else. I had many, many friends who were of my technical level working retail. It was really bad for us. (but the retail jobs were still there; everyone else was largely fine.)

Right now? it's our turn for the good times, while everyone else suffers. I'm not saying it's fair or good... just that it is, and shouting that money is a government construct, and that they are trying their damnedest to generate some inflation (no shit.) changes nothing.

>Inflation if used Ronald Reagan years formula and not today's hocus-pocus hedonistic whatever is at 10%. The whole thing seems to work just because of the interest rates at 0% since 2008. And you can't have them at zero forever.

I don't understand why people seem to think inflation is some kind of crazy boogyman. Think about it. Everyone is in debt. Much of that is fixed-rate debt. Real inflation (including wage inflation) would be good for all of those people.

In fact, I personally believe inflation, nationwide, really is close to as low as they say. It's hard to have real inflation without wage inflation, and we're only seeing that here in silicon valley. From what I understand, this is a problem. We need inflation (especially wage inflation) to deal with our consumer debt problem.

Now, what we've been seeing is inflation in commodities, which is about the worst-case all around. We need inflation in wages (which will result in general price inflation, but so long as wages inflate, too, I think that's just fine.)

Of course, all that macro bullshit is just that; it's bullshit. I'm no expert, and I'm not convinced at all that the experts know anything themselves.

I do have some experiences with this industry, though, and the bit about making hay while the sun is shining? it's real. It's way easier to make career progress while the (local) economy is up.

[1]I don't begrudge them that; that's the whole deal with hiring apprentices. They take the job for low pay so they can get the job for high pay after they have built some experience with you. If one of your employees gets hired away for 2x or 3x the maximum amount you could pay them, there's really nothing to do but congratulate them and ask if they know anyone who might want their old job. (That's how I get my best recruiting leads.) But it does mean that the job market for smart young programmers/sysadmins is hotter than it was.

[2]I mean no insult; Your English is not terrible for a native speaker, and English is a tough language. I'm a monoglot, myself.

I guess the corollary here is that if you still aren't in the US or in silicon valley, well, you probably see things rather differently than I do.

[LekkoscPiwa]

thanks for the reply. The thing with inflation: true, it helps those in debt. But is destroys savers. Inflation is a simple mechanism of wealth transfer from savers to debtors. You described who the debtors are. I agree. Let me tell you who the savers are: mostly retirees (401k), elderly people who use their life savings to pay the bills, etc, and others like successful businessmen who just want to save. I just don't think that it is morally ok and I know that it is not economically ok (due to moral hazard) to just move wealth from people who worked and saved to ones who were irresponsible with their debt, took risks, and now want someone else to be responsible for that. Because there are more debtors than savers then simple political calculation says screw savers, let's rescue debtors as they are the majority of voters. And here we go:

Insurance premium for me is up 20% year to year. Food is up. Medication is up. Gas is up. All kinds of insurances are up. And all of these hurt common folk the most too. Guys living paycheck to paycheck. But those don't even get what the inflation is and how it translates to their daily lives. So the Government just continues printing.

Now talking about good times we have now in the IT. My answer to this consists of 2 points: (1) It's not only IT. Just read somewhere that some parameters of the housing market are as "hot" now as they were in 2007 in some areas (Las Vegas); cars are also selling as well as in 2007; etc. Which takes me to (2) The FED by keeping interest rates at 0 since 2008 was able not only to reinflate housing and IT bubbles but probably to create even more bubbles all over the place. So what I think and of course I may be wrong -- what you are experiencing with your new hires now is just another bubble built on cheap credit. Since 2008 the whole world has been buying US Treasuries like never before, funding US Government, financial sector and big businesses on unprecedented scale. The VCs I mentioned - how in the world can you be a VC and have worse return than S&P500 for the past decade? And still get funding! Why? Because with interest rates at 0% nobody wants to keep cash or money on deposits - everybody has to "invest" (or rather speculate). So that's what happening. If you do nothing with that cash you loose 10% year to year. So you invest no matter what. In IT, real estate, startups, whatever. Once the world stops buying US Treasuries on such a scale and actually starts selling them, the interest rates will go up. So then the question is why to invest in all these crazy startups, equities, bonds, real estate, etc. When just keeping cash at the bank deposit returns 5% a year? Or maybe even better at 18% (as it used to be the case in 1981). That's when you will see - sorry for putting it so bluntly - how much all these VCs, IT sector, real estate, etc. are really worth. Without cheap credit doing the work of life support.

BTW, I'm an (proud) US citizen, originally from Poland. As crazy as it may sound to you, after almost 10 years in the US (9 years IT experience) I decided to move back to Poland because I'm really worried that the US economy may face extremely serious crisis. Comparable to hyperinflation in Germany in 1920s. Think of me as of one of these tin hat guys or gold bugs ;-) My English sucks at times. I try to reread whatever I write, but sometimes I just write stuff and don't really care and well, it shows. My apologies, I tried to be better this time, lol. Nice talking to you btw.

I get you. You are a business guy doing his thing and you could care less about all the economics and politics BS. Honestly, I think that's great. I don't want to waste your time, so just saying hello and take care.

[lsc]

>Let me tell you who the savers are: mostly retirees (401k), elderly people who use their life savings to pay the bills, etc, and others like successful businessmen who just want to save. I just don't think that it is morally ok and I know that it is not economically ok (due to moral hazard)

and don't forget bondholders. But yes, inflation (I mean, flat, across the board inflation, and it never actually happens that way) tends to hurt the rich and tends to benefit the poor. The view that the rich are rich because they are morally superior is pretty common, as far as I can tell; more common here than abroad. It's a view that I disagree with.

[LekkoscPiwa]

How the QE works is that these trillions and trillions are pumped from the FED directly to big zombie banks to help them stay afloat. As big banks spend these money by investing in bonds, equities, VCs, whatever, the economy as a whole starts feeling better, I agree. And the prices rise too. The problem is that the last ones to receive it still have to pay harsh inflation tax even though they didn't get much out of the benefit. It works like this (money creation): FED --> banks --> whoever banks loan money to or invest in (investment banks) --> VCs, real estate, homeowners (from your example), etc. --> whoever these folks spend money to. The poor gets poorer in that scenario, while rich get richer (and I'm a republican here, mind you)

So, to answer what you said -- newly created money benefits those who are first to receive it. If the owner of the printing press (the Government) makes it such that group A receives the money first and then decides how to spend it, then the group A will benefit at the expense of everybody else. If group A decides to spend it on people in group B then these folks will mainly benefit as well. And then group B spends on others, so on. The last one to receive it is the big looser. If the Government policy is to hand over the newly printed money to the healthcare companies - healthcare wins at the expense of everybody else. If the Government decides to spend it on the Travel industry - these folks win while we all get hit with the inflation. Etc, etc. It's not really rich vs poor debate, it is who gets the freshly printed money from the FED first is the one who benefits at the expense of everybody else.

That's why inflation is bad. Inflation is the reason why you see the gap between rich and poor - worlwide, not only in the US - getting bigger. Because somehow the FED always hands over newly created money to the banks. And I'm not a socialist saying it's bad on moral grounds - far from it. I'm saying that's a sick economy. The FED should be abolished and money should go there where the markets want the money to go. Without being influenced by politicians and their agenda. That's what - to me - true republicans hail - free economy. The FED needs to be abolished. And as can be easily shown this money creation process will create bubbles. If newly created money goes to IT, IT has a bubble. That's what happened when the FED printed in 1990s to go over Savings and Loan Crisis -- all the newly created money created IT bubble. To fight off the results of that bubble bursting they printed even more -- that's what caused to Housing Bubble. And when this one bursted (they always burst) - they created the US Treasuries bubble. The Ultimate Bubble. The Wholy Grail of Bubbles. Bubble in the reserve currency of the world. Bubble in everything across the spectrum. I'm not going to sit around in the US and wait for that one to burst as well.

Bauer Mayer Rothschild, 1838: "Let me issue and control a Nation's money and I care not who makes its laws"