
Economy Looks Like It's Picking Up Which Could Mean a Slowdown in Tech Investing - rudimental
http://recode.net/2015/05/19/the-economy-looks-like-its-picking-up-which-could-mean-a-slowdown-in-tech-investing/
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bsbechtel
I'm wondering if the issue here is not 'the economy is picking up, let's
invest elsewhere', but rather that investors don't have investment vehicles to
put their money into other areas of the economy that need it most. The public
markets are booming, and so is the tech sector, which I am guessing has a
greater chance of a liquidity event than businesses in most other industries.
While these two areas are doing fine, the small business sector, which is the
largest portion of our economy, continues to struggle to get access to
capital. Many of these small businesses could generate 20-30% returns, but
investors have no way to easily get their money back out of the business -
they'll never IPO, and a private acquisition is rare. This lack of liquidity
in one of the largest asset classes of our economy seems to be the major
bottleneck we're facing right now.

EDIT: I should add....the JOBS act and Crowdfunding are giving small
businesses and entrepreneurs more options for finding funding, but getting a
return on that investment still remains a question. In addition, crowdfunding
as an industry is somewhere maybe in the billions, whereas the financial
services sector is in the trillions, so the impact is still relatively small,
although growing fast.

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cma
Why not just pay a dividend?

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bsbechtel
Not entirely sure, but I am guessing it's for the same reason debt isn't a
super desirable form of financing for small businesses - cash flow is hard to
manage.

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pjc50
In Europe, we should not forget that the situation of Greece has not yet been
resolved and the country has resorted to shuffling every internal bank account
in order to pay the IMF.

The next final demand notice arrives on June 5.
[http://www.telegraph.co.uk/finance/economics/11617208/Greek-...](http://www.telegraph.co.uk/finance/economics/11617208/Greek-
default-woes-hit-the-euro.html)

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the-dude
I think the premise the economy will 'pick up' is highly questionable.
Furthermore I think we will see very low interest rates in the US and Europe
for a long long time.

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marincounty
In the United States I am questioning the need to keep the federal interest
rate so low. Yes, it might have brought us out of depression?(I still wonder
what the outcome would have been if Bush let the banks go bankrupt?)

Back to these low interest rates. At this point in the recovery, I am just
seeing rich people playing with essentially free money--taking some big risks,
but I don't see it trickling down to the middle class and poor--in most cases.

I see this essentially free money being funneled into the stock market,
because there's no where else to put the money, except real estate, and
speculative VC investments. That's fine and dandy, but the poor and middle
class are having a hell of a time getting loans. They are essentially locked
out of the party? Yes, the middle class is greatful their Company retirement
plan is soaring, but it will drop.

Many of us(poor, middle class) speculate in CD's, and in my case I am getting
.1 percent per year-- on my meager account. I can't afford to speculate. I
don't think I am alone. I counted on the interest I used to make. It's gone. I
now pay the bank more in fees than I get in interest. In my case, I have a
negative rate of return on my money.

My point is I don't see this essentially free money the rich are getting
trickling down, with the exception of the tech industry. You guys seem to be
doing great, and you guys deserve it. And yes, their are hot spots like the
Bay Area where houses are way up in value, but so are rents. Rents have gone
up so high long term residents are being forced to relocate.

What I am trying to convey--poorly--is I don't think the economy is doing that
great. Food stamp usage is at an all time high? The unemployment number is
beyond skewed because they stop including you in that figure once that check
stops--I believe? Student loans are at an all time high. Small and medium
sized business are having a hard time securing those low interest loans. I see
so many Homeless. I my county, section 8 housing is closed, and there's a
three year waiting list. I honestly don't see the variety of jobs like I did
before the ression. People are so desperate for work they are buying
newer(2008) four door cars in order to work for Uber. Non profits are closing
--some deserve to close, but some of the better ones are not getting the
donations like in years past. I can go on, but getting tired.

My major point is so many of us are losing net value in this low interest rate
economy. The renters who rely of cd's to hold their money are hurting. I don't
blame anyone politically. I'm glad medically uninsurable home owners don't
need to risk losing their home in a medical judgement attachment thanks to
Obama, and a Supreme Court justice.(forget his name, but he is a kind man, and
a Rebublican!)

I see another ression coming real quick. I hope families stick together, and
pool their resources--and don't blame the wrong people when the chit hits. I'm
usually 180 degrees wrong when it come to money--so I'll dummy up. Sorry--just
venting!

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hnnewguy
I'm not going to deny that much of what you describe is occurring. America is
a harsh, dog eat dog place. I'll only comment that it isn't unique to this
point in time, and isn't a result of Fed actions regarding the Great Recession
(post hoc, ergo propter hoc).

But what does irk me a bit is:

 _" My major point is so many of us are losing net value in this low interest
rate economy."_

This is a weak form of Bastiat's broken window fallacy in action. You see the
money _you_ are losing, but don't consider what higher rates mean for others,
like less discretionary money in the economy because more income is going
towards car loans, student loans, credit cards, mortgages. There could even be
less entrepreneurship occurring due to the higher hurdle rate. Have you
included this in your net value calculation?

You don't "deserve" to earn more interest on your CD any more than I "deserve"
to pay less interest on my mortgage.

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collyw
The UK is pretty much copying the US with low interest rates. It was recently
reported that since 2007, the richest thousand people in the UK have doubled
their net worth, while normal people are suffering austerity.

My assumption is that they haven't worked twice as hard. And as the UK economy
isn't really picking up, they clearly haven't added double the value to it.

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gutnor
Low interest rate are good thing for normal people. Normal people do not make
significant amount of money from the interest of their savings, at least not
enough to offset the cost of the money they need to borrow for their mortgage,
car/student/credit car loans, ...

The only problem that may have caused in the UK is making the ISA account look
less attractive, which could impact the rate people save. (the money you put
on your ISA is 'locked away', which mean you are less likely to spend it)

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simpleblend
If you look closer at all the jobs being created, they're mostly part-time and
for the elderly. The US government is lying. The economy is not recovering.

The FED can't raise rates without sending the economy back into recession. QE
4 will soon be here.

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adventured
The US has added six million full-time jobs in four years.

Almost all job growth has been in full-time employment.

Source: BLS

[http://i.imgur.com/AUkWSN9.png](http://i.imgur.com/AUkWSN9.png)

It's not a question of if the economy has recovered. It has. The question is
whether the gains can be kept and added to.

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toomuchtodo
The number of jobs has gone up, its just that they'll all shit jobs. Your
graph does a disservice by omitting the wages paid by those new jobs.

[http://www.theatlantic.com/business/archive/2015/05/the-
new-...](http://www.theatlantic.com/business/archive/2015/05/the-new-normal-
for-young-workers/393560/?google_editors_picks=true)

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jalonso510
The problem with this analysis is that the VC's investing money in companies
aren't choosing between various asset classes - they have funds committed to
their investment thesis, so they aren't going to go invest somewhere else if
returns start looking better in other sectors. It's the LPs who theoretically
may allocate less money to the VC's if they see better yields elsewhere, but
their fund commitments are long term and take a long time to change. Funds
have a life of 7-10 years and lots of folks have just raised new funds, so
there's a lot locked in that will keep going into startups for a while now.

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serve_yay
Right, but where does VCs' money come from? The money gets to choose asset
classes. VCs aren't the money, they just choose how to invest the money. All
of which is not to say I agree with the analysis.

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jalonso510
right, my point is just that the money is already committed to the VCs for the
next 7-10 years so can't change that quickly.

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lessthunk
the US economy is not doing well; As long as interest rates remain so low,
ever more money will plow into VCs/startup investing to get better returns.

