
Stock Markets Tumble Amid Worries Over Tech Firms and Trade Tensions - aaronbrethorst
https://www.nytimes.com/2018/04/02/business/stock-markets-technology-trade.html
======
cs702
A possible explanation for the sudden change in mindset:

Until recently, data was considered "the new oil." Those who sit on vast
amounts of it were considered rich.

Now, after the Equifax hack, the FaceBook/Cambridge Analytica scandal, and
other revelations (such as Grindr freely sharing highly personal data), it
seems that data is increasingly being viewed as "the new uranium."

Data, it seems, is becoming _radioactive_ and must be carefully controlled and
safeguarded to prevent leaks. Those who sit on vast amounts of it must now
handle it with care to avoid societal, political, regulatory, and legal
backlash.

The stock market seems to be reflecting data's transition from asset to
liability.

~~~
closeparen
Facebook is in trouble because it sold political influence at a price that
previously non-mainstream actors could afford. Data is incidental to that
scandal. Equifax suffered no meaningful consequences for its breach.

I understand that the HN consensus desperately wants your statement to be
true, but that doesn’t make it so.

~~~
eganist
> Facebook is in trouble because it sold political influence at a price that
> previously non-mainstream actors could afford.

Since there appears to be some confusion (it took me a few passes as well), I
interpreted your statement as the following:

> Facebook is in trouble because it sold political influence at a _discount
> from what_ previously _only large nation-state_ actors could afford.

The implication, if I'm reading correctly, is that any mom-and-pop millionaire
could practically launch the same sort of campaign on the platform. Or perhaps
more succinctly and dramatically,

Facebook commoditized the weaponization of data.

Am I understanding correctly?

~~~
closeparen
The traditional DNC/RNC campaign-finance and media-buy systems are not very
efficient. They're also based on relationships. Candidates must appeal to
broad coalitions of donors so that they can afford the TV airtime necessary to
succeed. Ads must not be too damaging to the reputations of the career
staffers and media companies putting them on the air. This tends to constrain
the ideological space a successful candidate can occupy.

We saw a successful candidate from outside that space because the efficiency
of Facebook's ad platform, plus a unique and possibly Russian-intelligence-
supplied savvy in wielding it, obviated the need for (as much) donor consensus
to achieve a winning level of influence. I don't know about "any mom and pop
millionaire," but you need less of them in your court than you used to.

That scandal that has everyone up in arms is Facebook's complicity in Trump's
election, which is a consequence of its enablement of extremists in general,
which is a consequence of its ad platform's cost-efficiency, which is a
consequence of its troves of user data. But it's not _data_ that started a
drumbeat of public intellectuals calling for heavy-handed intervention in the
New York Times editorial section (a fingerprint we've seen before). It's
influence. The establishment is (correctly) not trying to engage populism in a
meme war. It's fighting back the way it knows how.

------
chollida1
It is starting to get ugly.

\- Fed is raising rates to slow down the economy/inflation

\- Tech, which did alot of the leading of the market, is finally having to
account for alot of its negative externalities.

\- The US is picking a fight with China and Europe over trade access, though I
think the US has a point on this fight.

\- Market is just over bought by several common factors

\- Too much institutional money is chasing too few ideas so that these trades
are all levered up, the risk here is that the first person to be forced to
unwind could cause alot of additional unwinding as the selling off feedback
loop plays out.

And sadly this could have been bitcoin's time to shine and show that its a
gold replacement by performing well when the market goes to shit, but bitcoin
is going through an ever larger correction at the moment.

Hand's up, who thought back in December that we'd see a 6 handle on bitcoin by
April:(

Good time for HFT firms though, volatility is back.

~~~
ihsw2
There is an open possibility that cash will flood into BTC/ETH as a store of
value in a highly volatile S&P market, replacing traditional reservoirs (eg:
Japanese/other international equities, precious metals, etc).

~~~
ng12
I doubt it. Buying gold is irrational in most situations. People do it because
it "feels" safe and I'd argue BTC definitely does not.

~~~
AnimalMuppet
I disagree. I think gold functions, essentially, as a short on paper
currencies.

~~~
ng12
I didn't say you can't make money buying gold, just that gold is driven by
irrational fear.

~~~
AnimalMuppet
And I still disagree. Deciding you want a way to short paper currencies can,
at times, be _very_ rational. Does gold fulfill that function reasonably well?
Yes, I think history shows that it does. So it can be very rational to buy
gold.

(Perhaps "short" was the wrong word. But it is where people go - with reason -
when they're losing confidence in fiat currencies.)

------
meddlepal
I suppose a silver lining on a tanked economy caused by President Trump is
that it probably ends his parties control of Congress in November. If he keeps
wiping out market value at record pace with his policy statements and
decisions he is going to have a hard time convincing people the Republican
party is the party of smart business.

~~~
tootie
That's what I thought about Bush, but he checked out right when the crisis hit
and let employment bottom out on Obama's watch. Then Trump was able to run on
a pro-business campaign saying that Obama didn't create enough jobs. What
we're seeing is possibly the bleeding edge of a downturn that may not hit for
real for a year or two. It could easily hit the next administration and it
will a hell of cleanup job since we haven't paid off our last recovery yet.

~~~
Applejinx
Bear in mind a lot of the unemployment numbers are hilariously fake. Way too
much is exempted, and for the last several administrations of both parties,
this talking point is not reflected in people's lived experience.

Bear in mind that what's considered 'employment' is far from what people
called employment in the fifties. This does not translate into people
attaining self-sufficiency.

~~~
majewsky
I would like to know why this is being downvoted. I cannot speak for the US,
but the same has been happening in Germany in the last 20 or so years, at
least anecdotally.

The reported unemployment rate peaked at 13% in 2005 (which, whether
coincidentally or not, is also the year when Merkel was first elected), then
fell steadily [1] and is currently at 5-6%. Critics attribute a fair amount of
that positive trend to tampering with the statistics. For example, unemployed
people are excluded from the statistic while they are going through
government-mandated job training. I've heard stories of people who had to sit
through the same Excel course over and over again because the stat was lower
while they did so.

[1]
[https://commons.wikimedia.org/wiki/File:GermanyUnemploymentR...](https://commons.wikimedia.org/wiki/File:GermanyUnemploymentRate.svg)
\- Notably, it's very hard to see the Great Recession in this chart. There is
only a small negative dent in the overall positive trend.

~~~
existencebox
The specific metric you and the parent are looking for is "Labor Participation
Rate".[0]

This is a personal favorite metric of mine, because it makes readily apparent
some of the distortions the parent brought up. I imagine they're likely being
downvoted for some combination of more vociferous language, less citations,
different perspectives on the merit of the math/historical comparison the
poster is referring to, as well as good old "you're wrong" downvotes, but I
certainly found myself agreeing with the thrust of the point. (that
unemployment and in related fashion CPI are regularly distorted for one agenda
or another; for a recent example of this look at the application of C-CPI in
the latest tax code to help address budget shortfalls in a way one might
fairly call "slight of hand."[1])

[0][https://data.bls.gov/timeseries/LNS11300000](https://data.bls.gov/timeseries/LNS11300000)
[1][https://www.bloomberg.com/view/articles/2017-12-20/the-
big-p...](https://www.bloomberg.com/view/articles/2017-12-20/the-big-
permanent-tax-increase-inside-the-tax-cut-act)

~~~
cm2187
But it is also skewed by the “papy boom”, wealthy post war generation going
into retirement, leaving the workforce. So it’s not trivial to read the
participation rate either.

------
nostromo
It's common for people to look at the S&P 500 chart and immediately decide
it's due for a crash. (In fact people have been doing that since 2013!)

But the economy itself is quite healthy. Earnings have been rising and driving
up valuations. Unemployment is low. Wages are (modestly) growing. Things are
in general very good.

Why has the market risen for so long? Because the correction in 08 was so fast
and deep, and took so long to recover from. That doesn't mean we're due for a
correction anymore than sunny weather makes you due for rain.

Barring a shock to the system (a war, an unforeseen debt crisis perhaps coming
from China, terrorism, etc.) I think we've got some more gains to realize.

~~~
maerF0x0
> But the economy itself is quite healthy. Earnings have been rising and
> driving up valuations. Unemployment is low. Wages are (modestly) growing.
> Things are in general very good.

But the multiple is rising, meaning prices have grown _faster_ than the price.

[http://www.multpl.com/](http://www.multpl.com/)

~~~
mdorazio
To clarify what I think you mean, the P/E ratio is rising and is now above
historical averages for the S&P 500 dataset. The only times in the past where
this was true was in the bubble days of the late 90s and mid 2000s. The
takeaway is that stock prices are not actually supported by the underlying
earnings gains, even if earnings are going up - this is evidence of an
overheated market.

------
ironjunkie
On top of that, you have Trump tweeting negatively about Amazon.

This pushed AMZN down for a third session now, snowballing with it a lot of
others.

He basically brought down the economy he is responsible for.

~~~
AznHisoka
But why do investors have to respond to Trump's tantrums? Why don't they
collectively just ignore him?

~~~
alehul
The market responds to Trump's tantrums because it affects the potential of
Amazon in the future.

Basically, if Trump threatens to take some action against Amazon that may hurt
its value as a company by 10%, and investors believe there is a 50% chance of
Trump following through with this threat, the investors will (theoretically)
collectively lower the price of the stock by 5%.

A price on a stock market is determined wholly by future outlook, which a
president's negative tweets can affect, hence why some companies with high
earnings expectations in the distant future _cough_ Tesla _cough_ have
ridiculously high price/earnings ratios on their shares.

~~~
sp527
The part you omitted is how the long-term outlook currently priced into a lot
of tech stocks (including AMZN) is far too optimistic and not accurately
discounted relative to likelihood. Current prices aren't a function of
rigorous analysis so much as pie-in-the-sky projections and too much capital
floating around.

~~~
alehul
The efficient-market hypothesis basically asserts that if a price weren't a
function of rigorous analysis, then there would be a sizable incentive to find
and correctly analyze this stock, and trade appropriately to take advantage of
the inefficiency until it no longer exists.

There could possibly be a more optimistic pricing in the markets if we
factored in, just as a random example, that people are more timid to short
rather than buy, as a short can easily result in a loss higher than the entire
value of the position. An interesting read if you'd like to go down the
rabbit-hole of that ideology would be anything on the concept of 'Adaptive
Markets' by Andrew Lo. Rather than the common physics/maths-based approach to
market behavior, it focuses on a more biological one, and thus includes these
'emotional inefficiencies' that may be present in market pricing.

------
tekkk
The self-proclaimed genius president seems like is following through his
threats. What worries me is not the fact he is challenging China for its more
than questionable trade practises but the incompetency how this problem would
be solved. Tit-for-tat politics won't go far. And just when I started
investing in stocks, oh well. I had a policy that I'd buy only after market
crash and keep my assets liquid till then but since predicting market crash is
just as improbable as investing at the right time I wagered that I should just
buy now and worry about it later.

~~~
komali2
No worries, just keep buying. Unless you're trying to become a day trader, you
were never trying to time the market anyway, just have a nest egg.

If all your stocks zero out, liquid capital will be worthless anyway. Raise
chickens.

------
JumpCrisscross
Poor Spotify--they're set to go public tomorrow [1]. (Last time they were
talking about going public, Snap beat them to the punch.)

[1]
[https://www.ft.com/content/a3c43c14-2876-11e8-b27e-cc62a39d5...](https://www.ft.com/content/a3c43c14-2876-11e8-b27e-cc62a39d57a0)

~~~
smileysteve
?Luckily? They're not being underwritten by anybody, which means that the
internal shareholders get to control what price they will sell at. Entirely.

------
matte_black
This market is a bit painful right now, amazing how everything seems to be
going to shit all at once. Right now, I'm back to where I was a few months
ago.

But, the economy is still pretty good IMO, I still have 40k in cash to
allocate, planning to buy in if things go a bit lower. Trade war stuff should
subside once people get used to the new reality, and the issues with tech
stocks are mostly negative press, but fundamentals are still strong and that's
what matters. Wait till earnings. I do not hold any positions in TSLA.

~~~
fwdpropaganda
Trade war isn't a matter of people getting used to. You're adding actual
frictions to the system.

~~~
smileysteve
But this is optics/pr;

let's remember that 2018 dropped the max corporate tax rate 14% to 21%. So,
Tariffs add 25% friction on your steel usage or 10% on your aluminum, or x% on
your chinese imports - but your value add is taxed at 14% less.

It's really a shame the tariffs and the corporate tax rate weren't packaged
together to be closer to revenue neutral.

~~~
fwdpropaganda
> let's remember that 2018 dropped the max corporate tax rate 14% to 21%. So,
> Tariffs add 25% friction on your steel usage or 10% on your aluminum, or x%
> on your chinese imports - but your value add is taxed at 14% less.

I couldn't really tell what point you're trying to make.

Also don't really why you're connecting those two. I'm sure in your mind it
makes a lot of sense, but you gotta share it with the rest of us...

~~~
smileysteve
Thanks for letting me know that that wasn't clear.

The point is that Tariffs are not happening in an economic vacuum; but are
happening in the same space as a 14% corporate tax break.

The extension of this is that tariffs collect revenue (much like taxes did)
while enforcing a political agenda (encouraging changing of sources).

If a "trade war" tariff exchange is isolated to raw materials (steel,
aluminium, pork, etc) then tariffs are preferable to a higher finished good
tax rate because there is margin on the finished good.

------
cwkoss
Market is long overdue for a correction, these issues are just the straws that
broke the camel's back.

~~~
eldavido
It's interesting how the market never just drops though. I was talking about
this with my family over the weekend.

There always has to be some precipitating event, e.g. if you think Tesla is
wildly overvalued, it gets adjusted as the result of some event like a (car)
crash, and all of a sudden, it's a giant panic.

It's certainly interesting to watch.

~~~
nostrademons
This is often a result of selection bias. There's always _some_ event out
there that could conceivably affect the stock price in some direction. When
the price moves, your brain (and the news headlines) ties the price move to
the event because humans don't like "Yeah, it was just random chance" as an
explanation, but the actual reason the price moved was there were fewer or
more buyers than sellers that day.

I've seen this happen in action when the S&P 500 might start the day with a
big drop and the headlines are all "Markets drop on inflation fears" at 11 AM,
and then they turn positive in the afternoon, and suddenly the headline
changes to "Markets rebound on positive economic data". In actuality, neither
the inflation fears nor the economic data was the cause of the market moves,
but "Markets move randomly throughout the day", though true, is a terrible
headline that won't get any clicks, and so no news outlet will ever run with
it.

~~~
eldavido
This isn't how I see it at all.

In my view, there's a price that correctly prices in all information that's
knowable. Note that each individual may have his own version of this price,
which is why buying and selling takes place. "Market efficiency" just means if
I think it's worth 5 and you think it's worth 10, and we're participating
equally in the market, the price will be 7.5. It _does not_ mean one of us is
necessarily not right and the other not wrong. If the market price is 7, but I
have better information that makes be believe it's worth 10, I'm right, the
market is wrong. Efficiency just means everything is aggregated properly and
all opinions are priced in.

In the long term, we all know stocks are driven by both macro and company
fundamentals, stuff like GDP growth, earnings, margins, revenue, free cash,
etc. But there's also a short-term view that drives prices day-to-day. I think
Peter Lynch was right, that short-term movements are more like a "voting
machine" driven by news, hype, perception, and a lot of other things. While
short-term pricing is unpredictable, I don't think it can properly be called
"random" in the sense of a coin toss, or dice roll. It may be hard to predict,
but it does feel that there's a definite cause and effect to things. In the
case of Tesla, you may not know that they were going to release news of a
crash, but it's a pretty safe bet that once that news is released, it's going
to depress prices. It's not hard to see why, market participants are human,
they do things for reasons, though those reasons may not be well-informed,
predictable, or otherwise rational.

What's interesting is how these two views--the short and long-term ones--
equilibriate/converge over time. Empirically, I've observed it's usually some
sort of "event", whether an earnings release, or a news item, or a job report,
that causes this equilibriation process to kick off. All of a sudden, some
good or bad news item breaks, and the market "overreacts" (positively or
negatively). I find this really interesting.

------
bluetwo
Anyone who tells you why the market went up or down without talking to
everyone who bought or sold stock is pulling that wisdom from their rear end.

------
contrarianguy
Let's see how many people sell low. Just hit support on various indexes today.
Short-term bottom is in, already today, or tomorrow on marginal new lows.

Signed, 15 years futures experience

~~~
celticninja
Can you explain what you mean? I'm reading it that you think this is as low as
it is going for the moment, but could easily be wrong.

~~~
yborg
It's refreshing reading a comment from one of the 5% on HN that doesn't
believe themselves to be smarter than the market. However, listening to a
technical analyst is going to be about as useful to you in figuring out where
the market is going as listening to an astrologer. There are a lot of
parallels between the two disciplines, actually.

~~~
contrarianguy
Yes, you're right, TA is useless, unless you have astrological powers. Nothing
to see here.

------
machinehermit
"Stock market starts to correct because it has been doing nothing but going up
for a decade, News at 11".

------
blondie9x
It is a bit more complicated than just data becoming a liability.

There are a bunch of moves that the current president has taken that undo the
actions the previous president took to help the United States and the global
economy recover from the worst financial recession in history. The undoing of
all of those efforts and the efforts of previous generations is seriously a
risk the global marks and capitalism.

Potential NAFTA withdraw, TPP withdraw, Paris Climate Accord withdraw,
starting trade wars, creating America isolationism, is a serious headwind for
the global economy for for American prosperity.

The markets are beginning to price that in and will continue to do so until we
get back on the course we were on before this administration took office.

------
kristianc
It surprises me that people are so exercised about Trump's tweets and Amazon.
Amazon is the archetypal survivor of the original dot com bust, has grown
enormously since then. AWS alone is a $10bn a year business.

~~~
ISL
It's the trade war, not Amazon, that matters.

------
dqpb
> _A broad market sell-off hit Wall Street on Monday, ...as a recent blitz of
> bad news about technology companies and festering worries about a trade war
> between the United States and China_

Indeed the media blitz against US tech companies has been well coordinated.
Somebody is running a very effective campaign.

~~~
shdh
Who's running said campaign?

------
m3kw9
Market at all time high relative to 5-10 year average it is way above average.
This is a psychological run market, models will often roll with punches. So
people are in a hand on the trigger mode after suffering suffering close 10
percent losses. Any news and downs will trigger more downs, and ups will cause
people to buy back due to losses and the models also play into these predicted
effects.

------
rdlecler1
GDPR is the Sarbanes-Oxley of data privacy. It was intended to stop the large
abusers but it just stifled small companies, giving large companies even more
of a protective advantage. Omar size fits all rules make no sense.

~~~
laaph
> It was intended to stop the large abusers but it just stifled small
> companies

It also hasn't gone in to effect yet, so I'm not sure how much stifling it has
done so far.

------
3pt14159
There was a bit of discussion over here when banks first warned about an
oncoming downturn:

[https://news.ycombinator.com/item?id=15081150](https://news.ycombinator.com/item?id=15081150)

------
feelin_googley
"He reminded me to re-watch the onstage interview from just months before that
he did with me and Walt Mossberg. Walt asked him about privacy and referenced
Facebook CEO Mark Zuckerberg, who was also in the room listening.

"Privacy means people know what they're signing up for - in plain English, and
repeatedly," said Jobs in that interview, which you can see below, aiming at
the young techie and advertising-based businesses like Facebook."

Source:

[https://www.recode.net/2018/4/2/17189192/mark-zuckerberg-
fac...](https://www.recode.net/2018/4/2/17189192/mark-zuckerberg-facebook-
steve-jobs-apple-tim-cook)

------
tanilama
Trump is bring the end of a system. Interesting to see how it will actually
unfold.

Trade war with China will hurt both sides, with China on the loser side. But
China will be resilient, after all the anti-west narrative never goes away and
Trump only proves its correctness , when the propaganda machine rolls it will
make China even more united, a divided US on the other hand, is not. Any
negative impact will be written down by opposition as bullets for next
election. Violent delights will have violent ends. Grab my popcorns, the show
has just begins.

