{"id":57319,"date":"2021-03-29T17:26:54","date_gmt":"2021-03-29T22:26:54","guid":{"rendered":"https:\/\/olduvai.ca\/?p=57319"},"modified":"2021-03-29T17:26:54","modified_gmt":"2021-03-29T22:26:54","slug":"ponzis-go-boom","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=57319","title":{"rendered":"Ponzis Go Boom!!!"},"content":{"rendered":"
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Ponzis Go Boom!!!<\/a><\/h3>\n
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For the past few years, I have been critical of the Ponzi Sector. To me, these are businesses that sell a dollar for 80 cents and hope to make it up in volume. Just because Amazon (AMZN \u2013 USA) ran at a loss early on, doesn\u2019t mean that all businesses will inflect at scale. In fact, many of the Ponzi Sector companies seem to have declining economics at scale\u2014largely the result of intense competition with other Ponzi companies who also have negligible costs of capital.<\/p>\n

I recently wrote about how interest rates are on the rise.<\/a>\u00a0If capital will have a cost to it, I suspect that the funding shuts off to the Ponzi Sector\u2014buying unprofitable revenue growth becomes less attractive if you have other options. Besides, when you can no longer use presumed negative interest rates in your DCF, these businesses have no value. I believe the top is now finally in for the Ponzi Sector and a multi-year sector rotation is starting. However, interest rates are only a small piece of the puzzle.<\/p>\n

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Conventional wisdom says that the internet bubble blew up due to increasing interest rates. This may partly be true, but bubbles are irrational\u2014rates shouldn\u2019t matter\u2014it is the psychology that matters. I believe two primary forces were at play that finally broke the internet bubble; equity supply and taxes. Look at a deal calendar from the second half of 1999. The number of speculative IPOs went exponential. Most IPOs unlock and allow restricted shareholders to sell roughly 180 days from the IPO. Is it any surprise that things got wobbly in March of 2020 and then collapsed in the months after that? Line up the un-lock window with the IPOs. It was a crescendo of supply\u2014even excluding stock option exercises and secondary offerings…<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n

adventures in capitalism, ponzi, interest rates, bubble, financial markets, psychology, speculation,<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Ponzis Go Boom!!! For the past few years, I have been critical of the Ponzi Sector. To me, these are businesses that sell a dollar for 80 cents and hope to make it up in volume. Just because Amazon (AMZN \u2013 USA) ran at a loss early on, doesn\u2019t mean that all businesses will inflect […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[24146,1806,1849,431,2942,658,4806],"class_list":["post-57319","post","type-post","status-publish","format-standard","hentry","category-economics","tag-adventures-in-capitalism","tag-bubble","tag-financial-markets","tag-interest-rates","tag-ponzi","tag-psychology","tag-speculation"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57319","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=57319"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57319\/revisions"}],"predecessor-version":[{"id":57320,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/57319\/revisions\/57320"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=57319"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=57319"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=57319"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}