If CNBC is reporting a housing bubble, they're either wrong or it's already burst. The media is never in front of these things. They are incapable of seeing outside the bubble because they are in it. Bad events are always over-estimated. I know it feels like the opposite, that capitalists have a rosy view of the economy, but the media always says bad things on the verge of happening. They're seeking engagement and fear is a good tool for engagement.
People always over-estimate volatility. This means they think good and bad events count for more than they do. People look at the rent moratoriums and assume that it will have a major, industry-ending affect on the market. But they do that with everything. They do it all the time. If you say it's going to rain eventually you will be correct. A lot of people, since 2008, have become doomsayers. Because the few people who saw 2008 coming got incredibly rich and are still respected to this day for being smart. People just say bad things are always going to happen on the hopes they'll eventually be correct.
A bubble is when an asset is priced way higher than its value. We've seen housing prices steeply increase over the past couple years. Therefore there must be a bubble! Housing has been priced above its fundamental value for quite a while. The whole point of home ownership is to build equity, which means your house increases in value over time. That's how boomers are able to retire with millions. If someone buys a house in the 70s for $30k and now it's worth $1M, is that a giant bubble? Of course not. It's how the increase is absorbed. Prices can go up forever as long as there are both buyers and sellers. Prices have steeply increased but there are supposed inventory shortages right now. That means there's not enough buying and too much selling. As soon as there is selling, it's immediately bought at market prices. It's a problem when people stop buying. When housing is too expensive for investors, the bubble will burst. But how do we know housing is too expensive for investors? We don't. It's like trying to predict the top of a stock price. We will only know once the bubble bursts. Blackrock just spend all of last year buying up housing at market prices. Tons of people are trying to get into real-estate investing despite it being more expensive. Lower tier investors are being priced out, but that's not a bubble. It could be the start of a bubble. Or it could be the new normal where the petite-bourgeois are just shit out of luck and they must join the proles down here in "lifetime renter" territory. They have a lot of sway with the media, so of course they would view it as a bubble.
Higher interest rates means less free-flowing capital for investing. It doesn't mean investing stops. it just prices people out. So like #3, it could be a sign of a bubble about to burst or it could just be poorer investors not getting a seat on the gravy train.
There's a symmetry here with stonks and crypto. Under the pandemic there was a lot of ways to get into these investments which fueled a bull run. People got richer and assumed it was their savvy that did it. But now that the money printer costs a little more, they can't hang and are losing their asses. They're in a new reality they didn't see coming and don't understand why. Stocks are now more expensive to to buy and will probably produce fewer returns for the foreseeable future. They're priced out of being day traders and investment opportunities. Crypto too. It boomed and then busted. Housing is probably the same way, just lagging behind. It might boom for another few months, or years. But it's definitely going to be more expensive and return less. This means only the biggest investors can afford it, and that reduces their competition. Hence them buying it up. I guess when Blackrock starts unloading their real-estate positions, the bubble is bursting.
how we are developing the best labor movement since at least Reagan
well, the bar is very low... I want to be hopeful, but I think it will take decades and I don't know if we have that long before climate change or fascism annihilates us
I'm definitely starting to realize that trying to predict something like this isn't particularly doable or even worth the effort. But for someone who the 2008 recession was a significant event in my late childhood, seeing something similar on the horizon is pretty unnerving.
The VIX is the current market value for forward-looking volatility. Meaning it's what people are willing to pay right now for what they think volatility will be in the future. It's a forecast, for months ahead. Realized volatility can only be measured in retrospect. You can't know how much a price will swing until it actually swings. Therefore what people do is they forecast the worst case scenario. I mean not the worst case, because the worst would be a swing to $0 per share. But they predict within a reasonable range. So yes, people are risk adverse and that's why they expect the worst. That's why average VIX is almost always higher than average realized volatility. I originally said always, but that's too strong. In 2008, implied was lower than realized because people weren't forecasting an economic crash or its effects.
What makes smart money has nothing to do with estimating volatility. The smart money is the big money and the big money is what moves markets. So they're the ones setting the VIX and moving actual prices. What makes them smart is how they react to volatility through risk management. That's what allows them to consistently make a modest return (on a large amount of capital) rather than gamble it away on risky moves. The smart money also knows how to make money off volatility. If you can sell options to retail traders when there's a large spread between IV and realized vol, then you make money off the premiums. If you buy options when there's a tight spread between the two, you can also make money. You're essentially just betting on how big the changes in price are rather than the direction of the price. Since changes are almost always smaller than predicted...
The strategy isn't mine, it's cribbed from Barclay's. They developed it in response to the meme stock craze. They take stocks, given them a score (the exact method of calculating the score is proprietary). The score measures the spread between IV and realized while also taking into account the historical data for the stock and its sector. Then the ones with the right score, ie the ones with the large positive spread between IV and realized, means you sell options. You make money off the premium because people are paying more due to the high IV. When the spread is narrow, you buy options because premium is cheaper than normal.
I'm not super duper educated on stocks and finance. I got started with GME and have been trying to learn as much as I can because I think it gives me an edge as a leftist to understand how this shit works. It's a lot harder to argue against my criticisms when you can't weasel out of arguments with technical details, like capitalists love to do. It's why I was a big proponent of c/finance when it started. A lot of people who got into this stuff last year stopped after GME floundered. I just kept going and tried to understand why people were wrong and the mistakes made. I've waded through a lot of terrible youtube finance people and stuff to find the nuggets of criticism and real information.
If CNBC is reporting a housing bubble, they're either wrong or it's already burst. The media is never in front of these things. They are incapable of seeing outside the bubble because they are in it. Bad events are always over-estimated. I know it feels like the opposite, that capitalists have a rosy view of the economy, but the media always says bad things on the verge of happening. They're seeking engagement and fear is a good tool for engagement.
People always over-estimate volatility. This means they think good and bad events count for more than they do. People look at the rent moratoriums and assume that it will have a major, industry-ending affect on the market. But they do that with everything. They do it all the time. If you say it's going to rain eventually you will be correct. A lot of people, since 2008, have become doomsayers. Because the few people who saw 2008 coming got incredibly rich and are still respected to this day for being smart. People just say bad things are always going to happen on the hopes they'll eventually be correct.
A bubble is when an asset is priced way higher than its value. We've seen housing prices steeply increase over the past couple years. Therefore there must be a bubble! Housing has been priced above its fundamental value for quite a while. The whole point of home ownership is to build equity, which means your house increases in value over time. That's how boomers are able to retire with millions. If someone buys a house in the 70s for $30k and now it's worth $1M, is that a giant bubble? Of course not. It's how the increase is absorbed. Prices can go up forever as long as there are both buyers and sellers. Prices have steeply increased but there are supposed inventory shortages right now. That means there's not enough buying and too much selling. As soon as there is selling, it's immediately bought at market prices. It's a problem when people stop buying. When housing is too expensive for investors, the bubble will burst. But how do we know housing is too expensive for investors? We don't. It's like trying to predict the top of a stock price. We will only know once the bubble bursts. Blackrock just spend all of last year buying up housing at market prices. Tons of people are trying to get into real-estate investing despite it being more expensive. Lower tier investors are being priced out, but that's not a bubble. It could be the start of a bubble. Or it could be the new normal where the petite-bourgeois are just shit out of luck and they must join the proles down here in "lifetime renter" territory. They have a lot of sway with the media, so of course they would view it as a bubble.
Higher interest rates means less free-flowing capital for investing. It doesn't mean investing stops. it just prices people out. So like #3, it could be a sign of a bubble about to burst or it could just be poorer investors not getting a seat on the gravy train.
There's a symmetry here with stonks and crypto. Under the pandemic there was a lot of ways to get into these investments which fueled a bull run. People got richer and assumed it was their savvy that did it. But now that the money printer costs a little more, they can't hang and are losing their asses. They're in a new reality they didn't see coming and don't understand why. Stocks are now more expensive to to buy and will probably produce fewer returns for the foreseeable future. They're priced out of being day traders and investment opportunities. Crypto too. It boomed and then busted. Housing is probably the same way, just lagging behind. It might boom for another few months, or years. But it's definitely going to be more expensive and return less. This means only the biggest investors can afford it, and that reduces their competition. Hence them buying it up. I guess when Blackrock starts unloading their real-estate positions, the bubble is bursting.
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how long will it last?
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ETA? :sicko-yes:
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well, the bar is very low... I want to be hopeful, but I think it will take decades and I don't know if we have that long before climate change or fascism annihilates us
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what are they winning right now? besides Amazon's right to unionize or w/e
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Ah interesting!
I'm definitely starting to realize that trying to predict something like this isn't particularly doable or even worth the effort. But for someone who the 2008 recession was a significant event in my late childhood, seeing something similar on the horizon is pretty unnerving.
Your post is good and everything, but it looks like these are flip-flopped
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The VIX is the current market value for forward-looking volatility. Meaning it's what people are willing to pay right now for what they think volatility will be in the future. It's a forecast, for months ahead. Realized volatility can only be measured in retrospect. You can't know how much a price will swing until it actually swings. Therefore what people do is they forecast the worst case scenario. I mean not the worst case, because the worst would be a swing to $0 per share. But they predict within a reasonable range. So yes, people are risk adverse and that's why they expect the worst. That's why average VIX is almost always higher than average realized volatility. I originally said always, but that's too strong. In 2008, implied was lower than realized because people weren't forecasting an economic crash or its effects.
What makes smart money has nothing to do with estimating volatility. The smart money is the big money and the big money is what moves markets. So they're the ones setting the VIX and moving actual prices. What makes them smart is how they react to volatility through risk management. That's what allows them to consistently make a modest return (on a large amount of capital) rather than gamble it away on risky moves. The smart money also knows how to make money off volatility. If you can sell options to retail traders when there's a large spread between IV and realized vol, then you make money off the premiums. If you buy options when there's a tight spread between the two, you can also make money. You're essentially just betting on how big the changes in price are rather than the direction of the price. Since changes are almost always smaller than predicted...
deleted by creator
The strategy isn't mine, it's cribbed from Barclay's. They developed it in response to the meme stock craze. They take stocks, given them a score (the exact method of calculating the score is proprietary). The score measures the spread between IV and realized while also taking into account the historical data for the stock and its sector. Then the ones with the right score, ie the ones with the large positive spread between IV and realized, means you sell options. You make money off the premium because people are paying more due to the high IV. When the spread is narrow, you buy options because premium is cheaper than normal.
I'm not super duper educated on stocks and finance. I got started with GME and have been trying to learn as much as I can because I think it gives me an edge as a leftist to understand how this shit works. It's a lot harder to argue against my criticisms when you can't weasel out of arguments with technical details, like capitalists love to do. It's why I was a big proponent of c/finance when it started. A lot of people who got into this stuff last year stopped after GME floundered. I just kept going and tried to understand why people were wrong and the mistakes made. I've waded through a lot of terrible youtube finance people and stuff to find the nuggets of criticism and real information.