The markets are down today as rates are increasing. Some times the markets rally because higher rates mean higher growth. Not now. Higher rates are all about higher inflation. It’s been this way all year.
Here’s a graph of the NASDAQ and 10-year yield since February.
You can see the two graphs are mirror images. Rates go down, NASDAQ goes up. Rates go up, NASDAQ goes down.
Investors are more worried about inflation after seeing Powell speak today. Rates are up, market is down.
Over the long-term rates are probably going down.. but over the short-term …
Historically, we worried about state funded product dumping. i.e. a country’s government subsides production, it gets dumped it on the world, drives out competition, and then drives up pricing. Well, we have investors doing that now.
Let’s take a look at Uber and Lyft – aka the major rideshare companies. They started in 2009ish. I don’t display all the way back until then (it’s no better than this), but here’s a look at the last 5 years of operating profit and retained earnings. Retained earnings gives you the cumulative loss/profit since inception.
Those aren’t typos. These two companies combined have lost no less than $4 billion dollars in a single year since 2017. In total, these two companies have lost more than $35 billion dollars since their inceptions.
Uber claims when it’s a “big” company it will make money. When they go self driving they’ll make money…. except they sold off their self driving assets. Of course, they have major issues with how their drivers are classified etc.
So how are these companies still alive? Because investors keep giving them capital to stay alive. And what has that done? It’s driven out their old competitor the taxi cab and all those old limo services and now they have raised prices 100% in the last 2 years… which makes them more expensive than cabs used to be.
They blame a lack of drives but I am sure prices will never be as low again.
