The news was all over the media. The default wasn’t yesterday; they got in trouble in 2021 and had sought a “moratorium” in the first week of 2022!
So how is it that nobody gave a crap for the last two years? You’d be carried out on your shield by now and long-ago eaten by worms if you shorted the US market into the original default 2 years ago.
Witness Lahaina. HE, the power company, spent basically all of their money on “green” initiatives rather than basic maintenance and hardening to reduce wildfire risk. They were trading close to $40 before the fires and yesterday touched close to $10; a wild-eyed 75% collapse. That’s a utility and of course now there is a serious financial risk from lawsuits — richly-deserved, if the article in the WSJ is all factual.
But that’s a microcosm of all the distortions that have been embedded in the so-called “green economy”; the virus was also part of it, and the government had their foot on the scale in the “rah-rah” side of it because everyone loves a higher stock market.
The problem is that how you got it matters.
If you got it because the company expanded its business organically, it beat others in the market because they were at least two of “better, faster, cheaper” then you’ve got a sustainable and reasonable price.
If you got it because the government subsidized bad behavior — uneconomic things that cannot work over time because they violate the laws of thermodynamics and are predicated on feelings and political promises then you get a crash because there is nothing under any of the so-called “improvement” beyond hot air.
Think about so-called “Generative AI.” What’s the power bill and server farm requirement to do that, and what does all of that cost? It costs whether anyone pays or not; you have to have it online all the time and much worse as demand goes up so does the cost so it can return more and more “answers.” Will there ever be the sales — someone has to buy, I hope you realize — that covers said cost or everyone doing this going to wind up in bankruptcy court because while they are compelled to spend the money to have it online they can’t sell the subscriptions required to make a profit!
Think this is new? Rhythms and Northpoint in the 1990s anyone? Great technology; the problem I identified with it was that the price they could get for the service didn’t pay the cost of doing it, plus a profit. They both blew up.
Every morning the people who trade wake up. Some wake up with a boner expecting all the money they’re going to make and hit the buy button. Some others wake up with dread, fear and even thinking this might happen and mash the sell button. That’s what makes a market; every person who buys thinks they’re they’re smarter than the person who sold it to them, and that someone did so its rather arrogant, if you think about it for 30 seconds and contemplate the premise that you’re smarter than all the other people out there.
If there’s a day when there are no people waking up with boners and even worse some of them realize they were had by the claims that all they had to do is lick the boots of people demanding “green energy” instead of cutting back the brush under their wires, replacing some of it with insulated runs and improving their fault detection and reaction time to it in their switchgear and then there’s a fire as a result……
No folks, this is not just Real Estate.
It’s everywhere, its been all over the economy for the last couple of decades, and the “fun” is just getting started.