text:
The Bubble Question (avc.com)
236 points by DanielRibeiro on Apr 24, 2014 | hide | past | web | favorite | 91 comments
7Figures2Commas on Apr 24, 2014
> It's hard to sustain a bubble for four years.
Says who? As Wilson observes, "Since the financial crisis of 2008, policy makers in the developed world have kept interest rates at or near zero. They have flooded the market with cheap money in an attempt to heal the wounds (losses) of the financial crisis and incent business owners to invest and grow their businesses." It's kind of amazing that he doesn't see how years of unprecedented coordinated central bank action could drive and sustain bubbles.
> It's been a good time to be in the VC and startup business and I think it will continue to be as long as the global economy is weak and rates are low.
As an investor, there is no doubt that DFTF and BTFD has been very profitable, but the implication that a weak global economy and low interest rates is essentially responsible for sustaining the good times should be disturbing to anyone with exposure to the venture capital asset class given what it is supposed to represent.
Incidentally, I think it's somewhat amusing that VCs are asked the "Are we in a bubble question?" in the first place. When you ask market participants who can only play the market in one direction using a single asset class, you tend to get the least insightful answers in my opinion.
dgreensp on Apr 24, 2014
Interestingly, he didn't answer the question with a no. He described a situation that, to some readers, may be a yes. "It's hard to sustain a bubble for four years, but here we are," in essence. He explains that the demand for stock in certain companies is artificially high, driving up valuations by a multiple.
hadoukenio on Apr 24, 2014
"Markets can remain irrational longer than you can remain solvent."
macco on Apr 24, 2014
Absolutely. The thing with market trends is, no one can predict them. It's a guessing game, that no one can predict. Sometimes the bubble last very long, sometimes not.
mcmullen on Apr 24, 2014
Great post; I agree with everything here.
mactitan on Apr 24, 2014
Well, this chart focuses on tech but Robert Schiller also thinks the overall market is bubbly. I'm amazed that interest rates could have been held down so long and this is the real danger: how the heck can they ever normalize? If they do it will wreck havoc so the fed is trapped between the proverbial rock & hard thingy. Lo interest also hurts older people who rely on savings (But theyre not going to be here long anyhow...but Peter Schiff argues savings is the only real form of investment )
Bottom line is interest rates can only be held low because alternatives around the world don't exist. I'm also amazed how alot of people think the fed saved the economy & created more wealth : as Jim Rogers says they only know how to print).
Finally, I think the derivatives were around 600bill upto Lehman downfall. I was astonished to find that they're now a quadrillion! Buffet called derivatives financial weapons of mass destruction. I think this world might experience this interesting concept.
http://www.pinnacledigest.com/blog/dscaroknight/chart-below-...
hnnewguy on Apr 24, 2014
>If they do it will wreck havoc
No they won't. Rates don't magically rise in a vacuum; rising rates coincide with improved economic conditions or rising inflation. Or, most likely, both.
The Fed Board of Governors, unanimously, predicts interest rates of ~4% beyond 2016[0]. They certainly are not infallible, but they have the tools and the mandate to get there. Do you claim the market isn't pricing this in already?
>Lo interest also hurts older people who rely on savings
If anyone is to blame for the financial wrongdoings and shenanigans of the past 20 years, it's these same old people. I'm not terribly sympathetic. Besides, no one has ever said you're entitled to a magic return on your cash for glorified mattress-stuffing (savings account). This is a capitalist society, put your capital to work.
>I was astonished to find that they're now a quadrillion!
Notional value.
[0]http://www.federalreserve.gov/monetarypolicy/files/fomcprojt...
When the fed raised rates the last time ,stepwise & slowly it didn't work as planned and I think they're going tohave a helluva time normalizing. 2)Keeping savings is putting money to work . (sure I'd rather be a VC) I just believe Peter schiff on this.
That notional value didn't help AIG. The pt. Is that nothings changed in the financial system. 1 quad means things are riskier than ever.
inthewoods on Apr 24, 2014
"The pt. Is that nothings changed in the financial system"
Actually, a ton has changed in the financial system - some good and some bad. Banks are larger than ever (bad - more potential systemic risk), but they're being more strictly regulated (probably better). Mortgage rules now exist that didn't exist in the housing bubble (generally good) - but Fannie and Freddie are the only game in town. Our bailout of Fannie/Freddie has now paid back the invested capital. And we haven't hit the hyperinflation that Peter Schiff and other similarly ill-informed pundits said would happen. The notional value of the derivatives contracts says nothing about the risk - just total exposure.
>When the fed raised rates the last time ,stepwise & slowly it didn't work as planned
You mean how when they raised rates in part to prick the housing bubble? How did it not work "as planned"? When the economy heats up and inflation is a risk, rates will rise. This is the business cycle.
>I just believe Peter schiff on this.
Being as how he's been wrong on just about every public prediction he's made, and his hedge fund gets crushed both during the crisis (which he "predicted") and since, I think you'd do better to expand the borders of your economic prognosticators.
Well my 1st expansion was looking at the bandwagon of ( Rogers, faber, schiff,...) I was about to invest at the peak of dot com but reading them kept me out Didn't buy during house bubble- I was wary of what this group was saying - but I couldn't convince my condo flipping acquaintances - my chicken little perception faded a bit. I do notice that it's very hard for analysts to be flexible , thus titles like perma bear/bull...
netcan on Apr 24, 2014
One interesting thing about the high valuations of tech startups now is where the money is coming from. It's not stock markets.
At or near the bottom (or is it top?) of this "bubble" funnel a lot of high valuation investments from "private" money acquisitions & other supposedly smart money, like the recent AirBnB investment. Were $10bn valuations possible without public markets before recently? Does that make us daffier if this is a bubble? IE, is this proper risk capital that is less fragile and sensitive to death spirals?
Facebook has been aggressively scaling up (in my opinion successfully) their ad business since the IPO. Facebook has/had 2 big make-or-break risks: (1) losing popularity/users (2) failing to turn users/visits into into ad revenue. There was also some risk that in trying to fix #2, #1 would break.
Risk, reward, uncertainty. Nothing unusual here. Risk #1 is constant ambient risk. Risk #2 is/was more of a "what's under that rock" risk. The rock is being turned as we speak and so far the news has been good. FB value has roughly doubled in the last 9 months and IMO, that's the product of "information" about the viability of facebook as an advertising platform.
Here is the subtle point.^ They could have turned that rock just as eerily before IPO. They could have worked on the ad platform sooner or they could have delayed the IPO. I think that move was deliberate. Facebook chose to make that unavoidable, but timeable risky step after the IPO.
As an analogy, imagine a widget company. They get investment design & manufacture a warehouse full of widgets. Then they pause, take some more investment, don't spend it and go public before finding out if their widgets sell.
What role does this pre-IPO money play? FB didn't seem to need it to operate.
^I'm not sure about this. It's a speculation and I don't know or understand enough to be confident at all about it.
hagbardgroup on Apr 24, 2014
VC is private equity, so generally we do not know who invests in whom. But many of the ways that VCs receive investment are through highly diversified means.
VC is some fractional line item allocation for diversified investors. The Sultan of Brunei or whatever is not calling Fred Wilson to yell at him about how USV is performing, unless the Sultan invested directly for some reason. The Sultan has 7% of the 5% of his funds that he handed to his asset management guy at investment bank X to handle.
It's possible that the asset management guy will yell at Fred Wilson about Zynga being a turkey, but not likely, because that fraction of the Sultan's money was supposed to be high risk anyway. It is playtime fun money for him anyway.
Similarly, CALPERS bureaucrats do not actually need to show a stupendous return -- they just need to maintain the appearance that their allocations have the possibility of providing a stupendous return. They won't get fired if they tried to hit 8% and can show that some model shows that according to previous decades of performance they were on track to hit 8% until some act-of-god prevented it from occurring. Their VC allocation helps them maintain this appearance so that they can maintain their 3rd wife to the lifestyle she has become accustomed to and continue to golf.
One of the later episodes of the a16z podcast featured Marc Andreessen and Benedict Evans. They were discussing technology valuations and made some good points. Though I disagreed with their "no bubble" consensus, they were right in mentioning the classic "Russian oil money" and "new players" argument. Previously, most tech investing was done by U.S. venture capitalists. (One of the reasons why non-U.S. start-ups find it hard to fund themselves.)
However with multi-billion dollar technology floats like Facebook taking place - many, many people are taking notice and bringing lots of money with them. This, obviously, increases demand which in-turn increases prices. That's all. If, or indeed when, the bubble pops and people realise that these businesses aren't worth the price paid, I suspect it won't lead to the type of crisis that occurred in 00/08 - just lots of rich people with less money.
pyoung on Apr 24, 2014
"just lots of rich people with less money."
My original take on the "bubble" was somewhat in line with this. However, the more I think about it, the more I am inclined to believe that this will "trickle down" in many ways. Fewer investments will lead to fewer jobs. In SV, this could lead to a cooling down (or worse) of the labor market. The established players (Google, Apple, Amazon, etc) will probably pull through alright, but the VC money will thin out. If I was a software engineer and I wanted to hedge my bets, I would probably try get a job at one of the bigger, more stable companies in the next year. If things do cool down, I imagine that programmer jobs and salaries will be the most noticeable side effect.
Of course I could be entirely wrong. It's possible that VC money makes up only a small fraction of the demand for software engineers. After all, almost every industry under the sun is shifting towards (or wants to shift towards) higher levels of automation and efficiency using computers and software.
You're absolutely right that "trickle down" occurs. Basic logic suggests that if lots of businesses have lots of funding, and that funding dries up, there will inevitably be job losses because they have to be funded from somewhere.
However, I wouldn't worry too much because technology is clearly the future and the need for technology professionals will continue to grow. These stupidly high valuations are for, I hope, decent businesses. By that virtue, they will get the funding they need - just not the scale that we have seen. Hence, I used "just lots of rich people will less money" because the people set to lose out are the huge investment vehicles who seem to be huddled around the Valley at present. The highly skilled engineers needn't worry because the likes of Mr. Wilson and Mr. Andreessen aren't going anywhere, and the average Joe Bloggs needn't worry because their pensions aren't at risk. The people who should worry are those who watched the Facebook float and said, "Shit, I need some of that action!"
As always, it's the stupid that lose out. Fortunately, the stupid ones aren't providing our mortgages or issuing our credit cards this time. (Namely, Royal Bank of Scotland, Bank of America, et al.)
But, hey - I'm just a 24 year old CS grad come IT consultant, what do I know?
JonFish85 on Apr 24, 2014
> One interesting thing about the high valuations of tech startups now is where the money is coming from. It's not stock markets.
See, I think that it is coming from the stock markets. These valuations are there because the investors think that they can dump the stock onto the market for above that amount. Look at KING--investors in KING knew that the jig was up, they dumped it onto the stock market and got out.
$10bn valuations are possible because of the public markets. If the investors weren't extremely optimistic that the stock market will eventually buy their stock for more than that valuation, they wouldn't do the investing. That's the only time they'll get their money back. Make no mistake: they're (VCs) not in it to keep it private and to keep the profits to themselves. They're in it to take it public or get bought by someone even bigger. That's all it is.
The stock market is their end-game, and that's what they're targeting with these investments. The intermediate money isn't coming from it, but ultimately that's where the money comes from, in my view.
I think the £1bn+ acquisitions must be playing a role as well (obviously that's is stock money too). That is an IPO scale exist without an IPO.
tpeng on Apr 24, 2014
Keep in mind that this generation of startups is delaying IPO as long as possible. The main reason appears to be a desire to delay public company reporting requirements, not a lack of capital needs. Since the IPO market remains strong, a set of new investors has entered the market to play this "public/private arbitrage" opportunity, buying private stock shortly before IPO for apparently* sure gains. This group of players includes hedge funds (Tiger Global), mutual funds (TROW), and private equity funds (TPG). Traditional growth-stage funds are starting to pull back as this competition is pushing up valuations. Note that the arb players are betting on near-term market reception to the stocks that they are buying, and less sensitive to absolute valuation. Without commenting on current valuations, I will say that these dynamics certainly have the potential to create significant overvaluation in the private markets.
* I call them apparently safe gains because if the IPO market collapses, these investors will be stuck with some very large, illiquid investments.
That's the straightforward reason, but it doesn't sound big enough to me.
First, AirBnB just got valued at 10bn. FB's IPO broke valuations records. Reporting requirements are a drag and I'm sure they impact IPOs on the margin, but 10bn is not marginal. Reporting for a company like AirBnB is not that hard. They have a straightforward business model with one business. It's not like they have 50 years of hair, cross ownership, JVs and zombie businesses.
Second, FBs timing indicates (to me) that something else is going on.
Third, WTF is the reason for these arbitragers. Arbitrage requires a willing seller. Why raise capital (sell shares) at a lower cap 9 months before an expected IPO?
It's not the administrative cost of reporting, it's the cost of having to run your business differently based on being measured quarterly.
I generally agree with fred that monetary policy is driving valuations. However, I think it's not quite as simple as he describes (although he may be intentionally simplifying for his audience).
It's true that financial assets compete with each other for investors. So when the Fed reduces the yield on Treasurys or MBS, the marginal investor will rotate to a riskier asset. This will create a chain reaction that eventually raises equity prices. However, it's not the case that earnings yield (Earnings/price or the inverse of P/E) is going to be equivalent to the interest rate on Treasurys (T-bills). Typically the way that investors think about it is earnings yield = Treasury rate + equity risk premium. So at an equity risk premium of 5%, even a Treasury rate of 0% would result in an earnings yield of 5% or P/E of 20, not infinity. This isn't too far from the market multiple of the S&P 500 right now. (The historical average ERP over the past century has been 4.2%.) So the market multiple implies that the overall market is not in a bubble, but that doesn't eliminate the possibility that some sectors are in a bubble.
The Fed's influence on the market goes beyond their impact on interest rates. One reason for the sharp rise in markets is that investors are fearful of inflation. Although CPI inflation has remained low, investors would rather hold scarce assets such as equities and real estate than a rapidly diminishing percentage of the money supply (i.e., cash) that results from money "printing". While money creation is nothing new, and in a sense, unconventional money creation is not that different than conventional easing, the sheer scale of our current monetary policy is unprecedented. This lack of precedent creates a high degree of uncertainty in the ultimate outcome.
The final reason for the strength of the markets is a widespread belief that the "Fed put" is back. It is almost universally believed that the Fed has taken on a third, unstated mandate of stable and rising equity markets, by easing and talking the market up when it declines. I don't know to what extent this is true, but the mere notion has created a hidden source of instability in the market by giving investors unusual confidence. While there is no reason to believe that markets will crash, it's also not out of the question.
The Fed has announced that it will "taper" QE purchases from $75 billion / month to $55 billion / month. At the current rate of taper, QE purchases could reach zero by the end of the year. One key question for investors is whether this may reverse any of the three dynamics listed above.
>investors would rather hold scarce assets such as equities and real estate than a rapidly diminishing percentage of the money supply (i.e., cash)
Do you have any data to back this up? It is my understanding that the demand-for and holding-of cash (specifically the USD) reached epic proportions in 2008 (as happens during financial crises, hence the need to print) and remains very high.
leoc on Apr 24, 2014
At the same time as this tech boom, S&P 500 companies are (I'm told) busy borrowing fistfuls of money in order to pass it on to shareholders through dividends and share buybacks. That seems to suggest that investors are happy to have cash right now; it also puts the complaints about excess or wastefulness against the current SV boom into some perspective ...
mahyarm on Apr 24, 2014
Isn't that borrowing more because of US tax policy causing vast amounts of money to just sit there in foreign bank accounts for those SV companies?
Well, to be clear, an asset purchase transaction (ex the Fed) does not change the number of "dollars outstanding" (the money supply). To be more precise in my language, investors prefer holding assets to cash at a specific asset price. The evidence for this is in the rise of asset prices (even more specifically, the rise of multiples, since underlying values change over time). The specific phenomenon you are referring to during the crisis itself is a flight to safety/liquidity, which is unrelated.
pitnips on Apr 24, 2014
The key here is the context of inflation risk. In an inflationary environment, his point holds with the rational investor. Most people would rather invest in something than effectively lose money by holding cash.
silverlake on Apr 24, 2014
Paul Krugman argues that there's too much money chasing too few assets. Combined with low interest rates we have a bidding war for anything that isn't Zynga. Even Greece has seen money pouring in recently because, really, where are you going to put $10B?
pdonis on Apr 24, 2014
> too much money chasing too few assets
And why are there too few assets? To put the question another way, why is it that, even though the Fed has given banks $2.8 trillion in quantitative easing, the banks can find nothing better to do with it than to leave it in their accounts at the Fed earning 0.25%? Is there really nothing more productive going on that they can loan money for?
My worry is that I don't see any "mainstream" economists asking this question.
http://blog.peterdonis.com/rants/non-beatings-will-continue....
001sky on Apr 24, 2014
Be wary of conflating corporate cash with the LP cash backing VC companies. Companies are holding record amounts of cash because (1) it is seen as insurance for financial shock-event; and (2) low interest rates do not penalize them for holding it.
If interest rates were 7%, shareholders would be demanding minimal cash on balance sheets. But with money @ 0.25%, the BOD is telling investors the "option value" is worth the minimal carry cost to the company in terms of FCF and/or NI.
On the other hand, the sources of VC (LP) have excess liquidity they do not want to hold as cash. If they had 7% <paid> on cash they would hold some cash as insurance; but with 0.25% (6.75% forgone) the cost of this insurancs is too high. This is exactly opposite dynamic of the corporate case.
So, you see companies hoarding cash and LPs trying to get rid of it. But for VCs and valuations, it is the LP's dynamics (excess liquidity) which are relevant. The corporate cash piles have second-order effects (via M&A), but the central source of liquidity is driven by LPs wanting to be fully invested.
(There is also the issue of spread/total rate which pushes LPs deeper into the risk spectrum to meet threshold returns. This effect drives allocation to equity vs bonds, and equity market liquidity has carry-through for VC exits both at the iPo and m&a level.)
> Don't confuse corporate cash with the cash backing VC companies.
Actually my post wasn't talking about either: it was talking about all the reserves the banks are holding at the Fed instead of lending them out. Technically those aren't cash since banks can't just hand them to you with no strings attached; they have to give them to you as a loan.
Corporate cash, OTOH, could be paid out as dividends directly, though you're correct that that's not going to happen with rates where they are now.
Banks are hoding cash for the same reason as corporates. The cash is cheaply financed by low-cost debt and it has utility as an insurance-liquidity-pool-of-last resort in the case of a policy reversal by the Fed.
For argument's sake, assume debt is mis-priced right now relative to equity. If you believe that, and you are a bank, what you do is increase ROE through increasing leverage (shor debt markets+long equity). So, if you are a bank you borrow and buy back shares. Or, you borrow and keep shares at a minimum/flat.
On the other side of your ledger, if you are a bank and you believe debt is mis-priced, the last thing you want to be doing is going long credit (to customers). So, what you should expect is increasing debt/equity ratio and flat/decreasing proportion of long-credit/total assets.
The "stingy credit" allegation is perfectly rational if you make the assumption that debt is fundamentally mis-priced as an asset class. That is the essential assuption Wilson is making to explain why money is chasing equity/pe/vc.
The only open issue is whether or not the assumption is correct.
If we look at policy, when regulators ring-fence reserve and increase the reserve level, they are forcing the banks to sell-equity. The reason they are doing this is because--assuming equity is mis-priced--they understand that banks will leverage up. The problem with banks leveraging up increasingly over time is policy hysterisis.
If the fed policy results in increasing bank leverage, the baking system will become increasing more "brittle". This tie the hands of the Fed--when they move to revert policy--they will risk creating a problem due to having added "brittleness" to the financial system.
So, even the fed is acting as if the assumption about debt pricing is true.
That being said, it is a more difficult case to explain from first principles whether or not debt is truly mis-priced as an asset class. But the analysis can be followed as far as I can tell simpley based on the binary assimpyion (yes/no). And one of those assumptinos seems to explain alot, while the other faces a harder time making sense of the data we are seeing.
From your piece:
The hope is that the lower interest rates will encourage people and businesses to take out more loans and thereby start spending again.
What we are seeing is opportunistic borrowing for financial engineering. We are not seeing 1:1 borrowing to spending on operating expenses or PPE. We are seeing borrowing that is being spent on share-buy-backs and/or cash-stockpiles that maked increasing leverage ratios more operationally risk-tolerant. (And it seems this is true for corporates and financials, at least to a first order approximation.)
ScottBurson on Apr 24, 2014
That blog post is the best explanation of how the Austrian economic philosophy applies to the current situation that I've ever seen.
Am I convinced that QE is a bad thing? No; I'll have to think about it. But at least I have some idea now of what the argument against it is.
(Like most of us, I'm no more than an armchair economist, but I do find it interesting.)
pjc50 on Apr 25, 2014
Yes, there really is nothing more productive to do. Worse, we're going to end up in a situation where unless we make big investments now with negative current ROI, society will be even poorer in the future once the current capital assets have depreciated and been written off.
Example: sustainable power generation.
17Crash on Apr 24, 2014
>>> investors would rather hold scarce assets such as equities and real estate.
Real Estate is not the investment it once was and homes have yet to recover their initial value since the crash in 2006. I doubt this is something people would be actively investing in like they used to.
kunle on Apr 24, 2014
This is pretty spot on. We in the SFBA don't think about rates much but in a past life it was all I did. The moment the markets price in a long term expectation of rates rising, a lot of the current behavior we are seeing (eye popping salaries/valuations/home prices/rents) will correct themselves. It won't mean the businesses are bad - just that they're priced less richly. Until then, they are making hay while the sun shines and they're probably wise to do so.
antr on Apr 24, 2014
I think Fred is not telling the entire story with this bubble question/explanation. From a macro perspective I personally don't think there is a bubble, part of the rationale is explained in Fred's post.
What I think Fred is avoiding is the company-specific micro-view. In that case, I think "yes", many late stage startups seem to be over valued, just by applying Fred's yield logic (and growth-risk accounted for). Zynga was one of those companies (and obviously) we never heard how overpriced this was at IPO from Fred.
The valuation of these over valued startups seem to be driven by (i) increase in capital/competition from funds, (ii) eagerness by public markets to jump on the tech/startup bandwagon, and (iii) unrealistic "believe" that double-digit growth is sustainable for years to come.
rdl on Apr 24, 2014
Aren't a lot of those levels "sticky"? I could certainly see rate of increase going to zero very quickly, but actual decreases in salaries, leveraged assets like homes, etc. are a much bigger step.
michaelt on Apr 24, 2014
I agree it's unusual that an employer will cut someone's salary - but there's another way to decrease average salaries.
If the cost of money rises, companies that are only viable while the cost of money is low go out of business, and their employees' salaries drop to zero.
Absolutely spot on
kokey on Apr 24, 2014
I don't know about SF, but it certainly didn't stick in London (UK) post the dotcom bubble. Many people ended up either with no work in tech or taking voluntary pay cuts, and the hourly rates for contractors dropped dramatically only to get back to previous levels in GBP terms 10 years later. Many tech workers left London because they couldn't afford to live there any more. New properly developments around certain parts of London didn't find tenants, rents dropped making it more attractive to buy a few years later.
They are sticky, but part of the rate of change is driven by people moving between companies and getting raises and such. That will just happen less and attrition over time will do the rest.
This is the most honest article that I've seen from a mainstream financial figure about why valuations are so high.
ZIRP (zero interest rate policy) means that money is near worthless to financial institutions that can run the carry trade on Treasuries, or other carry trades involving foreign exchange. VCs manage money for those guys, along with pensions and other enormous concentrations of capital.
What you want are equity stakes (control) of productive assets. The cash that you use for that is not that useful except to normal suckers like you and I who need to hand over a bunch of paper tickets every month to the landlord, the grocer, and the government. The guys who issue the tickets are generally above those concerns, but they still need to get a return on their capital.
I would rather own stock than a pile of green tickets. Stock is, again, just another kind of ticket, but they're more expensive tickets that grant you rights to a productive asset. It is a safe bet to dump your green tickets into speculation because, while the speculation may work out, you know for a fact that those tickets are going to depreciate.
You will not see interest rates go up if the Fed can help it, because to do so would provoke an immediate fiscal crisis. Bubbles result from rational allocations of funds based on a certain set of assumptions. It is a good assumption that the US government will not permit rates to rise as long as there is zero public appetite for a major reduction in government spending. Once that reality changes, the structures that rely upon that environmental state will either need to adapt or will fail.
Startup-land is a greenhouse arrangement that thrives so long as the temperature remains high. When the guy who owns the greenhouse cuts the power, most of those plants are gonna die. If you want to be resilient to that risk, you must leave the hothouse. However, the hothouse plants have a lot more access to capital in the near term, so it is rough to compete with them directly. That is the trouble with bubbles: you can't really escape their effects by being 'prudent,' because low interest rates make prudence imprudent.
In order to raise rates, the US would probably have to either confiscate a lot of assets (which would harm its international status as the cleanest dirty shirt), raise taxes, raise retirement ages, implement means testing on medicare + social security, and cut military pensions/VA expenses. There is no real solution that does not involve provoking some sort of major crisis, so it is much easier for everyone to keep the carnival going as long as possible until something snaps internationally. The federal government can't afford even a slight rise in rates without having an immediate cash flow crisis.
streptomycin on Apr 24, 2014
It is a safe bet to dump your green tickets into speculation because, while the speculation may work out, you know for a fact that those tickets are going to depreciate.
Green tickets are almost guaranteed to depreciate, but probably very slowly. Speculation can result in very fast and large losses. There is no such thing as a safe bet.
Probably? We see a lot of examples where they depreciate quite quickly, both in American history and worldwide more recently. Look at a JPYUSD chart, or ask a Japanese guy. Whoa Nelly, that's a steep drop from 2012.
I agree that there are risks in absolutely everything. What's important is to understand and manage them.
Yep, I'm sure USD hyperinflation is right around the corner. Eminent economists such as Peter Schiff and Ron Paul have been predicting it for decades. They can't always be wrong about it, can they?
I didn't say that. I compared it to other steep depreciations. I also dislike Peter Schiff for various reasons.
minimax on Apr 24, 2014
The fact that the yen has fallen against the dollar means that yen are worth less in countries where they use dollars, but not necessarily in places where they use yen. If yen were worth less in Japan that would reflect itself through higher yen denominated prices on stuff in Japan -- it would show up in inflation -- but inflation in Japan is somewhere south of 2%.
There are a number of gross oversimplifications here.
> What you want are equity stakes (control) of productive assets.
Productive assets are great, but valuation matters. When everyone is chasing yield and you are forced to overpay for productive assets, you are extremely vulnerable and stand to lose a lot more in the long run.
I'm not suggesting that you should have a mattress full of cash, but "I'm losing money if I leave my cash in the bank" is not a good justification for, say, chasing Momo stocks, especially at these levels. The risk of losing 1-2% a year is a different proposition than losing 10% in two weeks.
> You will not see interest rates go up if the Fed can help it, because to do so would provoke an immediate fiscal crisis.
You have to look at the yield curve. Short term rates are still incredibly low, but the 10Y has already crept up. Right now, it appears likely that short term rates will be kept at incredibly low levels, but long term rates will rise modestly.
If you don't consider the entire yield curve, you're liable to make bad investment decisions. For instance, a market in which the Fed is holding short term rates at near historic lows and allows long term rates to rise a bit would create an ideal scenario for mortgage REITs, which borrow money at short term rates and invest in long term mortgage bonds, effectively pocketing the spread.
>There are a number of gross oversimplifications here.
Yup. Dunno if I'd call them 'gross' or 'over,' but sure.
>Productive assets are great, but valuation matters. When everyone is chasing yield and you are forced to overpay for productive assets, you are extremely vulnerable and stand to lose a lot more in the long run.
Yes, I agree with this. As far as VCs care it's OPM. As far as entrepreneurs care it's the OPM of OPM. So mostly good for both classes of people until the music stops.
>I'm not suggesting that you should have a mattress full of cash, but "I'm losing money if I leave my cash in the bank" is not a good justification for, say, chasing Momo stocks, especially at these levels. The risk of losing 1-2% a year is a different proposition than losing 10% in two weeks.
Absolutely agree unless you are a professional trader, and even if you are a professional trader.
>You have to look at the yield curve. Short term rates are still incredibly low, but the 10Y has already crept up. Right now, it appears likely that short term rates will be kept at incredibly low levels, but long term rates will rise modestly.
Entirely possible. Also possible that there will be another round of intervention to respond. Further possible that that round of intervention would not work at achieving its intended goal of rate suppression.
roymurdock on Apr 24, 2014
Thanks for the insightful comment. I am curious to know whether you subscribe to the Keynesian or Austrian school of economics (or neither).
I would also be interested to get your insights on how this game might play out in the long run if other high-powered countries are afraid to make the move to raise interest rates for fear of upsetting the local/global economy.
IronIvan on Apr 24, 2014
A good explanation!
I made a rather long (2 hours) YouTube video that explains the fundamentals of our current economic system - perhaps it is helpful to someone who wants to get a better understanding of the issue:
http://youtu.be/t8_sjmRBGPE
marincounty on Apr 24, 2014
"In order to raise rates, the US would probably have to either confiscate a lot of assets (which would harm its international status as the cleanest dirty shirt), raise taxes, raise retirement ages, implement means testing on medicare + social security, and cut military pensions/VA expenses. There is no real solution that does not involve provoking some sort of major crisis, so it is much easier for everyone to keep the carnival going as long as possible until something snaps internationally. The federal government can't afford even a slight rise in rates without having an immediate cash flow crisis."
They could demand immediate taxes(30 years retroactive) on all those offshore banks that slick corporations and rich boys like to hide money. If the banks hesitate; send in the the Boys. It might be the first honest war we have had in awhile? Oh yea, and immediately default on the Chinese debt. Wow--I sound like my father? I am ashamed of wealthy Americans who skip out on taxes though. They like to blame the poor, but it's the guy's who don't get a regular check who hide money. I remember this Harris dude who bragged about his Caymen Island trips in the 80's.
You can't legally selectively default on debt; see the ongoing Argentinian "pari passu" saga as documented by FT blogs. Doing it illegally is basically hanging out a "we're now a rogue state lol" banner in New York to welcome businesses.
Having said that, I'm in favour of politely but firmly squashing the tax haven states. There is some work in this area but it's very slow.
debt on Apr 24, 2014
Can you offer a good book on that coherently explains US federal monetary policy? You have a good handle on what's going on. I still don't quite understand it.
No, you have to read maybe 10+ books at a minimum plus a lot of other stuff.
I would start from federalreserve.gov and go from there. There's also an educational site set up by the Fed here: www.federalreserveeducation.org/about-the-fed/structure-and-functions/
Once you get it straight from the horse, you can go out from there. When people ask me this question I start there, because it has official authority and is usually more direct than other more opinionated sources. If you talk about it from sources other than the Fed most of the time you'll get a lot of incredulity because the system is counter-intuitive.
If you want to duel perspectives, you can read both 'A Monetary History of the United States' by Milton Friedman and Anna Schwartz (http://www.amazon.com/Monetary-History-United-States-1867-19...) and 'A History of Money and Banking in the United States' by Murray Rothbard (http://en.wikipedia.org/wiki/History_of_Money_and_Banking_in...), which draw nearly opposite conclusions, although both agree that the pre-Fed eras were rife with major crises caused by poorly managed banking schemes.
Paul Volcker shines in secrets of the temple
ganeumann on Apr 24, 2014
Seconded. Secrets of the Temple by Greider is pretty accessible (if biased, as they all are).
http://www.amazon.com/Secrets-Temple-Federal-Reserve-Country...
Also, the EconTalk podcasts are awesome: http://www.econtalk.org/archives/money/
- David Laidler on Money (http://www.econtalk.org/archives/2013/09/david_laidler_o.htm...)
- Sumner on Money, Business Cycles, and Monetary Policy (http://www.econtalk.org/archives/2013/03/sumner_on_money_1.h...)
- White on Hayek and Money (http://www.econtalk.org/archives/2010/02/larry_white_on.html)
crazy1van on Apr 25, 2014
I second the EconTalk podcasts. I've been listening to them for over 5 years. They are hour long interviews on a wide variety of subjects. The host, Russ Roberts, does a great job of letting the guest get his or her point across even when you suspect he disagrees. The tone is polite and non-confrontational. It is more about accurately presenting a position than debating, although there is some point/counter-point.
I cannot exaggerate how much I've learned from EconTalk. Plus, there's even an episode with Paul Graham about ycombinator and startups:
http://www.econtalk.org/archives/2009/08/graham_on_start.htm...
rexreed on Apr 24, 2014
While it is certainly true that valuing a business with an ongoing (and somewhat predictable) revenue stream, the typical yield approach is earnings / purchase price, this is not as applicable in situations where there is either no revenue (such as in the case of Oculus Rift) or little predictable revenue (WhatsApp). What exactly is the yield rate on the Oculus Rift acquisition when earnings are near zero?
Much of the acquisition activity that is driving exits, which is in turn driving VC activity (exits motivate investment), is coming from land grabs in expectation of FUTURE potential significant markets. Facebook grabs OR because it believes that the $2B purchase price now will be far outweighed by the potential for VR in the future, same for WhatsApp.
It would be simplistic to say that valuations that drive acquisition activity comes simply from comparing yield levels.
That being said, where does Facebook get the money to make the acquisitions they do? From the public market. The public market is mostly driven not by individual investors, but by major market movers, which are few in number compared to the "retail" investor market, but significant in influence. And Goldman Sachs and the like might be motivated to keep pushing money into Facebook because the alternatives are weak, given the current low yield environment.
If yields improve, then GS and the other market movers might shift from equities to other asset classes (fixed income, equities, maybe even CDOs again), and then as the money stream starts to taper for folks like Facebook, their acquisition activity will slow, and then valuations will start to decrease, and then Venture Capital activities in those sectors will also dampen, because the exits will be seen as less lucrative.
It would seem to me that exit activity drives valuation more so than current yields, but current yields might impact the money flow that drives those acquisitions.
rguzman on Apr 24, 2014
I don't think so. The housing bubble that popped in 2008 lasted a lot longer than 4 years.
mathattack on Apr 24, 2014
It's been a good time to be in the VC and startup business and I think it will continue to be as long as the global economy is weak and rates are low.
The discounting is what's propping up the market. It's a strange phenomenon in that the market is betting that earnings will hold or grow, but the economy will be weak enough to discount future cashflows at a low rate. This is why signs up recovery that suggest tightening cause the market to tank.
porter on Apr 24, 2014
More on the discount rate here:
http://www.propertymetrics.com/blog/2013/09/27/npv-discount-...
Cheap money (or, low rates with "safe" bond markets) + high growth tech = sky high valuations - got it, Fred.
Just, one more thing... how did he go from the 10% yield ($100M / 10M = 10% yield) to "if interest rates are 5% instead of 10%, then you would pay $200mm for the business ($10mm/$200mm = 5%)." Is he simply interchanging the word "yield" with "interest rates" or actually talking about the central bank?
badamson on Apr 24, 2014
(s/b 10M / 100M = 10%). He is interchanging the terms and he should have written things differently to avoid confusion. It s/b "yield = annual earnings/purchase price", not "interest rates = annual earnings/purchase price". (He does correct himself later in the paragraph.)
Thanks for the clarification!
brc on Apr 24, 2014
>They have flooded the market with cheap money in an attempt to heal the wounds (losses) of the financial crisis and incent business owners to invest and grow their businesses. That has not worked particularly well but it has worked a bit.
I would argue that it hasn't worked at all, given all the bad things that are yet to come from it.
rjtavares on Apr 24, 2014
"Bad things that are yet to come" aren't a given...
Well, yes they are. The can has been kicked down the road. Few things have actually been repaired. Printing and borrowing money only temporarily solves a current problem, and pushes other problems down the track.
sz4kerto on Apr 24, 2014
The _really_ scary thing is that as rates are moved close to 0, inflation seems to slow down. This is true both in the US (almost 0 rates, low inflation) and in the EU (a bit higher rates, but almost 0 inflation in the last few months). If deflation kicks in, then this flood of free money will evaporate very quickly.
I think we should be more worried about high inflation in the future, not deflation:
The lack of inflation despite the Fed's printing can be explained in the massive increase in excess reserves (and also the slowdown in the velocity of money.): https://research.stlouisfed.org/fred2/series/EXCSRESNS
This jump is a result of the Fed getting authorization from congress to pay interest on said reserves. By controlling this rate, the Fed can effectively control how much excess reserves they have, thus having a large impact on the rate of inflation. Having said that, it is a massive and unprecedented amount of excess reserves. If something goes terribly wrong in their exit strategy (and/or the velocity of money picks up unexpectedly) then the worry would be high inflation, not deflation.
EDIT: I believe you meant if inflation kicked in then the flood of free money would discontinue. That would be accurate as interest rates would rise and QE would most certainly be off the table. Deflation fears is what set QE into high-gear in the first place ;)
rtpg on Apr 24, 2014
Economics aren't discontinuous around zero. All this evaporation would either happen approaching zero or not happen.
Deflation does not mean spending money is a bad idea. If I have $100 and there's 10% deflation, in a year, it's worth $110 of today's dollars(or some other number because I can't math, but in that general direction). But if a company is experiencing 100% growth and is worth $100 today, it's still a good investment (if you can sell it in a year).
pessimizer on Apr 24, 2014
https://en.wikipedia.org/wiki/Zero_lower_bound_problem
gizmo on Apr 24, 2014
The Eurozone is looking at mild deflation, and it will do a lot of damage. Deflation in the US is nearly impossible, because the FED will just purchase assets until the problem of low inflation goes away.
Deflation in the Eurozone will be bad mainly because it will make the personal and public debts of the debtor nations unbearable. Not because "money will evaporate very quickly".
tonyedgecombe on Apr 24, 2014
Deflation will be bad because nobody will by something today when they think it will be cheaper tomorrow.
This is standard excuse trotted out. Of course it is incomplete at best and grossly misleading at worst.
Deflation is the opposite of inflation. One is an increasing value of currency, and the other is a decreasing value of currency.
People deal with deflation every day - both in their own national economies and internationally - when your currency is rising (gaining value) why would you purchase something today when it is going to be worth more tomorrow? The answer is because the value of having the thing today is worth more than having the money tomorrow - which is how we base all our purchasing decisions.
It's true that deflation will have effects that are not good - but mild deflation is no horrific thing. Most people have been told deflation is a scary monster in the same way that they have been told marijuana is a scary drug. There are circumstances and reasons when that is true, but it's not generally true and generally overblown. Both high deflation and high inflation are runinous to an economy, but mild deflation and mild inflation just produce different classes of winners - savers vs creditors.
What people actually mean when they say "buy something" is "invest in something".
When an investor chooses whether to invest in something, the question they ask themselves is "will this make more money than the best alternative investment on offer to me?"
When the value of currency is falling, it becomes relatively more appealing to invest in things that are not currency. For example, new machines for the local factory - those machines make widgets, and with 2% inflation those widgets are worth 2% more every year.
When the value of currency is rising, it becomes relatively more appealing to invest in things that are currency, like keeping my money in the bank. Glad I'm not one of those suckers who invested in the widget factory, because of the 2% deflation those widgets are worth 2% less every year.
Me, I think our economy would be better off with more invested in manufacturing and less in financial services.
>because of the 2% deflation those widgets are worth 2% less every year.
Also, the value of your loan increases in real terms, as does the labour-share of input costs (because the workers aren't going to give back wage gains in times of deflation). Your return is hampered.
These are some of the problems with deflation.
>savers vs creditors.
Savers and creditors are the same people.
True. Creditors vs Debtors. Creditors are advantaged by deflation, debtors advantaged by inflation. Except where effects of one or the other affect the amount of bad debts.
kenster07 on Apr 24, 2014
That's a bit of an overstatement. Many purchases are time-sensitive to the extent that expected deflation would have to be very high.
That effect isn't very strong in an already depressed economy (where people only buy the bare necessities anyway).
zurn on Apr 24, 2014
This is why I try not to buy computers with my own money :)
Other EU countries with their independent currencies/central banks have gone the same way as the Eurozone: Sweden just went into deflation and UK seen inflation go below their 2% target (designed for normal times, arguably should now be higher) as well.
clxl on Apr 24, 2014
If deflation kicked in, why wouldn't the fed fight with increased QE?
kevin818 on Apr 24, 2014
This may sound subjective but at least in my opinion when the rate of IPOs starts to rapidly increase and the companies behind those IPOs don't really seem promising, then you begin to worry about a bubble. Back in the 90s it seemed like if your company wasn't going IPO something was wrong.
jpmattia on Apr 24, 2014
> It is the combination of these two factors, which are really just one factor (cheap money/low rates), that is the root cause of the valuation environment we are in. And the answer to when/if it will end comes down to when/if the global economy starts growing more rapidly and sucking up the excess liquidity and policy makers start tightening up the easy money regime.
> I have no idea when and if that will happen.
Apparently, neither does anyone else, including the Fed itself who's been predicting a rise since 2010 or so: http://www.zerohedge.com/sites/default/files/images/user5/im...
j_baker on Apr 24, 2014
This sounds like a perfectly reasonable take on the situation. As a general rule of thumb, expansionary monetary policies benefit smaller companies. Now that the fed will likely start tapering back some, I think we'll start seeing larger companies (Apple, Google, maybe Facebook) having good years.
There's one thing I can guarantee though: we are almost certainly in some kind of bubble. It may not be a tech bubble, but bubbles are just a fact of economic life.
hoodoof on Apr 24, 2014
Nothing like some well argued logic with supporting numbers and formulas to ease the anxiety. Ahhhhh.
nutjob2 on Apr 24, 2014
"This is not the bubble you're looking for..."
"Move along..."
The VC can have a strong influence on the weak minded.
rajacombinator on Apr 24, 2014
VCs don't understand markets, and market guys don't understand VC. It's foolish for either to opine in the other's territory.


text:
Monday's Movers
Modest Monday Gains
Howard J. Godfrey
Updated Dec. 11, 2000 6:55 pm ET / Original July 18, 2019 7:49 am ET
L ed by technology shares, the stock market completed Monday's session with modest gains.
The tech-heavy Nasdaq Composite Index finished the day up 97.35, or 3.34%, to close at 3014.78 -- its first foray above the 3,000 level since November 17. The Dow Jones Industrial Average hovered in positive territory for the majority of the day, closing at 10725.80, up 12.89, or 0.12%. Monday's gains follow the Nasdaq's jump of 164.77 on Friday, and the Dow's gain of 60 points.
Despite some reservations, most investors were encouraged that the yet unresolved presidential election may be finally nearing an end. The U.S. Supreme Court heard arguments Monday on Republican George W. Bush's appeal of Friday's Florida Supreme Court ruling, which required the counting of disputed ballots in the presidential election.
Encouraging comments from UBS Warburg strategist Edward Kerschner, as well as Morgan Stanley Dean Witter strategist Barton Biggs, gave the market an added boost.
The Standard & Poor's 500 index rose 10.34 on Monday, closing at 1380.23. Advancers on the New York Stock Exchange outpaced decliners: 1,574 stocks rose, while 1,303 fell. Volume on the Big Board was 906 million shares traded.
The price of the 10-year Treasury bond fell 1/2 while the yield rose to 5.54%. Bond prices and yields move in opposite directions.
Barron's interview, "Eyeing the Bear ," chatted with Lee Cooperman and Mickey Straus, co-managers of Straus Asset Management fund, which has $220 million in investments. The methods of the two complement one another. Both managers are consummate stock pickers who manage risk by refusing too pay too much and by paying strict attention to a company's after-tax returns.
Cooperman and Straus concur that a rally is coming and offer advice on how to play the market. The cited 16 sixteen stocks to watch and warned about three other stocks.
Talk about having a good day: 14 out the 16 rose, with one falling and one unchanged. Meanwhile, all three stocks they panned slumped for the day.
Among the day's big winners were Storagenetworks , which soared 11.31 to 51.25; Nuane Communications , which jumped 8 to 69.44, and Speechworks Intl ., which rose 5.38 to 54.75. As for the losers, Heidrick & Struggles tumbled 4.56 to 40, Korn/Ferry lost 3.31 to 24.31 and Talbots fell 2.75 to 43.25.
In Barron's column, Up and Down Wall Street , Eric Linde, president and chief investment officer of Source Capital, offered several ideas on how to play a slowdown. Linde runs a $420 million closed-end fund.
Linde cited Knight Transportation , a highly efficient service-oriented truck operator with a $300 million market value. It's selling at a knockdown multiple, however. Linde felt that Knight, despite rising diesel and gas prices and a tight labor market, was worth watching. On Monday, Knight's stock rose 0.56 to 18.06. Another intriguing pick of Linde was auto-parts retailer O'Reilly Automotive , which jumped 1.81 to 20.19.
Barron's feature, "Recipe for Growth ," detailed how fast-food king McDonald's could sharply increase earnings by slowing its international expansion. A 12%-25% cut in its overseas openings, which average about 1,600 annually, could make the earnings growth more attractive to investors. At the same time 10%-15% annual earnings growth would be more sustainable. McDonald's stock edged up 0.44 to 29.94 on the day.
Other stocks mentioned in this week's Barron's : Antec rose 0.16 to 9.19, and Rehabcare Group slipped 2.12 to 42.13.
Howard J. Godfrey is an editor with the Wall Street Journal Interactive Edition and Barron's Online.

redpajama_set_name: RedPajamaCommonCrawl


The LSB502 double Side Burner is the perfect complement to the Sedona by Lynx grill featuring two 12,500 BTU stainless steel burners capable of delivering intense high heat or a low simmer for the perfect cooking conditions every time. The burners and burner basin are sealed making them exceptionally easy to clean and heavy-duty welded construction eliminates gaps where grease and moisture can collect. Lynx spark ignition system provides reliable start-up so you can focus on cooking.
The stainless steel grill body, stainless steel grill burners, cooking grates, ProSear burner and rotisserie infrared burner are warranted to be free from defects in material and workmanship when subjected to normal domestic use and maintenance for the lifetime of the original purchaser. This warranty excludes surface corrosion, scratches, and discoloration which may occur during normal use. This warranty is limited to the replacement of the defective parts, with the owner paying a processing fee and all other costs including labor. Failure to perform required maintenance will void this warranty.
The following grill parts are warranted to be free from defects in material and workmanship, when subjected to normal domestic use and maintenance, for a period of five (5) years from the original date of purchase; warming racks, spit rods, briquette trays, manifolds and gas valves. This warranty is limited to the replacement of the defective parts, with the owner paying a processing fee and all other costs including labor.
All other grill components are warranted to be free from defects in material and workmanship, when subjected to normal domestic use and maintenance, for a period of two(2) years from the original date of purchase. This warranty is limited to the replacement of the defective parts, with the consumer paying all labor costs.
For a period of one (1) year from the original date of purchase, Lynx will replace or repair parts found to be defective at no cost to the original purchaser. This includes the cost of shipping replacement parts and , when necessary, service labor at prevailing local rates by a Lynx authorized service person. Servic will be provided during normal business hours and must be authorized in advance by Lynx.
1) This warranty shall apply to products purchased and located in the United States and Canada. Products must be purchased in the country where service is requested.
2) Warranty applies only to the original purchaser and may not be transferred.
3) Warranty is in lieu of all other warranties expressed or implied and all other obligations or liabilities related to the sale or use of Lynx products.
4) Warranty shall not apply and Lynx is not responsible for damage resulting from misuse, abuse, failure to prod\vide reasonable and necessary required maintenance, natural disaster, animals, alteration of or tampering with the appliance, accident, hostile environment, flare-up fires, improper installation or operation, or an installation not in accordance with the instructions contained in the manual, or the local codes.
5) Lynx shall not be liable for incidental, consequential, special or contingent damages resulting from its breach of this written warranty or any implied warranty.
6) Some states do not allow limitations on how long an implied warranty lasts, or the exclusions of or limitations on consequential damages. This warranty gives you specific legal rights and you may have other rights which vary from state to state.
7) No one has the authority to add to or vary Lynx's warranty, or to create for Lynx any other obligation or liability in connection with the sale or use of its products.
8) Limited to the replacement of defective parts with the owner paying all other costs including labor.
1) Installation or start-up, damages or problems caused by improper installation or use.
2) Service by an unauthorized service provider.
3) Damage or repair due to service by an unauthorized service provider or use of unauthorized parts.
4) Warranty does not apply to products installed in any commerical or non-residential application. Examples of excluded applications include, but are not limited to day care centers, schools, bed and breakfast centers, churches, private clubs, fire stations, club houses, common areas in multi-family dwellings, restaurants, hotels, nursing homes, food service locations and institutional food service locations. Contact Lynx for Common Area Warranty.
5) To correct normal adjustments or settings, due to improper installation, commissioning or local gas supply properties.
6) Shipping and handling costs, export duties, installation, removal, or re-installation cost (RMA excluded).
7) Display models are sold "as is". If you have purchased a display model, please be advised that it is sold "as is" and that it is subject to the following warranty exclusions: any exterior or cosmetic damage is nonwarrantable; any missing components will be replaced at consumers expense; major handling damage to manifold, valve and ignition system will be serviced at consumer's expense; all other warranties will remain in effect.
8) The cost of a service call to diagnose complaint.
9) Modification to Lynx product will void related warranties.


I am a first time buyer and happy to say: each chocolate is a pleasant surprise. Excellent choice of flavors. My favorite were the ones with salt on top. I absolutely love the one with pink salt.
Not as fresh as usual. Seemed flat.
While still enjoyable, this order was not as good as my first. Everything did not seem to be as fresh. Still edible, but disappointing. I will try once more and return to ordering from Belgium if freshness is not good.
My favorite. Love this assortment. It takes a lot of discipline not to immediately gobble up the whole box.
I have ordered chocolate gifts from Araya for years. At Christmas time I ordered gifts to be ordered close to the 25th. Two of them were delivered a week ahead of time. Araya honored the mistake and replaced the chocolates. Needless to say, the chocolates were delicious as always.
What happened to the Ginger chocolates? Miss those! How can we pick our flavor choices in a box?
I have gone through 2 boxes of these chocolates and fell in love with Araya. I prefer dark chocolates and at first picked some favorite flavors, then went back for 2nd box to try some new ones. I was pleased with most of the flavors. Some I didn't think I would like but really fell in love with. Like the strawberry balsamic.
The minute I opened the box, I knew I had discovered something very special. The flavors are so fresh and the combinations so unique...strawberry balsamic, key lime. After 2 pieces, I raced to my computer to leave a review. Thank you for creating such beautiful AND delicious chocolates. I will definitely be ordering these (along with your macarons) for gifts.
Both orders arrived at one time, although I had asked for different shipping dates. The ones I kept, which should have been delayed by a week, have been in the fridge. When we tried them this weekend, they were not very flavorful and the texture was dry. I don't know if it was because they were old, or too cold, or what.


I found this article helpful and reassuring.
If you recognize any of those behaviors in a partner or friend who you have had a relationship with, then congratulations- you were in a toxic relationship with a narcissist or a sociopath.
Now, if you were like me, then you probably felt at war with your own mind, constantly wondering if the fault was with you, or them. After doing some research, as I'm sure many of you have done in this situation, I discovered that all the things I thought were "broken" in me, were actually just fine. I wasn't the one who was so destroyed that I couldn't find a way to keep myself together unless I was destroying another person…that was them.


text:
The Soviet Standard of Living, and Ours
By Marshall I. Goldman
"Today our task is to tip the scales in world production in favor of the Socialist system against the capitalistic system, to surpass the most advanced capitalist countries in labor productivity and output per head of population, and to attain the world's highest living standards. In this stage of the competition, the Soviet Union intends to surpass the United States economically."--N. S. Khrushchev, "Target Figures for the Economic Development of the Soviet Union," Soviet Booklets, no. 47, London, 1959.
KHRUSHCHEV, in outlining these goals of the First Seven Year Plan, did not mean to imply that success would be attained overnight. He was realistic enough to realize that, at least with respect to the standard of living, there was a considerable gap to overcome. In fact, of all the areas of competition with the U.S.S.R., it seems safe to say that the Soviet Union lags farthest behind in its standard of living.
Yet Western commentators must be very cautious. We remember the plight of observers in other fields who at one time made similar statements and then found that in spite of everything the Russians had indeed "caught up." Soviet retail sales are continually increasing and 1960 sales of such items as refrigerators are to grow by 60 percent over 1958. In the light of the new interest shown by the Soviet Government in consumer goods distribution and an improved standard of living we should survey the state of consumption in the Soviet Union before risking an evaluation of Russia's chances of "catching up."
By the time Stalin died in March 1953, the wartime destruction of a large portion of Soviet manufacturing facilities had been repaired and the level of Soviet industrial production was above its prewar level. In the continually neglected areas of domestic trade and the standard of living, however, it is estimated that by 1952 real wage income, although slightly higher than prewar, was still below that which existed in 1928, the year before collectivization.[i] It was necessary to recover not only from World War II but also from the trauma of the five year plans and collectivization. While conditions slowly improved, the greatest transformation took place only after Stalin's death.
There seems to be little doubt that the Russian people welcomed the death of Stalin in more ways than one. The reforms and concessions granted immediately after Stalin's death are well known. Pardons, reduced tensions and the ending of the Korean War followed. The immediate improvements in the standard of living were also important. While it is clear that conditions improved from Malenkov on, the immediate increase in retail sales seems to suggest that consumer goods were used as a political tool--presumably to preserve stability.
A close inspection of the sales data by quarterly and semiannual increases indicates the rapidity of the change. Retail trade increased in the second quarter of 1953 by 23 percent, and by 26 percent in the second half of the year. This was double the increase of the earlier quarters and triple the increase of the first quarter of 1953. Moreover, there seems to have been an even greater improvement in rural trade. In the countryside sales increased by 30 percent the first half and by 32 percent the second half.
After the sales surge immediately following Stalin's death, retail trade volume continued to increase at a somewhat more subdued but nevertheless fairly rapid rate. While consumer goods production has continued to take second place to heavy industry, and while many of the more optimistic plans of Malenkov (at one time the outspoken exponent of expanded consumption) have been abandoned, the living conditions of the people have been substantially improved. By 1959, yearly retail sales were about double the sales of 1952, the last full year under Stalin.
Clearly the living standard of the Soviet consumer is rapidly improving. Whether or not such growth means that the Soviet Union will be able to overtake the United States will be considered later. At this point, attention will be focused on the pressures created by the recent expansion of consumption on both the population and the distribution network. The reaction to such pressures, it will be seen, has affected consumption goals.
From the point of view of the Soviet citizen, conditions are much better. There is no reason to believe that this increased availability of consumer goods has not served to whet Soviet appetites for even more. The Russians have found that new apartments create a need for new furniture, new suits create a need for new shoes. So goes the familiar and heretofore unending process.
It also seems clear that demands have been stimulated by the improved and more objective exposure to Western living conditions. The Russian people are obtaining more accurate information about the way of life in the West. To some extent this is gleaned from the magazine Amerika, and from the large number of foreign tourists in Russia. The American exhibition also was an especially effective method of conveying a picture of a country with a much higher standard of living. While some Russian citizens simply did not understand what was being shown at the Fair, many left convinced that it was time their society began to provide some of the same living conveniences.
Russian delegations for the first time are being allowed to visit Western or Eastern European countries. While the number is in no sense comparable to the number of foreigners visiting the Soviet Union, a strong impact is none the less made. Moreover, Khrushchev's recent visit to the United States and the descriptive and visual coverage of the sights he saw--supermarkets, private homes, superhighways and farm houses with swimming pools--should only increase the Russian hunger for consumer goods.
Finally, it is not just a matter of creating desires. The latent demand and the financial resources for implementing these demands are in abundant evidence. The author personally has met members of the Soviet upper and middle income groups who have the necessary 25,000-40,000 rubles (two and a half to four times the average yearly wage) needed to purchase a Russian car, but who nevertheless have been on a waiting list for three years and expect to wait several more. Khrushchev may be entirely correct when he asserts that the American system of individual automobile ownership and the resultant traffic problem demonstrate an irrational use of economic resources. However, his pledge to spare the Russians this problem by substituting a taxi pool for individual automobile ownership hardly coincides with the dream of many Soviet workers.
The contrasts in living standards, of which the Russian is becoming increasingly aware, have had a considerable demonstration effect. One frank letter-writer in a Russian paper went so far as to criticize the present Soviet emphasis on such technical triumphs as the sputnik and Tupoliev jet airliner. Instead he dared to suggest that a more important challenge to Soviet industry would be to produce a pair of shoes that would wear as long as those made in the West. The realization that other nations and even other members of their own society have a vastly superior standard of living only accentuates the desire of individual Russians to obtain the same things. As a result, there is a strong demand for an even more rapid improvement in the standard of living.
The growth in consumption has also had an important effect on the operation of the distribution network. This has led to considerable change, both voluntary and involuntary, in the operation and structure of the marketing system. The resulting innovations may be divided into two categories: those introduced to improve the efficiency of the existing trade network; and those used to cope with the phenomenon of "overproduction," an unusual planning problem for a Communist state.
Although the volume of trade turnover has shown an impressive increase, the trade network itself has been enlarged at a much slower rate. Whereas by 1958 the absolute volume of trade had increased by somewhat less than 170 percent over that of 1940, the number of retail and restaurant outlets had increased by only 30 percent.[ii] Although this is one way of holding down costs of distribution, the quality of service suffered. The existing network had to be made more effective until investment funds could be diverted from heavy industry and housing.
To facilitate the flow of goods through an inadequate distribution network the Soviet authorities have introduced a series of "progressive" marketing methods. Since 1953, over 1,500 stores have been converted to self-service in the Russian Republic alone. Similarly, vending machines dispensing everything from beer to eau de cologne have appeared throughout the country. A national mail order firm sends goods to provincial areas, thus reducing the need for retail outlets. It should of course be understood that these "progressive" measures are often altered to meet Soviet conditions and do not always evolve in the operational form familiar in the United States. Yet on the whole they have permitted the existing distribution machinery to dispense an increased volume of goods.
More recently, there have been other innovations of a different nature.[iii] The motivation here was not to make better use of existing facilities but to promote the sale of a few over-abundant items. In no sense does this mean that Soviet stores are now filled with overstocked counters and shelves of goods. None the less, in some localities the sale of certain high-priced commodities is below expectations and accordingly the inventories are too high. Instead of the usual annual increase, sales may actually fall off. This occurs primarily with the more expensive varieties of such goods as watches, bicycles, television sets, radios and cameras.[iv]
Unusual steps were taken to cope with this saturation of the market in certain models of four or five items. On July 1, 1959, the prices of almost all the expensive models of these commodities were reduced 15-30 percent. Subsequently it was announced that they would be sold on an installment basis, with interest charged on the unpaid balance. Moreover, they have been advertised and promoted widely. These phenomena, familiar to Western businessmen, are almost always associated with a buyer's market and overproduction. The decision to adopt such measures must certainly have caused quite a disturbance among some Communist leaders, both above and below ground.[v]
The phenomenon of advertising in a Communist economy warrants special attention. Recently it has become increasingly important, and not only for the four or five overproduced items listed above. In addition to the First All Socialist Advertising Conference, held in Prague in 1957, and a nation-wide competition for the best window display in the Soviet Union, the formation of several Soviet Republic Advertising Agencies in late 1958 represents a significant alteration of policy. Not only has there been increased emphasis on billboards and truck-side advertising, but radio and TV commercials are being used. What was regarded as heresy no more than two years ago is now considered an important marketing tool.
Finally, centralized planning of distribution and retail trade is yielding more and more to decentralized planning. Not only has the power to make major decisions been transferred to local planning units, but the operating enterprises themselves have been given increased discretion over their own operations. Moreover, Iarmarki (wholesale trade shows and exhibitions) have been greatly increased in number and importance. There has always been a strong ideological distaste for the participation of non-producing and non-consuming agencies in the flow of goods from producer to consumer; yet wholesalers of each commodity line now hold at least two shows a year for the traditional purpose of matching buyers and sellers.
To sum up, there clearly have been major innovations in Soviet marketing since 1953. While there may be many reasons for it, including the desire to improve the way of life of the Soviet consumer, increased sales volume was probably the most important cause. The latter phenomenon gave rise to two new developments. The larger volume of retail sales made it necessary to improve the operation of the existing distribution network, resulting in a series of measures which increased marketing efficiency and did not seem ideologically objectionable. The second development was the emergence in the Soviet Union of certain phenomena which usually indicate overproduction and lack of planning--traditionally stigmatized as distasteful features of capitalism.
It may well be that as retail trade continues to grow in the Soviet Union, marketing methods will come more and more to resemble those of the West. The questions to be considered now are the crucial ones--how fast will the Soviet Union grow, and will it overtake the standard of living enjoyed in the United States?
First, what is the significance of the future Seven Year Plan goals? By past Soviet standards, the goals as originally announced were somewhat modest in scope. Whereas formerly the average increase of sales had been almost 10 percent annually, the projected increase in sales volume from 667 billion rubles to 1,080 billion rubles in 1965 would mean an over-all increase of only 60 percent or about 7 percent annually. To some extent, of course, this is a problem of numbers. As the base broadens, a larger and larger absolute increment is needed to maintain a given percentage growth rate.
In October 1959, less than a year after the announcement of the Seven Year Plan goals, the Soviet Government called for a sharply increased expansion in the production of consumer goods. Although the goals were projected only three years ahead, the average annual growth from 1959 to 1961 was raised to 12 percent, or by a total of 42 percent. It seems fair to say that this sudden acceleration in goals is the fruit of the psychological seeds mentioned above, the most fertile of them undoubtedly being Khrushchev's visit to the United States.
As yet there is no indication that the Russians plan to maintain this pace beyond 1961. It may be assumed, however, that if the Russians succeed in meeting the 1961 goals, the 12 percent growth rate will continue into 1965, at least as an upper limit.
The most significant aspect of the Seven Year Plan concerning food targets was the call for the Soviet Union to surpass the United States in per capita production of butter, milk and meat. On December 26, 1959, Khrushchev announced that per capita production of butter and total production of milk exceeded that in the United States. Considering the levels of agricultural production during the collectivization famine of the 1930s, this is quite an accomplishment. But as D. G. Johnson and A. Kahan point out, the relation of Soviet production of meat and milk to American production of these goods has improved little if any over the pre-revolutionary era when Russia was a major livestock producing nation.[vi] Still, this does represent a substantial improvement for the average Russian, although the targets for other fresh foods are less spectacular.
It must be remembered that the standard of living is not only a matter of production. Distribution and marketing must also be improved. It is one thing to show that you can produce certain things; it is another to provide them to your consumer in a fresh state and when he wants them. Thus in the same speech in which Khrushchev claimed that butter production per capita is now greater in the Soviet Union than in the United States, he complained that Omsk had no butter in its stores and that milk and meat shortages were reported in Kharkov, Rostov and other areas.
Soviet production and consumption of soft goods other than foods have similarly improved in the post-Stalin years and are to continue to grow under the Seven Year Plan. While the over-all average increase in production of such items is to grow by approximately 50 percent, the output of specific items such as knitted underwear is scheduled to double. The Soviet production of wool fabric in 1958 already exceeded American production; and by 1965 it is slated to be double the 1958 American output.
Yet all the discussions having to do with foods and soft goods tend to be polemical in nature. Clearly, the Soviets have made vast improvements, at least over the dreadful days of the early 1930s. While they should have done much more, and done it sooner, the fact remains that they are on the verge of overtaking the United States in both the production and consumption of certain food and soft items. It is with regard to consumer durables, however--on which Americans especially pride themselves--that the test must be made.
As might be expected, sales of Soviet consumer durables are to increase at more than the average rate of growth.[vii] For example, the original plan called for an annual increase in washing-machine sales of 26 percent and the revised plan calls for 38 percent. For refrigerators, the respective figures were 22 to 30 percent and for television sets 19 and 25 percent. All were above the over-all average sales growth projections.
Taking the maximum variant, we find that by 1965, production and sale of 4,750,000 Russian washing-machines will surpass 1959 American sales of 4,010,000. For refrigerators, the original Seven Year Plan goals for 1965 as well as the revised goals are lower than 1959 U.S. sales. This is also true of the sales and production figures of the other durable goods. At best, sales of Soviet refrigerators in 1965 will be three-fifths of U.S. sales in 1959, or a little over two million units. Yet considering that sales of washing-machines and refrigerators in the Soviet Union totalled 3,600 and 50,000 in 1953 and 670,000 and 415,000 in 1959, this is a significant improvement (despite the fact that, at best, only washing-machines will exceed 1959 U.S. sales.)
The Russians are much further behind with respect to housing and automobile production. Even though housing construction in the Seven Year Plan is to be 2.3 times greater than it was in the preceding seven years, a noted economist, V. Nemchinov, asserts that 55 percent of the housing to be completed under the plan will be needed just to maintain the present low housing standards. Due to demographic growth and normal housing depreciation, it is necessary to run just in order not to lose ground.
While the Russians dream some day of duplicating many aspects of American life, they do not include automobile production in their aspirations for the time being. Thus automobile production is to expand from the 124,500 units produced in 1959 to 200,000 units in 1965, but the Government does not exhort the Russian worker to overtake the U.S. 1959 production of 5,590,000. It simply cannot afford nor does it desire to divert the resources from heavy industry which even a fraction of this production would require. Consequently, instead of a rate of growth equivalent to that of the other rapidly growing durable consumer goods items, the seven-year increment in auto production of 64 percent is not much larger than the lower over-all increase in retail sales.
With the goals in mind, let us now evaluate them and see if increases of the magnitude suggested are possible. The past record in this respect is not encouraging for the Russian citizen. The Soviet Government has always regarded heavy industry as the most important economic sector and thinks of consumer goods as expendable. During the prewar five year plans, the goals for consumer goods were almost never kept. This background warrants a certain amount of skepticism toward planned increases in the immediate future.
While heavy industrial production is still the major objective, it does seem fair to suggest that consumer goods in the Soviet Union today are more important than ever before. Yet retail sales in 1960 are to increase by only 6.9 percent over 1959. Moreover, Khrushchev apparently supposes that the great production increases are to be gained from increased efficiency and productivity and with little new capital investment. Better use of waste and scrap may indeed result in some added production. However, the expansion is unlikely to meet the revised 1961 goals of a 12 percent annual increase without substantial investment and a more rapid sales increase for 1960. If anything, the 6.9 percent rate of growth just meets the original Seven Year Plan goals of a 7 percent annual increase.
The 1961 goals seem to be exaggerated, especially since they are to be achieved in such a short period. Although Khrushchev certainly wishes to concentrate more of Russia's economic resources on producing consumer goods, he will find it difficult to meet the original 1965 plan, not to mention the revisions of 1961, unless he can route substantial quantities of materials from some other production sector. Since he shows no intention of reducing his emphasis on heavy industry, this may partially explain his strong support of disarmament.
Let us assume that the Russians attain their goals, that they do reach or surpass the production levels of various American consumer goods. Will this then mean they have overtaken our standard of living? To compare living standards is an extremely difficult statistical problem. Quantitative measurements are not the only criteria to be considered. Taste and variations in quality come into the equation too. To compound the problem, tastes change. Consumption of potatoes per capita has fallen in Russia; it was lower in 1958 than in 1957, and both these were lower than the 1953 figure. Does this mean the Russian consumer was worse off in 1958 than in 1953? We face both dilemmas when we discuss Russian woolen fabrics. As was pointed out earlier, the Russians now produce more of these than we do in the United States. Yet before this can be claimed as a Russian victory, it must be remembered that it comes about partly as a reflection of climatic tastes and needs and partly because synthetic fabrics have been substituted for woolen fabrics in the United States.
Many qualitative differences also exist. How is it possible to adjust for the fact that all but a fraction of the milk sold in the United States is pasteurized, while a much smaller percentage is so treated in the Soviet Union? Similar considerations hinder comparison of durable consumer goods. To say that the Soviet Union will produce 2,500,000 or 4,500,000 washing-machines in 1965 is meaningless unless there is some way of comparing their qualitative features with those of a washing-machine produced in another country. At the present time, almost all Soviet models are the wringer type with only a limited washing capacity. To say that by 1965 they will be producing 60 percent or 120 percent as many units as we did in 1959 under the circumstances may not have much meaning. And is it possible to compare Soviet housing with that in the United States? Our emphasis is on private homes while in the Soviet Union it is on semi-private apartments with jointly shared kitchens and toilets. Finally, because the quality of production is often so poor in the Soviet Union, all comparisons remain to some degree suspect even if one finds commodities somewhat comparable in nature.
There is a further element to be considered. Although we are concerned with the consumption sector, we run into many of the problems encountered by those who measure stocks and flows in the capital goods industry. While it is necessary to consider what is newly consumed this year, it is also important that some account be taken of what was purchased in previous years, but which still is in use and continues to satisfy and serve. Thus as a larger and larger share of annual total expenditure is devoted to durable commodities, the standard of living is improved not only in the given year, but in the years of the immediate future.
The special character of durable goods consumption has two implications. First, it means that actual living conditions prior to Stalin's death were even lower than the simple retail sales data suggest, because so large a portion of consumption expenditures were completely consumed in the same year. This also means that comparative studies of relative standards of living, both with other countries and between different periods, are even more difficult than has already been suggested by various researchers. How is one to describe in statistical language the relative standards of living when one of the countries has a large stock of consumer durables and the other does not?
An attempt has been made to calculate the stock of selected appliances in the Soviet Union as they existed in 1959 and as they will be in 1965.[viii] For 1959-65, two possible estimates are offered. The larger, a projection of the revised goals for 1961, is certainly the upper limit. On the other hand, the original goals of the Seven Year Plan are not necessarily a lower limit. If anything, they may be considered a median estimate.
In order to be as conservative as possible, the counterpart American figures do not refer to stocks, but to the number of households possessing these goods. Because many own more than one, the actual American stock of goods is much higher. An extreme example is that compared with a stock estimate of 155,000,000 radios, the number of households possessing radios is about 50,000,000. Because the estimate of Soviet stocks fails to take into consideration replacement of scrappage (important, considering the notoriously poor quality of Russian consumer goods), the comparisons tend to overstate the availability of Soviet durable consumer goods while the corresponding American figures are understated.
Regardless of the sudden growth in production and sales, the stock of Soviet washing-machines will equal only 16,000,000 by 1965 at best. This would represent 35 percent of the almost 47,100,000 U.S. households possessing washing-machines in 1959. If sales increased at the originally expected rates, the figure would be 25 percent instead of 35 percent. The relevant comparisons for refrigerators is a maximum of 10,000,000 units by 1965 compared with 49,600,000 in the United States in 1959.
A similar disparity will continue to exist far beyond 1965 between other stocks of Soviet and American consumer durables. This is not meant to imply that washing-machines, refrigerators, television sets and radios are the only items to be considered in evaluating relative standards of living. Many more comparisons are necessary (and not just of material goods) before one can make a final judgment. None the less, if precise comparative considerations of such stock variables as housing and automobiles were possible, they would only work to our advantage.
An approximate indication of the difference in Soviet and American housing conditions is suggested by the fact that in 1957, each Soviet urban resident had 83 square feet of living space. Nemchinov, the Soviet economist mentioned earlier, says that the Soviet goal of 129 square feet per person will not be achieved until much after 1965. An exact estimate of comparable American data is not available. However, the most informed guess is that American living area per capita in 1950 was approximately 269 square feet, or more than double the eventual Soviet goal. Considering the housing boom since 1950, it is logical to suppose that the present U.S. living area per capita is even higher.
What does all of this imply for the United States? First of all, it appears that the Soviets are determined to match not only the heavy industrial production of the United States, but also its standard of living. In their attempt to do so, they have shown that improved retail trade is a convenient political tool for assuring public allegiance. They have also discovered, however, that in trying to overtake the United States in the pleasures and joys it derives from a high annual sales rate, they also encounter many of our problems. As long as the consumer is kept at a low consumption level, and is given more money than goods to buy with it, there is no difficulty. Whatever is produced is sold. However, when conditions improve even slightly, new troubles arise. The Soviets have found that the consumer is fickle and that demand cannot be precisely estimated and planned, as they had always assumed. Where the market is thinner, certain commodities (usually those with higher price tags) simply do not move. The result is that they must fall back on the capitalistic expedients of advertising, consumer credit and middlemen.
The standard of living will doubtless continue to improve in the Soviet Union. This is to be expected regardless of any decision about total disarmament. However, a personal visit into any Soviet apartment off the main street or a drive through any Russian village will answer the question whether the Russians will overtake the United States during the next few seven year plans. There is little doubt about the capability of Russian heavy industry. But the disparity between the simple two-wheel horse cart of the typical peasant and the supersonic Tupoliev jetliner of the transcontinental passenger is immense.
At the opening of the American Fair in Moscow, Khrushchev asserted that "after the fulfillment of the Seven Year Plan, we will need five years, maybe less, to overtake the United States in total and per capita production." Even if this were so, he should know that overtaking the United States in production of specific commodities is not enough. Production must be sustained over a long enough period of time to allow the acquisition of these items by the average citizen. This is not to say that the Russians will never have a stock of consumer durables as large as exists in the United States; but considering the distance to be overcome, and the past record in regard to consumer goods, the possibility of the Russians catching up within the present generation seems very remote.
[i] Janet Chapman, "Real Wages in the Soviet Union, 1928-52," Review of Economics and Statistics, May 1954, p. 147. Even though it is probable that there were more workers per family in 1952, consumer goods production was always of minor importance.
[ii] Voprosy Ekonomiki (Problems of Economics), no. 8, 1959, p. 55. Naum Jasny disputes the increased sales figure of 170 percent. The Soviet 1956 Statistical Handbook: A Commentary, Michigan State Press, East Lansing, 1957, p. 178.
[iii] For a more detailed discussion of these as well as the preceding category of changes, see the author's "Marketing--A Lesson for Marx," Harvard Business Review, January-February 1960, p. 79.
[iv] Tsentral'noe Statisticheskoe Upravlenie, Narodnoe Khoziaistvo SSSR v 1958, Gosstatizdat, Moscow, 1959, p. 704, indicates that radio, watch and bicycle sales in 1958 were lower than in 1957 and/or 1956. The First Deputy Minister of Trade of the R.S.F.S.R., D. D. Korolev, during a visit to Boston recently, stated, "A few years ago we discovered that we had produced too many radios and cameras. We produced more than we could sell under the existing conditions."
[v] Sovetskaia Rossiia, July 1, 1959, p. 4, describes the price reductions. The issue of August 16, 1959, p. 4, outlines the procedure for installment sales.
[vi] Joint Economic Committee of the United States, Comparisons of the United States and Soviet Economies, Washington, G.P.O., 1959, 1, p. 222.
[vii] The following statistics are derived from Planovoe Khoziastvo, No. 2, 1959, p. 63, Electrical Merchandising Week, January 18, 1960, p. 35, and Pravda, January 22, 1960, p. 3.
[viii] The past sales figures for 1950 to 1959 are found in Sovetskaia Torgovlia (Soviet Trade), Gosstatizdat, Moscow, 1958, p. 57, Sovetskaia Torgovlia, January 1959, p. 12 and Pravda, January 22, 1960. The original 1965 figures are given in Vestnik Statistiki, no. 5, 1959, p. 91, and the revised figures are derived from Pravda, October 16, 1959. To obtain an estimate of existing stocks, it is necessary, however, to find a sales figure for the years prior to 1950. Since sales of most consumer durables before 1950 were almost nil, the danger of making any significant error is small. If anything, the estimates are purposely high. The figures for the United States are taken from Electrical Merchandising Week, January 18, 1959, p. 59.
MARSHALL I. GOLDMAN, of the Department of Economics, Wellesley College
More By Marshall I. Goldman
Russian Federation Economic Development
Macron's Flawed Vision for Europe
Persistent Divisions Will Preclude His Dreams of Global Power
Francis J. Gavin and Alina Polyakova
What Putin Really Wants in Ukraine
Russia Seeks to Stop NATO's Expansion, Not to Annex More Territory
Dmitri Trenin


The traffic has slowed down and you can tell most people have ventured out of town for their summer holidays. The weather has finally warmed up and everyone is taking advantage of the great outdoors. Open house attendance has dropped off and property showings have slowed down. In real estate language, we call this "The Summer Market".
It's easy to see the freehold sector easing into the summer market. Listings remained unchanged except for a slight increase in the 3 million plus range. There is still some good news. Homes selling in the $700 to $1.5m range, almost half of them sold over asking!
In the condo sector the number of new listings has not increased but a surprising number of condos (35) are available in the $300-400 range and more than 50% have sold over the asking price. Good news for the first time buyers with a small budget.
The Bank of Canada interest rate hike last week could prolong the slowdown of the Toronto housing market, but economist Benjamin Tai said it is not expected to last long term. "What led to the slowdown in Vancouver was really more domestic buyers waiting to see what the foreign buyers tax will do."
While Toronto could follow a similar path to the Vancouver market that saw a significant decline there are other factors now at play, Tai said.
"We also see interest rates going up and the regulators are talking about introducing more measures to slow down the market" he said. "That's why it's possible the slowdown in Toronto will be more durable than the slowdown in Vancouver."
How Will The Rise In Interest Rate Affect Us?