Pent Up Demand: Debunking the Narrative (long post using data)

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Thanks for posting, it’s refreshing to have people share what actual macro analysis looks like on occasion.


Op – great post. Could you talk more about point 6 and how indebted economies can’t handle much inflation and how that sends us to deflation? What does your macro view of medium/long term look like? Is underlying economy healthy enough to back off stimulus in medium term?


I think the pent-up demand we will see will be in the travel and leisure sector (airlines, hotels, restaurants, amusement parks, etc..). I guess that is the only thing people are not able to do currently. Everything else is online and you can still spend a ton of money on consumer discretionary and staples products


I can tell you right now I’m blowing money in bars and restaurants like a motherfucker as soon as we’re fully reopened, but as far as goods and stuff go, I’m kind of doing a lot more shopping than usual now already.


This is the great analysis that I was waiting to read. I feel like with debt looming in the background, lots of young technologically-oriented people(especially college grads) have turned to the stock market to make some money, especially because the service sector is out. And since the stock market hasn’t lost money in over a decade, people think it’s a safe bet to make. All arrows, from the past 10 years, are pointing upward. But most of the economists are seeing large warning signs of doom underlying the stock market in the economy–near 0% interest rates, large unemployment numbers, large inequality of wealth, etc. If something big were to happen, the US no longer has a safety net to fall back on, and what I believe many people aren’t seeing is that *stocks do not equal money*. If you don’t have much money in your savings account, which MANY people do not, you will have to sell your stock eventually to pay rent, to buy groceries, to pay off three generations of college graduation debt in a job market that asks for 3-5 years of experience for an entry level job. So when are these people going to sell? When the stimulus dries up(much of it misplaced) and all the average companies for average people are not hiring because they’re inching towards the red, they will have to sell. And the people who have done any research at all, have already sold or are going to sell soon. And then it’ll be a matter of who will be able to stomach the drops. If I’m low on savings, and I’m all in on Tesla, and I know stimulus is about to end, unemployment is about to end, the vaccine is coming out, and people will *have* to start doing things again. Am I going to be *able* to “wait it out”, “go long”, “buy the dips” when this winning streak finally comes to an end? Or am I just going to take my god damn money. And this will be the tip of the iceberg. Only the absolute madlads are all-in on Tesla. Most people, if they’ve listened to the conventional wisdom of the past 5 odd years, they would know, Index funds, ETF’s, and large diversification are the way to go if they want to play it safe. So what happens if all of these people sell, even just the cream off the top of their stocks. Every company that’s bundled together with the biggest winners will also take a hit. Before, it wasn’t such a big deal. These people were taught, put your money in these safe funds, and don’t even look at it for 10 years, and you’ll have made a fortune. But now, *everyone* is looking. How could you not look? Who doesn’t like watching money being made every day out of thin air. But when scale tips, and the buyers run out–and they will run out–we’re looking for some massive swings. And it’s inevitable. It’s just a matter of counting. There are a finite amount of people in the world who are in the stock market and each of those people have a price they’re willing to pay. Remember, every time the stock goes up it means someone is willing to buy for more than someone is willing to sell. If there’s no one left willing to buy, the stock will go down, and it can keep going down until someone is willing to buy again. But who knows when someone will be willing to buy. Would you buy something that could lose 30% of its value the next day? It happened in March last year. It would be like buying a car knowing that tomorrow one of your wheels might pop. This is just what I see might happen. Who knows what will really happen. I’m not an economist or a professional investor. I just read a lot and listen to a lot of people. But I do want to hear other people’s opinions. If I’m feeding too much into the doomsday predictions or this is real, I want to know.