[HN Gopher] When buying the dip doesn't work: An analysis of the...
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When buying the dip doesn't work: An analysis of the dot-com crash
Author : makaimc
Score : 304 points
Date : 2022-05-06 17:03 UTC (2 days ago)
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| flipbrad wrote:
| I'd love to better understand how crashes start / propagate. A
| lot of the discussion seems to talk in slightly binary terms -
| "bear" vs "bull", "crash" as an on/off state, etc. But if we
| think inflation and reduced stimulus are going to cause a
| downturn in the stock market, I assume different sectors / types
| of companies will get impacted at different times? I'd love to
| see some theories/discussion of how that might play out. Timing
| dips might be super hard, but predicting how they play out, once
| they're underway, might be less difficult
| greenyouse wrote:
| I can't answer the part about what sets off a crash. AFAIK, it
| seems to vary slightly for each crash. They all share similar
| valuation problems though. If a company is worth $10 but it's
| trading for $50 then there's a risk that it will drift back to
| its intrinsic value in a bear market (aka mean reversion). When
| the most heavily traded companies are all overvalued then you
| see a situation where a large market can crash.
|
| As investment firms realize that the investment isn't going
| through normal volatility, they'll sell off the shares and
| focus on other types of returns. The same goes for individuals
| but most will probably move after larger firms. A heavy sell
| off of a stock can cause the share price to drop. To some
| extent it probably happens in waves as negative events keep
| unfolding. That helps set the downward trajectory over the
| long-term.
|
| Unfolding macroeconomic conditions like raising the federal
| interest rate will also have an effect like it does now in the
| current crash. That raises the interest rate for bank loans so
| consumer and commercial lending slows down. That typically
| ripples out with knock-on effects for the broader economy.
| There are other factors at play like inflation and supply chain
| logistics that have their own knock-on effects too.
|
| There are trends in how to invest during a crash and bear
| market. Try looking for companies that are trading close to
| their intrinsic value that also offer a dividend. It's helpful
| to partition the companies by industry. Some industries are
| going to be fairly safe like healthcare, utilities, and
| defensive consumer products (e.g. toilet paper producers).
| Those companies are going to have steady business whether the
| market crashes or not.
|
| On the other side of the coin, there are okay sectors and bad
| sectors. You can check the general valuations across the sector
| and what's going on across companies. For example, energy
| companies are hot right now because of oil demand. That's okay
| because it doesn't track the crash of the larger market. It's
| heavily dependent on oil value though, good luck predicting
| what happens to the price of oil over a year out.
|
| A bad investment is something overvalued with bad future
| prospects. If you know people will be capital constrained and
| limiting big purchases, then cyclical industries like real
| estate might not be as good to invest in.
|
| It might be helpful to think about companies in terms of size
| and market valuation too. A growth stock usually has higher
| price to book because it's invested in R&D for future growth.
| They may not be making that money right now but the price is
| higher because they should at some point if everything works.
| That hurts when mean regression happens and the market price
| snaps back to book value. Value companies make money now and
| have lower price to book. When they go through a bear market
| they'll be largely unaffected by mean regression and have an
| easier time getting consistent returns. They usually pay
| dividends which helps over time too.
|
| I'm not sure if there's any consistent trend with how market
| cap size works in a crash or bear market. Check out some
| quarterly or annual economic outlook reports from major
| investment firms. They'll do the best at analyzing the current
| risk based on market cap if there is a trend.
|
| Those bear market investment strategies should be put behind
| the caveat that long-term investing is a better way to go. The
| market ups and downs smooth out over time so trading based on
| fundamental analysis of a company usually works out much better
| than speculating on the current trends. With a long-term
| mindset you can be less stressed about news since you'll get
| less caught up with the short-term market conditions. Stay the
| course and all that.
| lucidlive wrote:
| It feels like the vast majority of the comments are negative
| towards the stock market and essentially saying "we may not
| recover this time". The thing is, we always think that. We always
| think this time is different. We always think this might be the
| end. When Covid struck? It was different because the world
| economy was shut. When 2008 happened? It was different. 2000?
| Different. 1987? Different. Markets will eventually recover. It
| will not take you 4 decades to recover. Sure, it could take
| years. But buy good companies, dollar cost average, and realize
| your loss isn't realized until you sell. Also realize that the
| best time to buy stocks is always, but especially when people are
| flooding forums with negativity.
| rossdavidh wrote:
| I feel like this comment is well addressed in the article,
| where it shows how long it would take to get back to even from
| various dip-buying scenarios. Some of the timelines are far
| longer than most people would be able to cope with.
| pdevr wrote:
| Index investing will work, if you live for a long time. The
| problems are, we do not live infinitely, and the average person
| does not have the stomach to see their investment going down for
| years, unless that investment is small enough to tolerate (in
| which case it is not enough to make a big difference, for most
| people).
|
| What I think will work - not claiming that it will actually work
| - based on history:
|
| Invest in companies that are generating a lot of cash and a lot
| of profits, have a moat/USP/technology advantage, and are at the
| forefront of where the world is headed in terms of trends, or at
| least are following a sustainable trend. Yes, you need to
| identify the company. Yes, you need to take decisions: INTC vs
| AMD (1980s), YHOO vs GOOGL (2000s). But it gives you a much
| better chance of seeing a profit in your lifetime than index
| investing. You can still index invest, but only an amount you can
| "set and forget". This gives you the best of both worlds.
|
| Edit: (1) What I posted above is for long periods of no movement
| of stocks except downwards, as I believe we are going to see. (2)
| Index investing will work eventually and that is what I said
| above as well. The point is, the time period required for that.
| (3) I thought of posting this on my blog tomorrow, but it is past
| midnight here, and I wanted to see what HNers think. It is
| interesting to see the different opinions. Time may change some
| of your opinions (not about "index investing will not work" -
| that is not what I said above - but rather, about the protection
| offered by diversification, and what diversification actually
| means. Also, quoting this part again: "the average person does
| not have the stomach to see their investment going down for
| years, unless that investment is small enough to tolerate (in
| which case it is not enough to make a big difference, for most
| people)").
| refurb wrote:
| Your strategy sounds like "pick winning stocks"? A strategy
| which has been show to produce (on average) worse returns than
| index investing.
|
| Index investing has produced a ~200% return in the past 15
| years (from 2007 peak to now). Not sure what you mean by "a
| chance of seeing a profit in your lifetime".
| john_moscow wrote:
| There's a third strategy of "index minus bullshit stocks"
| where you would include both INTC and AMD stocks for risk
| hedging, but would leave out things with questionable
| sustainability like Uber and Netflix that otherwise made it
| into the index due to the speculative value.
| kkdaemas wrote:
| This strategy would miss some huge and unexpected gains.
| Tesla comes to mind (at least for the time being...)
| Ekaros wrote:
| On other hand it also avoids Tesla when it inevitably
| crashes to same ballpark as other automotive companies...
| No I really believe it is nothing special and will
| eventually come down.
| redisman wrote:
| There are plenty of value or dividend funds if that's your
| philosophy
| baq wrote:
| You can try SPLV or similar but you miss the bubble
| inflating with these.
| pdevr wrote:
| More or less. Of course, I am advocating to leave out any
| company where it does not fit this criteria: " are
| generating a lot of cash and a lot of profits, have a
| moat/USP/technology advantage, and are at the forefront of
| where the world is headed in terms of trends, or at least
| are following a sustainable trend".
| alar44 wrote:
| Parent has literally no idea what he's talking about.
| Investing in indexes has always worked. Always. Over all time
| periods. Since they existed.
| h-w wrote:
| Well indexes are a relatively new product (less than 100
| years old).
| cudgy wrote:
| All 20-30 years? Believe it or not, the history of
| investment spans more than the last 25 years. Also, there
| are some questions regarding the liquidity of ETFs during a
| major crash/selling session. It's possible there could be a
| feedback loop of selling to deal with cashing out that
| results in price of the ETF going below net asset value.
| [deleted]
| landemva wrote:
| 200% in 15 years didn't keep pace with my house assessment
| from county tax lady. And I got to use my house!
| cudgy wrote:
| Kind of the opposite of diversification though. Houses burn
| down and neighborhoods change, sometimes for the worse. I
| knew someone that bought a house in 1972 for $70,000 and
| sold it in 2015 for about $70,000. Real estate is not all
| roses and candy.
| RaRic wrote:
| No, it sounds like picking winning businesses. Big
| difference. Warren Buffet has said that he's a business
| picker, not a stock picker.
| refurb wrote:
| Warren Buffet buys a controlling position and changes how
| companies operate. He himself said "Your average investor
| should just invest in indexes".
| redisman wrote:
| So your advice is to be Warren Buffet?
| pdevr wrote:
| Yes, that is it essentially. You are looking at businesses
| which have cash flow and the other criteria mentioned
| above.
| milofeynman wrote:
| I have a million dollar bet to make you...
| alar44 wrote:
| I'm sorry, when did investing in indexes not work? No idea what
| you're talking about.
| anonporridge wrote:
| Index investing has really only existed in common practice
| since the 1970s. You can simulate back further and do
| imaginary index investing, but we really only have 50 years
| of actual history with it. It's a very young experiment.
|
| One thing that a lot of people are worried about is if the
| surge of people and money getting blindly pumped into broad
| basket index funds as if it was a savings account (because
| those have negative real yield) will itself distort the
| market in weird and unpredictable ways. It's entirely
| possible that it breaks the entire system and creates the
| mother of all crashes.
| pdevr wrote:
| This, pretty much. Whenever a new trend comes up, be it
| Bitcoin or index investing (both of which are poles apart
| in terms of risk), passionate people will defend them
| passionately. Good on you all. I posted it hoping to see
| HNers' original or novel thoughts about this (along with
| the expected defending of index investing).
| icelancer wrote:
| It's pretty tough to figure out if there's over-exposure
| in index investments, and tougher still to untangle the
| expected fallout of that problem, if it exists. Some
| people have talked about it, and have been shouted down
| of course.
|
| I've done a decent amount of reading on the topic and
| think I'm barely knowledgeable about the surface of it. I
| guess that's how it always is, though.
|
| People burying their heads in the sand and thinking that
| index investing has no hidden black swans are the ones to
| be most scared of, though.
| icelancer wrote:
| >> Index investing will work, if you live for a long time.
|
| Maybe. Those who own the Nikkei index are still waiting.
| pdevr wrote:
| Ha ha. It did finally reach that old "peak" again, but I
| guess it took some 30 years :) A little over 10% for 30 years
| of patience.
| galaxyLogic wrote:
| Investing in stocks is risky you can lose most of your money.
| And some people do lose most of their money. That is the
| nature of probability.
| andsoitis wrote:
| diversify
| chris123 wrote:
| Sorry, the standard of living for the night class has been
| declining for decades, and the rate of decline accelerating.
| Anyway, buy the dip works in the bull market and doesn't end up
| bear market, it's as simple as that.
| dehrmann wrote:
| Buying the dip doesn't mean you should try to catch a falling
| knife.
| baq wrote:
| Bottom pickers have smelly fingers
| lokar wrote:
| Using QQQ here seems like cherry picking (vs SPDR).
| franciscop wrote:
| Exactly my thoughts, the author talks about S&P500 initially
| (which recovered "fairly" quick after the dotcom bubble burst)
| and then uses a different index to exemplify how the dotcom
| bubble took long time to recover.
| ryl00 wrote:
| While the peak-to-trough drop wasn't as bad as QQQ's, the S&P
| 500 still managed to fall something like 40% from its dot com
| peak in 2000 over two years, and didn't fully recover until
| 2007. (And of course 2008 sent it right back down again for
| another five-ish years).
| [deleted]
| 01100011 wrote:
| SNL skit from the dot-com era:
| https://twitter.com/WallStreetSilv/status/152279877872567500...
|
| Does anyone have a solid understanding of how QE affects the
| economy? From what I've read, QE basically stays locked in the
| financial system as interbank cash. I think this can affect short
| term interest rates, and therefore affect lending(and money
| creation by the big banks), but otherwise that money doesn't
| really drive inflation, at least not directly.
|
| Based on that assumption, the real driver of inflation is the
| $5.4T in stimulus combined with supply-side shortages.
|
| It's looking to me like inflation is here to stay. On-shoring,
| demographics(aging boomers), the end of cheap energy and many
| materials, and other factors seem to be putting the US on a
| different course than we've been on for ~100 years.
| JKCalhoun wrote:
| Why would $5.4T in stimulus that, as far as I know, came and
| went a year ago be causing ongoing inflation?
| ctennis1 wrote:
| Did it come and "go", though? A lot of that money was
| earmarked for local and state government programs, and at
| least from what I'm seeing, a lot of those projects haven't
| even taken place yet. Our local city hall, for example, is
| still trying to spend some of the money, which they will be
| reimbursed for after the projects are complete.
| jokethrowaway wrote:
| Because... you have more money in the market?
|
| It did spike up inflation when it was introduced and once
| inflation starts its effects tend to spiral.
|
| Look, we're also coming from years of QE. We've been screwed
| for years, it's just a matter of understanding when the
| government won't be able to support this monster they created
| and let th market correct itself. Instead of a series of
| small economic crises we'll get a massive one.
|
| Most of our economic crises are caused by governments
| interfering with the market.
| JKCalhoun wrote:
| I assumed it was Wall Street's bundling of derivatives that
| caused the last economic crisis.
| VirusNewbie wrote:
| >money creation by the big banks)
|
| How could this not cause inflation?
| tmnvix wrote:
| If they were lending for productive purposes. Sadly, that
| hasn't really been the case (e.g. mortgage lending).
| jasfi wrote:
| No technique always works. Buying the dip is just that, a
| technique, not a promise. This is a single example at a specific
| (long-term) time-frame with many other factors involved.
| levinhugo82 wrote:
| nathanvanfleet wrote:
| Sad to think that investing in the stock market, which I have
| only been able to financially over the last 5 years might have
| been much riskier than I might have previously thought. What I
| previously thought as "okay I just leave it in the stock market
| for a bit of time to recoup" is something I am now realizing
| would likely have to be 10+ years.
|
| It's kind of funny because I was getting shaky about having money
| in the stock market back in December, and I held onto investing
| some of my money there. But I ultimately relented 4 months later
| to lose 10% within about two weeks (and after just index funds).
| Now it's much worse, and I guess I'll just leave it all there.
|
| And in 15 years I'll be back to where I was when I originally
| invested it.
| jrumbut wrote:
| > What I previously thought as "okay I just leave it in the
| stock market for a bit of time to recoup" is something I am now
| realizing would likely have to be 10+ years.
|
| I am wondering where you previously got your information?
|
| At one point ten years was considered about the minimum time
| window for investing in stocks.
|
| To give an example, an old rule of thumb was to have 100 minus
| your age percent of your retirement savings in stocks and the
| rest in less volatile investments such as bonds (so a 50 year
| old would be half and half between stocks and bonds).
| nly wrote:
| It's been easy to promote bonds when we've been in 40 year
| bond bull run
| refurb wrote:
| My grandfather had $3M invested in the market in 2007. Lost $1M
| at the bottom in 2008, but didn't do anything other than
| rebalance. Now worth $8M.
|
| Either you fret over every price move and likely buy/sell at
| the worst times, or you invest with a long-term vision and stop
| tracking the price moves everyday.
| landemva wrote:
| >>> Now worth $8M.
|
| That is the price. Worth and value are different than price.
|
| If that $8M now buys about the same amount of blueberries or
| house as $3M in 2007, then it kept pace. Except for paying
| the capital gains on $5M.
| [deleted]
| ramblerman wrote:
| Are you suggesting in 15 years, the $ devalued by more than
| 250%?
| antisthenes wrote:
| Something can't devalue by over 100% of itself.
|
| If you're asking about inflation, it is usually measured
| as an increase in prices.
| galaxyLogic wrote:
| Problem with "long term investing" as I see it is that to
| realize the gains you must get out of the market at
| approximately the correct time. That is difficult
| psychologically because if you have been able to increase
| your worth by doing what you have been doing so far you are
| likely to keep on doing it. Then one day the next crash
| comes. All of a sudden having been a long term investor does
| not help so much any more.
|
| You need to be a long-term investor for a limited term. But
| hard to know when that term is over.
|
| So I think when markets go up you should seriously consider
| taking some money out and using it for leisure and travel and
| education investing in yourself. But taking money out and
| spending it is not usually considered prudent investing.
| Especially because taking money out means you must pay taxes
| on it. So you stay in the market and soon most of your long-
| term gains are wiped out, and you have to be a "long term
| investor" all over again.
| refurb wrote:
| You should clearly have a purpose for your investing goals
| and adjust your investing style based on risk.
|
| So if your goal is retirement and you're 30, you can
| tolerate higher risk because if the market crashes, you've
| got 30 years to wait for it to recover. If you're 60 and
| retiring in a few years, your risk tolerance is low. And
| you can slowly adjust your portfolio in between.
| srean wrote:
| This a very popular idea but I don't fully accept it.
| Goals and desires are not static. They are path dependent
| and adaptive. I want a funding scheme that's able to fund
| that.
| refurb wrote:
| So you want high returns with little to no risk?
|
| Doesn't exist. Sorry bud.
| srean wrote:
| You think you are entitled to returns just because you
| took a risk ? Sorry bud, sad to break it to you but it
| does not work that way.
|
| That's the idea that I am criticizing. Risk might be
| necessary, but never sufficient.
|
| BTW I don't think, you think that way, but neither should
| you. Gratuitous condescension poisons the well.
| refurb wrote:
| I never said I "think [I am] entitled to returns just
| because [I] took a risk". There is no _entitled_ , it's
| simply a trade-off.
|
| It's a basic precept of investing. In a very simplified
| way - higher returns require higher risk of invested
| capital - why else would you invest in something higher
| risk unless the return justifies it? And likewise, people
| will accept lower returns if they know the risk is low.
|
| Nobody is doing payday loans at prime because the risk
| isn't justified by the return.
|
| When you start looking at portfolio allocation across
| multiple investments, it gets more complicated because
| you can actually achieve the _same return_ at _lower
| risk_ through diversification across classes of assets.
|
| But to answer your original question - the only way to
| guarantee short-term and long-term positive returns (as
| you put it "if my goals change, I don't want to lose
| money") is to invest in low risk investments. Low risk
| investments mean low returns.
| srean wrote:
| > I never said I "think [I am] entitled to returns just
| because
|
| Exactly! Why did you think I said anything about not
| taking risks. I didn't say that either. I was
| misinterpreting on purpose to show yours.
|
| > "if my goals change, I don't want to lose money"
|
| I did not say that either. I vehemently agree with
| everything else that you said.
| refurb wrote:
| Ok, then I misunderstood and am very confused.
|
| You said "This a very popular idea but I don't fully
| accept it. Goals and desires are not static. They are
| path dependent and adaptive. I want a funding scheme
| that's able to fund that."
|
| Which I interpret as "I reject the idea of setting some
| financial goal decades into the future. I want a scheme
| that is flexible and can accommodate changes to how I
| want to use my money."
|
| How is that different than "If my goals change, I don't
| want to lose money."?
| srean wrote:
| The best sort of discussions are those where each is
| happy with the other's rewording of their position. I
| certainly do not reject setting financial goals decades
| into the future. I do not like ('like' and 'reject'
| aren't synonyms) investment discipline that are strictly
| fixated on some goal I had in the past. I would rather
| have an adaptive trade off of risk to return depending on
| where I am right now financially. Some goal I had ten
| years ago may not be as relevant in my current state. I
| wouldn't want to let go of a favorable opportunity by
| pulling out the money, just because a goal that I had set
| in the past has been met.
|
| > How is that different than "If my goals change, I don't
| want to lose money."?
|
| ... and I don't see at all how they are equivalent. I
| might be willing accept the possibility of losing some
| money if there is a notable increase in the possibility
| of meeting my updated goal.
|
| I doubt that we have any fundamental disagreement. You
| have a good day.
| throwaway898989 wrote:
| if you have a large enough sum of money (i.e., $50m USD )
| you can stay invested all the time and withdraw a small sum
| of money each year like $300k
|
| With $50m if your portfolio averages 4% a year you would be
| clearing $2m then pulling out $300k for 1.7 gain. You only
| pay tax on the income withdrawn
| matwood wrote:
| The real baller move for someone worth 50M+ with rates as
| low as they have been, is take out loans against the 50M
| to live off of. Pay back the loans with rates less than
| the annualized market returns. Also limits/pushes out cap
| gain taxes.
| danielmarkbruce wrote:
| Unfortunately for every one of these folks, there are a
| handful of folks who panic sold and still haven't made it
| back...
| bagacrap wrote:
| yes but in that case the Fed rode to the rescue and delivered
| the greatest bull market in US history. There's absolutely no
| way the next decade looks like the last so this is a poor
| comparison.
|
| As far as rebalancing --- you may have noticed stocks and
| bonds falling in unison this year, so rebalancing is not much
| help.
| bushbaba wrote:
| Why not l? If the market returns don't keep up at 6-7%
| annualized government pensions will run out of cash.
|
| If rates go up drastically, government debt payments go up.
|
| The game must go on! *until the us empire collapses, taking
| down with it the western world
| landemva wrote:
| Yes, pensions and Illinois are cooked.
|
| But EU has had negative interest rates for years, and
| will collapse (break up the eu monetary union) before USA
| goes under. Dollar strength confirms capital is moving
| into USA.
| refurb wrote:
| Take a gander at the PE ratio for the S&P500 over time. A
| substantial amount of those gains are backed by increased
| profitability.
|
| https://www.multpl.com/s-p-500-pe-ratio/table/by-year
|
| And not sure what your comment on rebalancing not being
| much "help" is. Rebalancing is not about "help" it's about
| sticking to an investing approach.
|
| And I can recall back in the early 2000's when people said
| "Equity growth will never be like it was the 90's".
|
| Glad I never listened to them.
| ProjectArcturis wrote:
| What are you buying that you've lost "much worse" than 10%?
| There's no guarantee each individual stock will go up over
| time.
| jokethrowaway wrote:
| I was pissed because I didn't invest in my portfolio to buy a
| house during the pandemic and missed out on pandemic gains -
| but checking how much money my portfolio lost, I made more
| money to keep those in cash.
| SturgeonsLaw wrote:
| It was hard to predict that real estate would see pandemic
| gains. It's an asset that people need to leave their homes to
| inspect, and comes with face-to-face time with multiple
| parties. In a locked down society, there were plausible
| reasons to assume that the real estate market would be
| dampened.
| matwood wrote:
| Predictions are always hard. I bought my house during the
| last housing 'crash'. It was my first house so I didn't
| have one to sell, so it was easier. But, I was being told
| by friends and online that things could drop more, wait,
| etc... At the end of the day, I needed a place to live, I
| could afford it, and my job was reasonably secure.
|
| Now people ask how I timed it perfectly and the fact is I
| didn't. I simply made personal financial decisions based on
| my situation at the time.
| anonporridge wrote:
| Are you ignoring dividend reinvestment creating compounding
| growth?
|
| Even god couldn't beat dollar cost averaging,
| https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
| DantesKite wrote:
| Damn thanks for the great read. This is just what I was
| looking for.
| qznc wrote:
| There is an inverse question: If you have a cash windfall you
| want to invest, all-at-once or split it up?
|
| I have seen a similar analysis (but can't find it right now).
| Even if you invest at the all time highs, so the market drops
| right after you buy, you still win with the all-at-once
| strategy.
|
| The general lesson: Get your money into the market as soon as
| possible. Maybe more memorable: Time in the market beats
| timing the market.
| layer8 wrote:
| Investing in the stock market has the general assumption
| that, a priori, stocks are more likely to rise than to fall
| at any given point in time. Under that assumption, the all-
| at-once strategy has the better expected outcome. Of
| course, you can be unlucky and end up buying the all-time-
| high just before a crash. You can avoid that risk by
| splitting up the investment, at the cost of lowering the
| overall expected value. So it's more about how you feel
| about that risk, and whether you feel avoiding it is worth
| having a somewhat lower expected return.
| doopy1 wrote:
| Peter Lynch had a pretty interesting talk where he said
| that on average the stock market has a sizable dip every
| few 2-3 years, meaning it's lower at the end of that year
| than it was at the beginning. Generally though, it goes
| up over time.
| layer8 wrote:
| Right, up to now the maximum interval where the market
| _didn't_ go up to a new all-time-high is about 15 years,
| but so far it always ended up reaching a new all-time-
| high in the end.
| mberning wrote:
| Buy all the time. Only reliable way to win.
| slaw wrote:
| Past performance is not indicative of future results. Japan
| stock market JP225 didn't recover yet from 1990 crash.
| astrange wrote:
| Do Japanese people have to buy Japanese stocks just
| because it's the same country?
| SapporoChris wrote:
| No, Japanese can invest in other markets using
| international brokers. I don't know details on the fees
| and currency conversions. Investing in a foreign exchange
| is always at a slight disadvantage because of currency
| conversions and fees.
|
| For a US centric view: https://www.investopedia.com/artic
| les/investing/032615/how-t...
| id wrote:
| US stocks are traded on foreign exchanges. Even if you
| insist on buying on a US exchange, the currency
| conversion is not very expensive. If you're a buy and
| hold investor, it won't matter at all.
| tasuki wrote:
| And yet you often see US people recommending to buy US
| stocks. There are risks and benefits to buying both
| domestic and international stocks.
| rubidium wrote:
| Yea so buy land if you're so paranoid about becoming
| Japan. It's an island nation with a very unique history.
| Not a great counterpoint to current US and global
| economics.
| scrivna wrote:
| The UK is at more or less the same price as it was in
| 2000. France same as 2008. Meanwhile SPY is up 2.75x in
| that period. The US seems to be the anomaly. Value
| doesn't always go higher. Maybe the USA is special, maybe
| not.
| digitalnatives wrote:
| lordnacho wrote:
| Is that with dividends? Watch out because the German DAX
| actually does have reinvestment in it iirc. Most of the
| others don't.
| qznc wrote:
| An index never includes dividends. An index fond might
| (accumulating) or might not (distributing).
| lordnacho wrote:
| https://personal-financial.com/2020/11/27/the-dax-and-
| its-di...
| qznc wrote:
| Thanks. Learned something today.
| weberer wrote:
| I'd wager most of that difference is due to the USA's
| tech industry growth.
| nly wrote:
| The UK FTSE all share total return index, which accounts
| for reinvested dividends, is at 8430 today and was at
| 2870 in May 2000. That's an annualized return of exactly
| 5%/year
| rwmj wrote:
| Buying land in Japan isn't a great idea (except to live
| on it). You have to pay a hefty annual tax on it. Land
| even with property on it is so often abandoned they have
| a word for it and many marketplaces where you can buy
| abandoned land from the tax office.
| argomo wrote:
| As the saying goes, there are four types of economies:
| developed, undeveloped, Argentina, and Japan.
| hanniabu wrote:
| Why Argentina?
| astrange wrote:
| Argentina's economy is a series of endless crises from
| the government choosing the worst possible ways to
| intervene in it at every opportunity. Like a reverse
| South Korea.
| christophilus wrote:
| If you invested only in the Nikkei on the way up and on
| the way down, you still came out fine. The only person
| who didn't is the person who put all of their savings in
| at the very top and never bought again.
| newshorts wrote:
| Don't worry friend, it's about the savings rate, not the
| savings return.
|
| Just keep putting a little in here and there. Don't put in
| anything you can't afford to lose and it'll turn out alright
| qeternity wrote:
| > Don't worry friend, it's about the savings rate, not the
| savings return.
|
| Yikes, please reconsider your advocacy of this.
|
| As Einstein said: "Compound interest is the eighth wonder of
| the world."
| nly wrote:
| If person A invests monthly and achieves a 7%/yr return, how
| much more does person B have to invest every month to get the
| same pot after 30 years?
|
| 50% more
| chii wrote:
| you have to take risk to earn returns. Sometimes that risk
| actually eventuates, and you have to either keep going, or take
| the loss.
|
| That's why you must know the time horizon for your investments
| - if you know you need the money "soon", you cannot actually
| invest in the stock market.
| bequanna wrote:
| You have to take _calculated_ risks to earn returns. FOMO at
| your own risk.
|
| If you are 30 and don't need the money you put in SPY until
| 70, don't sweat it. You'll be fine.
|
| But let's not pretend blindly taking risk is OK because some
| return is expected. Time horizon and some relative valuation
| context is important.
|
| Buying into the stock or housing market at extreme historic
| levels of valuations like those in late 2021 and now GREATLY
| reduces your expected return over 5/10 years.
|
| If you don't have the (extremely) long view, expect to lose
| some sleep watching your net worth over the next couple
| years.
| [deleted]
| srean wrote:
| > But let's not pretend blindly taking risk is OK because
| some return is expected.
|
| Exactly. I have seen this idea float around that just
| because they have taken a risky position they will be able
| get better rewards. Risk may be necessary for above market
| rate returns, but it is not sufficient. A proportionate
| amount of those taking the risk will be cleaned off the
| amount that was risked. Why do you think its not going to
| be you ! Of course when you use time effectively or use
| other hedges one can reduce the exposure.
| thathndude wrote:
| This is a large part of why I'm feeling so negative about this
| draw down. In the last 5ish years I paid off my student loans
| and started banking real cash. I put it in the market and now
| am down tremendously. Crap timing.
| tracyholmes355 wrote:
| lvl102 wrote:
| Random thoughts:
|
| (1) People were deeply and extremely risk-averse coming out of
| the 2008 crisis. And now we are _starting_ to see the other end
| of that spectrum. However, we are still far from the
| heights/throes of the dot-com boom. Those were some insane times
| when nothing even mattered.
|
| (2) But keep in mind, the main driver of global economy is still
| increasing standard of living and middle class. And that's far
| from over. We are still roughly 50% into land grab.
|
| (3) If current pace of inflation persists, then you want to be in
| equities chasing cash flow in enterprises with pricing power.
| What you don't want is to stay in cash. It appears
| counterintuitive because of all the things we experienced in 2000
| and 2008. A vast majority of investors still base investment
| decisions with those two crises in mind. It's a significant
| handicap.
| ProjectArcturis wrote:
| I think the NFT bubble and other crypto stuff is at least as
| crazy as anything from the dot-com bubble.
| unicornmama wrote:
| Crazy. But so far has remained isolated from the stock and
| bond markets.
| TheBigSalad wrote:
| Sure but if it's all crashes it will have little effect on
| the economy. In fact, people expect it to crash and will sit
| through virtually any dump based on the volatile history.
| VHRanger wrote:
| Yes, extremely risk averse when you see behaviors like
| GME/crypto maniacs, tech stocks at price to earnings of 50-250
| martincmartin wrote:
| _If current pace of inflation persists, then you want to be in
| equities chasing cash flow in enterprises with pricing power.
| What you don't want is to stay in cash._
|
| And if inflation ebbs, you want the opposite.
|
| Both outcomes are possible. So it's best to hold a well
| diversified portfolio and not try to time the market. Just
| rebalance once a year.
| MomoXenosaga wrote:
| The story of my country has been one of decadence and degeneracy
| since the 1960s but the 90s were peak Sodom and Gomorrah. I'm
| glad I experienced it.
| tunesmith wrote:
| Another thing to look at is the CAPE ratio. Even now, it's still
| above 30. We've gone from around a 37 to a 32. Mean/median is in
| the 16-17 range. DotCom crash in 1999 topped out at around 44.
|
| Still a lot of room to fall.
| onlyrealcuzzo wrote:
| The historic average for interest rates is considerably higher
| than it is right now.
|
| Considering the amount of public debt outstanding - it's
| extremely unlikely we're returning to those levels of interest
| rates long-term (short-term I suppose anything can happen).
|
| Interest rates have a huge effect on P/E. I wouldn't expect
| CAPE to match historic trends if interest rates don't.
| dannyw wrote:
| 1. Nominal interest rates are pretty normal right now. 3.3%
| on a 10y, that's not bad in history.
|
| 2. The government's debt is fixed. Only new deficit is on
| higher rates.
|
| 3. Completely agree, my thesis is that interest rates are
| going to continue to go up (IMHO 4%, 4.5%)
| runeks wrote:
| > 2. The government's debt is fixed. Only new deficit is on
| higher rates.
|
| This is not that relevant because the government is
| completely dependent on borrowing new money to pay of old
| debt.
| baq wrote:
| US government can't afford 4%. Rates will rise until
| something breaks, but 4% will be transitory if it gets
| there at all. My bet is things break sooner than that.
| anonporridge wrote:
| Also known as the Shiller PE ratio,
| https://www.multpl.com/shiller-pe
| known wrote:
| a_c wrote:
| Can some of you share what are the ways to hedge against tumbling
| NASDAQ? The article is assuming we swing only a single bat. To me
| it seems spreading your investment into fixed dollar amount over
| a period of time is a sensible strategy.
| baq wrote:
| In this environment? Nothing, just get out. Gold, short term
| bonds and dollars (UUP).
| vitus wrote:
| > Buying the dip isn't some secret strategy. Time is the secret
| strategy.
|
| Ah yes, the good ol' "time in market beats timing the market".
|
| Of course, that assumes that markets trend upwards in the (very)
| long term. Which... if past performance is any indicator of
| future performance [0], the past 100 years provide a fairly
| compelling narrative.
|
| [0] Another mantra: it's not.
| chii wrote:
| > [0] Another mantra: it's not.
|
| it's the best indicator so far.
| GolfPopper wrote:
| It's also the same reasoning used by a Thanksgiving Turkey.
|
| The farmer has _always_ come in and given the turkey food, so
| logically he will continue to do so. And it is true. Until it
| isn 't. But the cost of that one day when it isn't is very
| high for the turkey.
| jrumbut wrote:
| What's the turkey supposed to do? It can either starve
| itself now or die with a full stomach later.
| epicureanideal wrote:
| There are some limitations to the metaphor but I think it
| illustrates the point.
| chii wrote:
| it doesnt illustrate anything, because the turkey
| situation assumes that there's a higher power controlling
| the stock market.
| epicureanideal wrote:
| I don't think that interpretation of the metaphor is
| intended. Just that something good can happen many times
| and be followed unexpectedly and suddenly by something
| bad.
| tsimionescu wrote:
| Given that global warming will cause the global economy to
| contract one way or another within the next 100 years (either
| we willingly contract to soften the blow, or keep going and
| producing more greenhouse gases until a massive crash), I
| really don't think this is the right time to think in these
| terms.
| chii wrote:
| Why can't technological advancement stave off climate
| change damage? Why cant renewables replace fossil fuels,
| and continue human expansion? Why can't space exploration
| and settlement be where the future growth occurs?
| tsimionescu wrote:
| > Why can't technological advancement stave off climate
| change damage?
|
| What technology in particular could stop the oceans from
| rising and swallowing much of today's southern
| coastlines, and what technology in particular could
| reduce wet-bulb temperatures across most of the world's
| south below 50C, the point where healthy adult humans
| with access to infinite water will die of heat stroke?
|
| > Why cant renewables replace fossil fuels, and continue
| human expansion?
|
| Because renewables are not reliable, rely on rare metals,
| and can't replace the huge amount of energy produced by
| oil. Someone was making a calculation the other day that
| replacing the entire fleet of vehicles in the USA with
| electrical cars would require doubling the electricity
| production of the states. Do you really think that's
| possible in 50 years, while also replacing all gas and
| coal plants with renewables?
|
| Also, there are huge areas of industry that use oil or
| natural gas for many reasons other than energy -
| plastics, synthesizing NH3 for fertilizer and other uses.
|
| > Why can't space exploration and settlement be where the
| future growth occurs?
|
| Because we are nowhere near having the technological
| advancement needed for space settlement that would do
| anything other than cost resources. Perhaps there is some
| small chance of having a research base on Mars or the
| Moon within the next 50 years, akin to the ISS, but ideas
| of "colonizing Mars" are beyond sci-fi at this point. We
| couldn't even colonize Antarctica with current
| technology.
|
| Besides, there's nothing on Mars that we don't have much
| more easily accessible on Earth - no rare metals, no crop
| fields, no spices, no native workers we could import as
| slaves, no cotton or anything that could even conceivably
| resemble the existing reasons for colonization. And lest
| you think anything else, there is nothing we can
| conceivably do to the Earth that would make it anywhere
| near as inhospitable as Mars. Even the worse possible
| consequences of a Nuclear War would not leave Earth as
| radioactive, poisonous, cold, or otherwise inhospitable
| as Mars is today.
| baq wrote:
| No technology can work around limits given by
| thermodynamics.
| chii wrote:
| We are far from the limits of thermodynamics. You'd have
| to wait till nearer to the heat death of the universe for
| that to have an effect on the economy.
| baq wrote:
| Define far. Gasoline engines eg are within 2x of Carnot
| limit. Not much room for improvement.
| chii wrote:
| > Not much room for improvement.
|
| Only for gasoline engines. And the efficiency limit isn't
| the limit of possible sources of energy for work. Future
| engines could be electric, and the power source could be
| fusion.
| baq wrote:
| fusion takes is to a straight line to exceeding capacity
| of the planet to radiate waste heat fast enough to keep
| it habitable. free energy is self destruction. still
| better than fossil fuels, though.
|
| electric engines require batteries and batteries are
| super duper enviromentally expensive to make at scales
| needed right now, let alone the 10y forward predictions.
| milkytron wrote:
| Maybe those things can happen. But it's a race against
| time and we don't seem to be making progress on those
| fronts as much as we may need to.
| chii wrote:
| 10 years ago, no one would predict that the cost of solar
| would drop by 80%-90%. There's still a lot of untapped
| potential in other forms of renewables too. The current
| bottleneck of batteries might be solved, i'm sure, in the
| near future.
|
| There's a lot of pessimism among the media. I, for one,
| am hopeful.
| auggierose wrote:
| Because there are still too many people using Windows.
| bushbaba wrote:
| Wouldn't global warming increase asset price in many areas.
|
| Food will be more expensive. Housing more expensive.
|
| Green Energy is more expensive. Just look at Germany and
| California electrical rates.
|
| I don't see how it'll reduce prices
| qznc wrote:
| Green energy itself is cheap. What makes energy expensive
| in Germany is that we need to fall back on natural gas
| energy so often.
| tsimionescu wrote:
| Global warming is extremely likely to lead to large areas
| that are well populated today becoming uninhabitable in
| the next 100 years - either through oceans rising or
| through extreme heat. This will likely lead to huge
| migrant crises - not hundreds of thousands, but tens of
| millions leaving places like Bangladesh. This in turn is
| very likely to lead to wars and other forms of extreme
| events. A world at war is very likely to stop growing
| economically, and we may not be able to require from a
| nuclear war the way we did after WW2.
| baq wrote:
| Another way to look at it is that fossil fuels don't have
| externalities priced in correctly. Nuclear is a safety
| and regulatory mess.
| PeterisP wrote:
| I believe the latest IPCC report on climate change expected
| outcome even for the worst scenario had a noticeable
| _decrease in the rate of growth_ of the global economy -
| not a contraction, just slower growth. We do not seem to be
| on track for a global contraction of economy, not even in
| the face of climate change.
|
| And economic growth is already (though not that recently)
| somewhat decoupled from growth in greenhouse gas emission,
| so any actions taken to reduce climate consequences do not
| have to be at the cost of stopping global growth, much less
| intentionally contracting global economy; and in fact the
| only actions likely to be taken in practice are those which
| don't stop economic growth - the general population,
| especially those in poorer countries (even those directly
| harmed by climate change) will not accept that cost.
| tsimionescu wrote:
| > I believe the latest IPCC report on climate change
| expected outcome even for the worst scenario had a
| noticeable decrease in the rate of growth of the global
| economy - not a contraction, just slower growth. We do
| not seem to be on track for a global contraction of
| economy, not even in the face of climate change.
|
| The reports do talk about economic contraction after the
| year 2050 if we don't reach the 2 C temperature goals.
| They also don't model the likely resource wars that will
| happen if large parts of Bangladesh, India, Pakistan,
| Mexico etc will become uninhabitable by the end of the
| century, due to rising temperatures and water levels.
|
| > And economic growth is already (though not that
| recently) somewhat decoupled from growth in greenhouse
| gas emission, so any actions taken to reduce climate
| consequences do not have to be at the cost of stopping
| global growth, much less intentionally contracting global
| economy
|
| The IPCC reports says that GHG emissions increase is
| mostly proportional to GDP increase throughout all
| regions, with a significant, though smaller, contribution
| from population increase. It's also notable that GHG
| emissions continue to increase - we are not anywhere near
| a plan for net 0, and nothing suggests so far that we are
| even likely to start reducing GHG emissions, globally or
| even in any particular region.
| chewz wrote:
| > Ah yes, the good ol' "time in market beats timing the market"
|
| > Of course, that assumes that markets trend upwards
|
| Market will trend upward only with positive demographics...
| Next 100 years might be rather disapointing for passive
| investing and "time in the market" types.
| hn_throwaway_99 wrote:
| > the past 100 years provide a fairly compelling narrative.
|
| In the US. The Nikkei is down over 25% from its peak _32 years
| ago_.
| [deleted]
| ivanche wrote:
| And before the peak it was the greatest asset bubble of all
| time! "A $100,000 investment in Japanese large cap stocks in
| 1970 would have turned into $5.7 million by 1989." [0]
|
| [0] https://awealthofcommonsense.com/2016/09/the-greatest-
| bubble...
| Gatsky wrote:
| Key point. Of course it is possible to pay too much for
| something and never make any money.
| FredPret wrote:
| Japan and the US got into a trade war; it's a special
| situation for them. Absent getting a bloody nose from an
| economic giant, they would have done well
| hn_throwaway_99 wrote:
| > Absent getting a bloody nose from an economic giant, they
| would have done well
|
| I don't know any economic historian with expertise in Japan
| who believes that.
|
| Their bubble basically puts all other bubbles to shame. The
| land under the Imperial Palace _really was_ worth more than
| all the real estate in California at the peak. Japan was
| destined to have an epic crash of equal proportions to the
| size of their bubble, any US actions notwithstanding.
| icelancer wrote:
| Yep. No one in the 1970s and early 1980s would believe that
| Japan would be in the position they're in now.
|
| Sounds a lot like people examining only post-WW2 markets in
| the United States during a period of historic national
| expansion and growth and thinking they'll continue on
| average.
|
| The next few decades have very different social and economic
| considerations of the past few decades, so...
| manquer wrote:
| Why though ? Their 70-80s boom was always going to be short
| lived, geographically they are resource poor as well.
|
| The demographics of Japan weren't a sudden change or
| surprise their population is always been heading in this
| direction , coupled with their strong anti immigration
| culture and barriers to entry. It was bound to happen
| sooner or later .
|
| It is extremely unlikely any one company /market can keep
| ahead of every single tech /product evolution cycle and
| always be the best .
|
| While it is hard to guess correctly when that will happen
| as it did in 90s , but it will always inevitable sooner or
| later .
|
| ----
|
| The growth of U.S. economy post ww2 and importantly post
| Bretton woods have been phenomenal is very true, however
| were already a powerhouse , the preceding 300 hundred years
| have also been explosive growth catching one wave after
| after .
|
| Largely thanks to immigration of some form or other .
|
| Modern America has always been built on the backs and hard-
| work of immigration. First European settlers fleeing
| stagnant economies, actual slavery for a while, economic
| slavery? of poor driven by famine or lack of opportunity
| later like the Irish wave or Chinese etc, then those
| affected by various wars, and most recently top talent from
| most countries in the world .
|
| It has always been exploitative even now it is , most
| immigrants legal or illegal are paid less than their peers
| for example
|
| Illegal immigration is more well known on how they are paid
| less, even In legal work visas like say H1B changing
| companies is hard because out of work even for a week you
| to leave the country immediately, changing employers also
| affects the Permanent residency qualifications, so people
| on those visas move jobs less, on average get 10-20% less
| and have lesser negotiating power, companies know this and
| use those visas as cost saving technique.
|
| Despite all the problems around immigration, U.S. still
| remains the country most open to immigration , few
| countries come close to the volume of immigration legal and
| illegal U.S. supports, and path to citizenship .
|
| Japan is other end of the spectrum in terms of immigration,
| which for the economy is a big problem because of such
| aging population.
| trashtester wrote:
| Yet, when including dividends (reinvested), the annualized
| return from 1990 to 2021 was 1.765%, (in Yen, adjusted for
| Japanese CPI).
|
| https://dqydj.com/nikkei-return-calculator/
| anonporridge wrote:
| If the measuring stick you use is getting shorter every year by
| design (monetary expansion/inflation) then you can be quite
| certain that the market will trend upwards for as long as you
| use that unit of measure.
| vitus wrote:
| S&P 500 growth has historically outpaced inflation by 6-7%
| annualized over the ~65 years of its existence. That cannot
| be explained solely due to central bank policy and/or
| inflation. Naive extrapolation would posit that keeping your
| money in this index would continue to stay far ahead of
| inflation given sufficiently long horizons [0].
|
| If your goal is simply to keep up with inflation, then buy I
| bonds.
|
| [0] The aphorism that comes to mind here is that "the markets
| can stay irrational longer than you can stay solvent".
| depingus wrote:
| I bonds are great right now. But you can only purchase
| $10,000 per year ($15,000 if you finagle your taxes right).
| I wish my IRA had an I bonds-like product I could invest
| in.
| Kon-Peki wrote:
| > Ah yes, the good ol' "time in market beats timing the
| market".
|
| In the context of this article, buying the dip is a form of
| timing the market.
|
| Consider instead the effect of time in market via the standard
| 401k model: You buy $250 of QQQ at the opening price on the 5th
| trading day of _every single month_ , and you start in April of
| 2000 - the first month after that QQQ high mentioned in the
| article.
|
| By January of 2004, you have a positive total return (which
| sucks). Your total return stays at less than ~20% all the way
| until 2006 (which sucks). You would get hit hard again in 2008,
| but by mid-2009 you are back to being positive. You hit a 100%
| return in 2013 (that took a really long time!). The next
| doubling is 2017 and the next is in 2020. In November 2021,you
| are sitting at very close to a 600% total return, but as of
| right now it is back down to ~450%.
|
| Your $250 per month totals ~$66k and has a present value of
| ~$360k. That really isn't so bad for being the worst case
| scenario the author could find ;)
|
| PS - this does not consider dividend reinvestment, but QQQ
| doesn't pay much in the way of dividends.
| kzrdude wrote:
| Past 100 years also tell us that there will be world wars,
| empires will go bust and some nations/people will be uprooted
| and have to migrate. That's a lot of uncertainty to bear, of
| course, and history does not predict what happens in the
| future. It just tells us something will hit us and we probably
| won't see it coming (paraphrasing Dan Carlin).
| StanislavPetrov wrote:
| > Buying the dip isn't some secret strategy. Time is the secret
| strategy.
|
| There is a Dutch guy out there with some rotted tulips who begs
| to differ.
| chii wrote:
| when they say buy the dip, they refer to buying the stock
| market index (like S&P), not individual stocks like a tulip.
| xeromal wrote:
| I think their analogy is that your investment in the
| Prussian/Holy Roman Empire/Carthage stock market can still
| end up ruined regardless of time.
| chii wrote:
| And yes, that's true. Geographic concentration is a real
| risk.
|
| if you purchased a world wide index, you will not suffer
| from such risk.
| xeromal wrote:
| Yeah, that definitely is the best way barring the
| existence of aliens. :)
| grey-area wrote:
| World indexes are 50% American stocks, they are not as
| diversified as you think. They're also vulnerable to mass
| panic during a crash.
| pertymcpert wrote:
| 50% American sounds good to me though? And of course a
| global financial crisis is expected to hit global stocks.
| That's completely fine.
| barefeg wrote:
| Dinosaurs beg to differ
| adam_arthur wrote:
| If interest rates continue to increase, the market is in for a
| very rough time.
|
| COST is about 40 PE right now which implies 2.5% trailing yield.
| You can get 3.1% on a 10y treasury risk free right now.
|
| Of course equities have growth potential, but also risk,
| typically the spread between risk free rate and equity yields is
| much higher.
|
| Plenty of 30-40 PE companies at index level with close to 0
| growth. Companies like NET still at 30x sales.
|
| If inflation persists and the 10y runs to even 3.5-4%, could be
| looking at close to 50% downside. However there are signs that
| the consumer is likely to collapse within the next 6 months,
| which should lead to disinflation, but also likely an earnings
| recession
| mercy_dude wrote:
| > You can get 3.1% on a 10y treasury risk free right now
|
| I am a noob of how yields work and the math behind the 2.5% . I
| don't buy treasury directly but through VUSTX and VUTY. I am
| actually DOWN, not up. At least that's what my Schwab portal
| shows. I have COST on the other hand, bought prepandemic. I am
| up at least 20%.
| dannyw wrote:
| The yield is for new buyers. Your bonds, bought when yield
| are lower, is worth less.
| mercy_dude wrote:
| OK, so it could happen if I buy now it would be worth even
| less due to yields go higher which seems to be the trend.
| adam_arthur wrote:
| The market value of a bond will decrease, but the yield
| at purchase is locked in. But bond funds are different
| because they are constantly rolling money into new bonds,
| rather than just buying and holding a given set of bonds.
| srean wrote:
| That depends on whether you want to sell your bonds or
| hold on to them and enjoy the coupon payments. If its the
| latter the falling price of the bond is not relevant to
| you. You can still get hurt by inflation, default,
| changes in tax laws etc. If you have the spare cash, you
| could buy the older bond issues on the dips induced by
| rising interest rates. That's a pretty decent strategy
| because these old bonds are those that are going to
| mature sooner, lower the time left, less sensitive are
| their resale value to further interest rate hikes. This
| leaves you with the option of selling them without much
| financial harm in case you are in a situation that you
| have to.
| throwaway2037 wrote:
| Tip: Don't buy bond funds (mutual and ETFs). Buy the bonds
| directly, then hold to maturity. This will give you the
| yield-to-maturity that you are seeking.
| adam_arthur wrote:
| The math is a 100 PE implies a 1% yield. The company could
| distribute 1% of its value each year to the shareholders in
| perpetuity. Many started using FCF and PS ratios in recent
| years, but often this hides the actual profitability of the
| business. For example, FCF measures typically do not add back
| equity compensation.. which is obviously highly misleading
| for tech companies that issue a lot of stock
|
| If a 100 PE company doubles earnings, they will yield 1%,
| then 2% etc. Of course if they don't pay dividends then this
| yield is "theoretical", but its the fundamental basis of how
| to price equities.
|
| Coke (KO) which is a fairly stagnant company is at a 30 PE,
| while GOOG is at 20. It seems to me that most fund managers
| these days haven't lived in a time where valuation matters...
| everything is vastly mispriced for the most part. There are
| pockets of fair value though, but buying a broad index is a
| pretty bad idea right now, IMO.
|
| In terms of bonds, they have a market value, but the yield is
| guaranteed (assuming the issuer doesn't default). If you buy
| a 1yr bond yielding 3%, and the issuer doesn't default, you
| will get a 3% return by the end of the next year. It doesn't
| work the same for bond funds, but this is how it works for
| individual bonds
| MuffinFlavored wrote:
| you wouldn't buy an S&P509 ETF until at least how much of a
| pullback, 30%?
| nly wrote:
| Companies like COST can increase the prices of their goods and
| services to maintain margin during inflationary periods (where
| their own costs go up).
|
| With your government bond you're at the mercy of the Fed
| adam_arthur wrote:
| They can also lose earnings if the consumer weakens, which
| looks pretty likely to me, given consumer credit data.
|
| https://fred.stlouisfed.org/series/CCLACBW027SBOG
| icelancer wrote:
| >> Plenty of 30-40 PE companies at index level with close to 0
| growth. Companies like NET still at 30x sales.
|
| This is the scariest thing to me that very few are discussing.
| Corporate debt is either toxic or nearing it based on the
| implications of your statement (which I believe to be
| accurate).
| 300bps wrote:
| The Federal Reserve has taken on $9 trillion onto their balance
| sheet to flood the economy with money.
|
| https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
|
| They've lowered short-term interest rates to effectively 0 and
| kept them there for quite a number of years.
|
| Federal and State governments have flooded the economy with
| stimulus.
|
| There is so much money that has been injected into the economy
| that it is no wonder that every asset has gone up so much. It is
| no wonder we have such high inflation. The trick now will be to
| stop it before we have a wage-price spiral where employees demand
| higher wages to compensate for higher prices which leads to even
| higher prices.
|
| Expect the Fed now to be raising interest rates, taking $47.5
| billion out of the economy per month starting in June and then
| $95 billion per month starting in September.
|
| https://www.federalreserve.gov/newsevents/pressreleases/mone...
|
| I think what's coming is going to look at lot more like the
| dotcom bust than it will 2008. So I think the article's caution
| on buying dips this time around is warranted.
| kmonsen wrote:
| I honestly think that's not the main reason we have inflation
| now. Since every country in the world is seeing similar
| inflation I would think it's supply side and not something any
| central bank can fight.
|
| I've always been Keynesian, but it faces the same problem as
| everything else, you need to be able to predict the future to
| do it well.
| Tiktaalik wrote:
| Every other country did what the Fed did for the same reason:
| We've experienced (and are still experiencing) a once a
| century global pandemic. The measures to limit pandemic
| deaths would have completely destroyed the economy had the
| governments and their associated banks not taken the measures
| they took to support people during this difficult time.
|
| It's not the Feds fault, it's the pandemic.
| benjaminwootton wrote:
| There is still considerable debate if those measures were
| actually effective. Did closing down entire industries,
| closing borders, making 20 year olds WFH etc really move
| the needle on Covid deaths in retrospect?
|
| And even if it did, was it ethical, fair and is it a
| reasonable price to damage the economy and life prospects
| of hundreds of millions of young people who weren't at
| statistical risk?
|
| Its important because it means the current and future mess
| is down to bad science and politics and not an act of god.
| icelancer wrote:
| > There is still considerable debate if those measures
| were actually effective.
|
| Not really. I agree with the thrust of your post but
| there is definitely no considerable debate being had on
| this topic, because Near-Zero COVID is the only
| acceptable policy, and saving lives at any cost along
| with it.
| jokethrowaway wrote:
| If you're the Chinese Communist party, that's it.
|
| I'm not willing to ruin my life on the chance some 90
| years old may catch the flu and die. If they're worried
| about COVID they can isolate.
| icelancer wrote:
| I happen to agree with you. Unfortunately, that debate
| isn't allowed to happen in the US. Or most modern
| countries.
| kmonsen wrote:
| Not sure what you mean here. In the U.S. there has been
| considerable debate, vaccines are free, safe and
| available same day. Finally we have given up on almost
| all safety measures as long as the healthcare system can
| handle the load.
|
| Can you be specific in the change you want or which
| debate isn't allowed?
| Tiktaalik wrote:
| The measures were certainly very effective under the
| metric of limiting deaths.
|
| British Columbia and New Zealand have about the same
| population, both are rich jurisdictions. BC was
| relatively open (compared to other Canadian provinces)
| while NZ was more locked down. BC has dramatically more
| deaths than NZ.
|
| And then if you compare BC, which was more locked down
| than various US states, BC had less deaths than them.
|
| It seems pretty clear to me that the "lock downs" worked.
|
| (putting "lockdowns" in scare quotes here because really
| the only thing BCians were prevented from doing was going
| to restaurants and bars. You could still go to the
| grocery store and home depot etc with a mask on)
|
| If you have some other metric well I dunno, but I don't
| think there's any better metric than deaths avoided.
| [deleted]
| jokethrowaway wrote:
| Thanks to you authoritarians deciding for us, we will never
| know for sure. Comparing countries with similar densities
| (like Sweden and Finland) and different COVID policies
| seems to point out to a resounding no. Most likely we would
| have had a few more mostly elderly deaths, we won't have
| ruined the mental health of a generation and we won't have
| enriched big pharma even more.
|
| Even with the pandemic going on it would have been better
| to suffer during the pandemic than cause a recession. The
| same people who were hit by lockdowns would be hit 10 times
| worse by a recession.
| Tiktaalik wrote:
| What recession?
|
| Employment numbers in my jurisdiction are back to normal
| and thanks to the sort of government intervention we're
| talking about very few companies went out of business.
| Where I live everything is pretty much "back to normal."
|
| The government successfully shut down big parts of the
| economy, kept people alive, and avoided companies going
| out of business. They did it.
|
| If there is any recession, and it remains to be seen if
| there will be, it won't be because of local factors, but
| rather because goings on in China and supply issues
| stemming from our over-reliance on their manufacturing.
| 300bps wrote:
| Fed balance sheet is about $9 trillion.
|
| This article gives details on $5 trillion in government
| stimulus.
|
| https://www.nytimes.com/interactive/2022/03/11/us/how-
| covid-...
|
| To put those numbers in perspective, the market cap of the
| entire S&P 500 is about $40 trillion.
|
| I hear what you're saying about supply-side inflation but you
| don't think flooding the economy with so much unearned money
| might be driving up demand a bit?
|
| A beach town near me, I paid $4,000 for a week to stay there
| two years ago. This year, an equivalent house is $15,000 per
| week. So now I'm driving six hours away to get a house for
| $10,000 per week.
|
| When people make $20,000 per month in stock
| market/cryptocurrency gains, it starts driving up demand for
| everything dramatically.
| kmonsen wrote:
| Oh I'm not saying the feed is not causing inflation at all.
| I think the primary driver is supply side, but clearly
| there is more going on.
|
| And that I'm not so sure anymore if federal banks are net
| positive.
| leehuffman wrote:
| Love your relatively simple (that's a compliment - I'm sure
| you can go deeper) yet 100% accurate (IMO) take on this
| topic.
|
| Just want to mention that we shouldn't forget that the
| fed's balance sheet ballooning started with the 2008
| crisis. If I recall correctly, they had _just_ started to
| lightly unload all the things they gobbled up like fiends
| during that period before COVID smacked. Of course they
| hard turned 180 degrees and got on the throttle again,
| going in to stabilize the usual markets along with new
| additions people never would have anticipated they'd touch,
| ever.
|
| I guess my point is this has been very very long running
| and is another data point that says (to me) it's not just a
| supply side issue that's driving what we're seeing.
| refurb wrote:
| They blamed inflation in the 1970's on supply side issues
| as well. Sure, the oil embargo contributed to price
| increases, but looking back, it was pretty clear it was fed
| monetary policy that drove most of it. And monetary policy
| by Volker that fixed it.
|
| No different today. Massively expand the money supply and
| you (eventually) get inflation. Add in a few supply issues
| and you amplify the problem. But I agree with you that
| without the massive monetary expansion, the supply issues
| would be minor blips.
| kmonsen wrote:
| That's the problem, in bad times you pour money into the
| market either directly or with interest rates. Then I'm
| good times the opposite is supposed to happen. But this
| time the good times never arrived and now we are trying
| to fix it in the middle of a war, pandemic and massive
| supply shock, including for energy. It's too easy to get
| it wrong and make the problem bigger.
| refurb wrote:
| The situation we're in now is pretty close to what some
| people were warning about back in 2008 when the feds
| decided on their massive monetary expansion.
|
| By the time inflation starts to heat up (it doesn't
| happen right away), there will be immense pressure to
| delay any monetary contraction for fear of dampening
| economic growth. Then Covid hit and the economy was
| goosed with another massive injection while everyone
| worried about a recession.
|
| Then once inflation starts it's too damn late to put the
| genie back in the bottle so you just spend the next 5-10
| years trying to get it under control while not entirely
| tanking the economy.
| icelancer wrote:
| >> Then I'm good times the opposite is supposed to
| happen. But this time the good times never arrived and
| now we are trying to fix it in the middle of a war,
| pandemic and massive supply shock, including for energy.
| It's too easy to get it wrong and make the problem
| bigger.
|
| Good times happened recently, and they've happened in the
| past. But no POTUS ever wants rates to go up and money to
| be tightened under their watch, no matter what the
| situation is.
|
| We're doomed to a bust/boom cycle, because it's all we
| can tolerate. We can't tolerate minor pain or minor
| corrections if they're preventative. We can only tolerate
| unavoidable catastrophe.
| landemva wrote:
| >>> the good times never arrived
|
| First two years of Trump were economically pretty good.
| Low unemployment - particularly for minorities. The Fed
| was raising rates!
| kmonsen wrote:
| Mostly we spent it on tax cuts for the rich instead. You
| don't cut taxes in good times, that more than offset the
| minor rate hikes.
| landemva wrote:
| Spent what? I don't see economic growth as a reason to
| expand government spending, though many disagree.
|
| The economy was good, unemployment was low, rates were
| rising.
|
| USA was still spending it's treasure protecting
| Afghanistan poppy fields.
| kmonsen wrote:
| Right, so the theory is that in good times you put on the
| brakes so there is something in the tank you can spend
| during bad times. Spending can take many forms, but the
| traditional ones are lower interest rates and tax cuts.
|
| The issue is that we lowered taxes significantly in the
| middle of good times. It's like feeding ice cream to kids
| already on a sugar high.
|
| There is no room to lower taxes anymore as we are already
| running a significant deficit, and there is a recession
| coming where we are going to need to juice the economy.
| kortilla wrote:
| This is simplistic thinking in line with the "what if the
| government budget was a household budget" memes that
| float around.
|
| > theory is that in good times you put on the brakes so
| there is something in the tank you can spend during bad
| times
|
| The government is not a squirrel with acorns. It can
| spend during both good and bad times, as the past 30+
| years have shown. The only backpressure is inflation.
| Nobody seems to actually care about debt, despite the
| hand wringing.
|
| > There is no room to lower taxes anymore as we are
| already running a significant deficit, and there is a
| recession coming where we are going to need to juice the
| economy.
|
| Yes there is, they just adjust the tax rates down
| further. There is no floor other than zero.
| kmonsen wrote:
| I'm not talking about rubbing the country like a
| household, still there are considerable reasons to do
| some accounting.
|
| 1. Even the most spend willing economists agree there is
| some limit to debt that is sustainable. It's just way
| higher than what most are comfortable with.
|
| 2. There is also political/popular will. If this is not
| there it doesn't matter what makes economical sense. In
| the U.S. we are firmly against that.
|
| 3. About that inflation ...
| landemva wrote:
| Biden raised taxes.
|
| Decades of deficit spending demonstrate the feds can
| print adequate amounts of fiat currency, and issue debt,
| to continue to bail out the banksters, bail out foreign
| cruise line owners, and attempt to police the world and
| police outer space. USA could drop the federal personal
| income tax and continue on with the charade.
| galaxyLogic wrote:
| Tax-cuts to the rich meant they had more money to invest
| in stock-market. And the tax-cuts to the corporations
| meant they made more profits which made them a more
| attractive target for stock-investors. Both effects meant
| the stock-market went higher and higher. And so here we
| are stock market doesn't seem to be going up because
| there are no new tax-cuts to the rich.
|
| There is inflation which is bad for the poor people. But
| people have work and are getting paid. That increases
| demand which causes inflation. Would it be better if
| people did not have money to buy anything, which would
| cause prices to go down?
|
| If supply-side could flex then inflation would not
| happen, but it can not because of pandemic which is still
| closing up China and Russia whose oil is out of the
| market for many would be buyers, and Ukraine whose wheat
| is not reaching world markets.
|
| Trying to blame Biden and Fed for the inflation is
| Monday-morning-quarter-backing. For anybody who blames
| them I would like to say: Are you seriously asking us to
| believe that if you had been elected president of USA, or
| of Fed, things would be so much better now?
| vmception wrote:
| The US fed is the biggest whale in the whole market
|
| And every major economic union is duplicating what the fed
| does
|
| Even if the second part wasn't true, the first part would
| cause inflation in those economic unions
|
| It buys bonds from ANY bondholder indiscriminantly. It didn't
| matter where they are, they get new dollars, and dilute the
| value of their area.
| [deleted]
| john_moscow wrote:
| This is a good point, but there is a counter-argument as well.
| America is currently divided into the rank-and-file class vs.
| the stockholder class. The governments' actions so far have
| been heavily benefitting the latter. Workers get a $1000
| cheque, stockholders get a 20% net worth increase. Mom'n'pop
| shop closes due to lockdowns, Walmart eats up their niche due
| to being exempt.
|
| Taking too much money out of the economy at this point would
| harm the interests of the stockholder class, so they would try
| to do as little of it as possible. Of course, that would only
| deepen the divide and push Gen Z into accepting more socialist
| demagoguery, but the short-term stock market dip might be
| somewhat less than in the dotcom times.
| astrange wrote:
| Workers (well, unemployed ones) got $2400 a month. "We just
| got a $2000 check" is a meme from people who weren't
| unemployed and are looking for more free money.
| phendrenad2 wrote:
| What percentage of the population is unemployed?
| astrange wrote:
| That's not the question, the question is what the
| percentage was in 2020.
|
| People who were still working got 1. PPP loans 2. support
| from their customers still being able to buy things.
| daenz wrote:
| >Why has this strategy been so profitable and painless? Well,
| because stocks have been in a bull market for thirteen years.
|
| If "buy the dip" works for a bull market, does "short the peak"
| work for a bear market?
| PragmaticPulp wrote:
| Shorting the peak always works, just as buying the dip always
| works.
|
| The challenge is identifying the peaks and dips. They're only
| obvious in retrospect.
|
| Buying perceived dips is easier than shorting perceived peaks
| because the stock market tends to go up over time.
| __john wrote:
| The technical expression is "buy the dip, short the rip".
| daniel-cussen wrote:
| I would say so.
|
| I predicted this bull-to-bear market transition to the day (it
| started on Sep 27 when the Fed announced rate hikes) and yeah,
| everything's the opposite.
| [deleted]
| kmonsen wrote:
| The problem is of course we don't know how long bull or bear
| market will last.
|
| If I was a betting man I would short everything I guess, but
| I'm not. I'm also sure there are others with way more knowledge
| on when it's going to turn around.
| hammock wrote:
| > If I was a betting man I would short everything
|
| On a long enough timeline, the survival rate for everyone
| drops to zero
| kmonsen wrote:
| But then surely it doesn't matter. To short everything you
| have to hope it gets worse, but not nuclear war worse. Like
| just so bad that you can earn a ton of money, but not so
| bad that the money is useless. Or so bad that the fed
| decides to intervene as well.
| mwattsun wrote:
| I lived through the dot-com crash and got out safely after
| hearing something so ludicrous that I had to ask myself "How
| insane does this industry have to be for someone to think they
| can build a high growth internet company out of home cement
| delivery?" My memory may be playing tricks, but it was something
| like that.
|
| After 2008 I became interested with crashes throughout history.
| There are so many fascinating little details that added up to one
| giant mess.
| sharkweek wrote:
| Have you seen the movie Margin Call?
|
| There's a great scene where the CEO of a Goldman-style bank is
| recapping the last 100+ years of global financial collapses and
| he mentions, "we just can't help ourselves."
|
| https://youtu.be/LtFyP0qy9XU
|
| One of the best banking movies I've ever seen. Jeremy Irons
| absolutely nails his role.
| mwattsun wrote:
| I watched on your recommendation and it's a damn fine movie.
| Thanks.
| na85 wrote:
| I just watched that a few weeks ago. Great movie, but to be
| honest I thought Jeremy Irons was unconvincing and played the
| role poorly/was poorly cast.
| michannne wrote:
| Felt the opposite, he really exuded that cold-and-carefree-
| but-wise archetype I'd expect from a mid-2000s cocky hedge
| fund manager who got themselves into that position in the
| first place.
| headmelted wrote:
| The character was based on Dick Fuld, which if you look
| at any interviews with him from that time you can kind of
| see where the inspiration came from.
| sharkweek wrote:
| The scene in the boardroom where the analyst says, "well,
| that's where it becomes more of a projection" then looks
| sheepishly over at the two VPs.
|
| I love the way Irons' character catches the glance and
| says, "you're speaking to me Mr. Sullivan."
| throwaway_1928 wrote:
| Will Emerson: Jesus, Seth. Listen, if you really wanna do
| this with your life you have to believe you're necessary and
| you are. People wanna live like this in their cars and big
| f-in' houses they can't even pay for, then you're necessary.
| The only reason that they all get to continue living like
| kings is cause we got our fingers on the scales in their
| favor. I take my hand off and then the whole world gets
| really f-in' fair really f-in' quickly and nobody actually
| wants that. They say they do but they don't. They want what
| we have to give them but they also wanna, you know, play
| innocent and pretend they have no idea where it came from.
| Well, thats more hypocrisy than I'm willing to swallow, so f
| em. F normal people. You know, the funny thing is, tomorrow
| if all of this goes t-s up they're gonna crucify us for being
| too reckless but if we're wrong, and everything gets back on
| track? Well then, the same people are gonna laugh till they
| p-ss their pants cause we're gonna all look like the biggest
| p-ssies God ever let through the door.
|
| Seth Bregman: Do you think we're gonna be wrong?
|
| Will Emerson: [long pause] No, they're all f-d.
|
| (edited for language)
| iplist wrote:
| Welcome to this shiny new thing, called the internet, where
| you're allowed to say fuck!
| candiodari wrote:
| Which illustrates the real point: "what we have to give
| them" is debt. Can we grow debt from this point forward?
|
| In the short term: I don't see what the problem is with
| growing debt at this point.
|
| Oh and, btw, the FED will never repay its balance sheet.
| It's just not going to happen, ever, under any
| circumstances.
|
| Which gets me to my, seemingly rather unique, position:
| this is not a financial crisis (at least not yet). There's
| problems yes, but there's also a lot of money to solve
| them. Which means they will get solved, quickly. And just
| because we're recovering from the mother of all supply
| crunches and the numbers are going down to readjust, we see
| a lot of models crying "recession". There is no real
| recession. There's a recession in money paid for things.
| There's no recession in physical goods being distributed,
| quite the opposite. People aren't suddenly vastly more
| indebted (like in 2008) than they can be.
|
| There was such a big problem with supply and demand that
| when we all collectively decided to take away to artificial
| roadblocks, which turned out to be the point some idiot
| Russian decides to use to ... and supply and demand had
| such a big and such a wide ranging adjustment to make that
| it took the the law of supply and demand ~12-18 months to
| adjust prices, of which some 6-8 months are still in the
| future. Now supplier prices are adjusting down, not for
| housing, not for finance, but for everything else, and
| everybody cries recession. Wrong. Supply just shot through
| the roof and demand is actually rising. The same refrain is
| seen everywhere. Prices for X ROCKETED up, and are coming
| back down rather quickly. Take your pick cars, flights,
| food, chips, ... There are confusing factors, such as with
| housing: people have been using SUBSIDISED money for
| housing and this is being wound down, people are getting
| kicked out of the housing they're in. So ... lots of
| complaints. But this is actually an indication, of course,
| of too much demand, not too little. Too much demand, too
| much people yelling here's money, now give me ... This
| shouldn't lead to a recession!
|
| Of course my problem is ... I'm "fighting the FED". The FED
| disagrees with me. Of course. I'm fighting JUST the Fed at
| this point. I'm still on the side of the ECB, BOJ and PBOC
| ...
| WA wrote:
| Isn't that the movie in which every dialog is basically "but
| look at the numbers" without ever going into any kind of
| detail? I didn't like it.
| DoughnutHole wrote:
| Well it's not really about the numbers - the details of the
| collapse don't really matter. In the context of the last
| crash we know the global economy is brought down by
| financialised insanity and fraud. It's a morality play
| showing what's happening inside the first firm to realise
| the house of cards is about to collapse, and who are about
| to bring it down themselves by being the first out the
| door. The details aren't really the point.
| vishnugupta wrote:
| It's a terrific movie that perfectly complements The Big
| Short.
| headmelted wrote:
| Big Short was a movie that other people loved but I just
| didn't really like all that much. I don't even know why. I
| think maybe the cameo scenes made it feel a little dumbed
| down?
|
| I'd also watched Inside Job not long prior and really
| enjoyed it, but others found it too dry. Different strokes
| I guess.
| jstx1 wrote:
| I kind of enjoyed watching it and at the same time I don't
| think it's a good movie. It's so overly dramatic, the
| conflict between the characters is super vague, and the most
| annoying thing is the language they use - a lot of the time
| the characters talk to each other with metaphors and generic
| cliches to the point where they aren't saying anything. But
| the thing is that everyone in the room works in finance, they
| have no reason to be super generic and non-technical (apart
| from making the movie more accessible).
|
| I imagine that people who work in finance would like it even
| less than I did.
| hn_throwaway_99 wrote:
| > After 2008 I became interested with crashes throughout
| history. There are so many fascinating little details that
| added up to one giant mess.
|
| I would recommend looking into Jeremy Grantham. Not saying he's
| right about everything, but he really views himself as a
| "bubble historian" and he's got some great commentary on
| bubbles and crashes.
|
| Interestingly, his experience during the dot com bubble and
| crash is pretty fascinating. He saw the bubble pretty clearly,
| but he got out early which caused his investors to withdraw
| something like half of his assets under management. He was
| eventually proven right of course, and his strategies did very
| well during the crash.
|
| Which also points out why diversifying can be emotionally
| difficult. If you're well diversified you should expect to do
| _worse_ than the market when it 's booming, and _better_ than
| the market when it 's crashing (i.e less volatility). The
| problem with that for money managers is that it's very easy for
| clients to feel "Hey, the market is exploding, and I'm paying
| this person who is underperforming the market!", and then, when
| the market falls, even if the manager overperforms the market
| (but still has negative returns) "I'm paying this person but
| he's doing worse than if I just kept my assets in cash!"
| Ekaros wrote:
| I kinda loved some near ending scene of Big Short. The
| investor is talking with the fun manager and saying "Market
| is at all times low and you are buying". Kinda hammering home
| that they don't really know and are just following the
| general sentiment...
| rfreiberger wrote:
| One of the big wake up calls I had during that time was a
| friend telling me about Webvan. At the time I was younger and
| not investing so the conservation was mostly around how great
| the food was, cheaper than up scale stores and they delivered.
| The echo that reflected much of the dot com era was as he
| mentioned "how do they make money doing this". The wild part is
| the wages they paid was higher than other delivery drivers, I
| worked in a warehouse at the time and frequently heard of
| seasoned UPS and FedEx drivers leaving to drive for the
| company.
| tedunangst wrote:
| Funny that webvan is always cited as an example of a startup
| that could never work, but really just an early example of do
| something that doesn't scale and just keep doing it until you
| somehow make money. But VCs weren't yet ready for the unicorn
| burn.
| eastbound wrote:
| Juicero was the mirror product, then: An overpriced orange
| juice machine, with little packets that you can only buy on
| subscription, but can't suspend while on holidays, with a
| QR code to prevent you from consuming after your holidays.
| It is also down if it can't reach the Wifi. It showed that
| you can overcharge and make everything become a cloud
| subscription, because money was unlimited on the consumer
| side this time.
|
| Surprisingly, it didn't work outside of the Bay area. Some
| entrepreneurs have difficulty seeing the world's situation
| beyond their local horizon.
| jokethrowaway wrote:
| While I can see luxury food delivery kind-of working
| (wealthy workers in the office ordering lunch, wealthy
| home workers ordering lunch, fitness nuts who want
| calories and good food without cooking), Juicero was just
| plain ridiculous.
|
| Competition from local supermarket is too strong. I can
| get freshly squeezed juice from the store machine anytime
| I want for cheap.
| eastbound wrote:
| > Competition from local supermarket is too strong.
|
| Honest question: Do startup millionaires still go
| shopping themselves? I imagine when you are between the
| area where you have a gardner for time-to-time tasks and
| don't have "un majordome" yet to serve you at any time,
| there's an entire higher-class-market-but-not-elites who
| would be interested in Juicero?
| fossuser wrote:
| Plus juice is kind of a crappy high sugar project that's
| bad for you?
|
| Relatedly, I have no idea how "Joe and The Juice" stores
| remain in business. They're in super valuable real estate
| in cities across the country and as far as I can tell
| never have anyone in them.
| lordnacho wrote:
| Isn't it like a Starbucks? Overpay for some juice and sit
| in the cafe and use their internet for a bit?
|
| Reasonable deal for a lot of people, given that you're
| only overpaying on a thing that costs a tenner.
| Ekaros wrote:
| Do they? How long have the same ones been around 5 or 10
| years yet?
|
| On other their products likely have such margin it might
| be possible with enough sales. The components aren't too
| expensive, there isn't massive number of labour and
| equipment isn't that big of investment either likely...
| mejutoco wrote:
| I keep hearing this, but I don't really think fresh
| orange juice, for instance, is as bad as sth like sunny
| delight or soda. I do not have a source though.
| serenitylater wrote:
| farmerstan wrote:
| You, and everyone that responded to you, have no idea
| what Juicero was. It wasn't orange juice at all, or any
| type of fruit juice. It was green juice. The founder made
| millions selling his chain of green juice stores on the
| east coast so he short had a history of success.
|
| I have a friend that worked there so I even tried the
| product. I thought the idea was vastly overpriced, but it
| definitely had the chance of working. Lots of people are
| into green juice vs fruit juice and they were trying to
| create a new market.
| jallen_dot_dev wrote:
| > It wasn't orange juice at all, or any type of fruit
| juice. It was green juice.
|
| This is a distinction without a difference. It doesn't
| matter what the juice is called. It doesn't change the
| fact that it's idiotic to pay hundreds of dollars for a
| machine that just squeezes bags of fruits and vegetables,
| and needs an Internet connection to ensure you're locked
| in to only squeezing the company's pricy bags.
| farmerstan wrote:
| What it shows is people who criticize the company don't
| actually know anything about it. If you're going to
| criticize actually take the time to understand instead of
| throwing rocks thinking you're so smart because you read
| a headline.
| sva_ wrote:
| Their advertising video felt like something straight out
| of the TV show "Silicon Valley":
|
| https://m.youtube.com/watch?v=X1oHp-VvhDE
| CPLX wrote:
| The problem wasn't the real world part it was the internet.
| I was there at the time, it was clear there was _some_
| value in all the delivery services and so on the issue was
| that it was so painful and tedious to dial in with a modem
| and wait for photos to download and navigate the catalog on
| a 56k (or 128c or whatever) connection, often losing your
| cart and having to start over.
|
| And that was for those of us that were literary in digital
| stuff and comfortable with the internet. A lot of people
| just hadn't gotten around to using it much yet.
|
| It just wasn't time yet. And there wasn't any massive
| network effect or lock-in to capture like there was with
| something like a social network.
|
| Being too early is the same thing as being wrong.
| TedShiller wrote:
| NO strategy always works. Buying the dip is no different.
| bfm wrote:
| I recommend reading the book " Panic: The Story of Modern
| Financial Insanity" by Michael Lewis. It's a series of articles
| and expert opinions before and after modern market crashes that
| helps gaining perspective of expert opinions during the ups and
| downs of the market.
| yowlingcat wrote:
| Buy the dip is always trumped by "don't try to catch a falling
| knife." If you can't tell the difference (I am not professionally
| trained to) then it may not be worth the effort.
| JKCalhoun wrote:
| I assume catching a falling knife is at least preferable to
| buying the peak. :-)
| _uy6i wrote:
| While I appreciate many of the arguments being made - and there
| are countless similar situations (nifty 50 anyone) - that nasdaq
| is not the stock market it's like 1/3rd of it... pop over to
| yahoo finance and look at the chart of the Russell 3000 Vs the
| nasdaq, this is why people recommend diversification...
| throw0101a wrote:
| Nick Maggiulli:
|
| > _Logically, it seems like Buy the Dip can't lose. If you know
| when you are at a bottom, you can always buy at the cheapest
| price relative to the all-time highs in that period. However, if
| you actually run this strategy you will see that Buy the Dip
| underperforms DCA over 70% of the time._
|
| > _This is true despite the fact that you know exactly when the
| market will hit a bottom._ Even God couldn't beat dollar-cost
| averaging.
|
| > _Why is this true? Because buying the dip only works when you
| know that a severe decline is coming and you can time it
| perfectly. Since dips, especially big ones, haven't happened too
| often in U.S. market history (i.e. 1930s, 1970s, 2000s), this
| strategy rarely beats DCA. And the times where it does beat DCA
| require impeccable timing. Missing the bottom by just 2 months
| lowers the chance of outperforming DCA from 30% to 3%._
|
| * https://ofdollarsanddata.com/even-god-couldnt-beat-dollar-co...
|
| The thing about trying to miss the worst days (get out before the
| dip, get in after), is that the 'best' (recovery) days are often
| not long after, and if you miss just a few of those your returns
| get hosed:
|
| > _If you missed just the 25 strongest days in the stock market
| since 1990, you might as well have been in five year treasury
| notes._
|
| * https://theirrelevantinvestor.com/2019/02/08/miss-the-worst-...
|
| > _This is actually a pattern, it turns out. The market's worst
| days tend to be followed by its best days, according to research
| from J.P. Morgan Asset Management._
|
| > _If you sell when the markets hit the skids, you'll likely miss
| the upside._
|
| [...]
|
| > _According to J.P. Morgan's analysis, the 10 best days over the
| past 20 years occurred after big declines amid the 2008 financial
| crisis or the 2020 pullback during the onset of the Covid-19
| pandemic._
|
| * https://www.cnbc.com/2022/03/09/you-may-miss-the-markets-bes...
| GlennS wrote:
| > This is true despite the fact that you know exactly when the
| market will hit a bottom. Even God couldn't beat dollar-cost
| averaging.
|
| I'm a bit unconvinced by the studies that say this, because I
| don't think the "buy the dip" strategy they're talking about is
| the same one that people are running.
|
| The studies describe waiting for a low point in a given year
| (or even across multiple years!) then lumping in all your money
| then.
|
| Whereas I think what people actually mean when they talk about
| buying the dip is shifting their dollar cost averaging buy-in
| by days, weeks, or at most a few months, while they wait for
| the market to get spooked.
|
| I don't do this at the moment. I had a "wait for the US
| president to say something stupid" strategy which seemed to
| work for a while, but of course I don't really have enough
| evidence to back that up.
| hunter2_ wrote:
| But even if you're just modifying a DCA schedule slightly
| (buying a little early/more when things feel particularly
| cheap, or buying a little later/less when things feel
| expensive) -- doesn't the same problem exist: that those
| adjustments typically cause a worse outcome than if you
| didn't apply them?
|
| Maybe some people have a better crystal ball than others, but
| if we just look at the average case where studies favor
| vanilla DCA, I have to imagine that the reasons (why DCA
| wins) will prevail regardless of the extent that they're
| applied. But if your skill is enough above average that it's
| helpful to deviate, go for it...
| mbrubeck wrote:
| Even an investor who just waited for 5% or 10% dips would
| have underperformed an investor who bought on a fixed
| schedule each month, historically:
|
| https://www.bogleheads.org/forum/viewtopic.php?p=6196749#p61.
| ..
| fny wrote:
| Look at a chart of the S&P 500 from 1920 to 2008 and you'll
| notice something rather curious: the stock market has gone
| parabolic ever since the financial crisis. What made this period
| so unique? Tremendously low interest rates coupled with
| quantitative easing dissuaded capital from financing the real
| economy and instead encouraged herding and levering up in the
| financial economy for returns.
|
| At ever dip, it was an open secret the Fed would cut rates and
| ease again.
|
| At least for now, that game is over. We've had moments in the
| past when the markets had a similar panic (see 2018), but this
| period is unique due to the inflationary backdrop. Since 2008
| we've never seemed to be able to create significant economic
| growth or inflation greater. The COVID fiscal canon blew growth
| and inflation skyward. The fed can't just turn on the printers
| again or cut rates until we hit proper a proper recession.
|
| That's when you buy the dip.
|
| [0]: https://www.macrotrends.net/2324/sp-500-historical-chart-
| dat...
| chii wrote:
| > dissuaded capital from financing the real economy and instead
| encouraged herding and levering up in the financial economy for
| returns.
|
| i don't really agree with this - the money used to purchase
| financial products don't disappear, because for every product
| bought, there was a seller. This seller now has cash, which
| would be invested elsewhere.
|
| The only concern is low interest rates, which makes the hurdle
| for any investment lower thus making it easy for malinvestments
| to occur; In hindsight is easy to make judgements on what is a
| malinvestment, but not so easy at the time.
| jseban wrote:
| > i don't really agree with this - the money used to purchase
| financial products don't disappear, because for every product
| bought, there was a seller. This seller now has cash, which
| would be invested elsewhere.
|
| And buying stocks is financing real projects, and you only
| get those returns if they manage to do something actually
| useful, this is helping to finance and promote economic
| activity, how is that taking money away from the "real"
| economy?
| PretzelPirate wrote:
| If someone buys stocks from a third party in the open
| market, are they financing real projects? It really feels
| like it's all speculation since the value of my shares
| doesn't actually entitle me to that portion of the
| company's profits, unless I can sell back directly to the
| company.
| jseban wrote:
| It's speculation on the future development of the
| company's performance, you aren't entitled to a share in
| the profit, but you often get one anyway in the form of
| dividends.
|
| If you buy a stock on the open market you don't actually
| fund _starting_ a real project, but you fund the
| continuing development and improvement of that project,
| it 's driven by the fact that they have shareholders to
| answer to, and you are entitled to voting rights.
|
| It has to have some amount of speculation, that's the
| driving force behind it, otherwise the whole thing would
| just stagnate and you have no incentive to improve a
| company and it will just get looted by its employees. In
| the big picture it just help collectively push for more
| efficient ways of working, and stop inefficient work.
|
| It's not pure speculation in the sense that you are not
| betting on a random event like tomorrows weather in a
| zero sum game.
| qgin wrote:
| The value of stocks is pinned to two events that you
| often don't directly participate in but are absolutely
| connected to in a real way.
|
| 1. The IPO. While it's true that only the people who buy
| at the IPO directly finance the company, if there wasn't
| the promise of someone else in the future to sell the
| shares to, nobody would buy at the IPO. The existence of
| future second-hand buyers makes the direct funding at the
| IPO possible.
|
| 2. Dividends and buybacks. All stocks get their value
| from either the current existence or future promise of
| dividends and buybacks. While from time to time people
| get lost in "greater fool" trading, the reason a stock
| doesn't go to zero is because there is either currently a
| dividend/buyback or people believe that eventually when
| the company matures, they will offer a dividend/buyback
| to shareholders and a future buyer will want to buy this
| shares for the cash returned by the company. (As a
| tangent, this is something most crypto investors don't
| understand... cryto is almost exclusively "greater fool"
| trading with no basis in the promise of future real cash
| return)
| MisterMower wrote:
| Point 2 is false: shares of stock derive their value from
| the fact that they represent ownership in a company.
|
| If the company is profitable or owns valuable assets
| beyond their liabilities, then the shares themselves are
| valuable.
|
| Their value does not depend on current or future
| dividends, but on the company's current assets and the
| market's estimation of the value of the company's future
| cash flows.
|
| Your point about crypto still stands: there are no future
| cash flows to consider with crypto, only the current
| value of the asset, although the comparison is really
| apples to oranges.
| qgin wrote:
| But if there is no mechanism for giving cash to the
| shareholder, ownership is essentially worthless (from a
| money perspective) except for the possibility of amassing
| enough ownership to take a controlling stake in the
| company. But even a controlling stake is just a hobby
| unless somehow that stake returns cash to you at some
| point.
|
| I agree about assets though. Book value of assets does
| need to be added to the value of shares, though usually
| that's the smallest part of a share's valuation.
| MisterMower wrote:
| You can sell stock to another person. The sale price will
| be higher, ceteris paribus, because the company is more
| valuable. This is how you make money investing in
| companies that don't pay dividends. Google retained
| earnings for a more in depth explanation.
|
| Buying shares of stock in a company that doesn't pay a
| dividend isn't investing, it's the textbook definition of
| speculation. You are buying something that you hope to
| sell at a higher price. Investing is when you put money
| into something, and it gives you more money back over a
| period of time. Buying and selling crypto is speculation.
| jseban wrote:
| > Buying shares of stock in a company that doesn't pay a
| dividend isn't investing, it's the textbook definition of
| speculation.
|
| Yeah but this reflects the fact that starting and growing
| a company in itself is a type of speculative activity.
| Any optimism about the future is a type of speculation.
|
| If you have a proven profitable business model, that you
| see no way to scale, there's no reason to list the
| company in the first place.
|
| The main reason to even list a company is to take it
| through a growth phase, and companies get taken off the
| stock exchange all the time when they don't see any
| forthcoming growth, because then it's only annoying for
| them to compromise with the power/ownership for no
| reason.
|
| The stock market is an accelerator for companies, not a
| central bank that makes absolute valuations.
| hn_throwaway_99 wrote:
| > i don't really agree with this - the money used to purchase
| financial products don't disappear, because for every product
| bought, there was a seller. This seller now has cash, which
| would be invested elsewhere.
|
| But just look at housing, which has exploded well beyond the
| rate of inflation since the Great Recession bottomed out, and
| especially in the past couple years.
|
| Yes, if money is plowed into housing, the homeowner has more
| cash when they sell. But presumably they have to live
| _somewhere_ , and with housing skyrocketing in basically any
| halfway desirable place, it means they're just going to spend
| that cash on another expensive house.
| chii wrote:
| > if money is plowed into housing, the homeowner has more
| cash when they sell.
|
| but it's not expensive _everywhere_. It's expensive in some
| of the most desirable places. And housing has some issues
| unrelated to the market - such as NIMBYs stopping new
| constructions.
| hn_throwaway_99 wrote:
| > but it's not expensive _everywhere_. It's expensive in
| some of the most desirable places.
|
| I disagree with this. I think this _was_ true for the mid
| 00s property bubble, but now prices are exploding not
| just in the usual suspects like SF, LA and NYC. Pretty
| much every place that 's not a total shithole is
| experiencing huge home price appreciation.
|
| I made a post on a different thread making this point,
| and I used Flint, Michigan as my example of "sure, prices
| in Flint are still low..." only to get a response from
| another commenter along the lines of "You'd be surprised
| - while bad areas of Flint are still depressed, many of
| the nearby areas have also seen huge runups in real
| estate values."
| mach1ne wrote:
| >but it's not expensive _everywhere_. It's expensive in
| some of the most desirable places.
|
| The fact that the median and average house prices have
| exploded signifies that the housing market is in a
| bubble. It's not relevant that house prices have not
| increased equally everywhere. Ultimately, after the
| bubble eventually bursts, it will leave a lot of people
| indebted to banks with their real ownings not matching
| the debt. This translates to a decrease in consumer
| consumption, meaning slower economic growth. Resources of
| the society will be more directed towards customers who
| have more wealth, meaning those who weren't part of the
| housing crash. Likely customers from abroad.
|
| Obviously we're talking about percentages, but that's how
| economy works and that translates to very real changes in
| a many people's lives.
| lottin wrote:
| Since the mid-2000s house prices have risen _less_ , on
| average, than disposable income in the US.
|
| https://twitter.com/MPelletierCIO/status/1522704947556483
| 073...
| Retric wrote:
| Notice you said disposable income rather than income,
| there is a huge difference.
|
| But I think people recognize the housing bubble that
| popped in 2008 as a bubble. Saying we haven't reached the
| peak of the last bubble doesn't mean we aren't in a
| bubble.
| pastaguy1 wrote:
| There were structural/regulatory reasons that helped the
| bubble grow last time, are there any indications of this
| now?
|
| If they are there we probably won't know until it's too
| late, but this housing bubble feels a little more like an
| everything bubble
| redisman wrote:
| Artificially low interest rates for a decade could have a
| similar effect
| adventured wrote:
| > The fact that the median and average house prices have
| exploded signifies that the housing market is in a
| bubble.
|
| It doesn't signify that. The US has long since switched
| over to a permanently low interest rate environment due
| to the extreme national debt that the Fed has to manage.
| Housing is going to stay artificially expensive on a
| longer-term basis accordingly. Housing only deflates on a
| sustained basis if interest rates go up a lot on a
| sustained basis, and that's not going to happen (we're
| coming up on 14 years into the forever low rates era).
|
| We've been enjoying very high rates of consumer inflation
| and what has the Fed done? Zilch. Mostly all they've done
| is jabber, which is most of what they can do now:
| endlessly talk about how they plan to raise rates. Why?
| Because they can't do anything of consequence and they
| know it. It's a humiliating failure of their supposed
| mandate.
|
| One of the many consequences of forever low rates is
| forever artificially inflated asset prices.
|
| Real-estate values broadly are not a bubble, it's dollar
| debasement, which is why gold is going to become normal
| up toward $2,000 and oil is going to be normal at
| $65-$75+.
|
| Mediocre economic growth will (presently is) ultimately
| take care of the elevated rates of inflation, rather than
| the Fed hiking rates by a lot. Later in the decade the
| Fed will be back to talking about how they'd like to
| spark higher rates of inflation, as typical annual real
| GDP growth sinks below 2%.
| bagacrap wrote:
| I've had this same thought, but everyone seems to be sitting
| in cash? No one wants to invest unless everyone else invests.
| Seems the emperor is suddenly naked.
| gabereiser wrote:
| You should see the volume of the last 24 hours. No one is
| sitting on cash unless they are hobbyists.
| zmgsabst wrote:
| That's ironic.
|
| If you'd sold your S&P500 on Monday and bought back on
| Friday, you'd have gained 2.7 shares per 100 sold.
|
| If you'd sold your S&P500 a month prior and bought back
| on Friday, you'd have gained a 8 shares per 100 sold.
|
| If you'd sold your S&P500 six months prior and bought
| back on Friday, you'd have gained 14 shares per 100 sold.
| gabereiser wrote:
| You just described a hobbyist. Institutions don't sit on
| cash for that long, nor do they buy S&P in any
| significance.
|
| [0] Berkshire Hathaway -
| https://www.dataroma.com/m/holdings.php?m=BRK
| zmgsabst wrote:
| Yes -- I called it ironic because a hobbyist sitting on
| cash out performed the market over the past six months.
|
| Institutions "making moves" aren't magic -- and often
| fail to beat indexes, which in turn failed to beat cash
| over the past six months.
|
| Sometimes the hobbyist mindset wins.
| gabereiser wrote:
| >sometimes the hobbyist mindset wins.
|
| In this case, you're absolutely right. Had they just sat
| on it they wouldn't have the losses they do today,
| furthering the panic selling.
| [deleted]
| carnitine wrote:
| Interesting that you cite BRK, who famously have been
| sitting on ~150bn in cash recently. Professional
| investors absolutely sit on cash all the time.
| gabereiser wrote:
| Yeah, they did, and within a month or two it was
| reinvested elsewhere. Whether it was pulling out of
| American Airlines in favor of more shares of Chevron, or
| doubling down on tech stocks. BRK doesn't just sit on
| 150bn in cash for longer than they have to. Not saying
| they don't sit on cash but they definitely don't sit on
| it for a year or more.
| gabereiser wrote:
| Show me a hedge fund that sat on more than 1% of their
| holdings for more than a year. I'll wait.
| JumpCrisscross wrote:
| > _everyone seems to be sitting in cash?_
|
| What is this based on? Every indicator suggests we're still
| in a risk-on mode as an economy. It's why we have
| inflation.
| EGreg wrote:
| Yield curve inverted and interest rates have begun to go
| up. Risk on?
| JumpCrisscross wrote:
| > _curve inverted and interest rates have begun to go up.
| Risk on?_
|
| Yes, we're still seeing billions of dollars being
| deployed into start-ups [1], crypto and the like. We are
| less risk on than we were. But within America, there is
| no flight to safety. (Internationally, it's more
| complicated.)
|
| [1] https://fortune.com/2022/04/08/venture-
| capitals-2022-slowdow...
| baq wrote:
| Don't know which indicators you're looking at, but the
| bond market disagrees.
| arrosenberg wrote:
| Couldn't there be an issue if the buyer is paying with margin
| that's backed by an overvalued asset? Maybe not for the
| seller, but eventually someone will be left holding the bag.
| adg001 wrote:
| > i don't really agree with this - the money used to purchase
| financial products don't disappear, because for every product
| bought, there was a seller. This seller now has cash, which
| would be invested elsewhere.
|
| Make no confusion, please. Quantitative easing was intended
| to give credit institutions greater ability to lend money to
| entrepreneurs, so as to boost real economy. When capitals are
| invested in financial products the entities closing their
| positions (e.g., selling stocks) and, in turn, getting the
| cash are not necessarily credit institutions (i.e., they are
| typically fund managers and private investors) - which is to
| say they pocket the money.
| stewbrew wrote:
| Did you select logarithmic scale on the y axis? To me the post-
| WWII looks rather linear with some dips: energy crisis, dot
| com, financial crisis.
| [deleted]
| trashtester wrote:
| I think you reference only considers the index adjusted for
| inflation, but without taking the dividends into account.
|
| Optimists tend to consider the dividends too small to matter
| when buying stocks, but it turns out that over time, the
| dividends tend to be a large part of the inflation adjusted
| returns:
|
| According to this article [0], the profit of investing just
| before the .com bust would be only 12.9% by mid 2017, which is
| about 0.7%pa, if adjusting for inflation but not dividends.
|
| When taking dividends into account, that grows to 54.5%, or
| 2.54%, more than 3x more.
|
| And this is more or less the worst case based on recent
| history.
|
| [0]: https://finance.yahoo.com/news/inflation-adjusted-returns-
| si...
| maire wrote:
| People (and tool developers) forget that the purpose of a
| stock is to ultimately produce dividends. It is like buying a
| house for rental income and forgetting to include the rent.
|
| When I retired I had to switch from a growth-stock mindset to
| an income-stock mindset. I have made the switch but none of
| the free tools makes that easy. The closest I came was TOS
| will do this calculation for stocks but not ETFs. Oh well. I
| now have all the calculations in google sheets.
|
| I also now have a backtest that goes the the beginning of the
| Clinton administration to the end of the Trump
| administration. I added dividends to the backtest. I only
| went to the Clinton administration so that I could use ETFs
| to simplify the calculations. The backtest includes dividends
| - which I had to add manually.
| temp_praneshp wrote:
| Out of curiosity: How do you test your sheets? I feel like
| I can arrive at such a sheet over a few days of reading,
| but unsure how I'd test I'm doing the right things (since
| there isn't a tool or a combination of tools that can act
| as oracle)
| maire wrote:
| I used ETFs (and not stocks) to simplify the test. I was
| mostly looking for correlations of different investments
| across different scenarios. I then looked at severe
| market downturns to see how the correlations changed.
|
| As you can imagine - when there is a severe market drop,
| most investments are highly correlated to the S&P. The
| most negative correlation I could get was medium term
| bond ETFs. Short term bonds were still highly correlated
| and I am not sure why.
|
| The dot com bust was particularly interesting because
| each segment dropped at different times. Telecom dropped
| first, then tech. It took about a year for the drop to
| hit mid cap. In comparison - the 2008 crash hit
| everything quickly.
|
| Also - lately I have been using the backtesting tools in
| TOS. As I said earlier, this only works for stocks and
| not ETFs.
| temp_praneshp wrote:
| gotcha, thanks for answering!
| maire wrote:
| If you are using google sheets you can use ycharts to
| pull in the dividend data. Here is my calculation to get
| 1 year of dividends.
|
| =query(importhtml(concatenate("https://ycharts.com/compan
| ies/",$A4,"/dividend"),"table",0),...)
|
| where $J$2 is ="select Col6 where Col1 > date
| '"&TEXT(I2,"yyyy-mm-dd")&"' LIMIT 12"
| tyre wrote:
| > The COVID fiscal canon blew growth and inflation skyward.
|
| This is not true and has wrongly given credit to people who
| have said, since 2020, that COVID relief would cause inflation.
|
| Our current inflation is driven by supply chain issues
| (unrelated to COVID relief) and rising oil (unrelated to COVID
| relief.)
| astrange wrote:
| > Our current inflation is driven by supply chain issues
| (unrelated to COVID relief)
|
| Well, specifically it's because everyone went home and
| switched from purchasing services to goods. So there are
| serious composition effects comparing 2019 to 2020 and you
| don't have to assume you're making less money because an
| inflation number said you are.
| _uy6i wrote:
| This may be the case for many goods (e.g. cars, furniture,
| dishwashers, beef) - but definitely not assets (e.g. homes,
| bonds, stocks, art)
| astrange wrote:
| Asset and good inflation aren't the same kind of thing
| because you won't die if you can't buy a stock, and you can
| buy any fraction of a stock not just one share these days.
| (Although the second one is a reason they've gotten more
| expensive.)
|
| Homes are a special case, but it's entirely possible for
| the purchase price of homes to go up while rent doesn't.
| Nevermark wrote:
| Supply chain issues have pushed up construction costs and
| times.
|
| So buildings increase in value due to supply disruption
| too.
| candiddevmike wrote:
| From what I've read, our current inflation is due to combo of
| inflated asset prices causing mortgages and rents to
| skyrocket along with corporate greed raising prices "because
| of inflation".
| darkerside wrote:
| You should probably widen the pool of what you read. You're
| not wrong (well, corporate greed tends to be a bit of a
| bogeyman), but it's certainly reductive.
| SamReidHughes wrote:
| Working class wages have increased, and that is clearly
| because of Covid relief. Or other Covid-related policies like
| halting immigration.
|
| (I should be clear, this is still supply-side, but related to
| Covid relief. "Stimulus" money spent unproductively by the
| government is also supply-side.)
| bushbaba wrote:
| Covid relief prevented deflation. Thus when things went
| back to normal we saw large inflation.
|
| You also had PPP loans which went to businesses that saw
| growth! And those business owners got huge payouts used to
| buy houses and assets
| bagacrap wrote:
| I don't know why you're so confident. All of these things can
| contribute to inflation.
| freyr wrote:
| Probably an adherent of modern monetary theory.
| RealityVoid wrote:
| MMT does not say that liberal issue of currency does not
| cause inflation.
| ouEight12 wrote:
| > rising oil
|
| Monthly inflation numbers have been > 5% since May 2021. Oil
| didn't exceed 2018 $s until will into October 2021.
| throwaway2037 wrote:
| There is an saying: The stock market is not the economy. The US
| economy is still growing faster enough for corporations to
| fight off the effects of inflation. (People / workers are a
| different social and economic issue.) The Fed will continue to
| raise rates and wind down its balance sheet in an orderly
| manner. Eventually, after enough rate rises, inflation will
| slow, and the economy will reach a new equilibrium between
| growth, rates, and inflation. This is all a normal part of an
| economic cycle.
| baq wrote:
| Inflation will already slow (oil stopped going up), GDP
| prints are coming in negative, rates are only now
| accelerating while economy is slowing down. How this doesn't
| end in a recession is beyond me. Mortgage workers have been
| laid off already due to that. Real economy is next on a lag
| due to demand destruction.
| bushbaba wrote:
| Recession needs just two quarters of negative gdp. Q1 had
| negative growth. So will q2. We are already in a recession
| baq wrote:
| jury is still out on q2, I expect sub-1% growth, so
| technically not a recession, but it hardly matters. it's
| going to be interesting for the next 4 quarters anyway.
| tedunangst wrote:
| Every even modestly exponential curve has the same shape.
|
| https://www.wolframalpha.com/input?i=y+%3D+1.05%5Ex+from+1+t...
| shawnz wrote:
| This time is different, every time
|
| See for example this nice video from Ben Felix:
| https://www.youtube.com/watch?v=Jh9Gn58r9Fw
| AlchemistCamp wrote:
| What do you like about it?
| shawnz wrote:
| I generally enjoy his evidence-based approach to
| investing and this video is particularly good at
| addressing common FUD about today's situation being
| unique compared to the past.
| grey-area wrote:
| Exponential curves in real assets are not sustainable.
| pl-94 wrote:
| The GDP is itself exponential. A growth of +2% a year is an
| example of an exponential curve. Sure there are "limits to
| growth" (see Meadows et al.) but it's not clear whether
| those limits are reached yet.
| ArnoVW wrote:
| Unless we find a way to 'produce' (the P in GDP) without
| increasing entropy by digging up stuff (oil, metals,
| whatever) and then releasing them into our ecosystem once
| we're done with them, those limits seem to be pretty
| close though.
|
| That's not just me thinking that. That's the Club of
| Rome, in the 70's.
|
| https://en.wikipedia.org/wiki/The_Limits_to_Growth
|
| Their conclusion at the time:
|
| "the most probable result will be a rather sudden and
| uncontrollable decline in both population and industrial
| capacity"
| afpx wrote:
| A lot of the production and growth in production is in
| services. The global economy adds 50M+ new middle class
| incomes each year.
| baq wrote:
| And the most sobering thing - we're still on track for
| the base case...
| pfortuny wrote:
| As long as the Sun shines on (and this is essenty "for
| ever"), there is an increasing accumulation of energy in
| the planet: that is where the possibility of exponential
| "growth" comes.
| grey-area wrote:
| GDP rising exponentially is also clearly unsustainable.
|
| We have IMO reached a paradigm shift in central bank
| policy after decades of low rates and low inflation. The
| recent past is not a good guide to the near future in
| markets.
| adastra22 wrote:
| The entirety of human history since prehistoric times to
| the present gives evidence contrary to your claim. Human
| societies have experienced exponential growth since
| forever, with only occasional brief temporary setbacks.
| Even the Black Death is a blip on the exponential curve
| of economic progress.
| baq wrote:
| Past performance is not a predictor of future results. If
| we continue to grow GDP (~energy consumption) at about
| 1%/y, we'll boil oceans in 400 years. That's what
| exponential growth means.
| adastra22 wrote:
| Most of that GDP growth will not be on Earth in 400
| years.
| StireFarter wrote:
| Hand-wavy predictions like this scare me - it suggests
| people don't understand space travel or the distances
| involved at all.
|
| Sure, if you think of the Earth as a game of SimCity plus
| Kerbal Space Program, these discussions about exponential
| growth are interesting. However, they miss the part where
| the intervening 30-100 years become literal hell on Earth
| while space travel ramps up.
| adastra22 wrote:
| I started my career at NASA. I'm working on an asteroid
| mining startup. I'm well aware of the vastness of space
| :)
|
| The GP said 400 years. That's the time since the age of
| exploration until now. That's a vast era of time, and
| exponential technology development goes both ways.
| geeB wrote:
| With a long enough time horizon, the GP consideration
| ("If we continue to grow GDP (~energy consumption) at
| about 1%/y, we'll boil oceans in 400 years.") will still
| come true even if expanding in space. A sphere expanding
| around earth at the speed of light grows quadratically in
| the outer boundary and cubically in volume, and will be
| overcome eventually by any exponent > 1.
|
| I'm pretty convinced that increasing human activity so
| much to increase the background radiation to 373K is
| never going to happen, the point is more that any
| exponential energy growth eventually can't continue.
|
| In a way though it's already happening, the GDP ~ energy
| consumption equivalence from the GP assumption does not
| hold
| (https://data.worldbank.org/indicator/EG.GDP.PUSE.KO.PP).
| We'll just keep inventing ways for the GDP number to keep
| growing exponentially in questionable ways for the system
| to keep going, until we can't anymore.
| baq wrote:
| the dataset is interesting, thanks for linking to it. the
| relationship is for now linear, which I believe doesn't
| invalidate the point that you and I both make that
| exponential is not sustainable. the GDP-energy
| consumption decoupling must also become exponential,
| which I lack vision for how to achieve.
| andrepd wrote:
| Exponential growth, indeed economic growth at all,
| started with the industrial revolution. For instance,
| many places in Eurasia had the same GDP in 500 that they
| had in 1400.
| krigath wrote:
| In terms of population? Yes In terms of economic
| productivity per capita? No, not if you look at periods
| prior to the industrial revolution[1]
|
| [1] https://www.google.com/url?sa=t&source=web&rct=j&url=
| https:/...
| wcoenen wrote:
| > _The entirety of human history since prehistoric times_
|
| Extrapolating from the past doesn't always work. There
| are real limits.
|
| Take the rate of energy consumption of human civilization
| for example, which is currently about 17 terawatt[1].
| Thermodynamics tells us that after doing useful work,
| practically all of that energy ends up as waste heat. (A
| small fraction is stored, e.g. aluminium stores some
| energy. I assume this is negligible.)
|
| The power received by the Earth from the sun is about
| 170,000 terawatt[2], a factor 10,000 more. So plenty of
| room for growth, right?
|
| But now take a modest 2% yearly growth. This is a factor
| 1.02 each year. So 500 years of 2% growth would be a
| factor 1.02^500 = about 20,000.
|
| Maybe we could actually do that with fusion power. But
| then we'd have two suns(!) worth of extra waste heat to
| deal with. This cannot work. Current concerns about
| global warming pale in comparison. Even if we found a way
| to radiate all that heat into space as infrared, e.g. by
| concentrating the heat into country sized radiator
| panels, 35 years of 2% growth would double the waste heat
| again.
|
| A similar calculation can be done for the growth of
| anything physical. And even if you continue growth off
| Earth, you'll soon hit the limits of the solar system.
| Even the volume of an expanding sphere at light speed
| cannot keep up with an exponential function.
|
| [1] https://www.theworldcounts.com/stories/current_world_
| energy_...
|
| [2] https://news.mit.edu/2011/energy-scale-part3-1026
| mkr-hn wrote:
| People always talk about compound interest. Not enough
| people talk about compound waste heat.
| darawk wrote:
| That's exactly why the plot is in log scale. The point is
| that this period looks unusual _despite_ being rendered in
| log scale.
| MichaelMoser123 wrote:
| > The COVID fiscal canon blew growth and inflation skyward.
|
| COVID is going on for two years now. What really changed is the
| Russia-Ukraine war, this goes with higher energy and higher
| food prices (most of the wheat and fertilizers come from that
| part of the world) that all that stuff trickles down, as they
| don't know how to fix the metrics now (i guess no one was
| prepared for such a turn of events...)
|
| Most of the metrics for inflation are based on some
| technicalities (you can fix that, that's why we hadn't much of
| an inflation), but it can't cope with fundamentals like food
| and energy.
| chewz wrote:
| > What really changed is the Russia-Ukraine war, this goes
| with higher energy and higher food prices
|
| Green transformation is the real cause of high energy and
| food prices. EU's Fit for 55 gave Putin green light to invade
| Ukraine...
| andrepd wrote:
| Lol, very much in the contrary. Had the EU invested heavily
| in a proper Green New Deal (in ~2010-11 for example, around
| the time recovery was needed, instead of implementing
| austerity), we would have robust economic growth instead of
| a decade of stagnation, and near complete independence of
| Russian oil and gas, so much so that we could turn the taps
| off on 24/Feb and suffer only mild consequences.
| chewz wrote:
| > Had the EU invested heavily in a proper Green New Deal
| (in ~2010-11 for example
|
| Meantime in the real world in 2021 EU made strategic
| decisions that guaranteed high food and energy prices for
| next couple of years and made Putin think that he has a
| window of when Eu is completely at his mercy. (Putin made
| a mistake short term. Long term he surely forced EU's
| hand to go for alternative sources of energy).
| redisman wrote:
| As we transition out of the emergency mode of Covid the bill
| will be coming due at some point. Governments spent a whole
| lot of money to not generate any real work in the economy for
| two years
| nabla9 wrote:
| >Tremendously low interest rates coupled with quantitative
| easing dissuaded capital from financing the real economy and
| instead encouraged herding and levering up in the financial
| economy for returns.
|
| This is the standard response that people repeat year after
| year. They are not the full or even major factor. They are more
| like a result of changes in economy.
|
| >instead encouraged herding and levering up in the financial
| economy for returns.
|
| Real reason:
|
| Capital intensity has deceased dramatically. Capital intensity
| is the amount of fixed or real capital present in relation to
| other factors of production (especially labour).
| ars wrote:
| > Look at a chart of the S&P 500 from 1920 to 2008 and you'll
| notice something rather curious: the stock market has gone
| parabolic
|
| That's because you are using a linear graph instead of a
| logarithmic graph.
|
| If you have $100 and it double you have $200, if you have
| $10,000 and it doubles you have $20,000. Both of those are the
| same chance, but if you use a linear graph it looks parabolic.
|
| Do yourself a favor and NEVER use a linear graph of the
| stockmarket.
| tasuki wrote:
| > That's because you are using a linear graph instead of a
| logarithmic graph.
|
| The macrotrends.net graph linked by fny is logarithmic (by
| default, though there's a "Log Scale" checkbox to turn it
| off). It's also inflation-adjusted by default, which I think
| is a little unfair.
| mouzogu wrote:
| I hope this is true but I also feel like we no longer follow
| any kind of logic after 2008, we totally detached from reality.
| Melting_Harps wrote:
| > I hope this is true but I also feel like we no longer
| follow any kind of logic after 2008, we totally detached from
| reality.
|
| You're not the only one, consider that the financial crisis
| was the per-cursur and the necessary backdrop for why Bitcoin
| was created; this system went from being an arcane, but
| seemingly reliable way to grow the economy up until 2008 when
| the house cards fell down and we realized most business
| models were all based on the 'greater fool theory.'
|
| Monetizing everything and squeezing people for every nickle
| and dime for essentials became the norm: education, medicine,
| food, energy etc...
|
| Honestly, this system only benefits a small fraction of the
| Human Population, but it ultimately relies on their continued
| exploitation. The great resignation has been a somewhat
| limited counter-banace but it's still not addressing the
| underlying fact that this system is so utterly broken and it
| cannot sustain itself without perpetual intervention from the
| Central Banks.
|
| Their is nothing Capitalist about this system, it's feudalism
| with a very obvious plutocratic bend with it's aim to
| maintain itself via nepotism and corruption.
|
| This isn't a criticism of Capitalism, though I have come to
| the conclusion that it is ultimately a flawed system that
| relies on perpetual and infinite growth models, and does an
| even poorer job at pricing-in externalities that have had and
| will continue to have even worse devastation: be it
| economical or environmental.
|
| As an Anarcho-capitalist I agree it is the best of all the
| other worse system: I just think we have seen the limitations
| that even the freest markets can avail so long as the
| parallel system can destroy with impunity, but justify itself
| as the only thing that keeps the World from succumbing to
| utter chaos.
|
| When in reality, we live in that chaos and have been in chaos
| for most of my entire existence (middle millennial) with only
| the thin veneer of order, what's remarkable is we haven't
| completely obliterated ourselves in that time--Russia is
| doing what most Nation-States have done since the advent of
| it's existance, and what the US did that made it the ire of
| Humanity in the last decade in the Middle East. They seek to
| consuldate and extract for thier own vested interests, often
| to the detriment of it's own populace as it really only seeks
| to maintain it's own order and enrich an already obscenely
| wealthy political class which curries favour from the
| business class.
|
| Before, I used to watch Black Mirror or an Adam Curtis
| documentary solely for it's entertainment value, now I'm
| starting to see how prophetic much of what they focused on
| not just came into reality, but started to have more dire
| implications than was even portrayed.
|
| In short, while those of us in the BTC community haven't the
| grounds to declare we have made a utopia by any stretch of
| the imagination, I'm just glad we have learned our lessons
| and realized the inevitable demise of the financial system is
| starting to become clearer to more and more.
|
| Where this leads can be a horrible path, and we have had
| glimpses of it: the Russian invasion of Ukraine is over
| hubris and distorted views of the Soviet Union.
|
| Just imagine what it will look like if we are fighting over
| water or food as we have for most of our Specie's existence?
|
| People here benefited, or stand to benefit the most from this
| corrupt system: vesting is the only real way to make any real
| gains as it provides the bulk of most TC. Their inflated
| salaries at FAANG mean less when they hear the typical story
| about stocks getting IPO'd and even their first janitor team
| can afford to live in a mansion in Palo Alto and send his
| kids to Stanford.
|
| But the truth is this model is utterly broken, just look at
| the environment and woke culture that the valley has become:
| homelessness, social inequality and worsening substance and
| mental health issues etc...
|
| You'll just never get the HN crowds to go along with it
| because most are still just trying to 'get theirs' or have
| already 'gotten theirs' and are now too comfortable but keep
| telling themselves that rent-seeing is ok so long as it's
| them and they regard themselves as a 'disruptor.'
|
| It's pathetic and a shame to see, to be honest. To see so
| many talented people waste their collective skills at a time
| when climate change, and shortages of everything are starting
| to be the norm: you'd think if they had any capacity to act
| in anything but their own self-interest and had a modicom of
| self-perseverance they'd try to sepnd at least some time
| trying to address these problems.
|
| What good is money if this is this the World we live has
| always been my core moral compass that doesn't seem to be
| shared or well received when I work in tech. There is just a
| lots of lip-service but almost no deeds to back this up, it's
| a really just a bad platitude. One of many, unfortunately.
|
| As a person studying AI and ML: you'd think that for a class
| of people who go on about 'meritocracy' being the end-all to
| explain why they are exceptional and are where they are and
| where most are they it's just hiding behind the limited
| window they have where the tech oligarchs allow them to be
| well compensated: but be under no illusion, they will quickly
| dispel with them when it's AI solution is as palatable is it
| can be, even if it means delivering a more mediocre solution
| and experience.
| tasuki wrote:
| _> I [...] feel like we no longer follow any kind of logic
| after 2008, we totally detached from reality._
|
| What does it mean we have detached from reality? That
| valuations are not what they should be? What exactly should
| they be then? Who should be deciding these things?
|
| And a bonus question: Why do you think the current valuations
| are what they are?
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