Ask HN: How to prosper under negative interest rates? • Hacker News Board

Re: Ask HN: How to prosper under negative interest rates?

#121

Post by bwanab » Tue, Mar 31, 2020, 5:58 PM UTC

mancerayder wrote: post #88

mrfredward wrote: post #24

So the time value of money is more or less zero now and loan rates depend much more on default risk than any opportunity cost in loaning the money. To an economist, the implications of that might be big, but to a regular person, it's really a small shift in possibilities. A savings account at 0% doesn't build wealth, but it didn't really do that 3 months ago at 1.5%. Personal loans at 9% aren't much better than loans…

I just sold a home days before the pandemic hit, and consider myself very lucky. But now I have cash and I'm nervous inflation might start becoming a real problem. I'm also worried that dense American cities are going to have a huge drop in property values, desirability, and an increase in crime. I am seeing this right now, and a lot of sentiment from people with money is to never come back. It's a tough call. Is thi…

As a regular critic of many things and ideas American, I have to point out that in the long run, you’ve never been better off betting against America.

Re: Ask HN: How to prosper under negative interest rates?

#122

Post by bumpkinjunkie » Tue, Mar 31, 2020, 6:05 PM UTC

marcus_holmes wrote: post #70

mindslight wrote: post #45

Earlier quoted context omitted.

> Borrowing money to buy real estate and then collect income is a very common way to leverage your money. Over time that builds real wealth. My friend has bought 5 properties and is renting them all out This only "builds real wealth" for one person. For the larger system consisting of all 6 people, it's a net loss (the interest payments are still leaving, upwards). We've built a financial system where it is in everyb…

I used to own a house. Now I rent. The ability to walk away from the obligations that house-owning involve is worth a lot of money to me. I probably lose financially, maybe, but meanwhile I get to have a much better standard of living.

I'm in the same boat (or, house...boats are not great investments)

The justifications/case for home ownership can often be over-hyped. Everything works out well in a rising market. When shit hits the fan, sure my landlord can raise my rent, but I can move to another city for a better job with a very minimal hit. The stock market has created higher long term gains than the real estate market and is a hell of a lot more liquid.

The fact that people say your house is an "asset" is abuse of the definition and IMHO drives people to buy more house than they need. Sure it's an asset, but you also live there. Your liquidity is greatly reduced and your options become very limited.

Rental properties are another story. If you know what you're doing and can afford it, then I don't see issues with using that as an investing strategy. Just maybe don't buy all of them in the same city, or the same type of property. Just like with stocks and side hustles, diversification is important.

Re: Ask HN: How to prosper under negative interest rates?

#123

Post by Supermancho » Tue, Mar 31, 2020, 6:06 PM UTC

mindslight wrote: post #85

munificent wrote: post #73

Earlier quoted context omitted.

I think your natural argument rests on the idea that money is somehow a time-independent measure of "effort" but I don't know if that really makes sense.

I agree that is part of my argument. People certainly treat money as if it should be a time-independent measure of effort. Is there another objective metric that you can imagine money representing? I do not think it makes sense to insist that money can only ever be subjective based on the possibility that transients can occur - eg a factory burning down does cause natural price inflation, but this is an exception rat…

That is both how it is viewed by the 90% and how it is treated by the entire system. This is the source of "Time is money".

Re: Ask HN: How to prosper under negative interest rates?

#124

Post by wejowejfoiwejf » Tue, Mar 31, 2020, 6:08 PM UTC

chvid wrote: post #25

You don't build wealth by saving. You do it by investing using leverage. The system subsidises debt and risk-taking (within limits) by inflation and the structure of the tax system. You need to let go of the idea that it is immoral. Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good). Use your income to take on…

>You need to let go of the idea that it is immoral.

>Buy a house and when you can buy a bigger house. Put your money in the growth part of the stock market (technology ... big names like Apple and Amazon is good).

Your advice is sound, but I still argue that the system is extremely immoral. Consider what this mindset has done to the environment. The reality of Keynesianism is that by allowing the government to manipulate the market via inflation, we have encouraged a massive over-consumption of resources. People who would have otherwise saved their money and been satisfied with their current rate consumption are essentially threatened into spending their money faster. But hey, the system's worked for 87 years and only created the least equitable distribution of wealth ever seen on Earth, so I'm sure it will work for the next 87.

Re: Ask HN: How to prosper under negative interest rates?

#125

Post by solaxun » Tue, Mar 31, 2020, 6:11 PM UTC

WJW wrote: post #114

solaxun wrote: post #103

Earlier quoted context omitted.

"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and keep it in a safe than lock in a loss. I suppose for most people though the minor loss of principal outweighs that inconvenience, but for me, as a matter of principle, I refuse to be paid less than my principal (I didn't mean for that to come out as cheesy as it…

In order to make the calculation 'correctly', don't forget to price in the correct amount of risk. As an example, say there is a 0.2% chance in any given year of your house catching fire, either through your own fault or from a neighboring property on fire. If there is a 50% chance of you being able to rescue the money in such a situation, then that is an estimated 0.1% loss in any given year. There is also a similar…

Well, while we're in the realm of discussing tail risks - what is the risk that if your assets exceed FDIC insurance limits, the bank you have them in defaults?

Since we're discussing a negative rate environment, presumably this is a stressful time for the economy making this more likely than history would indicate. If you have your assets at multiple institutions to stay under the limits, what's the probability of one of those failing, and what's the probability the FDIC fails?

Depending on how negative rates are, the math can quickly turn those probabilities you outlined above into risks I'm willing to take.

Re: Ask HN: How to prosper under negative interest rates?

#126

Post by Supermancho » Tue, Mar 31, 2020, 6:11 PM UTC

m11a wrote: post #120

adaisadais wrote: post #40

Earlier quoted context omitted.

Warren Buffett talks about how cash is a bad thing to have over time as it can’t keep up inflation (1). He does advocating having enough on hand to “sleep at night”. But you really can’t build wealth by stocking money away in a savings account. Trump and his administration could have really done something awesome. He essentially got given the golden ticket for presidents: create a legacy. T. Roosevelt had parka, FDR…

Those presidents had remote wars and recessions as their triggers. Trump has a pandemic. Ultimately, you can't really go out and build a high speed railway during a pandemic, when you want to enforce social distancing and isolations (construction is the opposite to social distancing). And the US is so big that high speed rail would still be an awful way to go cross-country (it's only really effective within states),…

> Dumping money into schools won't fix education, either.

Depending on what you mean by "fix". If colleges payed Silicon Valley salaries, I think the quality of College Education would soar.

Re: Ask HN: How to prosper under negative interest rates?

#127

Post by tacon » Tue, Mar 31, 2020, 6:14 PM UTC

Rury wrote: post #99

toomuchtodo wrote: post #95

Earlier quoted context omitted.

> the money printer going "brrrrr" For those who have yet to have the enjoyment of the experience: https://brrr.money/

Can someone explain the 'going brrrrr' meme to me? I've seen it used in other contexts but can't quite fully grasp what is meant by it.

The sound of a lot of paper money being processed:

https://www.youtube.com/watch?v=ehFImqzVWos

Re: Ask HN: How to prosper under negative interest rates?

#128

Post by pontifier » Tue, Mar 31, 2020, 6:15 PM UTC

Create value.

Re: Ask HN: How to prosper under negative interest rates?

#129

Post by rayuela » Tue, Mar 31, 2020, 6:15 PM UTC

Der_Einzige wrote: post #92

rayuela wrote: post #51

Earlier quoted context omitted.

What do you mean by "good market conditions?" Also, we're definitely not in deflationary conditions - this implies a decrease in prices of goods. The shock to supply chains is actually going to make things more expensive. What we're really looking at is the possibility of stagflation - inflation + fall in demand.

Check currency trading platforms - we are deflationary as of this moment.

??? That's not how you measure deflation....

edit: for those wondering you wanna look at a Consumer Price Index (CPI) to dertemine inflation/deflation

Re: Ask HN: How to prosper under negative interest rates?

#130

Post by hluska » Tue, Mar 31, 2020, 6:16 PM UTC

solaxun wrote: post #103

qeternity wrote: post #8

You have to look at real rates, not nominal rates. The only markets that have negative nominal rates are battling deflation (which the US is not) or have serious liquidity concerns at the moment. The Fed is unlikely to go negative as they face a very different beast. Here's a quick example. Let's say you're in a deflationary environment: in 1 year, your money actually buys you more than it did last year, let's say fo…

"So, since you don't want to store that money under your mattress"... I never understood/agreed with this argument. I'd much rather withdraw all my money and keep it in a safe than lock in a loss. I suppose for most people though the minor loss of principal outweighs that inconvenience, but for me, as a matter of principle, I refuse to be paid less than my principal (I didn't mean for that to come out as cheesy as it…

When I was 19, I had an economics professor who did a great job of explaining that idiom to our young ears.

He talked about feudal times when landowners had to store their gold. So they had to build these massive castles with walls, hire professional soldiers, train their kids to wield weapons and even give some of their land to particularly good soldiers. That system was really expensive so they needed slaves to keep the whole system going. Since all the other landowners knew that you had all your gold in your castle, when they came upon hard times they would often attack. So, you would give your slaves primitive weapons and have them fight to defend ‘their homes’.

From the serf’s perspective, that system sucked. They worked hard, didn’t get paid and occasionally had to go into battle to protect their landowner. After a few generations, when you say “you know, Grandpa died in a battle. Dad and all my uncles died in battles. Three of my siblings died as infants. And they want me to take a fucking spear and protect that system?

Over the years, the system collapsed because slaves could get a better deal in cities. Landowners couldn’t afford their fortunes and castles fell into disrepair.

Basically, banks seem like a real ripoff until you consider the reality of having to store all your money in an environment where everyone knows whereabouts you have it stored!