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

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

#131

Post by fauigerzigerk » Tue, Mar 31, 2020, 6:18 PM UTC

dnautics wrote: post #63

wsetchell wrote: post #50

Earlier quoted context omitted.

I don't think deflation is the natural state of things. Even before fiat currency the money supply grew (e.g. gold mines) and we had inflation. Productivity growth is normal-ish, but the amount you prices have been all over the place throughout history.

Gold mines were not the major cause of inflation during the pre-fiat era. It was almost always deducting the precious metal content of the accepted currency, often to fund things like war. Deflation should be the natural order of things; for example the unit real cost of food had gone down massively since the first half of the 20th century, which is a huge part of why people don't starve to death during recessions an…

>Deflation should be the natural order of things

Yes, and it is, for existing unchanging things. But as productivity grows we invent and buy new and improved things.

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

#132

Post by orky56 » Tue, Mar 31, 2020, 6:23 PM UTC

1-more wrote: post #100

bonestamp2 wrote: post #23

Here's what I'm looking at... Since interest rates will be low, it could be a good buying opportunity for investment property. There is always risk here and with a rent strike looming there is potential for even more. I was already in the market for investment property so I've been following various markets (zillow lets you export a ton of data about historic property values and projections). Prices haven't fallen ye…

> I was already in the market for investment property I talked about buying a condo with my brother and renting it out but at the end of the day I'm just not comfortable just taking someone else's income because I happen to have the money on hand to make a down payment. It seems so predatory.

How is it predatory? The person who is renting likely does not have the ability to purchase and you adding another rental to the market drives rental prices down and provides another rental option (albeit insignificantly) thereby helping said renter.

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

#133

Post by akuchling » Tue, Mar 31, 2020, 6:23 PM UTC

hnarn wrote: post #115

mdorazio wrote: post #107

Earlier quoted context omitted.

1) Once again, inflation does not work that way. If it did, it would have been out of control in 2009. Instead, it was near zero. The same thing is happening right now. 2) The idea that 2-3% inflation is "really really serious" is completely absurd. I'm guessing you're young because historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't…

For context, the inflation goal set by the Swedish national bank is 2%. That's what they're aiming for, so clearly it's not "really really serious". CNBC also states that: >The Fed considers a 2% inflation rate to be a sign of sustainable growth and a level that keeps interest rates high enough to allow for mobility in the event of an economic downturn.

1-3% is also the Bank of Canada's target range: https://www.bankofcanada.ca/rates/indicators/key-variables/k...

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

#134

Post by solaxun » Tue, Mar 31, 2020, 6:23 PM UTC

hluska wrote: post #130

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…

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 kee…

That analogy works when everybody is doing the same thing and it's common knowledge that the average person has their assets sitting in their castle, but we're talking about 2020 when that would be the exception, not the norm.

You're acting like I would go on hackernews and tell everybody where my money is or something...

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

#135

Post by tarsinge » Tue, Mar 31, 2020, 6:25 PM UTC

shawnz wrote: post #105

chadash wrote: post #10

I'm not a financial planner or financial services professional of any kind, so take anything I say with a grain of salt. 1) should I stop saving? No. negative interest rates won't go that negative. Even if your bank is earning -1% interest, it still makes sense to be saving. 2) Should I put my savings elsewhere? Probably. ETFs or index funds with wide stock market exposure are a good idea (good examples are SPY, VOO,…

> That said, it's very hard to time the market, so the best strategy is to put your money in over time. One good way to do this is to take a set amount of money from each paycheck and invest it every pay period, regardless of what the market is at. If you have a bunch of money sitting in savings right now, maybe divide it into 52 parts (or 104 or 156 or even 208 depending on your risk tolerance and/or thoughts on how…

Is timing the market always wrong though? I don't feel like I made a bad deal selling one month ago and now re-entering DCA. It was obvious that the US market was not correctly pricing this pandemic. I think there is a middle ground between day trading and never touching anything.

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

#136

Post by xchaotic » Tue, Mar 31, 2020, 6:26 PM UTC

SketchySeaBeast wrote: post #61

walshemj wrote: post #55

Earlier quoted context omitted.

Not really binary bets or\day trading are gambling, if you can afford it and have spare cash it would make sense over the long term to invest - though not in individual shares for most. As Benjamin Graham said “Buy when most people, including experts, are pessimistic, and sell when they are actively optimistic.”

My parents retired a year ago. If they'd kept all their money in the stock market until this month they'd be in a lot of trouble, and probably will be for the foreseeable future - how is that not a gamble? "You need to diversify" would be an argument against gambling in the stock market, and getting into something safer.

You need to rebalance your portfolio as you get closer to retirement as you can’t time the market. I think by the time you’re retirement age, your portfolio should be 30% equities

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

#137

Post by fauigerzigerk » Tue, Mar 31, 2020, 6:27 PM UTC

mdorazio wrote: post #107

thorwasdfasdf wrote: post #82

Earlier quoted context omitted.

but we're not having deflation. With fewer and fewer people working, there's less and less supply with even larger demand, now that they're printing money like never before. As a result, we're going to get really really serious inflation of over 2%, 3%, maybe even more than 3%. It doesn't sound like much because we've become innured to it. But, it's really bad. Just think, you earned 100K in 1 year and 1 year later i…

1) Once again, inflation does not work that way. If it did, it would have been out of control in 2009. Instead, it was near zero. The same thing is happening right now. 2) The idea that 2-3% inflation is "really really serious" is completely absurd. I'm guessing you're young because historical US inflation prior to the ridiculous post-2009 financial situation had long periods of being well above 3% and the sky didn't…

I agree that 2-3% inflation is nothing to worry about. But what's happening now is not quite the same thing as in 2009.

For the first time in a very long time we actually have a shortage of supply. We didn't have that in 2009.

But I think/hope it will be short lived, and depending on how we act now it could easily turn into a shortage of demand once again.

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

#138

Post by xchaotic » Tue, Mar 31, 2020, 6:29 PM UTC

pjc50 wrote: post #47

> I was brought up to work diligently, not take on debt, and save - a simple approach to building wealth This basically doesn't build wealth, it builds a pile of money which you can draw down in the future. Not nothing and good to have at the base of a pension, but once you've gone beyond the basics it doesn't do much. It's mere deferred consumption, it's not making anything. Now you have to face three problems: - th…

“ If you can buy distressed property or businesses at the "end" of the pandemic”. Even if that goes as planned timing it is going to be tricky as there are a lot of punters in the same business- VC firms buying distressed businesses for a living

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

#139

Post by everybodyknows » Tue, Mar 31, 2020, 6:30 PM UTC

jnordwick wrote: post #111

Der_Einzige wrote: post #91

Earlier quoted context omitted.

At the moment, foreign demand for the dollar is so high that we are experiencing deflation (liquidity is still too low which is entirely why the fed is moving towards negative interest rates), in spite of the money printer going "brrrrr"

This is actually more true than people realize. Gold is down to flat even after the the huge Fed announcements. The CRB index has been getting crushed in the last month. But this short-term liquidity demand is going to go away. The real inflation story is going to be when it does and the economy settles down. Then we will have all these programs that pumped huge amounts of money into the system, and unless they are s…

The crucial question is when does business return to normal? Credible experts have put the time to a vaccine at 18-24 months. Until then, what sort of "normal" is plausible for say, an airline, or a dentist?

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

#140

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

munificent wrote: post #98

mindslight wrote: post #85

Earlier quoted context omitted.

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…

I don't think have the luxury of imagining a metric that we wish money to represent any more than we can say that "the number of rats in New York" means anything in any abstract sense. The value of money is an emergent property of what people do with it and if its numeric measure fails to track our selected "objective metric", it's the fault of our metric, not money itself.

Objective measures are necessary to independently judge the actions of the people in charge of the money supply. To write off objective standards is to hand them an enormous amount of unchecked power, power which will invariably be abused for their gain.