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Ask HN: How to prosper under negative interest rates?

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

#141

Post by 1-more »

orky56 wrote: post #132
1-more wrote: post #100

Earlier quoted context omitted.

> 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.

At the end I get a condo and the renter gets nothing, that's just so backwards to me.

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

#142

Post by saiya-jin »

oh_sigh wrote: post #104
Der_Einzige wrote: post #94

Earlier quoted context omitted.

No - You're wrong and the person you're replying to is right. Futures are how you multiply your money with relatively low risk. Stocks are how you get 5% returns amortized YOY if you're lucky

Why is there all this free money sitting in the futures market?

Yeah I wonder why on earth is any professional trader doing anything else rather than methods described. Those amateurs, right? Money sitting there for free... give me a break.

I don't need to be a finance expert to know when somebody sells a snake oil - things that sound too good to be true most often are.

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

#143

Post by Nacraile »

buboard wrote: post #116
thorwasdfasdf wrote: post #78

>> I was brought up to work diligently, not take on debt, and save It absolutely will put you at a huge disadvantage, through no fault of your own. The whole point is to transfer money from savers to debtors. And, there's no getting away from it, unless you take on large risks. The govt is pushing for more and more inflation. We've already had high inflation for the last couple of years of over 2%, and they're still…

That makes a case for non-centrally-manipulated assets like gold or crypto

Because neither of those have a history of volatility or risk.

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

#144

Post by jnwatson »

thorwasdfasdf wrote: post #82
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…

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…

That printing money necessarily leads to inflation is not true in a situation like this. Inflation happens when there's more and more money being used to chase a finite amount of goods. In our current economic situation, there's a huge pile of money that's not chasing any goods at all.

Like like after the 2008 crisis that didn't lead to inflation, this won't either, as long at they turn off the money printer when people start investing again.

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

#145

Post by AlexandrB »

mindslight wrote: post #33
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…

> in 1 year, your money actually buys you more than it did last year, let's say for instance, 2% more. Under this weird environment It's worth pointing out that this is not "weird", but rather the natural state of things! The effect is so strong in computing that we still see it, but technological progress means everything in general gets easier to produce. This policy that "prices must always go up" is itself the ab…

> It's worth pointing out that this is not "weird", but rather the natural state of things!

Except in health care, education, and real-estate - all three of which are needs more fundamental than personal computing or electronics.

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

#146

Post by mindslight »

tathougies wrote: post #75
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…

That's why we have a stock market, a futures market, businesses, etc. The commenter above gave an example of a real estate investor. That is a particular type of investor which has to deal with some particular kinds of risk that not everyone is suited to or wants to deal with. For those people, there are other investments they would be good at, and they should engage in.

You didn't actually respond to my points, but just pointed out the existence of other types of business where the centralizing flow is less obvious than real estate.

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

#147

Post by OrangeMango »

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…

> Crime is spiking in NYC right now and it's not really a priority to report it.

How can you know this? If it is not being reported, you must be relying on anecdotal reporting? Reddit, nextdoor, facebook?

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

#148

Post by shawnz »

tarsinge wrote: post #135
shawnz wrote: post #105

Earlier quoted context omitted.

> 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.

It's always wrong if you take luck out of the equation. With DCA, the problem is all the cash you have sitting around NOT invested while in the process of executing the strategy is really just money that you are betting against the market with.

For example, maybe there will be a downturn for the next 2 months but what about the 7 months following that? They could all be green for all we know, and all that money would be sitting around being lost to inflation. Also consider this: on average, missing just the best 10 trading days of each year would cut your returns in half, historically. We have already had several huge single-day rallies even in this downturn, and people who divested for that period may have made their losses even worse by doing that.

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

#149

Post by brobinson »

chvid wrote: post #74
mkaymalright wrote: post #65

Earlier quoted context omitted.

Spot-Futures arbitrage, especially if your brokers allows you to collateralize your futures position with the profits from your spot position which would allow for higher leverage on the futures side. Let's say the futures price is higher than the spot price and there is 3 months left until maturity. You sell the same (USD equivalent) amount in the future (expensive) and buy in the spot (cheap). You just made a profi…

No. Buy a house and some stocks in growth sectors.

Being long-only is great when everything is going up.

As for me, I like to hedge out the market and sector movements by being long/short (adjusted for beta) within a given sector. I only make money if my long outperforms my short. Trump tweets and other companies' earnings in the sector do not affect my P/L.

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

#150

Post by jjeaff »

fauigerzigerk wrote: post #137
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…

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.

Do we really have a shortage of supply? For what products? The only shortages I have seen are for toilet paper and a few random grocery store products that maniacs decide to stockpile next. (in my community, there is all the sudden a run on ice cream now that bread is back in stock).
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