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

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

#241

Post by [deleted] » Wed, Apr 01, 2020, 5:08 AM UTC

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…

[deleted]

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

#242

Post by meseeks555 » Wed, Apr 01, 2020, 7:28 AM UTC

voisin wrote: post #232

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…

Anyone else have a hard time believing the official inflation numbers? Housing, food, restaurants, electricity, hotels,... anything I can think of that I buy regularly all seems significantly more expensive than it did 10 years ago - much higher than the official numbers would lead me to expect.

This is my experience as well ... and healthcare and education costs have also gone up much faster than the stated rate of inflation. There are a few areas --- like consumer electronics and maybe food --- where this isn't the case or prices have actually gone down, but only a very few.

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

#243

Post by marcus_holmes » Wed, Apr 01, 2020, 9:15 AM UTC

pjc50 wrote: post #203

marcus_holmes wrote: post #70

Earlier quoted context omitted.

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 rather surprised; the inabiilty to paint the walls or put up pictures or have pets? The knowledge that you might have to leave at short notice?

I don't have pets - I'm not able to commit to 10+ years of being able to look after them, so I don't have them. This isn't due to renting, but due to me being bored with places easily.

I can paint the walls, put up pictures (Berlin has better rules than UK/Australia). Not that I do when I can.

I've only been evicted a couple of times, and even then I wanted to move anyway so it was convenient. It's usually me/us moving on and the landlord annoyed that they have to find a new tenant.

And don't forget the wonderful bonus of anything that goes wrong being someone else's problem. Roof leaking? Phone the landlord. Rising damp? Phone the landlord. Mold problems? Neighbours building a new fence? Frost damage to the pathway? Pipes frozen? Window cracked? All not my problem.

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

#244

Post by marcus_holmes » Wed, Apr 01, 2020, 9:19 AM UTC

gnopgnip wrote: post #217

marcus_holmes wrote: post #68

Earlier quoted context omitted.

Which is great in a rising market, but will ruin him when the market falls (which it looks like it's about to do). Leverage works both ways, it will amplify both gains and losses.

Leverage does not work the same way for real estate. There is no margin call like there is with stock. Even if you are upside down on the mortgage in many cases you are still cashflow positive and can ride it out. And if you are not, even in recourse states in practice the losses are not amplified and a strategic default, deed in lieu, or short sale are still possible.

Utterly not true outside the US. I've seen lots of people in negative equity, unable to afford the mortgage and unable to sell (the mortgage liability doesn't go away if you sell the property. If the mortgage is bigger than the current house price, selling doesn't help). People with multiple properties and multiple mortgages are in worse trouble. It's very easy to go bankrupt in this situation, I've seen it happen.

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

#245

Post by brokenkebab » Wed, Apr 01, 2020, 9:37 AM 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's more a fairytale, then the explanation to human history at least. It sounds almost as if feudalism gone, because guys with swords had no banks to keep their heavy yellowish coins. Which is not very accurate. FWIW very few feudal families were able to hoard gold, or jewels, and for the most part they kept the same things in their castles a village granddaddy would, just in bigger quantities (i.e. food, and fuel). Coins were as expendable as a sauerkraut, and sausages, just easier to store (but not always as liquid as fantasy series makes us think). Were you a feudal you would care the most for the sole thing able to give you wealth almost every year - land.

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

#246

Post by state_less » Wed, Apr 01, 2020, 10:07 AM UTC

csomar wrote: post #178

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…

> but we're not having deflation. We are going to have deflation. The stock market already "deflated". Just wait for the rest. Food prices are going to go through the roof (and maybe medical procedures) but everything else is going to get cheaper.

Stocks are deflated because they aren’t expected to earn because people aren’t out buying and companies aren’t earning. Same for oil. Same for airline tickets. It seems obvious that there is deflation. If you have a good paying job right now, you can buy a lot for less.

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

#247

Post by mancerayder » Wed, Apr 01, 2020, 12:57 PM UTC

gnopgnip wrote: post #210

mancerayder wrote: post #88

Earlier quoted context omitted.

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…

If you mean you sold your home and invested in stock market just before this all happened, you probably lost 20-25% as of right now as opposed to just holding on to the property. A bear market doesn't mean anything about real estate prices, and in practice demand for real estate increases as the stock market and bond market drops

I got lucky, because I had cash from the sale and the world crumbled before I had time to invest in the market. Otherwise I absolutely would have, and I've have absolutely lost a lot.

Now I have cash and wondering if inflation will become a problem for the first time since the 70s.

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

#248

Post by relaxing » Wed, Apr 01, 2020, 2:49 PM UTC

mancerayder wrote: post #161

OrangeMango wrote: post #147

Earlier quoted context omitted.

> 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?

Anecdotal - Citizen App blowing up, in several neighborhoods I know well. A large number of street robberies, gunshots heard. Unusual events, like a deadly assault during the afternoon in an area that never happened. Before the pandemic crime had spiked for certain things, like misdemeanor assaults and robberies, I want to say 20+ percent. The politicians use Major Crimes, because it makes them look better as they go…

Or maybe there are more people at home with free time to make reports on neighborhood apps.

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

#249

Post by fierarul » Wed, Apr 01, 2020, 3:34 PM UTC

marcus_holmes wrote: post #84

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…

This is a really good time to start a business. Established competition will be struggling because their spending is based on "normal" business but their revenues got hit. When the lockdown stops there's going to be a spending surge (because everyone has been forced to save for months).

> When the lockdown stops there's going to be a spending surge (because everyone has been forced to save for months).

Everyone that had income during that time saved money (ie. remote programmers). The rest just went into debt, right? Or spent whatever money the government provided.

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

#250

Post by fierarul » Wed, Apr 01, 2020, 3:40 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…

It is counterintuitive since the default explanation about DCA is that one will ride highs and lows for a good average return. I'll have to read that paper.