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End of Golden Era for Investors Spells Troubles

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Re: End of Golden Era for Investors Spells Troubles

#41

Post by fauigerzigerk »

vog wrote: post #23
fauigerzigerk wrote: post #13

Earlier quoted context omitted.

I wouldn't put a lot of faith in such predictions either, but there are a few reasons to believe that exceptionally good returns might not be repeatable. One is simply regression to the mean. Others are high global levels of debt and a significant wave of globalization having just run its course. But I think productivity growth and our ability to redistribute the fruits of that productivity growth are the big unknown…

> The current step change in our AI capabilities could throw a spanner in all attempts at making any reliable predictions. On the other hand, vastly improved AI capabilities could mean that future prediction systems are more reliable. At some point in the future, all further predictions may become roughly accurate. Maybe these AI sytems are clever enough in make only predictions which are self-fulfilling prophecies.…

That's a nice thought experiment but I don't think we have the slightest indication that such a thing is even theoretically possible.

Our current AI systems are pretty good at identifying patterns of past behavior. But the extent to which past behavior contains information about future behavior may be limited. Information that isn't there cannot be found irrespective of how clever any predictor may be.

Re: End of Golden Era for Investors Spells Troubles

#42

Post by StanislavPetrov »

"The Long Run" is a completely relative term. As someone who used to trade, I know plenty of people who consider 3 months "the long run".

The unfortunate fact is that markets are all about leverage based on future returns, and the estimates for future returns have been massively inflated for decades. In 2008 this started to become apparent, so central banks everywhere have been printing and loaning trillions while buying up everything in sight to try to hide the fact that the assumptions that markets would grow 7% a year forever are totally false. The fact is that the bill is coming due very soon, and all the printing and suspension of accounting rules("mark to market") and jawboning won't do a thing about it.

Re: End of Golden Era for Investors Spells Troubles

#43

Post by darawk »

Ntrails wrote: post #39
nostrademons wrote: post #34

Earlier quoted context omitted.

I think part of the article's point is that there is no better place to put your money, and that we are likely to see reduced returns to capital across all asset classes. It is possible to have a glut of both capital and labor if there's no innovation in the economy. (Conversely, this makes it a great time to be an entrepreneur if you have a good idea, but part of the article's point is that most of the low-hanging p…

>* there is no better place to put your money* I'm not sure I buy into that in the slightest, alternative asset classes exist for the very purpose of allowing diversity when market returns are poor. Some of them are rough to access as an individual, but others are not. The real kicker is that the absolute size of a retirement pot is utterly meaningless without reference to the interest and inflation rates during reti…

No, the point of the article is that all asset classes across the board will experience lower than normal returns. Diversification will not help you.

Whether or not its thrust is correct is hard to say, but that appears to be their thesis.

Re: End of Golden Era for Investors Spells Troubles

#44

Post by kfk »

While P2P lending and all the new stuff coming from new technology in finance (for individuals and businesses) can easily average above 6.5%, but taxation is horrible (it's part of the income tax in Europe).

Taxation is the real shame in all of this. We need better laws on deferred accounts (non taxed accounts). We should be able to keep money invested for x years (where x can be <10) and not paying any taxes until the end of this period. Paying taxes every year kills the compound effects of YoY capital appeciation (a 40% on a P2P lending interest rate of 8% means you net 4.8% instead).

Re: End of Golden Era for Investors Spells Troubles

#45

Post by Nokinside »

marvin wrote: post #7

Honest question: How is is possible to lend any weight to predictions like these when, even when it comes to the lower profits of the last few years, predictions have always been based on the recent past and wrong? There's any number of "black swan"-type events that could prove this to be incorrect.

I didn't read this McKinsey's report but the expectation of lower returns have been around a long time and there are good reasons for it.

Most analysis of lower expected returns in long term is not based on recent past or any kind of trend spotting. Its based on looking how the expected marginal product of capital and growth in economy are expected to change.

1. Expected marginal product of capital. For the past 30 years financial depth (the ratio of assets to GDP) has been increasing. There is more capital relative to other factors of production than there was before.

2. Economic growth. In most growth models (Solow standard growth model is good enough for this discussion) the most important parameters are capital, labor and technological progress. The amount of labor in industrialized countries is not growing anymore and there is plenty of capital. In the long run, growth is achieved only through technological progress. Only rapidly industrializing countries can expect rapid growth. China is good example how growth will gradually slow down as it catches up with others and population growth slows down.

summary: capital/millenial > capital/baby-boomer + law supply and demand.

Re: End of Golden Era for Investors Spells Troubles

#46

Post by madaxe_again »

StanislavPetrov wrote: post #42

"The Long Run" is a completely relative term. As someone who used to trade, I know plenty of people who consider 3 months "the long run". The unfortunate fact is that markets are all about leverage based on future returns, and the estimates for future returns have been massively inflated for decades. In 2008 this started to become apparent, so central banks everywhere have been printing and loaning trillions while bu…

Many traders consider 15 minutes the long run - which it is, when most of your positions last microseconds.

Me, I'm making time and running a business while waiting for the system of the world to collapse. It's hard to take this life too seriously when you know you're just playing the loading screen prelude to a survival horror game. Pensions? Don't make me laugh.

Re: End of Golden Era for Investors Spells Troubles

#47

Post by SyneRyder »

justinjlynn wrote: post #8
knieveltech wrote: post #3

Earlier quoted context omitted.

Gen X was standing on the same rug as you guys when it got pulled out. Take a look around next time you're in WalMart or McDonalds. All those 40ish looking people that look weirdly out of place in their uniform shirt? Yeah, that's us since the boomers nuked domestic manufacturing and construction wages made a run for the bottom. Don't even get me started on retirement. sigh

Well, I didn't say that Gen X got nothing at all. We all got hurt in some way by the GFC. Of course to generalise about an entire generation people is egregiously pointless. At the same time, simply due to the luck of timing, it feels as though Gen X had more of a chance to do something about it. However, they did not and in fact they had much more of an opportunity to take advantage of the selfish and short-sighted…

"We all got hurt in some way by the GFC."

Worth noting that the GFC was one of the best times in history to buy stocks. I'd be in a terrible situation right now if it wasn't for the GFC: I bought some brand name stocks (supermarkets, mining, banking) at huge discounts. One of them more than tripled in price in 5 years and is still throwing off a 20% cash dividend every year.

Don't give up. You never know when a Black Swan event might swing things in a way that benefits you. And Millennials have so much online access to education about stock market trading, E-Trade, online banking, and new things like crowdfunding that just weren't around before. It's not easy for Millennials, but there's a lot of amazing opportunities that other generations would be jealous of.

Re: End of Golden Era for Investors Spells Troubles

#48

Post by noir-york »

We're gonna be overdue for a large war within 20 years so the pension pot of today's millenials, or indeed, anyone's, is going to be the least of their worries.

By large I mean either a world war or a big regional one - and large wars have a habit of resetting economies, technology and societies. Most likely flashpoints: Russia and/or South East Asia.

Best investment - I am guessing either a New Zealand or a South American passport...

Re: End of Golden Era for Investors Spells Troubles

#49

Post by ap22213 »

trhway wrote: post #15
knieveltech wrote: post #3

Earlier quoted context omitted.

Gen X was standing on the same rug as you guys when it got pulled out. Take a look around next time you're in WalMart or McDonalds. All those 40ish looking people that look weirdly out of place in their uniform shirt? Yeah, that's us since the boomers nuked domestic manufacturing and construction wages made a run for the bottom. Don't even get me started on retirement. sigh

>All those 40ish looking people that look weirdly out of place in their uniform shirt? Yeah, that's us since the boomers nuked domestic manufacturing and construction wages made a run for the bottom. technology and economy do change. The changes can't be stopped. The question is how you adapt to them. When many people suddenly lost their job as soldiers 70 years ago there was in particular GI bill created to help man…

Or, as they say, hindsight is 20/20.

Concepts like exponential change and globalization certainly weren't mainstream in the 80s when I was a child. In fact, I'd bet that most adults at the time still worked at the same company, in the same town, for most of their adult life. Companies at the time were still providing pensions and health care and middle class salaries, and employees (owners, bosses, and workers) generally all still worked in the same place.

It is silly in hindsight, yes. We were quite naive. But, I think you're being overly harsh (or maybe I'm just too sensitive). Many of us assumed that changes would happen linearly, not exponentially, and that we would live out our lives differently, but mostly similar to our parents.

Hopefully, those under 30 today have been better trained to be highly adaptive. However, at a certain point, even the most well-trained Human will reach an adaptive limit.

Re: End of Golden Era for Investors Spells Troubles

#50

Post by cm2187 »

RobertoG wrote: post #19
cm2187 wrote: post #14

I think it can get much worse than that. I don't know why people think the current levels of accumulation of debt are sustainable but there is a limit to what even the US can roll in term of debt. All developped nations are at around 100% debt to GDP, more than 200% if you include private debt, and growing at 3-5% per annum. Now does anyone really think that sometime soon any developped country will start making publ…

Massive defaults of states doesn't make sense. A country that have debt in its sovereign currency have not need to default. Inflation is not precisely the problem now, is it?

Then if you do not believe in default or inflation, what exactly do you think will happen? 1000% debt to GDP?
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