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How Norway spends its $882B global fund

economist.com

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Re: How Norway spends its $882B global fund

#21

Post by ricardonunez »

dogma1138 wrote: post #15
harryh wrote: post #2

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is…

Will that be the reason why Germany has one of the lowest home ownership rates?

Re: How Norway spends its $882B global fund

#22

Post by hx87 »

dogma1138 wrote: post #15
harryh wrote: post #2

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is…

It's what inevitably happens when the balance between "owner-occupied housing as investment" and "housing as cost of living" gets out of whack.

Re: How Norway spends its $882B global fund

#23

Post by tormeh »

avn2109 wrote: post #14
finstell wrote: post #11

Earlier quoted context omitted.

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

>> "...impossible..." https://en.wikipedia.org/wiki/Renaissance_Technologies "...famed for one of the best records in investing history, returning more than 35 percent annualized over a 20-year span..."

People have done it before. It has always turned out to be luck. Fantastic track record until they cease being lucky.

So, cynicism and economic orthodoxy aside, that sounds like a really cool company. Has anyone tried just tossing a big dumb neural network on stock data and investigated whether it can make money? It sounds very obvious, but a quick googling returns little. But I guess the investment industry is pretty secretive by nature.

Re: How Norway spends its $882B global fund

#25

Post by dogma1138 »

hellogoodbyeeee wrote: post #13
harryh wrote: post #2

882 B / 5.2 Million ~= $170k for every citizen of Norway. At 4% a year that's $6,800 each in annual income. Not bad!

The US would need 56 trillion to achieve the same level of per capita income

That's not a correct calculation, however the US has sovereign wealth funds which are usually administered on a state level and are usually orietned towards a specific funding goal (e.g. https://en.wikipedia.org/wiki/Permanent_School_Fund) , as well as social security. The Social Security Trust Fund is a sovereign wealth fund it's not called like that due to historic convention, but it does operate like one.

Overall a pretty stark difference between the funds is the source and volatility of the revenue, US funds tend to be considerably more safe in those regards, and the how and where it is invested. 55-60% of Norway's (and there are calls to increase this to 70%) fund is invested in the international stock markets, US funds are for the most part invested locally (within the US) and in considerably less volatile commodities.

A large scale financial crisis can erase much of Norway's SWF while having considerably less effect on US social security and state level SWF's.

Re: How Norway spends its $882B global fund

#27

Post by webbore »

adventured wrote: post #16
finstell wrote: post #11

Earlier quoted context omitted.

> 20-30-40% per annum, for over 20 years It is impossible, at least continuously. Nobody has ever managed to do that. You'd be lucky if you could beat the market by a few points on average over a 20 years time period. Compensation well for good performance does not make sense when you aren't penalized for losses.

Continuously? Ok, perhaps that would be almost impossible, to pull off 20% for 20 years without missing a year. However, Buffett and Soros managed to average above 20% annual returns over 30 plus years. For example in the 1960s Berkshire returned 28.3% per year averaged. In the 1970s it returned 22.2% per year averaged. In the 1980s it averaged 39.1% (!) per year. In the 1990s it averaged 20.5% per year. Nobody would…

The thing about both Buffett and Soros is that they get deals that the general investor, or even really good and kinda famous investor, would never get. For example, Buffet did 300 million in unsecured loans (but with front-of-line payback) with Harley Davidson in 2009 at 15 percent, essentially to cover customer financing (i.e. cashflow) not because the company was in any real trouble. You and I would be lucky to find that sort of return from the riskiest loan, let alone a profitable manufacturing company. AND, Buffet could have made more than a Billion extra if he'd bought stock instead of debt, so even when he's wrong he's still getting a sweetheart deal.

Re: How Norway spends its $882B global fund

#28

Post by dogma1138 »

ricardonunez wrote: post #21
dogma1138 wrote: post #15

Earlier quoted context omitted.

Not bad, but not enough to cover the current levels of household debt in Norway, while a large portion of the debt is tied to mortgages the mortgage debt in the Norway have been increasing faster than income for quite a few years now. http://www.tradingeconomics.com/norway/households-debt-to-gd... This isn't a problem unique to Norway, Norway is just one of the biggest offenders, even in the Nordic countries there is…

Will that be the reason why Germany has one of the lowest home ownership rates?

Not the only reason, and most likely not the primary one. When adjusted for age Germany has a pretty solid house ownership rate.

Germany is big and has a pretty mobile workforce, in many other countries you are considerably less likely to be moving every 2-5 years across large distances like you are in Germany.

Overall the affordability of housing even when accounting for mortgages and required seed money is considerably better in Germany than in Norway, Sweden or Denmark, and while Germany does have about half the house ownership rate on paper it is also because rent is both available and affordable and is favored by the younger workforce.

One can argue about what is better having to rent until you settle down at the age of 30-35, or buying a house at the age of 19 with decades of mortgage and only having to sell it to move into your parent's house which is still under mortgage. The house pricing in Oslo rivals NYC these days.

Also while Germany does have a considerable below average age for the EU28, the highest / above average EU28 countries are not those which you would expect, those are the Eastern European countries like Romania, Poland, Hungary, Slovakia etc. countries which were in the USSR/Warsaw Pact or were under socialism at one point or another. When you give everyone in the country a home at some point in time you'll end up having very high homeownership rates even 50 years later.

Re: How Norway spends its $882B global fund

#29

Post by webbore »

netcan wrote: post #26

Norway's oil money story is one of the weirdest. Are there any examples in history where a country has saved up such a big stash? Are they planning to retire young, as a nation?

I live in Calgary, Alberta which is pretty much the exact counterpoint to Norway with a very similar historical starting point (size, population, dynamics). It doesn't matter who's in power, all our governments spend like drunken sailors on shore-leave, no sales tax to even out the boom/bust (and counter low-ish taxes), A savings fund that is now empty going into an incredibly rough period.

I'm not says one is better than the other - Norway looks great right now, but didn't when I visited ~10 years ago and my Subway "value" meal cost over $25 CDN - just an interesting counterpoint.

I keep waiting for that manufacturing "bump" from Eastern Canada we were promised from a sinking dollar...

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