Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

What to Worry About in This Surreal Bull Market

bloomberg.com

Post reply on HN
Print view View original

211–220 of 223 posts

Re: What to Worry About in This Surreal Bull Market

#211

Post by OscarCunningham »

ThrustVectoring wrote: post #136
Al-Khwarizmi wrote: post #106

Honest question: is there any unavoidable reason why there cannot be a permanent bull market? I mean, apart from empirical/historical observation reasons (I don't find those very compelling, as some stuff in economics seems to never happen until it happens). Given the low interest rates, people are growingly investing in diversified stocks to obtain profits in the long term. Index funds are growing, which don't even…

>Taking that into account, could a slow and steady rise not just become a system equilibrium and go on an on? There's positive feedback inherent in the system under control. Specifically, lower volatility makes it safer and more profitable to use leverage. This leverage will force people to overreact to negative market movement.

Why do they have to overreact? They're smart. Often they're computers. Can't they just ... not?

Re: What to Worry About in This Surreal Bull Market

#212

Post by dharma1 »

sp527 wrote: post #143
dharma1 wrote: post #134

Earlier quoted context omitted.

Expansive monetary policy has happened in many places around the world, Europe, UK, Japan - not just the US. https://en.wikipedia.org/wiki/Quantitative_easing It's curious that something that was done as a measure to alleviate the effects of a previous crash is creating another bubble and (probably) another eventual crash. My guess is the explosion in money going into cryptocurrencies is partly because of that - more…

I’d argue most of the run up in the last year is driven almost purely by price, with people embracing and then purveying the ‘Bitcoin story’ because it helps rationalize their decision and not because they necessarily understand or believe it. The funny thing is how said people often then come to genuinely believe they believe or understand Bitcoin, when in reality they’ll scatter at the first sign of a major correct…

I think it's a mix of different reasons.. I think there is a correlation between events in North Korea and trading volume in South Korean exchanges too

Re: What to Worry About in This Surreal Bull Market

#213

Post by namlem »

dominotw wrote: post #101
mathgeek wrote: post #14

The next market recession will happen the same as the previous ones: some lucky people will predict it, most won't, and everyone will in hindsight declare how obvious the signs were. The best strategy is still to diversify your investments, keep enough emergency assets to ride the wave, and not worry about it.

>diversify your investments Diversify into what though? Once market crashes, it takes everything down with it.

Bonds, precious metals, ETFs tracking industries that do well during downturns.

Re: What to Worry About in This Surreal Bull Market

#214

Post by NTDF9 »

mac01021 wrote: post #177
sharemywin wrote: post #72

Earlier quoted context omitted.

I worry what if the entire market is made of fools that will buy their next slightly smaller share of the market at ever increasing prices. It used to be that traders set pricing enough that if things got out of hand then traders would come in to sell/short. But what if most people just used buy and hold?

> But what if most people just used buy and hold? I'm having trouble imagining that. Every time someone buys, some one else is selling, after all.

Clearly there are fewer and fewer people selling now causing prices to go up?

Re: What to Worry About in This Surreal Bull Market

#215

Post by pnathan »

sytelus wrote: post #182
pnathan wrote: post #172

Earlier quoted context omitted.

Diversify yo' assets. I recommend starting with ETFs, ensuring you aren't locked into specific companies. And ETFs don't have the specific conditions of mutual funds. Several stock ETFs; I suggest one tuned for growth and one tuned for dividends. If you aren't sure, the Vanguard VOO ETF is a solid starting point. At least one bond ETF: I'm inexperienced there, but they tend to move in inverse correlation to stocks. S…

US ETFs are no longer diversification. Now that everybody is doing it, when market goes down ETFs will fall from sky as well at same or faster rates. More importantly, most ETFs are tied with one market, one country and one currency. For true diversification, you want to have gold, oil, Chinese, Russian, Asian along with usual American ETFs.

You expose yourself to currency risk as well with that strategy. I primarily worry about single company failures and wobbles; if the US economy implodes, the rest of the world will be caught up in it.

But you're right, you should balance with non-US as well. I've steered clear of them, myself, but that's not per se ideal practice and I'm overdue for a rebalancing.

But, to be clear, I was sketching an entry level into investing, not a more sophisticated approach.

Re: What to Worry About in This Surreal Bull Market

#216

Post by fnovd »

mac01021 wrote: post #186
fnovd wrote: post #162

Earlier quoted context omitted.

>But... there is the question of whether our economic growth brings us closer to the absolute carrying capacity of spaceship Earth. Are we inching up on the absolute carrying capacity of Earth? Perhaps. But what about the carrying capacity of the Sun? We are barely capturing a fraction of the energy the Sun sends our way. Think about what we could do if our ability to harvest renewable energy in the next two decades…

The following blog post[1] should be required reading for everyone everywhere. It talks about physical constraints on economic growth. The main point he makes is that, regardless of how inexhaustable our sources of energy are, increases in our rate of energy use are still necessarily limited. He notes: 1. Economic growth is always accompanied by increase in energy consumption. 2. Nearly all energy consumption (whethe…

Great blog post, but I had to take pause at this line:

>Economist: More than happy to keep our discussion grounded to Earth.

Of course we can't just keep ramping up terrestrial energy production ad infinitum. All evidence points to us trying to leave spaceship Earth. The entire discussion was grounded in a reality we are trying to move past.

Re: What to Worry About in This Surreal Bull Market

#218

Post by ThrustVectoring »

OscarCunningham wrote: post #211
ThrustVectoring wrote: post #136

Earlier quoted context omitted.

>Taking that into account, could a slow and steady rise not just become a system equilibrium and go on an on? There's positive feedback inherent in the system under control. Specifically, lower volatility makes it safer and more profitable to use leverage. This leverage will force people to overreact to negative market movement.

Why do they have to overreact? They're smart. Often they're computers. Can't they just ... not?

As the market falls, their portfolio value falls while the loan amount remains constant, increasing leverage. All levered positions must either sell into corrections or let their leverage increase to unacceptable levels. And at some point, the folks lending you money will have the right to call in the loans you took to buy securities.

This automatic buy high / sell low effect is why people like using less leverage in more volatile markets. When volatility is high enough, it starts becoming advantageous to hold cash to buy the dip / sell the peak. The breakeven point between "more money in the market" and "volatility cleans out my position" can be calculated with the Kelley Criterion.

Re: What to Worry About in This Surreal Bull Market

#219

Post by benp84 »

kylestlb wrote: post #139

The PEOPLE VS COUNTRY graph is a little concerning. Household wealth rising faster than USA GDP. Is there some normal, boring reason why this would happen?

Those numbers are in two different units: wealth is $ and GDP is $/time. Increasing wealth/income ratio could mean people are saving more.

Re: What to Worry About in This Surreal Bull Market

#220

Post by mac01021 »

zbentley wrote: post #171
mjburgess wrote: post #51

Earlier quoted context omitted.

Ah yes, the Flimflam-Fo Equation with its key parameters, "rich person a" and "rich person b". Conspiracy theories might well be defined just by the application of the fallacy, "if someone benefits, then they intended it". And here we see this fallacy being applied. Sound like a textbook conspiracy to me. The extremely weathly are not interested in increasing their net wealth, only in specific purchases to further th…

> the fallacy, "if someone benefits, then they intended it". Slightly tangential, but neat: that fallacy has a name! It's the "Post hoc ergo propter hoc" fallacy: https://en.wikipedia.org/wiki/Post_hoc_ergo_propter_hoc There might be a more specific named fallacy for when post-hoc happens with regard to individuals' intentions and benefits rather than causes and effects in general though.

I don't think "after it, therefore because of it" describes the fallacy identified by the GP.
Post reply on HN