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Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

hussmanfunds.com

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Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#141

Post by ratacat »

spookthesunset wrote: post #95
smogcutter wrote: post #83

Earlier quoted context omitted.

"Bitcoin is inherently wasteful, therefore it's not wasteful." What?

Welcome to Bitcoin advocate logic. Clearly using more energy than a moderate sized european country in order to process 3 or 4 transactions per second isn't wasteful. Right? I mean in absolute numbers, says the bitcoin advocate, the fiat banking system has to use more, right?.... ....nevermind the fact they do something that is not driven by pure speculation and do it at thousands of times larger scales. Bitcoin -- t…

Yes our financial system isn't based on speculation. Good one

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#142

Post by maneesh »

asimpletune wrote: post #129
maneesh wrote: post #128

The writer makes a few good points -- I liked his quoted selection "Faced with extreme valuations, the first impulse of investors..." However, I think there is a fundamental flaw in his analysis -- specifically when he makes this a majority foundation of his point: "Every security is an asset to the holder, and an equivalent liability to the issuer." That's not true right? A few moments reflection makes me think of s…

He’s just saying it’s an IOU, I think.

but shares aren't an IOU. They are points that represent a company, and can be traded at a later date dependent on the market. They can't just redeem it for a promised cash amount at a later date -- they are tradeable at what someone else is willing to buy -- with no guarantee that someone else will be willing to buy...

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#143

Post by wmrowan »

maneesh wrote: post #128

The writer makes a few good points -- I liked his quoted selection "Faced with extreme valuations, the first impulse of investors..." However, I think there is a fundamental flaw in his analysis -- specifically when he makes this a majority foundation of his point: "Every security is an asset to the holder, and an equivalent liability to the issuer." That's not true right? A few moments reflection makes me think of s…

Companies issue shares. These shares are listed as a liability on the company's balance sheet. Each share represents a liability to the company because it entitle its holder to a share of any dividends paid by the company.

The intrinsic value of a share is the net present value of this future stream of dividend payments, not its current market price. OP's point is that the market price of a share can be significantly above its intrinsic value in periods of irrational exuberance, such as now, creating "paper wealth" that doesn't really exist and which will evaporate when the speculators head for the exit.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#144

Post by perl4ever »

wmrowan wrote: post #143
maneesh wrote: post #128

The writer makes a few good points -- I liked his quoted selection "Faced with extreme valuations, the first impulse of investors..." However, I think there is a fundamental flaw in his analysis -- specifically when he makes this a majority foundation of his point: "Every security is an asset to the holder, and an equivalent liability to the issuer." That's not true right? A few moments reflection makes me think of s…

Companies issue shares. These shares are listed as a liability on the company's balance sheet. Each share represents a liability to the company because it entitle its holder to a share of any dividends paid by the company. The intrinsic value of a share is the net present value of this future stream of dividend payments, not its current market price. OP's point is that the market price of a share can be significantly…

The present value of future dividends is highly dependent on the terminal state of the company, and the future of the economy. So I don't find wild fluctuations in stock prices to be proof that the market is inefficient or over/undervalued because the far future is very uncertain.

Every stock chart is an invitation to assume false precision, because unlike a scientific measurement there is no explicit +/- range. But the true value must have a range of uncertainty, and it can easily be many orders of magnitude.

Also, every time I see the phrase "irrational exuberance" I am reminded that while there was a bubble in the late 90s, at the time Greenspan famously was worrying about the market in public, the Dow was around 5,000 or so IIRC, a long time before the peak.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#145

Post by perl4ever »

exelius wrote: post #7
junkscience2017 wrote: post #3

Lots of permabears will go long when it's obvious markets are headed up, not Hussman. https://www.hussmanfunds.com/strategic-growth-fund/ As always, Hussman manages the near impossible feat of reliably losing money in virtually any market environment The Dow has risen 5k in a year and Hussman still manages to be in the red....I'm sure his clients are thrilled on top of the how-is-that-possible string of losses in eve…

It’s a canary in the coal mine IMO. Sure, he’s early; but he’s not wrong. A very significant portion of growth over the last decade has been the growing ability of US companies to avoid paying US taxes. That growth eventually caps out until you reach a 0% corporate tax rate — the problem here is that shifts the tax burden 100% onto the populace, which absolutely destroys consumer spending and ultimately the economy a…

I'm in favor of a (more) progressive tax system, but I'm not sure that means we should tax corporations heavily or at all. The thing about a corporation is that its costs are borne by some combination of customers, employees, and shareholders, some of whom are rich and some of whom aren't. If we want to soak the rich, we should do that, rather than go after entities that are imperfectly correlated. Of course, it is then important to not let rich people shield their income with corporations.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#146

Post by perl4ever »

icedchai wrote: post #74
junkscience2017 wrote: post #3

Lots of permabears will go long when it's obvious markets are headed up, not Hussman. https://www.hussmanfunds.com/strategic-growth-fund/ As always, Hussman manages the near impossible feat of reliably losing money in virtually any market environment The Dow has risen 5k in a year and Hussman still manages to be in the red....I'm sure his clients are thrilled on top of the how-is-that-possible string of losses in eve…

Since Inception (07/24/00): 0.54% It truly is amazing. You'd have to really try to do that bad.

It seems to me whether that is good depends on what you conceive of as counterfactuals. If you truly believe that the investments would have made you a zillion dollars in a worst case scenario for the economy, then the fact that they've made almost nothing when the market has gone up & up & up doesn't seem that bad.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#147

Post by perl4ever »

maneesh wrote: post #142
asimpletune wrote: post #129

Earlier quoted context omitted.

He’s just saying it’s an IOU, I think.

but shares aren't an IOU. They are points that represent a company, and can be traded at a later date dependent on the market. They can't just redeem it for a promised cash amount at a later date -- they are tradeable at what someone else is willing to buy -- with no guarantee that someone else will be willing to buy...

I disagree, somewhat.

Shares are an "I owe you dividends, if and when" and they also represent voting control that a buyer could use to extract value from the company. Those both mean the holder of the paper is owed something even if it's much more vague than a bond.

I guess there are stocks these days that have neither dividends nor votes, though. That seems like a scam though.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#148

Post by perl4ever »

VMG wrote: post #47
alex_young wrote: post #45

Earlier quoted context omitted.

>> Every time a block is validated, a single node in the network gets a reward, and everyone else’s computing time is completely wasted. >This is a misunderstanding of what PoW is http://www.truthcoin.info/blog/pow-cheapest/ Honest question: I tried to find the problem with that view in the link you provided, but couldn't. Can you explain it to others who may share the same belief? I think that's what the Bitcoin whi…

You need opportunity cost in order to secure the network. Without that, there is no incentive to keep the network secure. There is no cheaper solution to solve this problem, therefore there is no waste.

Is there a simple way to explain why trusting the developers of the software to manage the network is meaningfully different than trusting the Fed to manage the dollar?

I mean, I understand (I think) that Bitcoin doesn't require a given node to trust another node. But what if there is a change to the software that trickles down to all the nodes without them realizing the consequences until it is too late? Either a bug or intentional subversion.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#149

Post by hux_ »

junkscience2017 wrote: post #101
hux_ wrote: post #20

Earlier quoted context omitted.

That's what the British thought about the East India Company. Then what happened?

then everyone who lost some money in the East India Company invested in everything else rising as the British Empire expanded and made fortunes, that's what

Where is the empire now smartass?

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#150

Post by neumann »

oblio wrote: post #76
adventured wrote: post #33

Earlier quoted context omitted.

> if the market crashed that low for a decade, you would see massive regime change in every democratic nation and the rich would be stripped bare That wouldn't happen at all in fact. We've already recently seen that kind of economic pain on a protracted time frame. See: 1967 to 1982, a time in which inflation adjusted the S&P 500 lost 2/3 of its value. Stagflation, high unemployment, high inflation, economic chaos, p…

The common theme is that the majority of people were not starving. That's how revolutions are fueled. None of the countries you listed were facing actual famines.

So, for the rich to keep (and make) their wealth, they just need to ensure that the serfs/plebs don't starve. Low bar for success!
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