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Can We Survive the Next Financial Crisis?

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Re: Can We Survive the Next Financial Crisis?

#271

Post by ThrustVectoring »

seppel wrote: post #50
ram_rar wrote: post #19

Earlier quoted context omitted.

But, what if everybody only buys index funds and there arent any active players anymore ? I am not an expert in this field, but I do feel that the passive nature of index funds has been benefiting greatly from the actions of active investors.

If everyone invests passive, you could make a ton of money by buying companies which are worth more than their stock or just give you an extremely high dividend.

A company's dividend has zero bearing on the fair price of its stock. Profits do, but that's a separate decision from dividend. Any money a company makes is either invested in growing the business (increasing the stock's value), or returned to investors, and as long as the investment makes economic sense you don't care either way.

Dividends vs stock buybacks are a wash economically - if you look at cash flows, they both reduce the market cap by the cash given to investors. It's just that dividends reduce the price of the stock directly, while buybacks reduce the number of shares outstanding.

Re: Can We Survive the Next Financial Crisis?

#272

Post by nonbel »

AnimalMuppet wrote: post #234
nonbel wrote: post #229

Earlier quoted context omitted.

From a few posts up: >"This is backwards. Inflation destroys the value of debt. Poor tend to be borrowers and rich tend to be lenders, so inflation is an equalizer." chimeracoder seemed to be agreeing with this "equalizer" position by saying: >"Ceteris paribus, inflation hurts debtholders (who, incidentally, tend to be wealthy), and it helps debtors (who, incidentally, tend to be poorer)."

All true. But I fail to see how your point about raises happening after price increases refutes the point that inflation destroys (reduces) the value of debt. Now, true, if you're a worker who owes money, and inflation kills your cash flow (because raises come later than price increases), it may not matter to you that the value of your debt decreased, because the cash flow problem is going to bankrupt you before the…

I just don't think the fact that there is debt erosion has much impact on the gap between rich and poor. I'm talking about an income that ten years ago would get you a full one bedroom apartment now gets you living in a converted closet. Meanwhile the pay for the same work has gone from 12 $/hr to 15 $/hr.

Also, this is ignoring that anyone sane issuing debt plans for inflation and accounts for this somehow (interest rate schedule, etc)...

Edit:

Another thing, this "inflation helps the poor idea" seems to be a version of trickle down economics.

Re: Can We Survive the Next Financial Crisis?

#274

Post by auggierose »

AnthonyMouse wrote: post #242
TaylorAlexander wrote: post #207

Earlier quoted context omitted.

I honestly feel like it’s nuts that we don’t collectively fund healthcare, precisely because I don’t want to live in a world where I may be ruined by an illness and I am willing to pay to make sure others don’t have to live in that world. However I am specifically a proponent of voluntary collectives for things, as government forced cooperation seems suboptimal and fragile to me.

> I honestly feel like it’s nuts that we don’t collectively fund healthcare, precisely because I don’t want to live in a world where I may be ruined by an illness and I am willing to pay to make sure others don’t have to live in that world. Isn't this the exact thing insurance solves, in particular catastrophic coverage insurance? Nobody really gets "ruined" by paying out of pocket for one X-ray and two aspirin. The…

The problem is that the patient doesn't know what the right price is, and what the difference in products will be when going to a competing lower price offer. It's fine to try out a competing smartphone at a lower price point; I would not want to gamble with my health that way.

Re: Can We Survive the Next Financial Crisis?

#275

Post by sigvirt »

crazynick4 wrote: post #104
y-c-o-m-b wrote: post #21

The definition of "we" and "survive" needs to be established clearly first and I don't think all those fancy graphs and market trends will define them. There's a lot of people that ended up bankrupt, in a bottomless depression, turned to drug abuse or committed suicide because of the last crisis. Wages are still relatively low while prices continue to climb. Many people are working 2-3 jobs and having trouble affordi…

If you have an extreme health care incident, why pay the bill? Sure it would hurt your credit score not to, but if it's between that and tens/hundreds of thousands, I think it is worth it to take the hit for 7 years. I know health care workers who give this 'unofficial' advice to their patients and I've had friends and family members do the same thing - people who had no health insurance but still got health care and…

Being potentially wiped out by a healthcare incident is not simply a matter of the looming bill. Your recommendation (i.e. to carry on by ignoring the bill) assumes the illness causes little disruption and the cure is complete. Many illnesses or injuries take much time to recover. Sometimes proper medical care cannot be obtained. Sometimes doctors don't want to take on a case, or even care to be honest. Others might withold a cure to generate recurring therapy revenue. Especially in the US, medical fraud and waste is monumental and the social safety net is insubstantial. These things will disintegrate a life more surely than a bill. Employers and creditors become impatient. Opportunistic predators circle about. If people are in debt, and without savings, then life circumstance unravels quickly at any non-trivial interruption.

Re: Can We Survive the Next Financial Crisis?

#276

Post by edelans »

crazynick4 wrote: post #104
y-c-o-m-b wrote: post #21

The definition of "we" and "survive" needs to be established clearly first and I don't think all those fancy graphs and market trends will define them. There's a lot of people that ended up bankrupt, in a bottomless depression, turned to drug abuse or committed suicide because of the last crisis. Wages are still relatively low while prices continue to climb. Many people are working 2-3 jobs and having trouble affordi…

If you have an extreme health care incident, why pay the bill? Sure it would hurt your credit score not to, but if it's between that and tens/hundreds of thousands, I think it is worth it to take the hit for 7 years. I know health care workers who give this 'unofficial' advice to their patients and I've had friends and family members do the same thing - people who had no health insurance but still got health care and…

honesty ? respect ? integrity ?

As someone who doesn't live une the US, maybe I can't figure the whole complexity of such a situation, be it really strikes me that people can recommend to fraud people that saved their life...

Re: Can We Survive the Next Financial Crisis?

#277

Post by lsc »

busterarm wrote: post #69
ryandrake wrote: post #56

Earlier quoted context omitted.

Only around 50% of Americans own any stock at all, including indirect ownership like IRAs and pensions. So, I don’t see the working class suffering that much due to stock market decline. They will suffer due to joblessness.

If you know your history, it's the "middle class" that has directed just about every non-marxist revolution. I guess I should add the clarification that I think most folks who consider themselves middle-class and who are investing and saving money are actually working-class. If you don't own your residence outright or have the liquid assets to purchase it and still make investments, you are working-class. If you live…

>If you know your history, it's the "middle class" that has directed just about every non-marxist revolution.

One can make a strong argument (even from marxist sources) that even the marxist revolutions were mostly directed by the middle class; most of the marxists call it the intelligentsia, but these were mostly educated men at a time when that meant more than it does now. (and even now, I think most people consider a good education enough to make you "middle class" even if you don't make that much scratch.)

I mean, all this depends on your definition of a "revolution" and of "middle class" - if I define "middle class" as "powerful or educated enough to get something done, while not being super rich" and I define revolution as "overthrow of the government by people who aren't already at the top of the power structure" then it almost becomes tautological; if people are powerful enough to start a revolution, by that definition, you are middle class or better, and if an elite starts a revolution, by that definition, it's then a coup.

(I'm not suggesting those are your definitions of revolution and middle class; just that the definition of those two words (and the definition of those two words is kinda fuzzy) makes all the difference in this question)

Re: Can We Survive the Next Financial Crisis?

#278

Post by lsc »

busterarm wrote: post #162
oihoaihsfoiahsf wrote: post #120

Earlier quoted context omitted.

Right. But I'd wager that index fund investors are more interested in profits than GDP, at least as it relates to their investments and the proposition at the top of this thread that index funds will be "ripped" (presumably disproportionately) in the next downturn.

Right. If you have a wide market downturn, all of the "active investors" are going to take their money out as cash and wait to buy and the "passive investors "are going to take a bath. The mistake that index fund adherents make is that there is no such thing as passive investing. Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now.

I mean, there's some causality there; when the active investors try to take their money out as cash all at once, it does tend to have negative effects on the market. but... I think that, generally speaking, the goal of your active investors is to buy during the downturn, and sell into the upturn.

Buy low, sell high; not the other way around.

I mean, that's the goal. Of course, it doesn't always work out that way, but you don't plan on selling at the bottom and buying as it recovers.

Re: Can We Survive the Next Financial Crisis?

#279

Post by darawk »

megaremote wrote: post #250
darawk wrote: post #36

Earlier quoted context omitted.

This is a real misunderstanding of how markets work. An index fund invests in everything, market-cap weighted (usually). This means that your investment merely reinforces the prices already determined by the other participants in the market . There are still huge numbers of active managers, not to mention quants and others. They, collectively, determine the prices of assets. When you invest in an index fund, you're j…

This is true, but it also means that they don't fall as much. No matter what the results, the index funds will not sell, so it means the market doesn't change as much.

That's sort of true, but it's an over-simplification. People with capital and conviction can still short heavily. What it does is dampen the emotional swings of retail investors. So, for the market as a whole, volatility should go down as indexing becomes more popular.

Re: Can We Survive the Next Financial Crisis?

#280

Post by watersb »

crazynick4 wrote: post #104
y-c-o-m-b wrote: post #21

The definition of "we" and "survive" needs to be established clearly first and I don't think all those fancy graphs and market trends will define them. There's a lot of people that ended up bankrupt, in a bottomless depression, turned to drug abuse or committed suicide because of the last crisis. Wages are still relatively low while prices continue to climb. Many people are working 2-3 jobs and having trouble affordi…

If you have an extreme health care incident, why pay the bill? Sure it would hurt your credit score not to, but if it's between that and tens/hundreds of thousands, I think it is worth it to take the hit for 7 years. I know health care workers who give this 'unofficial' advice to their patients and I've had friends and family members do the same thing - people who had no health insurance but still got health care and…

Effectively, more like 10 years.

Getting paperwork together took a while, medical bills arrive at odd times, often delay of six months. About 60 days for the actual bankruptcy to go through (the “Discharge Date”).

Then another 60 days as the bankruptcy is recorded on the credit record.

It says here that public records will be automatically dropped from my credit file after the appropriate interval. No action required. That would be 12 months from now. I wonder if that will actually happen.

Note that bankruptcy shows on a credit report, so if you are applying for a job, or trying to rent a flat, you are going to be asked about it. And so on.

I strongly advise against having a medical crisis. Stay normal as long as possible.

Good luck.

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