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The stock market and economy have parted ways

washingtonpost.com

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Re: The stock market and economy have parted ways

#221

Post by acd »

Central banks keep printing money forever. Now we are at the point where the real economy and stocks have diverged. Of course central authorities cannot always just buy all bad debt. There is somehow a distortion of risk. Ie buyers of financial papers are not exposed to their risk fully if central banks buy “bad debt”. This financial printing of limitless debt is putting many at debt.

I am worried if there is no caps in debt printing and freedom. You are not free if you are forever a life time in debt.

Somehow I feel there is a symbiosis between politicians winning elections on promises which central banks deliver by creating through new debt.

I am trying to say that we are at global warming and constantly creating more stuff is requiring more energy and we are already using too much of that.

Thus the economy and the environment are diverging. We probably cannot maintain status quo for too long.

Something better more sustainable will come after that.

Zero interest rates are not causing inflation through salaries increasing they flow to more automation and robotics. Automation lower cost of production and are thus deflational.

Re: The stock market and economy have parted ways

#222

Post by devalgo »

whatshisface wrote: post #63
ed25519FUUU wrote: post #50

Earlier quoted context omitted.

I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food” But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.

Expecting that you'll be able to trade gold for food is assuming that the state after the collapse will fall into a very narrow band of "collapsed enough that the financial system is gone" and "not so collapsed that the food supply is gone." You might even call it... the Goldilocks zone. ;)

Why wouldn't you plan for that? The only plan you'd need for the total collapse situation is to have a revolver to eat a lead sandwich with.

Re: The stock market and economy have parted ways

#223

Post by beagle3 »

david927 wrote: post #164
beagle3 wrote: post #98

Earlier quoted context omitted.

It is actually very hard to get real gold (especially in a form that you can convert back to cash in the future). Just try to get delivery of a gold bullion. And if you succeed, try selling it into the system again, without losing 30%. Paper gold is a bet no different than a stock; it is a bet that the system and your counterparty will both be solvent when you need them.

And that seems to imply that it is a valid alternative, maybe not for large hedge funds but individual investors.

(Assuming you refer to paper gold) It’s a viable investment, just as stocks are. But not a financial-system-crash proof store of value, which is what the GGP meant, I think, when he recommended getting gold.

Re: The stock market and economy have parted ways

#224

Post by danans »

apta wrote: post #210
danans wrote: post #173

Earlier quoted context omitted.

> It should purely be a charitable contribution without expecting a return. > Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways. What kind of investor are you referring to that doesn't expect returns? Even "social impact" investors expect returns in reputation, or…

You can expect returns, but not fix them ahead of time as what people do with interest bearing loans (i.e. usury). Loaning money for money is parasitic and immoral. Investing that can incur a profit or a loss is fine in general.

> You can expect returns, but not fix them ahead of time

Fixing them ahead of time is an attempt to quantify risk. It doesn't eliminate risk - loan defaults happen. The riskier a loan, the higher the interest rate. As long as the lendee has the option of refinancing with another institution (i.e. there is a competitive market for loans), usury shouldn't be an issue. Usury is an issue when the lendee has no other resort due to being persona-non-grata in the credit system (i.e. people whose only option is payday loans)

Without loans, there would be no way for people without extraordinary amounts of capital to purchase such basic items of modern life as a home or a car. What other mechanism do you suggest for those? Also, a lot of businesses are not public investment like technology firms, i.e. a neighborhood deli. If they have multiple investors, they are just partnerships, often with the partners in the same family. Loans are how such businesses find "investors".

I'd like a world where housing (in the right place), transportation, and costs of small enterprise startup were cheap and good enough for everyone to pursue without loans, but we aren't in that world yet. Maybe some technology advancement (modular homes, self driving buses, 3d printers) will help to reduce the cost of these things such that people won't need to make such large purchases, but that's still to be seen.

Re: The stock market and economy have parted ways

#225

Post by devalgo »

beagle3 wrote: post #98
secondcoming wrote: post #25

Earlier quoted context omitted.

I'm no gold bug, but turn some of your cash into gold.

It is actually very hard to get real gold (especially in a form that you can convert back to cash in the future). Just try to get delivery of a gold bullion. And if you succeed, try selling it into the system again, without losing 30%. Paper gold is a bet no different than a stock; it is a bet that the system and your counterparty will both be solvent when you need them.

>Just try to get delivery of a gold bullion

It's fairly trivial to get lots of gold just above spot price. https://www.apmex.com/product/75/10-oz-gold-bar-brand-name

>And if you succeed, try selling it into the system again, without losing 30%.

In the scenario where the markets are collapsing and you need to sell gold for cash it's possible or even likely that it could be worth more than what you bought it for and even if not the discount rate you accept for selling it back may be worth it either way. If the market dropped 50-80% and you are only taking a 30% loss on gold that's clearly worth taking.

Re: The stock market and economy have parted ways

#226

Post by hitpointdrew »

JKCalhoun wrote: post #186
hitpointdrew wrote: post #20

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.” An alternative place to put investments will trigger it. When your options are savings accounts paying 0.25% interest, and treasury notes paying nothing, and CD's being garbage, what are your alternatives for investing? If…

> But the safety/stability doesn't mean shit if the return is near 0. Hmmm.... One of the things you mentioned though could drop in an instant. A return of negative is worse than 0. I suspect many are sitting on cash, waiting for the other shoe to drop (or, you know, the market).

> I suspect many are sitting on cash, waiting for the other shoe to drop (or, you know, the market).

Well, MOST people can't afford an unexpected $500 bill, so most people aren't sitting on cash. Nevertheless, I don't agree that most of the people who can afford an unexpected $500 bill are sitting on large cash sum either either. Personally I have 2/3 in the market, and 1/3 cash (for liquid assets, I also have equity in my home but I am not counting that).

Re: The stock market and economy have parted ways

#227

Post by devalgo »

ogre_codes wrote: post #80
whatshisface wrote: post #63

Earlier quoted context omitted.

Expecting that you'll be able to trade gold for food is assuming that the state after the collapse will fall into a very narrow band of "collapsed enough that the financial system is gone" and "not so collapsed that the food supply is gone." You might even call it... the Goldilocks zone. ;)

And for that matter, assumes you will be able to find safe places to trade gold for anything. Unless we go back to a gold-rush style economy where there are scales all over the place you can trade gold by the gram, the smallest tradeable gold will be coins which are worth $1600+ each. Try taking that to the local grocery store.

>the smallest tradeable gold will be coins which are worth $1600+ each

Not really accurate, you can get rounds down to 1/10 oz which are worth ~$200. In any case the USD value of a gold coin in a collapse situation is obviously irrelevant. If fiat really does collapse barter is obviously going to be the default way to trade goods and gold could easily be used as it was in the past.

Re: The stock market and economy have parted ways

#228

Post by prussian »

apta wrote: post #76

Interest is one of the main reasons the economic and financial system is in ruins. It is an exploitative, parasitic practice and we've known that for thousands of years. But some people only care about their pockets.

Even islamic banking expects some kind of ROI. Perhaps it isn't strict usury, but there is generally some kind of ownership or profit sharing happening.

Re: The stock market and economy have parted ways

#229

Post by devalgo »

prewett wrote: post #113
ed25519FUUU wrote: post #82

Earlier quoted context omitted.

I guess total collapse is something I don’t particularly worry about, since I won’t be here to worry. I think partial collapse is more likely scenario (of the two).

I would assume a Venezuela-like collapse would be what you're thinking? Would gold help much in that case? (Honestly don't know, probably depends if the person you're trying to trade the gold to believes it will be easy for them to trade the gold to someone else when the time comes)

Can't really speak for Venezuela but lets say if currently 1 oz of gold is as valuable as a Macbook worth ~$1800 and in a hyperinflation event a Macbook costs $200,000,000 perhaps 1 oz of gold could be worth a Macbook? You would then just trade your coin for $200,000,000 and buy the Macbook. Obviously a massively simplified scenario. Perhaps there are sources out there on how people have dealt with hyperinflation?

Re: The stock market and economy have parted ways

#230

Post by devalgo »

Aunche wrote: post #121
ed25519FUUU wrote: post #50

Earlier quoted context omitted.

I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food” But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.

Even the tiniest gold coin costs over $200. For bartering, silver, Mountain House, and ammunition make much more sense to hoard.

Probably a mistake to assume the USD value of something is relevant in a collapse situation. As you said ammo could end up being far more valuable that it currently is. Similarly Gold's utility as a way to transfer value could make it much more "valuable" in that situation.
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