Earlier quoted context omitted.
$80 for a 1 gram coin https://www.apmex.com/product/201564/2020-1-gram-gold-maple-...
Do you have an idea just how tiny 1 gram of gold is? It really isn't practical for bartering.
Yep, tiny, diameter is 8mm
The stock market and economy have parted ways
491–500 of 542 posts
Re: The stock market and economy have parted ways
#492Earlier quoted context omitted.
There is also the significant risk that you are wrong. I haven't seen this mentioned; maybe it's obvious and you've considered that aspect too. A short bet means unlimited downside, and if you arrive at 1/5 of the current market cap, there seems like a significant risk the market has seen something you haven't. Tesla was at $200 one year ago. Guaranteed to be an irrational bubble?
>There is also the significant risk that you are wrong. I haven't seen this mentioned; maybe it's obvious and you've considered that aspect too. Yes! This is maybe the most likely outcome! However, to date I have not heard a good reason why Tesla should be valued higher the the other leading car companies combined. There is no moat for them. Anything they are doing, all of the other car companies can easily retool to…
I can give it a shot. Maybe you've heard some of these before, it's just a list of claims. Tl;dr is there's a probability Tesla will become a tech behemoth with a tech moat that's Google/Apple/Amazon oligopoly-level unassailable. Not just in cars, but also in autonomous driving and maybe energy distribution. Dunno if I'd invest at the current valuation, but it's not obviously insane.
Established automakers are structurally incapable of competing, due to innovator's dilemma. BEVs will eventually get cheaper than fossil vehicles due to decreasing drivetrain cost (li-ion battery++), but this tech will not be a commodity for at least a decade after this point - requires billions of R&D. Means established automakers are under an existential threat they aren't facing. Their best shot at competing BEV models with inferior price/performance make this abundantly clear.
Production capacity of enough & the right batteries & motors requires both capital investment and R&D that won't materialize out of thin air just due to demand; existing manufacturers won't be able to source these at competitive price and performance. Development must be in-house at scale. Takes years, no one else is trying. Tens of billions investment. Capital is dirt cheap, so established industry's coffers does not protect them. Tesla now has 15 years lead on another startup trying the same.
Superior battery tech at such scale also has unquenchable demand from solar energy industry. As long as no one can compete on price & performance, margins are huge. Will eventually be a commodity, but that's two decades away. Might also be network effects at play here.
Must also consider fully-loaded cost of established industry -- meaning enterprise values that consider their debts & pension obligations, not just market cap.
Autonomous driving is an industry-defining strategic advantage. Autonomous driving means Uber is obsolete. It's like landing used rockets on a barge. Established industry won't be able to just lease this capability for less than their entire profit margin. Harder than making cars. Waymo approach makes centimeter-level manually curated maps of their entire area of operation; not scalable & not compatible with inclement weather. Computer vision necessary. No one but Tesla has a real-world fleet gathering data at scale any time soon. Might be a strategically critical advantage. But even if multiple autonomous approaches succeed at the same time, established automakers are over a barrel here.
Software is eating the world, established automakers don't have the culture for it. UX & software integration increasingly important both for a good driving experience & economics of maintaining a vehicle fleet. Recently saw VW slide bragging about how many lines of code they're making. It shows. Structurally incapable of competing there.
Coronavirus pandemic accelerates Tesla's advantage, as the entire established industry gets its profit margins crushed far into unprofitable territory.
Lots of misc. points: Dealer network doesn't like EVs due to lower maintenance costs, so established automakers have a sales problem there.
Charging network availability for long trips is an obvious UX problem that no one else is handling at scale. It's hard when you don't have batteries to even out load spikes; competitors without cheap multi-kWh batteries in their charging stations will get screwed by energy distributors and be prohibitively expensive. This is also abundantly clear from existing industry dynamics.
Etc.
Re: The stock market and economy have parted ways
#493Earlier quoted context omitted.
It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody. How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening no…
The Conservative Party in Great Britain has been trying to make home ownership a reliable method of saving for the last century. They pretty much succeeded: house prices have been going up almost constantly since the war, and owning a house all but guarantees you'll be able to built generational wealth. This came at high costs: once a large enough part of the population buys houses at inflated prices with the expecta…
Central banks keep interest rate low not because of the stock market.
People focus too much on stocks. The real question is about the real economy, about price stability and unemployment. Especially in case of the Fed ( https://www.chicagofed.org/research/dual-mandate/dual-mandat... , but of course other central banks are also tracking labor markets too, even if de jure it's not their target - https://ideas.repec.org/p/fip/fedbsp/70.html ).
And we can say whatever we like about how the rich get richer, our current economic system do responds to what central banks do. Cheap money (an oversupply of low and even lower interest rate debt) helps persuade people to buy/invest/order things. It helps finance stimulus bills, and so on.
The savings are "just" an indicator. Sure, when the savings crash, the economy crashes too, but the causality is backwards. If/when the economy crashes (when industries stop, when people stop buying, when businesses let people go) savings will also become "worthless", because after all they represent future income, and if the economy tanks its productivity (income) tanks too.
Re: The stock market and economy have parted ways
#494Earlier quoted context omitted.
Is part of the issue that there is just too much money has been printed and hoarded and its creating some weird effects? The government has been printing money for a long time, to stimulate the economy, provide spending money, etc. Due to 80/20 rule, rich get richer effects, etc, a large portion of money the government prints ends up in the hands of a relatively small group who doesn't spend it but rather tries to in…
It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody. How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening no…
Is there any serious idea about how a fair pension scheme could/should work without just buying the market? (So in some countries the pension system is just mandated by law, managed by the government. And might be even "guaranteed by law" to track inflation. But in this case it's again exactly the same, your purchasing power of your pension income depends on the strength of the country's economy - which depends on the global market.)
Re: The stock market and economy have parted ways
#495Earlier quoted context omitted.
It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody. How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening no…
Is there any serious idea about how a fair pension scheme could/should work without just buying the market? (So in some countries the pension system is just mandated by law, managed by the government. And might be even "guaranteed by law" to track inflation. But in this case it's again exactly the same, your purchasing power of your pension income depends on the strength of the country's economy - which depends on th…
Well, as I expand in the second paragraph above - the ONLY real pension scheme is having kids, and more kids. Everything else is just an obfuscation and/or securitization of this basic fact. If you don't want to work, someone else has to. And if we (jointly as a society) decide that "old" people are more deserving to not work, then, well, we need to make & have enough non-old people.
That's why to some degree I think asset-hoarding (S&P, real estate, cashflow-positive businesses etc.) is a good idea and actually my preferred plan, because I fundamentally don't trust the governments (they're all delusional with their long-term plans re: pension obligations, education, family planning & birth rates, immigration, ...), but at the same time I'm aware of the fact that while this strategy works individually (i.e. if I own more property, I'm better off than the next retiree), it doesn't quite work for the whole society. Pension as a social transfer really is the only way to go.
Re: The stock market and economy have parted ways
#496Earlier quoted context omitted.
Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.
This. For years now everyone has been saying "where is the (consumer price) inflation"? Meanwhile real estate prices are rising fast (in desirable parts of the country) and the stock market has been on an epic bull run. It's obvious that the inflation is in the asset prices. This is a dangerous trend. The rich (who tend to own those assets) get richer and and the poor (who rent/live paycheck to paycheck) get more and…
Piketty tried to analyze this, and the idea is to have a minimal wealth tax. (I have no idea what's the current best evaluation/assessment of his work and this idea, but Land Value Tax is something many economists already favor, and it'd help decouple the pain of growing cities from housing as an investment.)
So similarly there is probably some sense in trying to counteract low-interest-rate inflated asset bubbles via some kind of tax or other financial structure. (A progressive capital gains tax might help, but that might just make markets less efficient by introducing a chilling effect on the high end.)
In the end this is a purely political question, because obviously the problem is not that it's unfair that some very "desirable" assets price inflates, but that the majority of the population did not have the means to buy into it before the inflation happened to reap the capital gains.
There's already serious trouble due to inequality. (The recent protests about police brutality follow a long series of other symptoms that highlight how socioeconomic inequality manifests and persists on an ethnic level.)
Re: The stock market and economy have parted ways
#497Earlier quoted context omitted.
Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.
Exactly this. The FED and the ECB have been printing money like crazy for years, however this money did not go to the man in the street but to banks and indirectly to other financial institutions. And those don't spend their money in the grocery store but in the stock market. The classic economical laws are not broken, they are still in full effect and we see their effect in the inflated share prices.
It doesn't "go" to financial institutions, it goes through them. (Of course they make a "healthy" profit. Though it's arguably too much, if this many banks can survive: https://www.statista.com/statistics/184536/number-of-fdic-in... )
So who is buying equity (so stocks)? And one argument is, that "retail investors" are driving this. (So end users, the folks on the WallStreetBets subreddit, and whoever uses RobinHood, or anyone that puts money into a passive index fund: https://www.reddit.com/r/econmonitor/comments/hnohi6/us_equi... )
Also savings increased a lot, since people were not spending (they were staying at home), so where to put the money? They put it into index funds.
Re: The stock market and economy have parted ways
#498Earlier quoted context omitted.
> 20% more Where did this number come from? At 4% compounding over 40 years, you will have at least 130% again over what you put in.
The issue is two-fold - assuming that all the money comes at beginning, and forgetting about inflation, and not taking into account the shift in risk towards the later ten years, and assuming that your income stays the same. When taking into account the increase in income both absolute and in real terms after necessary expenses, you realize that a lot more than the majority of the money is invested in the latter 25 y…
"The average annual total return and compound annual growth rate of the S&P 500 index, including dividends, since inception in 1926 has been approximately 9.8%, or 6% after inflation" [0]. If you have a 40 year career, money you put in at the start would approximately be worth 10 times what you put in adjusting for inflation, and even money you put in midway would approximately be worth triple.
Re: The stock market and economy have parted ways
#499> “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…
Noob here, but doesn't this comment assume stock markets and investments outside the US do not exist? Surely large investment funds aren't entirely in on US stocks alone and are diversified. So isn't one option to just move some money elsewhere? i.e out of the US market - to a place(s) deemed more stable or with better upside.
You can, but that exposes you to currency risk because if you live in the US, you will almost certainly want your money converted back into USD when you want sell your investment to spend it but currency exchange rates changes over time.
Re: The stock market and economy have parted ways
#500Earlier quoted context omitted.
In the Argentinian collapse, many preppers found their gold coins useless to trade. No one would give them anything close to fair value for it because no black market seller was able to assay it to verify that it's real gold. Junk gold like jewelry is what really moved, and preppers switched to hoarding rings and necklaces and whatnot.
Interesting insight. I always thought gold/silver coins would be more useful than jewelry. I mean, how can you verify if a ring or necklace is actual gold, but not be able to verify a coin? I guess using the age-old method of density perhaps? do you know what did process to exchange jewelry looked like?
I think it's more that a ring or necklace is more easily scratch tested for hardness, harder to counterfeit, and less valuable individually. If I show up with a gold krugerrand (1oz, approx. $1,800 at today's prices), expecting to get that value or even half, you're not going to give me that value without somehow testing it. A basic density test involves both scales and beaker with water for volume--who's going to carry that around in the black market where others are trading things at DVD scale prices? If I have a bunch of gold and silver wedding bands in a ziploc, though, they're the equivalent of loose change and the risk calculation is different, especially since gold jewelry is almost as common pre-collapse cash.
The lesson I took is that a pure gold economy depends upon a level of infrastructure that just isn't present in economic collapse conditions. At best you're holding something that will retain value after things become normal again.