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Four Basic Truths of Macroeconomics

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Re: Four Basic Truths of Macroeconomics

#101

Post by chordalkeyboard »

arcticbull wrote: post #99
chordalkeyboard wrote: post #75

Earlier quoted context omitted.

> Boy are you going to freak out when you learn about stock splits and fractional share investing. You really must be confused if you think thats a rebuttal.

> You only want your investments to increase in price if you intend to sell or collateralize them. As investments proper, you want to earn dividends. uh... no my dude. Whether a company buys back the shares, or issues a cash dividend, warrants, or someone else is willing to pay you more for the same shares, you've obtained what's called a "total return." What any investor is looking for is a total return, and it does…

> uh... no my dude. Whether a company buys back the shares, or issues a cash dividend, warrants, or someone else is willing to pay you more for the same shares, you've obtained what's called a "total return."

You seem to be unaware that different investors have different investment goals.

> What any investor is looking for is a total return, and it doesn't matter in what form.

Yeah, no. Some investors want dividends, some want gains, some are more concerned with security of principle, some optimize for total return. This is taught in finance 101.

> Inflation only sets the benchmark rate for total return.

Inflation creates a margin rate of profit that must be met or a business loses money.

> When a company issues a dividend its stock price drops by the decrease in net asset value of the company once the dividend is issued.

It depends. Sometimes the price goes up because they have shown that they are in a position for the owners to take profit. Sometimes it goes down because shareholders want to reinvest their capital elsewhere and its timely to do this immediately after dividend receipt (because you’re not waiting for the next dividend).

> The difference between an unrealized gain and a dividend is the difference between a "realized" and a "mark-to-market" gain. They have different profiles, and different benefits. For instance, a mark-to-market gain can be rolled forward into different tax years where as a realized gain must be attributed to the current tax year.

I’m glad you understand this. Now based on this, can you see why some investors would prefer dividends and some would prefer capital gains?

> Please, for the love of stocks, take an ECON class. I'm not a complementary tutor, and you're so far off the reservation it's hard to even know how to reign you in.

Really now, this is rich. If you think my perspective is that outlandish then you truly have not studied this to any great extent.

Re: Four Basic Truths of Macroeconomics

#102

Post by arcticbull »

chordalkeyboard wrote: post #83
arcticbull wrote: post #73

Earlier quoted context omitted.

Oh my where to even begin. > Citation for your claim that everyone has access to cheap credit. Are you aware of payday loans? I have at no point stated that. What I said is that inflation affects all debts equally. Interest rate on loans is defined on "cost plus" basis, where "cost" is the treasury interest rate, and the "plus" is based on your default risk. However, the "cost" is the same for everyone no matter what…

> I have at no point stated that. What I said is that inflation affects all debts equally. So you do, at least, understand that a person with more debt benefits more than a person with less debt? > Interest rate on loans is defined on "cost plus" basis, where "cost" is the treasury interest rate, and the "plus" is based on your default risk. However, the "cost" is the same for everyone no matter what. So you are awar…

> When the principal decreases by 2% per annum and the rich person pays 2% interest and the poor person pays %600 percent, the rich person gets free credit while the poor person pays ~600% per annum. Surely you can see that this is worse for the poor person, even before factoring in that the rich person gets capital gains from asset inflation while the poor person gets real decrease in wages.

Inflation is a small part of the interest rate calculation. Even if inflation were 0% a rich person would pay 0% and a poor person 598%. You've achieved nothing.

> Surely you can see that this is worse for the poor person, even before factoring in that the rich person gets capital gains from asset inflation while the poor person gets real decrease in wages.

Wages have kept pace with inflation, and capital gains tax is a social/fiscal policy matter for Congress, not for Janet Yellen. Try again.

Re: Four Basic Truths of Macroeconomics

#103

Post by arcticbull »

chordalkeyboard wrote: post #75
arcticbull wrote: post #59

Earlier quoted context omitted.

> When assets go up relative to currency, fewer buyers can compete for those assets, leading to the wealthy owning more and the poor getting poorer. Boy are you going to freak out when you learn about stock splits and fractional share investing.

> Boy are you going to freak out when you learn about stock splits and fractional share investing. You really must be confused if you think thats a rebuttal.

> You seem to be unaware that different investors have different investment goals.

No, investors only have one goal: total returns. Anything else makes no sense. After all a stock that issues a $5 dividend and goes down $10 ain't worth investing in, is it?

> Yeah, no. Some investors want dividends, some want gains, some are more concerned with security of principle, some optimize for total return. This is taught in finance 101.

All are gains. At the end the day there's one bucket of money. you're saying it matters how you apportion it, and I'm telling you it does not.

If you hold 100 shares and a company that doesn't issue a dividend, but went up 1%, you can sell 1 share to obtain a 1% dividend. Or you can wait for them to issue a 1% divided and be left with 99% the value. It's a no-op. Same thing. You've failed at basic math here. There's one bucket of money. Dividends don't appear out of thin air.

> It depends. Sometimes the price goes up because they have shown that they are in a position for the owners to take profit. Sometimes it goes down because shareholders want to reinvest their capital elsewhere and its timely to do this immediately after dividend receipt (because you’re not waiting for the next dividend).

No. You are strictly wrong. When a dividend is issued the stock goes down by that amount. [1]

  After a stock goes ex-dividend, the share price typically drops by the amount of the dividend paid to reflect the fact that new shareholders are not entitled to that payment.
> I’m glad you understand this. Now based on this, can you see why some investors would prefer dividends and some would prefer capital gains?

Yes, but you have it wrong. Dividends are less valuable because they offer no flexibility in recognition date. Either way they are both treated as capital gains. In fact, I believe, correct me if I'm wrong, dividends are treated as ordinary income. On the other hand if you sell something you've held for 1 year in lieu you'll get long-term capital gains treatment.

> Really now, this is rich. If you think my perspective is that outlandish then you truly have not studied this to any great extent.

I'm an investor. I suggest you revisit ECON-101.

[1] https://www.investopedia.com/articles/investing/091015/how-d....

Re: Four Basic Truths of Macroeconomics

#104

Post by Retric »

gruez wrote: post #72
p1necone wrote: post #35

Earlier quoted context omitted.

Sure you can have the entire worlds information and entertainment at your fingertips with a $50 smartphone, but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant. I don't think we should be including basic necessities alongside improvements in entertainment in the same statistic, because it will just hide problems.

>but if you can't afford to have a roof over your head I'd argue the smartphone is irrelevant. The problem is that hosing (specifically land) is fundamentally a scarce resource, and since the 50s competition has only gotten higher (total population going up, people becoming more concentrated into cities). It's not that shelter has gotten more expensive, it's shelter in desirable places have gotten more expensive.

That’s very much a failure of society, making it a perfectly relevant thing to compare about different time periods.

The housing crunch in hot markets is really just a zoning issue. For example a federal mandate that new housing must be zoned into the area when adding new office space, retail, or residential space would largely solve the issue.

Re: Four Basic Truths of Macroeconomics

#105

Post by TearsInTheRain »

arcticbull wrote: post #20
anarchop wrote: post #17

The only truth: central banking facilitates theft of savings through debasement of the currency. This is the reason the founding fathers fought to keep central banking out of the US.

Yeah, it doesn't, though. Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. After that it sets the benchmark rate of return for your investments. If your salary fails to track inflation that's between you and your boss who's giving you a pay cut year over year, or between you and congress if you're under the minimum wage umbre…

> Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life.

This statement just reeks of entitlement and elitism. This is not how most americans live their lives. Stock ownership is highly correlated with income and education. Inflation is a regressive tax on the financially illiterate.

Re: Four Basic Truths of Macroeconomics

#106

Post by arcticbull »

TearsInTheRain wrote: post #105
arcticbull wrote: post #20

Earlier quoted context omitted.

Yeah, it doesn't, though. Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. After that it sets the benchmark rate of return for your investments. If your salary fails to track inflation that's between you and your boss who's giving you a pay cut year over year, or between you and congress if you're under the minimum wage umbre…

> Inflation only matters from the time you receive your paycheck to the time you invest it in productive assets or buy the necessities of life. This statement just reeks of entitlement and elitism. This is not how most americans live their lives. Stock ownership is highly correlated with income and education. Inflation is a regressive tax on the financially illiterate.

No, it's not.

Inflation doesn't affect those who don't have money because they don't have money. Wages have kept pace with inflation, housing on a dollars per square foot basis, on average across the US has kept pace with inflation since the 1970s. In places where it's more expensive, it's a function of zoning rules.

Stock ownership is correlated with wealth and wealth inequality is a real problem. So is income inequality. They both have nothing to do with inflation. You take that up with Congress not with Janet Yellen.

Poor people are poor because they don't have money, not because their non-existent savings are being inflated away, and not because their flat-after-inflation payroll has been chipped away at. They were born into a monopoly board with hotels on every square, because of the roughly 0% estate tax.

Re: Four Basic Truths of Macroeconomics

#108

Post by arcticbull »

unethical_ban wrote: post #97
arcticbull wrote: post #28

Earlier quoted context omitted.

> It means the people who save by depositing cash in the bank lose value over time, causing them to purchase investments out of necessity. Ah you get it. That's the idea. Buy gold if you want, buy real estate, buy annuities, buy fixed incomes, I don't care, but money is an intermediary - not a long-term store of value. If you treat it as one you'll have a bad time. Just like if you treated your car as a boat. It'll w…

> That's your duty in a capitalist society - to pick winners by investment. See, that, and well as your first point, are where the other person's philosophy and yours collide. I daresay his point is that "It should not be my defacto requirement in society to buy stonks in order to not lose the wages I have duly earned". You are saying "your obligation in society is to take the wages you earn and keep your money movin…

So buy gold. The point is that an inflationary fiat currency offers maximum flexibility by not forcing anyone into treating it as more than a medium of exchange. The OP is demanding the creation of a new class of thing, which is designed to preserve wealth, with no risk. Ok, pitch that. But there's many reasons why that isn't a good thing. Inability to react to shocks such as a global pandemic, generational wealth consolidation and so on are all reasons its a bad idea.

Many things people hate on such as wild value swings and boom/bust cycles were much worse on the gold standard. However, in a world where wages keep pace with inflation (they do) you can recreate the gold standard yourself by firing up Robinhood and buying GLD.

By pegging the currency to an arbitrary asset class you're forcing me to use your asset class. By leaving it un-backed, you're free to back your personal economy with whatever asset you like.

More freedom.

Re: Four Basic Truths of Macroeconomics

#110

Post by XorNot »

WalterBright wrote: post #13
tabtab wrote: post #2

I get a "please subscribe" pop-up and can't get rid of it without fiddling with the CSS editor. Anyhow... Summary of Truisms: 1) During recessions, employers tend to lay off rather than reduce wages 2) Central bank stimulus helps recessions 3) Too much stimulus causes run-away inflation 4) Non-monetary problems like oil shocks and pandemics can cause recessions 5) Increasing population helps economies. ("Hump to de-s…

> Non-monetary problems like oil shocks and pandemics can cause recessions It wasn't the oil shock of the 70's that caused recession. It was our response to it - Nixon's oil and gas price & allocation controls. We came out of that when Reagan repealed it. Our current recession is not caused by the pandemic, but the lockdown response to it.

Mmmm, the idea that the rapid and sudden collapse of the hospital system in major city centres would have led to no other economic consequences is certainly a take.
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