We get articles on HN about once a week arguing that massive inflation is coming soon. I think all of these articles are misguided. With such low interest rates, the Fed can and will raise those rates to prevent inflation. That interest rate rise will likely pop the bubble.
Prices are on the rise throughout the economy, so I'm starting to think the inflation has arrived.
And the Fed is starting to walk back their prediction that an interest rate rise before 2023 is unlikely.
Put your money in real estate. Our political system is unable/unwilling to address housing needs. Home owners vote for whatever it takes to increase prices. Renters and young people looking to buy their first homes don't have as much political clout. The reality of the situation is sad but the results are clear!
This warrants some disclaimers. We might very well be in a housing-bubble. So put your money only in there if you can miss it and if it is safe for you. And always consider spreading your money. E.g. consider paying off mortgage, which could be seen as a safe version of "investing in real estate". As well as putting aside some cash, and buying in on some ETFs.
I should have mentioned that I was thinking of a long term scenario. 20-30 years. The covid real estate market is... interesting.
Okay, let's phrase this another way. If your ability to consume food, water, shelter, and entertainment has not been impaired but you are complaining about "asset inflation" because you learned economics from message boards perhaps you are being haunted by nonexistent boogeymen and need to chill out?
If you’re not being hurt by the fire alarm, maybe you should stop spreading conspiracy theories about there being a fire?
I wouldn't call some random person howling at the moon a fire alarm.
Never mind that online people have been predicting super inflation since at least 2009. I remember a Youtuber in 2009 that knew economics more than President Obama's advisors because Duck Tales did an episode on inflation.
But I guess by defining inflation as "stocks going up" the Duck Tales expert could have made it categorically impossible to be proven wrong since stocks tend to go up, further removing Duck Tales guy from the mainstream.
I mean, just look at last year, when the S&P 500 index plunged over 30%, then proceeded to nearly double from then until now, in the midst of a global pandemic that froze big chunks of the world economy. Stock market returns make no sense.
It starts to when you ask yourself: Where else are people meant to store money? Since interest rates and bond rates were at historical lows. So you have people who are looking at 10% YOY returns on one hand and 0.2%/2% on the other and making the rational decision. Does this make stocks overinflated? Yes. Is it going to suddenly pop? Unlikely, since the conditions that caused it won't suddenly change (e.g. certain bo…
Not only this, but with the near zero interest rates and perceived impending hyperinflation, people are taking out massive margin loans to bet on assets. Archegos isn’t the only one, they just happened to get caught with a dumb position. When the interest rates kick up, we’ll likely see a dual effect here(stocks react, high rates mean it’s harder to service debt for speculators and actual companies) and a 2008-like scenario except our bad bet is on stocks instead of mortgages
> It's likely to be a "picking up pennies in front of a steamroller" type trade. What does that mean?
If there's a highway made of pennies that is being maintained by a steamroller, you can make a very consistent but small profit by picking up pennies every day. Except for that one day that you get run over by a steamroller. A better example is imagine that every day you bet on coin flips. Every day you go home after you're up $1. You start off with a $1 bet, and double the bet every time you lose. So for example one…
Or the German stock market of 1914. An 1914 investor would have had to have held for 100 years to get his investment back. The major point is that only looking at 90 years of American stock market returns is very serious cherry picking. We can get a lot more data by including non-American stock markets. The last century was a century of American ascendance. 100 years from now America still might be at the top, but I…
No they would not have had to wait 100 years. Makes for a spicy headline, but no one just throws a lump sum of money into the market once and hopes for the best. If you continue to invest regularly, your returns eventually cover your previous losses and your back to making profits sooner than later. Your portfolio balance over time is the only thing that matters, not the returns of individual investments. It’s why yo…
Lots of people do something very similar. They throw money into the stock market regularly for years, and then on a single day they retire and start slowly taking it out instead.
Invest globally instead of throwing it all in the S&P500, and add some other asset classes.
Do you think the globe as a whole will outperform the US market? I don't think our collective future as a planet is any better than the US outlook, personally. If anything, the United States is probably better situated to win future dystopian contests than most, too.
If international stocks are undervalued because U.S. stock are in a bubble or overvalued international will outperform, in theory it has little to do with who is "better".
The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?
This is going to be a silly response, but how silly is it really? You asked what you would do with your money, to grow it... This is related to the Keynsian Beauty Contest for following fads actively instead of passively taking long positions for years: https://en.wikipedia.org/wiki/Keynesian_beauty_contest How about hiring a person to research and buy the latest shitcoins on Uniswap and Pancakeswap? I can name sever…
Great! Now you have your retirement stash. You'll have to protect it for decades to come. How? Which brings you to the beginning: how do you invest your money?
The ultimate point of these discussions is coming to a conclusion about "what should we do?". I can give you quite a few reasons why dumping all your money in market index funds could end in disaster. I'm not under the illusion these gains are guaranteed. But what the hell else am I going to do?
> But what the hell else am I going to do? Personally I'm taking some money that could go into the stock market and investing in increasing the energy efficiency of my home to reduce my future costs, buying items I'll need in bulk (things like 200 pairs of socks so I'm set for life) and other things that will improve my QOL without ongoing costs.
Exactly. Same with housing. They are not more valuable, the dollar is less valuable relative to them and likely will only get worse as equities and real estate are the good hedges against inflation, causing a positive feedback loop. Higher interest rates would create an incentive for traditional savings, but would destroy companies (and gov) holding big debts.
I'm not sure where you are but housing over the last year is a real supply/demand market condition. They aren't arbitrarily being overbid 10%+ because the dollar is worth less suddenly.
Sure, but supply is limited in part because of the wealthy folks buying properties they will not use as a residence to hedge against inflation.
That real-estate is the least risky manner to protect wealth is a result of low interests rates and inflationary monetary policy. Printing as many dollars in the last year as there were in existence before, has perturbed a "normal" real-estate market. More dollars flying around means overbidding 10% is possible, especially since the additional interest is relatively negligible (wealthy folks will still take a loan in such conditions since rates are at rock-bottom).