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How This Ends

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Re: How This Ends

#311

Post by politician »

nostrademons wrote: post #265
tenpies wrote: post #233

Earlier quoted context omitted.

I don't think there's even going back to pre-pandemic supply chains solely because how the West's cancel culture effectively ended globalization when Russia invaded Ukraine. There will be no global supply chain any more. Any country with a brain now knows they have to be completely independent of the West in every aspect. Sovereign assets must be within their borders. Currency reserves? Held at domestic banks as much…

I'll go even further: de-globalization pits governments (who want to become independent of other nation-states) against their people (who have benefitted from cheap goods, and will have to deal with the inflation). The likely outcome is that at least some of those governments are going to fall, and the nation-state system is likely to collapse. Unfortunately this by itself isn't good for globalization, because it rel…

Defense economics will prevent this transition to city-states from happening.

Re: How This Ends

#312

Post by Buttons840 »

vintagedave wrote: post #171
fny wrote: post #24

I'm going to explain what has happened so far. What happens next entirely depends on how inflation continues and the feds reaction. 1. We had zero percent interest rates. This causes the value of assets with cash flows out into the future (think speculative tech, Tesla) to accelerate. 2. We had massive herding in megacap tech. These valuations are high in part because for a decade you would not have beat the index wi…

So for non-finance-experts, what should we be doing with our money? Investing in what? Keeping in the bank? It sounds from your comment like there is _nothing_ that won't be devalued, even gold. Is real estate worthwhile? (Note: I am in the EU not US.)

If all assets are dead, you can spend your assets now to improve yourself or family. If you've been wanting some time to go to school or pursue some other self improvement, maybe spend some assets now to do so. Education and skills are an asset like any other, and can also be devalued though. I wonder how personal skills will fare in the coming years?

Re: How This Ends

#313

Post by lettergram »

matthewaveryusa wrote: post #185
lettergram wrote: post #154

I kind of disagree with the analysis, largely because there’s now a large block of the world separated from western commerce. Russia isn’t purchasing goods, yet the west is giving them wealth for oil, natural gas, wheat, etc. That’s effectively wealth leaving the system and entering there’s. More over, the west is increasingly looking at China as a threat AND China has locked down a large amount of economic output. T…

Genuinely curious : Russia’s GDP is < 10% that of the US or China. What’s up with this fascination with Russia (economically speaking — the humanitarian tragedy they are creating is a different topic)? The only question is if they align with the west or with china —-they’ve already lost as a super power, and their best strategic choice is to become a prized and expensive proxy between the west and china. The thing is…

All GDP is not equal. As an example, Ireland’s GDP was ~1/3 tourism, with covid they lost that GDP.

Russia GDP is primarily raw goods, commodities. They also have a decent domestic market for manufactured goods. Look up the global production of wheat, natural gas, oil, etc and look for Russia and Belarus. To put it bluntly, USA GDP is a mix and has everything from commodities to information tech to finance. Russia is a producer of raw goods.

Commodity prices are made at the margin, meaning a 1-2% reduction in supply could cause prices to go up 5-10% (similar for the reverse).

So Russia has an outsized ability to both weather sanctions (they don’t import as much raw materials, particularly energy) AND the world must continue to purchase their goods and/or dramatically reduce in production themselves.

For instance, German energy prices are up 500% (as of feb 2022) when compared to two years prior.

https://www.statista.com/statistics/1267541/germany-monthly-...

It’s now up 1000-1500%, how is German GDP going to be impacted? While Russia’s will maintain much of its GDP, Germans will likely drop substantially, as they’re effectively deindustrializing. Their factories / industries can’t function economically at such high prices.

> so the calculus for russia is losing on all fronts

I see Russia winning on all fronts tbh. They’re increasing domestic resilience and culture. They’re also winning the war in Ukraine (see Mariupol, Donbas encirclement), and winning the economic war with the west paying them even with the sanctions.

What’s their goals? To me it seems they are achieving the objectives Putin laid out at the rambling speech at the beginning of the war (independence from the west and “freeing” Russian sections of Ukraine)

I find it so interesting people think Russia is losing. I just don’t see it.

Re: How This Ends

#314

Post by ptero »

nradov wrote: post #230
ptero wrote: post #210

Earlier quoted context omitted.

If you think that there is some major economic turmoil ahead with dropping asset values across the board (and I personally this is fairly likely), the general advice is to aim for a positive alpha. That is, if you are moderately well off or better, invest to "go down less than your neighbors". Assets across the board lose value, but if at the end of the fall you preserved a higher fraction of your money to invest tha…

The general advice is always to aim for a positive alpha. No investor aims for a negative alpha, regardless of the economic climate.

> The general advice is always to aim for a positive alpha.

On the contrary, for the past 20+ years the general advice has been to specifically aim for the alpha of zero ("just use index funds"), not for a positive alpha ("don't try to beat the market", etc.).

> No investor aims for a negative alpha, regardless of the economic climate.

Factors other than alpha are way more important for most people. Many retirees put a high value on low volatility or stability of dividends and are perfectly OK with getting a small negative alpha as part of the package.

Original hedge funds (before they joined a cutthroat trading jungle) set up with a similar goal in mind: a small negative alpha, but protected against the loss of the principal. And had plenty of wealthy investors who were happy with this deal.

Alpha becomes the critical parameter to optimize for when actively investing in times of turmoil (then a negative total return on a positive alpha on the down leg is a success). But few people actually do that, so few care about alpha.

Re: How This Ends

#315

Post by thawaya3113 »

WalterBright wrote: post #160
lukeramsden wrote: post #146

Earlier quoted context omitted.

Depends how old you are. Even the youngest member of the UK cabinet is old enough to be my father, but the real decision makers are old enough to be my grandfather. I don't keep close track of US politicians but as far as I can tell, its even worse there.

Think about who the current generation voted for. When politicians are voted in because of their fiscally irresponsible proposals, who is really to blame? People are voting themselves money out of the treasury. This is the result.

Except the previous government gave out a lot more money.

Massive tax cuts, votes secured by giving over $40bn to farmers who were negatively impacted by a pointless and thoughtless trade war with China, and most of the COVID aid was given by the previous administration (although they did delay it because the previous President was insisting his name should be on a check that would be physically mailed to everyone).

Re: How This Ends

#316

Post by kgwgk »

jeffbee wrote: post #178
gedy wrote: post #166

Earlier quoted context omitted.

I heard the same thing in the last housing bubble before 2008

Really? It was obviously not true back then and is obviously true now. Housing starts hit nearly an all-time record high in the U.S. in January 2006. But then housing starts almost hit zero in 2009, and have never recovered.

> housing starts almost hit zero in 2009, and have never recovered

‘Have never recovered’ can be misunderstood as if they were still ‘almost zero’ (which is also a bit of an exageration).

Re: How This Ends

#317

Post by Forgeties79 »

riku_iki wrote: post #101
throwaway_1928 wrote: post #85

Earlier quoted context omitted.

> Bonds will be wrecked, stocks will be wrecked, cash is wrecked, even gold What will happen to the housing market?

People who bought houses will be fine, since they secured low interest loans, and will hesitate to sell because won't get good interest on next loan. This will cause low supply -> high prices -> people who didn't buy are very screwed: they will face high prices together with high interest.

Totally anecdotal, but I know a couple who are renting out their house they highly and renting a place to live because the interest rate they secured (2.75%) means renters paid their mortgage and then some (about 40% on top), so they basically make like $200/mo to live somewhere else as renters pay for their home.

Re: How This Ends

#318

Post by nostrademons »

staticman2 wrote: post #270
nostrademons wrote: post #133

Earlier quoted context omitted.

Assuming you're expecting inflation to moderate over 10 years. I think people who expect we're going to go back to pre-pandemic supply chains are vastly underestimating the difficulty of bringing a complex system like the economy up from a cold start. In my experience with complex systems that are much less complex than the economy (merely a few hundred million lines of code), it can't be done . You have to increment…

The 10 year breakeven inflation rate is less than 3 percent. Is it a perfect estimate of inflation? No. But I would trust it more than hot takes from non experts.

Luckily, this is completely tradable, so if you believe that inflation is going to average 3% over the next 10 years you can buy all those treasuries and I can short all those treasuries and one of us will be rich and the other broke. Events will tell who is who.

Re: How This Ends

#319

Post by thawaya3113 »

cjbgkagh wrote: post #259
mym1990 wrote: post #142

My view is that capital and investment will dry up and companies that are operating at a loss(many in tech right now) will either have to downsize or close up completely. This will cause a domino effect. People will lose jobs, and some of those people will have bought a million dollar shack in the past 2 years and they might have to sell at a loss or foreclose. Generally I think we have yet to see any real macroecono…

I wonder how many profit making companies are only making profits due to lost making customers. Things could spiral out of hand.

Nearly all of Alphabet and Meta’s profits are not from customers paying them to use their product, but advertisers who are trying to convince FB/GOOG customers to use their products.

If those companies start disappearing, or cutting back on ad budgets, FB/GOOG don’t have a business model anymore.

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