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How This Ends

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Re: How This Ends

#341

Post by ethbr0 »

jbay808 wrote: post #337
ethbr0 wrote: post #322

Earlier quoted context omitted.

New buying gets hit hard. In the US, fixed rate 30 year mortgages mean that a lot of existing owners are isolated from rates (albeit not from market price devaluations).

I mean that real estate prices get hit hard. The consequences of that may vary depending on where you are, what you've borrowed, and what you own.

Granted!

I just wanted to call out that must-sell (2008, falling market prices, unaffordable adjustable high-rate mortgages, low inflation) is different than can-hold (falling market prices, affordable recent low-rate mortgages, high inflation).

If you've got a fixed-rate mortgage at 3%, there are worse forms of debt...

Re: How This Ends

#343

Post by thechao »

spicyusername wrote: post #238
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…

I think this is probably the most useful wisdom for the average person: > do not invest money you need within 5-10 years and do not make rash decisions; it is better to ride this train down and then hopefully back up than jump randomly. Gaming the market successfully requires a ton of skill and knowledge, and even then you are not guaranteed success. Most people are better off focusing on asset-class diversification…

Right; so my plan of having 60% of my wealth tied up in unvested stocks in a single company is really coming to fruition!

Re: How This Ends

#344

Post by PaulDavisThe1st »

FollowingTheDao wrote: post #103
PaulDavisThe1st wrote: post #63

I have a real problem with pieces like this that define "recession" in terms of abstract measurements of bits of the economy. Real recessions are about actual people and their lives, and although there's a definite correlation between the sorts of measures cited here and people's lives, it's much weaker than the article implies. We have very low unemployment right now, and most the features of a people-affecting rece…

"The NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." Like another comment said, recessions hit the ordinary folks last. But their stress is already evident. Employment numbers can turn on a dime. as can retail sales. But real perso…

RPI is down because of inflation though, not because of a decline in GDP, increase in unemployment etc. So yes, uncharted territory but not necessarily on the recession continent.

Re: How This Ends

#345

Post by nostrademons »

lupire wrote: post #307
FollowingTheDao wrote: post #135

Earlier quoted context omitted.

The Taylor Rule explains it https://www.investopedia.com/terms/t/taylorsrule.asp r = p + 0.5y + 0.5(p - 2) + 2 Where: r = nominal fed funds rate p = the rate of inflation y = the percent deviation between current real GDP and the long-term linear trend in GDP As I said, the FED is betting that inflation is being caused by supply chain issues alone. This is obviously not true. It will get worse, so much worse, because…

r = p + 0.5y + 0.5(p - 2) + 2 = 1.5p + 0.5y + 1

The "2" is actually a parameter of the rule, and is the desired inflation target. OP is just hardcoding it in because the Fed's stated inflation target is 2%. If you leave it parameterized you can't simplify the equation further, as the 0.5 distributes over the desired inflation target parameter as well.

For that matter, the 0.5 is also a parameter, and is basically saying "Weight the goals of full employment and stable prices equally." If, say, you wanted to weight Fed policy 80% toward controlling inflation (to a target of 2%) and 20% toward maximizing employment, the equation would be r = p + 0.2y + 0.8(p - 2) + 2.

Re: How This Ends

#346

Post by shrimpx »

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…

> there is a risk free alternative to stocks

Really? 2.5% bonds in a 7% inflation environment is an attractive bargain?

This part didn’t compute:

> Bonds will be wrecked […] because it's actually a really good deal to buy bonds when they yield north of 10% (if we get there).

Re: How This Ends

#347

Post by danhak »

jimmaswell wrote: post #228
vintagedave wrote: post #171

Earlier quoted context omitted.

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.)

Same as always, keep investing in a well-diversified spread. The stock market as a whole will always bounce back. That or society collapses and your numbers in a computer are worthless anyway. This is the first big downturn I've been prepared to invest in, so personally I'm going to buy more than usual. I see it as stocks being on sale.

> The stock market as a whole will always bounce back

Japan is the common counterexample. It is entirely possible the stock market will stagnate in the future as the era of American economic hegemony comes to an end.

Re: How This Ends

#348

Post by tome »

cryptica wrote: post #33

Global economic problems were not caused by COVID19; it was just a convenient opportunity deflect blame away from more fundamental issues. One of the main real problems is that a decade of near 0% interest rates had led to money printing on such a scale that certain activities which would otherwise not have been profitable were able to be profitable (in nominal fiat terms)... But while these activities were reaping h…

> it was purely a money-printing scheme to allow the elites to cash out

What did the elites cash out to?

Re: How This Ends

#349

Post by rsanek »

ChrisMarshallNY wrote: post #83

> I would be planning to ride this thing out for at least eighteen months or more. I'm betting more like three to five years. I was talking to a friend (another old guy, like me, but really rich, unlike me). We've both been through at least two recessions (big, nasty ones, with teeth and claws). We realized that there's an entire generation of folks; many running companies, that have never seen a real bear market. It…

>there's an entire generation of folks; many running companies, that have never seen a real bear market

If anything, this is a problem that is much less bad than it was in previous down markets.

"7% of CEOs were younger than 50 years old at the end of 2018, compared with about 16% at the end of 2009." [0]

"Data on S&P 500 companies measured over the last two decades by executive recruiter Spencer Stuart shows a small but steady increase in the age of the CEO." [1]

[0] https://www.wsj.com/articles/ceos-under-50-are-a-rare-find-i...

[1] https://www.bloomberg.com/news/articles/2021-11-30/twitter-s...

Re: How This Ends

#350

Post by abirch »

thawaya3113 wrote: post #300
abirch wrote: post #253

Earlier quoted context omitted.

I'm not a Bezos fan in general but his response to Biden's tweet was spot on. https://www.twitter.com/JeffBezos/status/1525309091970699265

I disagree with Biden’s tweet and Bezos’s tweet. I personally believe that the vast majority of the inflation we are seeing today has nothing to do with government debt/deficits, so the government reducing its deficit will have minimal impact on inflation. However, a lot of people do believe, or at least claim to believe, that inflation is almost entirely being driven by government deficits, in which case corporation…

What was wrong with Bezos's tweet? Biden's was just wrong.
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