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“A Mild Recession”

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Re: “A Mild Recession”

#51

Post by samsonradu »

vorpalhex wrote: post #47
samsonradu wrote: post #35

Earlier quoted context omitted.

I used the word ‘statistically’ to underline the fact that it will not happen to everyone, and specially not to you in particular. > Meanwhile you hold a belief like, "the future will be good because capital will be allocated better" Yes

Do you have any actual statistics or are you just saying you do to borrow an air of authority?

That sounds a bit rude, but I'll try to answer anyway. No, I don't have the statistics at hand but I think we can agree that a lot of people go through financial hardship during a recession - basically what a recession means.

What part of my comment do you disagree with exactly? That people, in general, overestimate their financial security and capacity to overcome recessions?

Re: “A Mild Recession”

#52

Post by azemetre »

jpadkins wrote: post #46
upupandup wrote: post #41

We enjoyed 12+ years of cheap capital. Our stock market were largely bubble of tech companies that used this cheap capital to achieve insane market cap. Those days are over and will not come back for a loooong time. ex) Japan has not reached its 1989 peak and its nearly going into 40 years no sign of stopping. Globalization is also come to an end and our economy built around cheap capital and Chinese labor is over. T…

what tech companies were using cheap capital to achieve insane market cap? Very few tech companies borrow money. Unless you meant people were buying tech stocks with leverage, which I agree with...

DoorDash, Lyft, Uber, WeWork, Instacart, Rapid, Coinbase, Robinhood, etc. I mean I feel like I can list another dozen companies that has been using cheap capital of the last decade to establish themselves.

Re: “A Mild Recession”

#53

Post by pwinnski »

samsonradu wrote: post #6
nh23423fefe wrote: post #3

I actually feel really prepared for this one. 2007 made me nervous, but not this one. I feel secure in my employment and I finally have a real emergency fund even if I lose my job. I'm not optimistic about long term though. The infinite growth delusion seems like it will break in my lifetime, retirement is scary

Too young to understand what happened in the 2008 GFC but I doubt the 'feeling prepared' part works like this. First of all, the recessions tend to last longer than most people expect/plan for. Statistically, it will turn out their 'secure' jobs will be less 'secure' than expected. Meanwhile their emergency funds will start shrinking (slowly at first, then all at once) due to loss of purchasing power & eventual job l…

I'm old enough to remember 2008 and several other recessions as well, and "feeling prepared" works exactly like that. Not all jobs are secure during a recession, but job security is relative--and often knowable. Emergency savings are something few people actually have, and can make a world of difference when times are hard.

On the other hand, there is no guarantee whatsoever that capital will be better allocated after a downturn. After all, 2008 came post-2001, and here we are post-2008, with capital as misallocated as ever!

Re: “A Mild Recession”

#54

Post by nonameiguess »

samsonradu wrote: post #6
nh23423fefe wrote: post #3

I actually feel really prepared for this one. 2007 made me nervous, but not this one. I feel secure in my employment and I finally have a real emergency fund even if I lose my job. I'm not optimistic about long term though. The infinite growth delusion seems like it will break in my lifetime, retirement is scary

Too young to understand what happened in the 2008 GFC but I doubt the 'feeling prepared' part works like this. First of all, the recessions tend to last longer than most people expect/plan for. Statistically, it will turn out their 'secure' jobs will be less 'secure' than expected. Meanwhile their emergency funds will start shrinking (slowly at first, then all at once) due to loss of purchasing power & eventual job l…

What does "statistically" mean here? Even if unemployment jumps to double digits, which hasn't happened in the US since 1982, that means 93.6% of working people (0.9 / 0.961 to not inadvertently count people who are already unemployed) will continue being able to work. That's a near worst-case scenario that seems pretty damn statistically secure to me.

Re: “A Mild Recession”

#55

Post by pwinnski »

mrcheesebreeze wrote: post #20
nh23423fefe wrote: post #3

I actually feel really prepared for this one. 2007 made me nervous, but not this one. I feel secure in my employment and I finally have a real emergency fund even if I lose my job. I'm not optimistic about long term though. The infinite growth delusion seems like it will break in my lifetime, retirement is scary

thats why if you have reserve funds they need to not be in us banks, they can close down and go out of business in a recession. Take physical wealth and move somewhere else if a really bad one happens.

That is not true, though? Or rather, banks can indeed shut down, but that's what the Federal Deposit Insurance Corporation is for. The FDIC insures up to $250,000 per customer, per bank. So there is not much safer place to keep emergency funds than a US bank.

Re: “A Mild Recession”

#56

Post by pwinnski »

rocgf wrote: post #7
throwaway5959 wrote: post #5

Earlier quoted context omitted.

Please show on the S&P 500 graph where buying to sell now hasn’t been a great opportunity in the last 100 years minus the last twelve months.

You are correct, but that doesn't mean this will hold true forever.

The index fund approach doesn't suggest that index funds will always do really well, it suggest that it will always do better over a long period of time than individually-selected stock. Any conditions that cause index funds to do poorly seems to also cause most individual stocks to do poorly. Index funds are a risk-mitigation strategy.

Of course it is possible after the fact to find collections of individual stocks that have outperformed the index fund. Trillions of dollars have been staked on trying to do so ahead of time, with little to no success.

Is it possible in the future that groups of funds will somehow perform worse than the individual stocks making up those groups? It's very hard to see how that could happen over any extended period of time.

Re: “A Mild Recession”

#57

Post by voisin »

atlgator wrote: post #29
epups wrote: post #22

Honestly I don't think the issue is that another recession is coming. It's going to be the fourth or fifth serious economic crisis I've experienced in my lifetime. What worries me is that the quality of our political leadership and in general our ability to diagnose and address complex issues is, in my view, at an all-time low.

They are downplaying this whole thing heading into the midterm elections. Inflation is transitory, it's the supply chain, it's Putin, it's gas station owners and oil companies, we're doing a soft landing. These are all cover stories for doing nothing. Low interest rates + $5T in bond purchases fueled remarkable growth and all time high employment. Raising interest rates and selling those bonds will do the opposite. T…

> fueled remarkable growth

Much of which was growth in name only and will prove to be investments in unproductive assets that never would have made it out of the brainstorming session if there was an actual opportunity cost of capital.

Re: “A Mild Recession”

#58

Post by aluminaient »

throwaway5959 wrote: post #5
atemerev wrote: post #2

Oh, this is just the beginning. Ten years of “oh, just buy index funds” strategy will unwind with a huge snap.

Please show on the S&P 500 graph where buying to sell now hasn’t been a great opportunity in the last 100 years minus the last twelve months.

this fairytale may help you sleep at night. But 100 years is almost no history at all, i hope you can appreciate that.

Re: “A Mild Recession”

#59

Post by danaris »

atlgator wrote: post #29
epups wrote: post #22

Honestly I don't think the issue is that another recession is coming. It's going to be the fourth or fifth serious economic crisis I've experienced in my lifetime. What worries me is that the quality of our political leadership and in general our ability to diagnose and address complex issues is, in my view, at an all-time low.

They are downplaying this whole thing heading into the midterm elections. Inflation is transitory, it's the supply chain, it's Putin, it's gas station owners and oil companies, we're doing a soft landing. These are all cover stories for doing nothing. Low interest rates + $5T in bond purchases fueled remarkable growth and all time high employment. Raising interest rates and selling those bonds will do the opposite. T…

From what I can understand (which I will freely admit is somewhat limited, and biased), it seems to me that the root of the problem is that we let the very wealthy soak up all the economic gains due to productivity over the course of a few decades, while also letting those with more money have more influence over our politics (thus meaning that they had the means to ensure their gains would be locked in, rather than redistributed for the benefit of those who actually created them—ie, the workers).

Until we can collectively recognize this and address the staggering socioeconomic inequality in our society, we're going to keep seeing the economy limp and sputter frequently. A healthy economy needs its working class—the vast majority of people in it—to overall have healthy economic situations, enough for at least some disposable income on a regular basis on top of being able to comfortably pay for basic necessities and save a bit for the future. Ideally, it needs that to be the minimum condition, so that everyone in the economy has some genuine discretionary spending capability.

Re: “A Mild Recession”

#60

Post by lesuorac »

Shikadi wrote: post #39
kiba wrote: post #19

Earlier quoted context omitted.

Infinite growth forever is a truism that isn't very useful. Growth can continue indefinitely, but we will hit limiting factors relating to how we structured our economy.

Why do people believe this? The earth has limited resources

The earth having limited resources is just the inverse of the market can stay irrational longer than you can remain solvent.

Eventually we'll hit that limit [1] but the idea that its going to happen soon is undefended. The issue right now for growth is that we can't mine the earth's resources fast enough right not that we've used it up.

[1]: https://en.wikipedia.org/wiki/Heat_death_of_the_universe

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