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What if your entire worldview was just because of near-zero interest rates?

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Re: What if your entire worldview was just because of near-zero interest rates?

#161

Post by nicbou »

ako wrote: post #150
t0suj4 wrote: post #126

Earlier quoted context omitted.

From my parents' experience guaranteeing people a job will only result in people idling at job site because there is no work to do instead of people idling at home or possibly studying for a job they want to do. Giving artificial jobs don't differ much from giving people artificially valued money.

First time I came to the US over 25 years ago, one thing I noticed that was really different from western Europe was the amount of artificial jobs: grocery store bag filler, elevator boy, parking place guard, etc. I hadn’t seen these in Europe for years, cause nobody needs them. Having first visited Eastern Europe during communism, the resemblance in this aspect surprised me.

You have not seen them in part because of labour costs. Their existence seems to correlate with that.

Re: What if your entire worldview was just because of near-zero interest rates?

#162

Post by raffraffraff »

benjaminwootton wrote: post #106

I definetly think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. All of those losses flowed into the bank accounts of big tech (via AWS credits, Google and Facebook Ads). All of the high salaries, employee expectations and leverage in tech startups and big tech derive from that spigot of cheap money…

If cheap credit is at an end I can see a lot of small companies and hobbyists losing free-tier services. I don't know how companies like Gitlab can give away so much functionality for zero money. One startup I worked at operated for years on free tiers and spent nothing on version control, CICD, CDN, remote access, authentication, email, chat, video conferencing etc.

I don't want that dream to end, of course. I make use of free-forever services. I just don't see it lasting if we get to the end of cheap credit.

Re: What if your entire worldview was just because of near-zero interest rates?

#163

Post by em500 »

s1artibartfast wrote: post #55
FooBarWidget wrote: post #28

Earlier quoted context omitted.

> For me, it makes a lot more sense to tax realized profit, or better yet consumption, than wealth itself. Why not tax all of that simultaneously? That's what the Dutch do. > I don't think it is desirable to force realization just to increase tax revenue. And yet various governments are doing or are planning exactly that.

I searched and couldnt find anything about a Dutch wealth tax, just answers saying they dont have one. Do you have a source? I wasn't aware of any western countries which have wealth taxes, but I was surprised to find that Norway, Spain, and Switzerland do have some. https://taxfoundation.org/net-wealth-tax-europe-2022/#:~:tex... .

Straight from the source: https://www.belastingdienst.nl/wps/wcm/connect/en/income-in-...

Summary: https://en.wikipedia.org/wiki/Taxation_in_the_Netherlands#Bo...

Re: What if your entire worldview was just because of near-zero interest rates?

#164

Post by blitzar »

lamontcg wrote: post #151

What if you're just too young to remember a business cycle because you weren't an adult or were still in college so were insulated from 2008? Its funny to read all these takes from "kids" who think that all the fundamentals have totally changed at this point like the economy has turned some fundamental 180 degree turn and we're heading back towards >6% rates forever. It hasn't. The Fed is going to crash the economy i…

Born in the 80's I see. Complaining that people born in the90's have seen less than someone born 10 years earlier.

There are people born 20 years before you that have seen 2x as much.

Re: What if your entire worldview was just because of near-zero interest rates?

#165

Post by geysersam »

echelon wrote: post #149
HWR_14 wrote: post #144

Earlier quoted context omitted.

Why on earth would you think dividends are a terrible idea?

1. Theoretically speaking, this means the company has nowhere else better to put that cash [1]. Rather than reinvesting back into itself to fuel growth, dividends return company proceeds to investors. It's a sign of slow or no growth. 2. As an investor, you can't control when and how you're taxed. Dividends are taxable when they are paid out. A company stock buyback, on the other hand, would increase the value of you…

> Nowhere better to put their money

Same could be said about stock buybacks. In principle they're the same, only one has better tax characteristics.

> Rather than investing into itself.

Why would a mature business continue to invest into itself perpetually? What's in it for the investor?

Re: What if your entire worldview was just because of near-zero interest rates?

#167

Post by geysersam »

qaq wrote: post #154
spaceman_2020 wrote: post #124

Earlier quoted context omitted.

My wife's uncles is one of the top doctors in his field in the country, and was the head of department in the country's top medical university. He makes less money than me, even though I'm 35 years younger and my "skills" include some basic coding, some marketing, and some understanding of social media. Whereas this man has spent nearly 50 years in the medical field and has treated multiple presidents. None of the st…

"I'll be okay with a pay cut if it means a more equitable, more fair society" hmm you could make it more equitable by raising your maids comp by your own description it would have 0 adverse effect on you.

Sure, but we need broader reform if anything is to actually change.

You can't fight the market forces and systemic problems with personal choices.

Re: What if your entire worldview was just because of near-zero interest rates?

#168

Post by helsinkiandrew »

geysersam wrote: post #155
Animats wrote: post #113

Earlier quoted context omitted.

> I definitely think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. Yes. Buying growth at a loss is so over. A stock is worth the present value of future dividends.

> a stock is worth.. Hasn't this always been the case? Genuinely curious.

> Hasn't this always been the case?

Yes, but think the poster was implying the increase in interest rates makes it worth less.

$100 in 10 years is worth $91 today at 1% but $53 at 6%. That has a big affect on the valuation of growth companies.

Re: What if your entire worldview was just because of near-zero interest rates?

#169

Post by nmfisher »

mvhvv wrote: post #158
eftychis wrote: post #132

Earlier quoted context omitted.

In fact it is a terrible idea to pay dividends. You can thank the tax code if you subscribe to that school of thought.

What do you think the value is in a stock that doesn't pay dividends? It seems to me that if you remove them, you're getting into pyramid-scheme territory.

(1) the expected value of the company changing its mind and choosing to pay dividends in future + (2) the value of vote to remove management and replace them with someone who will pay dividends + (3) a legal right to share in the proceeds of sale/dissolution of the company.

These are actually worth quite a lot. But you do make a good point, particularly when it comes to companies like Facebook, who don't pay dividends but have dual class structures so management can't be ousted. I don't know why regulators allow these companies to be floated like that, they're pretty much the antithesis of what public companies are supposed to be. If Zuck's metaverse bet fails (which I anticipate it will), and he doesn't pull another rabbit out of the hat, I expect we're going to see a lot more institutional investors complaining about dual class structures in the next few years.

Re: What if your entire worldview was just because of near-zero interest rates?

#170

Post by benj111 »

IncRnd wrote: post #122
Animats wrote: post #113

Earlier quoted context omitted.

> I definitely think a lot of the startup world view is just a function of low rates. Startups could run for decades with $billions in losses and only a passing focus on eventual profits. Yes. Buying growth at a loss is so over. A stock is worth the present value of future dividends.

> A stock is worth the present value of future dividends. Not every stock pays dividends. A stock's worth is determined by supply and demand in a market or directly between the seller and the prospective purchaser.

There has to be some basis for valuation. If you buy a stock, not because you expect it to pay something but because you expect someone to pay more later for the same reason you don't have investment. You have speculation.

Yes there are other methods for distributing profits (stock buy backs) but unless you're saying it's a massive Ponzi scheme, then the value has to come from something real.

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