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America’s banks are missing hundreds of billions of dollars

economist.com

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Re: America’s banks are missing hundreds of billions of dollars

#441

Post by robertlagrant »

geysersam wrote: post #437
robertlagrant wrote: post #433

Earlier quoted context omitted.

Thanks for elaborating. It seems now I don't understand your definition of efficiency. People choosing free ice cream over costly beer doesn't strike me as a loss of efficiency.

"Efficiency" is total Utility produced with the available resources. > People choosing free ice cream over expensive beer doesn't strike me as inefficient. But it is! With the total available resources we have two options: All get beer. Or all get ice cream. Total utility (value/happiness/whatever) is maximized when everyone gets beer. When resources are unevenly distributed, ice cream is subsidized, and all get ice…

Ah! I understand. I agree that if you do that once, it works one time. But as soon as you take the money they all gave to the bartender and redistribute it, to maximise happiness, and they all buy more beer, you might start to spot where this falls down as a useful model, mightn't you?

Re: America’s banks are missing hundreds of billions of dollars

#442

Post by edmundsauto »

bluGill wrote: post #438
edmundsauto wrote: post #422

Earlier quoted context omitted.

> I concluded long ago that if I made studying the market my full time job and hobby I could make a good income doing it I'd be curious how you reached this conclusion. The outside view (lots of academic papers on this) is that nobody beats the market over a long time frame. I've often thought this assumes scale-invariance; as I look to make lower volumes of money, I'll see things that aren't worth a real trader's ti…

There are a handful of people - Peter Lynch, Warren Buffet... That over the years have proven that thesis false. The vast majority do not beat the market, but the vast majority are investing on emotion and fads. I would have completely missed amazon and google, but there were other companies that would for a while grow at better than market rates that I would have found (or so I think!), and would have been able to g…

> nobody can beat the market over time, with maybe 1-2 exceptions.

Apologies for the poor wording. Agreed there do appear to be a few people who beat the market regularly. My perspective is those people are not using the same tools available to even elite traders - Buffett gets really good deals because of who he is. That kind of thing isn't available to anyone else and in the context of "could GP beat the market if they worked really hard and were really smart", it rounds to "nobody can beat it".

Re: America’s banks are missing hundreds of billions of dollars

#443

Post by edmundsauto »

hnfong wrote: post #439
edmundsauto wrote: post #422

Earlier quoted context omitted.

> I concluded long ago that if I made studying the market my full time job and hobby I could make a good income doing it I'd be curious how you reached this conclusion. The outside view (lots of academic papers on this) is that nobody beats the market over a long time frame. I've often thought this assumes scale-invariance; as I look to make lower volumes of money, I'll see things that aren't worth a real trader's ti…

I haven't read those academic papers you mentioned so I might have missed some insights, but after thinking about it on and off for a while my thoughts on it are: 1. Many people trading on the stock market are professional traders who do it as a full time job, and they have access to information and tools that you don't. So unless you expend similar amount of time in studying the markets, it's highly unlikely you'd b…

This is a reasonable summary of mutual funds not beating the market. I think it's maybe a single-digit number of individuals can do it, but the reasonable default should be something like "a number that rounds to 0% of money managers in any format are able to beat the market over a long time frame".

https://www.nytimes.com/2022/12/02/business/stock-market-ind...

Re: America’s banks are missing hundreds of billions of dollars

#444

Post by geysersam »

robertlagrant wrote: post #441
geysersam wrote: post #437

Earlier quoted context omitted.

"Efficiency" is total Utility produced with the available resources. > People choosing free ice cream over expensive beer doesn't strike me as inefficient. But it is! With the total available resources we have two options: All get beer. Or all get ice cream. Total utility (value/happiness/whatever) is maximized when everyone gets beer. When resources are unevenly distributed, ice cream is subsidized, and all get ice…

Ah! I understand. I agree that if you do that once, it works one time. But as soon as you take the money they all gave to the bartender and redistribute it, to maximise happiness, and they all buy more beer, you might start to spot where this falls down as a useful model, mightn't you?

I haven't said anything about redistributing wealth.

The point is not that redistribution is a good idea. The point is that wealth inequality makes the economy less efficient, and that it is something we should take into consideration.

Redistributing wealth might also make the economy less efficient, that's an argument that can be made.

From where I stand, it seems the inefficiency caused by wealth inequality is too rarely discussed relative to its harmful impact.

The problems caused by redistribution/taxes etc. are otoh extremely often raised.

Re: America’s banks are missing hundreds of billions of dollars

#445

Post by lmm »

ceejayoz wrote: post #435
lmm wrote: post #419

Earlier quoted context omitted.

> They’re protected. There’s an FDIC for securities. Same $250k limit, same likelihood of going above that in practice. Not really. You're (partially) protected from your broker using your money market fund for themselves - even in a bankruptcy you get your fund back - but you're not protected against it becoming worth a bit less than you deposited (which is what would happen in an SVB-like situation - interest rates…

If your money market fund is losing any significant portion of its value, you've got larger societal issues to deal with that make all this stuff irrelevant. Zombies, nuclear war, or something along those lines. FDIC insurance won't protect you from inflation, either. You asserted the money market stuff isn't protected; it is, either via the FDIC or the SIPC.

> If your money market fund is losing any significant portion of its value, you've got larger societal issues to deal with that make all this stuff irrelevant. Zombies, nuclear war, or something along those lines.

One could have argued the same thing for non-FDIC bank deposits - the worst case for SVB depositors in the collapse would have looked a lot like a failed money-market fund, 94 or 96 or 97 cents on the dollar. That's still a lot different from 100, and it's a realistic thing to happen in a market crash, which do appen.

> FDIC insurance won't protect you from inflation, either. You asserted the money market stuff isn't protected; it is, either via the FDIC or the SIPC.

FDIC guarantees you 100 cents on the (possibly inflated) dollar. Money market funds don't.

3 weeks ago investment A and investment B both had a realistic worst case of ~95 cents on the dollar, with speculation that the government would back it to 100 but no firm guarantee. Now investment A has that firm guarantee and investment B doesn't. Surely you can see what that means for their relative valuation.

Re: America’s banks are missing hundreds of billions of dollars

#446

Post by scotty79 »

samus wrote: post #434
scotty79 wrote: post #332

Earlier quoted context omitted.

USA wouldn't be able to run at trade deficit for decades if it didn't literally print money for the rest of the global economy.

These two things are related the other way round as well: to become a reserve currency, the using country must have a trade deficit. Else the rest of the world would not have enough liquidity to actually use the currency, and the market would grind to a halt. If no liquidity were available, any transaction would have to be secured with other assets. That asset would be the actual reserve currency then.

That's true, but it doesn't make it better in any way. Ideally reserve currency should not be the currency of any single country to avoid this situation where one country basically freeloads on the global economic development by printing paper and can even cause wave of global inflation by arbitrarily deciding to print waaay to much, too quickly.

You might argue that to keep printing this country needs to invest into aircraft carriers to keep everybody else in line and well behaved. But it's still a very profitable arrangement as the recent history of USA shows.

Re: America’s banks are missing hundreds of billions of dollars

#447

Post by robertlagrant »

geysersam wrote: post #444
robertlagrant wrote: post #441

Earlier quoted context omitted.

Ah! I understand. I agree that if you do that once, it works one time. But as soon as you take the money they all gave to the bartender and redistribute it, to maximise happiness, and they all buy more beer, you might start to spot where this falls down as a useful model, mightn't you?

I haven't said anything about redistributing wealth. The point is not that redistribution is a good idea. The point is that wealth inequality makes the economy less efficient, and that it is something we should take into consideration. Redistributing wealth might also make the economy less efficient, that's an argument that can be made. From where I stand, it seems the inefficiency caused by wealth inequality is too…

Fair point - you didn't mention redistribution.

But I do think your argument of efficiency is not persuasive, as the definition of utility relies on people making choices they never regret, or that don't harm their total lifetime utility.

E.g. some people might want to take that money and save it, and if you come back to the situation in a year's time they now have more money than the people that bought beer. Now there's wealth inequality and they can buy something the others can't. Viewing the original situation in microcosm makes buying beer the "efficient" thing to do, but it also makes the second scenario less "efficient".

Re: America’s banks are missing hundreds of billions of dollars

#448

Post by fastaguy88 »

unyttigfjelltol wrote: post #195
dsomers wrote: post #148

Earlier quoted context omitted.

> 4. The old treasuries decline 30-40% in present value. Oops, they're not so safe after all if you need your money back before maturity, which is often decades away. This is because they fucked up their duration risk handling, no one held a gun to SVBs head and forced them to invest so heavily in long duration bonds. If they bought more short duration bonds none of this would be a problem. Other banks didn’t make th…

Maybe, but the latest Fed action violates a 40-year downtrend in interest rates, so it was exceptionally improbable from a historical perspective. From 2020 trough to 2022 peak, government interest rates increased almost 1,000%, which means the magnitude also is hard to anticipate or plan for, and the effects extreme from failing to do so. You can do a regression of interest rates from whenever to now, draw a line th…

It really didn't take a finance expert to appreciate that when interest rates ranged from less than 1% short term to barely 2% at 10 years, interest rates could only go up, 40 year trend or not. And being invested long, for very little gain, was extremely dangerous should rates go up. It has been clear since the 2008 crash that longer bonds had far more downside than upside when rates were so close to zero, so why take the risk?

Re: America’s banks are missing hundreds of billions of dollars

#449

Post by robertlagrant »

hutzlibu wrote: post #180
robertlagrant wrote: post #116

Earlier quoted context omitted.

Better a private entity that needs bailing out with taxpayer money than one that is normally funded by taxpayers.

Socialise the risks, privatise profit.

To be clear: I think we shouldn't socialise the risks either. Just saying it's better than fully running it on taxpayer money.

Re: America’s banks are missing hundreds of billions of dollars

#450

Post by robertlagrant »

mrguyorama wrote: post #440
robertlagrant wrote: post #406

Earlier quoted context omitted.

I'm not sure how globally applicable that point is, although it could be. Do you have a link to any stats? How do you define "overweight"?

Most wealthy countries are getting fat, and non wealthy countries have tons of other fun things that are common but would be considered "comorbidities" like parasites, or asthma (including pollution induced asthma)

Sure, but did you have a look at the infographic? It's quite helpful in telling you what it considers comorbidities.
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