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Pricing Money: A beginner's guide to money, bonds, futures and swaps

jdawiseman.com

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Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#271

Post by ineptech »

quickthrowman wrote: post #256
ineptech wrote: post #35

Earlier quoted context omitted.

This isn't false but it feels reductive. A financial instrument that allows one to bet on the corn harvest is obviously valuable to the corn farmer, as it allows them to use profits from good seasons to hedge against bad seasons. They're also valuable to people whose business is affected by the corn harvest - cereal manufacturers, say. The problem is that they can also be used by people with no exposure at all who si…

The buyers and sellers of a futures contract are both trying to offload risk onto someone else. The risk profiles of both sides don’t always offset exactly, so speculators are necessary for functioning commodity futures markets (and markets in general). Also, price discovery is much more efficient with more liquidity, which is what speculators provide, in addition to risk assumption.

Sure, I get this and agree, but price discovery and facilitating markets are subject to diminishing returns just like anything else, right? I don't think I would've been downvoted for saying something like, "It's a problem that it's more lucrative to speculate on existing housing than to build new housing, so we should make regulatory changes to address that" and this feels analogous to me.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#272

Post by alecco »

polymathemagics wrote: post #246
alecco wrote: post #218

All these Financial guides are very interesting. But beware of falling into the illusion of being a good-enough active investor. It's like entering the Pro league as an overconfident amateur. The other players are the best in the universe. And they have cybernetic extensions: algorithmic trading with virtually limitless amounts of resources and information. And sometimes they have "alpha" you'll never, ever get your…

Agree that people should not do active investing, although the solution would be passive investing (index funds), which allow you to focus on friends & family without missing out of the economy's long term gains.

This is a terrible moment for index funds.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#273

Post by pcdoodle »

rprospero wrote: post #257
pcdoodle wrote: post #250

Earlier quoted context omitted.

Another useful aspect: Heat pumps will take a long time to reach every application that needs heating. EG: drying grain. Sometime heat pumps are not the answer (-21F for instance). Bitcoins resistive heating properties are almost 100% efficient. With bitcoin mining: Money In = Heat + Air Flow = Money Out. Electrical energy now has an opportunity to not be waisted where it normally would be. Think renewables where lin…

It’s that last step I’ve never understood. I get that some guy in Iceland has excess power generation and can use that to mine bitcoin. I can then buy those bitcoins from him. However, I’ve never heard an explanation for how I then recover the energy from the bitcoin? The closest I’ve heard is that I could use the bitcoins to buy electricity from someone else, but I could have just paid that guy in the first first pl…

You could take the bitcoin from excess hydro generation in a northern climate and deploy solar panels in a climate where solar has great ROI for instance.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#274

Post by flagrant_taco »

chii wrote: post #245
flagrant_taco wrote: post #229

Earlier quoted context omitted.

> They should've just lied, and said that they'd do it for another bank, if there's a need to; this would've stopped any fear of a run, and thus stop the run before any more dominos collapse. While this may have prevented FRB, that's a very dangerous game to play should the bluff get called. I'm strongly opposed to the idea that those given the power and authority to control or markets, as best they can, should world…

The thing is, this white lie is what keeps confidence levels high, which is what prevents the run. By merely suggesting that a bank can fail, and that the FDIC is not going to bail out high depositors, they paradoxically _cause_ the run. After all, the people who took the money out just merely redeposited it back elsewhere (that they trusted more). The white lie is better than a loss of trust which lead to an actual…

While I totally agree that is how the system is designed, that's also the fundamental issue I have with it.

If we have such a fragile banking system that those in charge are expected to lie to us to keep people from seeing the fragility, we have to rethink the system.

> In fact, people in society today believe plenty of white lies already - what's one more?

That feels like a bit of a slippery slope, selling people on one lie shouldn't justify telling another. It also means first defining what a white lie is, and who gets to know the truth to decide whether it's acceptable or not.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#275

Post by henry2023 »

nabla9 wrote: post #199
henry2023 wrote: post #193

World government debt went from 5T at the beginning of the XXI century to about 305T today. Is this sustainable?

Thinking in nominal values is rookie mistake. You must think in terms of ratios, or not think at all. Debt-to-GDP ratio is a good measure that takes into an account most other variables like changes in population, productivity etc.

Well, world debt went from 5T to 305T while world GDP went from 33T to 96T in the same period

As ratio we went from to 16.5% to 317%.

Same question. Is this sustainable?

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#276

Post by MechanicalTim »

robocat wrote: post #240
h2odragon wrote: post #221

Earlier quoted context omitted.

There may not be a law explicitly stating you have to have homeowner's insurance. But. Without such insurance, specifically the "injury liability type" with its limits; then if someone gets injured on your property there may be no limit to your liability. So even people who could afford the loss buy insurance because it is the best method of limiting intangible risks.

> there may be no limit to your liability. You can put the house into a limited liability company, which theory should limit the liability to the value of the house. Depending on whether director negligence was involved etcetera.

My understanding is that for an LLC to provide protection the house would have to be used for purely business purposes and that there can be no co-mingling of personal finances. the concept is called "piercing the corporate veil". IANAL but I looked into this pretty extensively when choosing how to protect myself with investment properties.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#277

Post by vecinu »

alecco wrote: post #272
polymathemagics wrote: post #246

Earlier quoted context omitted.

Agree that people should not do active investing, although the solution would be passive investing (index funds), which allow you to focus on friends & family without missing out of the economy's long term gains.

This is a terrible moment for index funds.

Hot take but I'll bite, what's your rationale? We're only ~9% down from VTI's ATH and what happens now doesn't matter when your investing horizon is 15+ years.

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#278

Post by boppo1 »

alex_smart wrote: post #143
RyEgswuCsn wrote: post #122

Earlier quoted context omitted.

Except that is not exactly "productive", isn't it? After all, risk was not eliminated, only redistributed. Productive output, e.g., would be something that reduces the chance of your house catching fire.

This is exactly the why and how of "travel broadens the mind". You only have to visit countries and socities that do not have well-developed financial markets to directly see and appreciate the value financial markets bring to your own society. Visit a part of the world where most people do not have access to home loans, health insurance etc. and you will not have to ask how mere redistribution of risk and capital ad…

> (I happen to have been born one such part of the world.)

Care to elaborate for those of us who never made it out of middle-america?

Re: Pricing Money: A beginner's guide to money, bonds, futures and swaps

#280

Post by MrPatan »

notahacker wrote: post #268
MrPatan wrote: post #261

Earlier quoted context omitted.

Nobody is saying delivery of assets is done on chain. That's a strawman you've skewered twice already, well done. What we're saying is: a lot of the low level infrastructure used now in finance (brokers! Dealers! Clearinghouses!) is easily replaced by some code, once you have trustless decentralized computers. Which we do now. Then your oil barrel market is just some code nobody needs to trust, and yes, the "last mil…

You started off asking "why do you still want the guys with guns solution" and insisting that blockchain provided a "trustless, decentralized" solution to the problems financial markets purport to solve. So I don't think it's a "straw man" to point out the answer to your question is market participants want promises actually delivered upon which you now admit is entirely dependent on the "guys with guns" (and/or trus…

No. Here's the quote I responded to originally, slightly expanded for your convenience and ease of use:

> Similarly, building a somewhat straighter fibre (and then microwave towers) from Chicago to NY has no societal benefit I can discern. (But the solution to that is fintech and regulation, not crypto.)

I've always been talking about technical infrastructure, you're the one who brought up delivery of oil barrels.

If you think this bit is not important enough that's fine. Feel free not to get involved.

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