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Save like a pessimist, invest like an optimist

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Re: Save like a pessimist, invest like an optimist

#131

Post by paulryanrogers »

xmprt wrote: post #121
paulryanrogers wrote: post #105

Earlier quoted context omitted.

Our space-ward expansion has some hard physics limits. And we've not yet eclipsed what was already done decades ago. And even settling Mars will require more sustainable lifestyles than most first world citizens now enjoy.

We're talking about hundreds and thousands of years though. A few hundred years ago, the mere thought of airplanes and cell phones would be considered witchcraft. I don't think it's a long shot to be reasonably optimistic about where humanity can get in terms of technology.

Imagination is unlimited. I don't mean to harsh anyone's dreams. But technological development isn't a predictable march forward.

There is less low hanging fruit as things progress. I'd guess we're very close to the peak of attainable technology.

Once sustainability comes into the picture then, IMO, we're beyond the limit.

Re: Save like a pessimist, invest like an optimist

#132

Post by erik_seaberg »

kd5bjo wrote: post #85
smabie wrote: post #67

Earlier quoted context omitted.

They're not too good to be true. it's just the people making those kinds of returns aren't taking retail investment. For example in crypto, market makers are commonly making 100% return. You haven't heard of these firms and they aren't interested in your money. Market makers usually do quite well for themselves, but are capacity constrained: they can earn stellar returns on tens of millions of capital, but maybe not…

It sounds like people who invest the time to properly learn finance can make a pretty good living at it. If that’s you, I wish you the best of luck. But I’m a retail investor, and will almost certainly remain one— Not only do I not have the training to come up with these strategies, I don’t have the knowledge to judge the veracity of anyone claiming to sell them to me either. I’m content with my suboptimal portfolio…

Few cryptocurrency holders are using it for payments or building anything that creates value. It’s just zero-sum speculation and FOMO.

Equities are different because their connection (however tenuous) to actual earnings gives them a very steady long-term uptrend. The hard part is just staying in during a crash so you don’t miss the recovery. Half of S&P 500 returns came on its ten best days.

Re: Save like a pessimist, invest like an optimist

#133

Post by luckman212 »

simonsarris wrote: post #63
ericmay wrote: post #42

Earlier quoted context omitted.

Well, eventually what will happen is countries will disappear, wars will destroy things, and other events will wipe out economies, savings, or entire companies. The growth model will probably always be exponential, but from time to time things will reset to 0.

or 1% more optimistically: https://pbfcomics.com/comics/reset/

PBF is so genius. I had forgotten about it, thank you for the reminder.

Re: Save like a pessimist, invest like an optimist

#134

Post by twblalock »

icedchai wrote: post #64
Moodles wrote: post #14

Earlier quoted context omitted.

Yeah, it’s essentially just estimating the probability of you getting an emergency which coincides with a total market collapse so horrific it reduces your semi-liquid net worth to less than your emergency. I’m at a point where I’m ok with that risk. At some point you would be too: 85%? 90%? 99%? Clearly we agree Jeff Bezos doesn’t need 6 months cash on hand at all times. So the limit is somewhere. I think a total ma…

I keep roughly 10% of my net worth in cash... That equates to several years of expenses. It may be excessively high but it lets me sleep at night. You joke, but the past year shows something like a zombie apocalypse is a possibility.

> You joke, but the past year shows something like a zombie apocalypse is a possibility.

For me the past year shows that the economy has been more resilient than most people expected, that the Fed is willing to drop rates to zero in order to keep it that way, and that the stock market actually goes up when that happens because it is the only investment that might return more than a fraction of a percent.

If you are going to keep that much in cash, I might suggest putting some of it in inflation-protected securities like I-bonds. They are backed by the US government, and I can't forsee a situation where the government could default on them without the value of the dollar also tanking. They are better protected from inflation than money in a savings account.

Re: Save like a pessimist, invest like an optimist

#135

Post by icedchai »

Moodles wrote: post #91
icedchai wrote: post #64

Earlier quoted context omitted.

I keep roughly 10% of my net worth in cash... That equates to several years of expenses. It may be excessively high but it lets me sleep at night. You joke, but the past year shows something like a zombie apocalypse is a possibility.

Yeah as I say, it's fine to do whatever you want with your money to provide emotional comfort. I'm merely saying it's a psychological bias you may want to be aware of. I mean, you chose a 10% figure. Why 10%? Why not 20% or 5%? I think it's helpful to really think through the math sometimes.

Yes, you're right... Mathematically, I know I can be fine with less, it just makes me feel uneasy. I was actually trending towards a lower percentage, but I got scared and depressed earlier in the year. I sold off some poorly performing stocks and ETFs, giving me some more cash cushion. It felt like the sh*t was really hitting the fan. It still does, in many ways, just not for my investment accounts. When (if?) things "go back to normal" I will re-assess...

Re: Save like a pessimist, invest like an optimist

#136

Post by sudosysgen »

shoo wrote: post #97
yojo wrote: post #39

I’m skeptical of the closing claim that exponential growth keeps happening forever. Yes, you can grow GDP 2% for 200 years, that results in an economy 50x the start size. Expand it to 1000 years and you’re talking about an economy 400 million times as large. After 2100 years you’re up to an economy a QUINTILLION times as large. At some point the exponential curve has to go S-shaped. Maybe we’re still in the happy exp…

> I claim that economic growth cannot continue indefinitely. [...] the Earth has only one mechanism for releasing heat to space, and that’s via (infrared) radiation. We understand the phenomenon perfectly well, and can predict the surface temperature of the planet as a function of how much energy the human race produces. The upshot is that at a 2.3% growth rate (conveniently chosen to represent a 10× increase every c…

I made exactly that argument on HN a few months ago! I found that the inflection point would be 200-400 years into the future.

Re: Save like a pessimist, invest like an optimist

#137

Post by np_tedious »

fairity wrote: post #2

One question that's been top of mind lately for me is how optimistic you should be in your investing strategy. IBK currently allows retail investors to trade on margin with an annual interest rate of only 1% (yes, really). You can borrow up to 2x your principle at this rate. If you were extremely optimistic, you would borrow 2x your principal and expect to 3x your annual return. If you were optimistic but wanted to a…

Do you mean IBKR, Interactive Brokers?

I looked up IBK and was surprised to st Industrial Bank of Korea

Re: Save like a pessimist, invest like an optimist

#138

Post by fairity »

np_tedious wrote: post #137
fairity wrote: post #2

One question that's been top of mind lately for me is how optimistic you should be in your investing strategy. IBK currently allows retail investors to trade on margin with an annual interest rate of only 1% (yes, really). You can borrow up to 2x your principle at this rate. If you were extremely optimistic, you would borrow 2x your principal and expect to 3x your annual return. If you were optimistic but wanted to a…

Do you mean IBKR, Interactive Brokers? I looked up IBK and was surprised to st Industrial Bank of Korea

Yea, typo. Interactive Brokers's margin loan rates are BM + 1% (or 1.09%, at present). https://www.interactivebrokers.com/en/index.php?f=46376

Re: Save like a pessimist, invest like an optimist

#139

Post by ouid »

count wrote: post #123
paulryanrogers wrote: post #105

Earlier quoted context omitted.

Our space-ward expansion has some hard physics limits. And we've not yet eclipsed what was already done decades ago. And even settling Mars will require more sustainable lifestyles than most first world citizens now enjoy.

European global expansion also had hard physics limits. The age of sail grew the global GDP tremendously. I wouldn't discount multi-year asteroid mining trips/etc. from having the same impact in 50-100 years.

Really? What do you imagine to be receiving from an asteroid that cannot more easily be obtained from the earth?

Re: Save like a pessimist, invest like an optimist

#140

Post by ouid »

marvin wrote: post #75
smabie wrote: post #51

Earlier quoted context omitted.

One should target volatility, not leverage. Without leverage, you can usually only take the most risky of strategies in order to get a return. If you're willing to take on leverage, you are much more likely to find a good strategy. Source: work at a small prop firm that takes on around 10x leverage. Even at this leverage ratio, we are considerably less risky than the S&P 500. Even at 10x, our volatility is somewhere…

And certainly you are well protected against black swan type events, even at 10x leverage...?

if you have 10x leverage, your insurance against black swan events is to try to go 10x bankrupt.
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