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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

#151

Post by darkerside »

el_nahual wrote: post #124
darkerside wrote: post #109

Earlier quoted context omitted.

> The owner of a business with 200k in revenue is higher status than a McKinsey employee with a 500k salary. What makes you say that?

Status is weird like that. Different cultures assign status differently. In many parts of the world--certainly in LatAm--status is about power and independence more than it is about money.

If it wasn't clear, I'm not disagreeing, I'm looking for examples, or other reasons for that belief

Edit: The note I think about it, the more I'm inclined to disagree after all. A $500K McKinsey employee is not an entry level consultant. They are likely leading a large team and working regularly with C-level executives at enterprise businesses. They are going to have presence and gravitas because credibility is a huge part of their job.

What kind of business does $200K in revenue per year? It's very likely to be a sole proprietorship, maybe 1-2 employees at most.

I realize that there may be cultures and subcultures that truly believe the independence of the business owner makes them more respectable (although I personally believe that independence is a bit of an illusion), but I think more people would subconsciously assign a higher status to the first person and that it probably wouldn't be close.

Re: Save like a pessimist, invest like an optimist

#152

Post by spullara »

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…

Over that time, you could populate a good portion of nearby systems. It would only take 1m years for humans to populate every possible planet in the galaxy:

https://www.learnastronomyhq.com/articles/how-long-would-it-...

Plenty of room for a very large economy. The next galaxy would take some doing though since it is 2.5 million ly away.

Re: Save like a pessimist, invest like an optimist

#153

Post by Moodles »

sokoloff wrote: post #130
Moodles wrote: post #128

Earlier quoted context omitted.

I'm not suggesting to pay credit card interest. I'm saying you can cover any emergency expense with a credit card which buys you a month, and then you might have ordinary salary or time to sell your stocks before interest is due. No offense but I'm pretty surprised you commented what you did. Literally my first sentence says "... before interest hits...".

I’m perhaps equally surprised that you’d consider anything an emergency that would covered by your ordinary salary within a month’s time. I mean, that’s just normal credit card use, right?

Maybe we’re talking cross purposes here because I generally save a large % of my paycheck. So if an emergency came up (and I was still employed) I would just save a smaller % of it.

But regardless I’m just saying you can use a credit card to buy time interest-free before you pay off the emergency with your salary/stocks/whatever. It’s better than taking a margin loan, no?

Re: Save like a pessimist, invest like an optimist

#154

Post by Moodles »

icedchai wrote: post #135
Moodles wrote: post #91

Earlier quoted context omitted.

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?) thing…

I suspect if you know not to trust yourself to stay the course when the sky is falling, then you are in fact probably better off in the long-run with a less risky asset allocation. There’s plenty of evidence out there to show that the more you buy/sell/tinker, the more likely you are to get worse returns. Literally the best investors are dead people. So if you need some % of cash or bonds to stay the course and do nothing, that’s good. Which shows some self awareness and maturity. Ideal would be to dispassionately follow the math, but your strategy is the next best thing.

Re: Save like a pessimist, invest like an optimist

#155

Post by Robotbeat »

spullara wrote: post #152
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…

Over that time, you could populate a good portion of nearby systems. It would only take 1m years for humans to populate every possible planet in the galaxy: https://www.learnastronomyhq.com/articles/how-long-would-it-... Plenty of room for a very large economy. The next galaxy would take some doing though since it is 2.5 million ly away.

Sure, but then your economy is still constrained to grow at the speed of light. A shell of some thickness expanding at the speed of light. The volume of that shell increases parabolically, not exponentially.

So it still needs to slow down growth, although growth can still occur indefinitely. Well, billions of years until stars naturally start burning out, in which case you get a slowing of growth and degrowth until you're huddled around red dwarfs for a trillion or so years and then harvesting energy from black holes until like a quadrillion years.

Re: Save like a pessimist, invest like an optimist

#156

Post by icedchai »

twblalock wrote: post #134
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.

> 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 g…

I agree with what you say about the economy. I am also impressed by the resilience there. My apocalypse comment was more in reference to the non-economic aspects... sickness, death, isolation. I put on the news and it's awful. Working-from-home has also really worn me out. Many nights, I have trouble sleeping.

I will look into something like the I-bonds more seriously.

Re: Save like a pessimist, invest like an optimist

#157

Post by gexla »

patjenk wrote: post #148
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…

Sorry to be dense, but where in the article does it claim that GDP will grow forever? An as an aside, GDP is only a proxy for how prolific an economy/country is. The country's output can continue to grow without generating more dollars.

Parking my comment here to be part of the dense club.

Why would you even need forever growth? Is it good enough that old companies die and new companies replace the old? In that process, there's always growth to find and invest in?

Re: Save like a pessimist, invest like an optimist

#158

Post by ivalm »

lovecg wrote: post #119
ivalm wrote: post #71

Earlier quoted context omitted.

But humans also don’t have infinite demand on production. If we have a sufficiently high amount of production per capita (ie we are post-scarcity) then growth becomes irrelevant (especially if overall population isn’t growing, which with current trends seems reasonable). At that point the only thing is to ensure that output distribution is sufficiently equitable. We can then have millions of years of stable happy hum…

Would the world of today seem “post-scarcity” to a medieval peasant? I don’t think humanity will ever have “enough” — it’s just not in our nature.

I don’t agree. I don’t think we currently have enough stuff. As a techy in the US I make more than most, but there are still many material things that I can’t quite afford/have to limit myself. However, if production was 100x what it is now then perhaps I would be able to afford them. Post scarcity is at a production level far greater than current.

Also, higher production doesn’t mean higher natural resource consumption —- dematerialization is real. My phone satisfies my needs far more than a landline could but requires far less natural resources.

Re: Save like a pessimist, invest like an optimist

#159

Post by lern_too_spel »

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…

The physicist says that per capita energy use has surged, but that is only true in the developing world. California's per capita consumption of electrical energy has not changed since 1975. https://www.google.com/url?q=https://www.nrdc.org/sites/defa...

Re: Save like a pessimist, invest like an optimist

#160

Post by smabie »

Def_Os wrote: post #118
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…

But increased leverage doesn't mean your risk-adjusted returns are any better.

You can't eat on risk adjusted returns alone! gotta make that chedder

But leverage necessarily decreases your risk adjusted return assuming non zero volatility of the strategy. This is called "volatility drag."

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