Experts from a world that no longer exists • Hacker News Board

Re: Experts from a world that no longer exists

#261

Post by kortilla » Mon, Nov 22, 2021, 11:51 AM UTC

ItsMonkk wrote: post #154

pezzana wrote: post #116

> “Don’t buy stocks when the P/E ratio is over 20” was a good lesson to learn from the 1970s when interest rates were 7%, the Fed hadn’t yet learned what it’s capable of, and most businesses were cyclical manufacturing companies vs. asset-light digital services. Is it relevant today? At a broad, philosophical level, yes. In practical terms, probably not. In the same sense, buying stocks at all seemed like nothing but…

> They simply can't do it and rather extrapolate current conditions to infinity. This is what I think more people should be paying attention to. I keep seeing the FIRE(financially independent; retire early) people talk about the returns they have gotten the past 100 years, not taking into account that the first 50 of those years saw tremendous growth, and the last of those 50 years saw tremendous stagnation and debt…

I don’t understand the obsession with comparing the wealth of the furthest most point of the distribution tail to minimum wage, it makes absolutely no sense.

Who cares how much Musk or Bezos have? Have the government seize literally everything from them and everyone in the US could have $1k once. Despite being at the top, their wealth is irrelevant on a societal scale.

Re: Experts from a world that no longer exists

#262

Post by kortilla » Mon, Nov 22, 2021, 11:55 AM UTC

Kye wrote: post #183

spaetzleesser wrote: post #133

Earlier quoted context omitted.

The 2000 and 2008 blowups were pretty bad but back then there were still things that could be done like running deficits or lowering interest rates. We now have huge deficits and almost zero interest already during the boom. What can the Fed or government do during the next downturn? I don’t see them having any tools left to reinflate the bubble.

UBI Really. Just give people money. It generates more benefit than it costs. Look how well billionaires did when unemployment benefits were buffed up. Now imagine if they were taxed reasonably to capture some of that toward covering the cost. People still looked for work, but they could afford to hold out for better jobs.

That’s an absolute disaster. It wasn’t even UBI levels and it caused all kinds of inflation and a ballon of government debt.

> People still looked for work, but they could afford to hold out for better jobs.

A.k.a. weren’t really looking for work. It’s like uncle Eddie holding out for a management position for years of being unemployed.

Re: Experts from a world that no longer exists

#263

Post by mehlmao » Mon, Nov 22, 2021, 7:03 PM UTC

abetusk wrote: post #102

This line is what I think of whenever the cryptocurrency vitriol comes out here: """ Pets.com was mocked, but Chewy is now a $30 billion business. Webvan failed, but Instacart and UberEats are now thriving. eToys was a joke, but now look at Amazon. Some of the biggest businesses of the last 10 years are all in industries that were the starkest examples of stupidity 20 years ago. """

Chewy isn't profitable yet, is it? All of the new and successful example businesses (save Amazon) only exist because of money being thrown around, and can't sustain that forever.

Re: Experts from a world that no longer exists

#264

Post by npsimons » Tue, Nov 23, 2021, 1:00 AM UTC

pepoluan wrote: post #257

npsimons wrote: post #170

Earlier quoted context omitted.

> Similarly, seeing a list of past failures may inspire variations that seek to overcome the shortcoming without having to waste time first reproducing the same failure. One can try to learn _why_ it failed and use that to guide future attempts. To me, this is a big thing that survivorship bias overlooks, to the detriment of us all. Taking Edison's "1000 failures to invent a lightbulb" can often be more instructive t…

I don't mind criticism, as long as it's constructive and not for the sake of bringing down someone. "I did not see you considering X factor, do you think its impact will be insignificant" is a helpful, constructive criticism. "This will not work. You're stupid to pursue this, pursue something else likely to succeed" is not.

> I don't mind criticism, as long as it's constructive

I think the point of "criticism-free" brainstorming is that it is time constrained, and a free for all. It's precisely geared towards getting people to not hold back, to throw anything out there.

The criticism will always come, sooner or later.

Re: Experts from a world that no longer exists

#265

Post by grog454 » Tue, Nov 23, 2021, 3:48 AM UTC

ItsMonkk wrote: post #256

grog454 wrote: post #215

Earlier quoted context omitted.

> Musk, with a wealth 100x that of Hughes at $290 billion I've never really understood this kind of net worth valuation. Since most of that value is tied up in Telsa stock, he's only worth that as long as he keeps doing what he's doing. In a way he's a slave to his net worth (not that I would mind being in his financial position). If, tomorrow, Elon throws his hands up and decides he's had enough and wants to exit hi…

This was a fair comparison - the same exact thing was true of Hughes and Rockefeller. But your argument is actually my argument. The past 50 years wealth inequality has grown, and we are now starting to see liquidity issues where for their particular stock. But if we let this trend continue, sometime in the next 100 years, if they intend to sell and use their wealth for some utility, it will have a either have a liqu…

>This was a fair comparison - the same exact thing was true of Hughes and Rockefeller.

Agreed, but then Hughe's et al net worth are wrong imo as well. If you or I give a two week notice our net worth probably doesn't drop a cent. If some (but importantly not all) UHNW people quit on short notice their networth drops an order of magnitude or more. I presume it can be done with a very long term and carefully managed exit strategy, and I'll assume that's what bill gates did with nothing but the knowledge that he served as a board member long after stepping down as CEO.

I suppose my only point is that these top N networth lists are irrelevant at best, and it would not surprise me if significant wealth utility is actually held by people with lower public visibility (inheritors, private company owners, private investors, dictators, etc).

Re: Experts from a world that no longer exists

#266

Post by kragen » Tue, Nov 23, 2021, 6:24 PM UTC

The segue from Henry Ford's chain casting into buying stocks with a high P/E ratio seems sort of intentionally irrational; it would have made as much sense to tout perpetual motion machines. They laughed at continental drift! They laughed at Fulton!

The underlying value of a stock is the net present value of its future paid-out earnings. This is just a fact of the financial system, as fundamental to it as the conservation of energy is to the physical universe. It should have been mentioned in the article.

The reason P/E ratios vary is that companies' earnings change over time and companies go bankrupt. If you buy a stock with a P/E ratio of 20 years and then the company's earnings stay the same forever, eventually those earnings will find their way into dividends or buybacks, and your return on investment will be 5% per year, forever. If the P/E ratio is 10 years, 10%. If the P/E ratio is 50 years, 2%.

(If the company invests the earnings in assets, it doesn't pay them out in dividends or buybacks that year. But then the depreciation of those assets is deducted from its earnings in following years, so to maintain the same earnings, it would need to have higher earnings-plus-depreciation. So ultimately it all balances out.)

So when people rationally buy a stock with a P/E ratio of over 20 years, either:

1. They're expecting the company's earnings to go up by enough to put it back below 20; or:

2. They're expecting less than 5% per year return on investment, which probably means they're treating the company as a very-low-risk investment like commercial paper rather than like an ordinary stock; or:

3. They're hoping to find a bigger fool to unload the stock on before its price returns to what its earnings can rationally justify.

If you buy and hold a stock whose P/E ratio is 350 years, like Tesla today, and those earnings never change, you're getting an 0.3% annual return, forever.

Which, and forgive me because I'm not an expert here, sucks.

(Apologies for including the correct units on P/E ratios. I'm not the kind of person who thinks "vega" is a letter of the Greek alphabet.)

Re: Experts from a world that no longer exists

#267

Post by LoveMortuus » Wed, Nov 24, 2021, 11:51 AM UTC

jjoonathan wrote: post #200

barry-cotter wrote: post #182

Earlier quoted context omitted.

People who can retire are wealthy. They have a claim on [10, 20, 30] years of an income stream in the future. This can either be a claim on future tax revenues (public pensions) or on return to capital previously invested (private pensions). Most people have always worked til they died and it seems unlikely that the system where people work for 30-40 years and then get 30-40 years of pension will last.

95% of people used to work in agriculture, now 5% do. This scarcity is our own creation.

I don't think it's scarcity, I think it's just reallocation of workforce, due to technological advancements. Those 5% can now produce equivalent or more to what the 95% used to produce. And because of that, people are able to focus on other work.