4 ms·

What do you think about the rally now? I too have been following the site since it started. Around 2011 or so I realized I was missing the greatest rally, possi

by dismal2 10y ago

What do you think about the rally now? I too have been following the site since it started. Around 2011 or so I realized I was missing the greatest rally, possibly ever, but I was an unemployed millennial with no money to invest. In the past 2 years or so I'm finally on a good financial footing but I really think this monetary experiment is coming to an end and I dont think I'm thinking that only from reading doom media. Hope I'm wrong, because another downturn would be bad for this country.

mahyarm 10y ago
I've realized in my life trying to predict macro is pretty damn hard. Because even if something is irrational, it might be in a whole bunch of very powerful group's interests to keep on propping up the irrational for a very long time. For example, I come from Vancouver. In Vancouver, the 2007 real estate bubble never stopped, wages stayed at their Reno, NV levels. Having Vancouver RE has had about a %30 annualized return for about 15 years. Now an average house is about 1.5-2 million dollars. The housing market is completely irrational, but knowing how it works it might be another 'boom' decade or it might all collapse on itself in the next few years.
jonstokes 10y ago
There are two principles at work here. First is Lord Acton's rule: "things that can't go on forever, don't." The second is Keynes: "the market can stay irrational a lot longer than you can stay solvent." Everyone knows that this has to end -- not just in doom media but everywhere -- but all smart traders know that being early is the exact same thing as being wrong. You cannot time whats coming, and unless you're running money for somebody else, you don't have to. The only thing you can do is diversify. I know that this is standard advice and it's not nearly as sexy as betting on The Big One, but having a healthily diversified portfolio is literally the only way to stay sane. If you just have to buy catastrophe insurance, then treat it like what it is: a small hedge against a long tail eventuality. That means don't bet your lifestyle on it. For me, the most powerful lesson from the GFC is that /everyone/, without exception, is net long The System, and when you bet against The System you bet against the combined best efforts of the most advanced civilization that this planet has ever produced. That is stupid, so don't do it.
- StillBored 10y ago
  The problem is that you can't properly diversify anymore, I went looking for things that weren't correlated. Heck during all the fed/government meddling things that should have been negatively correlated were moving together. That is when I concluded the whole thing was rigged, and it was better to go with the herd than get run over by it. In my own way I bet against the housing boom of the early/mid 2000's too. I didn't really lose any money, but what I learned is that I should have just went out and purchased the largest house I couldn't afford, because the government made it clear that they would do anything to prop up housing/banks/etc. We will never see a _REAL_ price crash in housing because as soon as the markets start to dip a few percent the 2% loans, tax breaks, and bailouts for banks holding empty real-estate they cant sell because doing so will cause the prices to drop further.
nugget 10y ago
As other posters have said: diversification is the only free lunch because market timing is nearly impossible. The other thing you can do is invest in yourself and increase your income earning potential (which, to me, means both the absolute amount of income you make and how much your enjoy your job and therefore how long you can last in it). As returns on financial capital decrease, returns on human capital (your own labor) become relatively more important and attractive. If we are truly headed for decades of ZIRP and sub-4% (or even flat) real returns then YOU are the best place to invest your money.

by dismal2 10y ago

mahyarm 10y ago

I've realized in my life trying to predict macro is pretty damn hard. Because even if something is irrational, it might be in a whole bunch of very powerful group's interests to keep on propping up the irrational for a very long time. For example, I come from Vancouver. In Vancouver, the 2007 real estate bubble never stopped, wages stayed at their Reno, NV levels. Having Vancouver RE has had about a %30 annualized return for about 15 years. Now an average house is about 1.5-2 million dollars. The housing market is completely irrational, but knowing how it works it might be another 'boom' decade or it might all collapse on itself in the next few years.

jonstokes 10y ago

There are two principles at work here. First is Lord Acton's rule: "things that can't go on forever, don't." The second is Keynes: "the market can stay irrational a lot longer than you can stay solvent." Everyone knows that this has to end -- not just in doom media but everywhere -- but all smart traders know that being early is the exact same thing as being wrong. You cannot time whats coming, and unless you're running money for somebody else, you don't have to. The only thing you can do is diversify. I know that this is standard advice and it's not nearly as sexy as betting on The Big One, but having a healthily diversified portfolio is literally the only way to stay sane. If you just have to buy catastrophe insurance, then treat it like what it is: a small hedge against a long tail eventuality. That means don't bet your lifestyle on it. For me, the most powerful lesson from the GFC is that /everyone/, without exception, is net long The System, and when you bet against The System you bet against the combined best efforts of the most advanced civilization that this planet has ever produced. That is stupid, so don't do it.

StillBored 10y ago
The problem is that you can't properly diversify anymore, I went looking for things that weren't correlated. Heck during all the fed/government meddling things that should have been negatively correlated were moving together. That is when I concluded the whole thing was rigged, and it was better to go with the herd than get run over by it. In my own way I bet against the housing boom of the early/mid 2000's too. I didn't really lose any money, but what I learned is that I should have just went out and purchased the largest house I couldn't afford, because the government made it clear that they would do anything to prop up housing/banks/etc. We will never see a _REAL_ price crash in housing because as soon as the markets start to dip a few percent the 2% loans, tax breaks, and bailouts for banks holding empty real-estate they cant sell because doing so will cause the prices to drop further.

nugget 10y ago

As other posters have said: diversification is the only free lunch because market timing is nearly impossible. The other thing you can do is invest in yourself and increase your income earning potential (which, to me, means both the absolute amount of income you make and how much your enjoy your job and therefore how long you can last in it). As returns on financial capital decrease, returns on human capital (your own labor) become relatively more important and attractive. If we are truly headed for decades of ZIRP and sub-4% (or even flat) real returns then YOU are the best place to invest your money.