4 ms·

The Case-Shiller Index currently has home prices rising at 2-3x inflation: https://www.housingwire.com/articles/46307-case-shiller-home-prices-rising-at-least-t

The Case-Shiller Index currently has home prices rising at 2-3x inflation: https://www.housingwire.com/articles/46307-case-shiller-home-prices-rising-at-least-twice-the-rate-of-inflation https://www.housingwire.com/articles/46307-case-shiller-home... That would certainly seem to be unsustainable.

debacle 8y ago
We're still post-crash, and China is putting a lot of money into American real estate.
- monkmartinez 8y ago
  "is == were" from what I understand
- anonymous5133 8y ago
  We aren't at post-crash anymore. House prices have fully recovered and now exceed the previous housing bubble peak. Foreign buyers could be a catalyst that has inflated the home prices to new heights.
perl4ever 8y ago
I've never understood how stock market returns can exceed inflation in the long run either...it seems inescapable logically that if you can come up with an asset with a guaranteed return, people will flock to it until the real return equals approximately zero.
- mmt 8y ago
  Time (aka risk) matters. The fact that certain assets only have a "guaranteed" return over periods of 30 years or longer significantly limits the kind of people that are willing to flock to them.
  - perl4ever 8y ago
    If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine. It still seems obvious to me that any asset with perpetual outperformance must revert to the mean before or after it eats the world and people just have gotten very accustomed to denying this fact because the boom in the US stock market has outlived any human who doubted it. Look at Moore's law - it became an article of faith, but things that can't go on forever the same way don't.
    - mmt 8y ago
      > If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? > Like a corporation that sells annuities? They exist, of course, but I think you'll find "simply" doesn't begin to describe how this works in reality, especially with the confounding factor of that corporation adding another layer of risk/opacity. > any asset with perpetual outperformance That's different from your initial premise, which was returns exceeding inflation. Outperformance is a different concept, which is about being better than the mean, but the "stock market" (at least in the US) is often considered that mean. To consider inflation (i.e. zero, in real terms) to be the mean suggests zero economic growth and/or wealth creation and/or zero-sum activity, and I think it's safe to say it's obvious that's not what's happening. It may certainly be that the stock market outperforms overall economic growth, but that premium can easily be explained by risk, so long as it's not huge. If S&P500 real returns are 6%, there's not much room for a huge premium to begin with, and I'd be surprised if it's as wide as a full percentage point.
      - perl4ever 8y ago
        >> If that was the case, then couldn't someone simply >>establish a perpetual entity to invest and sell their >>average returns to people with shorter time horizons? >> Like a corporation that sells annuities? > >They exist, of course, but I think you'll find "simply" >doesn't begin to describe how this works in reality, >especially with the confounding factor of that >corporation adding another layer of risk/opacity. My use of "simply" wasn't expressing the idea that the details of running such a business are trivial, but that it's an everyday thing that's been invented and not some speculative or impossible or unbelievable thing. >> any asset with perpetual outperformance > >That's different from your initial premise, which was >returns exceeding inflation. Outperformance is a >different concept, which is about being better than the >mean, but the "stock market" (at least in the US) is >often considered that mean. No, it's not meant to be different. "Outperformance" can mean performance relative to a given benchmark - here, something like the CPI or PPI was the benchmark intended. >To consider inflation (i.e. zero, in real terms) to be >the mean suggests zero economic growth and/or wealth >creation and/or zero-sum activity, and I think it's >safe to say it's obvious that's not what's happening. Right now in the US, maybe it's not happening. But look at Japan and what's happened to investment returns and inflation in the last 30 years. Essentially all my savings are in fact in the stock market. So I'm not promoting, say, gold, or bitcoin, or whatever alternative. I'm just nervous if I can't justify the direction of the herd in spite of the fact it would make me feel better if I was sure the market would keep going up.

debacle 8y ago

We're still post-crash, and China is putting a lot of money into American real estate.

monkmartinez 8y ago
"is == were" from what I understand
anonymous5133 8y ago
We aren't at post-crash anymore. House prices have fully recovered and now exceed the previous housing bubble peak. Foreign buyers could be a catalyst that has inflated the home prices to new heights.

perl4ever 8y ago

I've never understood how stock market returns can exceed inflation in the long run either...it seems inescapable logically that if you can come up with an asset with a guaranteed return, people will flock to it until the real return equals approximately zero.

mmt 8y ago
Time (aka risk) matters. The fact that certain assets only have a "guaranteed" return over periods of 30 years or longer significantly limits the kind of people that are willing to flock to them.
- perl4ever 8y ago
  If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? Like a corporation that sells annuities? It seems like a minor detail of financial engineering, just like figuring out how to profit from a perpetual motion machine. It still seems obvious to me that any asset with perpetual outperformance must revert to the mean before or after it eats the world and people just have gotten very accustomed to denying this fact because the boom in the US stock market has outlived any human who doubted it. Look at Moore's law - it became an article of faith, but things that can't go on forever the same way don't.
  - mmt 8y ago
    > If that was the case, then couldn't someone simply establish a perpetual entity to invest and sell their average returns to people with shorter time horizons? > Like a corporation that sells annuities? They exist, of course, but I think you'll find "simply" doesn't begin to describe how this works in reality, especially with the confounding factor of that corporation adding another layer of risk/opacity. > any asset with perpetual outperformance That's different from your initial premise, which was returns exceeding inflation. Outperformance is a different concept, which is about being better than the mean, but the "stock market" (at least in the US) is often considered that mean. To consider inflation (i.e. zero, in real terms) to be the mean suggests zero economic growth and/or wealth creation and/or zero-sum activity, and I think it's safe to say it's obvious that's not what's happening. It may certainly be that the stock market outperforms overall economic growth, but that premium can easily be explained by risk, so long as it's not huge. If S&P500 real returns are 6%, there's not much room for a huge premium to begin with, and I'd be surprised if it's as wide as a full percentage point.
    - perl4ever 8y ago
      >> If that was the case, then couldn't someone simply >>establish a perpetual entity to invest and sell their >>average returns to people with shorter time horizons? >> Like a corporation that sells annuities? > >They exist, of course, but I think you'll find "simply" >doesn't begin to describe how this works in reality, >especially with the confounding factor of that >corporation adding another layer of risk/opacity. My use of "simply" wasn't expressing the idea that the details of running such a business are trivial, but that it's an everyday thing that's been invented and not some speculative or impossible or unbelievable thing. >> any asset with perpetual outperformance > >That's different from your initial premise, which was >returns exceeding inflation. Outperformance is a >different concept, which is about being better than the >mean, but the "stock market" (at least in the US) is >often considered that mean. No, it's not meant to be different. "Outperformance" can mean performance relative to a given benchmark - here, something like the CPI or PPI was the benchmark intended. >To consider inflation (i.e. zero, in real terms) to be >the mean suggests zero economic growth and/or wealth >creation and/or zero-sum activity, and I think it's >safe to say it's obvious that's not what's happening. Right now in the US, maybe it's not happening. But look at Japan and what's happened to investment returns and inflation in the last 30 years. Essentially all my savings are in fact in the stock market. So I'm not promoting, say, gold, or bitcoin, or whatever alternative. I'm just nervous if I can't justify the direction of the herd in spite of the fact it would make me feel better if I was sure the market would keep going up.