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Bull Market Hits a Milestone: 3,453 Days – Most Americans Aren’t at the Party
- didibus 8y agoWow, 10% own 84% of all stocks. That's a bit sad. Is it because 90% of Americans don't even have money left to invest after their cost of living? Otherwise, where are people investing, if not the stock market?
- davemp 8y ago> Otherwise, where are people investing, if not the stock market? Most people's primary investment is their home.
- didibus 8y agoI consider your primary home to be included in your cost of living, but maybe it's true. I guess most people can't afford to invest beyond a mortgage on their main residence.
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- the_gastropod 8y ago> Is it because 90% of Americans don't even have money left to invest after their cost of living? In part, I think this is true. But "cost of living" is maybe a bit broad. Most of these 90% of Americans have a poor grasp of personal finance, and spend way more on unnecessary crap than they should (car loans, credit card debt, restaurants, alcohol, coffee, cell phone bills, cable tv, etc.). This isn't to say that there aren't systemic problems that increase wealth inequality (there are), but a big part of the problem is just good old fashioned consumerism.
- tindm63 8y agoSo you can either spend money on useless junk that is advertised to you, or you can buy stocks in the companies that are producing the junk and the ads. What a choice!
- the_gastropod 8y agoOr buy bonds, or real estate, or start a business, or a nuclear bomb shelter, or build a house, or donate to charity, or whatever. These are hardly the only two options.
- asdffdsa321 8y agoAh, there it is, the condescension that brings down civilizations
- chrischen 8y agoYes but those 10% rich people didn't necessarily get there by avoiding unnecessary crap like coffee or cell phone bills. They most likely got there from legacy or pre-existing accumulated wealth.
- refurb 8y agoSource? From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Those that inherited their massive wealth aren’t that common.
- Someone1234 8y ago> From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings. Source?
- toomuchtodo 8y agoI happen to be reading "The Millionaire Next Door" [1], and this has some truth to it (statistical excerpts [2]). Most "working class" Millionaires own a small business and are very frugal, continuing to live below their means after obtaining their wealth. Frugality alone will not help you attain the quoted wealth level, but it is a component (along with a healthy income and/or equity/asset ownership). With reference to "common jobs", that would be limited to high income professions, such as doctors and attorneys. [1] https://smile.amazon.com/Millionaire-Next-Door-Surprising-Americas/dp/1630762504/ https://smile.amazon.com/Millionaire-Next-Door-Surprising-Am... [2] https://www.washingtonpost.com/wp-srv/style/longterm/books/chap1/millionairenextdoor.htm?noredirect=on https://www.washingtonpost.com/wp-srv/style/longterm/books/c...
- nugget 8y agoDoes this account for state and local workers who have pension plans that are heavily invested in equity markets? I have a family member retired from law enforcement who doesn't own any stock but receives a six figure annual pension from CalPERS, and so has equity exposure indirectly through that portfolio.
- rtkwe 8y agoIs it all that surprising given 40% of American's can't afford a surprise $400 bill? [0] Most people have very little savings period much less money to put in investment accounts. [0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
- QML 8y agoIf compound interest is a force to be reckoned with, shouldn’t we expect power law distributions for wealth? 10% owning 84% seems to be the expectation then. This reminds me of an Atlantic article lamenting the “9.9%” [1]. [1] https://www.theatlantic.com/magazine/archive/2018/06/the-birth-of-a-new-american-aristocracy/559130/ https://www.theatlantic.com/magazine/archive/2018/06/the-bir...
- ben509 8y ago> Is it because 90% of Americans don't even have money left to invest after their cost of living? It's because it doesn't take all that much to live on when you retire, and to have more money requires working longer. Especially, most retirees get big efficiencies from using tax-advantaged accounts, so you have less invested, but you get more out of it. Those accounts have contribution limits, so they don't scale up for the big investors. I work on goal-based financial planning, and one of the key things people want is to retire sooner, which means saving less. If your financial plan was perfect, you'd drop dead with exactly the amount you want to bequest to heirs / charities in your portfolio and not a penny more.
- simonsarris 8y agoNow many people have no money and are scraping by, and many(!) people are extremely bad with money, even fairly middle class people who cannot commit to saving anything and would rather the BMW, but... > 10% own 84% sounds more like simple power law. "A small wealthy % owns most of the X" is true for, well, almost everything. So when you ponder: > Is it because 90% of Americans don't even have money left to invest after their cost of living? The answer is "probably not." Because even if every american invested exactly 5% of their income in the stock market, or 50% of their income, you'd still expect to see ~10% own 84% of all stock. The 10% just have really high incomes/previous savings from incomes, etc. In fact just ponder for a laugh, imagine if the 10% [richest people] only owned like... 15% of the stock market, or owned only like 15% of all real estate, etc. If that were true, you should be really worried about that thing as an investment! Bitcoin might actually be the rare case where the top 10% don't actually own a huge share of a big valuable thing. > Otherwise, where are people investing, if not the stock market? The bottom 90% own most of the lotto tickets. The top 10% eschew these! The top 10% prefer index/hedge funds, which are basically lotto tickets with great odds and a totally lame ROI. There is probably lots of value in convincing people to invest in the index fund lotto instead of the lotto lotto, but even if you did, about 10% would still own about 84% of all stock.
- didibus 8y agoHum, plausible, but I'm not sure I fully see it. How is the stock market an exponential investment? If you look at the growth of the stock since the beginning, and of most company stock, isn't it much more a linear growth? So where would this power distribution come from?
- simonsarris 8y agoAnything with some kind of returns that you can put back into it will exhibit compounding interest. True of real estate or stocks or even just bank deposits. Even if a stock price goes nowhere but pays a 5% dividend (I'm looking at you, RDSA) It is trivially true in real estate (Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.) Why wouldn't it be true in a market where the returns have been higher than real estate?
- hew 8y agoCurrency devaluation (mostly)
- mesozoic 8y agoLikely true. And it's most affecting the general public.
- pc86 8y agoI would argue it's most affecting those who are particularly exposed to fluctuations in the currency market.
- mesozoic 8y agoSure and that is going to me a lot of people who live pay check to pay check paid in a constant dollar amount of people who have a little savings but must store it mostly in dollars.
- chkdsk 8y agoOdd you would think that, considering the US dollar is extremely strong right now relative to other global currencies and has been for the last 5 years (save for last year). I'd love to hear why you think this, and what information sources you're hearing this from? I've seen this line used equally by right wing political groups as well as left wing crypto anarchists who both seem to lack a basic understanding of how finance works.
- dnautics 8y agojust because the USD is strong relative to other currencies doesn't mean there isn't devaluation. Cost of living has not tracked salary increases since 2008.
- tryptophan 8y agoYes it has. This is exactly what the inflation indexes are meant to measure and apply it to nominal wage growth. https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q Maybe it hasn't in SF or NY or other insanely prices areas, but that is 100% because real estate policy in those areas is a disaster.
- draw_down 8y agoWell, what can you do- buy into the market now? If you really believe that strongly in the idea that it's impossible to time the market then be my guest! Your options pretty much boil down to "a crash is coming" (so says everyone for the last 5 years), or "it's different this time" (we all know the issue with that)
- deegles 8y agoHow could a startup begin to address wealth inequality?
- benlorenzetti 8y agoCompetitor to the Federal Reserve :)
- hodder 8y agoEducation
- analog31 8y agoIndeed, I believe that the three keys to success are wealth, education, and work, in that order. If you don't have wealth, then education is next. Perhaps education is like a kind of wealth. Rich people are likely to tell you that work is the most important, because they tend to have a heroic self image.
- trevyn 8y agoTake a wealthy person, ask them what they would do if they had zero money and connections, and teach that as a skill.
- stephengillie 8y agoStep 1: Gain money and connections, one way or another.
- xkcd-sucks 8y agoTake a wealthy person, ask them what they're addicted to, and milk them for all they're worth
- rlglwx 8y agoNo. Ask a person why they are "successful" and they will give you the answer they tell themselves. "I worked harder than others, I am smarter, I went to a good school, etc. etc." While they think that's true, it's mostly hogwash and most people can't tell you why they are or aren't successful. The problem is that most of what it comes down to is luck. Luck in the sense of time and place. People born into a wealthy family or even with two loving parents are lucky and way more likely to be wealthy than those that were born without. Warren Buffett came of age in the greatest period of prosperity in American history. Bill Gates came of age right at the time that PCs became possible. Bezos was first to market on a new and unproven platform. Zuckerberg got lucky because he was able to get started when broadband penetration in developing countries was finally starting to get some traction. No man is an island and teaching success as a skill is just silly in my opinion.
- tabtab 8y agoWe are entering Crash Territory. 100+ years of the same general pattern; meaning an economic "correction" is coming soon.
- conanbatt 8y agoI see you like predicting 10/3 recessions.
- tabtab 8y agoI'm not following. It's Occam's Razor: what's more likely: A) We will set a record bull market & recovery duration, or B) We'll hit a recession soon. Further, the yield curve is also near an inversion, another common pattern preceding recessions.
- conanbatt 8y agoEven a broken clock is right twice a day.
- tabtab 8y agoVarious metrics have predicted the majority of slumps for about 100 years. That's like every hour, not "twice". I don't believe the pattern of slumps is random: it's roughly a decade cycle. Inverting yield curves, PE ratios above average (using long-term earnings), and bull market duration all point to a likely pattern.
- xhrpost 8y ago> But for many seasoned stock market observers, the existence of continuing worries about whether the bull market can last is a strong piece of evidence that it can. >According to this line of thinking, the moment to worry is when there is broad agreement that the market can only go higher. That would suggest there is little fresh money to drive stocks to new heights. This is what I keep wondering about. It seems like everyone is just waiting for the crash to happen for the last 5 years. The slightest downtick seems to send people into a tailspin. Thus, possibly enacting it's own self balancing mechanism? I can't tell, but then, neither can anyone else.
- tabtab 8y agoIt's hard to argue there is not a lemming effect in the market. If the "spook level" reaches a certain threshold, then a mass of investors all bail out at once, and it snowballs. Professional investors are trying to time their sell point so that they bail early in the crash instead of late. (Warren Buffett has mostly ignored this strategy: he just waits for good deals to appear, such as low PE ratios, regardless of the general market trend.)
- wtvanhest 8y agoProfessional investors do not time markets.
- the_gastropod 8y agoSure they do! They just may or may not be any good at it.
- wtvanhest 8y agoNo they don't. There are a few exceptions, but the vast majority of assets are managed but asset managers who have mandates to stay fully invested. Only niche hedgefunds time markets.
- 8y ago
- mandeepj 8y agoMisleading article. It's not that we are continuously in the bull run from last 3453 days. We had a few crashes in between.
- tabtab 8y agoBut "crash" is relative and continuous. The article defined what's traditionally been defined as a "crash". It's like "unemployment": there may ways to measure, each with different strengths and tradeoffs, but there are one or two traditional "common" metrics. Politicians tend to cherry-pick different metrics over time to fit their narrative of making them look good and the "enemy" bad.
- kgwgk 8y agoBut no bear market, according to the usual definition of bull/bear markets.
- sdinsn 8y ago"Bull" and "bear" have definitions. We have been in a continuous bull run, by the definition.
- chrischen 8y agoInflation adjusted graph here seems to suggest that the stock market isn't really higher than since 2008: https://inflationdata.com/Inflation/Inflation_Adjusted_Stock_Price/NYSE_Inflation_adjusted_stock_price.asp https://inflationdata.com/Inflation/Inflation_Adjusted_Stock...
- dagoat 8y agoFollowing the link: I find it odd that his google plus pic is of him wearing a tux, with what looks to be a pile of money on fire above him.
- sdinsn 8y agoThat's for the index, it doesn't count dividends. The majority of gains from holding a S&P500 fund over a long period are from dividends compounding.
- throwaway9d0291 8y agoA substantial part of the difference he's pointing out just comes from using the NYA index instead of the S&P 500. Between the 2007 peak and the end of 2017 when he published this, his NYSE index gained only 20% (https://goo.gl/bWuBvQ https://goo.gl/bWuBvQ), while the S&P 500 index, which is what people actually use and invest in (http://etfdb.com/compare/market-cap/ http://etfdb.com/compare/market-cap/), is up more like 70% (https://goo.gl/pFZW9X https://goo.gl/pFZW9X). Inflation may have had an impact on his specially chosen index but the index most people use to invest is certainly worth a lot more than it was in 2008.
- RickJWagner 8y agoFinancial education is a must. So many people miss out on opportunities, splurge when they could build for the future, etc. When I was a young programmer (nearly 30 years ago), a retirement-age colleague took me aside and told me that if I paid the maximum into my retirement plan (401k) and didn't use it as an ATM, when the time came to retire I would be very pleased with the result. I'm not at that point yet, but I still have about a decade to go. If nothing extraordinary happens, my friend's advice will have been very good. The market has gone down, it has gone up, but always on an upward trajectory. It's a crime that kids aren't taught this and other basic financial tenets from the very first grades.
- singularity2001 8y agoThe very good longterm chart reminds me of the saying "The stock market is most boring if you invest over decades: It is just a log-linear curve with ignorable dips"