4 ms·

The working class will be too busy trying to keep up. There won't be time for a revolution.

by badbug 8y ago

busterarm 8y ago
I'm bullish on the sentiment expressed by the parent poster, actually. Like another commentator, I believe index funds are going to be ripped hard and this is what the average saver has been told to dump their money into by the banking industry since the last crisis.
- waterphone 8y ago
  Investing in total market index funds is literally investing in the economy as a whole. (Or as much of a whole as the index represents.) So while yes, they will crash with future market crashes, of which there will be many in each of our lifetimes, historically in the U.S. so far the market has always recovered.
  - kolbe 8y ago
    What percentage of 'the economy' do you think is represented by publicly traded corporations?
    - oihoaihsfoiahsf 8y ago
      According to this article [1], public firms account for about 80% of the pre-tax profit in the private sector. That's probably enough, given that public and private company returns are probably at least somewhat correlated. [1]: https://www.forbes.com/sites/sageworks/2012/09/21/private-companies-invest-more-than-publicly-traded-firms/#37a0b25d2536 https://www.forbes.com/sites/sageworks/2012/09/21/private-co...
      - kolbe 8y ago
        The P in GDP does not stand for Profit. An economy consists of a lot more than private sector profits.
        oihoaihsfoiahsf 8y ago
        Right. But I'd wager that index fund investors are more interested in profits than GDP, at least as it relates to their investments and the proposition at the top of this thread that index funds will be "ripped" (presumably disproportionately) in the next downturn.
        busterarm 8y ago
        Right. If you have a wide market downturn, all of the "active investors" are going to take their money out as cash and wait to buy and the "passive investors "are going to take a bath. The mistake that index fund adherents make is that there is no such thing as passive investing. Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now.
        asdfasgasdgasdg 8y ago
        > Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now. There's an alarming amount of overlap between the groups: "claim that passive investing will underperform," and "make money when people actively invest."
        PeterisP 8y ago
        First, it's literally impossible for all of the "active investors" to take their money out as cash; some active investors can cash out by selling all their stock to other active investors who think that this is a good time to buy more stock; passive investors would/could only absorb that amount of stock at the speed of new passive capital coming in, which is gradual, not that large (compared to the flows of active investors) and would likely slow down somewhat in a market downturn. Furthermore, how exactly are "passive investors" going to take a bath? They're simply making a very long term bull market bet; if DJI drops 50%, it's the active investors that might sell at this price, but the index funds will just keep their position until (and after) it recovers, the only case where they'll lose in the long run is if the DJI drops permanently and that doesn't seem plausible outside of ww3 scenarios.
  - nostrademons 8y ago
    "historically in the U.S. so far the market has always recovered." This is sorta enshrining survivorship bias in your premises - take the largest economy around today and point out that every time it's crashed, it's recovered. Well, if it hadn't, there wouldn't be anything to point at. There are actually plenty of examples - even among European settlers of the Americas - where the economy did not recover. The Continental Congress and the monetary system setup under it failed through hyperinflation, leading to the expression "not worth a Continental", and then the country had to be rebooted under the U.S. Constitution. Similarly, plantation owners in the Confederate States of America were totally wiped out - not only was the currency debased, the infrastructure destroyed, and the plantations burned, but the whole legal framework under which the plantation system operated was rewritten.
    - waterphone 8y ago
      Yes, it's an imperfect predictor of the future. No one else does a very good job predicting economic futures either, however.
    - hueving 8y ago
      But you are comparing with fledgling/emerging markets. Samples of failures at this point to scare people should be declines of economies established for more than a hundred years. The falls of empires, etc. Those are what are relevant to the current US investor.
- ryandrake 8y ago
  Only around 50% of Americans own any stock at all, including indirect ownership like IRAs and pensions. So, I don’t see the working class suffering that much due to stock market decline. They will suffer due to joblessness.
  - busterarm 8y ago
    If you know your history, it's the "middle class" that has directed just about every non-marxist revolution. I guess I should add the clarification that I think most folks who consider themselves middle-class and who are investing and saving money are actually working-class. If you don't own your residence outright or have the liquid assets to purchase it and still make investments, you are working-class. If you live in the valley and can't afford to buy and can't uproot your job to somewhere more affordable to buy while maintaining roughly the same income level, you're working-class too.
    - lsc 8y ago
      >If you know your history, it's the "middle class" that has directed just about every non-marxist revolution. One can make a strong argument (even from marxist sources) that even the marxist revolutions were mostly directed by the middle class; most of the marxists call it the intelligentsia, but these were mostly educated men at a time when that meant more than it does now. (and even now, I think most people consider a good education enough to make you "middle class" even if you don't make that much scratch.) I mean, all this depends on your definition of a "revolution" and of "middle class" - if I define "middle class" as "powerful or educated enough to get something done, while not being super rich" and I define revolution as "overthrow of the government by people who aren't already at the top of the power structure" then it almost becomes tautological; if people are powerful enough to start a revolution, by that definition, you are middle class or better, and if an elite starts a revolution, by that definition, it's then a coup. (I'm not suggesting those are your definitions of revolution and middle class; just that the definition of those two words (and the definition of those two words is kinda fuzzy) makes all the difference in this question)
      - 8y ago

The working class will be too busy trying to keep up. There won't be time for a revolution.

by badbug 8y ago

The working class will be too busy trying to keep up. There won't be time for a revolution.

I'm bullish on the sentiment expressed by the parent poster, actually. Like another commentator, I believe index funds are going to be ripped hard and this is what the average saver has been told to dump their money into by the banking industry since the last crisis.

waterphone 8y ago
Investing in total market index funds is literally investing in the economy as a whole. (Or as much of a whole as the index represents.) So while yes, they will crash with future market crashes, of which there will be many in each of our lifetimes, historically in the U.S. so far the market has always recovered.
- kolbe 8y ago
  What percentage of 'the economy' do you think is represented by publicly traded corporations?
  - oihoaihsfoiahsf 8y ago
    According to this article [1], public firms account for about 80% of the pre-tax profit in the private sector. That's probably enough, given that public and private company returns are probably at least somewhat correlated. [1]: https://www.forbes.com/sites/sageworks/2012/09/21/private-companies-invest-more-than-publicly-traded-firms/#37a0b25d2536 https://www.forbes.com/sites/sageworks/2012/09/21/private-co...
    - kolbe 8y ago
      The P in GDP does not stand for Profit. An economy consists of a lot more than private sector profits.
      - oihoaihsfoiahsf 8y ago
        Right. But I'd wager that index fund investors are more interested in profits than GDP, at least as it relates to their investments and the proposition at the top of this thread that index funds will be "ripped" (presumably disproportionately) in the next downturn.
        busterarm 8y ago
        Right. If you have a wide market downturn, all of the "active investors" are going to take their money out as cash and wait to buy and the "passive investors "are going to take a bath. The mistake that index fund adherents make is that there is no such thing as passive investing. Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now.
        asdfasgasdgasdg 8y ago
        > Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now. There's an alarming amount of overlap between the groups: "claim that passive investing will underperform," and "make money when people actively invest."
        PeterisP 8y ago
        First, it's literally impossible for all of the "active investors" to take their money out as cash; some active investors can cash out by selling all their stock to other active investors who think that this is a good time to buy more stock; passive investors would/could only absorb that amount of stock at the speed of new passive capital coming in, which is gradual, not that large (compared to the flows of active investors) and would likely slow down somewhat in a market downturn. Furthermore, how exactly are "passive investors" going to take a bath? They're simply making a very long term bull market bet; if DJI drops 50%, it's the active investors that might sell at this price, but the index funds will just keep their position until (and after) it recovers, the only case where they'll lose in the long run is if the DJI drops permanently and that doesn't seem plausible outside of ww3 scenarios.
- nostrademons 8y ago
  "historically in the U.S. so far the market has always recovered." This is sorta enshrining survivorship bias in your premises - take the largest economy around today and point out that every time it's crashed, it's recovered. Well, if it hadn't, there wouldn't be anything to point at. There are actually plenty of examples - even among European settlers of the Americas - where the economy did not recover. The Continental Congress and the monetary system setup under it failed through hyperinflation, leading to the expression "not worth a Continental", and then the country had to be rebooted under the U.S. Constitution. Similarly, plantation owners in the Confederate States of America were totally wiped out - not only was the currency debased, the infrastructure destroyed, and the plantations burned, but the whole legal framework under which the plantation system operated was rewritten.
  - waterphone 8y ago
    Yes, it's an imperfect predictor of the future. No one else does a very good job predicting economic futures either, however.
  - hueving 8y ago
    But you are comparing with fledgling/emerging markets. Samples of failures at this point to scare people should be declines of economies established for more than a hundred years. The falls of empires, etc. Those are what are relevant to the current US investor.
ryandrake 8y ago
Only around 50% of Americans own any stock at all, including indirect ownership like IRAs and pensions. So, I don’t see the working class suffering that much due to stock market decline. They will suffer due to joblessness.
- busterarm 8y ago
  If you know your history, it's the "middle class" that has directed just about every non-marxist revolution. I guess I should add the clarification that I think most folks who consider themselves middle-class and who are investing and saving money are actually working-class. If you don't own your residence outright or have the liquid assets to purchase it and still make investments, you are working-class. If you live in the valley and can't afford to buy and can't uproot your job to somewhere more affordable to buy while maintaining roughly the same income level, you're working-class too.
  - lsc 8y ago
    >If you know your history, it's the "middle class" that has directed just about every non-marxist revolution. One can make a strong argument (even from marxist sources) that even the marxist revolutions were mostly directed by the middle class; most of the marxists call it the intelligentsia, but these were mostly educated men at a time when that meant more than it does now. (and even now, I think most people consider a good education enough to make you "middle class" even if you don't make that much scratch.) I mean, all this depends on your definition of a "revolution" and of "middle class" - if I define "middle class" as "powerful or educated enough to get something done, while not being super rich" and I define revolution as "overthrow of the government by people who aren't already at the top of the power structure" then it almost becomes tautological; if people are powerful enough to start a revolution, by that definition, you are middle class or better, and if an elite starts a revolution, by that definition, it's then a coup. (I'm not suggesting those are your definitions of revolution and middle class; just that the definition of those two words (and the definition of those two words is kinda fuzzy) makes all the difference in this question)
    - 8y ago