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I don’t need the money I’m investing today for at least 10 years, maybe 20. I’m betting that the U.S. economy will not stay depressed for 10-20 years, which see

I don’t need the money I’m investing today for at least 10 years, maybe 20. I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet. I did not invest heavily during the 2008 financial crisis, and looking back, I have regrets about that. I invested more aggressively this time around on the downturn. And my younger siblings and colleagues all seem to be taking the same long-term approach. They all read /r/personalfinance and some are trying to “FIRE”—again, on a 10-20 year plan. The article seems to take an implied short-term view by talking about how the recovery might or might not be V-shaped. Honestly that seems like the crazy approach. I don’t know anyone, personally, who is investing today with hopes of pulling that money back out in a few months. That is what a symmetrical “V” would be at this time. Obviously that is not going to happen.

LatteLazy 6y ago
That’s exactly how I felt reading the article. Their worse case historic scenario is 3 years? Not many people should be investing with a shorter timeline than that anyway!?
hyperpallium 6y ago
The market overreacts to bad news. So Buffett bought American Express during a scandal, which (he checked) didn't actually affect their business. For the USA, business is affected, the question is if it's long term: Will closed businesses reopen? Will unemployed find work? Will the US lose its centrality to China? But however bad it is, the market overreacts.
hyperpallium 6y ago
BTW I achieved "Financial Independence, Retire Early", but didn't like it - though it was tremendous fun getting there, by creating value that I and others valued - being a good, contributing member of society felt good. (And the motivation of FIRE helped.) Plus, you don't really retire, your job is now investing. If you really love that particular job (like Buffett does), then this works out well. But if your innate talents and interests lie elsewhere, you'd be happier doing that... and the need for money can help motivate you, during those times you don't feel like it. It doesn't seem like extra motivation should be important, but is was for me personally. Maybe I'm lacking somehow, as I note that many independently wealthy people do keep working without that motivation. e.g. YC itself. (Though pg now does seem to have really retired, or maybe is a fulltime career parent - there is no more important job!) Thoughts on motivation?
- toomuchtodo 6y ago
  > Thoughts on motivation? Lose yourself in the service of others (Ghandi). Find a problem that speaks to your skills and curiosity, something that feeds your soul by doing. This has helped me find my path, I hope it helps you find yours.
  - carapace 6y ago
    Good advice. It's strange that something so rewarding is so often overlooked. It challenges our egos, I think, eh?
    - deleted 6y ago
      [deleted]
- madaxe_again 6y ago
  For me, after retiring at 33, I just turned my existence into an adventure playground. For me, getting there was very little fun - I accidentally built a successful business that I ended up hating like a prison sentence, so getting out was a huge relief. I live off grid in the middle of nowhere, and I am busy and engaged, all day, every day, doing and learning. I’ve become an infrastructure engineer, a construction engineer and labourer, a farmer, an arboriculturist, and at night I’m an astronomer, an author, and an automation coder. Right now I’m putting together a multi-stage solar and hydro dump heating setup. All sorts of interesting challenges, and I’m experimenting with welding and (safely) testing large pressure vessels, which is a first for me. Am I contributing to society? Not really - but I’m not taking anything from it either, other than passive income. My portfolio just sits there and grows for my dotage, the rental properties provide an income, and I do a tiny bit of tech consulting, both paid and pro bono, because it’s fun. So, motivation? Do something you enjoy. That’s pretty much all there is to it. I like screwing around with matter and information and learning and making things, so I do that.
  - amiga_500 6y ago
    > Am I contributing to society? Not really - but I’m not taking anything from it either, other than passive income. My portfolio just sits there and grows for my dotage, the __rental properties__ provide an income, You are taking from society through rentier activity ---- Reply to the dollar guy below as hacker news soft censors anti landlord replies This is so, so wrong. Perhaps you are a java dev? Stop attempting to lump wealth creators in with rentiers via inheritance.
dntbnmpls 6y ago
> I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet. Not to mention most americans' retirement is tied to their homes\ equity and their 401k/stocks. So it is political suicide for the government to let either drop in value for an extended period of time. Therefore, over the long term, house prices and stock prices will likely go up because politicians want to be reelected. The only caveat is that eventually, we will reach out "limit" ( demographically, economically, etc ) and then housing/stock prices will drop and stay down for decades/maybe forever. Japan hit their limit in the early 90s and their housing prices and the nikkei today is a fraction of what it was back then. https://tradingeconomics.com/japan/stock-market https://tradingeconomics.com/japan/stock-market If the check the 50Y chart, you'll see that the nikkei was at 37000 in the early 90s and is now at 20000. 30 years in and still nearly 50% down.
- ghouse 6y ago
  > So it is political suicide for the government to let either drop in value for an extended period of time. Therefore, over the long term, house prices and stock prices will likely go up because politicians want to be reelected. The obituary for Capitalism will point to this factor. The politicians killed it.
- panarky 6y ago
  > it is political suicide ... Politicians have different time horizons than the cities, provinces and nations that they govern. It's not political suicide if the politician enriched himself at the expense of the public and is out of office when the consequences are realized.
  - rubyskills 6y ago
    The government has no control of bubble bursts.. in fact they usually aggravate the possibility. According to history, bubble pops usually happen with one small pop and another much larger one after the fact. This second one will happen when people least expect it because the media has thus far spun a narrative of extreme optimism in contrast to reality. The reality is the economic numbers don't look great and will take awhile to bounce back.
kolbe 6y ago
But you aren't betting on the economy, you're betting on the perceived value of current publicly traded equities. For example, if a company you invest in goes bankrupt, you don't get that money back later when the economy recovers.
- strunz 6y ago
  Betting on one company always has that risk. Most people are investing in index funds and Fortune 500 companies which aren't going bankrupt.
  - kolbe 6y ago
    If GM (in indexes) goes bankrupt and Tesla (not in indexes) stays alive, or if IBM (in indexes) goes bankrupt and Palantir (not in indexes) stays alive, then you as an investor in public indexes do not reap benefits of the economy improving.
    - MiroF 6y ago
      Tesla is in indexes. If they're a publicly traded company, they are in indexes. Palantir is privately held and thus not super relevant to this discussion.
      - kolbe 6y ago
        Palantir is relevant because you cannot invest in it. That's the whole point. Did you read the previous part of this discussion about how publicly traded indexes do not represent a targeted bet on the economy because there are plenty of companies that are not a part of them (e.g. Tesla not in the S&P 500) that can completely replace the ones that are?
        MiroF 6y ago
        I agree that betting on publicly traded indices does not represented a targeted bet on the economy. I disagree that bankruptcy is a big risk to index fund investors.
Spooky23 6y ago
Betting on that now is insane. We haven’t even felt the main wave of bankruptcies and disruption yet. Credit is locking up (try getting an unsecured loan) and people aren’t paying bills. 50% of New York tenants didn’t pay rent. Every seasonal business is dead. Life looks ok for IT people working in their underwear right now, but we are heading into a very challenging time with fundamental changes in consumer behavior. The next big thing will be underwater mortgages.
- Spivak 6y ago
  Rent I get is going to be weird. But with the plan to just pretend that the last 3 months didn’t happen for mortgages and add the payments at the end I can’t really imagine a huge string of defaults happening. And nothing about the pandemic made the houses themselves more or less valuable so why would home owners be underwater?
  - whatshisface 6y ago
    >pretend that the last 3 months didn’t happen for mortgages and add the payments at the end How are people who can't afford three morgage payments going to afford a triple payment at the end?
    - occamrazor 6y ago
      They’re gonna pay the mortgage for three extra months, not a lump sum at the end.
      - whatshisface 6y ago
        Oh, so then it's nicer than what they're doing with rent.
      - cloudartisans 6y ago
        That’s a sweet deferral for people: at the end of their mortgage period, their mortgage payment is worth a lot less than it is today.
GeoAtreides 6y ago
>I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet. Everyone forgets about Climate Change...
- Spivak 6y ago
  Yes but if you’re betting on a huge long-term economic slowdown then does this blip even matter to your investing strategy?
- jhallenworld 6y ago
  Well this is interesting to consider. Disasters often create economic activity: maybe millions of rich people will be rebuilding their coastal houses. On the other hand, if it's so hot that humans can not go outside, that will dampen the economy- but I don't see this happening in temperate zones. But it very well could happen in places where there would be future expected economic growth.
  - walleeee 6y ago
    Millions of rich people will be attempting to relocate, on top of hundreds of millions of poor people. Some will profit from this in the short term, as they do in the wake of disasters and refugee crises today, but the overall trend will almost certainly be downward. It's not just climate change either. There's a whole host of interconnected ecological crises brewing, and most people with a stake in the global financial system either don't recognize or believe this, choose to ignore it, or have much more pressing problems (e.g., providing for themselves and their families).
    - throwbigdata 6y ago
      Yes, you can tell by the increase in insurance premiums and plummeting insurance stocks.
- kgin 6y ago
  Is it a given that climate change would be bad for companies? Changing needs usually means opportunities.
xoxoy 6y ago
The stock market is not the economy, as we can tell today. I do think “things are different” in many ways, in the sense that it’s impossible to ignore the interventions the Fed has taken to blow up their balance sheet to $7T and will likely reach $10T by end of year. The speed and size is unprecedented. Unfortunately I think Millennials will be the ones that have to deal with the massive debt we are in as a country and unwinding of the Fed’s massive balance sheet, which will play out 10-20 years from now.
- jondubois 6y ago
  >> The stock market is not the economy, as we can tell today. This is spot on. There are a lot of regulatory forces which help to prop up the stock market artificially. It's hard to imagine that pro-corporation regulations can go much further without severely damaging the underlying economy on which the stock market depends.
- _curious_ 6y ago
  Yes, and there are even commenters in this thread whom openly admit the fed 'backstop' is a factor in their decision to play equities. This market is highly manipulated and disconnected from reality on many levels - that's overtly obvious and intentional maneuvering via fed and pres. Only this pump and dump scheme isn't perpetuated by some shady OTC penny stock hype stunt. When the equity bubble does burst (not if, but when) it will be very painful and unfortunately not just for those who are directly exposed but the collateral damage of all the free money will adversely affect those who are not day trading on the golf course, instead sold their clubs just to put food on the plate.
  - MiroF 6y ago
    > This market is highly manipulated and disconnected from reality on many levels I feel like this presumes some "baseline" market that never really existed. The Fed has a dual mandate - they will and should engage in whatever sort of outlandish monetary policy is necessary to achieve that mandate. > When the equity bubble does burst (not if, but when) Absurd that so many people think they can make predictions like these.
pradn 6y ago
"I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet." I'm with you on this one, but it also feels like there's no other choice. Where else can you get high liquidity, with good returns, and a government ready to spring into action if the market goes down too much? European and Japanese markets generally have lower returns. Emerging markets are iffy. Bonds don't yield as much as equities. It's like "I'm gonna take a bet that I'm going to keep working a 9-5 job". Most people have no other real choice. You have no choice but to invest in a mix of US equities and bonds to be able to retire in a sane timeline.
- _curious_ 6y ago
  "and a government ready to spring into action if the market goes down too much?" This is an important aspect to the current craze not mentioned in the article. There are people - retail & institutional players - literally banking large sums of money on this dynamic of socializing losses. So long as this continues, we'll see an artificially inflated market.
  - pradn 6y ago
    There's two aspects of the government "springing into action": 1) The government trying to preserve businesses and jobs (both capital and employment) in a crisis through general Keynesian stimulus and industry-specific bailouts (a sort of corporate clientelism, whatever the justification may be). 2) The government having to pay to shore up losses of business where the business should have known better. This is the general populace taking the hit for particular bets gone wrong by private actors. I don't see that as much in this crisis. The closest I can tell is companies spending so much on dividends and buy-backs in the past few years without keeping any sort of cushion. The companies that are most distressed are the squeaky nails that get the hammer. This is a moral hazard. Of course, you must seem sympathetic to the present administration and, to a lesser extent, the public too. That's why airlines have been bailed out but not cruise companies.
    - dodobirdlord 6y ago
ptero 6y ago
This is a valid point, and folks who take a long-term view tend to come out ahead over the long periods, even going through worse disruptions than COVID (which, in my view is not that big when compared to wars, revolutions and such). I am not a financial planner, but just a few thoughts. First, folks who try to invest in crashes or divest on peaks tend to do it too early. Most of such events give you more than one opportunity to buy/sell and not being first in/out can give big advantages. Second, we did not (yet?) see a big drop. A rise of 20% would put S&P at or near all-time highs. For comparison, during the 2008 crash, S&P dropped by over 50%, so the rise back would give you ~120% return. Thus the reward for "catching the knife" today is much, much smaller than in 2008. Finally, a lot of stocks are now indexed and held in retirement accounts. Many folks there hold more than they should in stocks because they have been going up and seem to be the only game in town beating inflation. And all advisors say "leave your retirement accounts as is, long term view, yada yada". If a significant number of people start moving retirement money out of index funds, which they might do in uncertainty, there may be a lot of pain for stocks. For example, many smaller stocks just do not have the trading volumes to withstand even a moderate sales increase driven by index funds. My 2c.
- JMTQp8lwXL 6y ago
  > If a significant number of people start moving retirement money out of index funds A significant number of people do not also control a significant portion of total stock ownership. Droves of retail investors could sell, but their ownership is rather inconsequential: the top 10% of Americans own 84% of stock. https://money.com/stock-ownership-10-percent-richest/ https://money.com/stock-ownership-10-percent-richest/
  - l2p 6y ago
    There would still be consequences in the short term if droves of retail investors begin to sell. Consider normal daily/weekly volume, and what would happen if a large percentage of retail decides to liquidate at once. More sellers than buyers will depress share price irrespective of those sellers total % of ownership.
  - DuskStar 6y ago
deevolution 6y ago
I suggest taking a look at the dragon portfolio https://taylorpearson.me/thedragon/ https://taylorpearson.me/thedragon/ The basic idea is that you create a balanced portfolio of assets that are negatively correlated with each other so that, over a very long time horizon , your wealth retains its value even in the face of uncertainty, black swan events, and volatility. An example would be owning an equal proportion of stock, cash, bitcoin, gold, fixed income, commodities, and volatility. (Harder for the average person to get exposure to commodities and volatility - but I think bitcoin checks those boxes). Edit: include original paper that describes the portfolio by Christopher Cole: https://docsend.com/view/taygkbn https://docsend.com/view/taygkbn
- neural_thing 6y ago
  At least link the original paper! Christopher Cole is wicked smart, deserves attribution. https://docsend.com/view/taygkbn https://docsend.com/view/taygkbn
- themodelplumber 6y ago
  Why so risk-averse in the big picture? Just skimming for now, it seems like this could easily lock a person out of huge gains made by e.g. actively trading during a dynamic market event. Which is weird because there are really effective ways to cover risks during such periods as well, only they aren't nearly as deadly to one's overall profit. It seems like one of the selling points must be "set and forget," which makes me wonder if the target audience is just people who don't want to actively learn about a thing, but would rather take someone else's word.
  - hckrnrd 6y ago
    A bit more context around “really effective ways to cover risk” would be helpful. Are you referring to derivatives such as covered calls on stocks you already own? Or collecting premium by selling naked puts?
  - shard 6y ago
    For someone interested in learning about how to cover risk while taking during a dynamic market event, what would you recommend? My investment education pretty much stopped at "A Random Walk Down Wall Street".
trikonasana 6y ago
Agree. I'm not a CFA, but I do have a masters degree in finance and have studied it fairly closely the past few years. Investing should be thought of in terms of years, at a minimum. You're thinking about it in terms of decades, which I think is even better. However, I offer up two counter thoughts to consider: 1) You say you don't need the money, but how do you know? There could be a better investment opportunity that comes up or we could go into a prolonged depression. Leaving some money not invested gives you more flexibility to allocate your capital down the road. You'll have lower highs but higher lows, which in the long run is good. 2) I actually do know a lot of people who are investing toady in hopes that there is a V-shaped recovery. This is particularly worrying to me and I can't tell you how many times I've overheard amateur investors at work say things like "the market is at a bottom so now is a good time to invest". These are people who have never invested before and only look at the stock price as the determining factor. Like Howard Marks says, market bottoms don't occur until all hope is lost. I'm not sure we've felt that yet.
- ajmurmann 6y ago
  > There could be a better investment opportunity that comes up or we could go into a prolonged depression. Leaving some money not invested gives you more flexibility to allocate your capital down the road. You'll have lower highs but higher lows, which in the long run is good. What would that look like for a regular, middle class person? We've been educated to stay away from individual stocks; there is too little money and connections to suddenly be part of some lucrative real estate development plan or invest in some rocket ship ML startup. Most "normal" people incrementally a few grant here or there and what's available in the Vanguard or Fidelity account is what's on the menu. Maybe I am too narrow minded?
tarsinge 6y ago
The problem with that reasoning is that the stock market is NOT the economy. It’s a secondary market that is more or less necessary depending on your views. Buybacks instead of dividends definitely have set the market in the speculation territory. Sure the US economy can not stay depressed for 20 years, but drawing a causality with stock price is not automatic and is an opinion at this point.
- smaddox 6y ago
  > Sure the US economy can not stay depressed for 20 years... Are familiar with Japan's history over the last few decades?

LatteLazy 6y ago

That’s exactly how I felt reading the article. Their worse case historic scenario is 3 years? Not many people should be investing with a shorter timeline than that anyway!?

hyperpallium 6y ago

The market overreacts to bad news. So Buffett bought American Express during a scandal, which (he checked) didn't actually affect their business. For the USA, business is affected, the question is if it's long term: Will closed businesses reopen? Will unemployed find work? Will the US lose its centrality to China? But however bad it is, the market overreacts.

hyperpallium 6y ago

BTW I achieved "Financial Independence, Retire Early", but didn't like it - though it was tremendous fun getting there, by creating value that I and others valued - being a good, contributing member of society felt good. (And the motivation of FIRE helped.) Plus, you don't really retire, your job is now investing. If you really love that particular job (like Buffett does), then this works out well. But if your innate talents and interests lie elsewhere, you'd be happier doing that... and the need for money can help motivate you, during those times you don't feel like it. It doesn't seem like extra motivation should be important, but is was for me personally. Maybe I'm lacking somehow, as I note that many independently wealthy people do keep working without that motivation. e.g. YC itself. (Though pg now does seem to have really retired, or maybe is a fulltime career parent - there is no more important job!) Thoughts on motivation?

toomuchtodo 6y ago
> Thoughts on motivation? Lose yourself in the service of others (Ghandi). Find a problem that speaks to your skills and curiosity, something that feeds your soul by doing. This has helped me find my path, I hope it helps you find yours.
- carapace 6y ago
  Good advice. It's strange that something so rewarding is so often overlooked. It challenges our egos, I think, eh?
  - deleted 6y ago
    [deleted]
madaxe_again 6y ago
For me, after retiring at 33, I just turned my existence into an adventure playground. For me, getting there was very little fun - I accidentally built a successful business that I ended up hating like a prison sentence, so getting out was a huge relief. I live off grid in the middle of nowhere, and I am busy and engaged, all day, every day, doing and learning. I’ve become an infrastructure engineer, a construction engineer and labourer, a farmer, an arboriculturist, and at night I’m an astronomer, an author, and an automation coder. Right now I’m putting together a multi-stage solar and hydro dump heating setup. All sorts of interesting challenges, and I’m experimenting with welding and (safely) testing large pressure vessels, which is a first for me. Am I contributing to society? Not really - but I’m not taking anything from it either, other than passive income. My portfolio just sits there and grows for my dotage, the rental properties provide an income, and I do a tiny bit of tech consulting, both paid and pro bono, because it’s fun. So, motivation? Do something you enjoy. That’s pretty much all there is to it. I like screwing around with matter and information and learning and making things, so I do that.
- amiga_500 6y ago
  > Am I contributing to society? Not really - but I’m not taking anything from it either, other than passive income. My portfolio just sits there and grows for my dotage, the __rental properties__ provide an income, You are taking from society through rentier activity ---- Reply to the dollar guy below as hacker news soft censors anti landlord replies This is so, so wrong. Perhaps you are a java dev? Stop attempting to lump wealth creators in with rentiers via inheritance.

dntbnmpls 6y ago

> I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet. Not to mention most americans' retirement is tied to their homes\ equity and their 401k/stocks. So it is political suicide for the government to let either drop in value for an extended period of time. Therefore, over the long term, house prices and stock prices will likely go up because politicians want to be reelected. The only caveat is that eventually, we will reach out "limit" ( demographically, economically, etc ) and then housing/stock prices will drop and stay down for decades/maybe forever. Japan hit their limit in the early 90s and their housing prices and the nikkei today is a fraction of what it was back then. https://tradingeconomics.com/japan/stock-market https://tradingeconomics.com/japan/stock-market If the check the 50Y chart, you'll see that the nikkei was at 37000 in the early 90s and is now at 20000. 30 years in and still nearly 50% down.

ghouse 6y ago
> So it is political suicide for the government to let either drop in value for an extended period of time. Therefore, over the long term, house prices and stock prices will likely go up because politicians want to be reelected. The obituary for Capitalism will point to this factor. The politicians killed it.
panarky 6y ago
> it is political suicide ... Politicians have different time horizons than the cities, provinces and nations that they govern. It's not political suicide if the politician enriched himself at the expense of the public and is out of office when the consequences are realized.
- rubyskills 6y ago
  The government has no control of bubble bursts.. in fact they usually aggravate the possibility. According to history, bubble pops usually happen with one small pop and another much larger one after the fact. This second one will happen when people least expect it because the media has thus far spun a narrative of extreme optimism in contrast to reality. The reality is the economic numbers don't look great and will take awhile to bounce back.

kolbe 6y ago

But you aren't betting on the economy, you're betting on the perceived value of current publicly traded equities. For example, if a company you invest in goes bankrupt, you don't get that money back later when the economy recovers.

strunz 6y ago
Betting on one company always has that risk. Most people are investing in index funds and Fortune 500 companies which aren't going bankrupt.
- kolbe 6y ago
  If GM (in indexes) goes bankrupt and Tesla (not in indexes) stays alive, or if IBM (in indexes) goes bankrupt and Palantir (not in indexes) stays alive, then you as an investor in public indexes do not reap benefits of the economy improving.
  - MiroF 6y ago
    Tesla is in indexes. If they're a publicly traded company, they are in indexes. Palantir is privately held and thus not super relevant to this discussion.
    - kolbe 6y ago
      Palantir is relevant because you cannot invest in it. That's the whole point. Did you read the previous part of this discussion about how publicly traded indexes do not represent a targeted bet on the economy because there are plenty of companies that are not a part of them (e.g. Tesla not in the S&P 500) that can completely replace the ones that are?
      - MiroF 6y ago
        I agree that betting on publicly traded indices does not represented a targeted bet on the economy. I disagree that bankruptcy is a big risk to index fund investors.

Spooky23 6y ago

Betting on that now is insane. We haven’t even felt the main wave of bankruptcies and disruption yet. Credit is locking up (try getting an unsecured loan) and people aren’t paying bills. 50% of New York tenants didn’t pay rent. Every seasonal business is dead. Life looks ok for IT people working in their underwear right now, but we are heading into a very challenging time with fundamental changes in consumer behavior. The next big thing will be underwater mortgages.

Spivak 6y ago
Rent I get is going to be weird. But with the plan to just pretend that the last 3 months didn’t happen for mortgages and add the payments at the end I can’t really imagine a huge string of defaults happening. And nothing about the pandemic made the houses themselves more or less valuable so why would home owners be underwater?
- whatshisface 6y ago
  >pretend that the last 3 months didn’t happen for mortgages and add the payments at the end How are people who can't afford three morgage payments going to afford a triple payment at the end?
  - occamrazor 6y ago
    They’re gonna pay the mortgage for three extra months, not a lump sum at the end.
    - whatshisface 6y ago
      Oh, so then it's nicer than what they're doing with rent.
    - cloudartisans 6y ago
      That’s a sweet deferral for people: at the end of their mortgage period, their mortgage payment is worth a lot less than it is today.

GeoAtreides 6y ago

>I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet. Everyone forgets about Climate Change...

Spivak 6y ago
Yes but if you’re betting on a huge long-term economic slowdown then does this blip even matter to your investing strategy?
jhallenworld 6y ago
Well this is interesting to consider. Disasters often create economic activity: maybe millions of rich people will be rebuilding their coastal houses. On the other hand, if it's so hot that humans can not go outside, that will dampen the economy- but I don't see this happening in temperate zones. But it very well could happen in places where there would be future expected economic growth.
- walleeee 6y ago
  Millions of rich people will be attempting to relocate, on top of hundreds of millions of poor people. Some will profit from this in the short term, as they do in the wake of disasters and refugee crises today, but the overall trend will almost certainly be downward. It's not just climate change either. There's a whole host of interconnected ecological crises brewing, and most people with a stake in the global financial system either don't recognize or believe this, choose to ignore it, or have much more pressing problems (e.g., providing for themselves and their families).
  - throwbigdata 6y ago
    Yes, you can tell by the increase in insurance premiums and plummeting insurance stocks.
kgin 6y ago
Is it a given that climate change would be bad for companies? Changing needs usually means opportunities.

xoxoy 6y ago

The stock market is not the economy, as we can tell today. I do think “things are different” in many ways, in the sense that it’s impossible to ignore the interventions the Fed has taken to blow up their balance sheet to $7T and will likely reach $10T by end of year. The speed and size is unprecedented. Unfortunately I think Millennials will be the ones that have to deal with the massive debt we are in as a country and unwinding of the Fed’s massive balance sheet, which will play out 10-20 years from now.

jondubois 6y ago
>> The stock market is not the economy, as we can tell today. This is spot on. There are a lot of regulatory forces which help to prop up the stock market artificially. It's hard to imagine that pro-corporation regulations can go much further without severely damaging the underlying economy on which the stock market depends.
_curious_ 6y ago
Yes, and there are even commenters in this thread whom openly admit the fed 'backstop' is a factor in their decision to play equities. This market is highly manipulated and disconnected from reality on many levels - that's overtly obvious and intentional maneuvering via fed and pres. Only this pump and dump scheme isn't perpetuated by some shady OTC penny stock hype stunt. When the equity bubble does burst (not if, but when) it will be very painful and unfortunately not just for those who are directly exposed but the collateral damage of all the free money will adversely affect those who are not day trading on the golf course, instead sold their clubs just to put food on the plate.
- MiroF 6y ago
  > This market is highly manipulated and disconnected from reality on many levels I feel like this presumes some "baseline" market that never really existed. The Fed has a dual mandate - they will and should engage in whatever sort of outlandish monetary policy is necessary to achieve that mandate. > When the equity bubble does burst (not if, but when) Absurd that so many people think they can make predictions like these.

pradn 6y ago

"I’m betting that the U.S. economy will not stay depressed for 10-20 years, which seems like a pretty good bet." I'm with you on this one, but it also feels like there's no other choice. Where else can you get high liquidity, with good returns, and a government ready to spring into action if the market goes down too much? European and Japanese markets generally have lower returns. Emerging markets are iffy. Bonds don't yield as much as equities. It's like "I'm gonna take a bet that I'm going to keep working a 9-5 job". Most people have no other real choice. You have no choice but to invest in a mix of US equities and bonds to be able to retire in a sane timeline.

_curious_ 6y ago
"and a government ready to spring into action if the market goes down too much?" This is an important aspect to the current craze not mentioned in the article. There are people - retail & institutional players - literally banking large sums of money on this dynamic of socializing losses. So long as this continues, we'll see an artificially inflated market.
- pradn 6y ago
  There's two aspects of the government "springing into action": 1) The government trying to preserve businesses and jobs (both capital and employment) in a crisis through general Keynesian stimulus and industry-specific bailouts (a sort of corporate clientelism, whatever the justification may be). 2) The government having to pay to shore up losses of business where the business should have known better. This is the general populace taking the hit for particular bets gone wrong by private actors. I don't see that as much in this crisis. The closest I can tell is companies spending so much on dividends and buy-backs in the past few years without keeping any sort of cushion. The companies that are most distressed are the squeaky nails that get the hammer. This is a moral hazard. Of course, you must seem sympathetic to the present administration and, to a lesser extent, the public too. That's why airlines have been bailed out but not cruise companies.
  - dodobirdlord 6y ago

ptero 6y ago

This is a valid point, and folks who take a long-term view tend to come out ahead over the long periods, even going through worse disruptions than COVID (which, in my view is not that big when compared to wars, revolutions and such). I am not a financial planner, but just a few thoughts. First, folks who try to invest in crashes or divest on peaks tend to do it too early. Most of such events give you more than one opportunity to buy/sell and not being first in/out can give big advantages. Second, we did not (yet?) see a big drop. A rise of 20% would put S&P at or near all-time highs. For comparison, during the 2008 crash, S&P dropped by over 50%, so the rise back would give you ~120% return. Thus the reward for "catching the knife" today is much, much smaller than in 2008. Finally, a lot of stocks are now indexed and held in retirement accounts. Many folks there hold more than they should in stocks because they have been going up and seem to be the only game in town beating inflation. And all advisors say "leave your retirement accounts as is, long term view, yada yada". If a significant number of people start moving retirement money out of index funds, which they might do in uncertainty, there may be a lot of pain for stocks. For example, many smaller stocks just do not have the trading volumes to withstand even a moderate sales increase driven by index funds. My 2c.

JMTQp8lwXL 6y ago
> If a significant number of people start moving retirement money out of index funds A significant number of people do not also control a significant portion of total stock ownership. Droves of retail investors could sell, but their ownership is rather inconsequential: the top 10% of Americans own 84% of stock. https://money.com/stock-ownership-10-percent-richest/ https://money.com/stock-ownership-10-percent-richest/
- l2p 6y ago
  There would still be consequences in the short term if droves of retail investors begin to sell. Consider normal daily/weekly volume, and what would happen if a large percentage of retail decides to liquidate at once. More sellers than buyers will depress share price irrespective of those sellers total % of ownership.
- DuskStar 6y ago

deevolution 6y ago

I suggest taking a look at the dragon portfolio https://taylorpearson.me/thedragon/ https://taylorpearson.me/thedragon/ The basic idea is that you create a balanced portfolio of assets that are negatively correlated with each other so that, over a very long time horizon , your wealth retains its value even in the face of uncertainty, black swan events, and volatility. An example would be owning an equal proportion of stock, cash, bitcoin, gold, fixed income, commodities, and volatility. (Harder for the average person to get exposure to commodities and volatility - but I think bitcoin checks those boxes). Edit: include original paper that describes the portfolio by Christopher Cole: https://docsend.com/view/taygkbn https://docsend.com/view/taygkbn

neural_thing 6y ago
At least link the original paper! Christopher Cole is wicked smart, deserves attribution. https://docsend.com/view/taygkbn https://docsend.com/view/taygkbn
themodelplumber 6y ago
Why so risk-averse in the big picture? Just skimming for now, it seems like this could easily lock a person out of huge gains made by e.g. actively trading during a dynamic market event. Which is weird because there are really effective ways to cover risks during such periods as well, only they aren't nearly as deadly to one's overall profit. It seems like one of the selling points must be "set and forget," which makes me wonder if the target audience is just people who don't want to actively learn about a thing, but would rather take someone else's word.
- hckrnrd 6y ago
  A bit more context around “really effective ways to cover risk” would be helpful. Are you referring to derivatives such as covered calls on stocks you already own? Or collecting premium by selling naked puts?
- shard 6y ago
  For someone interested in learning about how to cover risk while taking during a dynamic market event, what would you recommend? My investment education pretty much stopped at "A Random Walk Down Wall Street".

trikonasana 6y ago

Agree. I'm not a CFA, but I do have a masters degree in finance and have studied it fairly closely the past few years. Investing should be thought of in terms of years, at a minimum. You're thinking about it in terms of decades, which I think is even better. However, I offer up two counter thoughts to consider: 1) You say you don't need the money, but how do you know? There could be a better investment opportunity that comes up or we could go into a prolonged depression. Leaving some money not invested gives you more flexibility to allocate your capital down the road. You'll have lower highs but higher lows, which in the long run is good. 2) I actually do know a lot of people who are investing toady in hopes that there is a V-shaped recovery. This is particularly worrying to me and I can't tell you how many times I've overheard amateur investors at work say things like "the market is at a bottom so now is a good time to invest". These are people who have never invested before and only look at the stock price as the determining factor. Like Howard Marks says, market bottoms don't occur until all hope is lost. I'm not sure we've felt that yet.

ajmurmann 6y ago
> There could be a better investment opportunity that comes up or we could go into a prolonged depression. Leaving some money not invested gives you more flexibility to allocate your capital down the road. You'll have lower highs but higher lows, which in the long run is good. What would that look like for a regular, middle class person? We've been educated to stay away from individual stocks; there is too little money and connections to suddenly be part of some lucrative real estate development plan or invest in some rocket ship ML startup. Most "normal" people incrementally a few grant here or there and what's available in the Vanguard or Fidelity account is what's on the menu. Maybe I am too narrow minded?

tarsinge 6y ago

The problem with that reasoning is that the stock market is NOT the economy. It’s a secondary market that is more or less necessary depending on your views. Buybacks instead of dividends definitely have set the market in the speculation territory. Sure the US economy can not stay depressed for 20 years, but drawing a causality with stock price is not automatic and is an opinion at this point.

smaddox 6y ago
> Sure the US economy can not stay depressed for 20 years... Are familiar with Japan's history over the last few decades?