4 ms·

"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 li

by 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
    Airlines are also important in ways that cruise companies are not.
    - rswail 6y ago
      Air travel is important. Airline companies are not.
koheripbal 6y ago
I mean, obviously the choice is to not demand big returns during a crisis.
- pradn 6y ago
  The parent was talking about the long term horizon here, not about expected positive returns during this crisis.
  - nostrademons 6y ago
    That still holds, though. Stock market vs. cryptocurrency vs. cash vs. guns in a bunker is all a bet on what the future looks like. When you say "There's no other choice - where else can you get high liquidity with good returns and a government backstopping the risk?", that's an implicit bet that a.) people will continue to demand stocks b.) for more money than they pay now and c.) under the government as it exists currently. That has been a good bet for the last 80 years. But there's a saying in financial markets: "past performance is no indicator of future results". If you believe that the future will be worse than the present for the vast majority of people, your priority shouldn't be to make more money in the future - it should be to preserve what you have and make sure you're not the one left without a chair when the music stops. And the way in which the music stops determines which asset class you might want to hold. If you believe that investors en masse will have a loss of confidence in the future earning power of American business, but without a monetary or political collapse, you should move to cash. If you believe that the government's support of the stock market will hyperinflate the currency, you might want to look into one of the many cryptocurrencies that promise quick transactions. If you believe we're headed for widespread social collapse, you should get some guns and plant a garden in a small non-descript home (or bunker) in the middle of nowhere.
chrismarlow9 6y ago
this is it for me. the government just pretty much admitted when things get ugly they will save it. why wouldn't you invest in that? it's like the US government has been bluffing about capitalism being the answer the whole time and that bluff just got called.
- pradn 6y ago
  The US government has been performing standard Keynesian monetary & fiscal stimulus measures during crises since the Depression. That's what I mean when I say the government is ready to spring into action. It's possible to imagine a totally laissez-faire world where they wouldn't do that. Despite the strength of free-marketeers in the US, we're not quite there yet.
htnsao 6y ago
>You have no choice but to invest in a mix of US equities and bonds to be able to retire in a sane timeline. Plant trees in the tropics, then your money has roots and grows fast. Different types of hardwoods give you a 5, 10, 20 year time to harvests. Plus the monkeys, parrots etc like it (if you do it right). Many of my 5 yr old trees are already 10" dbh and 15m tall. Straight timber, some with cacao below. ~75 acres can increase your net worth by about $3k/day, indefinitely.
- eden_hazard 6y ago
  Not a bad idea...how do I get into that. Do you have more info? I'm gonna look into it
  - htnsao 6y ago
    Buy cheap land in the rainy tropics that needs reforestation (~$500-$3000/ha), then plant trees. Labour at ~$15/day per worker is abundant and comes with much valuable local knowledge about the best trees etc. Interplanting the hardwoods with leguminous inga edulis trees to shade out the weeds and fertilize the soil is a preferred method, as per https://www.rainforestsaver.org/advice-for-farmers https://www.rainforestsaver.org/advice-for-farmers This year we'll have planted another 7 hectares of Guazuma ulmifolia at a density of 2mx3m or ~1700 trees/hectare using the Inga alley cropping method. They should have an average trunk section at least one foot square and 26' tall in 10 years. (ie 1x1x26x12= 312 board ft) so if you do the math at just $1/board ft then it's about $150/day/hectare. (ie 1700x312x1/10/365= ~$145). So 7 hectares makes your net worth increase by about $1000/day. The nice thing about these type of trees is that they re-sprout after harvest so no need to replant, ie continuous harvest indefinitely by cutting blocks only 1/10th of your trees per year, so the first cut trees are ready to cut again when the last, much bigger, are harvested. (I've got some teak & mahogany planted too but not a big fan, too slow. I'm not a fan of non-native pines nor eucalyptus either.) Those numbers go way up if you process the lumber and make furniture, flooring etc. Also many trees are valuable medicinals. For example a water extract (ie tea) from the bark of the G. Ulmifolia tree (bolaina negra, not blanca) kills virus, lowers fever and reduces pain. See https://www.rain-tree.com/mutamba.htm https://www.rain-tree.com/mutamba.htm Along with bark from uña de gato with lemon (immune system stimulus), chanca piedra (other antivirus & more), tumeric with black pepper (anti-inflammatory), ginger, moringa and matico leaves (antibacterial). Is our anti-virus go-to, much better than what is available in pharmacies.

by pradn 6y ago

_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
  Airlines are also important in ways that cruise companies are not.
  - rswail 6y ago
    Air travel is important. Airline companies are not.

koheripbal 6y ago

I mean, obviously the choice is to not demand big returns during a crisis.

pradn 6y ago
The parent was talking about the long term horizon here, not about expected positive returns during this crisis.
- nostrademons 6y ago
  That still holds, though. Stock market vs. cryptocurrency vs. cash vs. guns in a bunker is all a bet on what the future looks like. When you say "There's no other choice - where else can you get high liquidity with good returns and a government backstopping the risk?", that's an implicit bet that a.) people will continue to demand stocks b.) for more money than they pay now and c.) under the government as it exists currently. That has been a good bet for the last 80 years. But there's a saying in financial markets: "past performance is no indicator of future results". If you believe that the future will be worse than the present for the vast majority of people, your priority shouldn't be to make more money in the future - it should be to preserve what you have and make sure you're not the one left without a chair when the music stops. And the way in which the music stops determines which asset class you might want to hold. If you believe that investors en masse will have a loss of confidence in the future earning power of American business, but without a monetary or political collapse, you should move to cash. If you believe that the government's support of the stock market will hyperinflate the currency, you might want to look into one of the many cryptocurrencies that promise quick transactions. If you believe we're headed for widespread social collapse, you should get some guns and plant a garden in a small non-descript home (or bunker) in the middle of nowhere.

chrismarlow9 6y ago

this is it for me. the government just pretty much admitted when things get ugly they will save it. why wouldn't you invest in that? it's like the US government has been bluffing about capitalism being the answer the whole time and that bluff just got called.

pradn 6y ago
The US government has been performing standard Keynesian monetary & fiscal stimulus measures during crises since the Depression. That's what I mean when I say the government is ready to spring into action. It's possible to imagine a totally laissez-faire world where they wouldn't do that. Despite the strength of free-marketeers in the US, we're not quite there yet.

htnsao 6y ago

>You have no choice but to invest in a mix of US equities and bonds to be able to retire in a sane timeline. Plant trees in the tropics, then your money has roots and grows fast. Different types of hardwoods give you a 5, 10, 20 year time to harvests. Plus the monkeys, parrots etc like it (if you do it right). Many of my 5 yr old trees are already 10" dbh and 15m tall. Straight timber, some with cacao below. ~75 acres can increase your net worth by about $3k/day, indefinitely.

eden_hazard 6y ago
Not a bad idea...how do I get into that. Do you have more info? I'm gonna look into it
- htnsao 6y ago
  Buy cheap land in the rainy tropics that needs reforestation (~$500-$3000/ha), then plant trees. Labour at ~$15/day per worker is abundant and comes with much valuable local knowledge about the best trees etc. Interplanting the hardwoods with leguminous inga edulis trees to shade out the weeds and fertilize the soil is a preferred method, as per https://www.rainforestsaver.org/advice-for-farmers https://www.rainforestsaver.org/advice-for-farmers This year we'll have planted another 7 hectares of Guazuma ulmifolia at a density of 2mx3m or ~1700 trees/hectare using the Inga alley cropping method. They should have an average trunk section at least one foot square and 26' tall in 10 years. (ie 1x1x26x12= 312 board ft) so if you do the math at just $1/board ft then it's about $150/day/hectare. (ie 1700x312x1/10/365= ~$145). So 7 hectares makes your net worth increase by about $1000/day. The nice thing about these type of trees is that they re-sprout after harvest so no need to replant, ie continuous harvest indefinitely by cutting blocks only 1/10th of your trees per year, so the first cut trees are ready to cut again when the last, much bigger, are harvested. (I've got some teak & mahogany planted too but not a big fan, too slow. I'm not a fan of non-native pines nor eucalyptus either.) Those numbers go way up if you process the lumber and make furniture, flooring etc. Also many trees are valuable medicinals. For example a water extract (ie tea) from the bark of the G. Ulmifolia tree (bolaina negra, not blanca) kills virus, lowers fever and reduces pain. See https://www.rain-tree.com/mutamba.htm https://www.rain-tree.com/mutamba.htm Along with bark from uña de gato with lemon (immune system stimulus), chanca piedra (other antivirus & more), tumeric with black pepper (anti-inflammatory), ginger, moringa and matico leaves (antibacterial). Is our anti-virus go-to, much better than what is available in pharmacies.