5 ms·

"Markets can remain irrational longer than you can remain solvent."

H8crilA 6y ago
To be completely fair, there exists a justification for (at least some of) the action we're seeing: if developed economies' bond yields are correctly pricing in future nominal gdp, i.e. we will not be back to good times for the next 30-50 years, then owning anything that can grow is tremendously valuable. But it's such a stretch to assume 30-50 years of stagnation, even if the entire bond market agrees with you. I mean do you seriously expect property relationships to not be rewritten in some revolutionary way somewhere along the way if we get 30-50 years of misery?
- octoberfranklin 6y ago
  > If developed economies' bond yields are correctly pricing in Bwahahahahaha.... Oh wait I fell of my chair laughing.
  - H8crilA 6y ago
    :) I feel you, but I do have some respect for the markets no matter what they say. At least enough respect to be cognizant of what is being priced in, despite my personal views.
    - octoberfranklin 6y ago
      Oh come on, soverign debt is about as far from being "a market" as possible.... I'll believe the yields mean something when the US Treasury issues a special series of bonds that are forbidden to be owned by the Fed or any entity with access to the discount window.
      - busterarm 6y ago
        The benefit of a large, well-equipped military is that you get to tell people whether or not you're/they're going to pay your/their debts. For as long as your population is willing to pay for its prosperity in blood.
        H8crilA 6y ago
        There's a lot of countries with lower nominal yields that are not known for their military prowess ... like Greece. Yes, greek bonds have negative yields.
        busterarm 6y ago
        Greece has the miliary power of the entire fucking European Union (and its allies) behind them, for as long as they're willing to suffer for the benefit of France and Germany.
- busterarm 6y ago
  That's really just the Disco Stu Fallacy of economics at play. Assuming that things _will_ get better and passing the buck onto your descendants is madness. Also how much growth has been stunted by the weight of ancestral spending? Birth rates are declining and the cost of maintaining our infrastructure is at the point in most high-GDP locations (New York, California, etc) where obligations cannot be met and credit status changes were inevitable _before_ Coronavirus. Look at the insanity New Jersey has gone through with the criminal pilfering of infrastructure/development funds to pay pensions (aka, Christine Todd Whitman should have gone to jail). We're looking at cascading failures in a complex system. Nobody can see enough of the picture to predict what's next or realize that it's already dead. To assume that we'll right the trend with growth will most likely require either war or (a technical) revolution.
  - pavlov 6y ago
    The funny thing about the Disco Stu Fallacy is that Stu was right in the long run. Disco music in various forms is immensely popular today. It dominates global streaming charts. Rock is the loser. Stu was just an early adopter facing the through of disillusionment.
    - busterarm 6y ago
      Sure, but none of that music is called Disco and his bet was still a losing one. :)
      - pavlov 6y ago
        Kylie Minogue released a top-selling album last week that's literally named "Disco".
        busterarm 6y ago
        How long do you hold the losing investment from 1976? It took decades for the industry side of Disco music to recover from Disco Demolition Night. Italo and Hi-NRG notwithstanding. The music might have stayed four on the floor but the names and the people all changed. Also Kylie Minogue doesn't set trends, she rides them. Most of us realized Disco was still alive 10 years ago.
edouard-harris 6y ago
In this case, with interest rates near zero, it may be rational for markets to converge on prices that discount the transient effects of a pandemic recession.
- H8crilA 6y ago
  Yup, exactly. Low yields increase the duration of equities. This also means that prices become more random (because who's to judge what will Google ads sales look like in 20 years? or what will the iDevice of the 2050 look like? with low enough yields things like these become more and more important).
  - lotsofpulp 6y ago
    I don’t know what google’s ad sales or idevice will look like in 20 years, but I am betting the US government will do whatever it can to keep broad market equity index values rising.
    - H8crilA 6y ago
      Just like the Chinese believe that the China government will keep their apartment prices high.
      - lotsofpulp 6y ago
        Maybe, if all of China’s political leaders are invested in apartments.
        toomuchtodo 6y ago
        China’s political leaders are invested in avoiding their version of the French Revolution.
brian_herman__ 6y ago
https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/

To be completely fair, there exists a justification for (at least some of) the action we're seeing: if developed economies' bond yields are correctly pricing in future nominal gdp, i.e. we will not be back to good times for the next 30-50 years, then owning anything that can grow is tremendously valuable. But it's such a stretch to assume 30-50 years of stagnation, even if the entire bond market agrees with you. I mean do you seriously expect property relationships to not be rewritten in some revolutionary way somewhere along the way if we get 30-50 years of misery?

octoberfranklin 6y ago
> If developed economies' bond yields are correctly pricing in Bwahahahahaha.... Oh wait I fell of my chair laughing.
- H8crilA 6y ago
  :) I feel you, but I do have some respect for the markets no matter what they say. At least enough respect to be cognizant of what is being priced in, despite my personal views.
  - octoberfranklin 6y ago
    Oh come on, soverign debt is about as far from being "a market" as possible.... I'll believe the yields mean something when the US Treasury issues a special series of bonds that are forbidden to be owned by the Fed or any entity with access to the discount window.
    - busterarm 6y ago
      The benefit of a large, well-equipped military is that you get to tell people whether or not you're/they're going to pay your/their debts. For as long as your population is willing to pay for its prosperity in blood.
      - H8crilA 6y ago
        There's a lot of countries with lower nominal yields that are not known for their military prowess ... like Greece. Yes, greek bonds have negative yields.
        busterarm 6y ago
        Greece has the miliary power of the entire fucking European Union (and its allies) behind them, for as long as they're willing to suffer for the benefit of France and Germany.
busterarm 6y ago
That's really just the Disco Stu Fallacy of economics at play. Assuming that things _will_ get better and passing the buck onto your descendants is madness. Also how much growth has been stunted by the weight of ancestral spending? Birth rates are declining and the cost of maintaining our infrastructure is at the point in most high-GDP locations (New York, California, etc) where obligations cannot be met and credit status changes were inevitable _before_ Coronavirus. Look at the insanity New Jersey has gone through with the criminal pilfering of infrastructure/development funds to pay pensions (aka, Christine Todd Whitman should have gone to jail). We're looking at cascading failures in a complex system. Nobody can see enough of the picture to predict what's next or realize that it's already dead. To assume that we'll right the trend with growth will most likely require either war or (a technical) revolution.
- pavlov 6y ago
  The funny thing about the Disco Stu Fallacy is that Stu was right in the long run. Disco music in various forms is immensely popular today. It dominates global streaming charts. Rock is the loser. Stu was just an early adopter facing the through of disillusionment.
  - busterarm 6y ago
    Sure, but none of that music is called Disco and his bet was still a losing one. :)
    - pavlov 6y ago
      Kylie Minogue released a top-selling album last week that's literally named "Disco".
      - busterarm 6y ago
        How long do you hold the losing investment from 1976? It took decades for the industry side of Disco music to recover from Disco Demolition Night. Italo and Hi-NRG notwithstanding. The music might have stayed four on the floor but the names and the people all changed. Also Kylie Minogue doesn't set trends, she rides them. Most of us realized Disco was still alive 10 years ago.

edouard-harris 6y ago

In this case, with interest rates near zero, it may be rational for markets to converge on prices that discount the transient effects of a pandemic recession.

H8crilA 6y ago
Yup, exactly. Low yields increase the duration of equities. This also means that prices become more random (because who's to judge what will Google ads sales look like in 20 years? or what will the iDevice of the 2050 look like? with low enough yields things like these become more and more important).
- lotsofpulp 6y ago
  I don’t know what google’s ad sales or idevice will look like in 20 years, but I am betting the US government will do whatever it can to keep broad market equity index values rising.
  - H8crilA 6y ago
    Just like the Chinese believe that the China government will keep their apartment prices high.
    - lotsofpulp 6y ago
      Maybe, if all of China’s political leaders are invested in apartments.
      - toomuchtodo 6y ago
        China’s political leaders are invested in avoiding their version of the French Revolution.

brian_herman__ 6y ago

https://quoteinvestigator.com/2011/08/09/remain-solvent/ https://quoteinvestigator.com/2011/08/09/remain-solvent/