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Everybody in the industry is making predictions (with 0 dollars on the line) constantly, so cherry-picking different credentialed people to support a narrative

Everybody in the industry is making predictions (with 0 dollars on the line) constantly, so cherry-picking different credentialed people to support a narrative is pointless. Especially in the field of macroeconomics where a few individuals are making decisions behind closed doors that can radically alter the economy. I do tend to put more weight on the predictions of people who statistically understand markets. By that, I mean people who beat the market in the long term without exceptional drawdown. Ray Dalio is one of those people, whose mastery of macro trading is on display across a number of different projects in his career, often with relatively low measured risk and volatility [0][1]. Paul Krugman is not. Unfortunately, many of the loudest voices in the field of economics wouldn't have made it in a career in which compensation is directly tied to understanding of markets. [0] https://portfolioslab.com/portfolio/ray-dalio-all-weather https://portfolioslab.com/portfolio/ray-dalio-all-weather [1] https://atticcapital.com/bridgewater-associates-average-return-and-the-man-behind-the-money/#:~:text=Bridgewater%20Associates%20average%20return%20over,%2C%20which%20is%20about%207%25 https://atticcapital.com/bridgewater-associates-average-retu....

throw0101a 6y ago
I know who Dalio is. I've read his Principles. He's a smart cookie. I think he's wrong. The inflationists have been squawking about since QE started under Ben Bernanke way back in 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Krugman has been saying we don't have to worry about it for just as long since we're in the zero-lower bound territory: * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap Krugman has been writing about this since 1998 as Japan enter this territory a couple of decades before the rest of us: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... Can you point me to the theory(-ies) that Dalio uses in his predictions for inflation? He may end up being right, but unless he can explain why, then he's just throwing darts. Show me the math you base your predictions on: at least with Krugman/Keynes, if they are wrong, models can be examined and improved on (like they were with stagflation in the 1970s). As for Dalio's All Weather portfolio, Meh: * https://canadiancouchpotato.com/2015/07/06/raining-on-the-all-seasons-portfolio/ https://canadiancouchpotato.com/2015/07/06/raining-on-the-al...
- Spooky23 6y ago
  I agree. Dalio’s mission is to make more money for Bridgewater. Taking advice from an interested party whose interests you don’t understand is never a good idea. I would want to understand how influencing thinking on the topic benefits Dalio. Then evaluate in that context.
- lend000 6y ago
  While Dalio has publicly anticipated cash and bonds being poor investments in 2020, I'm making a blanket statement regarding appeals to authority (similar to you). But when authorities are to be invoked, economists are generally just sideline-experts with no skin in the game, who are unable to translate their understanding of markets into alpha. This is in response to you stating in your first post that economists are the true experts (intuitive, but I think incorrect. It's like interviewing a sports commentator (who wasn't formerly a coach or player) instead of an actual coach). While I don't know Dalio's full position or rationale, I have another comment on this post that explains when and why I personally expect inflation. I am curious though -- can you expand on what you believe Krugman's position to be here, and why it makes sense? He doesn't seem to worry about inflation from open market operations because it works until it doesn't. There has been inflation since 2008, but most of it went to wealthy people who hold the majority of their net worth in equities and real estate. These asset classes are severely under-represented in the CPI. Because these are mostly unrealized gains enjoyed by so few, there aren't that many more people competing to buy milk and eggs, which would actually affect CPI. Many progressive economists don't seem to realize their policies contribute to massive wealth inequality just as much as America's poor attempt at graduated tax brackets. Granted, Krugman has his moments, and for all his faults his recommendations don't seem to be purely ideologically motivated.
  - throw0101a 6y ago
    > While Dalio has publicly anticipated cash and bonds being poor investments in 2020, I'm making a blanket statement regarding appeals to authority (similar to you). Sure. But my appeal-to-authority has peer-reviewed models behind him. Does yours? [citation needed] :) > I am curious though -- can you expand on what you believe Krugman's position to be here, and why it makes sense? He doesn't seem to worry about inflation from open market operations because it works until it doesn't. I've heard the explanation (probably more than once), and it made sense to me when I heard it, but it was not important enough to me to bother retaining. I think this is a decent blurb on it: > Under these circumstances, normal monetary policy, which takes the form of open-market operations in which the central bank buys short-term debt with money it creates out of thin air, have no effect. Why? > Well, the reason open-market operations usually work is that people are making a tradeoff between yield and liquidity – they hold money, which offers no interest, for the liquidity but limit their holdings because they pay a price in lost earnings. So if the central bank puts more money out there, people are holding more than they want, try to offload it, and drive rates down in the process. > But if rates are zero, there is no cost to liquidity, and people are basically saturated with it; at the margin, they’re holding money simply as a store of value, essentially equivalent to short-term debt. And a central bank operation that swaps money for debt basically changes nothing. Ordinary monetary policy is ineffective. > The flip side of this, by the way, is that all those fears about how “printing money” in this slump would lead to runaway inflation were predictably wrong. If you paid attention to the Japanese story from the last decade, you knew that simply expanding the central bank’s balance sheet did little, and certainly wasn’t inflationary: * https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/ https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy... So as long as rates are at/near zero, 'printing money' won't be a problem. If, however, rates are in a 'normal' range, then yes, increasing money supply can lead to inflation at that time. Krugman first wrote about this in 1998 when Japan first experienced what the rest of us are now seeing (it asks for registration, but you can skip it): * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... Generally speaking, if you want to research this yourself, look at these concepts: * https://en.wikipedia.org/wiki/Zero_lower_bound https://en.wikipedia.org/wiki/Zero_lower_bound * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap Perhaps see "The IS-LM Model and the Liquidity Trap Concept": * https://www.semanticscholar.org/paper/The-IS-LM-Model-and-the-Liquidity-Trap-Concept%3A-to-Boianovsky/4d48513907b6eac16a34f3096e545bc784268f55 https://www.semanticscholar.org/paper/The-IS-LM-Model-and-th... * https://doi.org/10.1215/00182702-36-Suppl_1-92 https://doi.org/10.1215/00182702-36-Suppl_1-92 > These asset classes are severely under-represented in the CPI. Because these are mostly unrealized gains enjoyed by so few, there aren't that many more people competing to buy milk and eggs, which would actually affect CPI. It has not been "under-represented in the CPI". It is not the purpose of CPI to look at asset prices, but rather (roughly) cost of living via a basket of goods. For home, the CPI generally includes either rent or mortgage carrying costs. To home prices, Michael Batnick and Ben Carlson discuss this in light of Ben's weblog post: * https://www.youtube.com/watch?v=d3dO8BW9RHg&t=3m26s https://www.youtube.com/watch?v=d3dO8BW9RHg&t=3m26s * https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/ * Discussed here: https://news.ycombinator.com/item?id=25644580 https://news.ycombinator.com/item?id=25644580 > Many progressive economists don't seem to realize their policies contribute to massive wealth inequality just as much as America's poor attempt at graduated tax brackets. Want to reduce wealth inequality? Increase taxation/redistribution. Top marginal tax rates are half of what they were during Eisenhower's administration and the (adjusted) minimum wage is below what it was during Nixon. While you may need an economist to get the "right" / "optimal" number, you don't need one to know that they're probably too low.

throw0101a 6y ago

I know who Dalio is. I've read his Principles. He's a smart cookie. I think he's wrong. The inflationists have been squawking about since QE started under Ben Bernanke way back in 2010: > We believe the Federal Reserve's large-scale asset purchase plan (so-called "quantitative easing") should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed's objective of promoting employment. * https://economics21.org/html/open-letter-ben-bernanke-287.html https://economics21.org/html/open-letter-ben-bernanke-287.ht... Krugman has been saying we don't have to worry about it for just as long since we're in the zero-lower bound territory: * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap Krugman has been writing about this since 1998 as Japan enter this territory a couple of decades before the rest of us: * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... Can you point me to the theory(-ies) that Dalio uses in his predictions for inflation? He may end up being right, but unless he can explain why, then he's just throwing darts. Show me the math you base your predictions on: at least with Krugman/Keynes, if they are wrong, models can be examined and improved on (like they were with stagflation in the 1970s). As for Dalio's All Weather portfolio, Meh: * https://canadiancouchpotato.com/2015/07/06/raining-on-the-all-seasons-portfolio/ https://canadiancouchpotato.com/2015/07/06/raining-on-the-al...

Spooky23 6y ago
I agree. Dalio’s mission is to make more money for Bridgewater. Taking advice from an interested party whose interests you don’t understand is never a good idea. I would want to understand how influencing thinking on the topic benefits Dalio. Then evaluate in that context.
lend000 6y ago
While Dalio has publicly anticipated cash and bonds being poor investments in 2020, I'm making a blanket statement regarding appeals to authority (similar to you). But when authorities are to be invoked, economists are generally just sideline-experts with no skin in the game, who are unable to translate their understanding of markets into alpha. This is in response to you stating in your first post that economists are the true experts (intuitive, but I think incorrect. It's like interviewing a sports commentator (who wasn't formerly a coach or player) instead of an actual coach). While I don't know Dalio's full position or rationale, I have another comment on this post that explains when and why I personally expect inflation. I am curious though -- can you expand on what you believe Krugman's position to be here, and why it makes sense? He doesn't seem to worry about inflation from open market operations because it works until it doesn't. There has been inflation since 2008, but most of it went to wealthy people who hold the majority of their net worth in equities and real estate. These asset classes are severely under-represented in the CPI. Because these are mostly unrealized gains enjoyed by so few, there aren't that many more people competing to buy milk and eggs, which would actually affect CPI. Many progressive economists don't seem to realize their policies contribute to massive wealth inequality just as much as America's poor attempt at graduated tax brackets. Granted, Krugman has his moments, and for all his faults his recommendations don't seem to be purely ideologically motivated.
- throw0101a 6y ago
  > While Dalio has publicly anticipated cash and bonds being poor investments in 2020, I'm making a blanket statement regarding appeals to authority (similar to you). Sure. But my appeal-to-authority has peer-reviewed models behind him. Does yours? [citation needed] :) > I am curious though -- can you expand on what you believe Krugman's position to be here, and why it makes sense? He doesn't seem to worry about inflation from open market operations because it works until it doesn't. I've heard the explanation (probably more than once), and it made sense to me when I heard it, but it was not important enough to me to bother retaining. I think this is a decent blurb on it: > Under these circumstances, normal monetary policy, which takes the form of open-market operations in which the central bank buys short-term debt with money it creates out of thin air, have no effect. Why? > Well, the reason open-market operations usually work is that people are making a tradeoff between yield and liquidity – they hold money, which offers no interest, for the liquidity but limit their holdings because they pay a price in lost earnings. So if the central bank puts more money out there, people are holding more than they want, try to offload it, and drive rates down in the process. > But if rates are zero, there is no cost to liquidity, and people are basically saturated with it; at the margin, they’re holding money simply as a store of value, essentially equivalent to short-term debt. And a central bank operation that swaps money for debt basically changes nothing. Ordinary monetary policy is ineffective. > The flip side of this, by the way, is that all those fears about how “printing money” in this slump would lead to runaway inflation were predictably wrong. If you paid attention to the Japanese story from the last decade, you knew that simply expanding the central bank’s balance sheet did little, and certainly wasn’t inflationary: * https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy-in-a-liquidity-trap/ https://krugman.blogs.nytimes.com/2013/04/11/monetary-policy... So as long as rates are at/near zero, 'printing money' won't be a problem. If, however, rates are in a 'normal' range, then yes, increasing money supply can lead to inflation at that time. Krugman first wrote about this in 1998 when Japan first experienced what the rest of us are now seeing (it asks for registration, but you can skip it): * https://www.brookings.edu/bpea-articles/its-baaack-japans-slump-and-the-return-of-the-liquidity-trap/ https://www.brookings.edu/bpea-articles/its-baaack-japans-sl... Generally speaking, if you want to research this yourself, look at these concepts: * https://en.wikipedia.org/wiki/Zero_lower_bound https://en.wikipedia.org/wiki/Zero_lower_bound * https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap Perhaps see "The IS-LM Model and the Liquidity Trap Concept": * https://www.semanticscholar.org/paper/The-IS-LM-Model-and-the-Liquidity-Trap-Concept%3A-to-Boianovsky/4d48513907b6eac16a34f3096e545bc784268f55 https://www.semanticscholar.org/paper/The-IS-LM-Model-and-th... * https://doi.org/10.1215/00182702-36-Suppl_1-92 https://doi.org/10.1215/00182702-36-Suppl_1-92 > These asset classes are severely under-represented in the CPI. Because these are mostly unrealized gains enjoyed by so few, there aren't that many more people competing to buy milk and eggs, which would actually affect CPI. It has not been "under-represented in the CPI". It is not the purpose of CPI to look at asset prices, but rather (roughly) cost of living via a basket of goods. For home, the CPI generally includes either rent or mortgage carrying costs. To home prices, Michael Batnick and Ben Carlson discuss this in light of Ben's weblog post: * https://www.youtube.com/watch?v=d3dO8BW9RHg&t=3m26s https://www.youtube.com/watch?v=d3dO8BW9RHg&t=3m26s * https://awealthofcommonsense.com/2021/01/inflation-truthers/ https://awealthofcommonsense.com/2021/01/inflation-truthers/ * Discussed here: https://news.ycombinator.com/item?id=25644580 https://news.ycombinator.com/item?id=25644580 > Many progressive economists don't seem to realize their policies contribute to massive wealth inequality just as much as America's poor attempt at graduated tax brackets. Want to reduce wealth inequality? Increase taxation/redistribution. Top marginal tax rates are half of what they were during Eisenhower's administration and the (adjusted) minimum wage is below what it was during Nixon. While you may need an economist to get the "right" / "optimal" number, you don't need one to know that they're probably too low.