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I don’t understand this. My current portfolio is, say, 30 times my yearly living expenses. All I care about is that it will continue to grow in a way that stay

I don’t understand this. My current portfolio is, say, 30 times my yearly living expenses. All I care about is that it will continue to grow in a way that stays at/above this ratio, so I will be able to retire early. The pace at which my yearly expenses inflate is much more correlated to CPI than money supply. My expenses haven’t changed much between 2019, 2020 and 2021 (projected), despite the large money printing, and my consumption pattern has been the same. So, why should I care? Genuine question.

CyberRabbi 6y ago
The point isn’t that people with assets should care. The point is that people who hold dollars should care because eventually they’ll need to convert those dollars into assets.
- deleted 6y ago
  [deleted]
- bredren 6y ago
  It is this, but there's a twist. Presume a person with assets sees information like this and in combination with other factors causes them to agree a dramatic market pullback (on the scale of last year's but worse) is likely and soon. The next logical step would be to enjoy all of the gains so far and sell out from the risk of the drop, and even after a nominal loss of value rebuy. What I've seen is rather than deal with what that might require, people will present the above argument. They may refer you to 1973's "A Random Walk down Wall Street," or bring up capital gains taxes. But what they will not do is confront the cognitive dissonance they're feeling between their own sense that something is wrong with the market and that they are in a position to take great advantage of a drop but will not.
  - CyberRabbi 6y ago
    Hmm I don’t see a market pullback happening any time soon. Honest question, Why would this information lead one to believe that? This information leads me to believe that the market is reasonable priced, given that it suggests the recent price increase is not a bubble but rather due to dollar devaluation in the asset marketplace. All other things equal, unless they start burning money I expect prices to grow or remain stable.
  - lotsofpulp 6y ago
    > The next logical step would be to enjoy all of the gains so far and sell out from the risk of the drop, and even after a nominal loss of value rebuy. My next logical step would be to assume the government will do whatever is necessary to pump those equity values back up, just like they did last year in Mar/Apr. So unless you think you can time it so that you sell when asset prices drop, and buy before the government pumps them back up, the logical step would be to stay the course, and keep your wealth in inflation resistant broad market indices.
lotsofpulp 6y ago
> The pace at which my yearly expenses inflate is much more correlated to CPI than money supply. My expenses haven’t changed much between 2019, 2020 and 2021 (projected), despite the large money printing, and my consumption pattern has been the same. What were the changes in your health insurance premiums(employer+employee)/deductible/oop max? As an example, my parents’ deductible went from $3,450 to $6k, monthly premium from $1,137 to $1,232 between 2020 and 2021. My expenses consistently go up quite a bit, far more than any government number. Both for my businesses and at home. My taxes also reliably go up more than CPI figures. Land has especially gone up. Also, if you were planning on purchasing a home in any popular area of the past 10+ years, the lack of price increase in food or tech would have been meaningless in the face of land price increases.
- erosenbe0 6y ago
  Things are difficult to price. Your expenses probably are increasing and I believe you but I know there is bias in my expense calculations. For example, I need a new car. It will be a lot more in sticker price than real cost of previous car. However total cost of ownership if I look all the way out to 2030+ or later will be lower than previous car. This is one of the problems with pricing healthcare. It's out of control expensive but also morbidity and age adjusted disability keeps getting lower. Edit: The land problem is a thing also difficult to capture since amortized across entire country. Moreover, it's not Singapore in the USA, the land price problem points to various inefficiencies rather some kind of intrinsic supply/real value problem.
  - lotsofpulp 6y ago
    The bottom line is I need to make sure my income is growing at a faster rate than CPI to purchase the things I want to. Whatever daycare/tuition/land/healthcare/taxes/retirement savings cost today, the official CPI figures have not come anywhere close to resembling the growth in prices for those in my adult life, and they comprise of basically all my spending. The price of milk or flights is irrelevant to me when the houses I’m looking at purchase go up a few hundred thousand.
Invictus0 6y ago
You are already able to retire.
ItsMonkk 6y ago
Sustainability. The M2 is growing because interest rates are dropping. But interest rates are at 0, so they can't drop anymore. So there is reason to believe that we can not sustain our current trajectory any longer.
- deleted 6y ago
  [deleted]
- dragonwriter 6y ago
  > But interest rates are at 0, so they can't drop anymore Interest rates are not at zero [0], and interest rates, and their targets, can go negative. [1] [0] target range is currently 0-0.25%, actual is 0.08%: https://apps.newyorkfed.org/markets/autorates/fed%20funds https://apps.newyorkfed.org/markets/autorates/fed%20funds [1] https://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp https://www.investopedia.com/terms/n/negative-interest-rate-...
  - fny 6y ago
    The fed funds rate are not interest rates writ large however. This is the interest rates banks pay to borrow reserves over a short term. The markets for longer dated securities (i.e. 10Y and 30Y) more accurately reflect interest. The 10 year is currently at 1% and the 30 year at 2%.
    - icefrakker 6y ago
      So they are not at 0 and there is room for rate cuts.
    - dragonwriter 6y ago
      > The fed funds rate are not interest rates writ large however They are interest rates and since they are essentially risk free, they ought to be roughly the floor of interest rates that aren't being subsidized by some other consideration. > The 10 year is currently at 1% and the 30 year at 2%. I would argue that 1% and 2% are even more clearly greater than 0% than is 0.08% (the recent effective federal funds rate), so that just reinforces the point, to the extent one agrees that they are the relevant interest rates, that interest rates are not currently at 0.
tylerhou 6y ago
You shouldn’t care. This chart is making up claims of “obvious” inflation (despite no evidence) to push BTC and other cryptos. (That’s why the dropdown has crypto coins.) Also, the person doesn’t really understand monetary policy or macroeconomics — inflation is measured by changes in the price of a currency. M1 only measures supply. The other half of the price equation (that is missing from this chart) is the demand of the currency.
- lumost 6y ago
  Measuring the intrinsic demand for a currency is an exceptionally difficult problem and prone to cognitive bias in terms of which factors are weighted and how it's calculated. Measuring the money supply is a trivial matter - if we observe a radical change in the money supply which correlates to asset price increases it's reasonable to question if our understanding of the economy is correct. This may be in actionable information even if you buy the argument however. Holding assets while they inflate is the best move and at 0% interest rates there is no alternative to holding assets.

CyberRabbi 6y ago

The point isn’t that people with assets should care. The point is that people who hold dollars should care because eventually they’ll need to convert those dollars into assets.

deleted 6y ago
[deleted]
bredren 6y ago
It is this, but there's a twist. Presume a person with assets sees information like this and in combination with other factors causes them to agree a dramatic market pullback (on the scale of last year's but worse) is likely and soon. The next logical step would be to enjoy all of the gains so far and sell out from the risk of the drop, and even after a nominal loss of value rebuy. What I've seen is rather than deal with what that might require, people will present the above argument. They may refer you to 1973's "A Random Walk down Wall Street," or bring up capital gains taxes. But what they will not do is confront the cognitive dissonance they're feeling between their own sense that something is wrong with the market and that they are in a position to take great advantage of a drop but will not.
- CyberRabbi 6y ago
  Hmm I don’t see a market pullback happening any time soon. Honest question, Why would this information lead one to believe that? This information leads me to believe that the market is reasonable priced, given that it suggests the recent price increase is not a bubble but rather due to dollar devaluation in the asset marketplace. All other things equal, unless they start burning money I expect prices to grow or remain stable.
- lotsofpulp 6y ago
  > The next logical step would be to enjoy all of the gains so far and sell out from the risk of the drop, and even after a nominal loss of value rebuy. My next logical step would be to assume the government will do whatever is necessary to pump those equity values back up, just like they did last year in Mar/Apr. So unless you think you can time it so that you sell when asset prices drop, and buy before the government pumps them back up, the logical step would be to stay the course, and keep your wealth in inflation resistant broad market indices.

lotsofpulp 6y ago

> The pace at which my yearly expenses inflate is much more correlated to CPI than money supply. My expenses haven’t changed much between 2019, 2020 and 2021 (projected), despite the large money printing, and my consumption pattern has been the same. What were the changes in your health insurance premiums(employer+employee)/deductible/oop max? As an example, my parents’ deductible went from $3,450 to $6k, monthly premium from $1,137 to $1,232 between 2020 and 2021. My expenses consistently go up quite a bit, far more than any government number. Both for my businesses and at home. My taxes also reliably go up more than CPI figures. Land has especially gone up. Also, if you were planning on purchasing a home in any popular area of the past 10+ years, the lack of price increase in food or tech would have been meaningless in the face of land price increases.

erosenbe0 6y ago
Things are difficult to price. Your expenses probably are increasing and I believe you but I know there is bias in my expense calculations. For example, I need a new car. It will be a lot more in sticker price than real cost of previous car. However total cost of ownership if I look all the way out to 2030+ or later will be lower than previous car. This is one of the problems with pricing healthcare. It's out of control expensive but also morbidity and age adjusted disability keeps getting lower. Edit: The land problem is a thing also difficult to capture since amortized across entire country. Moreover, it's not Singapore in the USA, the land price problem points to various inefficiencies rather some kind of intrinsic supply/real value problem.
- lotsofpulp 6y ago
  The bottom line is I need to make sure my income is growing at a faster rate than CPI to purchase the things I want to. Whatever daycare/tuition/land/healthcare/taxes/retirement savings cost today, the official CPI figures have not come anywhere close to resembling the growth in prices for those in my adult life, and they comprise of basically all my spending. The price of milk or flights is irrelevant to me when the houses I’m looking at purchase go up a few hundred thousand.

Invictus0 6y ago

You are already able to retire.

ItsMonkk 6y ago

Sustainability. The M2 is growing because interest rates are dropping. But interest rates are at 0, so they can't drop anymore. So there is reason to believe that we can not sustain our current trajectory any longer.

deleted 6y ago
[deleted]
dragonwriter 6y ago
> But interest rates are at 0, so they can't drop anymore Interest rates are not at zero [0], and interest rates, and their targets, can go negative. [1] [0] target range is currently 0-0.25%, actual is 0.08%: https://apps.newyorkfed.org/markets/autorates/fed%20funds https://apps.newyorkfed.org/markets/autorates/fed%20funds [1] https://www.investopedia.com/terms/n/negative-interest-rate-policy-nirp.asp https://www.investopedia.com/terms/n/negative-interest-rate-...
- fny 6y ago
  The fed funds rate are not interest rates writ large however. This is the interest rates banks pay to borrow reserves over a short term. The markets for longer dated securities (i.e. 10Y and 30Y) more accurately reflect interest. The 10 year is currently at 1% and the 30 year at 2%.
  - icefrakker 6y ago
    So they are not at 0 and there is room for rate cuts.
  - dragonwriter 6y ago
    > The fed funds rate are not interest rates writ large however They are interest rates and since they are essentially risk free, they ought to be roughly the floor of interest rates that aren't being subsidized by some other consideration. > The 10 year is currently at 1% and the 30 year at 2%. I would argue that 1% and 2% are even more clearly greater than 0% than is 0.08% (the recent effective federal funds rate), so that just reinforces the point, to the extent one agrees that they are the relevant interest rates, that interest rates are not currently at 0.

tylerhou 6y ago

You shouldn’t care. This chart is making up claims of “obvious” inflation (despite no evidence) to push BTC and other cryptos. (That’s why the dropdown has crypto coins.) Also, the person doesn’t really understand monetary policy or macroeconomics — inflation is measured by changes in the price of a currency. M1 only measures supply. The other half of the price equation (that is missing from this chart) is the demand of the currency.

lumost 6y ago
Measuring the intrinsic demand for a currency is an exceptionally difficult problem and prone to cognitive bias in terms of which factors are weighted and how it's calculated. Measuring the money supply is a trivial matter - if we observe a radical change in the money supply which correlates to asset price increases it's reasonable to question if our understanding of the economy is correct. This may be in actionable information even if you buy the argument however. Holding assets while they inflate is the best move and at 0% interest rates there is no alternative to holding assets.