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Of course not, but that doesn't matter if a.) you can get out before the top or b.) the world will have changed by then in a way that makes your current positio

Of course not, but that doesn't matter if a.) you can get out before the top or b.) the world will have changed by then in a way that makes your current position worthless or c.) there is no alternative. Right now all three of those are true, to varying degrees. If you correctly called the top in 2007 and got out of the market, it wouldn't matter unless you got back in before 2012. As someone who lived through those years - at every point during that period, there was a loud chorus of voices saying that we were about to have a double-dip, prices didn't really correct far enough, and fair value indicated they should've gone back to where they were in 2002-2004. Remember that if you're in cash, you've chosen to put your wealth in an asset class whose controlling authority's stated policy is to make it worth consistently less every year.

cs702 6y ago
Agree. I like to think of a), b), and c) as: a) "epistemic arrogance" -- you believe you're smarter and know more than everyone else; b) "heads, you might win, tails, everyone loses anyway" -- so you might as well gamble on heads; c) "f*ck it, load up!" And there's also d): d) "wait it out" -- if you're already rich and infinitely patient, like Mr. Buffett. Maybe find a hobby to occupy your brain -- e.g., play Bridge online.
- dr_dshiv 6y ago
  Or, you know, try to create value day in and day out :)
  - cs702 6y ago
    That's a given -- at least from my standpoint.
- usmannk 6y ago
  a) "epistemic arrogance" -- you believe you're smarter and know more than everyone else; No, more like you decide to be less greedy than everyone else. You choose to leave money on the table in favor of getting out early.
  - bobthepanda 6y ago
    If you want to not get hurt, b makes this not necessarily a good idea. If you think things are overvalued, there are two ways for it to go: - the value of equities crashes in nominal terms and consumer prices are stable - the value of the dollar itself declines, so that the nominal values of equities stay the same but consumer prices inflate to make the real value of equities revert to the norm It’s probably a mix of a and b, but outcomes that tilt more heavily towards the latter would hurt people holding cash more. And right now b is closer to official Fed policy, since it would prefer that to getting into a Japanese deflation trap.
lotsofpulp 6y ago
>Remember that if you're in cash, you've chosen to put your wealth in an asset class whose controlling authority's stated policy is to make it worth consistently less every year. We might as well consider VTI to be better than FDIC insured on a 5+ year timeframe. FDIC only protects nominal values. The Fed can protect real values.
grey-area 6y ago
Everyone in every bubble since the beginning of stock markets has thought: a) They were getting out before the top, they'd sell to some other poor fool when it was time b) The world had changed completely and it was a new paradigm (it's different this time!) It's wise to avoid cash in the long term, but it's unwise to avoid it completely, and certainly when you sense things are getting a little crazy, it is not at all unwise to shift some of your holdings to cash, though you'll be mocked for it by many, for whom risk is a distant prospect which happens to some other poor sucker.
- andi999 6y ago
  Well, one thing is different. No inflation in commodities, since China is offsetting it by cheap production. This allow the central bank to keep interest low, which leads to high inflation in assets. So depending on what the central bank will do, cash might be good or not.
  - grey-area 6y ago
    Copper is seeing massive inflation right now. Retail prices are not as yet, and perhaps they won't, but if they see too much interest rates will rise and the free money spigot will be turned off.
    - mbesto 6y ago
      > Copper is seeing massive inflation right now. An asset that isn't used as a medium of exchange does not have the characteristic of inflation. An asset can have an inflated price (in a currency) but the asset itself (in this case copper) cannot have inflation if its not used as a medium of exchange. The distinction is important.
      - grey-area 6y ago
        How would you best describe the price rises in copper and copper miners? Just copper prices are going up right now?
woofie11 6y ago
I don't think this is a bubble, but expected inflation, due to COVID19. I am guessing we will see cash devalue roughly 2x in the next five years. As a result, there's a scramble where to put money safely. If the alternative -- cash -- loses half of its value once COVID19 financial measures start unwinding, all of a sudden, investments just need a 50% ROI to be profitable. If I dump a million dollars into a startup, and it sells for the equivalent of $500k in five years ($1M after inflation), I've come out neutral.
- icedchai 6y ago
  How's that? I think you'd need it to sell for at least 2 mil to come out neutral. We're ignoring the reality of your shares getting diluted in future rounds.
  - woofie11 6y ago
    Blargh. I wrote that badly, didn't I? Let me rephrase that more clearly: Let's say I expect 100% inflation over the next 5 years. I can buy an investment which will lose 50% of its real value over that time. I come out neutral compared to holding cash. In dollars: I buy today at a nominal value of $1 million, and sell at $1 million. Same as cash. In value: I buy today at a real value of $1 million. I sell at a real value of $500k in 2020 dollars. I can buy into investments whose real value is falling, and still come out ahead in inflationary times. Value-losing startups suddenly become okay investments since they lose less value than dollars. Both due to COVID19 and government debt generally, I think we're heading for high inflation.... People are looking for assets to put money into. Real values can go going down, while nominal (dollar) values can be going up. https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... Selling at $2 million would mean I didn't lose value, but I'm not sure people are finding alternative investments which won't lose value; it's why people are grabbing bitcoin, and stocks are hot.
    - icedchai 6y ago
      Yep, makes sense, thanks for the explanation!

cs702 6y ago

Agree. I like to think of a), b), and c) as: a) "epistemic arrogance" -- you believe you're smarter and know more than everyone else; b) "heads, you might win, tails, everyone loses anyway" -- so you might as well gamble on heads; c) "f*ck it, load up!" And there's also d): d) "wait it out" -- if you're already rich and infinitely patient, like Mr. Buffett. Maybe find a hobby to occupy your brain -- e.g., play Bridge online.

dr_dshiv 6y ago
Or, you know, try to create value day in and day out :)
- cs702 6y ago
  That's a given -- at least from my standpoint.
usmannk 6y ago
a) "epistemic arrogance" -- you believe you're smarter and know more than everyone else; No, more like you decide to be less greedy than everyone else. You choose to leave money on the table in favor of getting out early.
- bobthepanda 6y ago
  If you want to not get hurt, b makes this not necessarily a good idea. If you think things are overvalued, there are two ways for it to go: - the value of equities crashes in nominal terms and consumer prices are stable - the value of the dollar itself declines, so that the nominal values of equities stay the same but consumer prices inflate to make the real value of equities revert to the norm It’s probably a mix of a and b, but outcomes that tilt more heavily towards the latter would hurt people holding cash more. And right now b is closer to official Fed policy, since it would prefer that to getting into a Japanese deflation trap.

lotsofpulp 6y ago

>Remember that if you're in cash, you've chosen to put your wealth in an asset class whose controlling authority's stated policy is to make it worth consistently less every year. We might as well consider VTI to be better than FDIC insured on a 5+ year timeframe. FDIC only protects nominal values. The Fed can protect real values.

grey-area 6y ago

Everyone in every bubble since the beginning of stock markets has thought: a) They were getting out before the top, they'd sell to some other poor fool when it was time b) The world had changed completely and it was a new paradigm (it's different this time!) It's wise to avoid cash in the long term, but it's unwise to avoid it completely, and certainly when you sense things are getting a little crazy, it is not at all unwise to shift some of your holdings to cash, though you'll be mocked for it by many, for whom risk is a distant prospect which happens to some other poor sucker.

andi999 6y ago
Well, one thing is different. No inflation in commodities, since China is offsetting it by cheap production. This allow the central bank to keep interest low, which leads to high inflation in assets. So depending on what the central bank will do, cash might be good or not.
- grey-area 6y ago
  Copper is seeing massive inflation right now. Retail prices are not as yet, and perhaps they won't, but if they see too much interest rates will rise and the free money spigot will be turned off.
  - mbesto 6y ago
    > Copper is seeing massive inflation right now. An asset that isn't used as a medium of exchange does not have the characteristic of inflation. An asset can have an inflated price (in a currency) but the asset itself (in this case copper) cannot have inflation if its not used as a medium of exchange. The distinction is important.
    - grey-area 6y ago
      How would you best describe the price rises in copper and copper miners? Just copper prices are going up right now?

woofie11 6y ago

I don't think this is a bubble, but expected inflation, due to COVID19. I am guessing we will see cash devalue roughly 2x in the next five years. As a result, there's a scramble where to put money safely. If the alternative -- cash -- loses half of its value once COVID19 financial measures start unwinding, all of a sudden, investments just need a 50% ROI to be profitable. If I dump a million dollars into a startup, and it sells for the equivalent of $500k in five years ($1M after inflation), I've come out neutral.

icedchai 6y ago
How's that? I think you'd need it to sell for at least 2 mil to come out neutral. We're ignoring the reality of your shares getting diluted in future rounds.
- woofie11 6y ago
  Blargh. I wrote that badly, didn't I? Let me rephrase that more clearly: Let's say I expect 100% inflation over the next 5 years. I can buy an investment which will lose 50% of its real value over that time. I come out neutral compared to holding cash. In dollars: I buy today at a nominal value of $1 million, and sell at $1 million. Same as cash. In value: I buy today at a real value of $1 million. I sell at a real value of $500k in 2020 dollars. I can buy into investments whose real value is falling, and still come out ahead in inflationary times. Value-losing startups suddenly become okay investments since they lose less value than dollars. Both due to COVID19 and government debt generally, I think we're heading for high inflation.... People are looking for assets to put money into. Real values can go going down, while nominal (dollar) values can be going up. https://en.wikipedia.org/wiki/Real_versus_nominal_value_(economics) https://en.wikipedia.org/wiki/Real_versus_nominal_value_(eco... Selling at $2 million would mean I didn't lose value, but I'm not sure people are finding alternative investments which won't lose value; it's why people are grabbing bitcoin, and stocks are hot.
  - icedchai 6y ago
    Yep, makes sense, thanks for the explanation!