8 ms·

Sure, almost all central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont

by adflux 6y ago

Sure, almost all central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it and neither do many other economists. Stock prices, house prices and now, at last, commodity prices have gone through the roof... But you're probably earning about as much as you were a year ago, or less, if your industry was affected... It's not just food. Lumber, Steel and Oil aswell. https://www.ft.com/content/6a7c232e-9c63-420c-ac05-40aea84a9504 https://www.ft.com/content/6a7c232e-9c63-420c-ac05-40aea84a9... EDIT: noticed link is paywalled (but not when you access via google) alternative article here: https://www.reuters.com/article/us-global-markets-idUSKBN2AM014 https://www.reuters.com/article/us-global-markets-idUSKBN2AM... "World shares slide on inflation fears, commodities surge"

mistermann 6y ago
Asking for investment advice in a forum is probably not the best idea, but does anyone have any advice for someone who's been sitting almost entirely in cash for over 2 years (including missing the covid rebound)? I have a fair amount of experience in the market but from an intuition perspective, I feel like I have alzheimer's or something, I haven't a clue what a person should do in this situation.
- dominotw 6y ago
  Same. I think market bubble is going to keep going atleast in near future because of the new stimulus money that is going to start flowing to the market soon. https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-stimulus-checks-deutsche-bank.html https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-...
  - oceanplexian 6y ago
    The market != The Economy. The market trades on multiples that represent asset prices in the future, and the stimulus was priced in months ago. The recent movement in the market was a reaction to the possibility that inflation shows up 6-12 months in the future, and the Fed doesn't raise rates. Subsequently high inflation will erode the value of bonds (Corporate debt). Who is holding them? Banks. If the banks fail lending tightens and the whole thing implodes. People can't get mortgages, corporations can't pay employees, home prices crash, etc. It's possible something could set off the market today that accelerates the whole process, like the upcoming supplementary leverage ratio change. Or, the bubble could continue inflating until doesn't. But either way the whole thing is incredibly fragile and much more complicated than the "Stimulus is good for the economy" talk politicians are peddling.
- lupire 6y ago
  Stock market is always the best available long term bet on average, because that's where you can disguise your assets to mix in with wealthy people assets that gets government bailouts. There are other things like real estate and government contacts, but those are less available to the casual investor, except through stock market funds.
- hedora 6y ago
  Don’t try to time the market. Just put the money in a diversified portfolio at a roboadvisor. The market is up 2% YTD, but down 4% from peak. It’s a reasonable time to buy (better than peak, at least). If you must try to time the market, use time cost averaging to reduce volatility from getting a peak (or trough) price when you enter the market, but know that doing so reduces expected returns. The basic idea is to put 1/n of your money in over the next n weeks.
- mellavora 6y ago
  If you don't have a clue, then staying in cash is probably your best option. John Hussman has a nice article on the option value of cash. https://www.hussmanfunds.com/comment/mc201201/ https://www.hussmanfunds.com/comment/mc201201/ tldr: Suppose I offer you a security that will pay $100 two days from today. You can buy as much of it as you like today at $50, or you can wait until tomorrow. Tomorrow, I’ll flip a coin. If it’s heads, I’ll sell you the security at $99. If it’s tails, I’ll sell you the security at $25. What should you do? Clearly, if you buy the security today, you’ll double your money two days from now. That’s a 100% expected return for each dollar you invest, over that 2-day period. If you wait, you’ll earn nothing on the first day, but you’ll then have two possibilities. If heads, you’ll get just 1% on your invested money. If tails, you’ll get a 300% return, quadrupling your money. With a 50/50 chance at each, your expected return for every dollar you invest is 0.51% + 0.5300% = 150.5%. So waiting adds 50.5% to your expected return over that 2-day period.
bryanlarsen 6y ago
Interest rates are at zero. When official inflation starts ticking up they'll raise interest rates which will deflate the stock & house price bubble and cut inflation off at the knees. We have lots of things to worry about -- inflation isn't one of them.
- blaser-waffle 6y ago
  Popping the bubble will be worse than the inflation.
  - bryanlarsen 6y ago
    For rich people.
    - AlexandrB 6y ago
      Also for people that put their life savings as downpayment on an overpriced house.
      - ChuckNorris89 6y ago
        But at least the bubble popping would make it easier for the middle class newcommers enter the market. Just inflating the bubble further, as every European bank and government is doing, to make existing property owners richer on paper and get their votes, is not a viable long term solution. IMHO, it can't pop sooner. Houses should be for living, not for speculation and hoarding wealth. The younger generations have been screwed enough by the old established wealth hoarders.
        oceanplexian 6y ago
        I was around during 2008, that's exactly the opposite of what will happen. Financing will dry up and the newcomers will find themselves in a highly competitive rental environment with inflated prices, while the banks and wealthy snap up SFH's for pennies on the dollar.
RobertoG 6y ago
Inflation can be created, basically, by two things, an excess of demand respect to what the economy can produce or problems of supply. Personally, I'm surprise at how robust are the global supply chains that have been able to keep things more or less normal despise what we have been through the last year. The quantity of reserves created by the Central Banks are irrelevant if they are not spend in the economy. There are two effects to this "printing money": one is that the interest rate goes down facilitating borrowing from the private sector. The second is that governments have the ammunition to spend in stimulus. If the two things happen we could see inflation, but, notice that this the desired effect: compensate for a fall in the normal demand in the economy. >" [..] central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it [..]" It seems to me that, in your model of the world, this should be leading to hyperinflation. If this is the case, my model of the world is wrong and I will make an effort to change it. I wish all the people has been predicting hyperinflation the last 30 years did the same if it doesn't happen. Somehow, I doubt it. By now, the quantity theory of money based in the fractional reserve banking model should be discredited.
- Threeve303 6y ago
  The examples given above seem like a textbook definition of inflation inside of a closed loop economic system. That is not what the U.S. has and it’s definitely not the situation if a country has a reserve currency. The Triffin dilemma may hold the answer in that as you supply your currency to the rest of the world, you are creating local deflationary effects while essentially exporting inflation. When the rest of the world begins using other systems than the reserve currency to conduct trade, the end result is that the inflation returns home as demand for your currency drops.
  - RobertoG 6y ago
    The grandparent says explicitly in the comment "all the central banks". We are not talking specifically about the USA. Anyway, the "reserve currency" excuse doesn't explain Japan in the last 20 years or the Euro in the last ten. The theory is just wrong. I don't know what more have to happen for people changing their minds. It's spending what can generate inflation, specifically, spending above what the economy can produce. If Biden tomorrow created a trillion dollar coin and keep it under their bed, there will not be inflation. If the Central Banks create reserves, the interest rate will fall to zero (but not more), and if, despise the low interest rates, nobody is borrowing, there will not be inflation.
itsdsmurrell 6y ago
This. Let's take back the power (but don't be like this guy)... https://www.youtube.com/watch?v=yM4gNVme5a0 https://www.youtube.com/watch?v=yM4gNVme5a0
PragmaticPulp 6y ago
Inflation due to monetary policy is a hot topic right now, but it’s getting too much blame for current events. Prices are up for multiple reasons, including more pressure on shipping channels due to increased demand for goods across the board. Also, this article is largely about inflation in developing nations like Indonesia. The inflation noted in countries like the United States is more pedestrian: > In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.
artificialLimbs 6y ago
We were going to build a house about 6 months ago. Plywood sheets that we were looking at were $8. They're now $30.
- Diederich 6y ago
  May I ask what region you're in? Thanks.
  - artificialLimbs 6y ago
    Whoops, meant to include: southern United States.

by adflux 6y ago

mistermann 6y ago

Asking for investment advice in a forum is probably not the best idea, but does anyone have any advice for someone who's been sitting almost entirely in cash for over 2 years (including missing the covid rebound)? I have a fair amount of experience in the market but from an intuition perspective, I feel like I have alzheimer's or something, I haven't a clue what a person should do in this situation.

dominotw 6y ago
Same. I think market bubble is going to keep going atleast in near future because of the new stimulus money that is going to start flowing to the market soon. https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-stimulus-checks-deutsche-bank.html https://www.cnbc.com/2021/03/08/how-the-young-plan-to-spend-...
- oceanplexian 6y ago
  The market != The Economy. The market trades on multiples that represent asset prices in the future, and the stimulus was priced in months ago. The recent movement in the market was a reaction to the possibility that inflation shows up 6-12 months in the future, and the Fed doesn't raise rates. Subsequently high inflation will erode the value of bonds (Corporate debt). Who is holding them? Banks. If the banks fail lending tightens and the whole thing implodes. People can't get mortgages, corporations can't pay employees, home prices crash, etc. It's possible something could set off the market today that accelerates the whole process, like the upcoming supplementary leverage ratio change. Or, the bubble could continue inflating until doesn't. But either way the whole thing is incredibly fragile and much more complicated than the "Stimulus is good for the economy" talk politicians are peddling.
lupire 6y ago
Stock market is always the best available long term bet on average, because that's where you can disguise your assets to mix in with wealthy people assets that gets government bailouts. There are other things like real estate and government contacts, but those are less available to the casual investor, except through stock market funds.
hedora 6y ago
Don’t try to time the market. Just put the money in a diversified portfolio at a roboadvisor. The market is up 2% YTD, but down 4% from peak. It’s a reasonable time to buy (better than peak, at least). If you must try to time the market, use time cost averaging to reduce volatility from getting a peak (or trough) price when you enter the market, but know that doing so reduces expected returns. The basic idea is to put 1/n of your money in over the next n weeks.
mellavora 6y ago
If you don't have a clue, then staying in cash is probably your best option. John Hussman has a nice article on the option value of cash. https://www.hussmanfunds.com/comment/mc201201/ https://www.hussmanfunds.com/comment/mc201201/ tldr: Suppose I offer you a security that will pay $100 two days from today. You can buy as much of it as you like today at $50, or you can wait until tomorrow. Tomorrow, I’ll flip a coin. If it’s heads, I’ll sell you the security at $99. If it’s tails, I’ll sell you the security at $25. What should you do? Clearly, if you buy the security today, you’ll double your money two days from now. That’s a 100% expected return for each dollar you invest, over that 2-day period. If you wait, you’ll earn nothing on the first day, but you’ll then have two possibilities. If heads, you’ll get just 1% on your invested money. If tails, you’ll get a 300% return, quadrupling your money. With a 50/50 chance at each, your expected return for every dollar you invest is 0.51% + 0.5300% = 150.5%. So waiting adds 50.5% to your expected return over that 2-day period.

bryanlarsen 6y ago

Interest rates are at zero. When official inflation starts ticking up they'll raise interest rates which will deflate the stock & house price bubble and cut inflation off at the knees. We have lots of things to worry about -- inflation isn't one of them.

blaser-waffle 6y ago
Popping the bubble will be worse than the inflation.
- bryanlarsen 6y ago
  For rich people.
  - AlexandrB 6y ago
    Also for people that put their life savings as downpayment on an overpriced house.
    - ChuckNorris89 6y ago
      But at least the bubble popping would make it easier for the middle class newcommers enter the market. Just inflating the bubble further, as every European bank and government is doing, to make existing property owners richer on paper and get their votes, is not a viable long term solution. IMHO, it can't pop sooner. Houses should be for living, not for speculation and hoarding wealth. The younger generations have been screwed enough by the old established wealth hoarders.
      - oceanplexian 6y ago
        I was around during 2008, that's exactly the opposite of what will happen. Financing will dry up and the newcomers will find themselves in a highly competitive rental environment with inflated prices, while the banks and wealthy snap up SFH's for pennies on the dollar.

RobertoG 6y ago

Inflation can be created, basically, by two things, an excess of demand respect to what the economy can produce or problems of supply. Personally, I'm surprise at how robust are the global supply chains that have been able to keep things more or less normal despise what we have been through the last year. The quantity of reserves created by the Central Banks are irrelevant if they are not spend in the economy. There are two effects to this "printing money": one is that the interest rate goes down facilitating borrowing from the private sector. The second is that governments have the ammunition to spend in stimulus. If the two things happen we could see inflation, but, notice that this the desired effect: compensate for a fall in the normal demand in the economy. >" [..] central banks over the world have printed an astronomical amount of money. Even though they may state there is no significant inflation, I dont buy it [..]" It seems to me that, in your model of the world, this should be leading to hyperinflation. If this is the case, my model of the world is wrong and I will make an effort to change it. I wish all the people has been predicting hyperinflation the last 30 years did the same if it doesn't happen. Somehow, I doubt it. By now, the quantity theory of money based in the fractional reserve banking model should be discredited.

Threeve303 6y ago
The examples given above seem like a textbook definition of inflation inside of a closed loop economic system. That is not what the U.S. has and it’s definitely not the situation if a country has a reserve currency. The Triffin dilemma may hold the answer in that as you supply your currency to the rest of the world, you are creating local deflationary effects while essentially exporting inflation. When the rest of the world begins using other systems than the reserve currency to conduct trade, the end result is that the inflation returns home as demand for your currency drops.
- RobertoG 6y ago
  The grandparent says explicitly in the comment "all the central banks". We are not talking specifically about the USA. Anyway, the "reserve currency" excuse doesn't explain Japan in the last 20 years or the Euro in the last ten. The theory is just wrong. I don't know what more have to happen for people changing their minds. It's spending what can generate inflation, specifically, spending above what the economy can produce. If Biden tomorrow created a trillion dollar coin and keep it under their bed, there will not be inflation. If the Central Banks create reserves, the interest rate will fall to zero (but not more), and if, despise the low interest rates, nobody is borrowing, there will not be inflation.

itsdsmurrell 6y ago

This. Let's take back the power (but don't be like this guy)... https://www.youtube.com/watch?v=yM4gNVme5a0 https://www.youtube.com/watch?v=yM4gNVme5a0

PragmaticPulp 6y ago

Inflation due to monetary policy is a hot topic right now, but it’s getting too much blame for current events. Prices are up for multiple reasons, including more pressure on shipping channels due to increased demand for goods across the board. Also, this article is largely about inflation in developing nations like Indonesia. The inflation noted in countries like the United States is more pedestrian: > In the U.S., prices rose close to 3% in the year ending Jan. 2, according to NielsenIQ, roughly double the overall rate of inflation.

artificialLimbs 6y ago

We were going to build a house about 6 months ago. Plywood sheets that we were looking at were $8. They're now $30.

Diederich 6y ago
May I ask what region you're in? Thanks.
- artificialLimbs 6y ago
  Whoops, meant to include: southern United States.