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If an economy is not growing then the value of productive capital in that economy will not grow either. That's the root of the problem in Japan, and it has litt

If an economy is not growing then the value of productive capital in that economy will not grow either. That's the root of the problem in Japan, and it has little to do with temporary downturns like a stock bubble popping. To be clear, I don't assert that maintaining relative wealth is the sole concern of an investor. There are others. But I think it's the most important aspect of sudden downturns provided that you still believe in the long term real growth of the productive capacity of the economy you're invested in. Also, if you don't believe in that, then the only practical alternative I'm aware of is to invest in an economy you believe in more, or to invest in a slice of the overall economy you think is more likely to grow. Failing that, there simply aren't any good options.

Jensson 5y ago
Are you saying that USA's economic productivity tripled the past 10 years? Because the stock market tripled. How many decades do you think it takes for USA to triple its productivity for real, so that it catches up to the stock market? That is how many decades the crash could set you back if this really is such a bubble.
- asdfasgasdgasdg 5y ago
  > Are you saying that USA's economic productivity tripled the past 10 years? No, that's obviously false. How could I believe that? I am observing that Japan's economy has had very little real growth over the 30 year period referenced by my parent commenter, and that that is the primary problem for investors over there. (The real GDP of the United States as measured by the Federal Reserve bank increased by 33% from 2010 to 2020 immediately before the pandemic, see: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1.) > How many decades do you think it takes for USA to triple its productivity for real, so that it catches up to the stock market? That is how many decades the crash could set you back if this really is such a bubble. I think there are a bunch of assumptions here about how asset prices track the growth of GDP that may not be correct. But, the way I model it, it doesn't really matter if my absolute assets recover to a particular nominal dollar amount after a crash. What I'm mainly concerned about is that my share of the productive capacity of the US economy doesn't decrease, and that that economy as a whole (particularly the portion represented by publicly traded companies) continues to grow. As long as those two conditions are satisfied, I'm not terribly concerned about the dollar amount assigned to my portfolio. What I'm chiefly concerned about is the amount of real consumption that my investments and labor entitle me to. And I believe that the best way to think about my investments in this context is the fraction of real production in the country that they represent, times the total amount of real production.
  - Jensson 5y ago
    > What I'm mainly concerned about is that my share of the productive capital in the US economy doesn't decrease But that can still result in negative returns on your investments, it protects you from losing everything but it doesn't protect you from losing a lot.
    - asdfasgasdgasdg 5y ago
      > But that can still result in negative returns on your investments. Negative nominal returns, especially in the short term, yes. I don't dispute it, and if I said anything in the thread to suggest otherwise, I apologize. I'm concerned about long term real returns, in terms of something like purchasing power parity.

Jensson 5y ago

Are you saying that USA's economic productivity tripled the past 10 years? Because the stock market tripled. How many decades do you think it takes for USA to triple its productivity for real, so that it catches up to the stock market? That is how many decades the crash could set you back if this really is such a bubble.

asdfasgasdgasdg 5y ago
> Are you saying that USA's economic productivity tripled the past 10 years? No, that's obviously false. How could I believe that? I am observing that Japan's economy has had very little real growth over the 30 year period referenced by my parent commenter, and that that is the primary problem for investors over there. (The real GDP of the United States as measured by the Federal Reserve bank increased by 33% from 2010 to 2020 immediately before the pandemic, see: https://fred.stlouisfed.org/series/GDPC1 https://fred.stlouisfed.org/series/GDPC1.) > How many decades do you think it takes for USA to triple its productivity for real, so that it catches up to the stock market? That is how many decades the crash could set you back if this really is such a bubble. I think there are a bunch of assumptions here about how asset prices track the growth of GDP that may not be correct. But, the way I model it, it doesn't really matter if my absolute assets recover to a particular nominal dollar amount after a crash. What I'm mainly concerned about is that my share of the productive capacity of the US economy doesn't decrease, and that that economy as a whole (particularly the portion represented by publicly traded companies) continues to grow. As long as those two conditions are satisfied, I'm not terribly concerned about the dollar amount assigned to my portfolio. What I'm chiefly concerned about is the amount of real consumption that my investments and labor entitle me to. And I believe that the best way to think about my investments in this context is the fraction of real production in the country that they represent, times the total amount of real production.
- Jensson 5y ago
  > What I'm mainly concerned about is that my share of the productive capital in the US economy doesn't decrease But that can still result in negative returns on your investments, it protects you from losing everything but it doesn't protect you from losing a lot.
  - asdfasgasdgasdg 5y ago
    > But that can still result in negative returns on your investments. Negative nominal returns, especially in the short term, yes. I don't dispute it, and if I said anything in the thread to suggest otherwise, I apologize. I'm concerned about long term real returns, in terms of something like purchasing power parity.