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This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment. Saving money is

by lumost 4y ago

This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment. Saving money is a smart idea unless you live in a communist state or a dictatorship, then your best bet is to spend as fast as you can or secure assets resistant to confiscation. Maintaining liquidity is a smart idea unless you live in a world where the government decrees asset prices can never fall. In which case throwing everything you have into leverage is the best bet. It's not an irrational bet that the Fed's hands will be permanently tied to a low interest rate environment. The more people who make that bet the more true it will be.

pfisherman 4y ago
> This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment. How is it plausible? I would say given the historical data, it is extremely unlikely. Not impossible, but near negligible probability. People saying, “it’s different this time,” right before a economic crash is a cliche for a reason. I suspect that you could use the frequency of utterances to predict impending recessions / asset class corrections with extremely high accuracy.
- lumost 4y ago
  If we’ve transitioned into a different socioeconomic system from capitalism, then it really could be different this time. It just means that certain assets are no longer traditional “assets” but should be viewed as an annuity etc. Housing can return 20% per year until the end of time if the Fed wishes it to.
mmmm2 4y ago
You're certainly not alone in thinking along these lines, but it is another case of "it's right until it isn't." The Fed has said they're going to tighten until inflation eases. Maybe they're wrong about that, but in the past they've been willing to crash the economy to hold down inflation. Will they this time? Who knows, but it generally pays to hedge a bit.

by lumost 4y ago

pfisherman 4y ago

> This is true if the market has it's normal up and down swings. However it's entirely plausible that we no longer live in such an environment. How is it plausible? I would say given the historical data, it is extremely unlikely. Not impossible, but near negligible probability. People saying, “it’s different this time,” right before a economic crash is a cliche for a reason. I suspect that you could use the frequency of utterances to predict impending recessions / asset class corrections with extremely high accuracy.

lumost 4y ago
If we’ve transitioned into a different socioeconomic system from capitalism, then it really could be different this time. It just means that certain assets are no longer traditional “assets” but should be viewed as an annuity etc. Housing can return 20% per year until the end of time if the Fed wishes it to.

mmmm2 4y ago

You're certainly not alone in thinking along these lines, but it is another case of "it's right until it isn't." The Fed has said they're going to tighten until inflation eases. Maybe they're wrong about that, but in the past they've been willing to crash the economy to hold down inflation. Will they this time? Who knows, but it generally pays to hedge a bit.