5 ms·

Most investments are bad. Here's why

41 points by namanyayg 3y ago

NickM 3y ago
The headline thesis seems reasonable, but they lost me as soon as they started comparing USD to gold. Gold is just such a weird special-case thing in economics that it seems very hard to draw interesting conclusions about anything else when you're opening up the discussion with using gold as a benchmark.
- chasil 3y ago
  There is nowhere near enough gold for it to be considered a workable currency. Silver is/was more practical. The U.S. was on a silver standard until the Nixon administration. https://en.wikipedia.org/wiki/Silver_standard https://en.wikipedia.org/wiki/Silver_standard
  - christkv 3y ago
    Silver has such an interesting history as a unit of exchange. I remember reading that China started demanding payment in silver around the 1500 for goods leading to the boom in Spanish silver mining in the Americas to pay for imports. The lack of silver also lead the British to start the opium trades to get around the Chinese state.
  - dmichulke 3y ago
    How much gold would we need, in $ terms?
    - chasil 3y ago
      For a currency that we will all carry and use, more than this: "All of the gold discovered thus far would fit in a cube that is 23 meters wide on every side." https://www.usgs.gov/faqs/how-much-gold-has-been-found-world https://www.usgs.gov/faqs/how-much-gold-has-been-found-world
      - 7thaccount 3y ago
        Is that still true in modern times with more people, but also better technologies? They make gold notes now that are 1/1000th an oz. Two of those would get you lunch. Also...if it was the main source of currency, wouldn't the value go up to where you would need very little (example - $15,000 an oz)? I'd even guess you could keep it in a form of bank and then have a debit card you could use where most items were tiny tiny fractions of an oz. Is it still too little gold at that point? I'm not suggesting a gold standard btw...just curious. I'd also point out that it might be crazy, but our current system seems incredibly risky and many nations have had their currency collapse through over supply. I don't think a perfect solution exists here.
  - UncleEntity 3y ago
    You do realize that people aren't required to carry around actual gold? I just counted and there are exactly 6 $1 bills in my wallet that have been in there for I don't even know how long. That being said, the main problem with silver/gold was the government pegging their value to each other causing 'issues'.
    - chasil 3y ago
      To carry paper certificates that are redeemable in the base metal, that metal must exist to be redeemed.
      - UncleEntity 3y ago
        I'm not arguing for or against a specie based currency just saying technology is available to overcome the issue of 'not enough gold'.
- pphysch 3y ago
  The author only talks about gold for a few paragraphs and quickly moves on.
  - user90131313 3y ago
    even that is too much for a rock that returns very low for a decade. return of below inflation is only a rock would make it possible
  - fullshark 3y ago
    The concluding paragraph is a recomendation for hard money as a % of your porfolio, making the case for gold is the raison d'etre for the entire post.
  - slingnow 3y ago
    The author starts with 8 paragraphs on gold, and the word gold is mentioned 33 times throughout the article, spread about evenly throughout. By no means did the author "move on" from talking about gold, let alone "quickly".
- xnx 3y ago
  Gold has the invaluable economic quality of indicating when someone is a quack or not. https://en.wikipedia.org/wiki/Gold_bug https://en.wikipedia.org/wiki/Gold_bug
  - username332211 3y ago
    How's that invaluable? Even if someone's a quack or a little crazy, he may still be mostly right. Don't get me wrong, there were days when the paranoid fever dreams of borderline schizophrenics clearly belonged to the realms of unreality. But those days are gone. I miss them, but pretending they are still with us won't help. Take the pizza-parlor related conspiracy theories from a few years back. Thanks to the revelations concerning the late great J. Epstein, we know they were for the most part wrong. Except, for the part where a significant portion of the ruling class regularly engages in sex with underage girls. The quacks were wrong about everything except the most essential part of the story. I can give you other examples, if you wish, but few are as prominent and as unarguable as this one.
  - pphysch 3y ago
    Gold can be a crazy irrational form of money, but how is that different from USD or other (crypto)currencies? Everything is on the table in this moment of geopolitical uncertainty.
- throw0101d 3y ago
  > Gold is just such a weird special-case thing in economics that it seems very hard to draw interesting conclusions about anything else when you're opening up the discussion with using gold as a benchmark. Especially since the gold standard did nothing to help in stabilizing currencies: * https://archive.ph/FWKcL https://archive.ph/FWKcL / https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... Is not an hedge against inflation: * https://www.nber.org/papers/w18706 https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 even over the long-term, per Roy Jastram's The Golden Constant: The English and American Experience 1560 to 1976: > Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the value of gold essentially derives from its capacity to preserve real capital and purchasing power.”† I select this particular quotation because of the prestige of the organization and the position of the spokesman, but statements in this vein can be found in great numbers. They can be traced back for generations and in many countries. How can this proposition so contrary to statistical fact become so widely believed and quoted? Possibly because gold has preserved capital in cataclysmic cases it is easy to infer that it can be trusted to do the same in less severe circumstances. To extrapolate from gold’s protection in singular catastrophes to its use as a strategy against cyclical infation is an example of faulty inductive reasoning. * PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram-TheGoldenConstant.pdf http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram... * Via: https://www.pwlcapital.com/will-gold-save-the-day/ https://www.pwlcapital.com/will-gold-save-the-day/ Having a fixed currency base can turn economic downturns much worse, as happen in the Great Depression: * http://www.nber.org/chapters/c11482 http://www.nber.org/chapters/c11482 With countries only starting to recover once they left it: * https://delong.typepad.com/delong_long_form/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/delong_long_form/2013/10/the-grea...
bryanlarsen 3y ago
If you bought 100 dot-coms in 1999 and 99 went to zero but the other was AMZN, you would have doubled your money.
- dxhdr 3y ago
  If you bought gold in 1999 and kept it until today you would have 8x'd your money.
  - throw0101d 3y ago
    1999, or any other year is arbitrary, and you probably can pick dates to make any investment strategy look good: * https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ In the following graph: * https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart https://www.macrotrends.net/2608/gold-price-vs-stock-market-... we have: * over 5 years, gold over DJIA * 10 years, DJIA over gold * 20 years, gold * 30 years, DJIA
    - dxhdr 3y ago
      > 1999, or any other year is arbitrary, and you probably can pick dates to make any investment strategy look good I agree, that was partly my point!
    - bryanlarsen 2y ago
      > you probably can pick dates to make any investment strategy look good But buying internet stocks in 1999 is the worst year. What happens if you buy gold in 1979?
      - deleted 2y ago
        [deleted]
- twic 3y ago
  IF you'd bought an S&P 500 tracker, you would have more than quadrupled your money.
karol 3y ago
Did not expect to find it here, this article is a miniature, but complete theory behind investing.
- FabHK 3y ago
  Insightful, but by no means complete (missing, among other things: matching of liabilities with assets; risk or diversification or the basics of modern portfolio theory; the notion of real vs nominal returns (only alluded to); etc.)
- throw0101d 3y ago
  > Did not expect to find it here […] Why? The site gets posted often: * https://news.ycombinator.com/from?site=lynalden.com https://news.ycombinator.com/from?site=lynalden.com There is a sizeable population of pro-Bitcoin and pro-gold standard people on HN, and I'm sure Alden's writing is catnip to them.
  - rybosworld 3y ago
    Anecdotally, to me hackernews has seemed more anti-bitcoin than most other places on the internet
    - Cthulhu_ 2y ago
      Cynicism because "we" like to believe we understand technology and stocks better than the average person. But plenty of HN people both made and lost a lot of money in crypto.
    - npoc 2y ago
      Yes, to understand bitcoin well enough to confidently ride the volatility at this early stage in its growth, not only does it help to be technically minded, but you also need an understanding of what money really is and how fiat money really works. People with that combination are few and far between. But there's plenty of people on HN who confidently think they know.
  - karol 2y ago
gamepsys 3y ago
Is the era of low interest rates and increasing global financial interconnection truly over, or are we just seeing a small downturn in a larger trend?
- fullshark 2y ago
  Yeah the cats out of the bag, the on-shoring is for certain strategic needs only (e.g. computer chips and goods related to defense) but globalization is here to stay, the next big effort is to offshore knowledge work.
- rossdavidh 3y ago
  Well I'm no prophet, but the case would be: 1) globalization added downward pressure on prices, so deglobalization (or even just partial backing off) will remove that downward pressure 2) people really don't like inflation, even rich people, and expect the central banks to do something about it (raising rates)
- bluGill 3y ago
  What defines normal interest rates? Without defining that we cannot in turn defined high or low, much less ultra-high or ultra-low (or whatever name you want to give). That means we can't even have a discussion, yet I have yet to see anyone try to define what normal should be. Of course when defining normal you also have to define what variance is normal, and what to do when things get too far out of normal. (though everyone seems to agree we shouldn't go below zero)
fullshark 3y ago
Man she really wants me to put my savings into gold and bitcoin. I have no idea why gold and bitcoin will be worth more when I retire than a % of public corporations, which are machines that turn capital, labor, and money into more money. Basically money printing machines, with some of the world's greatest brain power working their hardest to figure out to make these machines robust and more and more efficient, instead of rocks and a % of a digital currency. Why should I do this? Why are these rocks and entries into a global digital ledger going to be worth more when I need this money in retirement?
- abraxas 3y ago
  What kind of strawman are you building? She did not mention bitcoin once in the article. And what she's saying is something that serious investment analysts have known for years. Most investments don't pan out, at best a passive investor can count on preserving their capital against inflation. Stocks in the USA overperformed but that is a clear survivorship bias as most other stock markets around the world failed to even preserve the capital for the stock owners.
  - fullshark 3y ago
    This isn't the first article of hers I've read, the advice for investment in hard money, or at least putting a significant % of your savings is essentially gold and btc based on previous articles of hers. I understand what she's saying, and I agree with that part of the article, but she's big on the "hard money" portfolio (lately? I think?). The advice to buy index funds is basically "you own a % of all of industry" which is these money printing machines I talk about, and i'm more confident people are going to need industry in 20-40 years than "hard money."
    - abraxas 3y ago
      I haven't followed her at all nor read any other articles. I agree with you that stocks should be owned and I own them. But I also don't shy away from gold, commodities or bonds. I believe that diversification is the best route to capital preservation that we have. I make an exception for bitcoin though which I consider utter idiocy.
throwaway22032 3y ago
It feels to me as if gold is cherry picked. Wouldn't the appropriate comparison be real estate (as a class) with precious metals or maybe even commodities (as a class)? Otherwise I can easily state that, parts of NY and SF and London etc may have appreciated differently relative to each other, but a London home has appreciated very well across most time periods.
lottin 3y ago
Apparently she still hasn't figured out that it's possible to invest in the entire market of stocks and bonds. Therefore it doesn't matter that most of them perform badly (by some arbitrary standard), as long as they perform well as a whole.
- rossdavidh 3y ago
  Hmmm...she mentioned broad investments numerous times, and talked also about how entire classes of investments worked (a few providing most of the benefits).
  - lottin 3y ago
    I was referring to her analysis of historical stock returns, where she spends 6 paragraphs out of 7 making the point that the majority of stocks historically have performed poorly (according to her analysis).
dspillett 3y ago
The trick is knowing that, getting in early enough, so you can get out before others realise and move out. Investment is all a game beyond a certain level, with the numbers just a means to keep score, there connection to money as we know it (the numbers we exchange for goods & services to survive day to day) being rather tentative.
- fullshark 3y ago
  Yes the trick is knowing that you aren't actually investing, but speculating and gambling. Your money is not actually moving the needle in any significant way like a true investment (e.g. giving start up capital to your brother's small business), you are just a speck of dust riding a global corporation's variable cash flow and you are trying to siphon out what you can when you need to.
- Cthulhu_ 2y ago
  The trick is knowing that you've missed the boat. Give up. If only you knew Amazon, Google, Apple, gold, bitcoin, etc would appreciate this much in value 30 years ago. "Get in early and get out before others realise" is not rational or a feasible strategy because it assumes knowledge that others don't have. This idea that you can know things before the "normies" do is behind the financial advice companies like Bloomberg, and behind the rapid fire boom and bust of the thousands of shitcoins. Everyone involved in those knows exactly what's going on, they're just in denial because they believe they know what's going on and can benefit from it.
heisgone 3y ago
The fact is, retail cannot compete risk-wise with institutions. Thanks to Quantitative Easing and low interest rates, money, by itself, has very little value. To make lending money "valuable", you have to leverage it at ratio that the average retail investor can't afford risk-wise. Only edge fund that can afford to risk it all can do that. More so, 2008 proven that the government was willing to bail out institutions, something not available to retail.
- mamonster 3y ago
  >The fact is, retail cannot compete risk-wise with institutions. You can, but you need to be taking risks that institutions can't/aren't allowed to take.
- rossdavidh 3y ago
  I think the downvotes come from people who don't like to believe this is true. But it is true, at least the part about retail investors being unable to compete. Sure there are occasional ones who win the lottery, but in general large institutions can afford to devote their attention full time to finding out what to invest in, get lower rates for leverage, and probably also use inside info more often than is discovered.
- lottin 3y ago
  As far as I know, the majority of hedge funds do not outperform the market in the long run, so I'm not sure where you get this conclusion from.
  - username332211 3y ago
    Most aren't trying to. The manager in an investment fund probably has all the money he needs to enjoy life. He doesn't care about the performance of his fund, so long as clients stay on board. And the funny thing is, that makes his fund far more driven by the whims of the public than retail investors. So many stories about funds staying away from the dot-com bubble end with "the fund had to close, because of clients pulling out their money". Half the reason Warren Buffett is hailed as genius is because his shareholders can't pull out their money easily.
croemer 3y ago
This article gets the economics quite wrong in an overconfident way. Money supply growth is not the relevant quantity here. Central banks set interest rates not money supply growth rate. And they look at inflation.
- rossdavidh 3y ago
  I don't think she asserts that central banks set the money supply growth rate, only that the money supply does, in fact, go up faster than for example the gold supply growth rate.
throw0101d 3y ago
A peer-review paper: > In this chapter, I have studied the returns to investments in durable assets since the start of the twentieth century. These assets are generally characterized by relatively low capital gains and substantial price fluctuations. The rate of value appreciation has been more pronounced for collectibles, but transaction costs are very high in such markets as well. It should also be pointed out, however, that a rental income yield can add substantially to the returns on housing and land, and likewise owners of collectibles may receive a significant emotional dividend. Because of the lack of such an income or utility stream, gold, silver, and diamonds appear to have been particularly bad long-term investments (at least if not held in the form of jewelry). Finally, durable assets are unlikely to be good inflation hedges, but they may still help diversifying a portfolio because of the imperfect correlations with financial assets. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746356 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746356
RecycledEle 2y ago
The author is an idiot. "If you had simply put $100 into gold, you would have turned $100 into $10,042. The number of dollars in the U.S. broad money supply increased by more than 400x from 1928 through 2023." The idiot ignores gold confiscation:https://www.usgoldbureau.com/gold-confiscation https://www.usgoldbureau.com/gold-confiscation She might as well argue that she should have put her money in crack cocaine.
- RecycledEle 2y ago
  To be clear, she says it would have been wise to buy gold in 1928, then commit a crime by not turning it in in 1933, and to have held it until today. I reject anyone who says "This illegal investment would have been better than ..." If she is going to compare historical investments, she at least needs to compare investments that were legal at that time.

41 points by namanyayg 3y ago

The headline thesis seems reasonable, but they lost me as soon as they started comparing USD to gold. Gold is just such a weird special-case thing in economics that it seems very hard to draw interesting conclusions about anything else when you're opening up the discussion with using gold as a benchmark.

chasil 3y ago
There is nowhere near enough gold for it to be considered a workable currency. Silver is/was more practical. The U.S. was on a silver standard until the Nixon administration. https://en.wikipedia.org/wiki/Silver_standard https://en.wikipedia.org/wiki/Silver_standard
- christkv 3y ago
  Silver has such an interesting history as a unit of exchange. I remember reading that China started demanding payment in silver around the 1500 for goods leading to the boom in Spanish silver mining in the Americas to pay for imports. The lack of silver also lead the British to start the opium trades to get around the Chinese state.
- dmichulke 3y ago
  How much gold would we need, in $ terms?
  - chasil 3y ago
    For a currency that we will all carry and use, more than this: "All of the gold discovered thus far would fit in a cube that is 23 meters wide on every side." https://www.usgs.gov/faqs/how-much-gold-has-been-found-world https://www.usgs.gov/faqs/how-much-gold-has-been-found-world
    - 7thaccount 3y ago
      Is that still true in modern times with more people, but also better technologies? They make gold notes now that are 1/1000th an oz. Two of those would get you lunch. Also...if it was the main source of currency, wouldn't the value go up to where you would need very little (example - $15,000 an oz)? I'd even guess you could keep it in a form of bank and then have a debit card you could use where most items were tiny tiny fractions of an oz. Is it still too little gold at that point? I'm not suggesting a gold standard btw...just curious. I'd also point out that it might be crazy, but our current system seems incredibly risky and many nations have had their currency collapse through over supply. I don't think a perfect solution exists here.
- UncleEntity 3y ago
  You do realize that people aren't required to carry around actual gold? I just counted and there are exactly 6 $1 bills in my wallet that have been in there for I don't even know how long. That being said, the main problem with silver/gold was the government pegging their value to each other causing 'issues'.
  - chasil 3y ago
    To carry paper certificates that are redeemable in the base metal, that metal must exist to be redeemed.
    - UncleEntity 3y ago
      I'm not arguing for or against a specie based currency just saying technology is available to overcome the issue of 'not enough gold'.
pphysch 3y ago
The author only talks about gold for a few paragraphs and quickly moves on.
- user90131313 3y ago
  even that is too much for a rock that returns very low for a decade. return of below inflation is only a rock would make it possible
- fullshark 3y ago
  The concluding paragraph is a recomendation for hard money as a % of your porfolio, making the case for gold is the raison d'etre for the entire post.
- slingnow 3y ago
  The author starts with 8 paragraphs on gold, and the word gold is mentioned 33 times throughout the article, spread about evenly throughout. By no means did the author "move on" from talking about gold, let alone "quickly".
xnx 3y ago
Gold has the invaluable economic quality of indicating when someone is a quack or not. https://en.wikipedia.org/wiki/Gold_bug https://en.wikipedia.org/wiki/Gold_bug
- username332211 3y ago
  How's that invaluable? Even if someone's a quack or a little crazy, he may still be mostly right. Don't get me wrong, there were days when the paranoid fever dreams of borderline schizophrenics clearly belonged to the realms of unreality. But those days are gone. I miss them, but pretending they are still with us won't help. Take the pizza-parlor related conspiracy theories from a few years back. Thanks to the revelations concerning the late great J. Epstein, we know they were for the most part wrong. Except, for the part where a significant portion of the ruling class regularly engages in sex with underage girls. The quacks were wrong about everything except the most essential part of the story. I can give you other examples, if you wish, but few are as prominent and as unarguable as this one.
- pphysch 3y ago
  Gold can be a crazy irrational form of money, but how is that different from USD or other (crypto)currencies? Everything is on the table in this moment of geopolitical uncertainty.
throw0101d 3y ago
> Gold is just such a weird special-case thing in economics that it seems very hard to draw interesting conclusions about anything else when you're opening up the discussion with using gold as a benchmark. Especially since the gold standard did nothing to help in stabilizing currencies: * https://archive.ph/FWKcL https://archive.ph/FWKcL / https://www.theatlantic.com/business/archive/2012/08/why-the-gold-standard-is-the-worlds-worst-economic-idea-in-2-charts/261552/ https://www.theatlantic.com/business/archive/2012/08/why-the... Is not an hedge against inflation: * https://www.nber.org/papers/w18706 https://www.nber.org/papers/w18706 * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3667789 even over the long-term, per Roy Jastram's The Golden Constant: The English and American Experience 1560 to 1976: > Andre Sharon, head of the international research department at Drexel Burnham, Inc., notes, “the value of gold essentially derives from its capacity to preserve real capital and purchasing power.”† I select this particular quotation because of the prestige of the organization and the position of the spokesman, but statements in this vein can be found in great numbers. They can be traced back for generations and in many countries. How can this proposition so contrary to statistical fact become so widely believed and quoted? Possibly because gold has preserved capital in cataclysmic cases it is easy to infer that it can be trusted to do the same in less severe circumstances. To extrapolate from gold’s protection in singular catastrophes to its use as a strategy against cyclical infation is an example of faulty inductive reasoning. * PDF: http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram-TheGoldenConstant.pdf http://csinvesting.org/wp-content/uploads/2016/02/RoyJastram... * Via: https://www.pwlcapital.com/will-gold-save-the-day/ https://www.pwlcapital.com/will-gold-save-the-day/ Having a fixed currency base can turn economic downturns much worse, as happen in the Great Depression: * http://www.nber.org/chapters/c11482 http://www.nber.org/chapters/c11482 With countries only starting to recover once they left it: * https://delong.typepad.com/delong_long_form/2013/10/the-great-depression-from-the-perspective-of-today-and-today-from-the-perspective-of-the-great-depression.html https://delong.typepad.com/delong_long_form/2013/10/the-grea...

bryanlarsen 3y ago

If you bought 100 dot-coms in 1999 and 99 went to zero but the other was AMZN, you would have doubled your money.

dxhdr 3y ago
If you bought gold in 1999 and kept it until today you would have 8x'd your money.
- throw0101d 3y ago
  1999, or any other year is arbitrary, and you probably can pick dates to make any investment strategy look good: * https://www.longtermtrends.net/stocks-vs-gold-comparison/ https://www.longtermtrends.net/stocks-vs-gold-comparison/ In the following graph: * https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart https://www.macrotrends.net/2608/gold-price-vs-stock-market-... we have: * over 5 years, gold over DJIA * 10 years, DJIA over gold * 20 years, gold * 30 years, DJIA
  - dxhdr 3y ago
    > 1999, or any other year is arbitrary, and you probably can pick dates to make any investment strategy look good I agree, that was partly my point!
  - bryanlarsen 2y ago
    > you probably can pick dates to make any investment strategy look good But buying internet stocks in 1999 is the worst year. What happens if you buy gold in 1979?
    - deleted 2y ago
      [deleted]
twic 3y ago
IF you'd bought an S&P 500 tracker, you would have more than quadrupled your money.

karol 3y ago

Did not expect to find it here, this article is a miniature, but complete theory behind investing.

FabHK 3y ago
Insightful, but by no means complete (missing, among other things: matching of liabilities with assets; risk or diversification or the basics of modern portfolio theory; the notion of real vs nominal returns (only alluded to); etc.)
throw0101d 3y ago
> Did not expect to find it here […] Why? The site gets posted often: * https://news.ycombinator.com/from?site=lynalden.com https://news.ycombinator.com/from?site=lynalden.com There is a sizeable population of pro-Bitcoin and pro-gold standard people on HN, and I'm sure Alden's writing is catnip to them.
- rybosworld 3y ago
  Anecdotally, to me hackernews has seemed more anti-bitcoin than most other places on the internet
  - Cthulhu_ 2y ago
    Cynicism because "we" like to believe we understand technology and stocks better than the average person. But plenty of HN people both made and lost a lot of money in crypto.
  - npoc 2y ago
    Yes, to understand bitcoin well enough to confidently ride the volatility at this early stage in its growth, not only does it help to be technically minded, but you also need an understanding of what money really is and how fiat money really works. People with that combination are few and far between. But there's plenty of people on HN who confidently think they know.
- karol 2y ago

gamepsys 3y ago

Is the era of low interest rates and increasing global financial interconnection truly over, or are we just seeing a small downturn in a larger trend?

fullshark 2y ago
Yeah the cats out of the bag, the on-shoring is for certain strategic needs only (e.g. computer chips and goods related to defense) but globalization is here to stay, the next big effort is to offshore knowledge work.
rossdavidh 3y ago
Well I'm no prophet, but the case would be: 1) globalization added downward pressure on prices, so deglobalization (or even just partial backing off) will remove that downward pressure 2) people really don't like inflation, even rich people, and expect the central banks to do something about it (raising rates)
bluGill 3y ago
What defines normal interest rates? Without defining that we cannot in turn defined high or low, much less ultra-high or ultra-low (or whatever name you want to give). That means we can't even have a discussion, yet I have yet to see anyone try to define what normal should be. Of course when defining normal you also have to define what variance is normal, and what to do when things get too far out of normal. (though everyone seems to agree we shouldn't go below zero)

fullshark 3y ago

Man she really wants me to put my savings into gold and bitcoin. I have no idea why gold and bitcoin will be worth more when I retire than a % of public corporations, which are machines that turn capital, labor, and money into more money. Basically money printing machines, with some of the world's greatest brain power working their hardest to figure out to make these machines robust and more and more efficient, instead of rocks and a % of a digital currency. Why should I do this? Why are these rocks and entries into a global digital ledger going to be worth more when I need this money in retirement?

abraxas 3y ago
What kind of strawman are you building? She did not mention bitcoin once in the article. And what she's saying is something that serious investment analysts have known for years. Most investments don't pan out, at best a passive investor can count on preserving their capital against inflation. Stocks in the USA overperformed but that is a clear survivorship bias as most other stock markets around the world failed to even preserve the capital for the stock owners.
- fullshark 3y ago
  This isn't the first article of hers I've read, the advice for investment in hard money, or at least putting a significant % of your savings is essentially gold and btc based on previous articles of hers. I understand what she's saying, and I agree with that part of the article, but she's big on the "hard money" portfolio (lately? I think?). The advice to buy index funds is basically "you own a % of all of industry" which is these money printing machines I talk about, and i'm more confident people are going to need industry in 20-40 years than "hard money."
  - abraxas 3y ago
    I haven't followed her at all nor read any other articles. I agree with you that stocks should be owned and I own them. But I also don't shy away from gold, commodities or bonds. I believe that diversification is the best route to capital preservation that we have. I make an exception for bitcoin though which I consider utter idiocy.

throwaway22032 3y ago

It feels to me as if gold is cherry picked. Wouldn't the appropriate comparison be real estate (as a class) with precious metals or maybe even commodities (as a class)? Otherwise I can easily state that, parts of NY and SF and London etc may have appreciated differently relative to each other, but a London home has appreciated very well across most time periods.

lottin 3y ago

Apparently she still hasn't figured out that it's possible to invest in the entire market of stocks and bonds. Therefore it doesn't matter that most of them perform badly (by some arbitrary standard), as long as they perform well as a whole.

rossdavidh 3y ago
Hmmm...she mentioned broad investments numerous times, and talked also about how entire classes of investments worked (a few providing most of the benefits).
- lottin 3y ago
  I was referring to her analysis of historical stock returns, where she spends 6 paragraphs out of 7 making the point that the majority of stocks historically have performed poorly (according to her analysis).

dspillett 3y ago

The trick is knowing that, getting in early enough, so you can get out before others realise and move out. Investment is all a game beyond a certain level, with the numbers just a means to keep score, there connection to money as we know it (the numbers we exchange for goods & services to survive day to day) being rather tentative.

fullshark 3y ago
Yes the trick is knowing that you aren't actually investing, but speculating and gambling. Your money is not actually moving the needle in any significant way like a true investment (e.g. giving start up capital to your brother's small business), you are just a speck of dust riding a global corporation's variable cash flow and you are trying to siphon out what you can when you need to.
Cthulhu_ 2y ago
The trick is knowing that you've missed the boat. Give up. If only you knew Amazon, Google, Apple, gold, bitcoin, etc would appreciate this much in value 30 years ago. "Get in early and get out before others realise" is not rational or a feasible strategy because it assumes knowledge that others don't have. This idea that you can know things before the "normies" do is behind the financial advice companies like Bloomberg, and behind the rapid fire boom and bust of the thousands of shitcoins. Everyone involved in those knows exactly what's going on, they're just in denial because they believe they know what's going on and can benefit from it.

heisgone 3y ago

The fact is, retail cannot compete risk-wise with institutions. Thanks to Quantitative Easing and low interest rates, money, by itself, has very little value. To make lending money "valuable", you have to leverage it at ratio that the average retail investor can't afford risk-wise. Only edge fund that can afford to risk it all can do that. More so, 2008 proven that the government was willing to bail out institutions, something not available to retail.

mamonster 3y ago
>The fact is, retail cannot compete risk-wise with institutions. You can, but you need to be taking risks that institutions can't/aren't allowed to take.
rossdavidh 3y ago
I think the downvotes come from people who don't like to believe this is true. But it is true, at least the part about retail investors being unable to compete. Sure there are occasional ones who win the lottery, but in general large institutions can afford to devote their attention full time to finding out what to invest in, get lower rates for leverage, and probably also use inside info more often than is discovered.
lottin 3y ago
As far as I know, the majority of hedge funds do not outperform the market in the long run, so I'm not sure where you get this conclusion from.
- username332211 3y ago
  Most aren't trying to. The manager in an investment fund probably has all the money he needs to enjoy life. He doesn't care about the performance of his fund, so long as clients stay on board. And the funny thing is, that makes his fund far more driven by the whims of the public than retail investors. So many stories about funds staying away from the dot-com bubble end with "the fund had to close, because of clients pulling out their money". Half the reason Warren Buffett is hailed as genius is because his shareholders can't pull out their money easily.

croemer 3y ago

This article gets the economics quite wrong in an overconfident way. Money supply growth is not the relevant quantity here. Central banks set interest rates not money supply growth rate. And they look at inflation.

rossdavidh 3y ago
I don't think she asserts that central banks set the money supply growth rate, only that the money supply does, in fact, go up faster than for example the gold supply growth rate.

throw0101d 3y ago

A peer-review paper: > In this chapter, I have studied the returns to investments in durable assets since the start of the twentieth century. These assets are generally characterized by relatively low capital gains and substantial price fluctuations. The rate of value appreciation has been more pronounced for collectibles, but transaction costs are very high in such markets as well. It should also be pointed out, however, that a rental income yield can add substantially to the returns on housing and land, and likewise owners of collectibles may receive a significant emotional dividend. Because of the lack of such an income or utility stream, gold, silver, and diamonds appear to have been particularly bad long-term investments (at least if not held in the form of jewelry). Finally, durable assets are unlikely to be good inflation hedges, but they may still help diversifying a portfolio because of the imperfect correlations with financial assets. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746356 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2746356

RecycledEle 2y ago

The author is an idiot. "If you had simply put $100 into gold, you would have turned $100 into $10,042. The number of dollars in the U.S. broad money supply increased by more than 400x from 1928 through 2023." The idiot ignores gold confiscation:https://www.usgoldbureau.com/gold-confiscation https://www.usgoldbureau.com/gold-confiscation She might as well argue that she should have put her money in crack cocaine.

RecycledEle 2y ago
To be clear, she says it would have been wise to buy gold in 1928, then commit a crime by not turning it in in 1933, and to have held it until today. I reject anyone who says "This illegal investment would have been better than ..." If she is going to compare historical investments, she at least needs to compare investments that were legal at that time.