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> If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, suc

by KK7NIL 2y ago

> If the market sucks so much for 5+ years and your government can’t get it pumped back up, you probably have a bigger problem than your retirement savings, such as food and energy and security shortages. The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. > It would be bold to bet against a government not constantly decreasing the purchasing power of its currency to prop up asset prices, especially with declining proportions of young people. The political apparatus will want to maintain old people’s position at the top of the social hierarchy, and if their purchasing power isn’t maintained so they can keep buying the fruits of others’ labor, it means the country is dissolving. How does the government decreasing the purchasing power help old people? This is quite the opposite, retirees survive off of a fixed income (mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation.

lotsofpulp 2y ago
> The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. At its worst, 1999 to 2009, SP500 total annual return was only -0.2%, per dqdyj. Thats really good considering the upside (which has since been realized), and it shows that the government is willing to pull out all the stops if the market is down just -0.2%. > How does the government decreasing the purchasing power help old people? Old people are likelier to have assets and/or fixed income from assets (such as defined benefit pension funds). The government can also increase Social Security benefits quicker than wages in the market. The government also can maintain current benefits and reduce them for younger people by increasing the retirement age and adjusting the “bend points” in the benefit formula. Of course, the poorest old people won’t benefit as much, but there’s a solid contingent of old people who do have at least real estate in their home, if not investments in the broader market that are very politically active. > mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation. They shouldn’t be in fixed income for expenses needed beyond 10 years. I’d even be so bullish as to say 5 years. The demographic changes of the population pyramid flattening and turning down just started hitting economies in the 2000s. I don’t see any other way out for governments, so your goal is to tread water, you at least want to be invested in whatever the politicians are going to backstop (which is evidently not USD or fixed income, but rather equities).
- KK7NIL 2y ago
  Your average retiree should not hold stocks as they usually can't survive a 10+ year drawdown (which, as I just showed you, happens a lot more than people think, even in the survivor biased S&P500 example). This is why target retirement funds transition to safer fixed income assets as the target date approaches. You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. TL;DR: Inflation doesn't magically make asset holders richer and retirees would be some of the worst affected people anyways. You're wrong on both fronts and your whole idea that the stock market is politically propped up by old people doesn't pass the sniff test.
  - lotsofpulp 2y ago
    >You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. Because the rate of increase of asset prices is quicker than that of other prices, namely labor. Hence the griping by young people about wages not keeping up with costs over the past many decades. Again, it’s not all old people, but a significant proportion are going to be pissed if their 401k show declines or even stagnation at this point. You can even include soon to be old people here, the 50+ year olds that are invested.
    - KK7NIL 2y ago
      > Because the rate of increase of asset prices is quicker than that of other prices, namely labor. This totally depends on the asset and is nowhere near as straightforward as you make it seem. For example, companies who mainly sell to consumers and require constant capex will generally be negatively impacted by inflation. Your idea that the government will hold up the stock market just doesn't up to historical data. 2020 was the big exception (and the most recent in memory, hence why you and others are so focused on it) but the inflation that caused has lead to economic hardship across the board. I agree with you that there's a political force trying to prop up the US stock market, but I'm not sure it's as simple as "old people and their 401k's!"
eru 2y ago
> The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. Be careful not to mix up the S&P500 index numbers with the total return you get from holding the portfolio and re-invest dividends. (However, even with the total return you can find some longer stretches that are flat or negative.)

by KK7NIL 2y ago

lotsofpulp 2y ago

> The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. At its worst, 1999 to 2009, SP500 total annual return was only -0.2%, per dqdyj. Thats really good considering the upside (which has since been realized), and it shows that the government is willing to pull out all the stops if the market is down just -0.2%. > How does the government decreasing the purchasing power help old people? Old people are likelier to have assets and/or fixed income from assets (such as defined benefit pension funds). The government can also increase Social Security benefits quicker than wages in the market. The government also can maintain current benefits and reduce them for younger people by increasing the retirement age and adjusting the “bend points” in the benefit formula. Of course, the poorest old people won’t benefit as much, but there’s a solid contingent of old people who do have at least real estate in their home, if not investments in the broader market that are very politically active. > mainly from welfare and pensions but also fixed income investments since they shouldn't risk the stock market) and are the most hurt by inflation. They shouldn’t be in fixed income for expenses needed beyond 10 years. I’d even be so bullish as to say 5 years. The demographic changes of the population pyramid flattening and turning down just started hitting economies in the 2000s. I don’t see any other way out for governments, so your goal is to tread water, you at least want to be invested in whatever the politicians are going to backstop (which is evidently not USD or fixed income, but rather equities).

KK7NIL 2y ago
Your average retiree should not hold stocks as they usually can't survive a 10+ year drawdown (which, as I just showed you, happens a lot more than people think, even in the survivor biased S&P500 example). This is why target retirement funds transition to safer fixed income assets as the target date approaches. You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. TL;DR: Inflation doesn't magically make asset holders richer and retirees would be some of the worst affected people anyways. You're wrong on both fronts and your whole idea that the stock market is politically propped up by old people doesn't pass the sniff test.
- lotsofpulp 2y ago
  >You're also forgetting that inflation doesn't just affect assets, it also affects living necessities (and that's how it's defined in fact), so it's unclear how this is a net gain for asset holders. Because the rate of increase of asset prices is quicker than that of other prices, namely labor. Hence the griping by young people about wages not keeping up with costs over the past many decades. Again, it’s not all old people, but a significant proportion are going to be pissed if their 401k show declines or even stagnation at this point. You can even include soon to be old people here, the 50+ year olds that are invested.
  - KK7NIL 2y ago
    > Because the rate of increase of asset prices is quicker than that of other prices, namely labor. This totally depends on the asset and is nowhere near as straightforward as you make it seem. For example, companies who mainly sell to consumers and require constant capex will generally be negatively impacted by inflation. Your idea that the government will hold up the stock market just doesn't up to historical data. 2020 was the big exception (and the most recent in memory, hence why you and others are so focused on it) but the inflation that caused has lead to economic hardship across the board. I agree with you that there's a political force trying to prop up the US stock market, but I'm not sure it's as simple as "old people and their 401k's!"

eru 2y ago

> The S&P500 was flat or negative from 2000 to 2012. And this isn't unusual. Be careful not to mix up the S&P500 index numbers with the total return you get from holding the portfolio and re-invest dividends. (However, even with the total return you can find some longer stretches that are flat or negative.)