4 ms·

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

by 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!"
  - lotsofpulp 2y ago
    2020 was far from an exception. https://www.thoughtco.com/government-financial-bailout-history-4123193 https://www.thoughtco.com/government-financial-bailout-histo... Push comes to shove, the only question about whether or not a bailout will happen (since there is no technical hurdle to issuing more money, just changing numbers in a database) is are the parties receiving a bailout sufficiently influential. And I argue that people exposed to SP500, whether it be by holding it directly or facing the prospects of higher taxes because the government pension fund holding SP500 is not meeting its returns, are now sufficiently influential that it is a given that leaders won’t allow the broad market to be negative for more than a couple years. 2020 isn’t even the most recent one. Here’s a multi employer pension fund bailout from Mar 2021: https://www.nytimes.com/2021/03/07/business/dealbook/bailout-pensions-stimulus.html https://www.nytimes.com/2021/03/07/business/dealbook/bailout... As an aside, the irony of this specific bailout is the main beneficiary, Teamsters’ union, came out in support of Trump after Democrats saved them.
jancsika 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. Target retirement funds transition to a safer mix of bonds and stocks as the target date approaches. Even VTINX has a conservative mix of 30% stocks. I'd say if you cannot afford to hold any stocks you're probably not yet ready to retire.
- KK7NIL 2y ago
  > Even VTINX has a conservative mix of 30% stocks. Your average retiree does not live off of VTINX. > I'd say if you cannot afford to hold any stocks you're probably not yet ready to retire. There's so many variables here that it's really not worth discussing. I'll just say that investing in stocks for retirement is a pretty recent fascination that is far less common outside of the US and in poorer regions in the US. Plenty of American retirees (maybe even a majority) own little to no stocks and live on a fixed income, making them very vulnerable to inflation (which was the whole basis of OP's idea that old people are holding up the stock market).
  - jancsika 2y ago
    > There's so many variables here that it's really not worth discussing. Fair enough. I only want to clarify what you wrote: "the average retiree should not hold stocks." To be crystal clear: 1. don't go out and buy individual stocks on a lark (good advice) 2. get all worried because your 401k is a conservative mix of mutual funds (hopefully index funds, probably managed mutual funds) and bonds (bad advice) > Plenty of American retirees (maybe even a majority) own little to no stocks and live on a fixed income The logically necessary flip-side is all I'm addressing: plenty of American retirees hold stocks in a 401k. To them I reiterate: don't fuss around with your target retirement fund.

by KK7NIL 2y ago

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!"
- lotsofpulp 2y ago
  2020 was far from an exception. https://www.thoughtco.com/government-financial-bailout-history-4123193 https://www.thoughtco.com/government-financial-bailout-histo... Push comes to shove, the only question about whether or not a bailout will happen (since there is no technical hurdle to issuing more money, just changing numbers in a database) is are the parties receiving a bailout sufficiently influential. And I argue that people exposed to SP500, whether it be by holding it directly or facing the prospects of higher taxes because the government pension fund holding SP500 is not meeting its returns, are now sufficiently influential that it is a given that leaders won’t allow the broad market to be negative for more than a couple years. 2020 isn’t even the most recent one. Here’s a multi employer pension fund bailout from Mar 2021: https://www.nytimes.com/2021/03/07/business/dealbook/bailout-pensions-stimulus.html https://www.nytimes.com/2021/03/07/business/dealbook/bailout... As an aside, the irony of this specific bailout is the main beneficiary, Teamsters’ union, came out in support of Trump after Democrats saved them.

jancsika 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. Target retirement funds transition to a safer mix of bonds and stocks as the target date approaches. Even VTINX has a conservative mix of 30% stocks. I'd say if you cannot afford to hold any stocks you're probably not yet ready to retire.

KK7NIL 2y ago
> Even VTINX has a conservative mix of 30% stocks. Your average retiree does not live off of VTINX. > I'd say if you cannot afford to hold any stocks you're probably not yet ready to retire. There's so many variables here that it's really not worth discussing. I'll just say that investing in stocks for retirement is a pretty recent fascination that is far less common outside of the US and in poorer regions in the US. Plenty of American retirees (maybe even a majority) own little to no stocks and live on a fixed income, making them very vulnerable to inflation (which was the whole basis of OP's idea that old people are holding up the stock market).
- jancsika 2y ago
  > There's so many variables here that it's really not worth discussing. Fair enough. I only want to clarify what you wrote: "the average retiree should not hold stocks." To be crystal clear: 1. don't go out and buy individual stocks on a lark (good advice) 2. get all worried because your 401k is a conservative mix of mutual funds (hopefully index funds, probably managed mutual funds) and bonds (bad advice) > Plenty of American retirees (maybe even a majority) own little to no stocks and live on a fixed income The logically necessary flip-side is all I'm addressing: plenty of American retirees hold stocks in a 401k. To them I reiterate: don't fuss around with your target retirement fund.