8 ms·

The thing is, you can simultaneously be completely correct about the market being insane, while also entirely wrong in expecting it to behave in a sane way. Cu

The thing is, you can simultaneously be completely correct about the market being insane, while also entirely wrong in expecting it to behave in a sane way. Cue the famous quote: “The market can remain irrational longer than you can remain solvent.” I have a vague theory that as the amount of wealth inequality increases in a system along with “money printing” (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general. In such a case, an increasing majority of the money circulating has no need to be grounded in anything close to the common basic needs and values that most normal people have to live with. Instead, most important to such wealth is to tap into the source of inflation to be on the winning side of that. This becomes a game of its own, where an investment’s connection to reality or fundamental value is mostly irrelevant compared to how it leverages or monopolizes the state-created and privately created instruments of “money printing” (sketchy lending, rehypothecation, etc.) and other such “games” that only the wealthy are allowed in on.

lazide 1y ago
Notably, very little of the US economy is plausibly basic needs (a roof over ones head, basic nutrition, actual basic medical care, etc.). The vast, vast majority is essentially luxury goods and services, but Americans have been conditioned to think what the rest of the world considers luxury is actually basics. If Americans actually cut back to actual basics (a fixer upper small house in a less desirable area), shared a older used car instead of buying several new ones (or a big truck!), made homecooked stews and beans and rice instead of eating out all the time or prepackaged food, stopped buying the latest fancy phones, took care of their health instead of gastric bypasses, dialysis, etc. Hell, even if the average American stopped taking expensive vacations! The world economy would likely collapse overnight, no joke. And it would likely be uglier than the Great Depression domestically.
- like_any_other 1y ago
  > a fixer upper small house in a less desirable area A lot of an area's desirability has to do with crime rate. Bulgaria has a homicide rate of 1.088, and the US 5.763. So what would be considered a very safe, friendly neighborhood in the US, would be average or worse in Bulgaria. In this sense, "luxury" is flipped - what Bulgarians would consider basic, would be "luxuriously safe" in the US.
  - lazide 1y ago
    What I’m referring to is random suburb and/or middle of Kansas type areas, which generally have middling to low crime rates in the US. They’re often not close to jobs or very interesting socially, however. Jobs and social opportunities are why Sofia is the big draw it is in Bulgaria, for instance. I do see Bulgaria in general as being 3.8/100k for murder? [https://en.m.wikipedia.org/wiki/Crime_in_Bulgaria https://en.m.wikipedia.org/wiki/Crime_in_Bulgaria]. Inner cities and specific (relatively uncommon!) rural areas (often in the Deep South) are what are dangerous in the US, and paradoxically even inner cities are often expensive to live in. Here is a map of homicide rate on a county by county basis [https://commons.m.wikimedia.org/wiki/File:Map_of_US_county_homicide_rates.png https://commons.m.wikimedia.org/wiki/File:Map_of_US_county_h...]. People often move to LCOL areas anyway to escape the crime and high costs of the cities when there are economic issues in the US.
    - aksnsman 1y ago
      [flagged]
      - lazide 1y ago
        Having in group/out group dynamics where the outgroup is systematically stomped on does cause problems eh? Or do you think the reason why the Deep South (and these inner city areas) is such a consistent problem has nothing to do with history?
    - pjc50 1y ago
      "Cost of living" correlates fairly well with the available jobs and incomes in a region. You generally can't move to a LCOL region while also having a high paying job. Which is why the possibility of full remote work was so exciting for so many people.
      - lazide 1y ago
        True, though COL tends to lag the actual jobs (both up and down) for various reasons. Which we definitely saw with remote work - both pros and cons.
- wpm 1y ago
  > Hell, even if the average American stopped taking expensive vacations! Lmfao what world do you live in where they haven't?
- arduanika 1y ago
  This is true. Bernays did more to end the Great Depression than Keynes, and to prevent its recurrence post-war. Sad truth.
marcosdumay 1y ago
> I have a vague theory that as the amount of wealth inequality in increases in a system along with excess money printing (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general. If you want to make it less vague, you can read Keynes. It's inequality that is the important one, money printing doesn't impact it (except for it impacting inequality). In simple language, people don't want to spend all their money on consumption (the "demand is infinite" you see on econ101 is an approximation), and so when only two dozen people have all the money there aren't many things you can sell and turn a profit. But those people still want to invest all the money they aren't using, there is just nothing to invest into. At the turn of the 19th to the 20th century, explaining this was a huge open problem in economics.
- Zigurd 1y ago
  A post-truth environment adds to the ickyness of the feeling: on top of the bubbles, we've got RFK Jr. deciding the fate of biotechnology companies. Having a tech bubble at the same time science is being vandalized at NIH and in universities looks pretty damn dark.
  - ethbr1 1y ago
    Not just RFK Jr. The rest of the government requiring a 15% kickback from Nvidia and AMD to approve GPU sales to China, and the CEO of Intel being told to resign. I feel like I'm going to be able to tell my adult kids "Yeah, when I was younger the Republicans were the party of free trade and government non-intervention in private industry..."
    - immibis 1y ago
      Conservatives have never been that party. They've always been the part of making the rich richer and the powerful more powerful by whatever means seem to work today. In the past free trade seemed to do that. Now arbitrary trade restrictions seem to do that. Or at least they feel so.
- electrograv 1y ago
camillomiller 1y ago
This is a very sad yet resoundingly plausible take. Scary.
throw0101a 1y ago
> Cue the famous quote: “The market can remain irrational longer than you can remain solvent.” It's not necessarily about things being (ir)rational, but about 'psychology' and the multi-player system that is The Market™. Because it's all very well and good to buy and sell individual products (securities) on their merits, but one also has to take into account what other people's ideas on them is as well (as you are buying/selling from them). This factor has been known about for almost a century: > A Keynesian beauty contest is a beauty contest in which judges are rewarded for selecting the most popular faces among all judges, rather than those they may personally find the most attractive. This idea is often applied in financial markets, whereby investors could profit more by buying whichever stocks they think other investors will buy, rather than the stocks that have fundamentally the best value, because when other people buy a stock, they bid up the price, allowing an earlier investor to cash out with a profit, regardless of whether the price increases are supported by its fundamentals and theoretical arguments. * https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest Of course other people know about this factor, so folks are judging others based on how they are judging others. (Personally I'm just going with index finds (VEQT/XEQT/VBAL up here in Canada).)
- bryanlarsen 1y ago
  Index funds won't necessarily save you. 7.5% of the S&P 500 is NVidia, 7% is Microsoft, etc. Almost 40% of the S&P 500 is in the top 10 stocks, and of the top 10, only #9 Berkshire Hathaway is not big into AI.
  - twic 1y ago
    Depends on the index. The usual ones are indeed market cap weighted, and so adopt the overvaluation of bubble stocks, but there are indexes which are weighted otherwise, in an attempt to avoid that. One example is the RAFI fundamental family of indexes: https://www.rafi.com/index-strategies/rafi-fundamental-indices https://www.rafi.com/index-strategies/rafi-fundamental-indic... They are pretty cagey about the exact formula, but they do say that > Security weights are determined by using fundamental measures of company size (adjusted sales, cash flow, dividends + buybacks, and book value) rather than price (market cap). The top ten holdings in their US index are (rank - company - weight): 1 Apple 4.1 2 Microsoft 3.4 3 Alphabet 3.3 4 Berkshire Hathaway 2.3 5 Amazon 2.2 6 Meta Platforms 2.2 7 JPMorgan Chase 2.1 8 Exxon Mobil 2.0 9 Bank Of America 1.4 10 Chevron 1.3 Whereas those of their benchmark, the Solactive GBS United States Large & Mid Cap Index, whatever that is, are: 1 Nvidia 7.1 2 Microsoft 7.0 3 Apple 5.7 4 Amazon 4.0 5 Alphabet 3.7 6 Meta Platforms 3.1 7 Broadcom 2.4 8 Tesla 1.7 9 JPMorgan Chase 1.5 10 Eli Lilly 1.3
throw0101a 1y ago
> I have a vague theory that as the amount of wealth inequality in increases in a system along with excess money printing (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general. Except that the Gilded Age, which had some of the highest levels of wealth concentration and inequality, was during the period of the Gold Standard where money could not be 'printed excessively'. And this was true not just in the US but most of the major countries in the world. Further, while wealth inequality has risen in the US under the non-gold fiat system (to levels similar to the Gilded Age), other countries do not have as much wealth inequality even though they are also non-gold fiat.
- salawat 1y ago
  That can easily be explained away in that the wealth concentration was a symptom of vertically integrated hard network based implementations (railroads, logistics, shipping, extraction), and the Gold Standard may have braked some level of wealth inequality acceleration and centralization to a degree, but that the trusts and business structuring were the cause moreso than any inherent tendency toward gold as basis to full fiat. That explains why we're seeing what we're seeing now. It's all about network monetization.
- immibis 1y ago
  You are right - it's about the inequality of holding the money, not the rate at which it's printed. Money printing is relevant to the extent it mostly flows towards the already rich. If money was printed and distributed to everyone evenly it would have the opposite effect.
gscott 1y ago
If the very most you need to live on is 10 million. You can gamble the rest. Buy apartments, jack up the rents like crazy worst thing to happen to you is that people may move out. Buy stocks on margin, win some loose some. The real economy your play toy.
- harmmonica 1y ago
  Not sure why you're being downvoted. Word "gamble" too inciting? Maybe if you'd used "much more risky investments" instead, but I'm not here to quibble about your language but to agree with you and extend what you're saying. I actually think the $10 million number is also relative to age because someone who's 30 and "merely" a millionaire can and will invest up the risk ladder as if they're a 50-year-old risking their above-$10 million capital. And the population of people who are millionaires vs decamillionaires is of course a healthy multiple so there's a lot more risk appetite than the relatively small number of decamillionaires would suggest. As an aside I feel like there's this terrible trend where folks focus so much effort and energy worrying about whether billionaires should exist, whether they should be taxed more aggressively, etc. that we've lost the plot on just how much loot even a net worth of $10+ million is. And at the risk of me writing a too-long comment (bad habit), think of the risk appetite someone has when their decamillionaire parents pass away, and they're given, sometimes overnight, millions of extra dollars. Sure, maybe they'll buy a house, but oftentimes those funds go straight into the market. With boomers starting to leave this mortal coil and their trillions of dollars being passed down you can start to understand why the market seems disconnected from historical fundamentals.
827a 1y ago
Yeah its important to decompose those two sources (among others) of "money printing". The obvious one people think most about is when our federal government does it. But a more concerning one is: Enforced banking reserve ratios. If a bank holds a trillion dollars in assets and is allowed to hold a reserve ratio of 10%, they can print $10T out of thin air, because they're allowed to issue debt up to that amount. As far as I'm aware, in 2020 the reserve requirement in the US was set to 0%, and it has not been changed since then.
- toast0 1y ago
  Doesn't our federal government set reserve ratios? They may not be creating money, but by setting the ratio (and other limits), they at least have a strong influence on creation.
- electrograv 1y ago
  Yes, but with the “revolving door” between private financial institutions and government financial policy/regulation, there’s little real distinction anymore between the two. Those private banks can print that money out of thin air because government allows them to. And the government officials (many formerly financial executives) allow them to because they “have to” to prevent “disastrous” private banking/financial collapse. But if you or I wanted to play the same games to print our own money they way they do? No, that would be wrong and dangerous and illegal! So it’s pretty clear that both government and private financial institutions are tightly coupled partners in a mostly corrupt, intentionally obfuscated shell game that primarily serves to keep money and power steadily flowing into the hands of the already wealthy and powerful. Just look at who is actually held accountable for financial crimes. Some individual trader that finds and exploits some glitch that allows them to profit from the wealthy? Straight to jail. High ranking institutional powers (government and private) that implement often illegal schemes that continuously siphon wealth from common people into their hands? Slap on the wrist at most.
- anzumitsu 1y ago
  This is a misconception afaik, yes there is no longer a literal percent reserve requirement but banks are still required to be “adequately capitalized”, the metric is just more complicated now.
BetaDeltaAlpha 1y ago
>I have a vague theory that as the amount of wealth inequality increases in a system along with “money printing”... This is well understood by some schools of economics. It's called The Cantillion Effect. https://mises.org/mises-wire/cantillon-effects-why-inflation-helps-some-and-hurts-others https://mises.org/mises-wire/cantillon-effects-why-inflation...

lazide 1y ago

Notably, very little of the US economy is plausibly basic needs (a roof over ones head, basic nutrition, actual basic medical care, etc.). The vast, vast majority is essentially luxury goods and services, but Americans have been conditioned to think what the rest of the world considers luxury is actually basics. If Americans actually cut back to actual basics (a fixer upper small house in a less desirable area), shared a older used car instead of buying several new ones (or a big truck!), made homecooked stews and beans and rice instead of eating out all the time or prepackaged food, stopped buying the latest fancy phones, took care of their health instead of gastric bypasses, dialysis, etc. Hell, even if the average American stopped taking expensive vacations! The world economy would likely collapse overnight, no joke. And it would likely be uglier than the Great Depression domestically.

like_any_other 1y ago
> a fixer upper small house in a less desirable area A lot of an area's desirability has to do with crime rate. Bulgaria has a homicide rate of 1.088, and the US 5.763. So what would be considered a very safe, friendly neighborhood in the US, would be average or worse in Bulgaria. In this sense, "luxury" is flipped - what Bulgarians would consider basic, would be "luxuriously safe" in the US.
- lazide 1y ago
  What I’m referring to is random suburb and/or middle of Kansas type areas, which generally have middling to low crime rates in the US. They’re often not close to jobs or very interesting socially, however. Jobs and social opportunities are why Sofia is the big draw it is in Bulgaria, for instance. I do see Bulgaria in general as being 3.8/100k for murder? [https://en.m.wikipedia.org/wiki/Crime_in_Bulgaria https://en.m.wikipedia.org/wiki/Crime_in_Bulgaria]. Inner cities and specific (relatively uncommon!) rural areas (often in the Deep South) are what are dangerous in the US, and paradoxically even inner cities are often expensive to live in. Here is a map of homicide rate on a county by county basis [https://commons.m.wikimedia.org/wiki/File:Map_of_US_county_homicide_rates.png https://commons.m.wikimedia.org/wiki/File:Map_of_US_county_h...]. People often move to LCOL areas anyway to escape the crime and high costs of the cities when there are economic issues in the US.
  - aksnsman 1y ago
    [flagged]
    - lazide 1y ago
      Having in group/out group dynamics where the outgroup is systematically stomped on does cause problems eh? Or do you think the reason why the Deep South (and these inner city areas) is such a consistent problem has nothing to do with history?
  - pjc50 1y ago
    "Cost of living" correlates fairly well with the available jobs and incomes in a region. You generally can't move to a LCOL region while also having a high paying job. Which is why the possibility of full remote work was so exciting for so many people.
    - lazide 1y ago
      True, though COL tends to lag the actual jobs (both up and down) for various reasons. Which we definitely saw with remote work - both pros and cons.
wpm 1y ago
> Hell, even if the average American stopped taking expensive vacations! Lmfao what world do you live in where they haven't?
arduanika 1y ago
This is true. Bernays did more to end the Great Depression than Keynes, and to prevent its recurrence post-war. Sad truth.

marcosdumay 1y ago

> I have a vague theory that as the amount of wealth inequality in increases in a system along with excess money printing (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general. If you want to make it less vague, you can read Keynes. It's inequality that is the important one, money printing doesn't impact it (except for it impacting inequality). In simple language, people don't want to spend all their money on consumption (the "demand is infinite" you see on econ101 is an approximation), and so when only two dozen people have all the money there aren't many things you can sell and turn a profit. But those people still want to invest all the money they aren't using, there is just nothing to invest into. At the turn of the 19th to the 20th century, explaining this was a huge open problem in economics.

Zigurd 1y ago
A post-truth environment adds to the ickyness of the feeling: on top of the bubbles, we've got RFK Jr. deciding the fate of biotechnology companies. Having a tech bubble at the same time science is being vandalized at NIH and in universities looks pretty damn dark.
- ethbr1 1y ago
  Not just RFK Jr. The rest of the government requiring a 15% kickback from Nvidia and AMD to approve GPU sales to China, and the CEO of Intel being told to resign. I feel like I'm going to be able to tell my adult kids "Yeah, when I was younger the Republicans were the party of free trade and government non-intervention in private industry..."
  - immibis 1y ago
    Conservatives have never been that party. They've always been the part of making the rich richer and the powerful more powerful by whatever means seem to work today. In the past free trade seemed to do that. Now arbitrary trade restrictions seem to do that. Or at least they feel so.
electrograv 1y ago

camillomiller 1y ago

This is a very sad yet resoundingly plausible take. Scary.

throw0101a 1y ago

> Cue the famous quote: “The market can remain irrational longer than you can remain solvent.” It's not necessarily about things being (ir)rational, but about 'psychology' and the multi-player system that is The Market™. Because it's all very well and good to buy and sell individual products (securities) on their merits, but one also has to take into account what other people's ideas on them is as well (as you are buying/selling from them). This factor has been known about for almost a century: > A Keynesian beauty contest is a beauty contest in which judges are rewarded for selecting the most popular faces among all judges, rather than those they may personally find the most attractive. This idea is often applied in financial markets, whereby investors could profit more by buying whichever stocks they think other investors will buy, rather than the stocks that have fundamentally the best value, because when other people buy a stock, they bid up the price, allowing an earlier investor to cash out with a profit, regardless of whether the price increases are supported by its fundamentals and theoretical arguments. * https://en.wikipedia.org/wiki/Keynesian_beauty_contest https://en.wikipedia.org/wiki/Keynesian_beauty_contest Of course other people know about this factor, so folks are judging others based on how they are judging others. (Personally I'm just going with index finds (VEQT/XEQT/VBAL up here in Canada).)

bryanlarsen 1y ago
Index funds won't necessarily save you. 7.5% of the S&P 500 is NVidia, 7% is Microsoft, etc. Almost 40% of the S&P 500 is in the top 10 stocks, and of the top 10, only #9 Berkshire Hathaway is not big into AI.
- twic 1y ago
  Depends on the index. The usual ones are indeed market cap weighted, and so adopt the overvaluation of bubble stocks, but there are indexes which are weighted otherwise, in an attempt to avoid that. One example is the RAFI fundamental family of indexes: https://www.rafi.com/index-strategies/rafi-fundamental-indices https://www.rafi.com/index-strategies/rafi-fundamental-indic... They are pretty cagey about the exact formula, but they do say that > Security weights are determined by using fundamental measures of company size (adjusted sales, cash flow, dividends + buybacks, and book value) rather than price (market cap). The top ten holdings in their US index are (rank - company - weight): 1 Apple 4.1 2 Microsoft 3.4 3 Alphabet 3.3 4 Berkshire Hathaway 2.3 5 Amazon 2.2 6 Meta Platforms 2.2 7 JPMorgan Chase 2.1 8 Exxon Mobil 2.0 9 Bank Of America 1.4 10 Chevron 1.3 Whereas those of their benchmark, the Solactive GBS United States Large & Mid Cap Index, whatever that is, are: 1 Nvidia 7.1 2 Microsoft 7.0 3 Apple 5.7 4 Amazon 4.0 5 Alphabet 3.7 6 Meta Platforms 3.1 7 Broadcom 2.4 8 Tesla 1.7 9 JPMorgan Chase 1.5 10 Eli Lilly 1.3

throw0101a 1y ago

> I have a vague theory that as the amount of wealth inequality in increases in a system along with excess money printing (lending, hypothecation, etc where the wealthy are permitted privileged leverage and risk), the more detached markets become from reality in general. Except that the Gilded Age, which had some of the highest levels of wealth concentration and inequality, was during the period of the Gold Standard where money could not be 'printed excessively'. And this was true not just in the US but most of the major countries in the world. Further, while wealth inequality has risen in the US under the non-gold fiat system (to levels similar to the Gilded Age), other countries do not have as much wealth inequality even though they are also non-gold fiat.

salawat 1y ago
That can easily be explained away in that the wealth concentration was a symptom of vertically integrated hard network based implementations (railroads, logistics, shipping, extraction), and the Gold Standard may have braked some level of wealth inequality acceleration and centralization to a degree, but that the trusts and business structuring were the cause moreso than any inherent tendency toward gold as basis to full fiat. That explains why we're seeing what we're seeing now. It's all about network monetization.
immibis 1y ago
You are right - it's about the inequality of holding the money, not the rate at which it's printed. Money printing is relevant to the extent it mostly flows towards the already rich. If money was printed and distributed to everyone evenly it would have the opposite effect.

gscott 1y ago

If the very most you need to live on is 10 million. You can gamble the rest. Buy apartments, jack up the rents like crazy worst thing to happen to you is that people may move out. Buy stocks on margin, win some loose some. The real economy your play toy.

harmmonica 1y ago
Not sure why you're being downvoted. Word "gamble" too inciting? Maybe if you'd used "much more risky investments" instead, but I'm not here to quibble about your language but to agree with you and extend what you're saying. I actually think the $10 million number is also relative to age because someone who's 30 and "merely" a millionaire can and will invest up the risk ladder as if they're a 50-year-old risking their above-$10 million capital. And the population of people who are millionaires vs decamillionaires is of course a healthy multiple so there's a lot more risk appetite than the relatively small number of decamillionaires would suggest. As an aside I feel like there's this terrible trend where folks focus so much effort and energy worrying about whether billionaires should exist, whether they should be taxed more aggressively, etc. that we've lost the plot on just how much loot even a net worth of $10+ million is. And at the risk of me writing a too-long comment (bad habit), think of the risk appetite someone has when their decamillionaire parents pass away, and they're given, sometimes overnight, millions of extra dollars. Sure, maybe they'll buy a house, but oftentimes those funds go straight into the market. With boomers starting to leave this mortal coil and their trillions of dollars being passed down you can start to understand why the market seems disconnected from historical fundamentals.

827a 1y ago

Yeah its important to decompose those two sources (among others) of "money printing". The obvious one people think most about is when our federal government does it. But a more concerning one is: Enforced banking reserve ratios. If a bank holds a trillion dollars in assets and is allowed to hold a reserve ratio of 10%, they can print $10T out of thin air, because they're allowed to issue debt up to that amount. As far as I'm aware, in 2020 the reserve requirement in the US was set to 0%, and it has not been changed since then.

toast0 1y ago
Doesn't our federal government set reserve ratios? They may not be creating money, but by setting the ratio (and other limits), they at least have a strong influence on creation.
electrograv 1y ago
Yes, but with the “revolving door” between private financial institutions and government financial policy/regulation, there’s little real distinction anymore between the two. Those private banks can print that money out of thin air because government allows them to. And the government officials (many formerly financial executives) allow them to because they “have to” to prevent “disastrous” private banking/financial collapse. But if you or I wanted to play the same games to print our own money they way they do? No, that would be wrong and dangerous and illegal! So it’s pretty clear that both government and private financial institutions are tightly coupled partners in a mostly corrupt, intentionally obfuscated shell game that primarily serves to keep money and power steadily flowing into the hands of the already wealthy and powerful. Just look at who is actually held accountable for financial crimes. Some individual trader that finds and exploits some glitch that allows them to profit from the wealthy? Straight to jail. High ranking institutional powers (government and private) that implement often illegal schemes that continuously siphon wealth from common people into their hands? Slap on the wrist at most.
anzumitsu 1y ago
This is a misconception afaik, yes there is no longer a literal percent reserve requirement but banks are still required to be “adequately capitalized”, the metric is just more complicated now.

BetaDeltaAlpha 1y ago

>I have a vague theory that as the amount of wealth inequality increases in a system along with “money printing”... This is well understood by some schools of economics. It's called The Cantillion Effect. https://mises.org/mises-wire/cantillon-effects-why-inflation-helps-some-and-hurts-others https://mises.org/mises-wire/cantillon-effects-why-inflation...