Bull Market Hits a Milestone: 3,453 Days – Most Americans Aren’t at the Party(nytimes.com)
nytimes.com
Bull Market Hits a Milestone: 3,453 Days – Most Americans Aren’t at the Party
https://www.nytimes.com/2018/08/22/business/bull-market-stocks.html
128 comments
It's hard to argue there is not a lemming effect in the market. If the "spook level" reaches a certain threshold, then a mass of investors all bail out at once, and it snowballs. Professional investors are trying to time their sell point so that they bail early in the crash instead of late. (Warren Buffett has mostly ignored this strategy: he just waits for good deals to appear, such as low PE ratios, regardless of the general market trend.)
Professional investors do not time markets.
You are actually right, many do not.
See the site 'Bogleheads' for a gathering area for folks of this type. They make some strong arguments for their thinking.
See the site 'Bogleheads' for a gathering area for folks of this type. They make some strong arguments for their thinking.
I worked on two different small (sub 10 people) investment teams with over $10Bn each under management while at BlackRock. 50% of my time was dedicated to competitive research on other actively managed funds. I'm confident that the vast majority of assets are with funds that are mandated to stay fully invested. Only the smallest rando institutional investors wanted to time the market. There is no research that says timing is a valid strategy (yet!)
Sure they do! They just may or may not be any good at it.
No they don't. There are a few exceptions, but the vast majority of assets are managed but asset managers who have mandates to stay fully invested. Only niche hedgefunds time markets.
Sector rotation is a pretty popular strategy. The manager stays fully invested, but they move the investment to different sectors, trying to time which sectors will be hotter than others.
Just one example of a way to stay fully invested while also timing the market.
Just one example of a way to stay fully invested while also timing the market.
Sector rotation is not considered timing by professional investors.
An example: expensive products, like new cars and refrigerators, tend to slump more during general downturns. Thus, fund managers may shift out of car & fridge stocks into something with smaller consumer price tags, like soda stocks.
It depends. Many managed funds have huge turnover percentages, tons of active trading, etc. Those asset managers are definitely attempting to time the market. This is more than just hedgefunds.
A few thoughts: huge amounts of money are now invested in passive funds and indices. Passively invested money, especially in retirement funds, tend to be less likely to suddenly flow out (and cause additional stock selling and further pressure prices) based on relatively minor drops. However, if that behemoth does start to move it could, in theory, bring prices much lower than a bunch of disconnected folks reacting in a knee-jerk fashion to bad economic news.
Also, with low latency and algorithmic trading I suspect many large investors think that they can move out in time to avoid major losses. If so, they are sitting in while there is no correction and are not upsetting the bull market. Should things go badly they will likely try to move with lightning speed (getting out before most peers do). If enough money managers think this way they can create a pretty powerful shock when they try to outgun each other.
Thoughts from the armchair, I am not in the financial industry.
Also, with low latency and algorithmic trading I suspect many large investors think that they can move out in time to avoid major losses. If so, they are sitting in while there is no correction and are not upsetting the bull market. Should things go badly they will likely try to move with lightning speed (getting out before most peers do). If enough money managers think this way they can create a pretty powerful shock when they try to outgun each other.
Thoughts from the armchair, I am not in the financial industry.
I've wondered about that. Could index funds be good in most times, but create the mother of all crashes?
I haven't really read any good analysis on how the rise in index funds could affect the next crash. Does anyone know of any? (They may not have any negative effect)
I haven't really read any good analysis on how the rise in index funds could affect the next crash. Does anyone know of any? (They may not have any negative effect)
Sure everyone is worried, but are they worried enough to stop plowing their biweekly paychecks into index funds? Time in the market is better than timing the market, as they say!
At most, people I know have changed their asset allocation to include 5-10% more bonds. The stock market's index fund tailwind is still going strong.
At most, people I know have changed their asset allocation to include 5-10% more bonds. The stock market's index fund tailwind is still going strong.
Wow, 10% own 84% of all stocks. That's a bit sad.
Is it because 90% of Americans don't even have money left to invest after their cost of living? Otherwise, where are people investing, if not the stock market?
Is it because 90% of Americans don't even have money left to invest after their cost of living? Otherwise, where are people investing, if not the stock market?
Now many people have no money and are scraping by, and many(!) people are extremely bad with money, even fairly middle class people who cannot commit to saving anything and would rather the BMW, but...
> 10% own 84%
sounds more like simple power law. "A small wealthy % owns most of the X" is true for, well, almost everything. So when you ponder:
> Is it because 90% of Americans don't even have money left to invest after their cost of living?
The answer is "probably not." Because even if every american invested exactly 5% of their income in the stock market, or 50% of their income, you'd still expect to see ~10% own 84% of all stock. The 10% just have really high incomes/previous savings from incomes, etc.
In fact just ponder for a laugh, imagine if the 10% [richest people] only owned like... 15% of the stock market, or owned only like 15% of all real estate, etc. If that were true, you should be really worried about that thing as an investment!
Bitcoin might actually be the rare case where the top 10% don't actually own a huge share of a big valuable thing.
> Otherwise, where are people investing, if not the stock market?
The bottom 90% own most of the lotto tickets. The top 10% eschew these! The top 10% prefer index/hedge funds, which are basically lotto tickets with great odds and a totally lame ROI.
There is probably lots of value in convincing people to invest in the index fund lotto instead of the lotto lotto, but even if you did, about 10% would still own about 84% of all stock.
> 10% own 84%
sounds more like simple power law. "A small wealthy % owns most of the X" is true for, well, almost everything. So when you ponder:
> Is it because 90% of Americans don't even have money left to invest after their cost of living?
The answer is "probably not." Because even if every american invested exactly 5% of their income in the stock market, or 50% of their income, you'd still expect to see ~10% own 84% of all stock. The 10% just have really high incomes/previous savings from incomes, etc.
In fact just ponder for a laugh, imagine if the 10% [richest people] only owned like... 15% of the stock market, or owned only like 15% of all real estate, etc. If that were true, you should be really worried about that thing as an investment!
Bitcoin might actually be the rare case where the top 10% don't actually own a huge share of a big valuable thing.
> Otherwise, where are people investing, if not the stock market?
The bottom 90% own most of the lotto tickets. The top 10% eschew these! The top 10% prefer index/hedge funds, which are basically lotto tickets with great odds and a totally lame ROI.
There is probably lots of value in convincing people to invest in the index fund lotto instead of the lotto lotto, but even if you did, about 10% would still own about 84% of all stock.
Hum, plausible, but I'm not sure I fully see it.
How is the stock market an exponential investment?
If you look at the growth of the stock since the beginning, and of most company stock, isn't it much more a linear growth?
So where would this power distribution come from?
How is the stock market an exponential investment?
If you look at the growth of the stock since the beginning, and of most company stock, isn't it much more a linear growth?
So where would this power distribution come from?
Anything with some kind of returns that you can put back into it will exhibit compounding interest. True of real estate or stocks or even just bank deposits. Even if a stock price goes nowhere but pays a 5% dividend (I'm looking at you, RDSA)
It is trivially true in real estate (Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.) Why wouldn't it be true in a market where the returns have been higher than real estate?
It is trivially true in real estate (Pareto showed that approximately 80% of the land in Italy was owned by 20% of the population.) Why wouldn't it be true in a market where the returns have been higher than real estate?
> Anything with some kind of returns that you can put back into it will exhibit compounding interest
This is only true if you play the market though. Just holding on stock is not a compounding interest rate.
I might be wrong, but that's my impression.
If I buy 1000$ of stock this year and make 10% return. At the end of the year I have 1100$. Now the next year, I need to make 10% off of 1100$ to be compounded and end up with 1210$.
Now if I hold onto my same amount of stock. If I end up with 1210$ the second year, that's not due to compound interest, but simply to good performance in the stock which grew by 21% in two years. Effectively allowing it to grow at an annual return rate of 10%.
To be compounding, I would need to sell my shares after year one. Thus pocket 1100$. And buy 1100$ worth of shares which again would make 10%.
I mean, in effect it's the same. If the shares truly grow by 10% year over year. But the point I'm making is that your ownership in total number of shares does not grow. So if I had 100 shares at 1000$ out of a total of 10000 shares, I still have 100 shares but they are worth more at 1210$.
So as you see, over time, I don't grow at the expense of others in my total ownership. Thus I feel this does not explain how 10% can own 84% of all stocks.
It would be true, if people play the market in a way that, every year, they sell to buy cheaper stocks, thus growing their share count. And it turns out the companies whose share they held prior years all go bust. Then they'd progressively own more and more at an exponential rate.
This is only true if you play the market though. Just holding on stock is not a compounding interest rate.
I might be wrong, but that's my impression.
If I buy 1000$ of stock this year and make 10% return. At the end of the year I have 1100$. Now the next year, I need to make 10% off of 1100$ to be compounded and end up with 1210$.
Now if I hold onto my same amount of stock. If I end up with 1210$ the second year, that's not due to compound interest, but simply to good performance in the stock which grew by 21% in two years. Effectively allowing it to grow at an annual return rate of 10%.
To be compounding, I would need to sell my shares after year one. Thus pocket 1100$. And buy 1100$ worth of shares which again would make 10%.
I mean, in effect it's the same. If the shares truly grow by 10% year over year. But the point I'm making is that your ownership in total number of shares does not grow. So if I had 100 shares at 1000$ out of a total of 10000 shares, I still have 100 shares but they are worth more at 1210$.
So as you see, over time, I don't grow at the expense of others in my total ownership. Thus I feel this does not explain how 10% can own 84% of all stocks.
It would be true, if people play the market in a way that, every year, they sell to buy cheaper stocks, thus growing their share count. And it turns out the companies whose share they held prior years all go bust. Then they'd progressively own more and more at an exponential rate.
> Otherwise, where are people investing, if not the stock market?
Most people's primary investment is their home.
Most people's primary investment is their home.
I consider your primary home to be included in your cost of living, but maybe it's true. I guess most people can't afford to invest beyond a mortgage on their main residence.
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> Is it because 90% of Americans don't even have money left to invest after their cost of living?
In part, I think this is true. But "cost of living" is maybe a bit broad. Most of these 90% of Americans have a poor grasp of personal finance, and spend way more on unnecessary crap than they should (car loans, credit card debt, restaurants, alcohol, coffee, cell phone bills, cable tv, etc.). This isn't to say that there aren't systemic problems that increase wealth inequality (there are), but a big part of the problem is just good old fashioned consumerism.
In part, I think this is true. But "cost of living" is maybe a bit broad. Most of these 90% of Americans have a poor grasp of personal finance, and spend way more on unnecessary crap than they should (car loans, credit card debt, restaurants, alcohol, coffee, cell phone bills, cable tv, etc.). This isn't to say that there aren't systemic problems that increase wealth inequality (there are), but a big part of the problem is just good old fashioned consumerism.
So that's the latest excuse? Bad financial management?
Most American households don't have disposable income, and even the ones that do it is modest. This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic.
And why shouldn't middle America enjoy creature comforts? The upper classes certainly do and aren't exactly great at financial planner either with their lifestyle often meeting their income.
The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
Most American households don't have disposable income, and even the ones that do it is modest. This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic.
And why shouldn't middle America enjoy creature comforts? The upper classes certainly do and aren't exactly great at financial planner either with their lifestyle often meeting their income.
The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
I understand what I'm saying is easily conflated with what no-empathy libertarian/conservatives say. I'm a Pikkety-reading progressive who absolutely thinks the U.S. government has to consider a wealth tax, increase top marginal tax rates (and add brackets), etc. This does not mean people have 0 responsibility for their finances. Most people can and should do better.
> Most American households don't have disposable income
This is consistent with what I've said: much of their income could be spent much more efficiently. Transportation and food alone are two areas where a normal American could easily save $10k+/year without any real drop in quality of life.
> This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic.
1. Where'd $6k/year come from?
2. Even $6k/year invested at 7% annually nets $1.3M over a normal career.
> And why shouldn't middle America enjoy creature comforts?
Nobody's saying they shouldn't. Just they should be aware of their cost. At the end of the day, you trade your time for money. It's important to respect that money, and not frit it away on "creature comforts" that don't really bring you any joy.
> The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
Hear hear! I'm with you. Again: this isn't an either-or situation. When you buy expensive high-margin things, you're voluntarily donating your money to the 1%ers. Don't do that.
> Most American households don't have disposable income
This is consistent with what I've said: much of their income could be spent much more efficiently. Transportation and food alone are two areas where a normal American could easily save $10k+/year without any real drop in quality of life.
> This whole "pull your bootstraps up!" talk about what is essentially under $6K/year of disposable income is pretty unrealistic.
1. Where'd $6k/year come from?
2. Even $6k/year invested at 7% annually nets $1.3M over a normal career.
> And why shouldn't middle America enjoy creature comforts?
Nobody's saying they shouldn't. Just they should be aware of their cost. At the end of the day, you trade your time for money. It's important to respect that money, and not frit it away on "creature comforts" that don't really bring you any joy.
> The reality is that people at the top are taking a larger and larger piece of the pie since de-unionisation, and the middle class has almost vanished as a direct result.
Hear hear! I'm with you. Again: this isn't an either-or situation. When you buy expensive high-margin things, you're voluntarily donating your money to the 1%ers. Don't do that.
Yes but those 10% rich people didn't necessarily get there by avoiding unnecessary crap like coffee or cell phone bills. They most likely got there from legacy or pre-existing accumulated wealth.
Source?
From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings.
Those that inherited their massive wealth aren’t that common.
From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings.
Those that inherited their massive wealth aren’t that common.
> From what i gather, most millionaires (not super wealthy) had relatively common jobs or business and became wealthy through savings.
Source?
Source?
I happen to be reading "The Millionaire Next Door" [1], and this has some truth to it (statistical excerpts [2]). Most "working class" Millionaires own a small business and are very frugal, continuing to live below their means after obtaining their wealth. Frugality alone will not help you attain the quoted wealth level, but it is a component (along with a healthy income and/or equity/asset ownership).
With reference to "common jobs", that would be limited to high income professions, such as doctors and attorneys.
[1] https://smile.amazon.com/Millionaire-Next-Door-Surprising-Am...
[2] https://www.washingtonpost.com/wp-srv/style/longterm/books/c...
With reference to "common jobs", that would be limited to high income professions, such as doctors and attorneys.
[1] https://smile.amazon.com/Millionaire-Next-Door-Surprising-Am...
[2] https://www.washingtonpost.com/wp-srv/style/longterm/books/c...
There's also ways to inherit wealth that isn't directly just receiving cash. It can be inheriting your parents' house, car, antiques, or simply inheriting a life that didn't begin in the slums or ghettos.
So you can either spend money on useless junk that is advertised to you, or you can buy stocks in the companies that are producing the junk and the ads. What a choice!
Or buy bonds, or real estate, or start a business, or a nuclear bomb shelter, or build a house, or donate to charity, or whatever. These are hardly the only two options.
Ah, there it is, the condescension that brings down civilizations
You're right that most Americans have a poor grasp of finance and capitalism - they don't teach it in school. Maybe if more people learned what the game is then they'd play it.
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Huge citation needed, if for no other reason than this is consistently used to justify cutting welfare programs for people who actually can’t afford things like health insurance or food. “The poor can’t manage money” has been a popular method of keeping people poor for hundreds of years.
Does this account for state and local workers who have pension plans that are heavily invested in equity markets? I have a family member retired from law enforcement who doesn't own any stock but receives a six figure annual pension from CalPERS, and so has equity exposure indirectly through that portfolio.
If compound interest is a force to be reckoned with, shouldn’t we expect power law distributions for wealth?
10% owning 84% seems to be the expectation then. This reminds me of an Atlantic article lamenting the “9.9%” [1].
[1] https://www.theatlantic.com/magazine/archive/2018/06/the-bir...
10% owning 84% seems to be the expectation then. This reminds me of an Atlantic article lamenting the “9.9%” [1].
[1] https://www.theatlantic.com/magazine/archive/2018/06/the-bir...
Is it all that surprising given 40% of American's can't afford a surprise $400 bill? [0] Most people have very little savings period much less money to put in investment accounts.
[0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
[0] https://money.cnn.com/2018/05/22/pf/emergency-expenses-house...
> Is it because 90% of Americans don't even have money left to invest after their cost of living?
It's because it doesn't take all that much to live on when you retire, and to have more money requires working longer. Especially, most retirees get big efficiencies from using tax-advantaged accounts, so you have less invested, but you get more out of it. Those accounts have contribution limits, so they don't scale up for the big investors.
I work on goal-based financial planning, and one of the key things people want is to retire sooner, which means saving less. If your financial plan was perfect, you'd drop dead with exactly the amount you want to bequest to heirs / charities in your portfolio and not a penny more.
It's because it doesn't take all that much to live on when you retire, and to have more money requires working longer. Especially, most retirees get big efficiencies from using tax-advantaged accounts, so you have less invested, but you get more out of it. Those accounts have contribution limits, so they don't scale up for the big investors.
I work on goal-based financial planning, and one of the key things people want is to retire sooner, which means saving less. If your financial plan was perfect, you'd drop dead with exactly the amount you want to bequest to heirs / charities in your portfolio and not a penny more.
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Financial education is a must. So many people miss out on opportunities, splurge when they could build for the future, etc.
When I was a young programmer (nearly 30 years ago), a retirement-age colleague took me aside and told me that if I paid the maximum into my retirement plan (401k) and didn't use it as an ATM, when the time came to retire I would be very pleased with the result.
I'm not at that point yet, but I still have about a decade to go. If nothing extraordinary happens, my friend's advice will have been very good. The market has gone down, it has gone up, but always on an upward trajectory.
It's a crime that kids aren't taught this and other basic financial tenets from the very first grades.
When I was a young programmer (nearly 30 years ago), a retirement-age colleague took me aside and told me that if I paid the maximum into my retirement plan (401k) and didn't use it as an ATM, when the time came to retire I would be very pleased with the result.
I'm not at that point yet, but I still have about a decade to go. If nothing extraordinary happens, my friend's advice will have been very good. The market has gone down, it has gone up, but always on an upward trajectory.
It's a crime that kids aren't taught this and other basic financial tenets from the very first grades.
Inflation adjusted graph here seems to suggest that the stock market isn't really higher than since 2008:
https://inflationdata.com/Inflation/Inflation_Adjusted_Stock...
A substantial part of the difference he's pointing out just comes from using the NYA index instead of the S&P 500.
Between the 2007 peak and the end of 2017 when he published this, his NYSE index gained only 20% (https://goo.gl/bWuBvQ), while the S&P 500 index, which is what people actually use and invest in (http://etfdb.com/compare/market-cap/), is up more like 70% (https://goo.gl/pFZW9X).
Inflation may have had an impact on his specially chosen index but the index most people use to invest is certainly worth a lot more than it was in 2008.
Between the 2007 peak and the end of 2017 when he published this, his NYSE index gained only 20% (https://goo.gl/bWuBvQ), while the S&P 500 index, which is what people actually use and invest in (http://etfdb.com/compare/market-cap/), is up more like 70% (https://goo.gl/pFZW9X).
Inflation may have had an impact on his specially chosen index but the index most people use to invest is certainly worth a lot more than it was in 2008.
That's for the index, it doesn't count dividends. The majority of gains from holding a S&P500 fund over a long period are from dividends compounding.
Following the link: I find it odd that his google plus pic is of him wearing a tux, with what looks to be a pile of money on fire above him.
The very good longterm chart reminds me of the saying "The stock market is most boring if you invest over decades: It is just a log-linear curve with ignorable dips"
How could a startup begin to address wealth inequality?
Take a wealthy person, ask them what they would do if they had zero money and connections, and teach that as a skill.
No. Ask a person why they are "successful" and they will give you the answer they tell themselves. "I worked harder than others, I am smarter, I went to a good school, etc. etc." While they think that's true, it's mostly hogwash and most people can't tell you why they are or aren't successful.
The problem is that most of what it comes down to is luck. Luck in the sense of time and place. People born into a wealthy family or even with two loving parents are lucky and way more likely to be wealthy than those that were born without.
Warren Buffett came of age in the greatest period of prosperity in American history. Bill Gates came of age right at the time that PCs became possible. Bezos was first to market on a new and unproven platform. Zuckerberg got lucky because he was able to get started when broadband penetration in developing countries was finally starting to get some traction.
No man is an island and teaching success as a skill is just silly in my opinion.
The problem is that most of what it comes down to is luck. Luck in the sense of time and place. People born into a wealthy family or even with two loving parents are lucky and way more likely to be wealthy than those that were born without.
Warren Buffett came of age in the greatest period of prosperity in American history. Bill Gates came of age right at the time that PCs became possible. Bezos was first to market on a new and unproven platform. Zuckerberg got lucky because he was able to get started when broadband penetration in developing countries was finally starting to get some traction.
No man is an island and teaching success as a skill is just silly in my opinion.
That's very simplistic. Of course they were lucky, but the thing that differentiated these people your mentioned from everyone else with their original privilege was their ability to make the best of the opportunities awarded to them. “Luck Is What Happens When Preparation Meets Opportunity"
The whole point of his question was that you take those advantages away from those men and see what they would do. The key is their creativity and ability to find ways to make money.
Bill Gates was actually famously asked a version of this question. (What would you do if you were poor with no education and lived in a third world country.) He responded "Buy Chickens".
Bill Gates was actually famously asked a version of this question. (What would you do if you were poor with no education and lived in a third world country.) He responded "Buy Chickens".
The one thing in common about the mega-rich is that they are obsessed with money and/or success. Warren's family members often complained he didn't spend enough time with the family because he was in his den sifting accounting and finance material. Warren is in love with numbers.
The thing is the obsession trait doesn't necessarily scale. If you cloned a billion Gates', that would NOT give us a billion Microsofts. It's not a zero sum game, but pretty close to one. There's only so much room in any given niche.
Another thing, I've been using and following Microsoft for about 3 decades. They didn't do anything special or innovative in my opinion, at least not relative to their size. MS just did smart marketing, acquisitions, pricing, and packaging. MS mostly leveraged monopoly in one category to gain another category: not raw merit. If MS never existed, the world would be the same or even better off: more OS and office-software choice. I have a bit more respect for Steve Jobs: he spotted useful product configurations before any one else (with means). MS just copied/purchased trends after it was obvious they were catching on.
The thing is the obsession trait doesn't necessarily scale. If you cloned a billion Gates', that would NOT give us a billion Microsofts. It's not a zero sum game, but pretty close to one. There's only so much room in any given niche.
Another thing, I've been using and following Microsoft for about 3 decades. They didn't do anything special or innovative in my opinion, at least not relative to their size. MS just did smart marketing, acquisitions, pricing, and packaging. MS mostly leveraged monopoly in one category to gain another category: not raw merit. If MS never existed, the world would be the same or even better off: more OS and office-software choice. I have a bit more respect for Steve Jobs: he spotted useful product configurations before any one else (with means). MS just copied/purchased trends after it was obvious they were catching on.
Really? The world would be the same if Microsoft never existed or better off?
No doubt IBM would have led innovation if not kneecapped by M$.
No doubt IBM would have led innovation if not kneecapped by M$.
I don't mean exactly the same, but in terms of general innovation. There were decent, good, and great alternatives to ALL of their key products: PC GUI's, spreadsheets, word-processors, desktop databases, etc. Heck, they purchased most of them from other co's. Granted, MS usually charged less, at least initially, but that's because they took an up-front loss in that product to gain market-share. But then stagnated once they killed competition. I know an obvious MS-Access bug not fixed for 15 years.
> The whole point of his question was that you take those advantages away from those men and see what they would do. The key is their creativity and ability to find ways to make money.
And the answer is that most wealthy people, when reset to zero, would never be able to regain their wealth. The only way they may have a shot is by exploiting things from their formally wealthy life (e.g. contacts, connections, niche industry knowledge, or an ivy league degree).
And the answer is that most wealthy people, when reset to zero, would never be able to regain their wealth. The only way they may have a shot is by exploiting things from their formally wealthy life (e.g. contacts, connections, niche industry knowledge, or an ivy league degree).
You have no problem ignoring all the hard work that goes into becoming successful and your comment comes across as... one should just sit around waiting to be lucky. You say that during the golden age of internet based business opportunities and funding. I suppose that you think Tiger Woods was lucky enough to win 79 tournaments and 14 majors because he got lucky?
Opportunity = hard work + luck
We as individuals should strive to learn how to be successful by looking at those who are successful, and many of those qualities are right in front of our faces. Hell just search for "discipline" or "confidence building" on youtube and one can find how to apply the correct qualities within a few hours. Try David Goggins if you don't know what I'm talking about.
Opportunity = hard work + luck
We as individuals should strive to learn how to be successful by looking at those who are successful, and many of those qualities are right in front of our faces. Hell just search for "discipline" or "confidence building" on youtube and one can find how to apply the correct qualities within a few hours. Try David Goggins if you don't know what I'm talking about.
Bill gates, bezos and zuckerbeg aren’t really good examples of “wealthy” because they are so beyond wealthy that it’s not even really worthwhile trying to emulate them for practical purposes. The very definition of the ultra rich is that there are only a few of them. (Realistically no one is going to become a billionaire, and it’s not even worth trying really. 100 million is already unlimited money for all intents and purposes) So it’s much more practical to think about people that are able to provide for their families comfortably. When you start thinking about wealth in terms of billions, it completely skews perception of what actions you shod be taking, and is ultimately a pretty unrealistic and unnecessary goal. I see so much “entrepreneurship” garbage peddling where kids now think being an entrepreneur is about becoming a billionaire and redefining entire industries. When it’s really much more practical and useful to think about how you can run a small business. If you get good at that then you can run a medium business and make make a few million which is plenty enough to be happy and live a good life.
I think you're both right and wrong. In our current system, yes, a lot of success comes down to luck. However, that doesn't mean that it's impossible to remove a lot of the luck from the equation.
For just one example, if you look at the average person's level of financial literacy today, the situation is appallingly bad. So statistically, it's true that you have to be lucky to be financially literate, but that doesn't mean it inherently requires luck to be able to learn these things. It's just not stuff that most people are even aware of, because nobody is teaching them. It's not an unfixable problem.
At the extreme end of the spectrum, yes, it requires a lot of luck to become as rich as Gates or Buffett, but I don't think that's what OP is trying to achieve. Helping everyday people achieve better financial outcomes is a very different goal from trying to break into the top 0.1%, and is much more achievable IMO.
For just one example, if you look at the average person's level of financial literacy today, the situation is appallingly bad. So statistically, it's true that you have to be lucky to be financially literate, but that doesn't mean it inherently requires luck to be able to learn these things. It's just not stuff that most people are even aware of, because nobody is teaching them. It's not an unfixable problem.
At the extreme end of the spectrum, yes, it requires a lot of luck to become as rich as Gates or Buffett, but I don't think that's what OP is trying to achieve. Helping everyday people achieve better financial outcomes is a very different goal from trying to break into the top 0.1%, and is much more achievable IMO.
Take a wealthy person, ask them what they're addicted to, and milk them for all they're worth
Most wealthy people did not start off with zero money and connections. Most wealthy people are born into privilege. They can afford to fail and try again. They have family and friends that can help them access resources and connections that the rest of us don't even know exist much less know how to get ahold of.
Despite the notion of the "American Dream", in our country, if you are born poor you will most likely stay poor.
Despite the notion of the "American Dream", in our country, if you are born poor you will most likely stay poor.
Privilege as defined by what? Having good teachers? Having parents not drug addicted or in prison?
Not sure how a start up can commodify business connections, family ties, inheritance or being born with money, a support network and in a good school district.
Step 1: Gain money and connections, one way or another.
This question comes across as a little callous, but I think the intent is genuine and is worthy of inspection.
In general, the best things that can be done to address inequality from a for-profit perspective is to reduce consumer costs. Now the obvious problem is that if you cut costs by paying your own people less - or by opting to get your business’s goods and services from suppliers that also pay poorly - then you have only moved inequality from one place to another. But if you invent a way to create goods or offer services at a lower cost without having to cut wages - perhaps by being more efficient with energy or input materials - then you can pass some savings along to the consumer while the rest go to the shareholders as profit. Competitors may go out of business, but new corporations and jobs will take their place. For example, almost everybody uses electricity for light; few use candles, and even then it is more of a luxury than a necessity (like a romantic bedroom scene).
Technological innovation, in my opinion, is the only way that a for-profit corporation can make money and reduce inequality.
In general, the best things that can be done to address inequality from a for-profit perspective is to reduce consumer costs. Now the obvious problem is that if you cut costs by paying your own people less - or by opting to get your business’s goods and services from suppliers that also pay poorly - then you have only moved inequality from one place to another. But if you invent a way to create goods or offer services at a lower cost without having to cut wages - perhaps by being more efficient with energy or input materials - then you can pass some savings along to the consumer while the rest go to the shareholders as profit. Competitors may go out of business, but new corporations and jobs will take their place. For example, almost everybody uses electricity for light; few use candles, and even then it is more of a luxury than a necessity (like a romantic bedroom scene).
Technological innovation, in my opinion, is the only way that a for-profit corporation can make money and reduce inequality.
Financial education in schools, or some sort of scheme where the benefits of long-term investing are made viable for poor people.
A start up could do some mental trickery / game theory that benefits poor people. Say a start up takes 10% of every pay check, but buys all your groceries. They invest the difference into your 401k. The person gets groceries and a retirement fund, without having to know about investing.
Obviously this doesn't really make sense, but the idea is that poor people don't have financial knowledge, don't know where/how to save money, don't have the time to cut costs, etc.
A start up could do some mental trickery / game theory that benefits poor people. Say a start up takes 10% of every pay check, but buys all your groceries. They invest the difference into your 401k. The person gets groceries and a retirement fund, without having to know about investing.
Obviously this doesn't really make sense, but the idea is that poor people don't have financial knowledge, don't know where/how to save money, don't have the time to cut costs, etc.
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Education
Indeed, I believe that the three keys to success are wealth, education, and work, in that order. If you don't have wealth, then education is next. Perhaps education is like a kind of wealth.
Rich people are likely to tell you that work is the most important, because they tend to have a heroic self image.
Rich people are likely to tell you that work is the most important, because they tend to have a heroic self image.
Offer extremely expensive deluxe services, like space travel.
Technically, by producing a product with value for the wealthy, and redistributing its money to poorer employees. In short, capitalism. And you'd be using it as intended.
Competitor to the Federal Reserve :)
Take money from venture capitalists, give it to actual people who need help?
Deliberate and structured hiring and mentoring of under-represented groups.
Abandoning meritocracy won't be good for anyone.
The assumption that what currently exists is a meritocracy is part of the problem.
And moving further away from it is the solution?
It's not moving further away. It's increasing your catchment area. It's reaching down into the pool, to people who didn't go to the right school, or have the right connections, who still never the less show promise and aptitude and say "You. Come with me. We're going to do cool things."
Why down vote?
Isn't the market growth unequally benefit people? Isn't this a fundamental question that everyone should spend some time on?
Isn't the market growth unequally benefit people? Isn't this a fundamental question that everyone should spend some time on?
Currency devaluation (mostly)
Odd you would think that, considering the US dollar is extremely strong right now relative to other global currencies and has been for the last 5 years (save for last year).
I'd love to hear why you think this, and what information sources you're hearing this from? I've seen this line used equally by right wing political groups as well as left wing crypto anarchists who both seem to lack a basic understanding of how finance works.
I'd love to hear why you think this, and what information sources you're hearing this from? I've seen this line used equally by right wing political groups as well as left wing crypto anarchists who both seem to lack a basic understanding of how finance works.
1. my rent
2. my healthcare bill
2. my healthcare bill
How has the US exchange rate against other currencies impacted your rent and healthcare bill?
You are focusing on a currency’s value relative to other currencies.
A currency can be devalued because cost of living can go up without any appreciate in quality of living—your USD buys less assets than it did in 2008.
Just because USD has been doing better than the Euro doesn’t mean inflation isn’t occurring.
A currency can be devalued because cost of living can go up without any appreciate in quality of living—your USD buys less assets than it did in 2008.
Just because USD has been doing better than the Euro doesn’t mean inflation isn’t occurring.
This is the main issue that both the right wing gold bugs and left wing crypto anarchists don't seem to understand: Steady modest inflation is a good thing.
If there was no inflation everyone would be incentivized to just hold cash under their mattress and not invest into the economy. When you put your money in a CD or money market account hoping to keep up with (or beat) inflation that money then goes to pay payroll for corporations via the commercial paper market. When you put your money into a savings account hoping to generate interest to keep up with inflation your money gets lent to local small businesses and other people to buy mortgages. Inflation creates inertia in the economy.
We don't have an inflation problem. What we have is a wage growth problem. Crypto nor gold bars will ever do anything to solve that. The issue has nothing to do with currency.
If there was no inflation everyone would be incentivized to just hold cash under their mattress and not invest into the economy. When you put your money in a CD or money market account hoping to keep up with (or beat) inflation that money then goes to pay payroll for corporations via the commercial paper market. When you put your money into a savings account hoping to generate interest to keep up with inflation your money gets lent to local small businesses and other people to buy mortgages. Inflation creates inertia in the economy.
We don't have an inflation problem. What we have is a wage growth problem. Crypto nor gold bars will ever do anything to solve that. The issue has nothing to do with currency.
Those are both problems that have nothing to do with currency or the economic concept of 'currency devaluation.'
Inflation has barely been present in the US for the last 10 years compared to historical levels.
The reason your healthcare bill and your rent have increased much faster than inflation (I'm guessing you're in the bay area) is because of US federal government failings in the case of healthcare; and in terms of rent the geographic limitations, rapid growth, and local government failings of the area you've chosen to live in.
Inflation has barely been present in the US for the last 10 years compared to historical levels.
The reason your healthcare bill and your rent have increased much faster than inflation (I'm guessing you're in the bay area) is because of US federal government failings in the case of healthcare; and in terms of rent the geographic limitations, rapid growth, and local government failings of the area you've chosen to live in.
This is the definition of currency inflation.
Goods and services costing more in my currency than they used to—and trust me, the housing hasn’t gotten any nicer, nor my healthcare services.
Goods and services costing more in my currency than they used to—and trust me, the housing hasn’t gotten any nicer, nor my healthcare services.
Thats not really inflation.
My housing and the healthcare services I pay for are the same as in 2008. I now have to pay twice as much in USD for the same goods and services.
That is the definition of currency inflation.
Exchanging more for the same.
That is the definition of currency inflation.
Exchanging more for the same.
That is an adjustment of relative prices, inflation is the generalized increase in nominal prices of all goods.
There is something called "asset inflation" but its not a correct terminology.
There is something called "asset inflation" but its not a correct terminology.
just because the USD is strong relative to other currencies doesn't mean there isn't devaluation. Cost of living has not tracked salary increases since 2008.
Yes it has. This is exactly what the inflation indexes are meant to measure and apply it to nominal wage growth.
https://fred.stlouisfed.org/series/LES1252881600Q
Maybe it hasn't in SF or NY or other insanely prices areas, but that is 100% because real estate policy in those areas is a disaster.
https://fred.stlouisfed.org/series/LES1252881600Q
Maybe it hasn't in SF or NY or other insanely prices areas, but that is 100% because real estate policy in those areas is a disaster.
Inflation is measured in local markets is it not?
In Canada it is, yet shelter inflation numbers are almost exactly inline with overall inflation in all regions, regardless of whether prices are up over 100% or not. Reality has no effect on the printed number.
Oh sure, this is explained somewhere, but the point is looking at the numbers as a reflection of reality is a poor idea
In Canada it is, yet shelter inflation numbers are almost exactly inline with overall inflation in all regions, regardless of whether prices are up over 100% or not. Reality has no effect on the printed number.
Oh sure, this is explained somewhere, but the point is looking at the numbers as a reflection of reality is a poor idea
Do you trust the inflation index (btw, inflation index != cost of living) which encodes choices by some very privileged people (and has questionable decisions, like hedonic adjustments that often have quite arbitrary factors use to periodically renormalize) to reflect the needs and worries of the median person? Go out onto the street and ask people, not even in SF or NY, and find out if they feel like they're doing better or worse, if they're struggling more or less to stay afloat.
Finally, even if inflation exactly tracks nominal wage growth, i.e. real wage value is zero, that's not enough. You would expect that there are real returns to technological advancement that are a tide that makes all boats rise. If that's not the case it is indicative that the structure of modern economy is such that that a very disproportionate amount of returns to global social and technical innovation are sent to the already-wealthy.
Finally, even if inflation exactly tracks nominal wage growth, i.e. real wage value is zero, that's not enough. You would expect that there are real returns to technological advancement that are a tide that makes all boats rise. If that's not the case it is indicative that the structure of modern economy is such that that a very disproportionate amount of returns to global social and technical innovation are sent to the already-wealthy.
I trust the opinions of experts over anecdotes from random people on the streets. People always complain, no matter how good or bad things are. Ignoring it is always the best thing to do, and instead look at the numbers. Society is so complex these days that many people aren't capable of analyzing their problems.
Total compensation has been growing very steadily, but healthcare costs have been rising and eating much of that, so while compensation rises, much of it goes to healthcare and wage growth becomes anemic.
Real estate policy is the #1 issue in America in my opinion. We aren't building enough houses, we have too many policies designed to inflate home values (because for some dumb reason a house is considered an investment in america), we make rent seeking behavior too easy. This issue is politically unpalatable though, for both parties as it would require a shift away from the "house as an investment" idea that is doing so much damage to our country.
Total compensation has been growing very steadily, but healthcare costs have been rising and eating much of that, so while compensation rises, much of it goes to healthcare and wage growth becomes anemic.
Real estate policy is the #1 issue in America in my opinion. We aren't building enough houses, we have too many policies designed to inflate home values (because for some dumb reason a house is considered an investment in america), we make rent seeking behavior too easy. This issue is politically unpalatable though, for both parties as it would require a shift away from the "house as an investment" idea that is doing so much damage to our country.
> I trust the opinions of experts
You're welcome to do so, but these are basically the same experts that have been disastrously wrong in the past.
https://www.youtube.com/watch?v=HQ79Pt2GNJo
You're welcome to do so, but these are basically the same experts that have been disastrously wrong in the past.
https://www.youtube.com/watch?v=HQ79Pt2GNJo
> Do you trust the inflation index
Keep in mind that while "the news" reports only a single "inflation" number, the available data is quite granular and is available for a large number of geographic areas[1]
[1] https://www.bls.gov/regions/subjects/consumer-price-indexes....
Keep in mind that while "the news" reports only a single "inflation" number, the available data is quite granular and is available for a large number of geographic areas[1]
[1] https://www.bls.gov/regions/subjects/consumer-price-indexes....
The money supply did triple over the last decade.
Can you elaborate on this.
https://www.xe.com/currencycharts/?from=USD&to=EUR&view=10Y
This shows that USD is actually worth more than the Euro over the past 10 years.
What exactly is the USD devalued relative to that caused a stock market boom?
https://www.xe.com/currencycharts/?from=USD&to=EUR&view=10Y
This shows that USD is actually worth more than the Euro over the past 10 years.
What exactly is the USD devalued relative to that caused a stock market boom?
It could be (which I believe) that both the USD and EUR are worth less to real goods and services while the USD is relatively higher than the Euro.
> It could be (which I believe) that both the USD and EUR are worth less to real goods and services while the USD is relatively higher than the Euro.
Sure but the original poster made a specific claim, how does this give us a huge bull market?
I mean currency devaluation leads to inflation which is how you cool a market and we are trying to explain why we have a bull market. So this fails a very simple first pass.
Sure but the original poster made a specific claim, how does this give us a huge bull market?
I mean currency devaluation leads to inflation which is how you cool a market and we are trying to explain why we have a bull market. So this fails a very simple first pass.
I would be replying to the original poster if I were replying to the original poster, wouldn't I?
I was replying to the post with a claim about EUR and USD "relative values."
I was replying to the post with a claim about EUR and USD "relative values."
That's measurable via inflation, which has been remarkably low over the past decade.
Usually, yes. However you can substitute lower quality ingredients, or you can implement a "shrinkflation" strategy:
https://steemit.com/money/@dedicatedguy/shrinkflation-sellin...
You can also manipulate prices at scale where you raise the price of some goods in the CPI basket while lowering others keeping "inflation" or CPI "low." If the marginal profit on the goods you're lowering was already relatively high and the marginal profit on the goods you are raising was low, you could find a point of arbitrage where you come out ahead on profit without moving the needle on inflation.
https://steemit.com/money/@dedicatedguy/shrinkflation-sellin...
You can also manipulate prices at scale where you raise the price of some goods in the CPI basket while lowering others keeping "inflation" or CPI "low." If the marginal profit on the goods you're lowering was already relatively high and the marginal profit on the goods you are raising was low, you could find a point of arbitrage where you come out ahead on profit without moving the needle on inflation.
Real goods -- like pieces of companies (stocks) or tangible assets (housing, etc).
In my layman opinion -- the western central banks are in cahoots continually "soft landing" (optimistic) or manipulating (pessimistic) and at an accelerated rate since 2008.
The marketing isn't booming up. The nominal metric is falling rapidly.
In my layman opinion -- the western central banks are in cahoots continually "soft landing" (optimistic) or manipulating (pessimistic) and at an accelerated rate since 2008.
The marketing isn't booming up. The nominal metric is falling rapidly.
has cost of living tracked wages?
Cost of living is measured via the "basket of goods" used in inflation measurements. Inflation has been extremely low over the past decade. I think the likelier conclusion is: the market isn't up because of currency devaluation.
no it's not. Cost of living is a different calculation than CPI.
Ok, I'll play: show me a reputable COLI that went up 323% over the past decade.
Likely true. And it's most affecting the general public.
I would argue it's most affecting those who are particularly exposed to fluctuations in the currency market.
Sure and that is going to me a lot of people who live pay check to pay check paid in a constant dollar amount of people who have a little savings but must store it mostly in dollars.
Well, what can you do- buy into the market now? If you really believe that strongly in the idea that it's impossible to time the market then be my guest!
Your options pretty much boil down to "a crash is coming" (so says everyone for the last 5 years), or "it's different this time" (we all know the issue with that)
Your options pretty much boil down to "a crash is coming" (so says everyone for the last 5 years), or "it's different this time" (we all know the issue with that)
Misleading article. It's not that we are continuously in the bull run from last 3453 days. We had a few crashes in between.
But "crash" is relative and continuous. The article defined what's traditionally been defined as a "crash". It's like "unemployment": there may ways to measure, each with different strengths and tradeoffs, but there are one or two traditional "common" metrics. Politicians tend to cherry-pick different metrics over time to fit their narrative of making them look good and the "enemy" bad.
"Bull" and "bear" have definitions. We have been in a continuous bull run, by the definition.
But no bear market, according to the usual definition of bull/bear markets.
We are entering Crash Territory. 100+ years of the same general pattern; meaning an economic "correction" is coming soon.
I see you like predicting 10/3 recessions.
I'm not following. It's Occam's Razor: what's more likely:
A) We will set a record bull market & recovery duration, or
B) We'll hit a recession soon.
Further, the yield curve is also near an inversion, another common pattern preceding recessions.
Even a broken clock is right twice a day.
Various metrics have predicted the majority of slumps for about 100 years. That's like every hour, not "twice". I don't believe the pattern of slumps is random: it's roughly a decade cycle. Inverting yield curves, PE ratios above average (using long-term earnings), and bull market duration all point to a likely pattern.
>According to this line of thinking, the moment to worry is when there is broad agreement that the market can only go higher. That would suggest there is little fresh money to drive stocks to new heights.
This is what I keep wondering about. It seems like everyone is just waiting for the crash to happen for the last 5 years. The slightest downtick seems to send people into a tailspin. Thus, possibly enacting it's own self balancing mechanism? I can't tell, but then, neither can anyone else.