> But Hitler could not have succeeded against his many rivals if it had not been for the attraction of his own personality, which one can feel even in the clumsy writing of Mein Kampf, and which is no doubt overwhelming when one hears his speeches … The fact is that there is something deeply appealing about him.
A commenter here (and one on the original article) has noted that the part being elided appears to be the following:
> I should like to put it on record that I have never been able to dislike Hitler. Ever since he came to power—till then, like nearly everyone, I had been deceived into thinking that he did not matter—I have reflected that I would certainly kill him if I could get within reach of him, but that I could feel no personal animosity.
That this is the only elision seems very strange. The passage is crucial to understanding how Hitler was able to do what he did. Orwell is expressing his admiration for Hitler's deep understanding of human nature while at the same time despising its application. It's a lesson too hard-won and too relevant today to be brushed aside.
Still, I can't help but think that Orwell, who gave us the Ministry of Truth and its capacity for historical engineering at scale, would be highly amused.
>The fact is that there is something deeply appealing about him.
I think the magic ingredient is utter, palpable self conviction. Complete unwavering dedication to your own rightness, regardless of any counter argument, any prevarication, even evidence to the contrary, is intoxicating. You don't need to argue, you don't need to convince, you don't need reasons, you're just right by definition. The simplicity and lack of complexity is intoxicating.
On a smaller scale, this is how people are able to build fiefdoms inside of companies, become successful local religious leaders, start cults, and maintain abusive domestic relationships.
Strong conviction is like a magical spell because it literally changes reality. Most people, myself included, are not really wired to be able to resist a constant force which is informing them of what “reality” is (not of its actual constituent components, but the framework of meaning and importance). This is normally a natural part of being human and living in society. We speak the language of the people around us, make the same foods, use the same body language. We think of society as the totality of what there is, but in reality it is providing us only a finite number of infinite options.
But every once in a while someone comes along who sense of reality is so self possessed that they create a force field around them. They change the set of available options for assigning meaning . Anything that falls into their event horizon is twisted and mangled by their totally consistent and unchangeable worldview, and it is contagious. If that person also happens to be charming, it’s all over.
The only way that I know not to fall into these kinds of traps is to regularly practice intentionally subverting or rejecting the norms around me. Not all of them, just the ones that don’t serve me. If I’m used to evaluating and potentially rejecting common practices in my culture (both societal and interpersonal), Then I know that if someone in my life is living in such a warp field that I will notice it since I am practiced in resisting its pull.
I think the grievance husbandry is part of the cocktail too.
Obviously if your message is too complicated you’re going to lose people, but if you’re operating at an effective complexity level, you still need a story to tell.
“You’ve been very badly treated by not rich people, rather someone else” sells in job lots even today.
Good point. Resentment is the root of all evil. You create a narrative where you’re actually the real victims, and then that justifies ‘retaliation’ at almost any scale or severity. It even justifies lies or distortion because it’s in the service of a ‘greater truth’.
He was highly charizmatic and could adjust the way he talked to audience very well. Both in personal encounters and in public speeches. He would told you what you wanted to hear and project exact kind of personality he needed to project.
If that’s a Jobs reference, I don’t think so. He talked about hiring smart people so they could tell him what to do, owned his mistakes, changed course when things didn’t work as expected. He said making mistakes was good as long as you learned something. Yes he could be an arse, but he was no Donald Trump.
I can't help but think one of the most appealing aspects of Hitler would've been his ability to deliver passionate speeches.
For example, I have no idea what he's saying in this speech [1], but the tone at which he delivers it is undeniably quite mesmerising, especially when compared to the tone of, say, Joe Biden [2].
In a time where radio ruled, it's hard not to think he wouldn't stand out, irregardless of the content contained in his speeches.
Yeah charisma is one of those things that can draw people in. Look at many cult leaders too. Charles Manson often went on just entirely nonsensical tirades, but could sound almost profound while speaking them. Jim Jones speeches have a similar angry rallying cry type of feel.
They would have been more open to it because Weimar Germany absolutely sucked, to put it lightly.
You lose the world war, your currency hyperinflates away, and now in places like Berlin mothers and even their prepubescent daughters are selling sex as a combo-deal to get money to survive, being taxied around to strange men, like Uber Eats for sex.
Should these conditions have been embraced tolerantly and lovingly or promised to be aggressively corrected?
The video clip omits the most important part of Vonnegut's lecture. He does Hamlet and it's a flat line. It's odd because this is the point of the article yet the clip omits it.
This is even explained in the article. It is the "infographic" which entirely misrepresent his point.
The title of the article is also rather misleading. It makes is sound like he thinks there is exactly 8 possible shapes, while he is just showing some examples.
Ah good point - we've de-eighted the title now. This is an obvious (except I missed it) application of the site guideline:
If the title contains a gratuitous number or number + adjective, we'd appreciate it if you'd crop it. E.g. translate "10 Ways To Do X" to "How To Do X," and "14 Amazing Ys" to "Ys." Exception: when the number is meaningful, e.g. "The 5 Platonic Solids."
Note that at the same time he refutes his earlier part about the stories of primitive people (as he put it) who had stories that were completely flat ( https://youtu.be/4_RUgnC1lm8?t=2470 ).
> We won't know the answer to this challenge for a very long time.
This is essentially the "halting problem", or the "principle of computational irreducibility", or whatever equivalent formulation you want to pick. We'll never know the answer -- for most computations there are no shortcuts to predict their outcomes.
> Programming Rust (link to review) is the first book I read for an initial introduction to the language.
This book is very much under-rated. If you've unsuccessfuly tried to learn Rust by reading "the Book" cover to cover, you might try reading Programing Rust in the same way.
> ... I felt like I had to walk away with dignity and just declined.
You dodged a bullet. Whatever company this is appears to be circling the drain. The problem you'll face now is: how many other companies are in the same position?
Currently paused due to "extreme market conditions". What conditions exactly? BTC is down from all-time high, but still worth about twice as much as it was only two years ago. Ethereum is worth over 4x as much. Is a two-year average appreciation rate of 40-100% per year so witheringly horrible that the Celsius business model couldn't survive it? Did crypto have to basically 2x every year without fail for Celsius to survive?
Celsius told their customers they were accruing Bitcoin and then Celsius didn’t buy the Bitcoin to deposit into their accounts, instead using the money to buy their CEL token that their ceo was dumping on exchange.
Their business model was fine. What wasn’t fine was not following it. Abra, Nexo, Gemini, and lots of other companies are business as usual with the same model right now.
How in God's name are there so many of these crypto companies? This post has 3 that I've never heard of, and the rest of this thread probably has a dozen more. Is the startup cost of these things near zero or something?
This is informative, but I'm not sure how illuminating it is to say that a business's business model was great, except they didn't follow it, they followed a completely different business model that was terrible? Isn't the actual business model of a business... the business model that they actually followed?
If I build you a model of a building that's fine, and then I build a building that isn't like the model, I think it's reasonable to still say that the model was fine.
That depends on what you're doing. If I put my life's savings into the S&P 500 at 2x leverage in 2008, I'd be wiped out in 2009. But that would be an extremely dumb thing to do.
The site is not actively accepting deposits. Did you assume that it was, based on something you saw there?
Read this passage from Alex Mashinsky's bankruptcy affidavit:
> Importantly, however, shortly after the Pause Date, on June 18, 2022, Celsius made the necessary changes to the Celsius App to prevent any new users from generating a deposit address and thus being able to deposit cryptocurrency on the Celsius platform. Moreover, as of the Petition Date, new users are prevented from even registering for a Celsius Account.
Celsius can't prevent people from sending crypto to addresses that Celsius controls, but that's a whole different story from "continuing to accept deposits."
If Celsius is accepting deposits on existing addresses, they are continuing to accept deposits that they know their customers can't access. Celsius designed the system without an off switch because DeFi systems generally view that as an anti-feature, but that means that they probably aren't able to be compliant with the bankruptcy affidavit.
You yourself wrote that they "can't prevent" deposits for existing accounts. It's very pertinent.
> If Celsius is accepting deposits on existing addresses, they are continuing to accept deposits that they know their customers can't access.
Did you read the affidavit? Your argument is specifically pre-empted and refuted:
> It is important to understand that users transfer their digital assets from external “wallets” to the Celsius platform by recording such transactions on the blockchain. These transfers are entirely user driven with no ability for Celsius to “approve” or “deny” a transfer to its platform. This is a feature of the underlying blockchain infrastructure and cannot be technically changed or otherwise prevented.
It is impossible to create, for example, a Bitcoin address that has an "off switch" that will prevent people from sending additional bitcoins to it. It's a feature that most blockchains simply do not support.
In other words, Celsius did not "design the system without an off switch." Satoshi Nakamoto designed Bitcoin without an off switch.
People were still buying hertz stock even though they were going through bankruptcy. They even tried to do secondary offering. Retail investors don’t operate with enough information to make financially sound decisions.
> PowerCo will use the prismatic unified cell architecture in its batteries which allows for use of different cell chemistries. The cells will be manufactured from 2025 with the factory planned capacity to be 40 GWh which is enough to supply 500,000 electric vehicles. By 2030 PowerCo plans to have all six European factories up and running with a combined capacity of 240 GWh. The unified prismatic cell harnesses synergy effects and can offer manufacturing savings of up to 50% when compared to current batteries.
I didn't see anything in this announcement about where raw materials will be sourced from. It looks like the idea is to support multiple chemistries, but it's far from clear where the materials for all those batteries will come from.
The impression I get is the supplies for batteries are rather more rare than the aluminum and steel, so if current companies are having problems sourcing them it seems like a worthwhile question to ask.
Whether it's in this factory or Tesla or whomever, there is going to be increasing demand in any case.
That impression is a deliberate result of the aforementioned propaganda. Lithium is one of the most plentiful resources on earth. Nickel isn't too hard to come by. Cobalt is the one that's difficult but it is the smallest part of lithium nickel cobalt batteries and progress is being made on reducing and eventually eliminating it (and it is recyclable, as are the lithium and nickel.)
The idea that batteries require rare and hard to source materials is a fabrication. This should be self evident by the way battery production has skyrocketed over the last decade while prices keep dropping at the same time. If material sourcing was hard, that wouldn't have happened.
The price of lithium has gone up 5x recently because the market has realize there is a scarce supply and a rapidly expanding demand. The price of batteries is increasing now instead of declining like they have done in the past.
In theory lithium is abundant in the Earth's crust. In practice, although the market is incentivizing more production now, it takes close to 10 years to bring a new mine online (7 years is doable). There was a glut of these materials in 2020, but by 2025 we will see a major bottleneck. Here is an analysis of the situation: https://youtu.be/5v-DTS-ibow
> That impression is a deliberate result of the aforementioned propaganda.
No its not. Very much pro EV are saying the same things.
> Lithium is one of the most plentiful resources on earth.
Nobody is denying that. That doesn't mean there is not an imbalance between new projects coming online and demand for lithium.
Lithium is not like an Iron mine. Lithium is more like a specialty chemistry and despite it being very common, its very uncommon to have high grade ore. That means lithium projects have to convert low grade ore to very high quality lithium and unlike with other materials, there are no standards. Your lithium output has to be certified individually by each battery/car maker. This adds a huge amount of difficulty in terms of bringing in new product.
If you follow the lithium industry over the last 5 years you will see how incredibly difficult it is to bring on new projects and almost nobody except the established players have managed it. Pretty much all lithium startups have failed to deliver what they said a couple years ago. Even the lithium majors have not expanded as fast as they said.
So if your analysis is limited to 'there is lots of lithium in the crust' then that's a terrible analysis. What you need to compare is the amount of hungry battery factory being built compared to the amount of new lithium mines.
You can build a giga-factory in 3 years, a new lithium project takes 5 years optimistically, and often 10 years.
I recommend this podcast if you want to learn the details of the lithium market, its both market analysis but also interviews with pretty most lithium majors and minors: https://www.globallithium.net/podcast
> Nickel isn't too hard to come by.
Nickel will not run out and battery makers will be willing to pay a premium compared to stainless steel. Even there is an issue where for batteries you need high grade and it will require quite a bit of investment to build facilities to do that conversion. However, that's likely not a limiting factor.
However when we are talking about environmentally friendly, nickel is a huge issue. Almost 100% of nickel growth comes from incredibly dirty mining in Indonesia.
There are significant nickel projects in North America but developing those takes many, many years and have to battle up-hill.
> The idea that batteries require rare and hard to source materials is a fabrication.
No its not, its a real series problem and industry experts pretty much universally agree on that. But of course there are people who overstate this even more to make anti-EV propaganda.
> This should be self evident by the way battery production has skyrocketed over the last decade while prices keep dropping at the same time. If material sourcing was hard, that wouldn't have happened.
As Musk and others have stated. The constant extreme price drop is over, lots of the easy gains from manufacturing are taken. Currently prices are going down because density is still improving slowly. However now that we have gigafactory style production, the cost of the manufacturing is increasingly small and to make further price drops materials prices need to drop and that is not happening.
Battery materials will be a limiting factor for EV roll out over the next couple of years. That is just the reality of the situation.
Also due to the recent spike in the price of nickel, as Russia is (used to be?) one of the major exporters. (There's more nickel than lithium in nickel-based lithium batteries.)
Edit: and cobalt is mined in the Democratic Repuplic of the Congo, which seems to be held in opprobrium by Western countries.
> and cobalt is mined in the Democratic Repuplic of the Congo, which seems to be held in opprobrium by Western countries.
The DRC has been snubbed by the west for decades. China has made key investments there and control a few of their major mines, as well as the trains and ports along the east coast of Africa in Kenya and Nairobi. Of course the west isn't happy with this arrangement, but they had decades to work out a similar arrangement and didn't.
> Its about that the best minerals people all predict that lithium, cobalt, nickel and graphite is gone be in shortage.
6% of nickel is used in batteries. 2.7 million tonnes annually are produced, enough for billions of kWh of batteries.
The majority of spheroidal graphite for batteries is synthetically produced because it has better performance. It can be made trivially from virtually any carbon source, including biofuels.
Lithium is more common than lead. Mines are coming. It is set to be wildly oversupplied.
Cobalt use has been dropping by nearly 50% per generation. It's readily mined outside the DRC, which is just the cheapest.
Some people somewhere need to worry about metal production. The same as people need to worry about polypropylene or vinylene carbonate. People did not worry about indium supplies when the iphone took off, or how it would impact tantalum, or whether we'll have enough quartz to make solar panels. It's not important for the PUBLIC to consider these things; they're trivial in comparison to eg charging infrastructure.
As I mentioned in my other post. With nickel the demand from other industries is also growing and batteries need high grade. Of high grade nickel is a lot and gathering high grade from current mines coming online is an issue.
However, nickel is the most unlikely to actually cause shortages, but it is still a price risk.
> The majority of spheroidal graphite for batteries is synthetically produced because it has better performance. It can be made trivially from virtually any carbon source, including biofuels.
Natural is usually cheaper and with extreme price pressure you will see that many car makers want to continue to use natural even if its worse in some aspects. The predicted split is about 50/50 this decade. Again, this is price risk.
> Lithium is more common than lead. Mines are coming. It is set to be wildly oversupplied.
You are disagreeing with all expert forecast on the topic. Are you an expert on the field? What is your qualification. If its so easy why are the mines not already here?
There are literally 100+ battery factory in production, all need huge amount of lithium. If you look at all major lithium producers and their expansion plans, its way below that need.
> It's not important for the PUBLIC to consider these things; they're trivial in comparison to eg charging infrastructure.
Of course no supply chain issues are public issues. But that doesn't mean it wont impact the public.
The autopilot part of Tesla has never made much sense. Is Tesla the electric car company, or is it the luxury car company? Either way, why does the power train (EV or ICE) come into play at all?
Not only that, but Tesla has played the Innovator's Dilemma game from the position of the upstart financially, but targeted the segment of the market that incumbents will defend to the death (luxury cars).
Tesla could have gone a different way and played the game from the true upstart: targeting the low end of the car market. Attack from below. But it didn't do that.
Incumbents always win at the sustaining innovation game. The electric power train is a sustaining innovation for the automobile industry. It doesn't break any incumbent's business model (financing the purchase of expensive cars), especially at this point. And we're now seeing this with all of the EV introductions and announcements from incumbents. Oddly, though, there are plenty of upstarts trying to do exactly what Tesla tried - attacking the blubber-rich end of the market with an immature technology.
The incumbents will defend that market segment to their death indeed. Tesla is pulling a 30% gross margin on their EV's, while legacy auto looses money on their EV's. I don't see legacy auto being capable of refactoring their cars, manufacturing processes and business models fast enough to survive.
The fall can cascade quickly, as the incumbents are stuffed with debt. When sales of ICE fall due to the growing EV segment they will have a hard time seeking the funding necessary to transition. IMO it's all a bit late. But good luck to them. From my observation only Ford and VW really appreciate the situation they are in, and they are trying hard to navigate out. Hopefully they survive. GM is screwed.
> I don't see legacy auto being capable of refactoring their cars, manufacturing processes and business models fast enough to survive.
That doesn't make any sense. "Legacy auto" knows how to make cars. To their final assembly factories there's not a huge difference between a BEV, PHEV, or an ICE drive train. So long as they feed in components they get cars out. They definitely know how to get components made to feed into their factories.
That's a place where they have an advantage over Tesla. They can make BEVs that break even or lose money because they have a whole line of ICE cars making a profit. Tesla only has their up market BEVs to make their money.
Tesla doesn't have a moat around BEVs. Now that "legacy auto" is making them Tesla is just another BEV manufacturer. As their market share erodes they're going to have a harder time maintaining their price premiums. They also don't have the deep bench of fleet sales that "legacy auto" has. The places they're trying to diversify (Power Wall, solar, etc) aren't markets that support the premium prices they currently enjoy with their cars.
> That doesn't make any sense. "Legacy auto" knows how to make cars. To their final assembly factories there's not a huge difference between a BEV, PHEV, or an ICE drive train. So long as they feed in components they get cars out. They definitely know how to get components made to feed into their factories.
That's the problem. When they do it that way, they don't make a profit on BEV's. "Legacy auto" got good at building the supply chain network for parts. Then they pick and choose and assemble into a car. But everyone is taking a slice, and it's hard to optimize designs for efficiency between so many suppliers. Then they have their dealers to contend with.
What i'm saying is that "legacy auto" can certainly build and sell a BEV like they do with ICE. And it's not too hard for them to make that change, baring battery supply challenges. But they don't have the 30% gross margin that Tesla does. That margin will continue to grow and then turn into a weapon when Tesla needs to be competitive.
> That margin will continue to grow and then turn into a weapon when Tesla needs to be competitive.
This does not follow at all. Tesla sells their barely up market cars at luxury car prices and makes a significant amount of money off selling emission credits and raking in other government subsidies.
As "legacy auto" manufacturers ramp up their EV production they won't need to buy emission credits from Tesla. They'll also themselves be eligible for the bottom line boosting government subsidies.
I also don't see Tesla being able to compete on luxury as they have significant problems with fit and finish. Now that traditional luxury brands have solid EV offerings it seems unlikely Tesla will be able to keep their margins and increase their sales volume.
> This does not follow at all. Tesla sells their barely up market cars at luxury car prices and makes a significant amount of money off selling emission credits and raking in other government subsidies.
Emission credits were 3.6%[1] of revenue last quarter (Q1 2022). I don't know what "subsidies" you are referring too but you may be thinking of the EV tax credit, which was exhausted by Tesla in late 2019[2]. So in that regard other EV automakers have an advantage over Tesla.
> I also don't see Tesla being able to compete on luxury as they have significant problems with fit and finish. Now that traditional luxury brands have solid EV offerings it seems unlikely Tesla will be able to keep their margins and increase their sales volume.
Tesla has certainly had fit and finish issues but they are solving this. Their new Model Y produced in TX uses their "giga castings" which removes the opportunity to screw up alignment by removing ~150 welds for the body. Look it up if you want to know more.
I think error in your thinking is that Tesla will remain static while others catchup. That's not going to happen. Tesla is innovating (increasing margin) and scaling at a faster rate than "legacy auto".
> But they don't have the 30% gross margin that Tesla does.
Sure, but they'll make it up on volume. Tesla also will have much lower than 30% gross margins in 10 years -but can it catch up with "legacy auto" on volume?
> I don't see legacy auto being capable of refactoring their cars, manufacturing processes and business models fast enough to survive.
My take is the opposite. Incumbents already have like 90% of what Tesla had or chose to build from scratch. EV's are not complicated at all compared to ICE, and incumbents have been refining their manufacturing process for decades in a brutally competitive industry.
Unless Tesla can somehow get an effective monopoly on battery tech or FSD, which they are not, they're going to be just another car company. Nothing they can deliver can't be done by others.
Personally I think it's way more likely Waymo or Apple deliver FSD first, with broad industry partnerships wiping out Tesla's advantage.
I agree that the EV tech stack is easy. EV retro fits illustrate how simple EV's are. But that's not the part that matters. What matters is if you can make an outsized profit building and selling EV's. Legacy auto can't, Tesla can. Tesla is very vertically integrated so they can eek out extra margin that others can't. They also aren't inhibited by the existing dealer / service / financing model. So what I'm saying is if legacy auto wants to compete with Tesla, they have to refactor their entire business. And i don't see that happening. It will be interesting to see who is right in 5-10 years.
I was with you in my 4 years of Tesla ownership but having researched & sampled the competition I just can't agree anymore.
Tesla has gone down a cul-de-sac with FSD to the point that there's plenty of equally competent highway "self driving", which is all 99% of people actually need/want.
Further Tesla is extremely focussed on SKU minimization .. very few models with very few options. Tesla only has 4 cars which are kind of like 3.5 given how similar 3/Y are. People want a variety of sizes/shapes/luxury levels, and to have some options within a model.
At the Model 3&Y end of price curve, they face serious competition from Ford, Hyundai, Kia and VW.
At the S&X end, they are actually in worse shape because the Germans will sell you a wide range of cars, which actually feel luxurious inside for the ~$100K price you are paying... with lots of fun colors and options packages. The interior of a $50K Model 3 and $130K Model S are more similar than dissimilar.
You can get also get worse EVs for cheaper than the lowest Tesla starting price... not every car can start at $50K.
I mean it's kind of crazy the Tesla Model Y has crept up to $68k starting price. There are a lot of crossover/hatchback EVs in the $40-60k range especially with tax credits included...
Tesla is focused on unit production, SKU minimization is a side effect. They are supply contained. Why make additional models of cars if you can sell more of the ones you already make instead? There's more than enough demand to support their limited SKU's, high price points and current production; for the moment. When Tesla manages to cap out on their demand, they can lower prices and introduce more models. But when that happens they will be at a scale where their economies of scale and vertical integration allows them to still make a large profit while their competition breaks even or worse.
Maybe? But cars are like fashion. Demand can change more rapidly than Tesla can design, announce, and scale production of new models to fill all the gaps in their model line.
Once competitors can ship in higher volumes at the Model 3/Y price points then they can readjust pricing quickly of course.
Look at the Model S right now, if you want a Plaid you can essentially have it RIGHT NOW, there's even a few inventory cars popping up periodically. For the Model 3/Y, if you go with performance model, again you can have it in weeks like in normal times. To me this looks like demand at the high end is cooling off for Tesla.
Analysts suggest that, while they may still be the market leader in EVs, by 2025 they're looking at a decline from today's 70-75% market share to 11-20%:
This meshes pretty well with them not having anything in the compact, pickup truck, offroading/camping segments (luxury, or not). They also don't have any commercial vehicles like delivery vans.
All of those segments are being filled in rapidly by competitors. Also, the first real non-Tesla luxury sedans have been on the market for what, under a year?
Fleet sales is a place I see demand seriously ticking up for BEVs. Even modulo today's price gouging on gas, gas prices are only going to increase over time and many countries/states are increasing emission regulations.
In California at least there's a significant percentage of fleet vehicles that are HEVs or low emission ICEs like CNG. Fleet edition BEVs will sell like gangbusters here (if they're not already).
I don't see Tesla really able to target the fleet vehicle market. They're currently geared entirely for consumer sales and then only up market consumer sales. Fleet sales aren't flashy or exciting but they're reliable income generators for car companies.
The trick is the to get those inflation-adjusted returns you need 100% time exposure. No selling because circumstances force you to. No selling because you get spooked at a 50% drawdown. Not many people can tolerate even a 20% hit, which explains a lot about the situation the world economy finds itself in.
> No selling because you get spooked at a 50% drawdown.
This is common-sense trading advice anyway. If short-term losses spook you into selling, you're probably doing too much stock-picking and are not long enough.
In fact, this is the often-cited reason that active investors can't beat index funds consistently.
This is why I don't follow how my portfolio is doing, knowing doesn't give me much actual information and can often encourage bad behavior (admittedly I don't have many investments compared to many).
I mean… that defeats the point, no? Surely you must plan to use the money at some point, even if that is just enjoying the end of your days. That's still a time horizon.
> I don't put money that I might realistically need in the market
While it's great that you might have a time horizon far, far into the future, not everyone has that luxury. In theory, I'm supposed to purchase a home & start a family around this point in my life, so that's a rather quick time horizon for at least some portion of my wealth.
I think you have a point. I should have been more clear. What I'm saying is I don't account for anticipated withdraw when investing. That's not to say I don't or won't do it, just that it's not a consideration when putting the money in.
I treat the question of if I can afford to take money out or if it is a good time to take money out as an entirely separate topic.
I found that trying to optimize investing and weigh risks for a short-term Horizon will drive you crazy.
I consider this an area where the burden of knowledge will hit you pretty hard. Time suck along with stress, and performing at best case a few percent over an automated "MODERATE RISK" button.
I don't have any more time in my life to track anything with the degree that it would take to "be good" at it.
You're right, and the conventional advice has been to have a mix of stocks and bonds, with bonds to reduce volatility and preserve some of the wealth that you might need to access in the shorter term. However, what's unusual about the past few months is that bonds have been getting whacked too!
Here's a comparison of four Vanguard funds, with stock:bond ratios of 80:20, 60:40, 40:60, 20:80 respectively: https://totalrealreturns.com/s/VASGX,VSMGX,VSCGX,VASIX What I find interesting is that they are all experiencing significant and comparable drawdowns right now.
I'm of the old school bogleheads mentality. I've typically been ageInBonds since I started investing after the great recession. While I expect poor stock performance, I am pretty shook by the poor returns on bonds. I accepted years of poor performance with the expectation that they would cushion the blow during the next recession, and they have done nothing.
I don't know how long, or how bad this recession will be, but I will likely be much less willing to hold bonds going forward.
I think part of the problem is established dogma (and regulatory regime) that believes bonds offer diversification from stocks. However this seems to have broken down post 2008, as they have become increasingly correlated.
Imho it's healthy to expect that market regimes change, especially since we do not operate in free market, but a semi-intervined market (where the Fed sets the price of money which is an incredibly important input to the global economy).
I also think it's important to not think of diversification in terms of asset classes anymore, but in terms of alpha source.
I know this is much harder to do because, as far as I know, only by actively trading can you isolate and quantify alpha sources like this.
At an individual bonds maturity I get the full principal back. How do I do that principal back from a bond fund if the value has dropped due to the macro environment?
The value will have dropped, but the distributions/dividends you got in the meantime will have made up the difference. The fund and its underlying holdings must end up even in the end (minus fees).
Bonds have been the only thing backstopping my 401k from taking the bigger hit that equities have taken, the Vanguard 500 portion itself is down 21% or something and total I'm still down 16% or something like that YTD.
I'm guessing it's the "real returns with investment" that is painful here... bonds may not be losing (as) much but they're also not keeping pace with 10-15% annualized inflation either.
Due to the way energy prices (which are a massive component of everything else too) are factored out of CPI, even TIPS probably has negative real returns at this point compared to reality. Is there a non-CPI TIPS equivalent, lol?
There's more than just monetary policy and war. Monetary policy would imply demand for gas is up, driving prices up. But demand for gas is still lower now than it was pre-covid.
Oil is on its way out the door. Oil companies all have projections that show demand for oil increasing in the short term and decreasing in the long term. The list of their options to (1) increase their profits by (2) increasing the supply of oil are all investments that only pay off in the long term. Hence, even as prices rise in the short term, they are making calculations off the long term and finding it not very profitable to increase supply. Simple economic theories of corporate response to supply and demand don't work nearly as well with this long-term, short-term incentive difference.
Correct me if I'm wrong but that chart shows gas prices on feb 21 being as high as in 2014, that upward trend just looks like a recovery from the $1 gas we had at the begging of the US "stay at home order"
Most of the pre-war rise was recovering from the covid crash of gas prices. The price overshot its pre covid level a bit, but that can be explained through supply issues (you can't increase production on a dime; demand was difficult to predict; and suppliers prefer to under produce than over produce)
We have a president who is hostile to oil.
Let's ignore if that is a good / bad idea for moment.
It's been long enough that price of gas reflects those decisions.
Except we've been drawing down our strategic oil reserves to keep prices cheap for the moment. So really it should be a lot higher.
Real pain will begin when the reserve runs out of good oil.
Gas is pulling up the CPI right now, but it's always volatile. Shelter is slow, strongly linked to monetary policy, and the highest-weighted component in the CPI basket, and it's up 5.6% YoY, with a lot of inertia to keep growing. That suggests to me, in a back-of-a-napkin way, that about half of the current inflation is due to monetary policy.
Remember how gold was going to protect you from hyperinflation?
Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell.
The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year.
The funny thing is that both can be true. Inflation can soar and the economy can crater. The Fed can be accommodative while inflation runs hot. It has happened before. If it happened again, it's hard to imagine a scenario that would cause greater confusion.
> On a monthly basis, headline CPI rose 1.3% and core CPI was up 0.7%, compared to respective estimates of 1.1% and 0.5%.
Here's the number to pay attention to. CPI increases are accelerating. Have a gander at this chart:
Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance.
> Something nasty is brewing in the economy. It will be obvious when it hits but until then it will be confusing as hell.
It's only confusing because of FUD from governments who know damn well we've entered a world-wide inflationary death spiral driven by the debt created to perpetuate the idea of infinite growth, even in the face of the system repeatedly trying to correct by popping bubbles. Turns out that reinflating the very bubbles that just popped is exactly the wrong strategy.
Also, in the US we are facing the fact that the vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters.
Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in. Meanwhile they are sticking it to consumers with inflation (even shrinkflation) and then complaining about worker shortages!
> Record profits across the board for corporations, highest CEO pay ratios ever recorded, massive housing bubble; the monied class is making off with their spoils and cashing the stock market in
> Meanwhile they are sticking it to consumers
That's a lot to parse, but I'll give it a try.
"Record profits across the board for corporations" - Record profits is exactly what you would expect with lingering low interest rates + lowered rates from COVID response + unleashed demand post-COVID. This was by design, because profitable companies don't fire everyone and create a recesssion from unemployment. Or tank the stock market and thus housing market and thus create a recession.
And you're a quarter out of date. Profits and margins have been compressing in Q1 2022 and look to continue.
"Highest CEO pay ratios ever recorded" - Exactly what you'd expect with a roaring stock market, given equity-biased compensation. That will correct, as it always does.
And furthermore, talent compensation is already increasing and on every HR department's priority list. [0]
"Massive housing bubble" - Low interest rates + stimulus + lack of supply + sudden demand spike = price spike. Fed rate hikes will cool this off fairly quickly.
"The monied class..." - You mean, everyone?
"... making off with their spoils and cashing the stock market in..." - Reallocating and diversifying assets?
"Meanwhile they are sticking it to the consumers with inflation..." - Who is "they"? Some generalized bourgeoisie who control the means of production and arbitrarily set prices?
See earlier point (and google for statistics) and margin compression for what's actually happening: companies are passing along less than all of their own cost increases.
To me, the subject of "the monied class is making off with their spoils and cashing the stock market in" seems intentionally generically-bad, so as to be outrage-driven agreeable to everyone.
Are we talking about the hyper-wealthy? Business owners? Business managers? Investors in general? It's unclear.
There are a lot of complicated things going on and being generically angry at people with "more" money is uninformative and unproductive.
As near as I can tell, the parent's policy prescriptions amount to (1) we should allow asset bubbles to pop harder, (2) we should have created less(?) or more strictly controlled(method undefined?) COVID emergency debt, and (3) we should implement price controls for consumer goods(?).
Frankly, it IS outrageous that a few dozen or hundred people own more wealth than 50% of the population. It would be one thing if that wealth was well and duly earned, and well and duly enjoyable. But when an individual commands hundreds of thousands of lifetimes of wealth[1], an unimaginable sum that they cannot even physically enjoy in their time on Earth, and at the same time both pursues more money and tells us that they should be taxed less, I call fucking bullshit!
[1] At $300 billion supposed net "worth", Elon Musk could retire ($3 million a pop) literally 100,000 times over. Or, he could retire, not making another cent, and live one hundred thousand times better than the average person. If his wealth only grew at par with inflation, he could literally spend $100k a year for three million years.
The fact that this much money is earmarked for this person, or any person really, is only possible because the enormous pyramid schemes they are able to set up which are paid into by speculative investors.
In my frank and honest opinion, there are NO words you can say, NO ideas you could have, NO labor that you could undertake, and NO buttons that you can push that morally justify the tax on humanity's subsequent activities that funnel that much wealth to you. Hands down. And with that money you have zero goddamn problems that justify you offering policy input that personally benefits you. We should shun such money addicts, not lionize them.
At that level it's not wealth, in the sense that we think about wealth: it's relative power.
The power to make something happen. Like "Long range electric cars should be a thing, now" or "Reusable rockets should be a thing, now." Even and especially when most other people think it's impossible and disagree with you.
Or you can just build a gold-plated swimming pool and ensure your descendants never have to work.
Is that productive? Eh. Versus what? It certainly allows for more risk-taking than government, minimum-cost bidding projects would target. DARPA et al. aside.
It's certainly not fair.
But from a fairness of opportunity perspective, there are certainly more egregiously-born examples who have objectively produced less to show for it than Musk. Or than Ted Turner, to use another random positive example. (E.g. Barbara Hutton for a negative example)
Elon Musk doesn't have 300 billion dollars. He owns 17% of a company that, if all the stock got sold at its current price, would be worth 743 billion dollars (plus similar for SpaceX, so I think your estimate is too high). Similar situations are true for most billionaires. They're not hoarding money. They have built and own organizations that produce very valuable goods and services.
Hacker News is a forum for entrepeneurs. The idea that successful entrepeneurship results in valuable companies shouldn't be foreign. Nor the knowledge that societies that confiscate the fruits of successful entrepeneurship, will soon not have any entrepeneurship at all.
Maybe the consequences of that in terms of individual wealth ownership are unpalatable to you, but the alternative would result in an option that is net significantly worse for society.
> confiscate the fruits of successful entrepeneurship
I don't accept this framing. That framing is what I thought 20 years ago. It's been the root of a major realignment of my thinking in realizing that these people more accurately have been successful at creating large organizations of people that instead do that fruit production, fight to keep themselves on top of that organization and channel the majority of the profits of those organizations to themselves. How else could you explain the massive, some would call obscene increase of CEO pay ratios over the past four decades? Are CEOs 10x or 100x more productive or good at making decisions than four decades ago? Do they do 10x or 100x more work? It's completely implausible. CEOs continue to be compensated insanely well, even when they make bad decisions and their companies go under.
The real answer is such titans have been more successful at changing the culture to make it acceptable to channel a larger and larger portion of their organization's profit to themselves. It's all mathematically impossible that these people could have done anything to produce so much more "entreprenurial" fruits themselves. Rather, they are the ones confiscating those fruits from their employees and their companies and are benefiting from the casino-like nature of speculative investment markets fueled ultimately by money created out of thin air by debt.
And on top of that, they tell us that they are being stolen from! Gaslighting horseshit.
> Maybe the consequences of that in terms of individual wealth ownership are unpalatable to you, but the alternative would result in an option that is net significantly worse for society.
The alternative? Surely there are more than two ways of organizing society: (i) one with successful entrepreneurship but large wealth inequality, and (ii) presumably one without successful entrepreneurship along with various other characteristics that make that society clearly "net" worse than it would be in (i).
For example, I could imagine a tax regime which resulted in a cap on individual wealth at, say, 1% of GDP. Or 5%. Or 0.1%. Or ...
It's not clear to me that there's an unambiguous demarcation between only two types of societies, and one which is observed across all possible policy or economic schemes.
I think the dollar is just fine. The problem is that there’s a war in Europe that’s making food and energy more expensive. And also China is just off on its own facing a real estate collapse + the fallout of idiotic lockdowns.
Things will cost more. That’s hardly surprising. Energy is really important.
Prices weren't just going up in December, they've been going up since 2020. The asset class boom beginning in 2020 was mostly just a graph of inflation. Trillions of new dollars in the economy, record low interest rates, PPP loans. I don't know if you realize this, but the actual economy wasn't booming then.
The CPI data took years to catch up because consumers are quite price sensitive and detecting and responding to increased demand is a delicate process.
Yes, of course the prices went up due to frantic actions taken by governments in the course of the pandemic. My point here is simply that blaming the inflation on war is simply trying to shift our attention and absolve themselves of responsibility.
Problem with citing the pandemic is the dissonance that red folk were very against shutting things down for just this reason. Meanwhile resurgence of COVID proved the shutdowns did little on a 5 year timescale
Folks gained some immunity (and experience in dealing with COVID) since the first few waves.
Plus at best there was a big slowdown, but there was no serious shutdown, many people still worked and got COVID, eg. people who would have otherwise worked at the port. (Though even a serious lockdown doesn't help much. (We saw this in China.)) And mask wearing was so far from ideal that it was not able to seriously decrease the transmission of the disease.
What's true is the shut/lock/slow part made no sense after we got the vaccines, and it's also quite obvious that there was just not enough stockpile of basically anything to do a ~1 month lockdown to stop the spread of the disease. (And the moment the first international plane landed it would have started again.)
The way you worded that somehow makes me think you aren't talking about the OPEC+ deal from 2020 that drastically reduced oil supply. Because strangely, not a coincidence, domestic production has been up since that deal expired.
I don't disagree that oil prices drive inflation since almost everything needs transportation, especially in the US where even domestic goods have to travel huge distances. But a "war on domestic production" is not evidence based.
Closest thing that could be serious considered a war was OPEC+, which I understand why Trump did it, prices were plummeting and we wouldn't want the entire sector to crash.
My gut feeling is that you’re correct and this is money printing coming home to roost. But lots of folks say that isn’t what it is. And I’m not an economist. What sources have you found helpful to explain what’s going on?
It seems to me traditional the story of supply side constraints (lots of places cut capacity for COVID, China is shut down) plus pent up demand (from savings and all the government spending) caused inflation.
When looking at TIPS and inflation expectations it looks like it's not quite self reinforcing yet.
But there wouldn't be anywhere near the same level of demand (pent up or otherwise) if there wasn't any money printing / near 0 interest. (Government spending is over budget - they were able to spend more than they have because Fed gave them a good chunk of the money they printed in exchange for treasuries).
This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation.
Had dollars+credit decreased with the supply of goods instead, people selling goods would have trouble demanding more dollars. For hyperbole, if only 1 dollar existed, no one could sell something for more than 1 dollar, no matter the supply of goods. People might still try to demand more than 1 dollar for their goods, but trade with dollars would cease to happen until they reduced their demands to <= 1 dollar.
If the government drastically increased interest rates during covid you're right we'd have less inflation. I don't see the argument here.
> This is what people seem to forget. Trade involves two items, so you gotta look at both sides of the trade (in this case credit+dollars vs goods). Dollar supply has increased dramatically since 2020, credit near free, while the supply of goods has decreased. Obviously that's a recipe for inflation.
I don't think anyone forgets this. The standard model says supply constrained + generous fiscal/monetary policy = inflation.
The parent post mentioned "money printing coming home to roost. Lots of folks say that isn’t what it is." I too seem to have encountered people saying the money printing is a non-factor, and it's just supply chain problems. In reality, both are factors.
There is this from Dalio who suggests money printer go brrr policies sank the Dutch and Brits: https://youtu.be/xguam0TKMw8
While all the fancy math is great for drawing geometric shapes, human intuition and basic arithmetic run the economy; human intuition for quantity has been evolving for millions of years whereas our fancy languages are only 5,000 years old (so says historians). We annotate our arithmetic operators differently for calculus and the rest of higher level math, but at the end of the day with only 13% of the adult public possessing an “advanced degree” most people make pretty basic arithmetical decisions.
Smart people used their education to get ahead but the rest of the world has caught up and caught on as <50% believe in higher powers now; elites are just people, not specials to be kowtowed by.
So what’s happened is again elites tried to form concrete agency habits into the masses (like religion did) but the masses agency does not concretely conform to rigid mathematical objects and the elites are now out of touch; either by stubbornness or age, they can’t handle they’re the ones losing ground all this time.
So in the end economic policy was always politically motivated power consolidation for the elites, and the public, probably thanks to the meta awareness of our communities the internet provides, has caught onto the big picture game. Like Assange said; only the highly numerate will be able to see. I like to think it’s because such minds are not as swayed by cable group think.
So here we are saving like the Fed said and emotionally normalizing to a recession coming because that’s what we talk about, and so we’ll create a self fulfilling prophecy of it because like the number say, only 13% have an advanced degree; the masses will go along with Jerome Powell and the cable news channels telling them; stop spending, save, because a recession is coming. And stopping that simple arithmetic spending at scale will trigger a recession.
Subs will get cut to services. Services die off. What’s left is the new “real economy”, and off we go again. Conveniently not giving a toss about general public who got hurt while the elites look smart for getting us to believe they saw the future, and ignore that listening to them really just modified our economics behavior to make it all true.
I've asked here in another thread but didn't get an answer.
What can the average _not_a_billionaire_ investor do to weather this out (not knowing exactly what _this_ is)?
In my example I have most of my money on Index funds (with a 60/20/20 split between US markets, China markets, and sector specific ETFs) plus an emergency fund that lasts me about 12 months and I (unfortunately now) earn in Euros.
My best guess:
* You can invest in covered call funds[1] (like QYLD) and equity-linked notes (like JEPI) as a hedge. This will lose out to index funds in the long-term, but should be better during volatile periods.
* The US has I-bonds[2]. An equivalent may exist in your country.
* Having an emergency fund is good.
* Diversified investments is good.
There is no good answer. I think Lyn Alden said the same in a tweet recently. You will most likely lose no matter what short term.
My conclusion is that long term it's probably good to be in stocks. The problem is that stocks might go down a lot before recovering, years from now. And of course you cannot time it.
We've had massive deficits for decades. It requires pretty strong evidence to claim that the problem is something that is common to the past few decades rather than the things that are unique to the last couple of years.
As much as I know that governments and central banks are to blame for inflation in a general sense, it can’t be understated that A LOT of this inflation is due to starting and stopping factories, ports, etc. in response to Covid over the past two years. There’s a long chain to finished products and when one link in the chain has an issue, everything else downstream suffers and price increases compound.
In short, a lot of what’s happening comes back to the debate we had during the early part of the pandemic... one side said shutting down the world would have major consequences down the line and we’re seeing that now.
This bothered me during those discussions everyone who pointed out the potential impacts to the economy were shouted down for "caring more about money and people" and "putting the rich ahead of grandma" like the economy was some nebulous abstract betting ring that only effected the powerful and wealthy.
No one seemed to understand that those kinds of things were going to have much more drastic effects for everyday people as well. This same thing goes for the stock market, sure I don't have a ton of money it it, but I do keep putting money in my 401k and so do a lot of other people that are depending on it for their retirement, when the stock market takes hits it effects me just as much as the "elite".
IMHO, the earliest shutdowns were defensible on the basis of ignorance: we knew so little about the communicability and lethality of SARS-CoV-2.
It would have been irresponsible to risk chicken with something that might have had MERS lethality.
Eventually we put tighter bounds on those quantities, and could make more informed decisions. But yes, all stages of the pandemic were unfortunately people talking past each other, without being actually curious about the pros/cons of various approaches.
But it's been awhile since the political class has had to deal with an actual existential science problem... so that muscle wasn't very strong.
Japan is an economic outlier in a lot of ways (i.e. savings and birth/immigration rates).
And I think it's a great example that most of the actual drivers of economic outcomes are unmeasurable. What we actually measure and react to are themselves second order effects of those primary drivers.
Which is why we can compare two situations with similar (second order) metrics (but different primary drivers) and be puzzled by different macro outcomes.
I think instead is that the mistake was to measure them in terms of money, which is a token, a signal, and hence not "real" (not to mention subject to feedback loops when trying to focus economic policy on that signal !)
If they printed enough money, they could generate all the inflation they wanted (or live in economic utopia.)
Basically, keep using newly printed money to buy up assets around the world. At some point you either own the globe, or you'll get the inflation you wanted.
With boomers retiring and deaths and disability due to covid taking workers out of the pool, along with suppression of immigration, there's a large overhang of jobs compared to workers. This is giving average workers negotiating power which is creating wage growth.
That is what the Fed and the business pages are really most concerned about and the sternest warnings from the Fed are about the labor market. Not the headline CPI numbers.
The fact that the "man on the street" now believes that inflation is purely a monetary phenomenon, though, means that every time wage inflation rears its head that people will clamor for the Fed to punish the economy.
The Fed is going to have to crash the economy to create a recession and thereby cause deflation. There will almost certainly be detonations elsewhere in the economy (commercial and residential real estate most likely) that will further cause deflation. High CPI will be transitory because this Fed doesn't care about tanking the economy. Billionaires also don't care about tanking the economy, the past 20 years have taught them they always wind up even more on top than before.
What will be interesting though is to see what happens when they've had enough of pain and start to support the economy again, then inflation will probably come roaring back, since its causes are now the structural conditions of the wage market. Then there will be renewed calls to tank the economy again and people will object to the Fed doing anything to try to support the economy with exactly the same rhetoric here. In the near term future (~10 years) any time the inflation numbers tick up the stock market may crash on its own now.
I suspect we're now in for a decade or more of stagnation, although alternating periods of inflation and recession should average out. I might be wrong though if the billionaires decide it is too painful and want the Fed to turn the money spigot back on. But as a lot of this comment section shows, the managerial class has now been taught to really deeply hate the Fed doing that, and believes it to be the root cause of all that is ill.
I suspect the massive money printing going on for years has had no impact because most of that money never actually landed in the hands of actual people and just existed to be sucked up by wall street and elites. And they dont spend in a way to impact prices.
But enter covid money printing actually reaching normal people (even if alot of it got soaked up too), plus the elites using the money to buy things normal people want instead of rich people nonsense (buying housing as "safe" investment during covid), plus all the money that was going towards servicing student loans getting spend in the economy, plus normal people using their power to get more wages due to worker shortages and here we are.
> I suspect the massive money printing going on for years has had no impact because most of that money never actually landed in the hands of actual people and just existed to be sucked up by wall street and elites. And they dont spend in a way to impact prices.
Yes. I think we had something like monetary inflation but it was all captured by the upper 1% and 0.1%. The policies suppressed wages down the Ginni Coefficient ladder and actually contained inflation. This produced low interest rates due to low CPI inflation expectations. But it would up producing what economists call asset bubbles rather than inflation. This has also built up over the past 30-40 years ever since Volker in 1980, it goes way beyond the post-2008 recovery and the pandemic.
We're now seeing the point where this has all become unsustainable, and the masses are clamoring (rightly) to get a share of it. Either we're going to allow that inflation to run downhill now and re-price via inflating wages and suck up the smaller pain of inflation, or I think we're going to have to inflict truly severe economic pain of multiple deep recessions. Given how much people now deeply hate inflation, now that wage inflation has reached the baristas and food service people, it looks like we're going to choose recession.
I think it is more that the earlier money printing addressed more normal, slow moving business cycle issues, and so slowly backing off of it worked exactly as planned. With COVID, the money printing was addressing a fast moving and fast correcting temporary effect of organic and top-down behavior changes in the early part of the pandemic, which snapped back hard with general reopening, meaning the normal pace of unwinding fiscal and monetary stimulus was too slow to prevent the measures meant to prevent catastrophic depression and deflation combining with the rapid economic rebound to produce inflation (there’s some pieces that didn’t rebound which actually exacerbated the inflation effect, e.g., supply chain capacity.)
Another element here is that a lot of that "money printing" went overseas. Agree with what you say, this time it was all sent domestically as part of stimulus checks.
> vast majority of emergency debt created to combat economic shocks from COVID was embezzled by corporations and fraudsters
I would at least expect that to be less inflationary than that same amount of money ending up in consumers’ hands and being rapidly spent without an offsetting increase in production.
When the government opens up the feeding trough, it should expect pigs to show up. I agree that it probably can’t be blocked up front, but fraud needs to be prosecuted aggressively after the fact.
You’re missing the parent’s point: in a counterfactual scenario, if as much money was handed directly in stimulus checks as was used to pump assets, the actual inflation would be even worse, because velocity of stimulus money is much higher than velocity of asset.
No, I did not miss the point that asset markets have lower velocity. Quite the opposite: I found it obvious and repulsively self-serving to invoke this as an excuse for rich people to print and pocket ten times as much money.
I don't see anywhere that I said that it was a good excuse to do that, merely that (in a thread specifically about inflation) I commented on the relative impact on inflation of high-velocity money vs low-velocity money.
And yet people have argued for decades that stimulus money going to corporations is multiplied many times over because those corporations supposedly create jobs which supposedly creates even more economic activity. Why is it not the case that stimulus money to corporations creates multiplicative inflationary effects in the same way?
Companies grow by producing supply of products/services for sale. They also turn around and employ staff. The first sentence represents the creation of supply; the second the creation of demand [via the payments of wages]. That's much more balanced than if you just give money to consumers, increasing demand without a corresponding increase in supply.
You conveniently left out the part where they are entitled to pocket it if they can, sending it straight into rich peoples' brokerage accounts, where it was intended to go all along.
Yes, the brokerage accounts of rich people have less velocity than the bank accounts of poor people. This makes it more scandalous, not less. People who didn't need the money took ten times as much, because they could, and now they are pointing accusing fingers at the little people. Again.
The irony of this statement is that it's so often the case that people argue for lower taxes with "I know how to spend my money better than the government!" Then when it comes to stimulus money, it's the complete opposite: "Don't give it to consumers, that'll cause inflation! Give it to corporations, they know how to spend it! They'll make jobs or something!"
We cannot make sense of it because we try to assess a global problem with American data.
It would be an easily explainable problem if the US and only the US printed a ton of money and got overheated market.
The problem is that virtually every country printed a ton of money during the pandemic. So the demand overheated globally.
On the supply side we have:
a) Chinese factories working intermittently due to COVID restrictions
b) Russia who cannot participate freely in the gas market anymore and their threat to cutoff Europe during winter
c) The supply chains are experiencing full scale bullwhip effects working overtime to satisfy demand that is not there anymore.
These incur huge import costs to any country.
So even if the US had printed zero additional dollars the past two years, we would still be experiencing inflation due to the vast raises of the cost of our imports.
Supply issues can be alleviated with less demand, which is precisely what the fed attempts by raising interest rates. So your logic about not printing dollars not having an effect isn’t spot on imo. You also ignore the fact that USD is the reserve currency making it difficult to compare to other countries.
That’s good though. We generally want demand to stay strong. Inflation sucks but if it’s just prices going up because supply went down, well that’s just the breaks.
right, it is relative in a way too right? because for the factory and parts suppliers the demand is what comes down the supply chain... So one day they will be producing and getting parts for 10 cars and the next time nothing at all. So the part suppliers will see the demand of its production to fall, even though there might still be 1 person buying one car.
It's good news if demand stays strong at a certain price point. If we are in a highly inflation environment and demand does not drop however that is not so good.
Let’s assume that we over reaching 10% of the global oil market, meaning that due to high demand we extended the supply by adding 10% expensive sources of oil.
To get the prices back to the original we need to bring down by 10% the *global* demand.
That means that the US needs to cut 50% their oil consumption (demand) if they are to act alone.
By increasing rates on USD you can affect demand globally. We are not in isolation as you seem to be so convinced. Also I have no idea why you'd compare global supply to domestic demand. Again, reserve currency and petrodollar status.
The last few years of zero interest rates has meant that a lot of people made a shitload of money . There is plenty of cash and liquidity around.28 year old FAANG engineers with 600k in savings and a house (as an oldie I am in awe).
Inflation is here to stay for the next 5 years at least no matter what the Fed does about it . Plenty of people sitting on cash and multiple houses at 2.x% mortgages . They have plenty to splurge on that trip to Aruba.
Yeah I'm in my 40s and I don't have that much in savings. Of course, working in failed tiny startups without 401k plans for most of my 20s didn't help. I've been doing my best to make up for lost time the past few years, but I've still got quite a ways to go before I get to that point.
But 600k in the bank is still not the norm for Americans, only a small percentage of them. Most are really struggling right now.
Who keeps 600k in the bank? I could have it in stocks and be making around $16k/year in dividends right now (that's just me picking a stock at its current price and dividend, I'm sure it would have been over time otherwise), while riding out the recession.
If you believe that the stock market is going to go downhill as well, investing in a stock is only worthwhile if it loses less than it pays in dividends.
I guess that a lot of people are on the fence about whether they should short stocks since "everything is going down" or just sit on their cash reserves, eat the inflation and hope to buy in again once the bottom has been reached.
Or you can stop trying to time the market and keep buying through the downturn. Might make less money that way, but you also don't risk totally mistiming the bottom, like a lot of people likely did back in March 2020 during what ended up being the shortest recession ever.
Granted I think this recession is likely going to be significantly worse and longer than that one. I'm still taking advantage of the the 25% discount on stocks and buying, though.
Also I suspect we're in for some terrible shit in the next 5-15 years with the way the environment is heading (the physical environment, i.e. lack of water, topsoil, ocean acidification, etc), but I also suspect we're in for at least one more solid bull run before that happens.
If it lasts for multiple decades, then that flies in the face of the entire history of the US stock market and we're probably in for a US collapse at that point (especially considering most of the biggest companies in the US are multinational) and keeping money in dollars in a bank is probably equally foolish.
I've lived through crypto winters before that have lasted 2+ years. If I had bought a little bitcoin every week during that time I would easily be retired now. I plan to do the same during this downturn, but focused more on stocks (also getting a small amount of crypto). I didn't have the spare cash back in 2008 during the Great Recession, or I would have done extremely well for myself then too.
If for some reason the stock market stays fucked for decades, then I am acquiring other assets too, like precious metals. Also guns and ammo and goods to barter with might not be a bad idea in that case.
Oh it's a ponzi you say? Well if only someone on the internet had mentioned that sooner I wouldn't have wasted my time with bitcoin then. Let me just sell everything real quick...done. /s
Thanks for being casually insulting. I know Hacker News is full of those comments so I'm used to it, but I'm not sure how you expected me to respond to your comment there, or what benefit it would add.
Your comment comes off to me as if I said something like "Oh look, I just got a pet mouse!" and you responded "Mice are crappy pets. It's going to bite you and give you the plague."
For the record, I said buy every week (as in DCA, or just buy no matter the price, all the way up until now), and I'd be retired now. That's not 'buy at the bottom, sell at the top'. It's currently $20,000, and that's not "at the top", the top was ~$69,000 in Nov 2021, so now is nowhere near the top right now.
First crypto winter I held bitcoin through, the price was hovering around $200 every week for two years, so I could and should have been buying more that entire time, instead of checking the price every couple of months to see if anything changed and buying nothing.
But I probably could have accumulated at least 40 coins potentially based on my income then, with a few sacrifices (by that I mean less going out to eat and buying a bunch of random video games that I'd often play once or twice and never again...still a problem I have today, it just makes up a smaller percent of my paycheck now). I was excited in bitcoin even then, but I was also a lot poorer, making about 15-20% what I'm making now, and I also wasn't prioritizing it as much as I could have been.
Even still, I'm not dumping all my earnings into this stuff. I put far more into my 401k/stocks than I do crypto.
This has never really made sense to me. Maybe if you're a big player somewhere, but the average person didn't get a 9% raise in June, inflation isn't really affecting their debt at all
>>Having it as debt instead of in the bank sounds even better as inflation eats your debt away.
This is a crazy hack, in countries like India where a home/rent-income is a defacto investment, being in debt is cleverest way you can can have your investments subsidised by the economy(general public).
One of the biggest things you can learn as an adult is to be comfortable with manageable levels of debt.
Others are discussing that the 28 yo FAANG engineer is such a small population that it's not relevant to the larger picture, which may be true, but misses the larger point that _lots_ of people had extra money of which the FAANG engineer is just one example. Home owners refinanced. Parents got the child tax credit. Federal and state-level stimulus checks. And businesses took 75% of PPP dollars for purposes other than wages.
It may be "a lot of people" in an absolute sense, but it's still only a small fraction of the population. Specifically, the fraction that was already very wealthy.
The poor are getting worse off, with wages not rising nearly fast enough to keep pace with inflation (not to mention being basically sacrificed to keep the great money machine running during COVID).
And they're already starting to do something about it: the unionization push is accelerating (I saw several weeks ago a figure that at the beginning of the year, there were zero unionized Starbucks, and at the time of that posting, they had just unionized the 150th), and if inflation continues at this rate—or higher—without some significant changes in wages, etc, we might start to see bigger problems before long.
> 28 year old FAANG engineers with 600k in savings and a house
This is truly such an exxagerated strawman. It’s such a minuscule number of people, and they’re definitely not 28. Plus, the sky high salaries are for senior engineers, not juniors.
600k in savings, not a 600k salary which I agree would be exceptionally rare and not the norm for 28 year olds (but definitely possible in the finance world for the top performers)
A FAANG engineer that joined just out of school (~22 years old) and spent 6 years getting regular promotions, awards, maybe a move into management, etc. and all of their initial stock awards vested could very well have 600k saved over that time. Doubly so if they're married and their spouse is in the same situation.
Lowest level Facebook managers are in the 550-600k TC range[0]. Not sure though how that compares to other FAANGs, or how likely it is to get there in your 20s. Honestly I'd expect it to be easier to get to M1 at FB than to get into the upper upper echelons of the technical ladder.
I still disagree, there’s so much in income/other taxes that are applied. They spend on exorbitant rents and overpriced goods. Most such people are not frugal by any stretch.
If you could link any survey/study/statistics on the number of such 600k saving individuals, I’d love to see it. Until then, it’s a strawman.
The FAANG example was exaggerated, but the core point still stands. Across the board, labor in US has seen sharp income increases the last couple years, and families have had elevated savings rate for a lot longer. Plus, nobody was spending anything in the beginning of COVID. That latent spending power of households is now being deployed, and huge contributor to inflation.
I find this disappointing because it basically says "anyone who works for a W2 will cause inflation if they are successful"
That shows to me that capitalism is broken if success means inflation. We should be able to swim in cash reserves and safety and not be penalized for it.
> it basically says "anyone who works for a W2 will cause inflation if they are successful"
Then take comfort in that armchair analysis being wrong. If it were true, if FAANG employees’ pay were driving inflation, we’d expect to see local inflation correlate with FAANG employment.
It does not. In fact, almost the opposite is true, with inflation in the interior outpacing that on the coasts [1][2]. (Shipping.)
My armchair analysis is that we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales
Or in other words, the rest of the country catching up to the big cities
> we have heavy inflation in what were low-mid CoL cities as the big money remote workers cash out of the coasts for cheaper locales
Internal migration is too slow and too small to explain the interior’s price shocks. Also, it’s not like the coasts are withering away. Real GDP growth in California and New York was better than the national trend in Q1 2022; the interior saw the worst of the real economic shock [1].
>Internal migration is too slow and too small to explain the interior’s price shocks.
As anyone who paid any attention to the housing market in the past 2yr knows, if you have 10 houses and 11 buyers...
>the interior saw the worst of the real economic shock
That places that have economies that are more dependent on physical goods, services that cannot be performed remotely and high volume low margin types of business (which are heavily affected by supply chain stuff and commodity prices) should not surprise anyone.
My primary point was that the extra demand caused by FAANG driven monopoly money suddenly sloshing into these other markets could easily cause prices to increase far beyond what the dollar values and number of people would make you think because supply for all sorts of things is not elastic enough over a short enough time period.
At least in housing, this seems to be the case... In cities like Seattle, the DMV area, etc., I hear about price decreases and homes sitting on the market for weeks.
Where I'm located(east coast LCOL area), we still compete with ~15 bidders for every house, and they're still reliably selling within 2-3 days for 10% over asking, all cash, with inspections waived.
Obviously part of this is a supply issue, but, I have a strong suspicion the rise of remote work is a contributor to price increases near us. We live a short distance(~1-2 hrs) from several major metros, and with the flexibility to go into the office only a few days a month, It's feasible to take a much higher paying job in somewhere like NYC and commute. Local wages for engineers here are/were also much lower than what was offered for typical remote roles, so I'm sure that's causing an additional upward pressure
Isn’t this a result of inflation in the interior finally catching up to the ridiculous pace that the coasts have had as coastal money flees inward due to WFH and unaffordable housing prices?
That is not at all what is going on here…it’s not the people with all the money, it’s the underlying monetary policy(little to no interest rates for a decade combined with money printing) that led to those people having that money. If a tech company couldn’t borrow cheap money early on, they couldn’t afford those wonderful compensation packages.
Apple, Netflix, Amazon, and Microsoft aren’t advertising supported and while Google does profiting from cheap money Google’s margins are insane. So, they can take a significant reduction in revenue without changing their business model.
I keep getting YouTube adds for the same kind of things I have seen on TV. Tide pods, dish soap, toilet paper etc alongside Door Dash’s attempt to recruit workers. They would definitely make less money without door dash but not enough to matter. Much like how startups keep splurging on Super Bowl commercials but the Super Bowl would still make lots of money without them.
While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way. Energy and resources have various allocation models that can be adopted, we just seem to be moving right back to the darwinistic models more and more which makes me question the stability of societies in general, especially as allocation systems tend to deviate away from natural allocation systems yet remain darwinistic.
If we continue along competitive models for allocation to the end, we're right back where humans started before forming societies except in an articicial darwinistic model which I'd say people are increasingly rejecting, so we need to start thinking a bit more about more equitable allocation systems than we currently have. Right now, I'd say the general population is pretty fed up with existing allocation systems.
> If we continue along competitive models for allocation to the end
Competition is a very strong motivator for progress. Even if you didn’t embed it formally within a society, I bet it would very quickly arise and build upon itself.
Anti-competitive practices are the cornerstone of unregulated societies (via mafias), but it certainly would in the (theoretical) absence of that. It's a fundamental property of entities that try to achieve things, of which humans are the prime example.
You can still have competition and create competitive forces that drive and motivate people, they don't have to be tightly coupled to fundamental energy and material resources needed for survival, or, they can follow classic models that assume necessary baselines for enjoyable survival levels for everyone and then provide luxury allocations for competitive successes. There's all sorts of options out there instead of directly mirroring natural selection in abstract human created systems.
> While I agree with the premise of finite energy and resources here, I don't agree that current systems are an inherent consequence of it. It's the way we as societies have allowed things to be structured. They don't have to be structured in such a way.
Yes, I do not see a problem with capitalism coexisting with a wealth transfer mechanism to constantly “reset” the game a little bit to prevent extreme disparities. Well, other than the fact that humans would have to allow it to occur.
The moment a centralised institution controls interest rates, and has the ability to buy government debt (in other words finance government spending without the market buying bonds), you are NOT talking about capitalism, but about government controlled markets.
“The public holds over $22 trillion of the national debt. 3 Foreign governments hold a large portion of the public debt, while the rest is owned by U.S. banks and investors, the Federal Reserve, state and local governments, mutual funds, pensions funds, insurance companies, and holders of savings bonds.”
> The public holds over $22 trillion of the national debt.
This is amazing. A very few seem to realise that it says the public buys and holds a promise on a future productive capacity of that same public. It's as if I paid another person for the privilege of promising myself to behave and work for that person overtime in the future.
* We're seeing June numbers. Gas prices lately have plunged relative to where they were
* supply problems are moderating
The one thing the fed should be worried about is another unexpected supply shock -either a COVID wave that affects Asia etc, or natural disaster that drastically affects energy. Then, the economy is in a deep bind and the fed has their hands tied.
It seems like that is only true if you're in a niche (like skilled tech) or if you're <$20/hr. I see tons of openings for shit jobs (low wage and/or bad environment).
Even being in tech and making under the national average for devs, I don't see many good jobs posted that fit with my experience. I'd like to switch industries, but that would generally require a significant
pay cut and other downsides with things like working construction, warehouse, driving a truck, etc.
The mechanic route is something I thought about. It seems a little questionable given the shift to EVs with lower maintenance needs and manufacturers (TSLA) being restrictive.
Becoming an electrician is currently at the top of my list. There should be considerable future work with all the various popular changes (EV chargers, solar panels, old homes being updated, new home and office construction, etc).
Crude oil has plunged. Gas prices pretty much remain elevated. I still see a lot of locations in Los Angeles charging preposterous $7+ a gallon with general prices pulling back $0.25-$0.30. That's a not a plunge.
Financial markets are leading indicators of job markets. The stock price is about expected future performance. When that bad performance materializes they decrease hiring and start layoffs. Then tax income decreases, which leads to public sector budget issues, so they start cutting too.
Apple and MSFT and the rest of big tech are safe havens.
It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.
My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021, and the reasoning was pretty sound. I'm kicking myself today for dismissing them.
> My favorite one is, you can't time the markets. Quite obviously a lot of people correctly timed the market's trends...
Whoa. Think about it, there are constantly people thumping their chests and posting their theories about how things are under and over-valued, and pretty much everything else (like the world ending). If you think that because some people made a winning bet with their money that timing the market in general is a good strategy, I'd suggest you never play poker seriously.
I would agree, there are fundamental reasons that would suggest different outcomes for investments, and that's sort of an illustration of why you can't time the market. Even if you know the truth, and you believe that the market will always eventually reflect the truth, it's difficult to know how long that correction will take.
Remember, every single shiller is selling you their product. A few additional thoughts:
> Gold and crypto protect against inflation.
No insurance policy pays when the house is already on fire.
> Bonds should be 20-40 percent of a portfolio.
If you believed in inflation north of 3%, why the hell would you own bonds?
> Apple and MSFT and the rest of big tech are safe havens.
Megacap tech is still up tremendously from the 2020 lows. Not saying they're going higher, but they've weathered the recent storm pretty well.
> It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.
This was good advice if you were planning to live in your home you could have locked in rates at generational lows. Sure you were paying up for the house, but your mortgage payments would have been absurdly low. And yes, I'm almost positive over a 15-30 year period you'd be able to recoup your principle.
I'm not sure how you can confidently make any conclusions about any of this while we're in the midst of it. We're not through to the other side of this downturn yet, so who knows what could win?
My casual observation that I'll probably forget about in a few years and maybe remember the next time a real downturn (I'm too young to have ever paid attention to the economy, economic news, etc. during a downturn) happens is that, most likely, everyone gets scared of the uncertainty and dumps their assets in to cash so they're ready to pay off any debts they have. What happens next is unknown.
> Quite obviously a lot of people correctly timed the market's trends starting around the end of 2021
How many incorrectly timed the markets in 2020? In 2019? Etc.
I felt real smart when I sold my BTC at the ~$18k peak way back when. I even told myself I'd wait til it dropped to $2k before I bought more. Seemed smart back then. Not so smart now. Granted, I still made money, but I left a lot on the table.
With bitcoin you could have bought back in at $3500-6000 and rode it back up in March of 2020, and had a bigger bag in the process (or the same bag plus a bunch of cash). Granted things were really scary then.
I'm the even bigger dummy. I held through that $18k peak and crash in 2018, and still held through the $68k peak and crash last year. Still holding, but could have made way more if I had sold even a piece of it when it hit my target ($54k) instead of waiting for the $100k everyone kept promising was definitely going to happen based on previous cycles. Oops.
> Still holding, but could have made way more if I had sold even a piece of it when it hit my target ($54k) instead of waiting for the $100k everyone kept promising
Why not sell now? Wouldn’t you still make a decent profit?
My gut said sell at 69k or even much before. I 100% knew 100k was impossible. Truly I expected 75k or so. But I listened to the shills.
Key lesson -- if a shill has good information, take the information. But make your own decision at the end of day. How it fits into your mid/long term goals etc.
Honestly I was expecting 75-80k myself, and was planning to sell a good chunk then (up to 50%). The 100k I was a little less sure about.
But it didn't even get that far. Dropped almost immediately after getting to its ATH, which usually doesn't happen. The world had to shit the bed and take it down with it before that.
Not OP, but I believe the answer is "on nothing". There is no way to know where it will go. It's just supposition and very specific numbers like this make me cringe hard.
That’s my conclusion after a bunch of losses that could have been gains (not in btc): ease in and out rather than trying to time the market and buy/dump all at once.
> I'm not sure how you can confidently make any conclusions about any of this while we're in the midst of it. We're not through to the other side of this downturn yet, so who knows what could win?
I saw some of the same predictions as GP, they were all about the start, not the middle or end.
Timing the market is often read literally, like someone bought or sold at peaks and bottoms. But a lot of people saw the bear markets coming. Whether they sold in November or August, they correctly timed. Buy and hold investors made the wrong move by holding. It was obvious then to many.
There's a classic scam (I'm sure it has a name, but I don't know it) where the scammer gives out predictions for some stock or other: they pick their (large) group of targets, then send half a prediction that it will rise, and the other half that it will fall. After the appropriate time passes, they are proven right to one half, and wrong to the other.
Then they take the half they got right, and do the same thing again. After a few iterations, their pool of marks is smaller...but they also believe that the scammer is never wrong. (I believe the scammer then tells them they need to put a large sum down—which the scammer will, of course, handle for them...and then absconds with it.)
You're focusing on the ones who got it right, ignoring the ones who got it wrong, and calling it smarts. It's very unlikely to be so. The market as a whole should always be treated no differently than the scammer's entire initial pool of marks.
You forget that you have to time the market correctly 2 times. 1 time when selling, and 1 time when buying back in.
Show me the person who can consistently time the market.
The data is pretty clear on this one: even the professional investors that did better than the index in one period, were not able to do the same in the following period.
Buy and hold, there is nothing better. Try to be smart and you will lose.
But you're using the results of a Pachinko machine to say that some balls knew the right place to land. There have been people pulling money because a crash is coming any day since the start of the bull market. Sure, it's possible to time the market but it's equally possible to make the wrong prediction.
> Whether they sold in November or August, they correctly timed. Buy and hold investors made the wrong move by holding. It was obvious then to many.
In a decade or so I strongly believe my investment will be up significantly from those November numbers. I won't care what happens right now, it literally doesn't effect my plans to withdraw the cash when I retire.
Bears have been predicting the next recession every year since 2008, and calling it "obvious" too. The ones who got the timing wrong -- most of them -- slink away, while the ones who more or less got it right will brag for the next decade. So it goes.
Yes, when there are both buyers and sellers (which is the definition of a market that clears), there will always be a number of trades that were right, and an equal number that were wrong.
Super low rates and a bunch of time on peoples' hands caused the biggest zero sum game in years. Pump and dump.
No new value created, just people playing musical chairs until the music eventually stopped.
I feel your pain, I was deep in it too and my gut was telling me the way forward. But I ended up listening to the shills, mostly because I'm relatively young and wanted to lean towards more exposure than less.
If it isn't clear to anyone right now. There are no safe assets, there haven't been a lot of options for the last year. Your best bet is to minimize your losses. Hold cash- lose ~7-8% real value. Safe bonds are probably your best bet for the short term or owning a inflation protected business however those are rare and a recession is coming along. I guess there's a case for some risky short bets but that makes the problem worse.
It just feels like there is about to be an asset wipeout across the spectrum - like a forest fire clearing out the forest for new growth.
Don't run to the exits because that's an even worse outcome unless your holding leveraged stock bets.
> It just feels like there is about to be an asset wipeout across the spectrum
That's generally expected when interest rates rise. Most assets have value now because they ought generate returns in the future -- but you can get interest between now and in the future, and if you can get a lot of that interest now, why would you spend so much on what is still a long way off?
The thing that's different here is you can get some interest now but less interest than the rate of inflation so you are only minimizing losses as your real value is decreasing.
Other countries have their own alternatives. For instance, here in Brazil we have the NTN-B, a federal government bond which can be bought by anyone and currently returns the inflation plus 6% (see https://www.tesourodireto.com.br/titulos/precos-e-taxas.htm which calls it "Tesouro IPCA", with IPCA being our main inflation index). And it doesn't have any "only 10k per year" limit.
I've been around since before the dot-com crash, and while "you can't time the markets" is true to some extent, some people take it as an excuse to turn their brains off entirely and ignore fundamentals.
Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.
> Why do you think housing is a safe haven? Interest rates will continue to rise, thus making a monthly mortgage payment more expensive. People can flat out not afford to purchase homes at these levels if interest rates rise. It's simple math.
But if you get your mortgage now, you don't have to worry about those future increases. IIRC, most American mortgages are fixed rate.
yes, but you still risk paying too much, and then if you have to sell for any reason, risk taking a huge loss. Lots and lots of people lost a ton of money in real estate during the 2008 downturn by overpaying and then being forced to sell.
American fixed rate mortgages are locked in for the life of the loan. If you get an ARM (adjustable rate mortgage) this is not the case. A fixed rate mortgage is a hedge against rising rents and rising interest rates. New landlords buy in at higher rates/higher prices and rents will increase as a lagging factor.
Yes, everything that goes wrong with the house is now your responsibility. Yes, you will pay property taxes. Landlords are not in the business of renting at a loss in cities just yet. Occupancy rates are still high.
There are a few items that make home ownership in the US financially advantageous:
* As others have mentioned, most US Mortgages are fixed-rate. (https://www.tandfonline.com/doi/full/10.1080/15214842.2020.1...)
* You also have homestead exemptions and associated limits on property tax increases (https://en.wikipedia.org/wiki/Homestead_exemption)
* The mortgage interest deduction
* The ability to refinance with a lower rate interest rate in the future
For anyone that is not currently a home-owner, I'm afraid you're correct.
The fed can't realistically let house prices fall too far. If they do, a lot of loans would only be partially secured. That would have far-reaching implications, and could potentially leave a lot of people homeless and the banks holding a bag of bad loans.
It would also wipe out a lot of people's savings.
I think interest rates will stabilize in the near future. I don't think they can continue to go up without demolishing the economy.
>It's always a good time to buy a home, as supply is at a generational low and will remain like that for a decade, we will become like Canada so you shouldn't wait to buy.
Sadly, this one hasn't been disproven yet (I hope it will be soon). All we've seen is record home cancellations which may or may not be a leading indicator [0]
The "not timing the markets" is an incredibly privileged take: for many people they are getting hired and fired cyclically -- when markets are high they are getting paid and when markets are low they might not be, and might be taking money out of their savings investments; so if they are doing their best to cost average when they have cash flow that permits they might be losing money.
What is generally meant by this is that you cannot know the future so you cannot know when is the most optimal time to buy or sell.
Now, you can react to trend (eg your “trends starting around the end of 2021”) and sell, for instance. But when are you going to buy again (ie can you know when the bottom is?).
crypto was sold as a deflationary investment, because supply of some crypto currencies is limited, i.e. no more than 21 million bitcoins are planned to be mined in total.
> because supply of some crypto currencies is limited, i.e. no more than 21 million bitcoins are planned to be mined in total.
But herein lies the trap. While any particular crypto currency may have limited supply, there is theoretically an infinite amount of crypto currency (people can and do create new ones out of thin air when an existing one has run its course). To top it off, these are not productive assets.
Based upon my understanding of the current state of NFT's you can make an NFT of whatever you want, even if it's the copyrighted media of someone else.
> Theoretically, Bitcoin is a deflationary asset, it’s supply is limited
Assets aren’t inflationary or deflationary. Prices are. Prices, denominated in crypto, have inflated through the moon this year as the value of the currencies crashed.
There are plenty of things in the world with naturally or artificially fixed supply. Anyone pitching them as deflationary is talking tripe.
Bonds were not a good idea because rates were historically low. If you can't time the market then why bonds should not be 20-40 percent of a portfolio?
Thinking you can't time the markets is a fallacious story that buy and hold investors believe in. It may be beneficial, as many tend to sell low and buy high, but it's nothing further from the truth for me.
Assuming someone can time the market, what reason would they have for not cracking into the list of the world’s wealthiest people within a couple decades?
This one was easy though. Practically everyone was looking around while the pandemic stock market was exploding, realizing that it didn't make sense.
For me, Tesla was the flashing red sign, it's market cap was something close to that of the entire auto industry combined. I had a big expense coming up this year, so I went ahead and sold a bunch of stock in January.
Ya but it hasn't made sense for years. Which is why you can't time it. You just got lucky. Tesla didn't make sense when it was $250/share prior to the stock split. Look where shorting got you.
Selling a stock that you think is obviously overvalued isn't "timing the market." You're just applying market fundamentals. Timing the market would be shorting a bunch of Tesla.
Exactly. My favorite one was about Cloudflare stock. Look at the responses in [0] when it was more than $210 per share, For Bitcoin reaching >$60K 'This isn't even close to what will be the all time high.' [1] and I suggested many to run away from the market [2] and one said 'Stock market up 1% today on both this news and decades-high inflation.' which that obviously didn't age well.
So as you can see, it looks like so far I (and many others) were able to time the market and predict the 2022 crash, especially in crypto. [3]
If I predict this coin flip will be heads, and I flip it, and it is heads… does that mean I can predict coin flips? What if I do it three times in a row?
I'm not optimistic about our future because no official will say the obvious, the $14 trillion injected into the US economy is driving this inflation. To put this in scale, US GDP is $23 trillion. This is helicopter money on a scale we've never seen in the US, much of it going to large banks and corporations. What did people think was going to happen? Raising rates marginally isn't going to soak up all this money, and even when it does and inflation eventually goes back to 1-3%, we'll still see the higher cost of living that has accumulated over the last few years. That means the typical American will be at least 10% poorer. But at least they got those checks for a few thousand dollars a few years ago.
Dead on. Helicopter money while at the same time forcefully shutting down production lead us where we are right now. Constraining actual economic output while pumping up demand with cheap money.
"Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output." - Milton Friedman
That website double counts money creation. When the Federal Reserve buys government bonds as part of quantitative easing, they aren't "creating money." They're converting bonds into cash. It's an equivalent exchange.
When the Fed buys the bonds back, they remove the bonds from circulation, so it's an equivalent exchange. Likewise, when they sell their bonds as part of raising interest rates, they're removing money from circulation, which is also an equivalent exchange. The only time something is created from nothing is when the Treasury issues new bonds to fund increasing government spending.
Ok. So in that case, you're not counting bonds as "money". In that case, you can't count the stimulus as new money because that was funded by bonds.
I emphasize that this isn't a great interpretation because the root of the problem lies with Congress's inability to balance a budget, not the Fed. If our budget were balanced, then the Fed would instead raise interest rates by selling more bonds, which destroys more money. Because we're already issuing so many new bonds already, the Fed doesn't have to sell as many.
There are several definitions of what you can consider money. Physical cash is M0. Including money in your bank accounts gives you M1. In the modern age of electronic banking, M1 is what people broadly think of as money.
Treasury bonds are considered M4 money. It's not as liquid as M1, but so long as if you don't want to liquidate it, it isn't much different from M1.
>If someone issues debt and exchanges existing money for bonds, there is no change to the money supply.
I'm not sure what you mean by this. Issuing debt is creating money. This is true for commercial banks as well. When a bank issues lends you $10k to buy a car, that's money that had never existed before. You receive $10k from the bank. Meanwhile, the bank's depositors are still entitled to withdrawal the full amount they deposited in the bank.
not sure what you mean by this. QE is essentially creating money. Though, in our current economy more money was created by loans especially mortgages than QE.
QT is the processes of reducing money supply so is paying off the loans. If more people pay off the loan than new people taking up loans due to higher interest rates, the money supply falls.
Actually the website is fine. I mean that the OP was double counting money injected in the economy by adding up legislative actions and executive actions with federal reserve actions. If you consider bonds money, then QE isn't injecting new money because that removes bonds. If you don't consider bonds money, then the stimulus spending isn't injecting new money, because that was funded through bonds.
On my Show HN project https://news.ycombinator.com/item?id=32081943 I've downloaded this CPI-U series and plotted the inverse of it, showing the reduced real wealth by carrying a dollar forward (green line on homepage), or go directly to it: https://totalrealreturns.com/s/USDOLLAR (but there is some explanatory text about "baguettes" only on the homepage if you find the y-axis confusing!).
>> The funny thing is that both can be true. Inflation can soar and the economy can crater.
The solution to that is raising interest rates. Possibly a massive rate hike. Look for the Fed to do a full percentage point or more next time. The party is over. They're trying to be gentle so as not to destroy the housing market like last time. But housing is going to drop, no question.
Many people predicted the situation we're in right now. What perplexed us all is that the ZIRP era lasted as long as it did without having the current effect.
We're heading for a consumer debt crisis. Outside of the tech bubble, average people are in a dire situation.
> What if the rate hikes keep coming fast and furious and the CPI keeps rising even faster?
Same thing that happened with the housing crisis in 2008. Consumers are going to default, and instead of the banks sharing the risk in the market they helped over inflate, Wall Street's going to get bailed out, because entering a deflationary environment is absolutely off the table.
>> Nobody is ready for that scenario because they think it's impossible.
Stagflation? Of course it's possible, that was the 1970's. The question is if the Fed is willing to do the unpopular thing needed to stop it. And then the follow-on is weather congress is willing to address the federal budget and pay down the debt (obviously not since they already missed the chance to do it before rates rise) painful as that will be.
As long as we're all fucked together (including rich people and wall street) I think we'll be OK in the end. It's the trying to play favorites that is probably causing the most damage.
This is fear mongering. If what you say might happen ends up happening we are fucked. There’s no reason to even consider it because there is no way to hedge or protect against it.
It’s like showing up to a job site with all the tools in the world and worrying that you’ll need a tool that doesn’t exist. Do not fall into paralysis by analysis.
The end of that inflationary period coincided with oil prices dropping, which isn't really something Volcker had any control over. Real supply shocks really are real supply shocks.
*You can't buy fire insurance when your house is on fire. Insurance prices also skyrocket when everyone is freaking out about the need to buy insurance.*
And guess what you do when inflation hits hard and you need to pay for things? You sell your gold. It's happening in Sri Lanka[0], I'm sure its also happening else where across the developing and even in the developed world.
Gold is still up 15% since before the pandemic in USD, in every other currency its up even more.
If you're buying now you're buying as a hedge against whatever inflation will come in the future.
Even in 1975 when inflation was at 9% gold prices collapsed by 30%!!!
Unfortunately, you need to time markets to some extend to get the full benefit of any hedge since you necessarily only profit when someone else is willing to buy at a higher price.
This is a boon for anyone with a fixed mortgage, aka a big chunk of the middle class. Other than gas prices increasing I don’t understand what the average person is worried about. Their biggest monthly expense (mortgage) is effectively plummeting month by month, while the value of their home has increased significantly. Even if the stock market is plummeting, most people have the bulk of their net worth tied to their home, not stocks. Their wages are keeping up with inflation anyway. All that is well worth the ~$100 extra per month in gas. That can be mitigated somewhat anyway by driving less, taking public transit, or getting a hybrid/electric car. The main losers seem to be renters, and bankers.
Your argument only makes sense if you are getting pay raises that are commensurate with inflation. Not everyone is. Some people might lose jobs (or not get one amidst a hiring freeze) because the nominal non labor cost of operating the business might go up than they can increase prices (or labor costs could go up because other employees are demanding raises).
>the value of their home has increased significantly
This causes their property taxes to go up, too, adding to the pressure.
> The main losers seem to be renters
Home ownership rates are decreasing; and you really forgot people on fixed incomes or no incomes (living on the street).
Of course, no one ever expects renters to do well in the long run economically in a capitalist system, regardless of what the inflation rate is. And same is true for people living on the street. Those groups don't do that well in any economic cycle, that's why the conventional wisdom has always been try to own a home. I am talking about middle class mortgage holders, people who do own homes. For the first time ever it seems like they are the ones coming out on top in this economic "crisis" but they seem to be the ones complaining about it the loudest.
I was complaining about inflation when I was making 26k and working more hours than was "legally allowed". I was also complaining about inflation when I was Lyft driver. I promise you other Lyft drivers were worried about inflation too.
Isn't that what the "problem" is? Tight labor market => higher wages => people have more money to spend => higher prices. Wages are absolutely keeping up with inflation or even surpassing it, I'm seeing it in jobs I'm hiring for. All my employees received a minimum 10% pay increase over the last 12 months. If your pay only went up 1% this year you need to find work elsewhere. With a tight labor market that shouldn't be hard.
Not everyone is a software developer.
For example nurses, paramedics, daycare workes which experience extremely tight labor market the salaries are not going up. Actually they slashed the pandemic bonuses so the salaries are going down.
They are bringing people out of retirement that are willing to work for the current wages. My son's daycare had a new educator who could barely walk with a cane(not to mention to lift a child) because yonger workers refuse to work for the low salaries.
I am not talking about software developers, I am talking warehouse workers, customer support specialists, bookkeepers. If they're having trouble finding employees it simply means they're not offering enough money for the job. Ask what the CEO is paying himself if he's complaining about not being able to find workers. I post ads in the $25-30/hr range and get about 500 resumes in 2 days, plenty of qualified applicants to choose from.
> "gold" or actual physical metal gold? What I hear is that getting gold or silver metal delivered is almost impossible.
What do you mean? That inflation fears caused consumers to clear out the retail channel, or that "investment" gold is often something that just sits in a bank vault and can't reasonably delivered except to a specialist?
Those are both valid; to be specific i refer to having heard acquaintances complain that they cannot find retailers willing to ship to them (in the USA), this was in April but I haven't heard them cheering so I assume they're still hunting. For further information this person is specifically after smaller coins; the market for bigger bars is probably different.
It's illuminating to observe the disparity between what gold vendors say they believe and what their actions suggest they believe. They claim that gold is the only safe place for your wealth, so the wise thing to do is give them your risky, value-less paper dollars and receive shiny metal. But their actions are the opposite, they are happy to take all of your paper dollars and give you the shiny metal that used to be theirs... No one would give away something valuable for something less valuable, their actions imply that they ascribe more value to the paper dollars than the shiny metal.
I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine. Then throw in other factors like housing undersupply in developed countries, continuing depletion of "easy" oil, and Chinese threats against Taiwan.
Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation but not against supply crunch driven inflation. Prices are going up because prices are actually going up.
>It's price inflation due to a supply crunch brought on by the pandemic shutdowns (whose effect was delayed) and the Russian invasion of Ukraine.
Pandemic, probably yes. Ukraine? Probably not. The supply problem is over-optimized supply chains, which means "we build everything in China, and they're not producing." I just got a time estimate of 52 weeks for a 1200A distribution panel, and things like breakers >600A have similar restrictions.
All of this compounds up and down the chain. But luckily, a lot of suits on Wall Street are making tons of money, so everything will be fine, right?
~ But luckily, a lot of suits on Wall Street are making tons of money forcing the global economy into this put-all-your-eggs-in-the-Chinese-manufacturing-basket strategy, so never mind any potential risks to the larger global economy outside Wall Street in the second or third decade of the twenty-first century; those suits on Wall Street are making tons of money and that's the main thing, so everything will be fine, right?
And sure, it was -- for a while. And for those suits on Wall Street, it probably still is: They've made their [m|b]illions. (Not sure what you mean by "risk assets", but I do know this: If they're really risks, you and I will probably be on the hook for them, rather than those suits on Wall Street.)
Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output. -- Milton Friedman
> I doubt this is monetary inflation. It's price inflation due to a supply crunch brought on by the pandemic shutdowns
Take a look at M2 money supply [0]. Pumping huge amounts of fiscal stimulus into the global economy caused this. Inflation has been driven by poor policy decisions.
> Then throw in other factors like housing undersupply in developed countries
There has been a housing stock shortage for over a decade, that's not new, so it's hard to argue that's a proximate cause [1].
> continuing depletion of "easy" oil
There's plenty of oil available [2]. New technology (hydraulic fracturing, horizontal drilling, etc.) allows for accessing reserves that were too expensive previously. There has been structural underinvestment in O&G thanks to misguided green/ESG policy.
> Chinese threats against Taiwan
How does this drive inflation? If anything, China has reduced inflationary pressures by decimating economic activity with Covid lockdowns.
> Gold tends to be (but is not guaranteed to be) a hedge against monetary inflation
Gold has been a great hedge against inflation in the long run. When measured in gold, a soldier today earns a similar salary to a Roman soldier 2000 years ago [3]. However, gold is not a good hedge against inflation in the short term. When inflation goes up, interest rates go up. When interest rates go up, the opportunity cost of owning gold increases. It should be noted that interest rates have steadily declined throughout history.
Define "monetary inflation" and how to measure it. It would also be helpful if you could point to a metric that allows one to distinguish "monetary inflation" from some other kind.
> Why would that be a measure of "monetary inflation”
The price of money is contained in the interest rate. There are loads of models for turning credit spreads and duration curves into a Fed-neutral level, but I have my doubts.
We have no metric for the part of inflation caused by monetary policy. If we did, central banking would be solved. Instead, we have various measures that include some confounding variables and exclude others. Core PCE excludes most volatile, non-monetary contributors to prices. If core PCE spikes, it’s hard to argue the cause isn’t systemic and widespread, i.e. monetary or something with similar breadth. CPI spiking, on the other hand, has more explanations which must be rejected before we can conclude monetary origins.
The Russian invasion isn't what caused inflation. I don't believe in the "Putin's price hike" because inflation was already picking up speed in Q2 2021, well before the invasion.
Nobody has a crystal ball, but would you expect housing prices to increase or decrease in the next year? I missed out on the low interest rates due to just not being ready to buy a house yet, but I think I'll be ready to buy sometime within the next year. Thankfully I've seen a couple of houses lately that we would be able to afford, but I can't help wonder whether our options would be even better as the recession and inflation continue.
> Here's the number to pay attention to. CPI increases are accelerating.
That’s what it means to go from a 2% inflation rate to a 9% inflation rate.
The inflation rate is literally the slope of that chart. It’s a price chart, not an inflation chart.
> Also notice how that chart only goes in one direction - up and to the right. There are very brief periods in which it reverses, only to return to trend with a vengeance.
Yes, because deflation is generally considered a bad thing.
> Notice how that chart only goes in one direction - up and to the right.
Up and to the right does not imply that CPI increases are accelerating, which I agree is the problem. You can have a perfectly healthy economy with linear, constant inflation, that's been the case for most of history. Some small, relatively consistent amount seems to be good for a society, it encourages reinvestment rather than hoarding. Straight lines are good, parabolas are dangerous, they usually turn into hyperbolas as an economy collapses.
Is it going up and to the right faster and faster? Here's a chart of the month-to-month delta of that chart since May 2020:
It's noisy like all real data, but a linear fit says y = 0.0028x - 123.44, R² = 0.476. That suggests that CPI is going up and to the right about 1.5 points per month, equal to 0.5% monthly or 6.2% annually, but that each month the rate of increase gets larger by 0.0028 points. That's what we need to bring back to 0.
the assumption that stocks hedge inflation has clearly been borne out of false over the past year
Inflation is not a tax as commonly assumed. This is why people who are dumping revenue-generating assets and bonds and are content with 'losing' 8%/year by being in cash, because they aren't really losing anything.
You only get 'taxed' by inflation if your consumption habits or preferences are aligned in such a way as to match the components of the CPI, which for the wealthy/rich they aren't. The rich don't need millions of dollars of food, healthcare, or gasoline. If you already own a home, then your hedging needs are already mostly fulfilled.
For someone who has much less money, then inflation is more like a tax, because your will be spending a lager % of your income on essentials, such as food and gas, which are tracked by the CPI.
> assumption that stocks hedge inflation has clearly been borne out of false over the past year
There are no short-term hedges to inflation outside the money markets. (And even they are highly imperfect.) Real assets broadly hedge against inflation in the long term, almost by definition.
> The bond and eurodollar markets have been signally for about a year now that the nasty thing will be a recession that will force the Fed back into accommodative mode as early as this year.
I've heard this quite a bit but I don't think it's true.
The FED is raising rates purposefully, knowing this will cause a negative turn in the economy possibly (and likely) leading to a recession.
Their goal is (perhaps indirectly but still intended) to cause a (controlled?) recession by raising interest rates.
It doesn't make sense they would they seek to undo a recession that they induced. Eventually they will once inflation is back down but the FED can (and should) keep raising rates until inflation comes back down.
I wouldn't be surprised to see interest rates at 6, 7 or even 8% if inflation continues at its current level or continues to rise.
Historically the fed has prioritised managing inflation over unemployment. My bet is that we will go through a recession without monetary easing until the CPI gets back in line.
The published CPI might not be that important - any small trader who cares about gold probably doesn't care too much about inflation. It isn't like the amount of money printing is a secret, when I care to check I measure the gold price vs the monetary aggregates.
And any big trader probably has better data available than the government statistics.
> And any big trader probably has better data available than the government statistics.
Government data is the gold standard.
Traders spend money trying to predict what the government numbers will be. It can be difficult to emulate, since it involves talking to real people, but there are brokers out there for consumer spending data.
Since gold has not been pegged to the US dollars since 1971 you will not see any quick changes in gold prices. It will come, but it will be delayed by several months if not a year.
Since the dollar is really a petrodollar now what you’ve been seeing in oil prices has been the hedge against inflation.
> The Fed can be accommodative while inflation runs hot.
The Fed will not become accommodative before the inflation is beaten. The Fed will keep increasing rates, recession be damned. They won't do the mistake that the '70s Fed did.
> Here's the number to pay attention to. CPI increases are accelerating
This by itself is not surprising. The fed has a target of 2% inflation which means that even in the best case, CPI will by an exponential that gains 2% per year.
A commenter here (and one on the original article) has noted that the part being elided appears to be the following:
> I should like to put it on record that I have never been able to dislike Hitler. Ever since he came to power—till then, like nearly everyone, I had been deceived into thinking that he did not matter—I have reflected that I would certainly kill him if I could get within reach of him, but that I could feel no personal animosity.
The full review is, apparently, here:
https://gutenberg.net.au/ebooks16/1600051h.html
That this is the only elision seems very strange. The passage is crucial to understanding how Hitler was able to do what he did. Orwell is expressing his admiration for Hitler's deep understanding of human nature while at the same time despising its application. It's a lesson too hard-won and too relevant today to be brushed aside.
Still, I can't help but think that Orwell, who gave us the Ministry of Truth and its capacity for historical engineering at scale, would be highly amused.