Deflation, obviously
The hard part hasn’t started yet.
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This piece is wild.
Economic downturns are usually horrible for poor people, bad for the middle class and an inconvenience for the rich. But if the economy enters a recession in 2023, or even if it manages to narrowly evade one, it might be the well-heeled who take a bigger hit than usual.
Call it the richcession.
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Doing without, living with so little savings that setbacks such as illness or job loss can be debilitating, is an ever-present source of stress. But for many poorer people, the years since the Covid crisis struck have been a bit easier financially than the years that preceded it. Several rounds of government relief helped them weather the early stages of the pandemic, and now a tight job market is providing them with wage gains that are reducing inflation’s bite.
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With the important caveat that they were starting off from much higher bases, percentage gains for the rich have been more muted. Household net worth for the top fifth was 22% higher in the third quarter than before the pandemic, and was down 7.1% from the end of 2021—a consequence of the falling stock market. Paychecks haven’t risen as much, either, with the Atlanta Fed measure showing average annualized monthly wage growth for workers in the top quartile was 4.8%.
Recent layoffs have also inordinately affected higher-income workers.
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Lol
Hopefully the affluent in the US will catch a break some day.
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My rich friends have a massive list of things the government should be doing to make them richer, but unfortunately any attempts to help poor people won’t work and will backfire and there is nothing that can be done.
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Tell them you’re worried this will trap them in a culture of dependency.
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Oh when they complain about the government and the economy and poor people I make sure they know they’re welfare recipients who got rich thanks to the government and their parents.
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For a paper titled “Strategic Sophistication and Trading Profits: An Experiment with Professional Traders,” the authors recruited 56 professional traders, plus an equal-size sample of students for controls, and evaluated their performance in a computer-simulated trading game. They then tested their subjects on a wide range of specific skills to see which skills were correlated to trading success.
The main finding was that among students the only useful predictor of trading success was general intelligence. Among professional traders, though, neither intelligence nor other personality traits and cognitive skills mattered much. Success did not depend on any fundamental insight about value. What mattered was strategic sophistication in the sense of taking analysis of other people’s behavior to high levels.
This calls to mind the folk wisdom found in poker, which is that “beginners think about their cards. With a little experience, they start thinking of the other guy’s cards. Poker begins when you think about what the other guy thinks about your cards.” The Fed paper suggests that professional traders are playing poker, while the students are playing games like chess, backgammon or blackjack that depend on intelligence rather than guessing what other people are thinking.
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On the other hand, if you’re counting on traders to assess fundamental economic value, the study is bad news. It suggests they’re focused on outsmarting each other, not on investigating reality.
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They fear him.
“Prepandemic a heavy jet cost $7k-9k an hour to charter. Now it costs $18k-$20k,” the unidentified CIO told Peters and noting that his own private indicators that show a still white-hot market. “All these guys worth $100mm got sucked into a portfolio mix with 75% illiquid investments, 25% liquid. Guys like that spend $3mm-$5mm year and make $2mm after tax. They’re slowly bleeding, but even after last year are not yet scared,” he said.
“Powell won’t finish tightening the tourniquet until he terrifies these guys,” he said. “They need to feel like their private portfolios won’t come back. They need to see their liquid portfolios lower still. They need to take losses to raise liquidity. It happens every cycle. We’re clearly not there yet.”
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In terms of being confident about future earnings, I thought that Google search was as much of a sure thing as possible. At least in any tech-adjacent area. But man, this ChatGPT thing seems like it could really put a dent in it.
Are we all going to be Bing-ers in 2 years?
Except we eventually figured out that in poker this doesn’t work at the highest level because the other guy can always go one level higher and you are constantly open to being exploited. The only way to guarantee success long term is to have rock solid strategy (which seems more analogous to the traders that can assess fundamental economic value).
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But unlike poker, stonks are a beauty contest in the short/medium term. And in stonks there’s no stakes-based separation of player pools, so what we’ve seen in TSLA, GME, AMC etc is the “highest levels” and it’s the poker equivalent of the softest private game. Of course a “GTO” trader would profit on those tickers (if not wiped out by a margin call), but a hypothetical “exploitative” trader would arguably profit more. A GTO trader would have missed out on all the irrational pumps, in fact they’d be short during the pumps and red for a while (but DCA’ing on the way up if able to).
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I just interpret this argument as something like “exploitative play is more effective in trading because trading is softer than poker”, which I’d say I’m highly suspicious of.
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Explo is more effective at low stakes or drunk-whale-infested poker, which trading can be the equivalent of. Maybe pork belly futures trade efficiently, but one needn’t try to beat that market when one can instead bum-hunt the GME’s of the world.
ETA: BBBY just lost 300M in Q4, they have <200M remaining cash, and they said they’re probably gonna file for bankruptcy. Stonk is up 25% on this news. The market is infinitely softer than a nosebleed poker table full of Linus, Redbaron etc. It’s way more similar to a live $1/2 game from 15 years ago.
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indeed, if anything the GME/AMC/BBBY/etc nonsense should’ve taught anyone is that there are far, far, far more morons in the market than there are good players
GTO trading is sticking everything in Vanguard
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Hmm so being a trader is like beating live $1/2 15 years ago? Yeah, I’m skeptical of that take.