My big question is how much of the crazy runup in stonks and houses the last decade is actually the value of cash declining? This is why every other place to park money seems scarier than stonks to me, even though stonks are scary as hell.
I think I just talked myself into diversifying into monkey jpegs.
Also the Democrats are the Wall Street crony party now more than ever.
I’m pretty sure you’re ignoring dividends.
Looks like Keeed beat me to it.
Why?
I’m mostly in cash, foreign value stocks, long-term biotech plays, and inflation protected I bonds.
The market crashes, I pour the cash into the market through dollar cost averaging starting somewhere on the way down/bottom/way back up.
I now stop fucking with it, other than re-balancing every so often.
How am I turbo-fucked?
I also don’t own a house and if the rate goes up and the housing market crashes, that’s great for me too.
P/E ratios are crazy high so that’s not it over the decade. You could argue it over the last year, and that the impact on earnings is lagging or something.
all hte people yelling at me over dividends
okay fine instead of 2000 to 2013 it’s 2000 to 2012 1/2
We’re talking Japan-style lost decade or worse. Your money keeps going down and doesn’t rebound. 20 years from now your foreign value stonks still haven’t rebounded.
But to me this kind of US collapse is global catastrophe scenario. We may have bigger worries than our retirement accounts - like starving to death or fending off fascism.
The next global depression could trigger all kinds of unrest and send civilization back to a new dark ages imo. Look at how violently angry right-wing dipshits are right now in the most white hot sustained economy we’ve ever had. Imagine how angry they’re going to be in a full collapse. They’re already ready to burn everything to the fucking ground.
Just gimme 30 more years dealer.
This is 100% why I’m going to sell my place and enjoy my money now and screw worrying about when I’m 70. I’ll figure it out then.
Yeah earnings could be tied to something like raising consumer prices, which lag in my scenario where scarce stuff rich people like is driving inflation.
But you make a good point that if the consumer prices never go up, the P/E ratio of a consumer stonk can’t be justified by inflation (unlike say a house). So I guess this is where interest rates come in or something.
I can easily see the US stonk market as a pyramid scheme - just one that every rich person and elected official in the US has 100% incentive to keep going as long as possible. All things being equal I guess I’d rather be riding on their coattails than in other investments that seem just as scary.
If it straight crashes, then it’s not a lost decade type scenario. It might take 10 years to get back to where it was, but that’s fine if I got in after a 70-90% drop. The nightmare scenario for millennials and myself is a true lost decade or more, where we basically trade sideways for the next decade while inflation catches up to valuations and gets them back in order. THAT is the nightmare for me.
My foreign value stock is basically fool-proof, as long as the company stays in business and profitable (and they’re a large conglomerate that’s been stable for years, so about as good as it gets - Korea Telecom). They return a huge chunk of their profits as dividends, which at current levels means about a 5% annual return on my initial investment. I’m perfectly happy to hold that for as long as it takes to bounce back, and the more it drops the more interested I am in buying more for a higher % annual dividend return. It’s in a retirement account so no different tax implications for those dividends, either.
Maybe. But having a financial position from which to work is the best way to mitigate most of that by either relocating or being able to provide for yourself somehow.
If it doesn’t crash soon that’s 100% the situation. The problem is it can’t go on like that forever, and the longer it goes the farther it has to fall.
Your comments are valid but it’s a pretty standard “so what?” observation. What are stupid buy and hold people supposed to do with that information? Try to time markets instead? Goldbug? Cash for decades? A criticism of buy and hold strategy would require an argument for an alternative strategy that is likely to outperform buy and hold going forward. Good luck with that.
If someone invested in the value-weighted market index on 3/10/2000, this is what they would have experienced (including dividends):
Recovery in mid-2006, back down to a 40% loss at the depths of the financial crisis in 2009, back to 0 in early 2012, and then rocketship emoji.
Through the end of 2020, you’ve invested at the peak of the dot com bubble, lived through the financial crisis, and then experienced the coronavirus. You still got about 6.9% compounded per year and that ignores 2021.
I think they devalue the currency here almost 100% of the time. Actually stopping inflation by raising interest rates causes too much pain… and devaluing the currency lets them (the people at the treasury and the fed) keep the music playing for at least one more round of idiocy.
If they raise interest rates and the market for financial products including houses tanks an already volatile political situation gets more volatile. I don’t see them having the sand to pull the trigger and do a hard thing. Not after the way they’ve behaved in my lifetime.
Apologies for cancelling my Netflix subscription
I honestly go back and forth and there are totally legitimate arguments on both sides.
The bear case: something is obviously wrong with markets when companies with huge losses and no path to profitability achieve $50+ billion market caps. Stocks are expensive on a historical basis. The US Government is barely functioning and likely to get worse. The GOP is likely to gain the House, meaning there will be no federal response to future crises. If they get the Senate and Presidency, the Fed will soon be full of complete lunatics. The prospect of zero adults in charge is very real. And you can pass all the tax cuts you want, if there is an actual recession and the government doesn’t respond there will be a stock market crash.
The bull case: America is still the world’s most productive economy with reasonably well-regulated markets, meaningful rule of law and incredible hubs of intelligence and innovation. Our urban areas are thriving and while startups are obviously overvalued right now the prevalence of them is great for America. Yes political leadership is poor but it has been terrible before and the U.S. has always come through it. Income inequality and corruption were much worse in the late 19th / early 20th century and central bankers have learned from prior crises. Every long term bet against the American economy has been a loser.
Who knows. My gut says we can’t go on with this level of political dysfunction and continue to thrive economically, but its happened before.
I think the bull case is actually more like “America is fucked but everyone with access to power will use it to protect the interests of the rich. Buying stocks is the best strategy for the Everyman to align their interests with the rich and capture as much of the kleptocratic largess as possible”.
Carrying on the Peloton discussion, because all I ever talk about is Peloton:
I don’t really think I could run a business, and successful companies often do things that I don’t understand. So maybe this is just another example of me not understanding the real world. But I truly am struggling to understand these simultaneous strategic decisions:
It reminds me of the classic death spiral that you can get when you set prices to cover costs, rather than based on (falling) customer demand. Kind of based on a story from my school: Imagine that you have an IT department with a fixed cost of $1,000,000 per year, and (to efficiently allocate IT services), you charge people for using those services. Say that every service item takes about the same amount of time, and there are about 10,000 service calls per year, so you charge $100 per service call.
But over time, the demand for those services drops. In 2003, maybe it made sense for the department to pay $100 for installing a fax machine. But now, lots of departments say, “Screw that - we’re not installing a fax machine; it’s not worth $100.” Service calls drop from 10,000 to 6,000, but the IT department still costs $1,000,000 to run. So the IT manager panics and says, “We’ve got to increase our service charges to cover our costs. Our new service charge will be $166.67.”
What happens next is obvious - the department that was still willing to pay $100 for a fax machine in 2022 (I don’t know, philosophy?) says “Ok, that’s ridiculous. Even we aren’t willing to pay that much.” And service calls drop even more, so the IT manager raises the per-service call price even more to cover the fixed cost with an ever dwindling number of customers. And then they’re left wondering why no one is using their services at $250,000 per service call.
I dunno, I just want Peloton to stay in business so that I can run and bike while attractive fitness instructors yell at me with BANGERS playing in the background.
Can I get a sanity check from you smart people? My current allocations for my HSA and 401k are as follows:
35% VIMAX
35% VSMAX
30% VTIAX
I chose these 3 based on the low expense ratio.
Seem reasonable for someone who is 20+ years away from retirement?
No bonds at all?
Nah. It seemed pointless at this stage of my life. Is a 5% bond allocation really going to protect me if I’m not retiring for 20+? Just seemed like wasted growth.
