[HN Gopher] I'm reading the FT and WSJ from 100 years ago each w...
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I'm reading the FT and WSJ from 100 years ago each week leading to
1929
Author : roaring20s
Score : 212 points
Date : 2021-08-08 15:18 UTC (7 hours ago)
(HTM) web link (roaring20s.substack.com)
(TXT) w3m dump (roaring20s.substack.com)
| cm2187 wrote:
| Today no one seems to care about inflation in Europe or in the
| US. It seems to be a subject confined to economists that every
| day people don't care about, if they even understand the concept
| (no one under 50 has really witnessed it in their adult life). So
| people are all for unlimited money printing.
|
| It is interesting to find old articles and read what people cared
| about at the time. Inflation was often a top concern, and
| politicians running their campaign on curbing it. Some old movies
| also refer to it (that stolen money which will melts away while
| you await behind bars).
|
| Our current complacency in term of budget deficits and monetary
| policy will wake up that sleeping dragon.
| sanp wrote:
| Perhaps inflation was a concern in an economic system where 1)
| A physical commodity (Gold) was the store of value, and 2) Debt
| was not easily accessible.
|
| Neither of these are true anymore and inflation now will be a
| reflection of true scarcity of a good / service (e.g., housing)
| as opposed to the transaction costs associated with procuring
| it...
| bequanna wrote:
| The familiar refrain of hubris the has preceded pretty much
| every crisis: "This time is different."
| leppr wrote:
| Access to debt is still difficult for those that will be hurt
| most by inflation of consumption goods (CPI in the US).
|
| Furthermore it's also more accessible proportionally to
| existing wealth, which means inflation is in effect an
| inequality amplifier.
| anonuser123456 wrote:
| I don't think inflation is a problem at all; the Fed clearly
| has tools to keep inflation low.
|
| Now... doing so might totally ruin the economy and eat all GDP
| growth, but that's the next generations problem.
| Spooky23 wrote:
| Why would normal people?
|
| Most folks are in mortgage and consumer debt and have little
| wealth. Higher inflation mostly impacts people with wealth.
|
| Look at what's happening now. Lower income folks are getting
| life changing payments of just a few thousand dollars in the US
| that is causing increase in services costs.
| toastermoster wrote:
| Wealthy people own assets that keep up with inflation. They
| may have 10% in cash which doesn't keep up with inflation but
| in general most of their holdings either keep up or
| outperform inflation. Poor people have wages that don't keep
| up with inflation unless they start job hopping. The poor are
| typically more affected by inflation than the rich.
| jbay808 wrote:
| I've been thinking about this topic more and more, and the more
| I study it, the more I realize how incredibly rich of a subject
| it is.
|
| For example, I used to assume that monetary inflation was
| instant and automatic. Double the money supply overnight, and
| everyone will double their prices and incomes overnight too, as
| though all that happened was a substitution of variables.
|
| Later I understood that it's not that simple. First, the new
| money doesn't get distribution in proportion to how much people
| own, so savings get halved. Second, contracts denoted in
| dollars don't get adjusted, so debts and purchase orders get
| cheaper, accounts receivable become worth less, and so on.
|
| And lastly, prices aren't updated automatically by some
| perfectly objective value calculation. They're held in place by
| a combination of supply and demand, competitive forces, price
| elasticity, psychology, and collective expectations.
|
| So the inflation can apply instantly in some markets but it can
| also take years for those changes to propagate into various
| other markets.
|
| And even once the money supply stops increasing, inflation can
| keep going all on its own accord, once expectations become
| fixed. This happened in Japan in the '60s and '70s where unions
| demanded 5% annual wage increases to keep up with the inflation
| caused by every industry getting 5% annual price increases
| caused by union wage increases...
|
| Right now it seems like the new money is going straight into
| asset prices, and that will probably remain the case until
| either asset holders start selling their assets to consume an
| absurd amount of food and gasoline, or the high price of assets
| starts to weigh heavily on the cost of production.
| imtringued wrote:
| Inflation is just the realization that your balance sheet
| doesn't match reality. The reason it is delayed is that
| people can flee into the balance sheet and refuse to interact
| with the real economy for years. Hyperinflation is what
| happens when the real economy is gone. Moderate inflation is
| what happens when the balance sheet is slightly off.
| Extremely low inflation or deflation is what happens when
| people pretend that there is no such thing as the real
| economy. Think of gold or Bitcoin. All hail the balance
| sheet!
|
| The funny thing about inflation is that if it is high enough
| to "sting" (2-5%) then people notice the missing wealth in
| the real world and create it to the best of their ability.
|
| The fact that the money isn't moving, that it isn't entering
| the real economy is one of the greatest mistakes made by the
| central bank which is prevented from doing so and the
| government which refuses to do it for petty ideological
| reasons.
| hiram112 wrote:
| > This happened in Japan in the '60s and '70s where unions
| demanded 5% annual wage increases to keep up with the
| inflation caused by every industry getting 5% annual price
| increases caused by union wage increases...
|
| As a gov contractor, I'm seeing this first-hand. Inflation
| has been tame my whole career in this industry - 2% or 3% /
| year; therefore, contracts of fixed length have built-in rate
| increases of similar percentages, and raises trickle down
| from there.
|
| Most companies will give you raises a bit less than what
| they're getting each year in increased rates themselves -
| it's how they increase their own growth and executive
| bonuses. This can go on for a long time - 5-10 years before
| the employee will really notice they're falling behind peers
| who've just been hired or general market rates if they were
| to jump shit.
|
| But when real inflation is running 7%-10%, the wage
| disparities between new hires & contracts and existing
| employees & contracts become evident quickly. For example,
| I'm discovering that new engineers with far less experience
| and talent are being hired on for $20K - $40K more than I
| make, all else equal.
|
| Which forces me to start looking for new employment or ask
| management for a raise, neither of which is desirable.
| leppr wrote:
| You could simply ask for your salary to be denominated in
| gold/bitcoin.
|
| /s?
| carnitine wrote:
| Probably because inflation has never been particularly bad
| post-QE. We had inflation north of 10% in the 70s, it's
| averaged a couple of percent in the last two decades.
|
| Also, despite what the Fed probably wants you to think, QE is
| not money printing, it is a duration swap between different
| forms of existing money.
| bhouser wrote:
| Can you elaborate on what you mean by a "duration swap" and
| "different forms of money"?
| carnitine wrote:
| When the Fed does quantitative easing, they swap bank
| reserves for bonds held by banks. These bonds are
| economically equivalent to money which cannot be spent
| until a certain date, so the Fed is effectively just
| bringing this date forward.
| arminiusreturns wrote:
| ...and where do those bank reserves originate from?
| pgwhalen wrote:
| It sounds like you subscribe to the increasingly popular
| framing of money creation, which is that the fed does not
| create money, the treasury does.
|
| Much of my knowledge on the matter comes from fedguy.com.
| imtringued wrote:
| You see, you can't pay rent or buy groceries with bank
| reserves but they sure do make it easier for banks to
| lend money. Someone has to borrow money before it can be
| spent.
|
| I would also like to mention that the fiscal stimulus by
| the Biden administration had the intended/usual effect.
| You know, the thing that QE couldn't create: inflation.
| If there is an effective tool then the defective tool
| that distorts the economy can be thrown away.
| x3sphere wrote:
| People don't care about inflation specifically, but they do
| care about how it is affecting them. For example, lots of
| people seem worried about getting priced out of buying a home
| these days, which inflation has certainly contributed to in a
| big way.
| annoyingnoob wrote:
| Its cheap credit that drives up home prices. Historically low
| interest rates are driving historically high home values. We
| are currently in some kind of home price bubble which will
| change when interest rates change. Zillow and recent sales
| say the value of my home is up 20% in 9 months.
|
| Last year a dozen donuts at the local family run shop was $9,
| this year it is $12. My daughter's specialist doctor raised
| the cost of an office visit by 30% this year. The cost of a
| burrito at my favorite spot is up 25% in two years. I could
| go on. I care about inflation, and it is real.
| imtringued wrote:
| People can afford those absurd home prices. The bigger
| problem is that the previous owner of the land gets to
| extract a huge chunk of your labor by simply by owning the
| land.
| annoyingnoob wrote:
| https://www.thetruthaboutmortgage.com/use-this-mortgage-
| paym...
|
| Lower rates mean a lower payment, maybe affording the
| ability to outbid someone for a home you want. When rates
| go up buyers have higher payments.
|
| The existing owner will have to pay taxes on the profits
| or reinvest in the same crazy market (perhaps losing a
| tax advantage).
| leppr wrote:
| Value is still shifting somewhere. Lower rates can force
| you to borrow more total value to outbid your peers,
| allowing the bank to extract the same or more value out
| of you. Same with taxes entering the equation.
|
| I don't reckon any monetary distortions benefit the
| common people. Society benefits from money being a
| reflection of labor as much as possible. Everything else
| is extraction of value.
| iso1210 wrote:
| Many people under 50 don't care about inflation because they
| owe money, they certainly don't have money - it's all be taken
| by rent seekers.
|
| Then all that nonsense about lumber earlier in the year,
| blaming QE for supply problems. Lumber prices now 1/3rd what
| they were a few months ago.
| cm2187 wrote:
| Usually people care about inflation in the context of cost of
| living vs their earnings, not their net assets.
| leppr wrote:
| Well, while the printing machines were running the zeitgeist
| was fully occupied with Covid-19, BLM and even a short episode
| of anti-Asian racism.
|
| Now that the harm is done and the money circulating, the media
| is slowly starting to shine some light on the topic.
|
| Although that could push one toward conspiracy theories, as per
| Hanlon's razor we shall not attribute to malice that which can
| be adequately explained by stupidity. The media probably just
| got distracted as we all were.
| Swizec wrote:
| > (no one under 50 has really witnessed it in their adult life)
|
| Akhem, there are places outside America. I still have the
| postage stamps for 100,000 monetary units from the late 1980's
| and early 1990's Yugoslavia in my mom's basement somewhere.
|
| My parents' tales of ridiculous mass inflation have been etched
| into my brain. I was too young to remember, but the spectre
| loomed large. Especially in the mid 1990's when the rest of
| Yugoslavia set the world record for monthly inflation that
| still stands today. Luckily we were our own country with our
| own money by then.
|
| At one point hyperinflation reached 2% per hour.
|
| https://en.wikipedia.org/wiki/Hyperinflation_in_Yugoslavia
|
| I believe many parts of South America are going through high
| levels of inflation right now.
| imtringued wrote:
| Zimbabwe could have implemented a land value tax on farmland
| to achieve its goals to undo colonization, instead they
| violently drove farmers away and then they could no longer
| feed themselves. Zimbabwe was just another victim of Marxism,
| to be more precise anti colonial Marxism.
|
| Imagine if the president of the USA decided to solve the
| homeless problem of the black population by pointing guns at
| white homeowners and forcibly dragging them out of town. It's
| clearly unsustainable.
|
| There might be truly disgusting capitalists like martin
| shkreli on this planet but they don't attack you directly,
| they merely deny you your fair share of the wealth you have
| created.
| rbinv wrote:
| > Zimbabwe was just another victim of Marxism, to be more
| precise anti colonial Marxism.
|
| What's the difference between Marxism and "anti-colonial
| Marxism"?
| otterley wrote:
| The Federal Reserve System cares very much about inflation and
| reports on it in every single FOMC meeting. You can read their
| meeting minutes at
| https://www.federalreserve.gov/monetarypolicy/fomccalendars....
| hogFeast wrote:
| There is already a book that does this (although I would
| definitely recommend doing what you are doing): Russell Napier's
| Anatomy of the Bear.
|
| Tangentially, it is kind of interesting that very few people in
| markets use this kind of historical information to learn more
| about markets. Russell Napier runs a library in Edinburgh that is
| composed solely of economic and financial history books. You can
| have all the technical information in the world, it won't help
| you avoid the impact of human psychology. I suppose this is why
| financial cycles happen, the old guys retire, the new guys who
| have only known a bull market get into it...same mistakes over
| and over.
|
| To give you a concrete example, I did my thesis on US monetary
| policy in the 50/60s. The understanding of this period within
| economics is based almost entirely on the view that economists
| have of themselves today. If you read the minutes, you see that
| the Fed understood why inflation was rising in the late 60s but
| were unable to do anything about it. This grey area of political
| independence is, of course, totally forgotten today (when you
| have a former Fed chair as Treasury Secretary, alarm bells should
| be going off...but, of course, this is all long forgotten).
| awinter-py wrote:
| ohhh good rec
| ozzythecat wrote:
| > when you have a former Fed chair as Treasury Secretary, alarm
| bells should be going off...but, of course, this is all long
| forgotten
|
| Can you elaborate on this point? I would think a cabinet member
| going to the fed and not coming from the fed would be more
| alarming. What am I missing?
| hogFeast wrote:
| What is the difference? The reason why it is alarming is
| because there is no political separation. It doesn't really
| matter which way it goes.
|
| This happened in the 70s. Nixon politicized the role with
| Burns (who came from the CEA), then Carter appointed Miller
| (who went onto become Treasury Secretary). And btw, Miller
| was (with hindsight) one of the worst Fed chairs of all-time.
|
| Tbf, Volcker came from Treasury, Geithner went into Treasury
| (after FRBNY) but, in both cases, they operated with
| Presidents who respected the distinction in functions. This
| distinction weakened significantly under Trump, and is now
| non-existent.
| jjoonathan wrote:
| Is the big deal primarily that the Fed needs to be able to
| spike rates (like Volcker) to get rid of inflation and
| close a business cycle, but that tanks asset prices and
| forces Zombie businesses to finally die, which is
| politically toxic, so it doesn't happen if there is too
| much political control of the Fed?
| hogFeast wrote:
| Correct. In 1957 or 58 (I can't remember which), the Fed
| increased interest rates to remove excess out of the
| economy. Economy went into a fairly mild recession. The
| Fed gets blamed for causing the recession (the Fed Chair
| at the time said the Fed should to take away the punch
| bowl...that stopped happening). Nixon loses to JFK
| (remember he was Eisenhower's VP, so Nixon blamed the Fed
| when he lost). And the cycle that led to the inflation of
| the 70s (where monetary and fiscal policy is timed to the
| election cycle) begins, tacit political involvement).
|
| Also, before 1951 (and for a period of years after,
| although the formal break was 1951), the Fed wasn't
| functionally independent from govt. Because the war debt
| was so large, the Treasury used the Fed to press interest
| rates down so the debt could be paid down (it continued
| after 1951 because the debt was still really huge, note
| the similarity with your hypothetical). So the period at
| the end of the 50s was the first real test of Fed
| independence.
|
| Again, I don't think people today understand that Fed
| independence is clear legally but has been more flexible
| in practice. Why? Because setting interest rates is
| inherently political. And there is an asymmetry: the
| incentive is always to be loose. The lesson is that there
| is no real way to get around political control, because
| the temptation is too great. I also think that
| policymakers should rely more heavily on macroprudential
| policy to take the heat out of markets (this is happening
| in the UK) because normal monetary policy is so
| asymmetric.
| deehouie wrote:
| there are at least three books on this period,
|
| Lefevre, E. (2004). Reminiscences of a stock operator (Vol.
| 175). John Wiley & Sons.
|
| Kramer, C. (2000). " Devil Take the Hindmost: A History of
| Financial Speculation" by Edward Chancellor (Book Review).
| Finance and Development, 37(1), 53.
|
| Mackay, C. (2012). Extraordinary popular delusions and the
| madness of crowds. Simon and Schuster.
| hogFeast wrote:
| You don't understand...there are thousands of books on this
| period (for some reason, only one of the books you mention
| are about this period...Mackay was written several decades
| before the 20s, Chancellor is a general history, Lefevre is
| interesting but not really going to give you the information
| you need as it is a personal story).
|
| The book that I cite is identical to the OP. The author goes
| through newspapers from the period leading up to 1929 (and
| iirc, through to the late 30s).
| JackFr wrote:
| I took a fabulous course in grad school on Monetary Theory and
| Policy and at one point the class was discussing how laughably
| bad the policies of (I think) Arthur Burns were. The professor
| scolded us pointing out that all the stuff we were being taught
| had to be learned somehow and what we were describing as
| laughably bad was this learning.
| hogFeast wrote:
| Right, that is exactly the wrong thing to take from it, that
| is exactly the kind of misinterpretation of history that
| people still have (generally speaking, you cannot view
| history in terms of the present, economists think you can do
| it because economics is a science...it isn't).
|
| The reason why Burns' policies were poor was because he
| wasn't making policy within a context that makes sense today.
| From the mid-60s onwards (before inflation took off),
| monetary policy was formed politically. The economy used to
| cycle around elections for this reason. Burns really took
| this to its logical conclusion...and to be totally clear, a
| lot of the mistakes that Burns made were made in other
| countries. Burns was actually fairly hawkish, compared to
| Miller, but the problem was (partly for reasons of political
| expediency) people believed that wage restraint policies
| would be effective.
|
| To loop back, the lesson of the 60-70s is that monetary
| policy should be free of political influence. Look at what is
| happening now. Has the lesson been "learned"? And, more
| importantly, can it ever be "learned"?
| john_miller wrote:
| Do you have a link to the fed's minutes or to your thesis?
| hogFeast wrote:
| You can get the Fed minutes (iirc) back to the 80s on the
| main website. To get earlier ones (they go back all the way
| iirc), you can get them from ALFRED (there is tons of
| interesting data on there).
| anonu wrote:
| Highly suggest reading "reminiscences of a stock operator". Which
| I'm guessing was written about 100 years ago about punting and
| gambling in the stock market...
|
| What you'll notice is "plus ca change, plus c'est la meme
| chose"... It's all self similar. The same concepts and patterns
| back then are the same concepts that people chase today.
| tornato7 wrote:
| Interesting that it talks about the hardships that Germany has
| paying war reparations. This is one of the main contributors to
| the rise of Nazis some years later; Germans were sick and tired
| of their paychecks going to pay England.
| riazrizvi wrote:
| > If one bought and held the Dow from 1921 to present, the total
| return would be 500,000% (5,000x)!
|
| If we can use hindsight in our trades, I'd recommend using the
| numbers 60, 54, 36, 24 and 7, on last week's Powerball lottery
| that paid out $211mm. That's a 100,000,000x return!!
| tehlike wrote:
| Indexing is less of a hindsight at this point.
| riazrizvi wrote:
| Based on the example of USA Inc? Over this time period what
| about Germany Inc? Or China Inc? Had Hitler used his
| artillery to wipe out the British Expeditionary Force
| retreating at Normandy, UK Inc investors would have lost
| their shirts.
| 5faulker wrote:
| The key here is hindsight.
| tshaddox wrote:
| Also expected human lifespans.
| chrismarlow9 wrote:
| The underlying factors that drive and produce the outcomes of
| these two systems makes me think your comparison is a false
| equivalence.
|
| I guess there's an element of randomness to everything and any
| company could go under overnight, but in general I think you
| can rely on hindsight in terms of performance. The higher you
| get up the ladder and aggregate, the more stable I feel that
| is.
|
| If you're just comparing the methodology of extrapolating
| expected returns from hindsight I would agree with you.
|
| I guess what I'm saying is using hindsight to pick a direction
| seems logical. And doing it from a broad perspective seems more
| stable (using hindsight to predict if a company will go up vs
| using hindsight to estimate if a sector ETF will go up).
| However, I agree that I don't think you can estimate how much
| it will go in that direction.
|
| There's probably a fallacy in my logic there somewhere. But the
| results in the real world are good. If those returns are all
| just luck, well at least I had fun and made some money.
| eloff wrote:
| That's apples to oranges. The Dow has a long history of
| excellent returns. Those lottery numbers do not.
| carnitine wrote:
| The Dow is arbitrary. It happened to do well, if you bought a
| Japanese index in 1929 you'd do well for 60 years and then
| make losses which would require another 30 years to recover
| from.
| eloff wrote:
| You're measuring conveniently from the top of the epic
| bubble in the late eighties. But yes the US has been a
| better long term bet than Japan. That doesn't mean it's
| "arbitrary".
| carnitine wrote:
| I'm not measuring from anywhere, I'm describing what
| happens if you invested over the same time period as the
| original comment with the same strategy but a different
| index.
|
| Nor did I say the US is arbitrary, I said the Dow was,
| which it is given it's fairly illogical weighting rules
| and arbitrary size limits. But the US is also somewhat
| arbitrary, it happens to have been the best performing
| economy over a period in which it won a World War and
| Cold War, and became the largest power in the world. To
| say it is the obvious choice now is to make a massively
| uncertain bet. I'm sure in 1929 the obvious choice was
| Britain who at the time controlled the largest empire
| ever, rather than the US, yet a British index would not
| have performed nearly as well.
| eloff wrote:
| Your 30 year comment is measured precisely from the top
| of the epic Japanese stock bubble of the late eighties.
| Whether you are aware of that or not. Measure from the
| bottom shortly after, and it's a very different story.
|
| You are right about the arbitrary rules of the dow. If
| you're going to do index investing, I would much rather
| the S&P 500.
| carnitine wrote:
| Well yes. We are talking in the context of buying an
| index in the 20s and holding it until the present day. I
| split the Japanese index's performance into two periods,
| but I'm not sure what your point is because I'm
| commenting on the entire 90+ year timeframe. Buying
| straight after the crash would obviously have a different
| outcome, but that seems like you're cherrypicking a
| particular date rather than me.
| eloff wrote:
| I shouldn't have to spell it out so much for you. You
| have no return for thirty years only if you cherry pick
| the top of that bubble in the late eighties. Start
| anywhere else and there is a positive return (ie what you
| said is false unless you cherry pick the start). You can
| do the same cherry picking in the US market and people
| frequently do. To look at long term average returns
| properly picking fair start and end dates is important.
| And then remember, we won't see growth over the next 100
| years like the last hundred, so expect much lower
| returns. But the same is true for other assets as well.
| Bonds have negative real yields right now.
| ivalm wrote:
| And if you had a 80/20 equities/cash split that you
| rebalance annually you would do well in the Japanese
| market over the same time period.
| pessimizer wrote:
| > measuring conveniently
|
| That's a bizarre but accurate way to describe "citing a
| specific example."
| eloff wrote:
| If you pick the top or bottom of the market as a starting
| point you can tell a very misleading story about returns
| over time. Starting and ending points matter a lot.
| carnitine wrote:
| I didn't though. That wasn't my starting point, the 20s
| was. It's just the 80s are when things start going wrong.
| The Nikkei declined over years, hitting just over 8k in
| 2003, whereas post bubble it went from mid-30s to
| mid-20s. The bubble wasn't even the worst of it.
| eloff wrote:
| You did though.
|
| "and then make losses which would require another 30
| years to recover from."
|
| Make losses starting from that high in the late eighties.
| Why choose that date to start from. Start a decade
| earlier and it doesn't look so grim. Look at the average
| return since 1929 and it's good as well. Pick a better
| date than 1929 and get a fairer picture.
| carnitine wrote:
| Are you missing the 'and then'? It's a compound sentence,
| I was just stating the point at which the losses occur. I
| didn't 'choose' that date, that's just when things
| happened. The start point was the 20s as is the point of
| this entire comment thread.
| Spooky23 wrote:
| If you were able to buy those numbers for the last hundred
| years, you'd have <$25k invested to make $200M.
|
| It's no more absurd than projecting stock returns over 100
| years.
| djbebs wrote:
| The difference is the stock market in not a game with net
| negative expected value
| ryeights wrote:
| That's impossible to say.
| drdeca wrote:
| I see two options (or, 3 options, depending on how you
| count it?): Either we interpret this taking probability
| to refer to some objective probability distribution, or
| one takes it to refer to a subjective probability
| distribution.
|
| In the first case, uh, one can either talk about the
| empirical distribution, and like, because the downside is
| limited ("all the money one invested in it"), if one puts
| p-value-ish confidence intervals on it (I don't know the
| right way to talk about this) on it, and, assuming we
| treat the behavior at different times in history as
| comparable, or like, if we assume that the current moment
| is randomly sampled from the time in which the stock
| market exists, or something like that, uh, I imagine that
| it would be possible to say something like "If the stock
| market across time-as-a-whole and like, selecting when
| you buy in and cash out at random, with like, some bound
| on how far apart those two are, had a negative
| expectation value, then we would see behavior like this
| with probability less than p" ? I don't know what the
| value of p would be, but, I suspect it would be fairly
| small, at least, for some ways of formulating the
| statement.
|
| Or, one could take a subjective probability distribution
| view of, uh, what the unknown objective distribution is,
| and so the statement that it has a positive expected
| value is just a statement that one assigns a high
| probability to it having a positive expected value.
|
| Or, one could just take a subjective probability
| distribution view of like, how it will behave, and
| interpret the statement as subjectively assigning
| positive expected value of investing in the stock market.
|
| I think? This seems to make sense to me, but, I've not
| like, read much about philosophy of probability or
| whatever, and also I could be missing (or wrong about)
| some of the math.
|
| But, in any of these 2 (or 3) cases, it doesn't make
| sense to me to say that it is "impossible to say" whether
| "the stock market in not a game with net negative
| expected value".
| yreg wrote:
| Sidenote: Dow Jones Industrial average is an incredibly archaic
| and dumb metric. It weights companies by _price per share_ ,
| not by market cap.
|
| So when Apple does a 1 to 4 stock split its influence on DJI
| nonsensically falls by 75%.
| bishoprook2 wrote:
| Also, it's an actively managed index. Companies are added and
| subtracted.
| dheera wrote:
| Don't they adjust for that when splits happen?
| christophilus wrote:
| Nope. It's price weighted. Hence the comment on how dumb it
| is.
| dheera wrote:
| Sounds like a simple thing to solve if they just let me
| make a pull request for the function getDJIAValue() or
| wherever the hell it lives. Based on price is fine --
| when splits happen just adjust the weight by the split
| factor. Are they really that incompetent at coding?
| yreg wrote:
| >Based on price is fine -- when splits happen just adjust
| the weight by the split factor
|
| It's not fine since companies have varying counts of
| shares, nevermind the stock splits.
|
| The proper solution is getSharePrice() * getShareCount().
| Which is what most other indeces do.
| bosie wrote:
| > Are they really that incompetent at coding?
|
| Wait, you think this is a _coding_ issue?
| quickthrowman wrote:
| It's not an error in the implementation, the problem lies
| within the index specification: https://www.spglobal.com/
| spdji/en/documents/methodologies/me...
| dheera wrote:
| So change the specification. Fire the person who hasn't
| changed it already and schmoozing with beer in a
| Manhattan high rise, and put an engineer in charge.
| wheybags wrote:
| They did, it's called the s&p 500, and it's run by the
| same company.
| kortilla wrote:
| If you change the specification, that's a new index FFS.
| It's like changing the specification for Fahrenheit.
| dheera wrote:
| Oh I'd __love__ to change the specification of Farenheit
| so that people get confused and stop using it.
| yreg wrote:
| No. Apple was the largest component and now it's 19th.
|
| Also amusingly, DJIA is unable to include Amazon since it
| would obliterate the rest of the index.
| pgwhalen wrote:
| They adjust for it in the sense that the value of the
| index itself doesn't drop, but yes, Apple's proportion
| needlessly changes.
| iso1210 wrote:
| Amazon is small fry compared with BRK-A, which was up
| $8,854 on Friday - over twice Amazon's share price.
| dheera wrote:
| Just weight it by 0.1 or whatever? Simple solution.
| mastax wrote:
| The whole point of the DJIA is that the same rules have
| been used for a long time. If you want a better index
| there are many available.
| dmurray wrote:
| No. Lots of other measures do, but not the DJIA.
| tkojames wrote:
| The s&p 500 is worse In my opinion. They make it sound like
| it is the top 500 public companies in the us. Which is not
| the case. They have group that picks them based on a bunch
| dumb rules. I like the total stock market index's. If you
| have people picking what goes into the index they why bother
| just buy active managed index funds.
| mrfusion wrote:
| Is there a better index fund to own then?
| sharpn wrote:
| check out the Russell 3000 Index - that might be better
| yreg wrote:
| Index != fund.
|
| There are funds that are more diversified than funds
| tracking S&P (e.g. $VOO tracks S&P 500). $VTI should
| represent the total US market. $VWRL should represent the
| total worldwide market.
|
| Not sure about "better to own" though - that depends on
| your risk profile. Of course both of them underperformed
| S&P 500 in the recent history.
| carnitine wrote:
| The S&P 500 and Dow are just simple algorithmic trading
| based on an underlying thesis (US does well) with good
| historic performance.
| tkojames wrote:
| S&p 500 is not a simple algorithmic trading system. That
| is the problem! They have a selection committee..
| https://en.m.wikipedia.org/wiki/S%26P_500
| jefftk wrote:
| The S&P 500 isn't ideal, but it's much better than the Dow.
| Both indices are a selection of companies, but the Dow is
| smaller which leaves much more room for judgment calls.
| Additionally, that the Dow is weighted by share price is
| completely ridiculous.
|
| (If you actually want to index, though, a total market fund
| makes much more sense)
| tkojames wrote:
| Yea true. But most people I think know the Dow is kinda
| of BS handpicked list. Where the S&P 500 pretends it is
| the top public 500 companies in the USA. Just always
| kinda bother me how they advertise it. Most of them will
| become useless anyways. Firms are going to be using in
| house index so they don't have to pay the fees. Fidelity
| is doing this with there free index funds.
| yreg wrote:
| The simple premise that S&P500 weights its components based
| on market cap already puts it lightyears ahead of DJIA.
|
| Also including 500 big companies is much more reasonable
| than including just 30.
|
| ---
|
| People lately criticize S&P committee for the rule that a
| company needs to report 4 consecutive profitable quarters
| in a row to be included. Thanks to this they've missed the
| boat on Tesla and they had to eventually include it as the
| 8th largest component.
|
| Someone on this forum joked that they should amend the rule
| to say: _A company needs to report 4 consecutive profitable
| quarters in a row and the CEO name must not rhyme with
| melon tusk._
| anonu wrote:
| There's a published methodology on how the S&P 500 works.
| It's quite predictable, as this is a desirable feature on
| any index. While it's true that there's a human index
| committee that meets, it's mostly for tie breakers. They
| strive for diversity and typically lean on precedence to
| make their picks.
|
| Also, almost nobody thinks the S&P5 is worse than the Dow.
| I'm not sure how you can back that up.
| ww520 wrote:
| Dow kicks out underperformers and brings on good ones from time
| to time. That ensures only the good ones remain. I wonder how
| those changes affect performance.
| ip26 wrote:
| The note was more about how good the supposedly 'unexciting'
| rates of return actually were, not about market timing.
|
| _risk free bonds are yielding 5%_
| FreeRadical wrote:
| This is a really interesting concept
| ourmandave wrote:
| John Tuld from _Margin Call_ movie...
|
| So you think we might have put a few people out of business
| today. That its all for naught. You've been doing that everyday
| for almost forty years Sam. And if this is all for naught then so
| is everything out there.
|
| Its just money; its made up. Pieces of paper with pictures on it
| so we don't have to kill each other just to get something to eat.
| It's not wrong.
|
| And it's certainly no different today than its ever been. 1637,
| 1797, 1819, 37, 57, 84, 1901, 07, 29, 1937, 1974, 1987-Jesus,
| didn't that fuck up me up good-92, 97, 2000 and whatever we want
| to call this.
|
| It's all just the same thing over and over; we can't help
| ourselves. And you and I can't control it, or stop it, or even
| slow it. Or even ever-so-slightly alter it. We just react.
|
| And we make a lot money if we get it right. And we get left by
| the side of the side of the road if we get it wrong.
|
| And there have always been and there always will be the same
| percentage of winners and losers. Happy foxes and sad sacks. Fat
| cats and starving dogs in this world. Yeah, there may be more of
| us today than there's ever been. But the percentages-they stay
| exactly the same.
| antaviana wrote:
| What I liked best of this scene is how all this truckload of
| truth was delivered with the guy relaxingly devoring a piece of
| meat at the office.
| birdyrooster wrote:
| I'm going to go ahead and sort of disagree with you there. What
| you are describing is a logical fallacy. By redefining winners
| and losers to be an arbitrary condition instead of a fixed set
| of attributes (homeless, hungry, lack of class mobility, poor
| health), you can claim some notion of relativism but it's not
| helpful for understanding anything. It's a bit of circular
| reasoning.
| remontoire wrote:
| His whole comment is a quote from the movie
| birdyrooster wrote:
| I know it was a quote. I was disagreeing with the
| sentiment.
|
| Why even repeat that? It's like saying "did you even read
| the article?"
| che_shirecat wrote:
| it's a quote from a movie. the premise being that as long as
| humans compete with each other for resources, there will be
| some they take most of the pie, and others that struggle for
| the remaining scraps. it's more a philosophical take on the
| human condition. the take is just that - winners and losers
| is arbitrary because humans will always view their successes
| and failures in direct comparison with others, regardless of
| whether from an absolute perspective their general condition
| or their share of the pie or the degree of wealth equality
| has improved. it's definitely helpful for understanding the
| human psyche. calling it circular reasoning misses the point.
| birdyrooster wrote:
| Oh I get the point (and I know it's a quote, which I why I
| quoted Office Space) but it's still useless rhetoric.
| che_shirecat wrote:
| > "I'm going to go ahead and sort of disagree with you
| there."
|
| Either you didn't realize it was a quote and are lying,
| or you have serious issues with communicating in the
| English language.
|
| > it's still useless rhetoric
|
| Why?
| VinLucero wrote:
| Does anyone know where I can find a digital version of historical
| FT / WSJ articles?
|
| I'd love to run some NLP over that history to track sentiment
| over time.
| deehouie wrote:
| WSJ has a link to its digital archive, which only goes back to
| May 1996. And unfortunately it doesn't have API so getting
| articles out of site for NLP is a pain. Let me know if you have
| code for that. I'm working on something similar
| otterley wrote:
| ProQuest is the digital provider for Wall Street Journal
| historical archives. Many public libraries provide free access;
| often all you need is a local library card and login.
| roaring20s wrote:
| Good idea.
|
| The market sentiment in 1921 was very bad for stocks. In fact,
| a week ago in 1921, Andrew Mellon (Treasury Secretary)
| suggested retail investors avoid stocks. This was covered in my
| post last week.
|
| Sentiment is going to flip around 1923-1924 (once we clear the
| 1920 top) and only strengthen into 1929.
| VinLucero wrote:
| @roaring20s I have read through all of your current Substack
| articles and would love to catch up on your own background
| and data sources. I think pre-computer data extraction powers
| the best ML insights.
|
| I am working at a YC Fintech company exploring economic
| opportunity over time and think there are some deep
| relationships here around human psychology and markets.
| anconia wrote:
| Interesting - What company?
|
| If you can't say, no worries.
| [deleted]
| fighterpilot wrote:
| A side effect of 1929 was the popularity of the Nazis. They went
| from low single digit support to 35-43 range levels of support in
| two years, in part due to the huge unemployment and disaffection.
|
| The ripple effects of seemingly disconnected events thoughout
| history never cease to amaze me. It makes me more aware how
| damaging seemingly once-off things can be (act of terrorism,
| discriminatory or unfair policies, economic hardship) due to the
| spiralling effect that can happen.
| rossdavidh wrote:
| For those who like this sort of thing, "The Great War" on YouTube
| followed WW1 week by week, 100 years afterwards. No reason you
| couldn't do the same with 107 year delay or something. It was
| very well done.
| [deleted]
| I_am_tiberius wrote:
| I recently bough an FT subscription for one year and am really
| disappointing that I'm still exposed to really annoying ads. Is
| this normal for subscriptions in this cost range?
| okareaman wrote:
| It's a cool concept. I follow "World War I as it happened (1914)"
|
| https://twitter.com/WarHappened
| rland wrote:
| There's this one for World War 2 also:
| https://twitter.com/RealTimeWWII
| cperciva wrote:
| _If one bought and held the Dow from 1921 to present, the total
| return would be 500,000% (5,000x)!_
|
| On the other hand, CPI has gone from 17.6 to 271.7 in the past
| century, so that 5000x total return is really 324x after
| adjusting for inflation -- also known as 6%.
|
| Now, 6% after inflation is nothing to sneeze at; but it started
| at a cherry-picked low point in the market and it comes with a
| lot of market volatility... and it's still not _dramatically_
| better than the 4-5% which ultra-long term investors (e.g.
| university endowment funds) aim to receive after inflation.
| narrator wrote:
| On the other hand, two generations would be dead after 100
| years and federal inheritance tax is 40% and has been higher
| and the exemption limit was only about $500,000 up till the
| 90s, so that return is not so great, mainly because of taxes.
| If you are a tax exempt foundation like an Ivy League
| University, it's absolutely awesome though.
| exporectomy wrote:
| And if you felt like passing it down your family tree, the
| number of people would have multiplied by an order of
| magnitude, diluting the share each grandchild ends up with.
| pg314 wrote:
| That ignores dividends. That will add a couple of percentage
| points to the return.
|
| If I rerun the calculation from the cherry-picked peak of about
| 360 in 1928, I get around 4.5% after inflation, without
| dividends.
| IshKebab wrote:
| I'm pretty sure they use a price that accounts for dividends.
| Or they should anyway unless they're doing it wrong.
| roaring20s wrote:
| Compounding works best when dividends are immediately
| reinvested... it also pushes up the total return
| considerably.
| cperciva wrote:
| The article says "total return", and the price index only
| increased by 513x (from 68.63 to 35,208). so I'm pretty sure
| they're including dividends.
| pg314 wrote:
| True. I missed that. The calculator at [1] gives totally
| different returns with dividends reinvested, though: 7.6%.
|
| [1] https://dqydj.com/dow-jones-return-calculator/
| roaring20s wrote:
| I am including dividends.
|
| I sometimes wonder if there are some long forgotten
| brokerage accounts just idly compounding.
| delaaxe wrote:
| Though dividends paid in cash don't really count as
| compounding no?
| seanmcdirmid wrote:
| You can reinvest them it or he stock after you've paid
| income taxes on them.
| psvj wrote:
| CPI drastically understates inflation--- my guess is that real
| returns after 'real' inflation are pretty close to zero
| FabHK wrote:
| Sources? I could be argued that due to "hedonic" improvements
| CPI understates inflation (viz, the entry level Apple laptop
| today costs about as much as the entry level Apple laptop 20
| years ago, but is vastly better).
| cvrjk wrote:
| This is what's so surprisingly scary about time value of money
| to me. Many "spectacular" investments that double or triple
| money over a decade or 2 are simply not all that great if you
| just calculate the annualized return and factor in the
| inflation.
|
| Back home, I've had so many agents try to sell me inferior
| insurance and investment opportunities dressed up as insane
| deals hoping I wouldn't look too much into the details. I was
| really lucky to come across the folks at /r/indiainvestments
| who frequently warn about this. But I am sure there are many
| others who are not aware of these things and fall for them.
| tedunangst wrote:
| DJIA is also a pretty dumb index.
| brantonb wrote:
| While I agree, this Planet Money episode from 2012 goes into
| the details of why.
|
| The thing that jumps out to me as the dumbest is that it uses
| raw share price instead of market capitalization.
|
| https://www.npr.org/sections/money/2012/02/07/146546183/why-.
| ..
| saghm wrote:
| I remember hearing about this after Apple did a stock split
| a little while back; apparently it completely tanked the
| Dow Jones due to the price per share being lower. I think
| they decided to add some new tech stocks or something to
| try to compensate for it, but finding out that they used
| the raw share price just made me stop paying attention to
| the Dow Jones ever.
| cptnapalm wrote:
| Best use of a time machine for stocks: Monster Beverage. In 20
| years it increased more than 100,000%.
| anconia wrote:
| Cool! Are you planning on doing any other time periods like this?
| JohnJamesRambo wrote:
| This will be an interesting journey. I got a real jolt yesterday
| when I read about one of the top value investors (Morningstar's
| International Stock Manager of the Year in the past) that jumped
| off a Manhattan skyscraper recently. His fund had gone from 20
| billion to 1 billion AUM because everyone was leaving for bigger
| gains. It's the opposite of the speculators jumping off we get in
| a crash and I think this means something.
|
| https://en.wikipedia.org/wiki/Charles_de_Vaulx
| aazaa wrote:
| > Writers at the FT ponder how to spend their day while equity
| and commodity markets vacillate listlessly. ...
|
| This is what a lot of people don't get about market bottoms.
| Nobody cares. It's not like they hate an asset class. They just
| could not care less.
|
| This is one of the reasons that buying market bottoms is so hard.
| There's no story. You tell somebody what you did, and they just
| look at you with a blank stare.
|
| Then you get to wait while ... nothing at all happens. Good news
| that should turn prices around - nobody cares. Or worse, a
| surprise snap lower that makes you question your "value" stance.
|
| During the transition period from bear to bull, nobody believes
| it's real. The bears from the previous cycle who called the top
| and made the right choice to sell will not believe the bull is
| real and so will stay on the sidelines. As the market rises,
| everyone - even the bulls - will expect the inevitable return to
| baseline. Rinse and repeat. Maybe for years. Not many people will
| continue to hold on during that period.
|
| Near market tops, of course, it's exactly the opposite. You will
| be congratulated from here to Timbuktu and back for your "wise"
| investment when buying into a market shooting higher. You'll look
| like a star. Somebody who knows what they're doing. There will be
| lots of talk about new paradigms and how this time it really is
| different, and why.
|
| You should be selling, but your own brain and the brains of the
| people around you will make you buy, buy, buy instead.
|
| It's so predictable as to be laughable, except for the pain and
| chaos that happens when an especially monstrous bull goes to the
| slaughterhouse.
| xorfish wrote:
| > You should be selling, but your own brain and the brains of
| the people around you will make you buy, buy, buy instead.
|
| This is bad advice.
|
| There is always a reasonable chance that the next bear market
| is more than 4 years away and that equities are still cheaper
| now than they will be at the bottom of the next crash.
|
| You have also explained quite well that you likely won't be
| able to hit that bottom of the next crash.
|
| So just don't care about anything and invest every month, even
| if everything is "overvalued" and a "crash is imminent".
| hiram112 wrote:
| Similarly, while there is an explosion in the markets we all
| know the most - equities, real estate, "commodities", etc. -
| there are many other markets out there that are, in fact, at a
| bottom. And like you said, nobody is paying attention or even
| considers them as an investment.
|
| So while the hordes are all trying to suck blood out of
| increasingly tapped investments in real estate (e.g. 8th tier
| mountain "resorts" in the middle of nowhere) or equities (me-
| too energy or tech pump & dumps), the next big thing is
| completely being ignored.
|
| And in 10 years, everyone will say it was obvious that these
| would be the next big play. 20/20 hindsight.
| anonu wrote:
| What?
|
| Market timing has always been a thing. Whether it's a bottom or
| a top or a head and shoulders pattern. This is the whole point
| of technical analysis and there's enough people out there to
| care about every single thing the market does at any stage in
| it's cycle.
| smabie wrote:
| Professionals by and large do not use traditional/manual TA.
| If you find some features/indicators that work, you include
| them in your algorithmic trading system.
|
| There's absolutely zero legitimate reason for a human to look
| at charts and use TA.
| EMM_386 wrote:
| > Whether it's a bottom or a top or a head and shoulders
| pattern. This is the whole point of technical analysis
|
| I'll let you in on a little secret. Technical analysis is a
| lot of smoke and mirrors. I was in this industry.
|
| You can draw all the head and shoulder patterns you want, if
| Elon posts a Tweet about price targets of 420.69, Apple
| doesn't sell enough iPhones, the company you are charting
| causes a major oil spill, or the weather gets warmer, those
| patterns vanish in an instant.
|
| Millions of global traders do not obey lines drawn on charts.
| The market is too complex for that.
| anonu wrote:
| It's not smoke and mirrors because enough people follow it.
| Then it becomes self fulfilling. Yes, conceptually, in a
| vacuum it's BS. But you have enough demand and belief in
| it, it validates itself. This is how the market works...
| engineer_22 wrote:
| It's the quants jobs to snipe the technical analysis
| retail investors.
| EMM_386 wrote:
| > This is how the market works...
|
| If whatever technical analysis you are using is actually
| working for you long-term, then stick with it and don't
| tell anyone else about it.
|
| Because there are vultures above waiting to pick up the
| scraps.
| JumpCrisscross wrote:
| > _not smoke and mirrors because enough people follow it_
|
| There is a lot of empirical evidence around it not
| working. Flow of funds analysis has merit, but that
| largely occurs by trading against people looking for
| constellations in candlestick charts.
| fighterpilot wrote:
| You can't prove a negative like that. It'd be like
| academics looking for monetizable edge in the orderbook
| _after_ properly simulating latency. They wouldn 't be
| able to do it due to a lack of domain knowledge but they
| didn't prove a negative through their failure.
|
| As for the effectiveness of TA, there's a tonne of dogma
| on both sides with extremely certain people saying it
| does or does not work.
|
| If we take a broad definition of TA (which is edge
| existing in operations on a time series of prices), I
| have conclusive evidence that it does work. I have seen a
| strategy print money almost daily using only that data as
| an input.
|
| If we take a narrow definition of TA, defined as lines on
| a chart, well I'm a believer of that too, although the
| evidence is not as strong. I just suspect that it works
| due to my observation of how things react in the market
| according to those levels and lines. Here's one you can
| look out for yourself. Observe what happens when the
| price moves through yesterday's close price. You will
| notice that volatility becomes significantly elevated.
| That's edge, and it's TA edge.
|
| I don't believe it works merely due to the self
| fulfilling prophecy aspect. It works because other market
| participants put stop orders, resting limit orders, or
| algo trading rules (in banks' liquidation or acquisition
| algos) tied to those levels.
| JackFr wrote:
| One reason I would imagine prices were so low (and soon might get
| so high) was that information on these companies was scattershot
| and very incomplete. There was no SEC. There were no legal
| reporting requirements and what few reporting requirements there
| were were mandated by the exchange.
| deehouie wrote:
| The view expressed in this blog and many of the comments on HN is
| a prime example of survivorship bias[1].
|
| In 1921, you did not know DJI would have done so well over the
| next 100 yrs.
|
| A very real counter example is the Japanese stock market. The
| Nikkei peaked at 39,000 in 1989. Thirty yrs later, it's only
| 28,000. Many blue chip stocks on Tokyo Stock Exch have never
| recovered their previous high.
|
| [1] https://en.wikipedia.org/wiki/Survivorship_bias
| G3rn0ti wrote:
| That's interesting: Nikkei's bad long term performance is due
| to Japan's bad economic policies in the last three decades.
| Many years of quantitative easing have given rise to a high
| public debt, a large unemployment rate and an uncompetitive,
| stagflationist economy after being one of the most innovative
| producers ("all the cool stuff comes from Japan").
|
| This is what happens when a central bank keeps on preventing
| moderate recessions necessary for correcting a nation's
| economic failures. The US and Europe should study the case of
| Japan very closely these days.
|
| https://en.m.wikipedia.org/wiki/Economy_of_Japan
| 88840-8855 wrote:
| I wonder how much the American Trade War against Japan has
| contributed to Japans stagnation/"the lost decades".
|
| If I remember correctly then Japan was about to take over the
| USA in terms of the GDP, but started to become strong in many
| key industries, and then Raegan, who was running under "Let's
| make America great again" slogan, initiated the anti-Japanese
| trade war.
|
| And if I am not mistaken or am not simplifying too much then
| Trump was even hiring the same consultants from that "anti
| Japan" trade war to start the trade war with China.
| deehouie wrote:
| I'm stunned why this comment is downvoted. It's exactly
| what's happening in US relationship with China.
| FabHK wrote:
| Would be interesting to compare a price return index with a
| total return index (ie including dividends) for Japan over
| the last half century.
| princeb wrote:
| > The US and Europe should study the case of Japan very
| closely these days.
|
| but they do? bernanke was a scholar of japan's central bank
| policy.
| imtringued wrote:
| I know this is never going to happen: Introduce wealth taxes
| on bank deposits and land ownership. It would help every
| nation on earth to achieve prosperity. If for some strange
| political reason you cannot do that, then issue perpetual
| government bonds because that is the only thing left to do.
|
| By the way. QE has literally no impact on an economy by
| definition. It's entirely psychological. I don't know why
| central banks keep doing it. There isn't any private demand
| left over for credit at current interest rates. Central bank
| reserves are counted as part of the money supply but their
| velocity is 0 for practical purposes. You can't withdraw them
| and you can't use them to purchase goods. The only thing they
| do is let banks lend out more money which counts for nothing
| if interest rates are too high.
|
| >This is what happens when a central bank keeps on preventing
| moderate recessions necessary for correcting a nation's
| economic failures.
|
| No such thing is necessary (enduring recessions for no
| reason). Also, USA is suffering from having the worlds
| reserve currency and Europe is suffering from having an
| incomplete euro.
| saiya-jin wrote:
| It might surprise you (or not), but Swiss have it. Yearly
| wealth tax, differently calculated in every canton, based
| on global assets. Doesn't hurt regular Joe, doesn't bleed
| the ultra rich enough to leave the safe and luxury
| lifestyle, but balances the scales a bit.
|
| Possibly largely unrelated solely to this, Switzerland is
| amazing on another thing - very strong middle class that is
| not dwindling, unlike most of the western world.
|
| Yeah, expats often complain to no end that services and
| food are expensive compared to where they came from, but
| thanks to that tons of folks are not desperate, we don't
| have slums of poor serving the rest, and you know that even
| person filling the shelves in supermarket is getting decent
| wage.
|
| Low criminality, high education, generally very smart
| general population (which allows to have frequent public
| votes on important things without shooting one's foot like
| some other places), tons of personal freedom that average
| US person can only envy, EU is even worse. It all ties
| together, and middle class is one of the pillars of this.
| seanmcdirmid wrote:
| > tons of personal freedom that average US person can
| only envy, EU is even worse
|
| Are we talking about the same Switzerland I lived in for
| two years? Not being able to do laundry on Sunday was
| actually a big hit to my personal liberty. There are also
| a lot of little rules that sneak up on you, all perfectly
| fine if you are willing to conform to basically being
| Swiss, but if you aren't it can get uncomfortable.
| neffy wrote:
| I suspect most countries would prefer Japan's problems to
| their own.
|
| An alternative view might be that the excessive returns in
| the US are due to outright financial manipulation using share
| by backs funded by low interest rates (amongst other things)
| leading to an insane concentration of money in the stock
| market and financial sector to the detriment of large
| sections of US society, its basic infrastructure, and its
| democracy.
|
| This is what happens when white collar crime is
| institutionalised.
| andreilys wrote:
| _This is what happens when white collar crime is
| institutionalised._
|
| Buying back shares is neither "financial manipulation" nor
| is it a "white collar crime".
|
| When interest rates are low and you are bullish on the
| company, it makes perfect sense to buy back shares.
| omgwtfbyobbq wrote:
| It's not, but it can be risky for that business.
|
| https://www.hbr.org/2020/01/why-stock-buybacks-are-
| dangerous...
|
| Course, if financial incentives for the c-suite are tied
| to share price, that's just another example of choose the
| reward, choose the consequences.
| kortilla wrote:
| > This is what happens when white collar crime is
| institutionalised.
|
| Do you know what share buybacks even are?
| downrightmike wrote:
| Oh, the Fed is totally looking at Japan, that is why they
| started "yield curve control" a little over a year ago,
| because inflation was clearly going to be a problem for us.
| Japan is the best and nearest real world model that allowed
| the country to survive their bad policies, which the USA has
| way more issues to work through. Undoing all the financial
| regulations and laws from the Great Depression was super
| fucking stupid. There would never be anything too big to fail
| had those remained intact.
| zippy5 wrote:
| I do think there is some real signal in this article in
| addition to the survivorship bias.
|
| 1) Noting that the stock market was boring I think is real
| indicator of the mass psychology of that time. There is
| definitely a inverse correlation between enthusiasm for markets
| and future returns.
|
| 2) Noting the returns of standard Oil is a reasonable take.
| There was a massive expansion of combustion engine production
| in the preceding two decades and inferring that this would be
| correlated with increased demand for oil based products is not
| hot take. Also it doesn't take a genius to understand a oil is
| better business that automobiles, recurring revenue and all.
|
| 3) Tax rates have historically influenced valuations.
|
| 4) I'm not sure how to extrapolate the the German currency
| situation but I think looking at the relative attractiveness
| global markets makes sense.
| xorfish wrote:
| How well a sector as a whole does is practically irrelevant
| for what return on investment a investor gets by investing in
| said sector.
|
| A sector can shrink from 63% of the total market to less than
| 1% and outperform the market over the time that happened. See
| the US railway sector from 1900 to 2020:
|
| https://www.credit-
| suisse.com/media/assets/corporate/docs/ab...
| tedunangst wrote:
| So if you had invested 10000 yen per month in nikkei from
| 1980-1990, where would you be at today?
| maerF0x0 wrote:
| > If one bought and held the Dow from 1921 to present, the total
| return would be 500,000% (5,000x)!
|
| One of the great challenges of human existence is we do not live
| 100 yrs to see those returns. Instead we're living, blind to the
| exact details, on the choices of those 100 yrs prior to create
| the X% returns of their choices _for our lives_ . One way to get
| people to make such choices is to create a love for whomever
| comes next. Children used to be a "skin in the game" sort of
| scenario where you didn't want to mess up the future cause you
| had a vested interest in it. Between selfish culture and few
| people having children, i'm not sure the solution .
|
| While many say that ending aging / increasing life span to 100s
| or 1000s of years would be disastrous, I actually think it might
| fix a lot of issues as we'd have that timespan of a personal
| interest to optimize across.
| baybal2 wrote:
| There is 1000 year gold, but no 1000 year people
| [deleted]
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