> Buying the dip isn’t some secret strategy. Time is the secret strategy.
Ah yes, the good ol' "time in market beats timing the market".
Of course, that assumes that markets trend upwards in the (very) long term. Which... if past performance is any indicator of future performance [0], the past 100 years provide a fairly compelling narrative.
Yep. No one in the 1970s and early 1980s would believe that Japan would be in the position they're in now.
Sounds a lot like people examining only post-WW2 markets in the United States during a period of historic national expansion and growth and thinking they'll continue on average.
The next few decades have very different social and economic considerations of the past few decades, so...
Why though ? Their 70-80s boom was always going to be short lived, geographically they are resource poor as well.
The demographics of Japan weren’t a sudden change or surprise their population is always been heading in this direction , coupled with their strong anti immigration culture and barriers to entry. It was bound to happen sooner or later .
It is extremely unlikely any one company /market can keep ahead of every single tech /product evolution cycle and always be the best .
While it is hard to guess correctly when that will happen as it did in 90s , but it will always inevitable sooner or later .
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The growth of U.S. economy post ww2 and importantly post Bretton woods have been phenomenal is very true, however were already a powerhouse , the preceding 300 hundred years have also been explosive growth catching one wave after after .
Largely thanks to immigration of some form or other .
Modern America has always been built on the backs and hard-work of immigration. First European settlers fleeing stagnant economies, actual slavery for a while, economic slavery? of poor driven by famine or lack of opportunity later like the Irish wave or Chinese etc, then those affected by various wars, and most recently top talent from most countries in the world .
It has always been exploitative even now it is , most immigrants legal or illegal are paid less than their peers for example
Illegal immigration is more well known on how they are paid less, even In legal work visas like say H1B changing companies is hard because out of work even for a week you to leave the country immediately, changing employers also affects the Permanent residency qualifications, so people on those visas move jobs less, on average get 10-20% less and have lesser negotiating power, companies know this and use those visas as cost saving technique.
Despite all the problems around immigration, U.S. still remains the country most open to immigration , few countries come close to the volume of immigration legal and illegal U.S. supports, and path to citizenship .
Japan is other end of the spectrum in terms of immigration, which for the economy is a big problem because of such aging population.
And before the peak it was the greatest asset bubble of all time! "A $100,000 investment in Japanese large cap stocks in 1970 would have turned into $5.7 million by 1989." [0]
Could this be the exception that proves the rule? I have never seen any example used for this argument except Japan. That makes it seem like the situations that generated that crash and continued loss are pretty unusual. At some point, it becomes difficult to make financial plans in order to mitigate a situation this rare.
For a huge portion of people, it is impossible to build wealth on a salary. Investing is basically mandatory unless you want to have a very low budget in retirement and live entirely off social security.
Japan and the US got into a trade war; it’s a special situation for them. Absent getting a bloody nose from an economic giant, they would have done well
> Absent getting a bloody nose from an economic giant, they would have done well
I don't know any economic historian with expertise in Japan who believes that.
Their bubble basically puts all other bubbles to shame. The land under the Imperial Palace really was worth more than all the real estate in California at the peak. Japan was destined to have an epic crash of equal proportions to the size of their bubble, any US actions notwithstanding.
The bubble reached evaluations virtually impossible to meet, true, but the US torpedoing the largest semiconductor and electronics company in the world certainly was a contributing factor.
If the measuring stick you use is getting shorter every year by design (monetary expansion/inflation) then you can be quite certain that the market will trend upwards for as long as you use that unit of measure.
S&P 500 growth has historically outpaced inflation by 6-7% annualized over the ~65 years of its existence. That cannot be explained solely due to central bank policy and/or inflation. Naive extrapolation would posit that keeping your money in this index would continue to stay far ahead of inflation given sufficiently long horizons [0].
If your goal is simply to keep up with inflation, then buy I bonds.
[0] The aphorism that comes to mind here is that "the markets can stay irrational longer than you can stay solvent".
I bonds are great right now. But you can only purchase $10,000 per year ($15,000 if you finagle your taxes right). I wish my IRA had an I bonds-like product I could invest in.
It's also the same reasoning used by a Thanksgiving Turkey.
The farmer has always come in and given the turkey food, so logically he will continue to do so. And it is true. Until it isn't. But the cost of that one day when it isn't is very high for the turkey.
I don’t think that interpretation of the metaphor is intended. Just that something good can happen many times and be followed unexpectedly and suddenly by something bad.
And that's why i said the analogy is not illustrative of anything - because you dont know the future at all, and there's no precedent for that bad future. You don't prepare for such a future at the cost of the current time.
If you switched the turkey to a pet cat, would the analogy still make sense?
Given that global warming will cause the global economy to contract one way or another within the next 100 years (either we willingly contract to soften the blow, or keep going and producing more greenhouse gases until a massive crash), I really don't think this is the right time to think in these terms.
I believe the latest IPCC report on climate change expected outcome even for the worst scenario had a noticeable decrease in the rate of growth of the global economy - not a contraction, just slower growth. We do not seem to be on track for a global contraction of economy, not even in the face of climate change.
And economic growth is already (though not that recently) somewhat decoupled from growth in greenhouse gas emission, so any actions taken to reduce climate consequences do not have to be at the cost of stopping global growth, much less intentionally contracting global economy; and in fact the only actions likely to be taken in practice are those which don't stop economic growth - the general population, especially those in poorer countries (even those directly harmed by climate change) will not accept that cost.
> I believe the latest IPCC report on climate change expected outcome even for the worst scenario had a noticeable decrease in the rate of growth of the global economy - not a contraction, just slower growth. We do not seem to be on track for a global contraction of economy, not even in the face of climate change.
The reports do talk about economic contraction after the year 2050 if we don't reach the 2 C temperature goals. They also don't model the likely resource wars that will happen if large parts of Bangladesh, India, Pakistan, Mexico etc will become uninhabitable by the end of the century, due to rising temperatures and water levels.
> And economic growth is already (though not that recently) somewhat decoupled from growth in greenhouse gas emission, so any actions taken to reduce climate consequences do not have to be at the cost of stopping global growth, much less intentionally contracting global economy
The IPCC reports says that GHG emissions increase is mostly proportional to GDP increase throughout all regions, with a significant, though smaller, contribution from population increase. It's also notable that GHG emissions continue to increase - we are not anywhere near a plan for net 0, and nothing suggests so far that we are even likely to start reducing GHG emissions, globally or even in any particular region.
Why can't technological advancement stave off climate change damage? Why cant renewables replace fossil fuels, and continue human expansion? Why can't space exploration and settlement be where the future growth occurs?
> Why can't technological advancement stave off climate change damage?
What technology in particular could stop the oceans from rising and swallowing much of today's southern coastlines, and what technology in particular could reduce wet-bulb temperatures across most of the world's south below 50C, the point where healthy adult humans with access to infinite water will die of heat stroke?
> Why cant renewables replace fossil fuels, and continue human expansion?
Because renewables are not reliable, rely on rare metals, and can't replace the huge amount of energy produced by oil. Someone was making a calculation the other day that replacing the entire fleet of vehicles in the USA with electrical cars would require doubling the electricity production of the states. Do you really think that's possible in 50 years, while also replacing all gas and coal plants with renewables?
Also, there are huge areas of industry that use oil or natural gas for many reasons other than energy - plastics, synthesizing NH3 for fertilizer and other uses.
> Why can't space exploration and settlement be where the future growth occurs?
Because we are nowhere near having the technological advancement needed for space settlement that would do anything other than cost resources. Perhaps there is some small chance of having a research base on Mars or the Moon within the next 50 years, akin to the ISS, but ideas of "colonizing Mars" are beyond sci-fi at this point. We couldn't even colonize Antarctica with current technology.
Besides, there's nothing on Mars that we don't have much more easily accessible on Earth - no rare metals, no crop fields, no spices, no native workers we could import as slaves, no cotton or anything that could even conceivably resemble the existing reasons for colonization. And lest you think anything else, there is nothing we can conceivably do to the Earth that would make it anywhere near as inhospitable as Mars. Even the worse possible consequences of a Nuclear War would not leave Earth as radioactive, poisonous, cold, or otherwise inhospitable as Mars is today.
10 years ago, no one would predict that the cost of solar would drop by 80%-90%. There's still a lot of untapped potential in other forms of renewables too. The current bottleneck of batteries might be solved, i'm sure, in the near future.
There's a lot of pessimism among the media. I, for one, am hopeful.
We are far from the limits of thermodynamics. You'd have to wait till nearer to the heat death of the universe for that to have an effect on the economy.
Only for gasoline engines. And the efficiency limit isn't the limit of possible sources of energy for work. Future engines could be electric, and the power source could be fusion.
With electric vehicles, you reach the problem of fuel weight. There is simply no realistic battery chemistry that comes close to the specific energy of oil-based fuels (J/kg). Gasoline (oxidation) is at 46MJ/kg, while a Li-Ion battery has at best ~0.9MJ/kg or so. Even a Zn-Air battery has a theoretical maximum specific energy of ~5MJ/kg, an order of magnitude less than gasoline oxidation.
You need huge increases in engine efficiency to make up for the extra weight. This is the reason why there are no electric cargo transporters so far - you may not care so much if your personal car is heavier, but a truck or cargo ship definitely cares.
Edit: Perhaps a car-sized fusion power generator is possible in some far future technology, but we are enormously far from that. At a minimum, it would require achieving fusion with materials that don't generate neutrons as a by-product, as those are enormously radioactive, and very hard to shield (read: have to be bulky). Things like deuterium-deuterium fusion are far out of reach at the moment, requiring much higher temperatures than we can currently achieve.
fusion takes is to a straight line to exceeding capacity of the planet to radiate waste heat fast enough to keep it habitable. free energy is self destruction. still better than fossil fuels, though.
electric engines require batteries and batteries are super duper enviromentally expensive to make at scales needed right now, let alone the 10y forward predictions.
Global warming is extremely likely to lead to large areas that are well populated today becoming uninhabitable in the next 100 years - either through oceans rising or through extreme heat. This will likely lead to huge migrant crises - not hundreds of thousands, but tens of millions leaving places like Bangladesh. This in turn is very likely to lead to wars and other forms of extreme events. A world at war is very likely to stop growing economically, and we may not be able to require from a nuclear war the way we did after WW2.
> Ah yes, the good ol' "time in market beats timing the market".
In the context of this article, buying the dip is a form of timing the market.
Consider instead the effect of time in market via the standard 401k model: You buy $250 of QQQ at the opening price on the 5th trading day of every single month, and you start in April of 2000 - the first month after that QQQ high mentioned in the article.
By January of 2004, you have a positive total return (which sucks). Your total return stays at less than ~20% all the way until 2006 (which sucks). You would get hit hard again in 2008, but by mid-2009 you are back to being positive. You hit a 100% return in 2013 (that took a really long time!). The next doubling is 2017 and the next is in 2020. In November 2021,you are sitting at very close to a 600% total return, but as of right now it is back down to ~450%.
Your $250 per month totals ~$66k and has a present value of ~$360k. That really isn’t so bad for being the worst case scenario the author could find ;)
PS - this does not consider dividend reinvestment, but QQQ doesn’t pay much in the way of dividends.
Past 100 years also tell us that there will be world wars, empires will go bust and some nations/people will be uprooted and have to migrate. That's a lot of uncertainty to bear, of course, and history does not predict what happens in the future. It just tells us something will hit us and we probably won't see it coming (paraphrasing Dan Carlin).
> Ah yes, the good ol' "time in market beats timing the market"
> Of course, that assumes that markets trend upwards
Market will trend upward only with positive demographics... Next 100 years might be rather disapointing for passive investing and "time in the market" types.
Ah yes, the good ol' "time in market beats timing the market".
Of course, that assumes that markets trend upwards in the (very) long term. Which... if past performance is any indicator of future performance [0], the past 100 years provide a fairly compelling narrative.
[0] Another mantra: it's not.