Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic ever since the financial crisis. What made this period so unique? Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns.
At ever dip, it was an open secret the Fed would cut rates and ease again.
At least for now, that game is over. We've had moments in the past when the markets had a similar panic (see 2018), but this period is unique due to the inflationary backdrop. Since 2008 we've never seemed to be able to create significant economic growth or inflation greater. The COVID fiscal canon blew growth and inflation skyward. The fed can't just turn on the printers again or cut rates until we hit proper a proper recession.
I think you reference only considers the index adjusted for inflation, but without taking the dividends into account.
Optimists tend to consider the dividends too small to matter when buying stocks, but it turns out that over time, the dividends tend to be a large part of the inflation adjusted returns:
According to this article [0], the profit of investing just before the .com bust would be only 12.9% by mid 2017, which is about 0.7%pa, if adjusting for inflation but not dividends.
When taking dividends into account, that grows to 54.5%, or 2.54%, more than 3x more.
And this is more or less the worst case based on recent history.
People (and tool developers) forget that the purpose of a stock is to ultimately produce dividends. It is like buying a house for rental income and forgetting to include the rent.
When I retired I had to switch from a growth-stock mindset to an income-stock mindset. I have made the switch but none of the free tools makes that easy. The closest I came was TOS will do this calculation for stocks but not ETFs. Oh well. I now have all the calculations in google sheets.
I also now have a backtest that goes the the beginning of the Clinton administration to the end of the Trump administration. I added dividends to the backtest. I only went to the Clinton administration so that I could use ETFs to simplify the calculations. The backtest includes dividends - which I had to add manually.
>People (and tool developers) forget that the purpose of a stock is to ultimately produce dividends.
It would be more accurate to say that they distribute profits back to shareholders. Buying shares back is equivalent to dividends. What's questionable are attempts to borrow money to boost the stock price as those then generate a hype cycle which lets the company sell its shares back for a profit which is exactly backwards to how it should work.
Out of curiosity: How do you test your sheets? I feel like I can arrive at such a sheet over a few days of reading, but unsure how I'd test I'm doing the right things (since there isn't a tool or a combination of tools that can act as oracle)
I used ETFs (and not stocks) to simplify the test. I was mostly looking for correlations of different investments across different scenarios. I then looked at severe market downturns to see how the correlations changed.
As you can imagine - when there is a severe market drop, most investments are highly correlated to the S&P. The most negative correlation I could get was medium term bond ETFs. Short term bonds were still highly correlated and I am not sure why.
The dot com bust was particularly interesting because each segment dropped at different times. Telecom dropped first, then tech. It took about a year for the drop to hit mid cap. In comparison - the 2008 crash hit everything quickly.
Also - lately I have been using the backtesting tools in TOS. As I said earlier, this only works for stocks and not ETFs.
> dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns.
i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere.
The only concern is low interest rates, which makes the hurdle for any investment lower thus making it easy for malinvestments to occur; In hindsight is easy to make judgements on what is a malinvestment, but not so easy at the time.
> i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere.
But just look at housing, which has exploded well beyond the rate of inflation since the Great Recession bottomed out, and especially in the past couple years.
Yes, if money is plowed into housing, the homeowner has more cash when they sell. But presumably they have to live somewhere, and with housing skyrocketing in basically any halfway desirable place, it means they're just going to spend that cash on another expensive house.
> if money is plowed into housing, the homeowner has more cash when they sell.
but it's not expensive _everywhere_. It's expensive in some of the most desirable places. And housing has some issues unrelated to the market - such as NIMBYs stopping new constructions.
>but it's not expensive _everywhere_. It's expensive in some of the most desirable places.
The fact that the median and average house prices have exploded signifies that the housing market is in a bubble. It's not relevant that house prices have not increased equally everywhere. Ultimately, after the bubble eventually bursts, it will leave a lot of people indebted to banks with their real ownings not matching the debt. This translates to a decrease in consumer consumption, meaning slower economic growth. Resources of the society will be more directed towards customers who have more wealth, meaning those who weren't part of the housing crash. Likely customers from abroad.
Obviously we're talking about percentages, but that's how economy works and that translates to very real changes in a many people's lives.
Notice you said disposable income rather than income, there is a huge difference.
But I think people recognize the housing bubble that popped in 2008 as a bubble. Saying we haven’t reached the peak of the last bubble doesn’t mean we aren’t in a bubble.
You mean artificially high interest rates. If interest rates fell negative then the money supply would shrink and there would be less unneeded money to speculatively buy houses with. Alas, we live in a world in which negative interest rates were banned and therefore the money supply and economy must constantly grow to raise interest rates above 0%.
I find it frustrating that people ignore basic market principles when it is inconvenient for them. Like, people get richer (everyone is saving incredible amounts of money), the population is no longer growing, there are fewer and fewer investment opportunities and yet for some reason, people think they have a god given right to high interest rates anyway, even when those are impossible to pay without inflation.
the inflation target was barely met (and according to arguments about service degradation) it was undershot, so no, the interest rate was not too low. (there's no non-artificial rate in a central bank managed economy)
> The fact that the median and average house prices have exploded signifies that the housing market is in a bubble.
It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage. Housing is going to stay artificially expensive on a longer-term basis accordingly. Housing only deflates on a sustained basis if interest rates go up a lot on a sustained basis, and that's not going to happen (we're coming up on 14 years into the forever low rates era).
We've been enjoying very high rates of consumer inflation and what has the Fed done? Zilch. Mostly all they've done is jabber, which is most of what they can do now: endlessly talk about how they plan to raise rates. Why? Because they can't do anything of consequence and they know it. It's a humiliating failure of their supposed mandate.
One of the many consequences of forever low rates is forever artificially inflated asset prices.
Real-estate values broadly are not a bubble, it's dollar debasement, which is why gold is going to become normal up toward $2,000 and oil is going to be normal at $65-$75+.
Mediocre economic growth will (presently is) ultimately take care of the elevated rates of inflation, rather than the Fed hiking rates by a lot. Later in the decade the Fed will be back to talking about how they'd like to spark higher rates of inflation, as typical annual real GDP growth sinks below 2%.
>It doesn't signify that. The US has long since switched over to a permanently low interest rate environment due to the extreme national debt that the Fed has to manage.
Strange, Germany did mild austerity over the 10s and the end result was even lower interest rates. The current debt to GDP is 59,8% which is perfectly "healthy". Lower interest rates mean less money is spent on interest and more money is spent on servicing the principal. The only conclusion you can derive in the EU is higher debt and more risk => higher interest rates. Yet everyone thinks we are bailing out Greece when in reality the ECB is bailing out wealthy Germans.
>One of the many consequences of forever low rates is forever artificially inflated asset prices.
You call it artificially inflated but lower interest rates don't make e.g. housing more expensive. Your monthly payment is still the same. Lower interest rates make it easier to build more housing which can reduce the monthly cost of housing over the long term.
the Fed has a dual mandate, there are still a lot of people who doesn't have a job due to the pandemic.
this inflation spike due to the combined effects of overspending on products in quarantine (partly fueled by unemployment checks, that should have been sent in monthly installments to discourage spending it on big items), and the energy market chaos thanks to the war in Europe. (and even though a small portion of the supply disappeared the price curve is steep, the new price point is much higher up as we see.)
should have the Fed done more about this? yes, definitely. but just as you observed, the low rates are here to stay on the long run. (mostly because aging population of the developed countries as pension funds buy bonds to get the fixed cashflow they need to pay the pensions.)
> but it's not expensive _everywhere_. It's expensive in some of the most desirable places.
I disagree with this. I think this was true for the mid 00s property bubble, but now prices are exploding not just in the usual suspects like SF, LA and NYC. Pretty much every place that's not a total shithole is experiencing huge home price appreciation.
I made a post on a different thread making this point, and I used Flint, Michigan as my example of "sure, prices in Flint are still low..." only to get a response from another commenter along the lines of "You'd be surprised - while bad areas of Flint are still depressed, many of the nearby areas have also seen huge runups in real estate values."
> i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere.
And buying stocks is financing real projects, and you only get those returns if they manage to do something actually useful, this is helping to finance and promote economic activity, how is that taking money away from the "real" economy?
If someone buys stocks from a third party in the open market, are they financing real projects? It really feels like it’s all speculation since the value of my shares doesn’t actually entitle me to that portion of the company’s profits, unless I can sell back directly to the company.
The value of stocks is pinned to two events that you often don’t directly participate in but are absolutely connected to in a real way.
1. The IPO. While it’s true that only the people who buy at the IPO directly finance the company, if there wasn’t the promise of someone else in the future to sell the shares to, nobody would buy at the IPO. The existence of future second-hand buyers makes the direct funding at the IPO possible.
2. Dividends and buybacks. All stocks get their value from either the current existence or future promise of dividends and buybacks. While from time to time people get lost in “greater fool” trading, the reason a stock doesn’t go to zero is because there is either currently a dividend/buyback or people believe that eventually when the company matures, they will offer a dividend/buyback to shareholders and a future buyer will want to buy this shares for the cash returned by the company. (As a tangent, this is something most crypto investors don’t understand… cryto is almost exclusively “greater fool” trading with no basis in the promise of future real cash return)
Point 2 is false: shares of stock derive their value from the fact that they represent ownership in a company.
If the company is profitable or owns valuable assets beyond their liabilities, then the shares themselves are valuable.
Their value does not depend on current or future dividends, but on the company’s current assets and the market’s estimation of the value of the company’s future cash flows.
Your point about crypto still stands: there are no future cash flows to consider with crypto, only the current value of the asset, although the comparison is really apples to oranges.
If a company was somehow set up in a way that prevented it from transferring wealth back to the owners by any means (buyback, dividends, salaries, or even creative ways, such as buying assets owned by it's owners), it's stock "value" would be close to zero, regardless of how much it owned in terms of assets. (One could imagine a non-profit trust set up this way.)
In other words, the reason why a company's assets and expected future cash flow does set its valuation, is precisely the expectation that it will lead to dividends/buybacks at some point in the future.
> set up in a way that prevented it from transferring wealth back to the owners by any means
and i noticed you omitted the method of the owner selling the share (to a third party).
This is the primary way to transfer wealth generated from a company.
> expectation that it will lead to dividends/buybacks at some point in the future.
it doesn't need to be an expectation of such at all, as long as there is someone else in the market willing to purchase the share, at a price they and the owner deem acceptable.
You could have the opinion that the lack of any possible cashflow returns to the owner as a proxy for the share being valueless, but as long as everyone else disagrees with you, and continue to transact the share in the secondary market, it has value.
> and i noticed you omitted the method of the owner selling the share (to a third party).
This is not a method for the company to transfer wealth to the owner. This is a way for a third party to exchange wealth with the owner. It doesn't affect the value of the shares.
And for virtually any normal share in a company (that I know of) that either generates income or is expected to do so in the future, the share owners has the ability to extract that revenue directly through dividends, buybacks or even by liquidating the company and selling the assets directly.
This means that they discussion is hypothetical for all such companies.
If you could name one company that is being traded at a significant valuation that has been set up in a way that makes it impossible to extract value from it to its owners, I would be interested to know about it, as it might prove me wrong.
But if there is no mechanism for giving cash to the shareholder, ownership is essentially worthless (from a money perspective) except for the possibility of amassing enough ownership to take a controlling stake in the company. But even a controlling stake is just a hobby unless somehow that stake returns cash to you at some point.
I agree about assets though. Book value of assets does need to be added to the value of shares, though usually that’s the smallest part of a share’s valuation.
You can sell stock to another person. The sale price will be higher, ceteris paribus, because the company is more valuable. This is how you make money investing in companies that don’t pay dividends. Google retained earnings for a more in depth explanation.
Buying shares of stock in a company that doesn’t pay a dividend isn’t investing, it’s the textbook definition of speculation. You are buying something that you hope to sell at a higher price. Investing is when you put money into something, and it gives you more money back over a period of time. Buying and selling crypto is speculation.
> Buying shares of stock in a company that doesn’t pay a dividend isn’t investing, it’s the textbook definition of speculation.
Yeah but this reflects the fact that starting and growing a company in itself is a type of speculative activity. Any optimism about the future is a type of speculation.
If you have a proven profitable business model, that you see no way to scale, there's no reason to list the company in the first place.
The main reason to even list a company is to take it through a growth phase, and companies get taken off the stock exchange all the time when they don't see any forthcoming growth, because then it's only annoying for them to compromise with the power/ownership for no reason.
The stock market is an accelerator for companies, not a central bank that makes absolute valuations.
It's speculation on the future development of the company's performance, you aren't entitled to a share in the profit, but you often get one anyway in the form of dividends.
If you buy a stock on the open market you don't actually fund starting a real project, but you fund the continuing development and improvement of that project, it's driven by the fact that they have shareholders to answer to, and you are entitled to voting rights.
It has to have some amount of speculation, that's the driving force behind it, otherwise the whole thing would just stagnate and you have no incentive to improve a company and it will just get looted by its employees. In the big picture it just help collectively push for more efficient ways of working, and stop inefficient work.
It's not pure speculation in the sense that you are not betting on a random event like tomorrows weather in a zero sum game.
> i don't really agree with this - the money used to purchase financial products don't disappear, because for every product bought, there was a seller. This seller now has cash, which would be invested elsewhere.
Make no confusion, please. Quantitative easing was intended to give credit institutions greater ability to lend money to entrepreneurs, so as to boost real economy. When capitals are invested in financial products the entities closing their positions (e.g., selling stocks) and, in turn, getting the cash are not necessarily credit institutions (i.e., they are typically fund managers and private investors) – which is to say they pocket the money.
Couldn’t there be an issue if the buyer is paying with margin that’s backed by an overvalued asset? Maybe not for the seller, but eventually someone will be left holding the bag.
I've had this same thought, but everyone seems to be sitting in cash? No one wants to invest unless everyone else invests. Seems the emperor is suddenly naked.
> curve inverted and interest rates have begun to go up. Risk on?
Yes, we’re still seeing billions of dollars being deployed into start-ups [1], crypto and the like. We are less risk on than we were. But within America, there is no flight to safety. (Internationally, it’s more complicated.)
Yeah, they did, and within a month or two it was reinvested elsewhere. Whether it was pulling out of American Airlines in favor of more shares of Chevron, or doubling down on tech stocks. BRK doesn’t just sit on 150bn in cash for longer than they have to. Not saying they don’t sit on cash but they definitely don’t sit on it for a year or more.
I generally enjoy his evidence-based approach to investing and this video is particularly good at addressing common FUD about today's situation being unique compared to the past.
The GDP is itself exponential. A growth of +2% a year is an example of an exponential curve. Sure there are "limits to growth" (see Meadows et al.) but it's not clear whether those limits are reached yet.
Unless we find a way to 'produce' (the P in GDP) without increasing entropy by digging up stuff (oil, metals, whatever) and then releasing them into our ecosystem once we're done with them, those limits seem to be pretty close though.
That's not just me thinking that. That's the Club of Rome, in the 70's.
As long as the Sun shines on (and this is essenty “for ever”), there is an increasing accumulation of energy in the planet: that is where the possibility of exponential “growth” comes.
Your point is invalid because it would require an exponential growth of the sun power (the derivative of an exponential is an exponential). While the sun power is exponential around a billion years, it is a constant over a year. So you would reach at most a linear GDP growth.
Not so fast. Entropy is decreasing. There might be more energy, but useless energy. Energy low enough, spread out enough or with too little temperature differential that you can't do much or anything with it.
The Earth is getting solar energy sure. But it also emits energy. And a lot of what stays here is just useless heat.
The population isn't growing exponentially anymore and most productivity gains per capita are linear. It's only the big breakthroughs that made it exponential by getting rid of old professions and replacing them with new ones.
GDP rising exponentially is also clearly unsustainable.
We have IMO reached a paradigm shift in central bank policy after decades of low rates and low inflation. The recent past is not a good guide to the near future in markets.
The entirety of human history since prehistoric times to the present gives evidence contrary to your claim. Human societies have experienced exponential growth since forever, with only occasional brief temporary setbacks. Even the Black Death is a blip on the exponential curve of economic progress.
> The entirety of human history since prehistoric times
Extrapolating from the past doesn't always work. There are real limits.
Take the rate of energy consumption of human civilization for example, which is currently about 17 terawatt[1]. Thermodynamics tells us that after doing useful work, practically all of that energy ends up as waste heat. (A small fraction is stored, e.g. aluminium stores some energy. I assume this is negligible.)
The power received by the Earth from the sun is about 170,000 terawatt[2], a factor 10,000 more. So plenty of room for growth, right?
But now take a modest 2% yearly growth. This is a factor 1.02 each year. So 500 years of 2% growth would be a factor 1.02^500 = about 20,000.
Maybe we could actually do that with fusion power. But then we'd have two suns(!) worth of extra waste heat to deal with. This cannot work. Current concerns about global warming pale in comparison. Even if we found a way to radiate all that heat into space as infrared, e.g. by concentrating the heat into country sized radiator panels, 35 years of 2% growth would double the waste heat again.
A similar calculation can be done for the growth of anything physical. And even if you continue growth off Earth, you'll soon hit the limits of the solar system. Even the volume of an expanding sphere at light speed cannot keep up with an exponential function.
Technology can produce goods with greater intrinsic value for less energy and fewer materials. A modern CPU is vastly more capable that the supercomputers of the 90’s, but costs less to produce and consumes far less energy. More importantly it means the market for CPUs and their contribution to GDP has exploded.
There are ultimate physical limits to how much information can be processed with a fixed amount of energy, but we aren’t near those limits yet. I’d argue that if you factor in technological growth you could go for much longer than 500 years before running out of energy, even if you limit yourself to a type 1 civilisation.
That's not correct. At a scale of a century, economic growth has been a zero sum game https://ourworldindata.org/economic-growth. Only recent abundance in cheap energy sources has allowed a HUGE economic boost.
Past performance is not a predictor of future results. If we continue to grow GDP (~energy consumption) at about 1%/y, we’ll boil oceans in 400 years. That’s what exponential growth means.
With a long enough time horizon, the GP consideration ("If we continue to grow GDP (~energy consumption) at about 1%/y, we’ll boil oceans in 400 years.") will still come true even if expanding in space. A sphere expanding around earth at the speed of light grows quadratically in the outer boundary and cubically in volume, and will be overcome eventually by any exponent > 1.
I'm pretty convinced that increasing human activity so much to increase the background radiation to 373K is never going to happen, the point is more that any exponential energy growth eventually can't continue.
In a way though it's already happening, the GDP ~ energy consumption equivalence from the GP assumption does not hold (https://data.worldbank.org/indicator/EG.GDP.PUSE.KO.PP). We'll just keep inventing ways for the GDP number to keep growing exponentially in questionable ways for the system to keep going, until we can't anymore.
the dataset is interesting, thanks for linking to it. the relationship is for now linear, which I believe doesn't invalidate the point that you and I both make that exponential is not sustainable. the GDP-energy consumption decoupling must also become exponential, which I lack vision for how to achieve.
Hand-wavy predictions like this scare me - it suggests people don't understand space travel or the distances involved at all.
Sure, if you think of the Earth as a game of SimCity plus Kerbal Space Program, these discussions about exponential growth are interesting. However, they miss the part where the intervening 30-100 years become literal hell on Earth while space travel ramps up.
I started my career at NASA. I'm working on an asteroid mining startup. I'm well aware of the vastness of space :)
The GP said 400 years. That's the time since the age of exploration until now. That's a vast era of time, and exponential technology development goes both ways.
Exponential growth, indeed economic growth at all, started with the industrial revolution. For instance, many places in Eurasia had the same GDP in 500 that they had in 1400.
Nope. The industrial revolution was a phase change in how economies operated and how wealth was distributed, but if you chart back thousands of years you get the same exponential trends.
>Human societies have experienced exponential growth since forever, with only occasional brief temporary setbacks.
If that were true why haven't we conquered the galaxy yet? It would only take 3% growth per year for 2000 years (numbers from memory). Oh right, it didn't happen because exponential growth is a fairy tale. It's always been logistic growth with breakthroughs increasing the upper bound.
There is an saying: The stock market is not the economy. The US economy is still growing faster enough for corporations to fight off the effects of inflation. (People / workers are a different social and economic issue.) The Fed will continue to raise rates and wind down its balance sheet in an orderly manner. Eventually, after enough rate rises, inflation will slow, and the economy will reach a new equilibrium between growth, rates, and inflation. This is all a normal part of an economic cycle.
Inflation will already slow (oil stopped going up), GDP prints are coming in negative, rates are only now accelerating while economy is slowing down. How this doesn’t end in a recession is beyond me. Mortgage workers have been laid off already due to that. Real economy is next on a lag due to demand destruction.
jury is still out on q2, I expect sub-1% growth, so technically not a recession, but it hardly matters. it's going to be interesting for the next 4 quarters anyway.
> Look at a chart of the S&P 500 from 1920 to 2008 and you'll notice something rather curious: the stock market has gone parabolic
That's because you are using a linear graph instead of a logarithmic graph.
If you have $100 and it double you have $200, if you have $10,000 and it doubles you have $20,000. Both of those are the same chance, but if you use a linear graph it looks parabolic.
Do yourself a favor and NEVER use a linear graph of the stockmarket.
> That's because you are using a linear graph instead of a logarithmic graph.
The macrotrends.net graph linked by fny is logarithmic (by default, though there's a "Log Scale" checkbox to turn it off). It's also inflation-adjusted by default, which I think is a little unfair.
> The COVID fiscal canon blew growth and inflation skyward.
COVID is going on for two years now. What really changed is the Russia-Ukraine war, this goes with higher energy and higher food prices (most of the wheat and fertilizers come from that part of the world) that all that stuff trickles down, as they don't know how to fix the metrics now (i guess no one was prepared for such a turn of events...)
Most of the metrics for inflation are based on some technicalities (you can fix that, that's why we hadn't much of an inflation), but it can't cope with fundamentals like food and energy.
As we transition out of the emergency mode of Covid the bill will be coming due at some point. Governments spent a whole lot of money to not generate any real work in the economy for two years
Lol, very much in the contrary. Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example, around the time recovery was needed, instead of implementing austerity), we would have robust economic growth instead of a decade of stagnation, and near complete independence of Russian oil and gas, so much so that we could turn the taps off on 24/Feb and suffer only mild consequences.
> Had the EU invested heavily in a proper Green New Deal (in ~2010-11 for example
Meantime in the real world in 2021 EU made strategic decisions that guaranteed high food and energy prices for next couple of years and made Putin think that he has a window of when Eu is completely at his mercy. (Putin made a mistake short term. Long term he surely forced EU's hand to go for alternative sources of energy).
> I [...] feel like we no longer follow any kind of logic after 2008, we totally detached from reality.
What does it mean we have detached from reality? That valuations are not what they should be? What exactly should they be then? Who should be deciding these things?
And a bonus question: Why do you think the current valuations are what they are?
houses for sale getting 30+ bids 200k over asking, buyers waiving all contingencies including appraisal gaps and inspections
some houses going for $400k+ over asking
EV companies valued at billions of dollars with <$50,000 in total revenue
retail tripping over themselves to buy SPACs before the SPACs even announce what company is merging with them
there was no repurcussion to the 2008 crimes. have been ingested into the system, not a doomsayer but hope the most egregious speculators get bankrupted it won't happen - we are in full bizzarro clown world.
"Fake it till you make It" implies when you make it, stop faking it.
We apparently didn't "make it" enough so had to keep faking after 2008. Now, we apparently think we can live on fake forever but the universe will likely not oblige.
Look at the world. The massive amount of people coming online. The pressure on resources this causes. The diminishing low hanging fruit (oil, water, fertilizer etc). The democratization of knowledge around the globe leading to technical talent in places besides the West and their close acolytes. The broken nature of Western BigCos many of which are one step above Soviet factories at this point in terms of actual efficiency, worker buy in and productive honesty.
I don't know what happens from here, but do believe is we are at the cusp of a radical paradigm shift over the next decade. The next 100 years in the West don't look like the last 100 in which Western companies and their captive governments ran the globe unchallenged.
Maybe I'm a cynic and a pessimist but have zero desire to invest in indexes of ossified Western big company stocks at the moment. Their paper value (in my mind) generally doesn't support their true value and potential earnings going forward. Now, there are no doubt some winners in the bunch and when things settle they are worth picking through. The US still has a lot of potential but so much faking it backed up with regime change military/intelligence ops instead of encouraging productivity and innovation has to be sorted out first to give a stable platform for growth again. We have much further to fall in my opinion before stability is achieved, and I'm not tossing dice in expectation of a reward on that right now. And that includes things like the obscene housing ponzi. It has to wash out and return to a stable base.
Other people might feel differently and they might be right. I thought the same things in 2006 and people with more faith made a lot of money but eventually reality catches up, and perhaps this decade is that time. I'm not a person to bet it isn't.
> I hope this is true but I also feel like we no longer follow any kind of logic after 2008, we totally detached from reality.
You're not the only one, consider that the financial crisis was the per-cursur and the necessary backdrop for why Bitcoin was created; this system went from being an arcane, but seemingly reliable way to grow the economy up until 2008 when the house cards fell down and we realized most business models were all based on the 'greater fool theory.'
Monetizing everything and squeezing people for every nickle and dime for essentials became the norm: education, medicine, food, energy etc...
Honestly, this system only benefits a small fraction of the Human Population, but it ultimately relies on their continued exploitation. The great resignation has been a somewhat limited counter-banace but it's still not addressing the underlying fact that this system is so utterly broken and it cannot sustain itself without perpetual intervention from the Central Banks.
Their is nothing Capitalist about this system, it's feudalism with a very obvious plutocratic bend with it's aim to maintain itself via nepotism and corruption.
This isn't a criticism of Capitalism, though I have come to the conclusion that it is ultimately a flawed system that relies on perpetual and infinite growth models, and does an even poorer job at pricing-in externalities that have had and will continue to have even worse devastation: be it economical or environmental.
As an Anarcho-capitalist I agree it is the best of all the other worse system: I just think we have seen the limitations that even the freest markets can avail so long as the parallel system can destroy with impunity, but justify itself as the only thing that keeps the World from succumbing to utter chaos.
When in reality, we live in that chaos and have been in chaos for most of my entire existence (middle millennial) with only the thin veneer of order, what's remarkable is we haven't completely obliterated ourselves in that time--Russia is doing what most Nation-States have done since the advent of it's existance, and what the US did that made it the ire of Humanity in the last decade in the Middle East. They seek to consuldate and extract for thier own vested interests, often to the detriment of it's own populace as it really only seeks to maintain it's own order and enrich an already obscenely wealthy political class which curries favour from the business class.
Before, I used to watch Black Mirror or an Adam Curtis documentary solely for it's entertainment value, now I'm starting to see how prophetic much of what they focused on not just came into reality, but started to have more dire implications than was even portrayed.
In short, while those of us in the BTC community haven't the grounds to declare we have made a utopia by any stretch of the imagination, I'm just glad we have learned our lessons and realized the inevitable demise of the financial system is starting to become clearer to more and more.
Where this leads can be a horrible path, and we have had glimpses of it: the Russian invasion of Ukraine is over hubris and distorted views of the Soviet Union.
Just imagine what it will look like if we are fighting over water or food as we have for most of our Specie's existence?
People here benefited, or stand to benefit the most from this corrupt system: vesting is the only real way to make any real gains as it provides the bulk of most TC. Their inflated salaries at FAANG mean less when they hear the typical story about stocks getting IPO'd and even their first janitor team can afford to live in a mansion in Palo Alto and send his kids to Stanford.
But the truth is this model is utterly broken, just look at the environment and woke culture that the valley has become: homelessness, social inequality and worsening substance and mental health issues etc...
You'll just never get the HN crowds to go along with it because most are still just trying to 'get theirs' or have already 'gotten theirs' and are now too comfortable but keep telling themselves that rent-seeing is ok so long as it's them and they regard themselves as a 'disruptor.'
It's pathetic and a shame to see, to be honest. To see so many talented people waste their collective skills at a time when climate change, and shortages of everything are starting to be the norm: you'd think if they had any capacity to act in anything but their own self-interest and had a modicom of
self-perseverance they'd try to sepnd at least some time trying to address these problems.
What good is money if this is this the World we live has always been my core moral compass that doesn't seem to be shared or well received when I work in tech. There is just a lots of lip-service but almost no deeds to back this up, it's a really just a bad platitude. One of many, unfortunately.
As a person studying AI and ML: you'd think that for a class of people who go on about 'meritocracy' being the end-all to explain why they are exceptional and are where they are and where most are they it's just hiding behind the limited window they have where the tech oligarchs allow them to be well compensated: but be under no illusion, they will quickly dispel with them when it's AI solution is as palatable is it can be, even if it means delivering a more mediocre solution and experience.
>Tremendously low interest rates coupled with quantitative easing dissuaded capital from financing the real economy and instead encouraged herding and levering up in the financial economy for returns.
This is the standard response that people repeat year after year. They are not the full or even major factor. They are more like a result of changes in economy.
>instead encouraged herding and levering up in the financial economy for returns.
Real reason:
Capital intensity has deceased dramatically. Capital intensity is the amount of fixed or real capital present in relation to other factors of production (especially labour).
From what I've read, our current inflation is due to combo of inflated asset prices causing mortgages and rents to skyrocket along with corporate greed raising prices "because of inflation".
You should probably widen the pool of what you read. You're not wrong (well, corporate greed tends to be a bit of a bogeyman), but it's certainly reductive.
> Our current inflation is driven by supply chain issues (unrelated to COVID relief)
Well, specifically it's because everyone went home and switched from purchasing services to goods. So there are serious composition effects comparing 2019 to 2020 and you don't have to assume you're making less money because an inflation number said you are.
Working class wages have increased, and that is clearly because of Covid relief. Or other Covid-related policies like halting immigration.
(I should be clear, this is still supply-side, but related to Covid relief. "Stimulus" money spent unproductively by the government is also supply-side.)
Asset and good inflation aren't the same kind of thing because you won't die if you can't buy a stock, and you can buy any fraction of a stock not just one share these days. (Although the second one is a reason they've gotten more expensive.)
Homes are a special case, but it's entirely possible for the purchase price of homes to go up while rent doesn't.
At ever dip, it was an open secret the Fed would cut rates and ease again.
At least for now, that game is over. We've had moments in the past when the markets had a similar panic (see 2018), but this period is unique due to the inflationary backdrop. Since 2008 we've never seemed to be able to create significant economic growth or inflation greater. The COVID fiscal canon blew growth and inflation skyward. The fed can't just turn on the printers again or cut rates until we hit proper a proper recession.
That's when you buy the dip.
[0]: https://www.macrotrends.net/2324/sp-500-historical-chart-dat...