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I disagree. Especially for anyone under 40, they are likely to see another reset. We pumped the economy with low-interest rates for the past decade and now even the threat of a minimal increase set the market into a downturn. A rise in mortgage rates to historical averages kills the housing market. We've added two trillion in debt in the current administration to provide tax cuts that have only provided modest increases in GDP and have not provided much to the middle class to battle everyday costs increases in housing, healthcare, and college to name a few. Now oil is on the rise which was the death nail the last time as oil soared past $100 a barrel and the price of regular passed $4 a gallon.
Our economy is not the stock market yet since the 1987 Black Monday crash it has dictated both fiscal and economic policy. More people have skin in the game and are concerned about the health of the market since it is the underlying "golden goose" of their 401k retirement savings. With few alternatives for savings rates that exceed the published inflation rates more and more money is funneled to the same group of stocks bidding up the names of some companies looking to capitalize on getting people to buy things through their social media platforms and/or data algorithm.
It's inevitable that the market will get ahead of itself and when other factors intervene such as high oil prices which reduce spending on cars, consumer products, retail, etc., there will be a dramatic response. The DOW nearly tripled under Clinton, declined nearly 20% under Bush, over doubled under Obama (massive Fed intervention initiated under Bush) and is up about 33% under Trump. If you look at the rough numbers 26400(current)/3300(beginning of Clinton presidency)= 8 times growth. That is an average of 30.8% annual growth. This is a supernormal growth rate and largely the result of active government intervention. Looking at CD rates there was a rapid drop due to intervention starting in the 1980s and accelerating under the first Bush presidency taking short-term rates from nearly 9% to 3% in four short years. Now both short-term and long-term rates average under 1%. It was a transfer of wealth from average savers to investors. Looking at an inflation adjusted 100 year chart the Dow dropped 72% from 1966 to 1982 (16 years). It returned to its 1966 level in 1995 (13 years). A lot of people compare 2009 to 1932. However, although it looks a lot like 1916 (1966) and 1929 (2000) it lacks the deep V that follows. The current pattern looks more like a stretched out version of 1948 to 1966 (18 years) a period of rapid growth in America. Ours has been more stretched out 27 years (2019 from the bottom in 1982) fueled by a combination of the information age and technological revolution along with heavy government fiscal and monetary intervention.
I predict (yet hope I am wrong) that the market will start to move downward over the next several years. I believe it will start in the current Trump term and that may be a factor in the 2020 election but whomever is elected will face difficulty in the next term fighting a decline. If that's the case what does the Fed do when the next crisis arrives? Eliminate taxes and cut interest rates to -2%? The 22 trillion dollar debt is also a limiting factor. Again I hope I am wrong but our fiscal and economic policies need to expand outside of propping up the stock market. We need to focus on 21st century energy sources, infrastructure, improved healthcare delivery, and expanding participation in the workforce in decent paying jobs that reduce reliance on government social supports to fill gaps for low wage jobs. Interest rates need to properly reflect true inflation rates and banks need to be weened off low interest rates and strengthen their deposits as sources for loans.
I disagree. Especially for anyone under 40, they are likely to see another reset. We pumped the economy with low-interest rates for the past decade and now even the threat of a minimal increase set the market into a downturn. A rise in mortgage rates to historical averages kills the housing market. We've added two trillion in debt in the current administration to provide tax cuts that have only provided modest increases in GDP and have not provided much to the middle class to battle everyday costs increases in housing, healthcare, and college to name a few. Now oil is on the rise which was the death nail the last time as oil soared past $100 a barrel and the price of regular passed $4 a gallon.
Our economy is not the stock market yet since the 1987 Black Monday crash it has dictated both fiscal and economic policy. More people have skin in the game and are concerned about the health of the market since it is the underlying "golden goose" of their 401k retirement savings. With few alternatives for savings rates that exceed the published inflation rates more and more money is funneled to the same group of stocks bidding up the names of some companies looking to capitalize on getting people to buy things through their social media platforms and/or data algorithm.
It's inevitable that the market will get ahead of itself and when other factors intervene such as high oil prices which reduce spending on cars, consumer products, retail, etc., there will be a dramatic response. The DOW nearly tripled under Clinton, declined nearly 20% under Bush, over doubled under Obama (massive Fed intervention initiated under Bush) and is up about 33% under Trump. If you look at the rough numbers 26400(current)/3300(beginning of Clinton presidency)= 8 times growth. That is an average of 30.8% annual growth. This is a supernormal growth rate and largely the result of active government intervention. Looking at CD rates there was a rapid drop due to intervention starting in the 1980s and accelerating under the first Bush presidency taking short-term rates from nearly 9% to 3% in four short years. Now both short-term and long-term rates average under 1%. It was a transfer of wealth from average savers to investors. Looking at an inflation adjusted 100 year chart the Dow dropped 72% from 1966 to 1982 (16 years). It returned to its 1966 level in 1995 (13 years). A lot of people compare 2009 to 1932. However, although it looks a lot like 1916 (1966) and 1929 (2000) it lacks the deep V that follows. The current pattern looks more like a stretched out version of 1948 to 1966 (18 years) a period of rapid growth in America. Ours has been more stretched out 27 years (2019 from the bottom in 1982) fueled by a combination of the information age and technological revolution along with heavy government fiscal and monetary intervention.
I predict (yet hope I am wrong) that the market will start to move downward over the next several years. I believe it will start in the current Trump term and that may be a factor in the 2020 election but whomever is elected will face difficulty in the next term fighting a decline. If that's the case what does the Fed do when the next crisis arrives? Eliminate taxes and cut interest rates to -2%? The 22 trillion dollar debt is also a limiting factor. Again I hope I am wrong but our fiscal and economic policies need to expand outside of propping up the stock market. We need to focus on 21st century energy sources, infrastructure, improved healthcare delivery, and expanding participation in the workforce in decent paying jobs that reduce reliance on government social supports to fill gaps for low wage jobs. Interest rates need to properly reflect true inflation rates and banks need to be weened off low interest rates and strengthen their deposits as sources for loans.
aaaaand this is why I'm heavy in real estate. Probably why my husband is interested in pivoting his career out and away from learning (HR in tech companies) and towards new energy technology and space exploration. What you are saying, maybe not explicitly, is that we need to refocus on more basic life-sustaining and energy-transfer elements. Stop the more abstract, sensory-gratifying-tribe-identifying-but- otherwise-needless spending spree... because it's unsustainable (for the planet and for our economic system).
aaaaand this is why I'm heavy in real estate. Probably why my husband is interested in pivoting his career out and away from learning (HR in tech companies) and towards new energy technology and space exploration. What you are saying, maybe not explicitly, is that we need to refocus on more basic life-sustaining and energy-transfer elements. Stop the more abstract, sensory-gratifying-tribe-identifying-but- otherwise-needless spending spree... because it's unsustainable (for the planet and for our economic system).
Yes. We have many unmet true needs and at this stage in the information and technology revolution the most celebrated uses are for exploiting personal data to sell people more things or create illusionary needs. So many of the companies are working off of entertainment and convenience. However, there needs to be more development on meeting the first two levels of Maslow's hierarchy (physiological and safety needs) for 8 billion people while not causing more harm than is necessary to accommodate a growing population. This is where technology could be deployed to make remarkable changes.
The DOW nearly tripled under Clinton, declined nearly 20% under Bush, over doubled under Obama (massive Fed intervention initiated under Bush) and is up about 33% under Trump. If you look at the rough numbers 26400(current)/3300(beginning of Clinton presidency)= 8 times growth. That is an average of 30.8% annual growth.
Good grief. Please take a math class. That's a little over 8% annualized. Add in dividends and we're right around the very long-term average for stocks.
Good grief. Please take a math class. That's a little over 8% annualized. Add in dividends and we're right around the very long-term average for stocks.
Thanks for pointing that out. Sorry, yes, a double, double, double doubling about every 9 years if it was straight lined 8 to 9%. However, the patterns seem to indicate we are due for a pullback larger than 2009 which many contend was our 1932 event.
I disagree. Especially for anyone under 40, they are likely to see another reset. ...
I predict (yet hope I am wrong) that the market will start to move downward over the next several years. ...
Such resets seem to occur about once a generation, so for an investor who starts at age 20 and continues through age 85, there are maybe 2-3. We should recall that 2007-2009 was not an isolated horror, but really a continuation of 2000-2003. The analogy would be 1937-1941 being a continuation of 1929-1932. In between, and largely now forgotten, was the bear-market of 1973-1974, which itself was embedded in a longstanding malaise, of 1966-1982. So if we count 2000-2003 and 2007-2009 as separate events, then we effectively double their frequency.
My own belief is that our future predicament is less one of near-term massive and sudden shocks like 2007-2009, than a longstanding malaise, where neither stocks nor any other asset-class does particularly well, over the course of decades. We muddle along, obtaining OK rates of return, but inferior to the expectations set in the 1980s and 1990s, where many disregarded the disappearance of traditional pensions, because of fond belief in getting 12% annual returns on their 401Ks.
Quote:
Originally Posted by flyingsaucermom
aaaaand this is why I'm heavy in real estate. ....
A similar argument could be made about real-estate. In many markets, the “price earnings ratio” of real estate, which is the ratio of cost to buy, to annual cost to rent, is quite high. This attenuates potential profits for landlords, both in terms of cashflow and capital gains. If the economy sputters because of malinvestment, or excessive debt, or some other overarching cause that reduces perennial growth potential, then why would real-estate somehow be exempt, as being especially robust and impervious?
Quote:
Originally Posted by Lincolnian
Yes. We have many unmet true needs and at this stage in the information and technology revolution the most celebrated uses are for exploiting personal data to sell people more things or create illusionary needs. So many of the companies are working off of entertainment and convenience. However, there needs to be more development on meeting the first two levels of Maslow's hierarchy (physiological and safety needs) for 8 billion people while not causing more harm than is necessary to accommodate a growing population. This is where technology could be deployed to make remarkable changes.
That’s an excellent point, and one that unfortunately gets neglected, given the spate of exasperation with the usual suspects: runaway healthcare and higher-education costs, income in equality and so forth.
Too much our engineering and our technical brain-power is going into smart-phone apps, video games, online platforms, algorithms for micro-targeting of advertising and so forth. Too little is going into hard civil engineering projects (power plants, transportation, etc.). We hear much talk about solar this and wind that, but these things are too often regarded as fringe-interests and public-funding boondoggles. We hear about electric cars all of the time, but there’s not yet a Moore’s Law for electric batteries – and until there is, electric transportation will remain more hype than promise. What about tidal turbines or other marine methods of energy extraction? And what about those much-vaunted stories of crumbling bridges? Never mind exotic technologies…. When’s the last time that we built something like the Hoover Dam?
Too much of our thinking, whether as customers, developers or investors, is going into “liking” videos on the internet and embedding ads (and ad-blockers). Too little is going into better ways to ship products or people, or generate energy.
Last edited by ohio_peasant; 04-26-2019 at 01:15 PM..
A similar argument could be made about real-estate. In many markets, the “price earnings ratio” of real estate, which is the ratio of cost to buy, to annual cost to rent, is quite high. This attenuates potential profits for landlords, both in terms of cashflow and capital gains. If the economy sputters because of malinvestment, or excessive debt, or some other overarching cause that reduces perennial growth potential, then why would real-estate somehow be exempt, as being especially robust and impervious?
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You mentioned Maslow's needs.. shelter is towards the bottom, right?
Real estate = shelter
The idea is to make your real estate investments as recession proof as possible. We could cut our rent revenue in half and still cover our operating expenses. Hopefully we will never have to do this or if we did, it would only be for a short time.
As long as you have hyperinflation, a repudiated note as your current monies, burdensome taxes, "saving money" is the last thing you should be doing.
[AGHAST CRIES FROM THE AUDIENCE]
Let me put it into perspective. Back in the 1970s, I knew a hard worker who SAVED $20,000 and believed he was "set for life."
In 2019, that $20,000 is barely minimum wage for one 1.25 years.
As long as you are 'money mad' you are a walking victim, skinned alive over and over.
Why?
USURY (interest) is an abomination, denounced for 'only' 3500 years, and mathematically unsustainable in a finite money token system. Due to the exponential equation used for compound interest, an infinite money supply is necessary for usury over any long duration - like lifetime of savings. (No one really 'saves' money - all banks re-invest deposits at usury) Inevitably, the bubble bursts and a number of debtors default simply because enough money never existed for all to repay their debts with usury. They may blame their bad luck, but it is usury to blame.
MONEY is not prosperity.
In reality, prosperity is based on prodigious production of surplus usable goods and services, equitably traded and enjoyed. Doing more with less so more can enjoy is superior to doing less with more so few can enjoy.
Prosperity can exist without money. In fact there is no correlation between money and the marketplace of goods and services. No government nor bank emits "more" money tokens because the economy grew by XYZ %. Money scarcity is a throttle choking economic growth.
Just look around at unmet needs, unemployment, underemployment, shuttered stores, and closed factories. Ask them why? The usual answer is "no one has enough money." And yet we're told that INFLATION IS CAUSED BY TOO MUCH MONEY CHASING TOO FEW GOODS.
Who has all that "too much money" that is causing inflation at the same time we're suffering from a money drought? Bill Gates is not bidding up the price for milk and cookies!
You don't really 'need' money - you want that which the money can buy... if it is for sale and the seller wants your money.
Sane people often won't trade for money because they have no use for it. Governments and banks impose the 'need' for money - either to pay taxes or to lawfully transact business. Barter annoys them immensely. The more trade in barter, the less "they" can skim from the (m)asses. Shucks, they can't even account for it, if it's not denominated in money!
A prosperous farmer with his bountiful crops, feeding his family and trading the surplus with neighbors is the bane of any money master and his minions. It is paramount to get the farmer into debt, borrowing money to buy tractors, or seeds, or whatever, so that the 'system' can skim his prosperity away. Ditto, for the worker. Get him into debt for his automobile, his house, his land, and the masters can enjoy great prosperity at his expense.
If you stop and think, if your prosperity is based on creating and producing goods and services, you're a harmless producer. If your prosperity is based on skimming from producers, via usury, you're a parasite and a predator, offering nothing in equitable trade. And if you really think long and hard, what's the logical basis for "retirement" where you keep consuming without producing anything in trade?
P.S. - no government instituted to secure endowed rights can tax rights - only government privileges. Which raises the question : what privileges are the basis for pervasive taxation in the USA?
And why aren't more folks aware that their endowed rights to live, work, trade, own private property,etc, cannot be taxed?
You mentioned Maslow's needs.. shelter is towards the bottom, right?
Real estate = shelter
The idea is to make your real estate investments as recession proof as possible. We could cut our rent revenue in half and still cover our operating expenses. Hopefully we will never have to do this or if we did, it would only be for a short time.
Yeah we had no issues during the recession whatsoever. The apartment buildings my family owns were near 100% full as people had no choice but to rent in many cases, then when the market recovered and houses got more expensive, guess what? People couldn’t afford to buy and we’re still near 100%. The state of the economy hasn’t made a lot of difference to many types of commercial real estate except we refinanced all of the loans and got insanely good mortgage rates now. Real estate if you buy the right types is a great investment, but I’m talking about commercial buildings like apartments, storage, office complexes, office buildings, even hotels. Disney managed an 87% average occupancy during the last recession - despite tourism taking a heavy hit. That’s 10% above the average hotel occupancy in a good market. Location, location, location.
And if you really think long and hard, what's the logical basis for "retirement" where you keep consuming without producing anything in trade?
What’s the logical basis? It’s that I put all that money away every year all those years I was working, so that I would be ABLE to consume without “producing anything in trade”, in retirement. That’s just common sense. Just like canning veggies from the garden, and freezing perishables, so you have food in winter or lean times. No difference. I already produced. I’m just consuming at a later time.
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