patrick.net

Misc says

Pick any reasonable long period of time...let's say 2000 years. Compound 1 gold coin at a reasonable rate of interest...say 3%. You can do the math. How many planet's of gold do you end up with? --- The system simply breaks. This must happen to pretty much everyone.

It's not the gold that breaks. It's your mental model. Gold represents work already done. It took a man a week to dig stone from a mountain, haul it, crush it, classify it, separate it, refine it, and come out with an ounce of pure metal. The slug represents completed work that need not be completed again to access the refined metal. Similarly, a bushel of grain took tilling, planting, weeding, watering, harvesting, drying, threshing, and separating to come up with a basket of food you can actually eat. It's not a promise to do work in the future, it is results you can use without promise.

What you see as "compounding 3%" is not the AMOUNT of gold, it is the PRICE in promises (FIAT currency). FIAT currency is a promise to do work in the future. 1 oz of gold represents the same amount of work over time (reduced by technological improvements). As does a bushel of wheat. Promises can be made all day long without doing anything. When you see the "price" of gold rise 3%, what you are seeing is more promises to do work enter the system, devaluing the existing promises to do work.

On a very small scale, think of it like this. You grow your bushel of wheat. It takes you all year, and you get 12 bushels. So you kind of have 1 month of work per bushel "invested". If someone comes along and offers you 5 chickens for one of your bushels, and it took them all year to raise 60 chickens, you might trade 1 bushel of your wheat for those 5 chickens. You don't have to guess if the chickens will be grown, they are right in front of you. You can inspect if they are healthy and a good weight.

But if someone comes along and says, "hey give me a bushel of wheat, I'll give you 5 chickens in 3 months", you might pass, and wait for another person to come along because you want to stop eating wheat, and have some chicken for dinner before that. But if they say "hey, i'll give you 6 chickens.. no? how about 7 chickens? 8?" and then you agree, you've just introduced interest and inflation. You've taken on a risk that you will never get those 8 chickens, and you've accepted a premium for that risk. If you write that promise down, and agree that anyone holding the piece of paper can come pick up the 8 chickens in 3 months, you've now introduced a currency.

If you now add a "bank", and say they can make promises to deliver chickens or bushels of wheat, even though they don't raise chickens, or grow wheat, and with no controls on how many promises they can make, you've introduced a FIAT currency.

"Wait!", you exclaim. "Why would anyone ever take promises from a bank that doesn't actually make or build or grow ANYTHING, and can just promise as much as they want to without anyone ever limiting them?" . And the answer will be: "Because we told you it is good for you."

"Ahh," you say, "It's good for me!". And then you go merrily on your way, collecting a paycheck denominated in US dollars, and having crazy ideas about gold being a strange thing that would have multiple planets worth of mass due to some strange "inflation or interest or something".

I am simply stating that for the vast majority of people, they mathematically must lose value on their "investments".

It doesn't matter what a person "invests" in. The system simply collapses.

Misc says

I am simply stating that for the vast majority of people, they mathematically must lose value on their "investments".

What do you even begin to think that means? If you make yourself a spoon, the spoon will wear away with time. If you make your spoon from metal, it might take 10,000 years to wear away. If you make it from paper, it might be gone in a day. The term of art for this is depreciation. However, if your spoon enables you to scoop 100 gallons of water per day out of a bucket onto your plants, where before you could only scoop 10 gallons per day, and the yield of your crop rises with better moisture for a larger area, then the increase in your crop yield is your return on investment in the time you took to make the spoon.

You have time, every day. You invest your time. It's truly the only thing you really "have". You choose to make yourself a spoon for watering your crop, or working in a factory to earn dollars, or listening to the local shogun warrior's directions to avoid having your time "cut short". Assuming you don't have a local shogun to worry about, and are working in a factory or office for a paycheck denominated in dollars, you are choosing to trade your time for a FIAT currency that is being eroded from inflation. You are also choosing a place to live, presumably paying rent or a mortgage to purchase an abode. The dollars are an output of your time investment in your job. You are choosing to invest them in shelter, food, medicine, and the conveniences of modern living. You MAY also choose to invest some of them in a stock, bond, CD, mutual fund, real estate, or building a business.

Some of your "personal investment" in shelter, food, health, education etc pays off handsomely. You become more capable, earn more money, have a stress capacity for larger decisions and responsibilities, and potentially take on larger investments, while not dying of an infected mosquito bite. Part of this is because those who came before you invested in science, technology, logistics, infrastructure, etc, and made the world a better place so you as a peasant today can actually live better than a king did a mere 200 years ago.

Today, investing in "just your job" with a basic healthcare plan gives you access to child mortality rates orders of magnitude lower than just 100 years ago. Yes, by investing your time in a job, you can save a few of your potential kids lives basically. That is beyond precious to the majority of the world. What a morbid view to think otherwise.

As for "they(the majority) mathematically must lose value on their "investments" ". ... it's just such a disconnected thought it doesn't even mean anything. If you are trying to say "the stock market is a zero sum game, and those making money necessarily take money from those losing it" you're simply bonkers. That does happen, and it is true that a fool and his money are soon parted, but you simply fail to understand what investment and wealth are. And as Warren buffet says, don't invest in something you don't understand.. So I well and fully recommend you not invest in the stock market.

Misc says

It doesn't matter what a person "invests" in. The system simply collapses.

This is true 100% for every person no matter how well connected or high in society they may be. It's called death.

Misc says

I am simply stating that for the vast majority of people, they mathematically must lose value on their "investments".

You are describing a zero sum transaction. That is not investing. That is speculation.

Investing is purchasing future cash flows that are in excess of the current net value of your investment.

These stocks are burning cash fast and might need to raise capital soon, Goldman Sachs flags

With rates these high, the strategists put together a list of companies with high ­­cash burn rates and also lofty valuations, all of which are losing money, as they advised investors to avoid unprofitable long-duration equities. The lists includes electric vehicle makers Lordstown Motors

https://newsbrig.com/these-stocks-are-burning-cash-fast-and-might-need-to-raise-capital-soon-goldman-sachs-flags/1015041/

Shaman says

I reinvested my investments in bonds yesterday, and switched my kids’ 529 college savings plan investments to bonds today. So I’m putting my own money on this bet, and I’m going all in.

Bond market has been signalling major problems for at least a year. If you can't bring yourself to diversify outside of the fiat system, the result will be the same.

Keep "saving" and "investing" most people don't like the end results.

As I said, "Good Luck".

If The Stock Market Doesn’t Go Down, Or Stays Unchanged, It Will Absolutely Go Up.

Investors just pulled a record $42 billion from stocks in one week in an attempt to cut their tax bill after grim 2022 losses, BofA says

https://markets.businessinsider.com/news/stocks/stocks-taxes-equities-tax-loss-harvesting-irs-capital-gains-investors-2022-12

I had an RMD of an IRA which I inherited, that was $12,000 so I'm one of the sellers I guess.

Next week I will convert some of my IRA to a Roth IRA.

Misc says

Keep "saving" and "investing" most people don't like the end results.

As I said, "Good Luck".

@Misc,

Saving and investing is making a bet. Use the money to take risk rather than saving is also making a bet. One can become financially free if their bet is successful, or start allover if not. This is why the wise ones suggest people to take risks when they’re young. They have time to start over if things don’t work out.

As I get older and look back, a lot of good life lessons from older folks, especially the successful ones. Money can’t buy our youth back so the earlier we can become financially free, the better off we are. Now that I have experienced what it’s like to live my current life, I’d rather die at 50 than to live to 75 working a W2.

Merry Christmas! 🎄

DD214 says

As much as some don’t like to admit, this is partially true.

Eman says

DD214 says

As much as some don’t like to admit, this is partially true.

I guess Sam Bankman Fried, Bernie Madoff, Ghislane Maxwell, Jeffrey Epstein, Nancy Pelosi, Joe Biden, Jeff Zuckerberg, Jeff Bezos, Bill Gates, etc are just really good people doing quite well. It's not like they are just criminals or something...

In 2022 the S&P 500 dropped 27.5% from its all time high of 4818.

It is now down about 20.5%.

The S&P 500 has a real (or inflation adjusted) return of around 0% since February 2020.

I can see it trading in a range for the next few months between being 25% to 15% down from 4818.

richwicks says

Eman says

DD214 says

As much as some don’t like to admit, this is partially true.

I guess Sam Bankman Fried, Bernie Madoff, Ghislane Maxwell, Jeffrey Epstein, Nancy Pelosi, Joe Biden, Jeff Zuckerberg, Jeff Bezos, Bill Gates, etc are just really good people doing quite well. It's not like they are just criminals or something...

That was why I said it’s partially true as there will always be some exceptions. However, it’s generally true in most cases. 😂

Supposedly, Pelosi sold her stock yesterday at a loss. Taking a loss isn’t something she does.
What’s coming?
Couldn’t have anything to do with the Federal reserve convening an emergency meeting of Congress about the banking system, could it?

https://www.tiktok.com/t/ZTRcd16W5/

Btw my timing was obviously off in November. But the DOW is currently down $1500 from that point. It’s been up a bit and down a bit, but I’m still waiting.

Today the W5000 index is at 40,708
Once upon a time it was 48,500 or so.

I'm pissed off at the bank bullshit again, SBF bullshit, and absurd Democrat debt spending on bullshit.

I collect dividends so I am slightly immune to the vissitudes of stock prices.

clambo says

Today the W5000 index is at 40,708
Once upon a time it was 48,500 or so

S&P 500 needs to cool down over next week or so. VIX has been beaten up quite a bit lately. Check out CNN Fear and Greed Index.

Also, sell monthly covered calls with your Wilshire 5000 ETF.

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Shaman says

Supposedly, Pelosi sold her stock yesterday at a loss. Taking a loss isn’t something she does.

Insider trading. Pelosi is acting on privy info.

Shaman says

Supposedly, Pelosi sold her stock yesterday at a loss. Taking a loss isn’t something she does.
What’s coming?
Couldn’t have anything to do with the Federal reserve convening an emergency meeting of Congress about the banking system, could it?

https://www.tiktok.com/t/ZTRcd16W5/

Sorry, but this guy’s information is not accurate. Last week, the US dollar index was trading at $103. Today, it closed at $102.60. Not sure where he got his USD lost 20% of its value in a week from.

clambo says

I had an RMD of an IRA which I inherited, that was $12,000 so I'm one of the sellers I guess.

Next week I will convert some of my IRA to a Roth IRA.

That implies you inherited north of $300k. That's material. I'm curious if you have lived your adult life knowing that you had this (and possibly more) inheritance and whether it affected your tolerance for risk in your own investments?

I ask because whereas I saved north of 25% of my gross income since my late 20's (knowing I had no inheritances in my future) I have friends in the same socio-economic situation that have always spent like drunken sailors ($15k annual vacations, new cars, boats, constant home remodels, etc...) while saving nothing for their retirement - but knowing that they would inherit bigley from previous generations.

Yes I'm a little bitter about it because now I have an inability to enjoy spending frivolous money.

@stfu
Actually, the inherited IRA was smaller than 300K and I inherited it in 2017; it was already invested for some capital appreciation so it grew in those few years.
I have saved and invested my entire life expecting not to receive much from my parents.
My father was not an astute investor; in fact he made some mistakes but he earned enough to eventually have money when he needed it.
My father's ancestor was a founder of Wachovia Bank; he had inherited shares. I told him "Go up to the Fidelity store on Broadway and sell it and buy a couple of stock mutual funds; it's better to be diversified than keep one stock."
He didn't follow my advice and in 2008 lost about $650,000 when Wachovia went bust and he got a few shares of Wells Fargo in exchange.

I previously got an inheritance from my mother and I rolled the dice with it and bought shares of AAPL; I have a large capital gain from this gamble.

I'm not bitter about the guys I know who won't save their money; I'm a little pissed off at my friends who get public pensions who pay no California tax on them. I'm also a bit pissed off at people who don't save a dime and get govt. money because they have some bastard children.

I have a frugal nature and have made arrangements to save even more money; it's just my habit and I can't quit.
I changed my state residence to Florida; next year I will depart Florida and be in Baja Sur, saving more since I won't be owning or renting in Florida for a decade or so.
Interestingly, others from up North (Canada, California, Washington, Oregon, etc.) are doing the same, so Baja housing prices are rising, but are still very reasonable.

At the rate I'm going, I'm never going to spend my money; it's a large enough nest egg that even if I spend 4X what I spend today, it will never run out.

My only frivolous spending it eating out but then the fun is finding places which are good but not expensive.

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The CAGR for the S&P 500 is about 3.7% (each year) from 1 January 2000 to 31 December 2022. It is inflation adjusted and accounts for dividends.

Historically the CAGR is around 6.5%. The last 22 years has been a dismal extended period for the S&P 500.

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https://www.fool.com/investing/2023/12/10/where-will-amazon-stock-be-in-3-years/

Amazon is slowly making its way back toward the 6% profit-margin record it set a few years ago. That's better than traditional retailer rivals like Costco Wholesale can manage but is far below the over-40%-profit rate that growth-stock investors can get from a company like Microsoft.

There's a good chance that Amazon's margins will reach double-digits over the next few years, though. Operating income is already soaring, compared to last year, for example. The company generated $24 billion in profits in the past three quarters, up from $10 billion a year earlier.

Management projects profits as high as $11 billion in the holiday quarter, too, compared to $3 billion in late 2022. Amazon is targeting more balance between growth and profits today, and this approach should continue improving its finances over the next several years.

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Account for inflation, the S&P 500 is only about 1.5% above its November 2021 high. So the S&P 500's real return has been flat for the last 2.5 years.

https://www.multpl.com/inflation-adjusted-s-p-500

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And if you examine since summer of 1999, the S&P 500's inflation adjusted or real gain in only 100%.

The S&P 500 only has increased about 3% annually since summer of 1999 when accounting for inflation.

Warren Buffet and Bill Gates are selling off stocks. Should I be worried?

rocketjoe79 says

Warren Buffet and Bill Gates are selling off stocks. Should I be worried?

Buffet sold some AAPL but bought an ins co stock. Gates - IDK.

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The S&P 500's total real (aka: inflation adjusted return) for the last 2.5 years has been at most 1.5% 😕

Source: https://www.multpl.com/inflation-adjusted-s-p-500

If the S&P 500 drops 10% from current level and remains there to this November, that means the real return for the S&P 500 will be 0% from the start to the end of Biden's first term.

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since a lot of 401K's (especially for those 401K account owners who are going to retire within 10 years) have at least 30% in investment-grade bonds
below is for a benchmark as far as bond market performance

bond performance will at least improve moderately over next few years because annual inflation for the most part has steadied between 2% and 4%

https://finance.yahoo.com/quote/BND/

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I sold off my underwater bond funds and instead am investing in 13 week UST’s. Will use the loss to decrease my income taxes.

Al_Sharpton_for_President says

I sold off my underwater bond funds and instead am investing in 13 week UST’s. Will use the loss to decrease my income taxes.

From August 2021 to October 2023, Vanguard Total Bond Market Fund decreased about 25% in price from around $90 to $68.

Its been likely one of the worst extended period for investment grade bonds within the last 40 years.

That is why I think the worse is behind for the Vanguard Total Bond Market Fund as annual inflation has steadied around 3.25%.

Keep eye on the 31 May 2024 report for Personal Consumption Expenditures (PCE), which the Federal Reserve uses to set the Federal Reserve Funds rate based on inflation.

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Don't expect capital appreciation from a bond fund.
Conversely, a falling NAV of a bond fund should not bother you; the purpose of the fund is income.
If or when interest rates are decreased, the average bond fund NAV should go up.
Over long time periods, the return of a bond fund is just the interest income it pays out.

clambo says

Don't expect capital appreciation from a bond fund.
Conversely, a falling NAV of a bond fund should not bother you; the purpose of the fund is income.
If or when interest rates are decreased, the average bond fund NAV should go up.
Over long time periods, the return of a bond fund is just the interest income it pays out.

I agree as a NAV does not show the annual return from the yield.

Right now the yield for Vanguard's Total Bond Market Fund (BND) is 4.7% which is expected given what Treasuries (1 year to 10 year duration) are at now

But I agree as far as the long term for a bond, as far as holding for at least 10 years, hopefully in a couple of years the 10-Year average annual return for BND is at least 1% above annual inflation, as BND recovers

I was just pointing out from summer of 2021 to fall of 2023 how the net asset value (NAV) dropped that much for the ticker BND (as expected because of inflation increasing around start of summer of 2021).

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I do remember hearing on financial news shows that for every 1% increase in interest rates there is generally a 1% drop in price of a bond for every year of duration.

The host of these shows were trying to relate interest rate increases to the value (price or NAV) of the bond.

Quite a few “experts” have been recommending longer duration UST’s, not so much for their yield, but for capital gains after interest rates fall. Of course they have been recommending this for quite a while, while rates remain higher for longer.

Al_Sharpton_for_President says

Quite a few “experts” have been recommending longer duration UST’s, not so much for their yield, but for capital gains after interest rates fall. Of course they have been recommending this for quite a while, while rates remain higher for longer.

Good point, as I figure the worst is behind bond funds until the Fed increases rates in the next inflationary cycle or period.

So the worse is behind bond funds like Vanguard's Total Stock Market Bond Fund for this cycle and likely the next stage is a recession as far as stocks crashing +20% and inflation decreases as well (based on no stagflation conditions). My best guess is all of this will be held off until right after the November election.

Even with the way Vanguard manages its bond funds like the Vanguard Total Stock Market Bond Fund with its bond-ladder-strategy, there will be at least some or a little capital appreciation or gains with bond prices increasing due to interest rates decreasing.

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