TwoCitiesCapital
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Posts posted by TwoCitiesCapital
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11 hours ago, schin said:
@bizaro86 @TwoCitiesCapital @johnpane - Thanks for the reply.
I have one German bank position (Commerzbank) that I believe will be a takeover target in the future. Do you know how stock mergers work out in ADRs? Do I get converted to cash nonetheless or will I get new ADRs if there is a stock transaction.
For example, if it get bought out by Deutsche Bank, which is NYSE traded, versus Unicredit (Italian and ADR, itself). How do mergers work out either way? I'm worried about the tax treatment.... if they pay me out, there's going to a huge cap gain... versus rollover into a stock position... of course, that's a rose-colored glasses problem.
Probably depends on the merger. If paid in cash, you'll receive cash. If acquired by a US listed company, my guess is you'll receive US listed stock. If acquired by a foreign listed company, my guess the ADR sponsor receives the shares, sells them, and distributes the cash to you.
But I cant say for sure it will likely vary pending the scenario.
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On 5/4/2024 at 1:17 AM, schin said:
I have InteractiveBrokers, so both transactions should be easy (ADR or purchase in foreign market). That said, is there any reason to buy ADRs instead of going directly to the foreign market?
Many noted they bought Nintendo directly in Japan instead of the ADRs. I know ADRs have extra, hidden (custodian) fees...
Is there any reason to buy the ADRs?
The primary reason would be just the simplicity and access. Most domestic brokers don't trade in foreign markets OR they charge exorbitant fees to do so.
The only downside of buying local markets on IB was that you had to convert enough currency to make the trade and it was hard to get the right amount without uneconomic residuals sitting in the foreign currency. That being said, I believe they just announced auto-conversion of currency balances which SHOULD mean that this is taken care of and you can buy foreign stocks with USD balances and IB auto-converts the appropriate amount for settlement/commission on your behalf. I only own local holdings @ IB. I use ADRs in my accounts at Schwab.
The other piece is liquidity - there may be a handful of notable instances where foreign companies listed on major exchanges via ADR might actually have more liquidity in the US than their home country, but I don't know how often this might actually matter for us smaller individual investors.
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On 5/4/2024 at 8:53 AM, SafetyinNumbers said:
I think I might be the only one who thinks the rupee has the potential to become a more relevant currency. Besides being the largest population, largest democracy, being strategically important to the BRICS countries and the G7, English law and language, about to be the 3rd largest economy, growing the fastest, Indians also own a lot of gold.
I think gold is in the midst of revaluation vs reserve currencies (USD and its best friends in the DXY) much like it did in the 70s and 00s. The best part is that it’s a free option as Prem explained at the FIH AGM, the expected returns have to be higher to account for continued rupee devaluation but that might change and that would super charge returns in USD if it happens.
This is interesting. What do you make of India, and the rest of the BRICS, seeking an alternative trade currency for use amongst themselves in trading commodities? It seems like they'd prefer some form of basket (or perhaps crypto currency) to settle trade without use of the USD. If even India is in discussions to sue something other than the rupee, does this change your view?
22 hours ago, treasurehunt said:Is there good statistical evidence for this? For instance, 15 years ago one US dollar was worth about 95 Japanese yen. Today it is worth over 150. During that period, inflation in Japan was much lower than in the US. Obviously even over long periods, factors other than inflation can be very significant.
Exactly. I think this theory is probably true if you're not discussing the world reserve currency pairs. We will break all economic theories with the USD because we have uneconomic participants in its use - global banks, insurance, pensions, world trade participants that are all required to hold some significant amount of debt/currency despite uneconomic pricing.
Any fiat currency crisis, even centered on the USD, will impact other currencies relatively harder even with better demographics, better finances, and better inflation profiles. This will happen until the pain of the USD continuously trending higher is deemed unacceptable and a replacement found.
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On 5/3/2024 at 8:23 PM, Haryana said:
Brett Horn blares again
https://www.morningstar.com/company-reports/1221484-fairfax-earnings-tailwinds-remain-in-place
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We think Fairfax’s first-quarter results were solid. Underwriting margins held at an attractive level, and tailwinds continue on the investing side. Book value per share, adjusted for dividends, increased 2% from year-end. We will maintain our CAD 1,180 fair value estimate and no-moat rating. We continue to see shares as overvalued. While Fairfax is performing well right now, its historical record is mixed, and we think the market is overly focused on the favorable near-term outlook.
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I think he's paying too much attention to the no-moat piece and maybe that's what is holding him back?
Let's ignore the moat. Let's assume insurance, and every insurance company out there, is offering a commodity product. Fairfax is still exceptionally well positioned with low duration, little-to-no capital impact from rising rates, and investments/associates that are banging on all cylinders. The earnings power is almost as perfectly predictable as you could hope barring a catastrophe and it's extraordinarily high for the next 2-3 years.
Even if we assume no differentiation or skill of management, we know Fairfax will earn ~600 CAD/share over the next 3-4 years. Assuming no reinvestment and just adding to BV as retained earnings, you'd expect the stock price to go up $ for $ and that alone represents an 11-15% annualized return over the next 3-4 years without assuming compound returns OR a rerating of the stock.
So why does he assume an equity risk premium of 6-10% for Fairfax with such visibility into its earnings?
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50 minutes ago, rkbabang said:
Yes. No one knows what the correct percentage is nor how long it will take to get there. My personal opinion is more than Gold, Art, and Collectables combined, but less than Equities. So the 2024 equivalent of $40T-$80T and within the next 20 years.
This is my long term thinking as well. And my guess is that it's not so much those markets ceding to BTC (other than maybe gold), but much of it may come at the expense of real estates market share.
BTC isn't really a substitute for bonds. Equities growth in profits and and assets over time may keep them from ceding much. BTC largely accomplishes the same inflation protection as R.E. with fewer intermediaries/costs/frictions so that is where I envision most of the market share will be lost - but it doesn't produce income not can you live in it so R.E will likely continue to be the largest sector by far.
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1 hour ago, SafetyinNumbers said:
I think it’s important to note that BRK has been way better on the equity investments which is why it has so much more surplus capital than FFH. It’s the reason Bloomstran prefers BRK. FFH is now in a position to stack surplus capital which will increase durability and the potential to add high return equities.
I know the analyst who used to work for Semper Augustus. The view of FFH was too much blow-up risk at FFH.
I dunno if that was from the insurance side or beunf uncomfortable with shorting/derivatives/investments etc, but that was the reason they were uninterested in FFH and Fairfax India when I was discussing them with him.
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If the broader market was gambling on a recession, it's doubtful that the long bond would've been down ~30% in 2022. Or that oil would've been up.
I think you need to revisit the big picture across ALL asset classes.
Stocks down. Bonds down. Oil up. Gold up. Yea, that's inflation driving the market.
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2 hours ago, Gregmal said:
Think we ve had this subject come up before, but using one flimsy, kind of subjectively picked argument based on a timeline of “in 2022” doesn’t even remotely cover “how stocks do with inflation”.
Equities also didn't do well in the 70s? Or is that also cherry picking?
Can you show me a period of significant inflation where stocks outperformed both short-term bonds and commodities?
We all agree that stocks are long duration instruments, but suddenly it becomes controversial to say that they have the same problems with inflation and rates ALL other long duration instruments do?
2 hours ago, Gregmal said:Saying “in 2022 they couldn’t raise prices fast enough to counter inflation” completely ignores the multi year runway they get for raising prices following it.
It wasn't ignored. I acknowledged that so far stocks have done better over the full cycle (entirely from margin expansion). I also acknowledged that after ~3 years of this 'multi year runway' that earnings are nominally flat and still significantly negative in real terms. How is that ignoring it? Do we just need to wait another 3-4 more years to catch back up?
Stocks are a great inflation hedge IF you have ~7 years to wait for them to be?
2 hours ago, Gregmal said:And then also “the returns aren’t positive in real terms”…why cherry pick the absolute peak?
The absolute peak for the indices was like November 2021. The absolute peak for most names in the index was summer 2021 (you've even pointed this out before). Using the beginning of 2022 was convenient from a calendar year perspective because 2022 is when inflation really showed up and rate hikes really started. It was a few months/percentage points off the top for both stocks and bonds, but it doesn't look much better if you rewind further back into 2021.
It improves the nominal peak-to-trough drops (for both stock and bonds), but also extends the time in which stock returns underperformed inflation
2 hours ago, Gregmal said:It should be very obvious stocks are dynamic, flexible to environment because they have actual operators managing them,
That hasn't mattered in prior inflations when stocks did very poorly. Why does it suddenly matter now?
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1 hour ago, Maverick47 said:
I don’t have an estimate of how much could be deployed from fixed income to equities, but I think it’s not uncommon for insurance company managements to choose to hold their insurance loss, and expense reserves (and unearned premium reserves) in the form of relatively secure fixed income instruments. The amount of float held by Fairfax might be a reasonable approximation for such a lower bound on fixed income — roughly $35 billion? I’d be surprised if they chose to hold fixed income investments in an aggregate amount less than that. I think they currently hold over $40 billion in bonds?
in addition, there may well be some regulatory or rating agency constraints on investments in equities. There’s often an implicit trade off between underwriting and investment risk for a company. When a company expands its premiums written such that they become sizeable relative to supporting surplus or equity, then they generally have less of an ability to accept risk on the investment side of the house by moving into equities. A company such as Progressive, with premiums to surplus/equity ratios in the high 2+ area (sometimes close to 3.0) takes much of its risk on the underwriting side, so not surprisingly will not hold a sizable investment in equities.
Fairfax has written premiums of about $29 billion, and equity including both preferred and common of about $24 billion. So they can be heavier into equities than a company like Progressive, and they are…with about $15 billion invested in equity-like instruments, associates, etc. If they anticipated opportunities to grow premiums dramatically, then they’d probably hold off on a further move from fixed to equities. But if they anticipated a soft market in which they even saw premiums shrinking, they might well choose to offset a reduction in insurance related risk with an increase in investment risk via a shift from bonds to equities.
Isn't the rule of thumb that they can invest roughly the accounting equity of the business in equities? The remainder is reserves/float for the insurance?
So they could probably add another $10B in equity if push comes to shove. Maybe more as long as we avoid major catastrophes over the next year or two.
I think the big win will NOT necessarily be from adding $10B of equities - but being able to roll a large portion of the $35B+ in fixed income into corporates/mortgages opportunistically to add another ~1-2% to the portfolio yield as well as the realized capital gains when the opportunity presents itself.
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4 minutes ago, thepupil said:
Nothing is without risk and things that we can't contemplate can happen, but for the on the run 30 year bond to fall 50% in price, yields would have to go to 9.9%. duration risk is dynamic and has changed drastically since the 30 yr yielded 1.2%. as rates move up, duration risk decreases (modified duration of 30 yr bond is now like 16)
I think this is what people are missing. Long bonds were a terrible investment in 2021. They're significantly better today and the risk/reward is skewed to the upside IMO.
Even if inflation accelerates, it'd have to go up quite a bit for 30-year mortgages to be a bad bet. You'd likely lose some on the 20 year treasuries, but reinvesting coupons at rates of 5+% on discount bonds isn't a bad way to go IMO even if you show unrealized losses for the first 1-3 years.
2 hours ago, mattee2264 said:I'm not really seeing the appeal of intermediate or long bonds right now unless you are anticipating some kind of deflationary bust. But in that scenario long duration stocks such as Big Tech and bond proxies probably do a lot better.
I disagree. 2022 returns were abysmal for big tech as inflation was accelerating.
Meta was down ~65%.
Apple was down ~27%.
Google was down ~40%.
Microsoft was down ~30%.
Nvidia was down ~50%.
They only turned around once it was clear inflation was abating. Intermediate bonds stomped big tech in 2022. Short term bonds even more so. This is why I keep repeating ad nauseum - stocks are NOT an inflation hedge. They do miserably when inflation is elevated and/or erratic. They do well when its consistent and low.
2 hours ago, mattee2264 said:In a "higher for longer" scenario real returns will approximate zero in bonds and if the yield curve un-inverts the way it should then you could end up with unrealised losses until your bond matures.
I don't disagree that real returns for bonds will likely be close to zero over a 10-20 year type time frame. But I expect that they will be significantly positive in the intermediate term.
2 hours ago, mattee2264 said:Equities generally do pretty well in a moderate inflation environment especially as it usually goes together with healthy economic growth. They can increase prices and volumes and that makes for very healthy nominal earnings growth. Many people thought the end of ZIRP would lead to multiple compression. But it hasn't in a meaningful way.
This hasn't really played out though.
Margins fell pretty quickly in 2022. Companies cannot raise prices as quickly their input costs are rising so margins get compressed at the front end of inflation acceleration. Then, you also have consumers that cut back, or substitute cheaper options, meaning that higher prices often lead to lower volumes and you're still behind. This is precisely why corporate earnings fell in 2022. After 2-years of moderating inflation, rising prices, and etc - corporations have only barely made it back to 2021 in nominal terms but are still significantly negative in real terms.
Equities did better than bonds over the whole cycle, but underperformed dramatically on the front of it - even with bonds starting from a historic bubble. What happens if we accelerate again? And bonds aren't in a historic bubble? They probably outperform again - and even more dramatically this time.
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1 hour ago, mattee2264 said:
Inflation isn't going to get back to 2% until government spending is brought under control and there probably will need to be a recession to achieve meaningful further disinflation. Unfortunately the Fed seem to have no further appetite for rate hikes and the US government will continue to spend because there is no one to stop them doing so.
I can understand the desire to avoid the pain of a recession. But the alternative of getting stuck with 4% inflation for the next decade is much worse for the average joe even if investors will probably do just fine (it is high inflation not moderate inflation that kills the stock market).
But what is pretty interesting is that we only managed 1.6% real GDP growth in Q1 with a government deficit of over 1/2 a trillion for the quarter with the economy at full employment (if you believe the official figures). Resilient consumer spending seems to be what is keeping the US out of recession growing at 2.5% for the quarter. Question is how long that can continue with job losses starting to rise and the saving rate at new lows.
I just don't think you need higher rates with GDP where it's at.
Under a lowish/stable inflation regime, I'd argue the nominal rate on the 10-year should roughly approximate GDP growth. At this point, were ~2-3x that level.
The gold/copper ratio is also suggesting significantly lower 10-year rates.
But the 10-year rate probably won't/can't go meaningfully lower until rate cuts occur and 5+% short term rates are absolutely restrictive in a 1.6% annualized growth environment.
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Should we add CLF to this list?
$5 Billion of net debt reduction since 2020. Announced a $1 billion share repurchase program in 2022. Just announced another $1.5 billion for 2024.
For comparison, current equity market cap is ~8.5 billion and rough EV is ~11.5 billion.
Not an insignificant share count reduction/deleveraging that has occurred and will occur going forward.
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4 hours ago, Jaygo said:
Both cn and cp released flat to down RTM quarters, Brk mentioned slow rail traffic in the past 6 months.
Pretty sure we are not booming. As far as I can tell the economy is slowing due to to high rates but still moving due to government largess. I think we are one rate cut from a boom to fill pent up demand and people who are on the fence just want to know what way to jump. People in their 20's just want to have a taste of the good life that comes from real capitalism not this dog and pony show we have.
If they keep dicking around with China and rates we could see outright recession. Id say drop rates to 3, let the Chinese build are shit for us cheaper than we can, Adam Smith style and we can just focus on spending.
I haven't verified myself, but saw somewhere recently that S&P earnings are actually negative YoY ex the mag-7.
If true, it's not exactly a ringing endorsement for equities in general. Nominal EPS for the S&P 500 index barely surpassed its 2021 nominal high (and is still significantly negative on a real basis) and we're already rolling over again?
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3 hours ago, thepupil said:
2 years later after start of thread and bonds have underperformed t-bills by 4%/yr and SPY by 8%/yr as the index's yield has increased from 3.5% to 5.25% (actually yields more since that's YTW and MBS will yield more than their YTW)
I'm continuing to plow the entirety of my 401k into bonds and have recently started to buy long term tsy's on margin in my taxable (having sold most of my IG corporates after the late 2023 rally).
credit risk free MBS >6%, LT tsy's approaching 5%. good stuff. I'm a buyer. no corporates. IG spreads way too low in my opinion.
not for everyone but if you buy say 30% in LT tsy's at 4.8% on margin at interactive brokers, at top federal tax rate, you're making 3% after tax yield, fund w/ 6.2% margin and you have negative carry of 3% on 30% of your portfolio. At constant yields you lose 90 bps/yr on the portfolio. But in a recession where rates drop just 1%, you get 30% of your portfolio going up 20%, 2% =42% for 600 - 1200 bps of PnL when you want it most from liquid monetizable instrument. if rates go up another % you lose 15% on your 30% / -450 bps. almost no mgn requirement.
JPow is making bonds great again.
Same. I don't think I've seen a more favorable set-up for fixed income in my adult life.
Yields significantly in excess of both GDP and inflation?!?!?! High single digit returns available without taking much, if any, credit risk?!?!? With a little leverage, spread, and/or illiquidity premium, you can easily get 8-12%.
401K is entirely in core bond and intermediate treasuries funds. All of my short-term fixed income products have been sold and rolled into intermediate/long treasuries, agency MBS exposure, OR fixed income CEFs utilizing spread/leverage and discounts to NAV. Betting on a move in rates sooner rather than later.
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1 hour ago, Hektor said:
https://www.wsj.com/economy/central-banking/us-gdp-economy-first-quarter-2024-1675df05
U.S. Economic Growth Slows to 1.6% in the first part of the year, falling short of economists’ expectations.
1.6% growth with interest rates @ 5+%.
That's how the Fed cuts rates with inflation over 3%.
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3 hours ago, cubsfan said:
The West has sent $600M per year to Gaza for years now. That's an awful lot of money. Gaza has had tremendous financial aid. Those funds, then are diverted to support a terrorist infrastructure instead of a rebuilt Gaza.
So you want to blame that one on the West?
You call it "bias", actually it's "failure".
I mean, the US sends Israel ~$3 billion a year to buy our military products so....
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1 hour ago, Santayana said:
But they were mostly right 2016-2018 when we did have a rising rate environment, and then 2019-2020 may have been the steepest cutting cycle in history, and I don't think it was very easy to see that was coming. Given how much lower the float was in 2016 vs. now, how much do you really think they could have made by taking on duration when the 10yr was trading at ~2%?
They were wrong for 2015/2016, neutral in 2017, right 2018/2019, and wrong in 2020. All that benefit of missing unrealized losses from 2016-2019 was reversed to missing out on billions of unrealized gains in 2020 making the outcome moot. The cost of that round trip to nowhere? 2-3% a year minimum in interest income in billions so 10-12% minimum.
And what happened to any 10-year bond bought in 2015/2016? They were 4-5 year bonds in 2022 when rates really started rising. You'd have lost roughly 8-10% at most in 2022. So you'd still be a positive net on those bonds even after the rise.
What saved them and made the trade work was float exploding as rates rose. The cost of 2-3% a year was borne on a much smaller portfolio than the benefit of being short duration as rates rose 5% on a much larger portfolio. But they couldn't have known/planned for that. It was luck that insurance pricing exploded post-covid.
And we're still only considering a buy/hold scenarios. Fairfax has a history of being savvy with rates - I really think the most likely scenario, had they actually had duration on, would've been them selling it for huge gains to redeploy elsewhere.
Point is - if you're giving them credit for being short duration in 2022, we also have to net that against under-earning from 2016-2021.
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5 hours ago, giulio said:
FFH did not need higher interest rates to work out well as an investment in 2020-2021.
If you held everything the same, the stock was easily worth 2x.
I agree with this. I was one of the few pounding the table on FFH back in 2020/2021 after having sold out in 2018.
Fairfax didn't recover with the rest of the market, DIGIT has done superbly well over the prior 2-years, and it became clear FFH was incredibly cheap even with very modest assumptions. I was guestimating $500-600 USD/share was a reasonable valuation, but it was reading for like $250-450 USD for much of that time.
But it WAS interest rates that changed things. Interest going from 0 to 5.5% allowed Fairfax to capture billions in interest income in 2022/2023/2024 and lock that in with visibility for the next 3-4 years.
That, paired with float exploding in a hard market, are what we're thinking game changers to justify the move to $1000 and still make it look like a reasonable value here.
5 hours ago, giulio said:To say that FFH worked out as an investment ONLY because JPow hiked rates is UNFAIR to the great work done by Watsa and the team.
It's what made a 2-3x and 4-7x. Prem deserves credit, but it's not without luck.
There was no guarantee, or foresight, that we'd have a hard market this strong for this long. Also, the fastest rate hikes in history was basically on nobodies bingo card in 2021.
The team executed very well on it, but that doesn't mean that the environment/beta wasn't the huge portion of the tailwind.
2 hours ago, Santayana said:Being positioned to take advantage of the higher rates was completely in management's control, and there was really only one direction rates could move.
It was - but if you're going to give them credit for that then you also have to ding them for the opportunity cost of sitting at 0 for 5-years waiting for it and missing the turn in 2019/2020 when rates reverted back to 0.
How many billions were left on the table from 2016 - 2021 as we waited in short-bonds earnings practically nothing? What would those billions have compounded into if redeployed at covid lows? Or used to increase share repurchases? Or invested into treasuries that could've been sold at massive premiums near the covid lows?
We'll never know - but there was a huge cost to shareholders for waiting.
Perhaps it paid off - but it paid off because we got lucky with the steepest hiking cycle in history paired with an incredibly strong insurance markets allowing a greater weight of portfolio to be reinvested at high rates versus what was invested/missing interest at low rates. Those didn't have to happen in tandem and isn't what Fairfax was prepared for when they went to 0 (you'll recall they did it under Trump expecting higher rates due to economic growth - not inflationary animal spirits under Biden).
I'm happy with the outcome. But I'm not judging the process by the outcome. Ultimately they got one interest rate call wrong and then they got one right. And it just so happened the portfolio was significantly larger for the right call then the wrong one which is the only reason that panned our so well. And that portfolio size was luck
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12 minutes ago, SharperDingaan said:
Doesn't really happen though; think of a cash holding in BTC/BTC-ETF.
If you think your cash/BTC is going to be worth more next year (by at least inflation) you would be inclined to HODL .... but in reality, the cash/BTC is going to be swing traded around a core holding; hopefully for gains that will be spent within the next year. But ..... while the gains are free money, they are only going to be 'spent' as long as they are relatively small (low spending bar); the reality is that the larger gains are going to be 'invested' ... in new truck/car, mortgage repayment, house upgrades, more bonds, etc (high spending bar).
But what when the cumulative gain to date has become so large, that you have now both paid off everything, and established the family 'pile' for generations to come? ... any further gains are now destructive to both you and your family. The gains get given away ... ideally on something lasting and worth while.
It used to be that cash (at best) earned a real return of 0-1%; but in the BTC age ... 50%+ year is not that unusual.
Changes the whole perspective.
SD
No - it's your scenario that doesn't really happen. You're basically the only person who advocates holding BTC as a "cash instrument". Everyone else recognizes its very volatile and incredibly risky for anything shy of a 3-5 year time horizon...i.e. "not cash".
But even with that example - I buy more BTC every 2 weeks. I also buy more stocks/bonds every 2 weeks. All with the expectation they appreciate in value. And yet? I still spend.
We could actually make a pretty good argument that I'd spend quite a bit more of that money being socked away if I didn't have to prepare for the eventual inflation that is required for the federal debt/deficit to make any sense.
We are currently living through a real time example of people getting paid 5% on CDs that are sub-1 year. 4-7% on short term bond YTMs with very limited volatility. 5+% on money markets. And yet - people still seem to be spending if you look at GDP.
So if people still spend when the alternative is to take very, very moderate risks and earn 5%, why wouldn't you think they'd spend when they can riskless having a stable currency?
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16 hours ago, Jaygo said:
I kind of agree if I look at it only from my point of view. It is theft in a way. But in another way it’s a difficult job to keep all the money from floating to the top of the pyramid in our system.
so if the actual money or dollar had the ability to hold its value or even increase in value the money would stay at the top of the pyramid and would not be distributed downward unless through some other means that I’m sure you or I would not like.
Let’s say in the case of 0 inflation I have 10 million dollars and I feel that if I spend exactly 200,000 a year my money will see me through to the end. It will sit under my mattress except for that yearly 200,000. Won’t the money supply be restricted in that case.? Isn’t this the reason gold is not used any more because there is not enough to do commerce with?
See the $100 is not money. It is just a method of transaction in the real world. Buy gold and sit on it if you feel like you want to hold real value.
This just isn't true -
I'm not independently wealthy. I can't simply stop working tomorrow. I still spend plenty on 'wants' in addition to 'needs' and its because I have enough to feel comfortable spending on 'wants' knowing what I have put away, and likely what I will put away.
If I knew that the cash in the bank was going to be worth more next year, just like I envision my stocks will be, it doesn't mean I don't spend it. I simply means its a higher bar to get me to spend then it burning a hole in my pocket because holding it is penalized via inflation.
I still spend plenty despite knowing I could sock it away in a short-term bond fund and earn 5-7% YTMs. Why would it be any different knowing that my $100 of cash is still going to be $100 of cash next year? Or even if it was going to be $101?
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16 hours ago, Gregmal said:
Do you not think though that either you are working for money or money is working for you is what separates those with freedom from those who don’t? The system is designed to benefit, dare I say, even serve the haves. The only real way to break the cycle is to try to participate in the mechanisms through which the haves benefit. Which is primarily investment in business, owning the resources, avoiding unnecessary taxation. Nobody is retiring early getting 5-6% pre tax on their money. And that 5-6% has only been recent. Imagine trying to get ahead with 2-3% annually? The compounding magic is real. The mortgage pay down magic is real. You just gotta let it work.
I'm not making the argument that people should get wealthy off minimum wage jobs and limited savings/investments. I'm saying the $ you traded your labor for today should still be worth same tomorrow because the labor has already been delivered. Having the $ drop every day/week/month/year simply steals from you after you've already delivered on your end of the bargain by devaluing what you traded for AFTER the fact.
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10 hours ago, cubsfan said:
That's an interesting take.
No mention of the last 4 years where the Biden administration works to turn this country upside down and use law fare to block his only political opponent from running a Presidential campaign.
Nothing to see there.
I mean I literally said I agree with y'all about Biden...
But if one of them is operating within the political apparatus and the decisions can be undone at a later date by others in the same political apparatus
And the other is unleashing angry mobs of violent populism and calling into question the very meaning of truth so he alone can be the purveyor of absolute truth to said angry populist mob regardless of reality/evidence/critical thought would suggest...
Then yes, I'll take the former any day.
Ideally these wouldn't be our choices, but America is so focused on not "wasting your vote" by supporting an alternative option, but end up wasting their vote on one of two bad ones...
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This system is designed such that people trade time/expertise for money and then the government purposely devalues that money so that they're forced to take risk of loss just to run in place for the time/expertise already delivered.
It is theft, it is immoral, and it is absurd to suggest that this is a foundational teaching that should be put forth in schools.
If you want to start calling the USD a "transaction" vehicle, then be my guest. But everyone else currently calls it money, and that word implies something is a means of exchange, a store of value, AND a unit of account. Otherwise, we're all just bartering collectibles and back to the days pre-gold.
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10 hours ago, Jaygo said:
Yeah but this is nothing new. Currency debasement is not some new idea. Its the way the monetary system works. If my money was going to be worth more tomorrow i wouldn't spend it today and our economy would stop functioning.
Inflation of the 70s was a supply shock as well as a major war. We may repeat that but there is no guarantee imo.
And to think that people may not invest in America again after some Financial mess is crazy. How many wars has germany started and lost and destroyed itself only to be the strongest economy in europe again in the last 100 years. People go where the getting is good and the getting is good in North America and likely will be for a while. Inflation is part of that. Japan has been dead money for 30 years at a time of no inflation so your argument is not accurate.
This simply isn't true. Just like I don't put every dollar into bonds/CDs/etc because 'they'll be worth more tomorrow" and still actually spend money each and every day.
At some point you feel sufficiently comfortable with your level of savings, and have desires to be met that you'll spend for. I think you can argue people will be more discerning with their spending - but it's not like people stop wanting things.
Inflation distorts this picture and encourages people to spend more and more money, take more and more risk to earn returns, and hoard assets all because we can't simply hold cash and have it retain the value we put into earning it...
And then when wages/etc aren't benchmarked to that inflation - it means a % of the population is falling behind daily. If you create a system that does that, it's not surprising poverty and homeless have become rampant issues in major cities that have experienced high inflation over the last ~3-4 years.
Cryptocurrencies
in General Discussion
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I saw somewhere recently that Grayscale had received its first inflows since conversion to an ETF.
Which begs the question - who is buying the ETF with significantly higher fees than ALL other available options?
I understand capital gains trapping some current investors - I don't understand new inflows. Anyone have the angle here?