Have We Hit The Top?

[TwoCitiesCapital]

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. 

 

 

[Gregmal]

21 minutes ago, TwoCitiesCapital said:

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. 

 

 

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. 

[Jaygo]

25 minutes ago, TwoCitiesCapital said:

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. 

 

 

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. 

[Gregmal]

Like this whole PARA shitshow should really highlight that for people. Shari didn’t build that empire. Her incentives in doing a deal aren’t what everyone in the thread are “guessing” based on their own normal people conventional wisdom and game theory. Her father built the empire through investment, cleverly navigating capital markets, and then estate planning.
 

Risk taking is often confused with being careless but risk taking is necessary for any sort of growth to occur. Growth meaning, building something. If I want to build something, I can and have to take that risk. If I can’t, then the next best option is to try to participate in someone else building something. If I can’t do either…then what value do I bring to the table? Well, I’m probably just a cog then. And will have to be a cog for as long as the system tells me.

[Jaygo]

6 minutes 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. 

Bingo. I’m not Austin Mathews so I’m not making the kind of money he is. He can do lots of dumb shit with his money because lots more is coming. 
 

But for normal folks we have to play the game that is being played not the one we want to play. I personally feel that reasonable dept financed asset purchases is the only way to get ahead. Would I rather make 15 mil a year and not worry about this shit? Yes!  
 

I am in the position that if I work and invest what I can ( say 30k a year)  I will live a decent life with some good security as I age, I personally feel that if I want to have an excess above this level I need to accelerate the flywheel by the use of dept. 

 

so far so good. I can borrow at 6 and expect 10 through something like brk. Safe if done right. 
 

the 6 is tax deductible yearly and the 10 is cap gains when I decide to unwind the game. I don’t like the game but I understand it is the way it is. 

[Paarslaars]

I really need to switch brokers, mine charges 13% for margin.

[gfp]

11 hours ago, Jaygo said:

Bingo. I’m not Austin Mathews so I’m not making the kind of money he is. He can do lots of dumb shit with his money because lots more is coming. 
 

But for normal folks we have to play the game that is being played not the one we want to play. I personally feel that reasonable dept financed asset purchases is the only way to get ahead. Would I rather make 15 mil a year and not worry about this shit? Yes!  
 

I am in the position that if I work and invest what I can ( say 30k a year)  I will live a decent life with some good security as I age, I personally feel that if I want to have an excess above this level I need to accelerate the flywheel by the use of dept. 

 

so far so good. I can borrow at 6 and expect 10 through something like brk. Safe if done right. 
 

the 6 is tax deductible yearly and the 10 is cap gains when I decide to unwind the game. I don’t like the game but I understand it is the way it is. 

 

Jaygo I notice you always spell "debt" with a "p" - is that a keyboard thing or a country of origin thing or what?  Just curious since it has been consistent.

[Jaygo]

lol I have no idea. I’m thinking I don’t know how to spell. Can’t put this one on spell check unfortunately! Just a foggy mind. 
 

 

[SharperDingaan]

On 4/13/2024 at 9:31 PM, Jaygo said:

But for normal folks we have to play the game that is being played not the one we want to play. I personally feel that reasonable dept financed asset purchases is the only way to get ahead. Would I rather make 15 mil a year and not worry about this shit? Yes!  

 

I routinely point out to both undergrad/grad students, that to get ahead - you must expose yourself to risk; and that most of us will only have two risk-windows per lifetime. We have a variety of tools by which we can mitigate and/or position ourselves to benefit from risk; but it's to us to both act, and recognise opportunity as it is passing. Most people lack the imagination, and the ability to apply; hence the well-known 'you can lead a horse to water, but can't make it drink'.

 

However, while there are infinite possibilities, whatever you choose also needs to be a good match for you. No different to finding your 'significant other'; yet look around you .... at how few seem to be able to do it. 

 

SD  

Edited April 21 by SharperDingaan

[Sweet]

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. 

Agree with this.  I had a friend who asked me ‘what’s the point of saving money, isn’t it better to enjoy it’.  I get what he means, but I said to him that even though I hadn’t spent the money it was buying me other things.  He was confused.  I think some get it and many don’t. 

Question, what do you mean by ‘mortgage pay down magic’?

[Jaygo]

I’m finding more and more young people are taking unnecessarily big risks for that big score because they feel the worlds passing them by. 
 

It’s shocking how risk averse they become when discussing simple strategies like a small levered investment in an boring idea but they have no problem putting 50% of their money into some shit coin or stock they saw on Twitter. 
 

I think in hindsight if I had known how much debt capacity I would have today I would have taken a little more risk in my 20’s. 
 

it’s funny how the lessons we learn as we age become less and less useful as we learn them. I think there’s a rod Stuart song about it. 

[Jaygo]

2 minutes ago, Sweet said:

what’s the point of saving money, isn’t it better to enjoy it’

I find a lot of enjoyment out of not worrying about money. 

[TwoCitiesCapital]

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. 

[TwoCitiesCapital]

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? 

Edited April 14 by TwoCitiesCapital

[Gregmal]

25 minutes ago, Sweet said:

Question, what do you mean by ‘mortgage pay down magic’?

Dont think it works in Canada but the 30 year mortgage really starts doing its thing once you get past the first say 5-8 years....especially with a decent down payment. The equity gets larger, the interest payments smaller, you dont even really need appreciation of the home, although that happens quite often as well. Basically you start approaching the mortgage "tipping point" they call it where your principal payments exceed the interest payments..is where you really see your "worth" accelerate and this unlocks a lot of variables for you in terms of accessing the equity. Also around this time, is where you really start to see the benefits of inflation on that fixed rate. There was a point in time, not even really that long ago, where a $3,000 a month housing payment was considered large. Today? Not so much. 

 

So its really just where the good aspects start accelerating up and the negative ones accelerate downward...a tailwind for the owner. 

[Sweet]

27 minutes ago, Gregmal said:

Dont think it works in Canada but the 30 year mortgage really starts doing its thing once you get past the first say 5-8 years....especially with a decent down payment. The equity gets larger, the interest payments smaller, you dont even really need appreciation of the home, although that happens quite often as well. Basically you start approaching the mortgage "tipping point" they call it where your principal payments exceed the interest payments..is where you really see your "worth" accelerate and this unlocks a lot of variables for you in terms of accessing the equity. Also around this time, is where you really start to see the benefits of inflation on that fixed rate. There was a point in time, not even really that long ago, where a $3,000 a month housing payment was considered large. Today? Not so much. 

 

So its really just where the good aspects start accelerating up and the negative ones accelerate downward...a tailwind for the owner. 

Thanks for the explainer.  Yeh no 30 year fixed from where I am from.  Thirty year fixed would have been amazing when I bought.

[Viking]

3 hours ago, Sweet said:

Agree with this.  I had a friend who asked me ‘what’s the point of saving money, isn’t it better to enjoy it’.  I get what he means, but I said to him that even though I hadn’t spent the money it was buying me other things.  He was confused.  I think some get it and many don’t. 

Question, what do you mean by ‘mortgage pay down magic’?

When you save you are ‘spending’ your money. It is being spent on financial independence. This appeals to people who value their independence. 

[SharperDingaan]

18 hours ago, TwoCitiesCapital said:

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 penalised via inflation.

 

 

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 

 

 

[TwoCitiesCapital]

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? 

 

[ValueArb]

On 4/12/2024 at 11:16 AM, 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.

 

Not true. People aren't going to starve themselves to make a buck, in fact the problem in society is that people don't save enough. 

 

On 4/12/2024 at 11:16 AM, Jaygo said:

 

Inflation of the 70s was a supply shock as well as a major war. We may repeat that but there is no guarantee imo.

 

Inflation was and is always a monetary phenomena. There was no major war in the 1970s, not for the US. Vietnam spending was over by 1975, and during the 1970s US military spending as a percentage of GDP was substantially lower than it was in the 1960s and had been declining since 1953.

 

https://www.usgovernmentspending.com/defense_spending_history

 

On 4/12/2024 at 11:16 AM, Jaygo said:

 

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.

 

This is a straw man, no one claimed "NO oNe WiLL EvER INveST IN ThE US aGAiN!".

 

The Marshall Plan constituted about 5% of US GDP in 1949. Germany has been the recipient of over a trillion dollars in assistance from the US in present day dollars, not just from the Marshal Plan, but also from US defense forces staffed in Germany to protect it from the USSR. We still spend tens of billions a year on forces in Germany to protect them allowing them to reduce military spending below 2% since the fall of the USSR, an enormous peace dividend they've received. So they've been sailing with a large wind at their back since 1950.

 

Again, if you had actually read what I wrote, inflation raises real capital gain tax rates which reduces capital investment here and pushes investors overseas. 

 

On 4/12/2024 at 11:16 AM, Jaygo said:

 

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.

 

Another straw man. No one claimed deflation is preferable to inflation. 

[james22]

If BTC is a new asset class, it cannot also be cash.

[SharperDingaan]

2 hours ago, TwoCitiesCapital said:

 

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". 

 

Nah ... I'm just ahead of everyone else 

The whole currency thing is that if you can pay for something with it, it's a form of cash; we just don't like the form. Could be USD, bricks of cocaine, hi-tech chips/weapons, oil, 'influence', or BTC; whichever is 'best' depends upon the purpose. Materially changing valuation is the norm, not the exception.

 

SD

[Xerxes]

Renewed half of mortgage to 5.5% (3-year) up from 3%. 
 

The other half still hanging at 1.7% expiring in very late 2025. Unknowingly I sort of shorted the bond market by issuing debt at bubble territory during Covid mania. 

[Blake Hampton]

I was reading BRK shareholder letters when I had a thought:

 

Since unrealized investment gains are now included in net income, wouldn’t that mean that the S&P 500’s EPS is overstated? Buffett has repeatedly explained since 2017 how Berkshire’s reported net income isn’t actually representative of its earnings. In a rising market, wouldn’t this then have the same effect with the S&P? It’s sort of hard to wrap my head around but I feel like appreciation in stocks generally would then show up in the earnings of companies.

 

Edit: The change was ASU 2016-01

Edited April 17 by blakehampton

[Blake Hampton]

^ or maybe it just increases volatility in earnings?

Edited April 17 by blakehampton