> Free markets, markets free from force and fraud > ... > Again, are you seeing a growth in the number of banks, or are > the larger banks getting bigger and bigger?
Let's dispel this bit of misunderstanding first.
Completely-free markets do nothing but generate monopolies. A monopoly is the logical and inevitable conclusion of unrestricted competition: at some point, someone wins, and then they do everything in their power to keep everyone else from being able to compete.
There is no invisible hand. Adam Smith mentioned it only once in the book, while he repeatedly noted situations where "natural liberty" does not work. Let banks charge much more than 5% interest, and they will lend to "prodigals and projectors," precipitating bubbles and crashes. Let "people of the same trade" meet, and their conversation turns to "some contrivance to raise prices." Let market competition continue to drive the division of labor, and it produces workers as "stupid and ignorant as it is possible for a human creature to become." (http://bit.ly/Ln1jis)
You need SOME regulation. There is certainly such a thing as too much regulation, and useless regulation, but you need SOME.
Oh, and that number of banks you're so fond of alluding to, it went down the most during a period of significant DEregulation. Few significant regulations have been put (back) into place yet. Little of Dodd Frank has taken effect, or even been defined yet. Food for thought. :)
> eventually purge bad investments
This is indeed true, but sometimes, for some markets, it takes too long and the price of the correction is too high.
If a company sold food that killed people, yes eventually people would stop buying their food and they would go bankrupt, but how many people would have to die before that happened? We, as sensible human beings, don't like that scenario, so we regulate food companies to try to prevent that from happening.
The price for letting the market purge a bad toaster-making company is a few bad toasters -- no big deal, there's really no need to prevent bad toasters.
The price for letting the market purge bad mega-banks is significant global economic turmoil -- so it probably would be better to prevent bad mega-banks in the first place...or ideally, to prevent mega-banks from existing at all.
> Each boom starts with a 'new technology': railroad... automobile > (1911); television (1947); computer (1983)......(2019)? > > Each bust starts with interest rates held too low for too long and > bubbles developing in the fabric of the economy and banker > corruption and bank panics.
It's funny how the rest of us have to work so hard to develop these booms (actually creating value), but the bankers get rich off of it and destroy pretty much the same way every time (extracting value).
> my observation is that there are simply more homes than people > that need a home.
More like there are more homes than people that can afford a home, even at these low prices.
More specifically, many people can't get mortgage, even with these low rates. Don't forget that there have been many millions of foreclosures over the last few years, there are many millions of foreclosures still in process, and there are many millions more to come.
All that said, simple supply and demand is indeed one major reason why prices have stayed so low. Even in the midst of the housing bust, the developers were still building tons of new homes in most regions. (And of course, it very depends on the region, even the neighborhood.)
Not to get too off-topic (though you already have, so why not)...this is where some people get very, very confused.
The Barney Franks, Chris Dodds, and Phil Gramms that we all love to hate, made a little bit of easy money due to their policies.
The Loyd Blankfeins, Jamie Dimons, Ken Lewises, Dick Fulds, John Thains, and Angelo Mozilos that some people still obliviously defend, made a TON of easy money due to those policies.
Follow the money, and you'll very quickly find that you probably have your chicken and egg backwards. :)
> The requirement was to make loans to people that could not > otherwise qualify or not get the funds
Yes, and less than a third of sub-prime loans were made by banks that were subject to that requirement.
So don't totally blame the regulators/government (don't NOT blame them either), and and hold the banks responsible for their fair share in this mess. :)
> Those are the "move up" buyers who maybe are thinking of > "moving down" these days.
And yet they can't even "move down" because they're underwater. (Unless they foreclose, which is only easy to do in a handful of states.)
This is one of those metrics that is very meaningful as a drag on the economy and certainly on the housing market, and yet most people have become totally numb to it.
Everyone was freaking out when ~15% of borrowers were underwater, but by the time it got to over 30%, no one cared anymore. :)
Vanguard's Jack Bogle takes advantage of Facebook's (FB) plunge and the negative impact it's had on the psyche of the retail investor to hammer home the merits of index investing. Bogle says: "It all comes down to value and it all goes away from price, and avoiding IPO's and avoiding individual stocks is the best strategy for investors." (video) [View news story]
Regarding the difficulty of asset allocation, there are many very simple models one can follow that is almost trivial to manage with just a handful of various ETFs, for example the Swensen model: http://seekingalpha.co...
Mostly left unsaid about the JPMorgan trading loss is the most crucial point, writes Sallie Krawcheck: The size and risk of the trade was identified not by management, but by the press, and then it took weeks for JPM to put a number on the loss - and this from one of the savvier management teams. Regulators need to take note before heaping more complexity on an already incredibly complex business. [View news story]
Well, the "most" crucial point is that JPM lost its own money, and it wasn't in such amounts that it poses systemic risk -- this time.
As for complexity, I think the financial industry has shown time and time again that they will exponentially increase the complexity of their gambling instruments with or without regulation. Indeed, the 90s and 2000s were a time of substantial deregulation, and yet financial complexity only skyrocketed that much more. Can't blame the big bad regulators for that.
Portfolio Ideas That Could Generate Up To $1000 A Month [View article]
I have a couple of questions/issues about this article.
1) I'm curious that there is no assumed inflation? This would seem to be very important when discussing long-term investments. A $12K/year dividend income after 10 years sounds great, but with an assumed inflation rate of ~3% would be a little under $9K/year. After 20 years your ~$50K/year would be equivalent to ~$28K/year. And don't forget taxes too!!
2) 4% yield /and/ 6% dividend growth rate seems difficult to achieve in practice. In fact the stocks mentioned in this and the linked screener article all yield less than 4% at the times they were written. Perhaps 3% is a more realistic place to start? This, of course, affects the outcome significantly.
I would like to hear any thoughts on these matters -- thanks! :)
Vanguard's Jack Bogle takes advantage of Facebook's (FB) plunge and the negative impact it's had on the psyche of the retail investor to hammer home the merits of index investing. Bogle says: "It all comes down to value and it all goes away from price, and avoiding IPO's and avoiding individual stocks is the best strategy for investors." (video) [View news story]
Thank for the thorough reply! :)
Naturally, I do have some disagreements...
1. Depends on the index. Russell 2000 might be a bit too broad, but SPY? DIA? You'll still get a few dogs, but arguably you'd get more dogs in a hand-chosen portfolio, unless you are a better stock picker than 80% of professional fund managers...which I predict most people aren't.
2. Diversification? Enron was once one of the larger components of several indexes. As Buffett says, diversification is only needed when investors don't understand what they're doing...but again, most investors don't.
3. Does that back of the napkin calculation include dividends? I have not done the math, but I expect if you factor in dividends you would come out ahead since 2000, and certainly ahead over a longer period. 2000 is also kind of a loaded start date -- tech bubble and all that. :)
4. I can't argue much here as I don't have risk-weighed return numbers floating around in my head; but again I wonder if you're accounting for dividends?
5. This is an excellent argument /for/ index funds over mutual funds, but doesn't tell me why stock-picking is better -- thoughts?
6. False equivalency fallacy. :) With index funds, you have to manage is your high level asset allocation (stocks vs. bonds vs. emerging markets, etc), where as if you're picking stocks, you must do that AND micro-manage your equity allocation to individual stocks too, requiring a LOT more time/research to manage your money in total.
7. Index funds make no claim about optimization, that I am aware of. They follow the market or some segment thereof...and that's it. Yes, if something goes wrong it's never the fund owner's fault, but the same is true of any company you invest in -- it's never the CEO's fault that you made a bad investment either, unless he commits fraud...and even then he's never prosecuted. :)
8. Maybe, but again, index funds beat most of that smart money almost every year. (Unless you're talking hedge funds, with have access to instruments most retail investors don't, so I'd call out of bounds on that.)
My take is that, in general, sure, if you're a great investor, and you have the time and education, go ahead and pick your stocks. But most investors aren't great and don't have the time and education, so they are better off with index funds most of the time.
Thanks again, I always appreciate good replies! :)
The Housing Recovery: An Update [View article]
Please stop putting up straw man arguments (http://bit.ly/zrR413) and start engaging intelligent, fact-based debate. Please. :)
The Housing Recovery: An Update [View article]
> ...
> Again, are you seeing a growth in the number of banks, or are
> the larger banks getting bigger and bigger?
Let's dispel this bit of misunderstanding first.
Completely-free markets do nothing but generate monopolies. A monopoly is the logical and inevitable conclusion of unrestricted competition: at some point, someone wins, and then they do everything in their power to keep everyone else from being able to compete.
There is no invisible hand. Adam Smith mentioned it only once in the book, while he repeatedly noted situations where "natural liberty" does not work. Let banks charge much more than 5% interest, and they will lend to "prodigals and projectors," precipitating bubbles and crashes. Let "people of the same trade" meet, and their conversation turns to "some contrivance to raise prices." Let market competition continue to drive the division of labor, and it produces workers as "stupid and ignorant as it is possible for a human creature to become." (http://bit.ly/Ln1jis)
You need SOME regulation. There is certainly such a thing as too much regulation, and useless regulation, but you need SOME.
Oh, and that number of banks you're so fond of alluding to, it went down the most during a period of significant DEregulation. Few significant regulations have been put (back) into place yet. Little of Dodd Frank has taken effect, or even been defined yet. Food for thought. :)
> eventually purge bad investments
This is indeed true, but sometimes, for some markets, it takes too long and the price of the correction is too high.
If a company sold food that killed people, yes eventually people would stop buying their food and they would go bankrupt, but how many people would have to die before that happened? We, as sensible human beings, don't like that scenario, so we regulate food companies to try to prevent that from happening.
The price for letting the market purge a bad toaster-making company is a few bad toasters -- no big deal, there's really no need to prevent bad toasters.
The price for letting the market purge bad mega-banks is significant global economic turmoil -- so it probably would be better to prevent bad mega-banks in the first place...or ideally, to prevent mega-banks from existing at all.
The Housing Recovery: An Update [View article]
> (1911); television (1947); computer (1983)......(2019)?
>
> Each bust starts with interest rates held too low for too long and
> bubbles developing in the fabric of the economy and banker
> corruption and bank panics.
It's funny how the rest of us have to work so hard to develop these booms (actually creating value), but the bankers get rich off of it and destroy pretty much the same way every time (extracting value).
It's a waste of human potential, really.
The Housing Recovery: An Update [View article]
> economics for pol to be bought.
What are you even talking about? Please use real words.
The Housing Recovery: An Update [View article]
> getting crushed by the policies you are advocating for.
Uh...maybe, but I don't seem to recall advocating any particular policies lately, so could you be more specific?
I think you are pretending that I'm arguing something that I'm actually not. :)
The Housing Recovery: An Update [View article]
> came to power.
You're absolutely right. You can't blame the Jews (the government) for not standing up to Hitler (the banks). :)
The Housing Recovery: An Update [View article]
> that need a home.
More like there are more homes than people that can afford a home, even at these low prices.
More specifically, many people can't get mortgage, even with these low rates. Don't forget that there have been many millions of foreclosures over the last few years, there are many millions of foreclosures still in process, and there are many millions more to come.
All that said, simple supply and demand is indeed one major reason why prices have stayed so low. Even in the midst of the housing bust, the developers were still building tons of new homes in most regions. (And of course, it very depends on the region, even the neighborhood.)
The Housing Recovery: An Update [View article]
I know! I can't fathom why you're defending the banks! :)
The Housing Recovery: An Update [View article]
Not to get too off-topic (though you already have, so why not)...this is where some people get very, very confused.
The Barney Franks, Chris Dodds, and Phil Gramms that we all love to hate, made a little bit of easy money due to their policies.
The Loyd Blankfeins, Jamie Dimons, Ken Lewises, Dick Fulds, John Thains, and Angelo Mozilos that some people still obliviously defend, made a TON of easy money due to those policies.
Follow the money, and you'll very quickly find that you probably have your chicken and egg backwards. :)
The Housing Recovery: An Update [View article]
> otherwise qualify or not get the funds
Yes, and less than a third of sub-prime loans were made by banks that were subject to that requirement.
So don't totally blame the regulators/government (don't NOT blame them either), and and hold the banks responsible for their fair share in this mess. :)
The Housing Recovery: An Update [View article]
> "moving down" these days.
And yet they can't even "move down" because they're underwater. (Unless they foreclose, which is only easy to do in a handful of states.)
This is one of those metrics that is very meaningful as a drag on the economy and certainly on the housing market, and yet most people have become totally numb to it.
Everyone was freaking out when ~15% of borrowers were underwater, but by the time it got to over 30%, no one cared anymore. :)
Vanguard's Jack Bogle takes advantage of Facebook's (FB) plunge and the negative impact it's had on the psyche of the retail investor to hammer home the merits of index investing. Bogle says: "It all comes down to value and it all goes away from price, and avoiding IPO's and avoiding individual stocks is the best strategy for investors." (video) [View news story]
http://seekingalpha.co...
Mostly left unsaid about the JPMorgan trading loss is the most crucial point, writes Sallie Krawcheck: The size and risk of the trade was identified not by management, but by the press, and then it took weeks for JPM to put a number on the loss - and this from one of the savvier management teams. Regulators need to take note before heaping more complexity on an already incredibly complex business. [View news story]
As for complexity, I think the financial industry has shown time and time again that they will exponentially increase the complexity of their gambling instruments with or without regulation. Indeed, the 90s and 2000s were a time of substantial deregulation, and yet financial complexity only skyrocketed that much more. Can't blame the big bad regulators for that.
Portfolio Ideas That Could Generate Up To $1000 A Month [View article]
1) I'm curious that there is no assumed inflation? This would seem to be very important when discussing long-term investments. A $12K/year dividend income after 10 years sounds great, but with an assumed inflation rate of ~3% would be a little under $9K/year. After 20 years your ~$50K/year would be equivalent to ~$28K/year. And don't forget taxes too!!
2) 4% yield /and/ 6% dividend growth rate seems difficult to achieve in practice. In fact the stocks mentioned in this and the linked screener article all yield less than 4% at the times they were written. Perhaps 3% is a more realistic place to start? This, of course, affects the outcome significantly.
I would like to hear any thoughts on these matters -- thanks! :)
Vanguard's Jack Bogle takes advantage of Facebook's (FB) plunge and the negative impact it's had on the psyche of the retail investor to hammer home the merits of index investing. Bogle says: "It all comes down to value and it all goes away from price, and avoiding IPO's and avoiding individual stocks is the best strategy for investors." (video) [View news story]
Naturally, I do have some disagreements...
1. Depends on the index. Russell 2000 might be a bit too broad, but SPY? DIA? You'll still get a few dogs, but arguably you'd get more dogs in a hand-chosen portfolio, unless you are a better stock picker than 80% of professional fund managers...which I predict most people aren't.
2. Diversification? Enron was once one of the larger components of several indexes. As Buffett says, diversification is only needed when investors don't understand what they're doing...but again, most investors don't.
3. Does that back of the napkin calculation include dividends? I have not done the math, but I expect if you factor in dividends you would come out ahead since 2000, and certainly ahead over a longer period. 2000 is also kind of a loaded start date -- tech bubble and all that. :)
4. I can't argue much here as I don't have risk-weighed return numbers floating around in my head; but again I wonder if you're accounting for dividends?
5. This is an excellent argument /for/ index funds over mutual funds, but doesn't tell me why stock-picking is better -- thoughts?
6. False equivalency fallacy. :) With index funds, you have to manage is your high level asset allocation (stocks vs. bonds vs. emerging markets, etc), where as if you're picking stocks, you must do that AND micro-manage your equity allocation to individual stocks too, requiring a LOT more time/research to manage your money in total.
7. Index funds make no claim about optimization, that I am aware of. They follow the market or some segment thereof...and that's it. Yes, if something goes wrong it's never the fund owner's fault, but the same is true of any company you invest in -- it's never the CEO's fault that you made a bad investment either, unless he commits fraud...and even then he's never prosecuted. :)
8. Maybe, but again, index funds beat most of that smart money almost every year. (Unless you're talking hedge funds, with have access to instruments most retail investors don't, so I'd call out of bounds on that.)
My take is that, in general, sure, if you're a great investor, and you have the time and education, go ahead and pick your stocks. But most investors aren't great and don't have the time and education, so they are better off with index funds most of the time.
Thanks again, I always appreciate good replies! :)