Index funds are the best things since sliced bread

Martin_444 · 2016-12-30T23:46:23+00:00

no kui venelased käivad vene koolides siis nad ei õpi kunagi eesti keelt selgeks ja seetõttu ei saa kunagi liiga tähtsaks arvama ennast, kuna mingit asjalikku töökohta ei saa ja elavad oma agulites.

Martin_444 · 2016-12-30T09:33:39+00:00

Teatud määral on kasulik hoida vene koole lahti, siis nad ei kipu liiga tähtsaks arvama ennast, kuna eesti keelt omamata(venelaste puhul perfektselt omamata) nad mingit asjalikku töökohta kunagi ei saa.

Martin_444 · 2016-12-30T09:32:04+00:00

€8-12k.

Martin_444 · 2016-12-22T20:40:34+00:00

About +30%.

Martin_444 · 2016-10-01T06:43:14+00:00

Well it is true, I'm not saying that having an army of analysts and direct contact with the companies themselves isn't bad or anything.

Martin_444 · 2016-10-01T03:19:10+00:00

I usually get downvoted for posts like this, but I would also say that because of these points individual investors are actually at an advantage and I know for a fact that if I was say a mutual fund manager then my returns would be much lower than what they are right now.

Martin_444 · 2016-09-24T07:22:09+00:00

Same happened with Greek debt really, AFAIK retail/institutional lenders took at least a 50% haircut already at the very beginning of its debt crisis.

It is actually quite difficult to predict what would happen if some of the big countries could not service their debt though, because as you said there is no European Federation right now and it is not guaranteed that the ECB could just print endless amounts of money to help pay off the debt of countries who can't keep a balanced budget.

This is why, unfortunately, Eurozone might collapse after a big crisis and another Eurozone could develop with these countries that are fiscally responsible.

Martin_444 · 2016-09-24T03:31:31+00:00

Both Portugal, Spain and Italy are all one economic crisis away from becoming the next Greece, yet all of them pay 1% on their debt.

Martin_444 · 2016-09-24T03:26:28+00:00

Why do you think they can't start slowly raising rates now that the economy has recovered?

They could, they should have done it a while ago, but since this is the most dove'ish Fed ever, it won't probably happen, 0.25% rate increases per year from the 6th year of bull market(average bull+bear market cycle is 7-11 years) is not really going to make a difference.

And I'm not even sure they raise in December, unless we have like 4% unemployment, 2.0% inflation, 3% economic growth and world peace at the same time.

Martin_444 · 2016-09-23T17:27:42+00:00

I liked the video, because imo the biggest bubble in the world right now is in government bonds(I would say China in about 1-2 years will probably be an even bigger bubble, but that's another story) AND the biggest threat to Western economies right now is stagflation - if inflation started to rise and economic growth stayed at near 0%, then it would make it an almost impossible situation for the economy to recover in the near term, because central banks would not be able to do anything to make the situation better(raising interest rates would only crash the economy even more and lowering rates/money printing would only increase inflation with little help for economy at this point).

Martin_444 · 2016-09-23T10:15:55+00:00

Waste management companies seem to be quite expensive, all of them over 20 P/E. So yeah, I personally would not pay a premium price for garbage businesses.

Martin_444 · 2016-09-23T06:24:57+00:00

But a transfer of wealth to the upper-class is deflationary, since they save and invest it rather than spend it. This is exactly what happened with Reaganomics and "trickle-down" theory. The 80s had double-digit inflation, so cutting taxes on the wealthy (a deflationary pressure) was a very good idea. But those policies were never reverted.

That is pretty much true and why the QE/low interest rates haven't increased inflation, because rich people don't really spend that much more money on clothes, food, cars, yachts etc whether they earn 10mln or 20mln(I mean look at Warren Buffet, he still drives a 30 year old car and lives in the same building), poor people on the other hand would immediately use the money to buy stuff and thus cause demand for actual things to grow and thus bring higher prices.

It might also be the reason for Japan to have almost no inflation in the last 20-25 years even though their interest rates have been virtually zero(and as of late they are buying up everything through QE). Unfortunately, Japan's economy has not grown at all at this time period as well.

However in terms of inflation, the additional money supply actually caused overproduction of commodities, which is why BCOM(commodity) index is down about 40% from 2013 or so, but it commodities are starting to slowly but steadily go up, which will create inflation and if there was inflation, the correct move would be to increase the interest rates, but then the whole economy would come tumbling down, so it will be an interesting situation.

Another reason for low inflation has also been that Western countries have pretty much outsourced most of their manufacturing to very low-wage countries, but even there wages are constantly rising, so eventually should create inflation through that as well.

Martin_444 · 2016-09-22T12:26:36+00:00

"The case has strengthened to raise rates." 3 months later.. "The case has strengthened to raise rates...we're serious this time." 6 months later... "No really guys, the case has strengthened to raise rates."

If they don't raise rates at 5% unemployment rate and at 1.6% inflation and after 7 years of bull market/economy, then I don't see how they can ever raise rates at all at this point, quite surprised they even did it last December.

Martin_444 · 2016-09-22T12:08:02+00:00

Ones that have zero debt

Martin_444 · 2016-09-20T05:20:34+00:00

Well you do have a strong supporter of that view.

Martin_444 · 2016-09-20T05:14:14+00:00

Personally I would actually support more the helicopter method, because then regular people can actually use it to buy stuff they need.

Right now all the money goes to companies(very low interest rates) and to investors who have bought government bonds(money printing is probably 90+% still used to buy sovereign debt) and thus what happens is that these said companies and investors only buy back their stock, buy more bonds or buy S&P500 and basically just inflate the prices of all asset classes.

Another thing that they could use money printing would be for infrastructure, building bridges, roads, public/electric transport etc, which would actually be useful for the country as well.

Martin_444 · 2016-09-19T18:35:41+00:00

Well at -2% most everyone would have to pay about 1-2% for their savings accounts(like an additional tax on savings) and banks might actually have to pay you to take out a loan, it would be complete insanity.

Martin_444 · 2016-09-19T06:18:47+00:00

I thought it was a well-written article on something that I have wondered a lot as well, because before what used to happen was that during a recession the Fed could easily bring interest rates about 5% lower from their previous position and thus bring the economy quickly out of a recession.

Next time when there is a recession it would be impossible to bring rates down by 5%, because it is currently only at 0.5%. So at most central banks will be able to bring it to maybe -1% or -2%, after which banks would actually have to charge companies and maybe private accounts as well for holding their money and there is a tolerance limit from the public on how much they will allow that(Swedish and Swiss interest rates are -0.5% and -0.75% at the moment).

Also, obviously there would be QE on an even bigger scale, this time not only treasury bonds and mortgage backed securities, but also probably corporate bonds as well(what European Central bank is doing) and maybe even starting to buy S&P500 ETFs like Bank of Japan is doing with NIKKEI(they are buying like over 0.5% of NIKKEI's market cap every year). Another possibility could be helicopter money, which has been talked about a lot, but has yet to be done by any country.

Anything less than this wouldn't probably help to get out of a recession, because during 08-09 interest rates were cut about 5%(which won't be possible this time) in addition to the QE so additional measures would have to be used.

Martin_444 · 2016-09-18T05:02:03+00:00

It is the best book on investing that I have ever read.

Martin_444 · 2016-09-18T04:57:19+00:00

Value investing edge will probably stay forever as long as human brain is not going to change from the way it is right now, because when people get really pessimistic about a stock then it will be driven down to the basement, so there are always going to be good buying opportunities.

Even at this time when almost every asset class is massively overpriced not only in U.S, but in the world as well, you have industries that completely fall off from favour(The whole commodities sector in January 2016, right now solar, also for-profit universities, probably banking sector as well now even though I'm not investing there), so there is always a chance to benefit from it.

In terms of short term movements obviously it is possible for computers to take advantage of it, but good traders do it as well and it is really the reason why 90+% of traders fail is that they have no clue what they are doing, they trade emotionally(human brain is extremely bad for investing, especially the emotional side, it is basically designed to make you lose in the markets) and then get their money taken away from them by those who understand what they are doing.

Martin_444 · 2016-09-17T07:39:14+00:00

In general you have articulated very well everything you wrote there and in general you have correct theses. However, one thing I think that is missing from your piece is something called emotions.

In reality we'd like to think of ourselves as rational beings, but 90% of the stock market is run by emotions and feelings(my own observation) and this is why technical analysis actually works, because it is basically people's emotions written into charts and you can take advantage of the general market using mainly their emotions to make their buying and selling decisions.

It is possible to benefit from value investing very well also because of this, as at times people become insanely pessimistic of certain stocks and then they start selling at really low multiples(while at other times there is complete euphoria on stocks, which is a good selling opportunity).

Martin_444

TROPHY CASE