A weekly thread to discuss financial matters - from personal all the way up to global.
Ground Rules
- Remember that we're all just Internet randos. Don't bet your life savings on a hot tip from this thread.
- Keep culture war in the culture war thread. Yes, global events may impact our personal finances, but that does not mean we have to incessantly harp on culture war aspects here. If you are going to discuss it, please stick to the practical impacts of it on an individual level.
- Be kind. Remember that everyone here comes from different circumstances. We all have different resources available and different risk tolerances.
- Don't let the perfect be the enemy of the good. Better is better. Celebrate people when they take a step up and work to move their finances in the right direction. Don't flame out because they haven't followed what you consider the optimal path. Everybody has to start somewhere.
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Notes -
Last Thursday I finalized an almost total de-risking of the money I received / inherited when I was 18 from my parents. I had done similarly with my own modest investments / savings a few months ago (shortly before the Iran War) but resisted moving this, by far the actual majority of my wealth, out of US equities due to having to deal with a bunch of legal and other admin stuff I resisted doing for a decade because it seemed boring, tiresome and I’m low agency when I don’t immediately fear extreme loss.
Taking stock, in 12 years, more or less in diversified primarily-US and some global equities, with reinvestment, I made 400%. This is average for the last decade but an extremely outsized return compared to most periods in the history of capital markets. Few run-ups in mature, developed markets (and I am obviously counting from five years into the 2010-present cycle) have yielded better returns, ever.
I have my doubts about the memory melt up. Semiconductors are cyclical, investment is flooding in, prices will fall, and a full KOSPI and Micron collapse, which the current extreme yo-yoing portends, can cascade quickly into rapid deflation in parts of the component market for the data center bubble as the market re-assesses the real impact of extreme capacity increases coming online to produce chips (where the majority of the hundreds of billions raised has been pledged to hardware bought at bubble prices and tied to absurdly optimistic depreciation schedules), which is in turn tied into a huge amount of private equity and debt that was itself provided extensive back-leverage by banks and insurers (including those owned by some of the same PE firms).
The thing about really big bubbles, and I’m not in any sense calling the top, is that the final run-up is the true test of the investor - the last few months or years can see another doubling or more of asset prices because earnings boom (as they are now) and so markets boom, and so earnings boom etc in a very rapid quarterly feedback loop. Extreme pricing power is sustainable in some sectors, some of the time. Not in every sector, indefinitely. The S&P 500 might hit ten thousand points before a big crash. But I’m happy with my 400%, I’m a neurotic, and it seems to me that greed for / FOMO on money I don’t really need is needless risk at this stage. Still, it felt nice to write the above out.
I will re-assess early next year, I think.
Can't blame you, I'd do something similar if I could afford to.
What are you moving into? Global equities? Farmland? Gold seems to have acquired risk asset characteristics this past year.
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I read a biography of Isaac Newton a few years ago, and this is pretty much how he financially destroyed himself. He invested during a bubble, exited his positions at a tidy profit, then watched in envy as his friends with a higher risk tolerance made bank as prices kept going up. He eventually bought back in and things almost immediately collapsed. It really drove home the value of pre-committing to a strategy.
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