Stock Market thoughts (continued - no politics please!)

[Checkout_my_Six]

well....there is stealth QE....that's been adding liquidity into the market. That could continue....

 

[1RTK1]

The Laffer curve has long been debunked as outdated and largely irrelevant at this point in history. I teach economics in High School and I barely even mention it anymore because it’s really becoming less and less relavant to anything.

What’s lost in this entire debate is the stagnation of wages in this country since the 70’s and the relative lowering of purchasing power of the average middle class American. What has become a normal practice for most middle class Americans is to live with mountains of debt because they want to maintain at least the life style they grew up in. When you are making the same equivalent wage as your dad but prices have gone up sometimes 10x you have to borrow money to afford anything. What the Fed hides from us but is not hard to see is they know very well that with real interest rates, or higher rates more in line with historical norms, the entire middle class except for the highest earners in the middle class become wiped out. They won’t be able to repay car loans, mortgages, small business loans etc... the entire situation goes away but they just don’t have enough money. I would love to right a book one day called the 0 principle which the premise would be that we all start out with essentially 0 dollars when we are born and basically life is accumulating money to reach certain finish lines( major purchases.) The issue becomes if you can’t accumulate money fast enough and the finish lines keep getting further and further away, you won’t reach them unless you try and change how far away the finish line is( borrow money) or you accelerate your speed( invest in speculative instruments or obtain a better job which involves going to college and paying huge loans— essentially like running a race with a 10 pound weight on your legs.)

Now the real reason people should feel totally confident investing in the stock market is the Fed will completely continue this easing policy until they can’t do it any longer. That’s why yesterday’s panic rate cut was potentially catostophic because once they reach 0 they are pretty done- I listened to a CNBC interview last night with a former Fed govener who was asked what other tools might be more effective and she had basically no answer.

To me, the house of cards fall real quick and has huge ramifications if this propping of be middle class goes away.

The problem you mentioned in the second paragraph about people living outside there means is easily corrected, Don’t spend money you don’t have, work harder or get a better job/education. No one is entitled to a better or certain lifestyle, only the one they earn and can afford.
The country needs and some day will have a major reset. I think it might be painful in many ways but would be healthy. Government and people have been spending and living beyond their means.

 

[Chip Sylverne]

The problem you mentioned in the second paragraph about people living outside there means is easily corrected, Don’t spend money you don’t have, work harder or get a better job/education. No one is entitled to a better or certain lifestyle, only the one they earn and can afford.
The country needs and some day will have a major reset. I think it might be painful in many ways but would be healthy. Government and people have been spending and living beyond their means.

Here the problem with that. Says easy, does hard. Why? Because roughly 70% of people do not have a college degree, and the average income of those folks is $40k. If you want to start moving up the income ladder, you need college, which is going to cost you what, $100k these days? So if you come from one of those 70% of households, you need to sink yourself before you get started. Or try to live and raise a family on $40k.

I think at one time in the not so distant past your argument was a valid one, but no more. Barriers to upward mobility are becoming too high. What was once a class system is becoming a caste system.

 

[SoonerAviator]

Here the problem with that. Says easy, does hard. Why? Because roughly 70% of people do not have a college degree, and the average income of those folks is $40k. If you want to start moving up the income ladder, you need college, which is going to cost you what, $100k these days? So if you come from one of those 70% of households, you need to sink yourself before you get started. Or try to live and raise a family on $40k.

I think at one time in the not so distant past your argument was a valid one, but no more. Barriers to upward mobility are becoming too high. What was once a class system is becoming a caste system.

Horse manure. College is not the only way to move up the income ladder. Any of the skilled trades are just fine for moving up the income ladder and won't put you in debt for six-figures. Plenty of machinists making $60K+ in middle America. Community colleges and most in-state colleges won't put you in debt that far, either, as long as it's just tuition you are financing on a meaningful degree. Being complacent about working an entry-level job for $15/hr isn't going to get you up the income ladder. Average wage is a poor metric to use anyway, especially when cost of living is vastly different across the country. A two-income household making $80K/yr is perfectly doable in OK, but probably not in Seattle/San Francisco.

 

[Checkout_my_Six]

just so ya know....the guy knows a thing or two bout horse manure. lol

Yup....skilled trades are making +$100K/yr in my area. My 20 year old son got his CDL and is driving a trash truck making +$70K....and he's getting the last laugh. Dad wanted him to go to college.

 

[jspilot]

Here the problem with that. Says easy, does hard. Why? Because roughly 70% of people do not have a college degree, and the average income of those folks is $40k. If you want to start moving up the income ladder, you need college, which is going to cost you what, $100k these days? So if you come from one of those 70% of households, you need to sink yourself before you get started. Or try to live and raise a family on $40k.

I think at one time in the not so distant past your argument was a valid one, but no more. Barriers to upward mobility are becoming too high. What was once a class system is becoming a caste system.

Right and again if I had a magic wand and wanted to fix the country immediately I would actually move towards a more affordable college system but not by giving lower rates on student loans but capping tuition's to private universities with endowments above a mathematically calculated figure. It's totally against my fiscal conservative position but I cant justify allowing Harvard for example charge 50,000 bucks to go when they have an endowment of 40 BILLION dollars!!! Realistically that's more money than 50% of the nations in the world!!! Something has to give here and the idea that we continue to allow people to be financially crippled by going to universities who are sitting on enormous piles of cash and doing nothing but grow those piles of cash is simply not a pathway forward for anyone and certainly not making the populous more educated.

How does this tie to the stock market? Well essentially the stock market is increasingly only benefiting a very select few an incredible amount A Gallup pole in 2019 found that 55% of the country owns stocks. For those other 45% they have almost no financial gain from the meteoric rise of the stock market for the past 11 years( I say almost nothing because most retirements are tied somehow to investments even if the individual is not actively managing their money.) To me, that lack of investing is not a choice but a byproduct of a lack of money left over once all basic needs and loans/debt are paid for.

 

[jspilot]

Horse manure. College is not the only way to move up the income ladder. Any of the skilled trades are just fine for moving up the income ladder and won't put you in debt for six-figures. Plenty of machinists making $60K+ in middle America. Community colleges and most in-state colleges won't put you in debt that far, either, as long as it's just tuition you are financing on a meaningful degree. Being complacent about working an entry-level job for $15/hr isn't going to get you up the income ladder. Average wage is a poor metric to use anyway, especially when cost of living is vastly different across the country. A two-income household making $80K/yr is perfectly doable in OK, but probably not in Seattle/San Francisco.

Fair and I agree-- that's the wave the country is taking to get more into skilled labor. I think that's a result though of colleges becoming way too expensive and not a result of people actually going into these trades because they are "the path to economic prosperity." Eventually the tide will even out again and the reason I think these trades are paying well is because they need to attract people to them. Once the job pool gets flooded with electricians for example, electricians will not see a salary increase anymore. Remember that most of these trades used to have unions for this very reason and now union membership is historically low in America( another reason real wages have stagnated.)

Your argument about real wages being a poor judge is flawed because your premise that cost of living is different in various parts of the nation was also true in the 1970's, 80's,90's 2000's-- we need to use some metric and to me that's why purchasing power is a much better way of determining an issue because it accounts for fixed costs and therefore accounts for the cost of living differences depending on where one lives.

 

[1RTK1]

Horse manure. College is not the only way to move up the income ladder. Any of the skilled trades are just fine for moving up the income ladder and won't put you in debt for six-figures. Plenty of machinists making $60K+ in middle America. Community colleges and most in-state colleges won't put you in debt that far, either, as long as it's just tuition you are financing on a meaningful degree. Being complacent about working an entry-level job for $15/hr isn't going to get you up the income ladder. Average wage is a poor metric to use anyway, especially when cost of living is vastly different across the country. A two-income household making $80K/yr is perfectly doable in OK, but probably not in Seattle/San Francisco.

Bingo,
I pay my plumber $85/hr, my general contractor about the same, not to mention electricians, welders, and many other trades which are in high demand.
People then say there aren’t those jobs in my area and it’s too expensive to live where I am, so freaking move. Have some ambition and drive, if you are not happy with minimum wage then do something about it.
I worked 60+ hours a week for many years, some employees said oh you are rich, which I am not but much much better off then they. Do you think for one damn minute I could get any of them to work 11 hours a day six days a week and have the headaches I deal with? No F’ing way.

 

[denverpilot]

What has become a normal practice for most middle class Americans is to live with mountains of debt because they want to maintain at least the life style they grew up in. When you are making the same equivalent wage as your dad but prices have gone up sometimes 10x you have to borrow money to afford anything.

...

I would love to right a book one day called the 0 principle which the premise would be that we all start out with essentially 0 dollars when we are born and basically life is accumulating money to reach certain finish lines( major purchases.) The issue becomes if you can’t accumulate money fast enough and the finish lines keep getting further and further away, you won’t reach them unless you try and change how far away the finish line is( borrow money) or you accelerate your speed( invest in speculative instruments or obtain a better job which involves going to college and paying huge loans— essentially like running a race with a 10 pound weight on your legs.)

As to the first part above, they’re not maintaining their parent’s lifestyle. They’re WAY above it.

My parents generally went to work, ate at home except for special occasions, and didn’t have new cars in the driveway. The house wasn’t purchased new, and needed a lot of remodeling or updating that dad did on weekends. Or if it was purchased new, it was a tiny tract home with no yard and no amenities inside. It definitely didn’t have a “man cave” or a big screen TV or cable.

When it did have nice things it was because dad built or installed them over time. There weren’t two quads in the side driveway, or an RV or a boat. Camping was something you did in a tent out of the trunk of the sedan, bed of the old pickup truck, or in my dad’s case, a cargo van he slowly converted — complete with brown shag carpet and $150 (big money back then) stereo system he installed himself.

So I’d generally say the concept that today’s debt addicted people are following in mommy and daddy’s footsteps is broken. They’re following online consumer culture “influencers” who are sent crap to review for free, and celebrities.

Now fo the whole “the goal line getting further away” thing... first see above. You can’t live the lifestyles of today and pay down massive debt. I’ll agree. But loan makers even with government guarantees in housing anyway, won’t loan above a certain debt to income ratio and paying off a house quickly is still very achievable with that as a budgeted and serious priority. Not only did we do it the slow lazy way, but there’s all sorts of people joining that bandwagon now. The typical working middle class couple can usually clear all consumer and school debt and pay off a house inside of what would normally be a 15 year mortgage. Thus, the house is usually about seven years of that.

Finally education prices and loans. Allowing an 18 year old to sign for tens of thousands of dollars with nothing but a signature is not just stupid, it’s retarded. In no other endeavors would we allow that as a society. Say one wanted to go into business instead and had a family trade skill learned from when they still were in diapers. They’d be laughed out of the bank asking for a business loan... that they actually had the skill to pay back!

So called scholars became predatory against kids and nobody says boo. Sorry, a semester of Algebra or Calculus in a lecture hall rammed full of 150 or more students isn’t worth $2000. It just isn’t.

Smart parents and kids are doing the pre-reqs at community colleges and choosing schools based on price. Especially for jobs where the degree gets you in the door once and nobody ever cares or looks at it again. Sorry but most of us aren’t going to Harvard and using our family connections to get CxO jobs.

So basically, I’m saying the goal posts moved a bit further away but not as far as many pretend — in order to maintain a much higher lifestyle than they grew up with. When I was in college and after I had to take three jobs to have the cash to barely learn to fly. That hasn’t changed.

My first condo was roughly the same debt to income ratio as what someone buying today would need and they’d be about as broke as we were. We shouldn’t have bought it at that point but “no money down” made it possible.

Now there HAVE been folks delayed on their start on life by recessions and such. That hurts but it’s not uncommon in our society. Young IT folks looking for jobs in the field right after the dot bomb had about a five year stint where they had to do something else. Pilots in the early 90s couldn’t find easy flight time or students if they were instructor rated. But they eventually got moving again.

But I’m not convinced the goal posts moved more than a couple of years out for the driven folk, on average. Other than education loans, the rest are still solidly capped by income to debt ratios and with the advent of the almighty credit “score” (what brilliant marketing by the way, make going into debt a GAME!) and centralized repayment history.

My folks were as broke as I was at the same ages, and loans were harder to get, so they spent less and did their own trades type work. And some kids watched and learned and also do it today, and buckle down and pay off the house they said they wanted to OWN.

Because somewhere we lost the idea that you don’t own anything until the title is in your hand. So if you want to OWN it, get serious and cut the budget to the bone and OWN it. It’ll take about seven years unless you overdid it in the having kids dept and then about ten.

Speaking of budgeting — there’s various estimates floating and people lie — but most numbers say something pushing 80% have never worked from a written budget. It’s simply not possible to hit a major financial goal that takes years that way, in my opinion. Or the success rate is going to be incredibly low. Take your pick. If you can’t see, smell, taste, and feel that house payoff coming seven years out... you’re not going to get there.

Heck people are shocked when I say we bought tires for the car and they were $1000+.

“Oh that hurts!”
“Not really. We saved $27 a month for three years and I managed to get five out of them with proper rotation and an alignment. The money has been there to buy them for three years and I got to use that $27 elsewhere in the budget for two years. I like this brand.”

Like any other skill or goal it takes practice and mistakes. I certainly once was on the “will this week’s paycheck pay this week’s bills” train once, too. The process of extending that view to a month, many months, a year, a few years... took time and raising income with different skills unrelated to the budgeting.

Anywhoo, that’s how I see it. Lifestyle is way higher than our parents for about the same income levels as a ratio to debt.

My dad’s self converted ski van is a long long way from the car I just bought that essentially drives itself via cameras!

And dad had an 18% balloon on his first house on his VA loan. Imagine the wailing and gnashing of teeth about “affordable housing” if banks didn’t have the guarantees they have today. Or the PMI that no longer can be removed at 80% LTV.

He got a new mortgage and avoided the balloon and it all still worked out the same. Seven to ten years to pay it off if you focused on it. He didn’t on that house but did on the next. And then drove some horrid sedan bought used from Chrysler for a decade to do it. He also refused to pay for bad grades in school and told me I’d better go find a job if I didn’t want to be there.

In retrospect, the best thing that ever happened to me. I got mad. “I’ll show him!” I did. Huh. Look at that. He knew his kid.

 

[Half Fast]

How does this tie to the stock market? Well essentially the stock market is increasingly only benefiting a very select few an incredible amount A Gallup pole in 2019 found that 55% of the country owns stocks. For those other 45% they have almost no financial gain from the meteoric rise of the stock market for the past 11 years( I say almost nothing because most retirements are tied somehow to investments even if the individual is not actively managing their money.) To me, that lack of investing is not a choice but a byproduct of a lack of money left over once all basic needs and loans/debt are paid for.

Is 55% of the country now a "very select few?" How much of that remaining 45% are kids and young adults?

Just my humble opinion, but I suspect that the focus on income disparity is missing the boat. Even if income disparity has increased, I contend that lifestyle disparity has decreased. Even the lower economic tiers in the US are able to live in comfortable homes, have a couple of vehicles, have plenty of food on the table, own computers and cell phones, etc. I just don't see that we have a miserable, hopeless, distraught middle class.

A rising tide truly does raise all ships. Does it matter that much if someone else has a bigger boat than you, if your own boat is safe and comfortable?

 

[jspilot]

Is 55% of the country now a "very select few?" How much of that remaining 45% are kids and young adults?

Just my humble opinion, but I suspect that the focus on income disparity is missing the boat. Even if income disparity has increased, I contend that lifestyle disparity has decreased. Even the lower economic tiers in the US are able to live in comfortable homes, have a couple of vehicles, have plenty of food on the table, own computers and cell phones, etc. I just don't see that we have a miserable, hopeless, distraught middle class.

A rising tide truly does raise all ships. Does it matter that much if someone else has a bigger boat than you, if your own boat is safe and comfortable?

I wrote that clumsily- What I meant by very few is that it is 100% unquestionable that the highest earners who invest the most have increased their wealth more rapidly. That's what I meant by select few-- clearly 45% is not select few.

 

[jspilot]

As to the first part above, they’re not maintaining their parent’s lifestyle. They’re WAY above it.

My parents generally went to work, ate at home except for special occasions, and didn’t have new cars in the driveway. The house wasn’t purchased new, and needed a lot of remodeling or updating that dad did on weekends. Or if it was purchased new, it was a tiny tract home with no yard and no amenities inside. It definitely didn’t have a “man cave” or a big screen TV or cable.

When it did have nice things it was because dad built or installed them over time. There weren’t two quads in the side driveway, or an RV or a boat. Camping was something you did in a tent out of the trunk of the sedan, bed of the old pickup truck, or in my dad’s case, a cargo van he slowly converted — complete with brown shag carpet and $150 (big money back then) stereo system he installed himself.

So I’d generally say the concept that today’s debt addicted people are following in mommy and daddy’s footsteps is broken. They’re following online consumer culture “influencers” who are sent crap to review for free, and celebrities.

Now fo the whole “the goal line getting further away” thing... first see above. You can’t live the lifestyles of today and pay down massive debt. I’ll agree. But loan makers even with government guarantees in housing anyway, won’t loan above a certain debt to income ratio and paying off a house quickly is still very achievable with that as a budgeted and serious priority. Not only did we do it the slow lazy way, but there’s all sorts of people joining that bandwagon now. The typical working middle class couple can usually clear all consumer and school debt and pay off a house inside of what would normally be a 15 year mortgage. Thus, the house is usually about seven years of that.

Finally education prices and loans. Allowing an 18 year old to sign for tens of thousands of dollars with nothing but a signature is not just stupid, it’s retarded. In no other endeavors would we allow that as a society. Say one wanted to go into business instead and had a family trade skill learned from when they still were in diapers. They’d be laughed out of the bank asking for a business loan... that they actually had the skill to pay back!

So called scholars became predatory against kids and nobody says boo. Sorry, a semester of Algebra or Calculus in a lecture hall rammed full of 150 or more students isn’t worth $2000. It just isn’t.

Smart parents and kids are doing the pre-reqs at community colleges and choosing schools based on price. Especially for jobs where the degree gets you in the door once and nobody ever cares or looks at it again. Sorry but most of us aren’t going to Harvard and using our family connections to get CxO jobs.

So basically, I’m saying the goal posts moved a bit further away but not as far as many pretend — in order to maintain a much higher lifestyle than they grew up with. When I was in college and after I had to take three jobs to have the cash to barely learn to fly. That hasn’t changed.

My first condo was roughly the same debt to income ratio as what someone buying today would need and they’d be about as broke as we were. We shouldn’t have bought it at that point but “no money down” made it possible.

Now there HAVE been folks delayed on their start on life by recessions and such. That hurts but it’s not uncommon in our society. Young IT folks looking for jobs in the field right after the dot bomb had about a five year stint where they had to do something else. Pilots in the early 90s couldn’t find easy flight time or students if they were instructor rated. But they eventually got moving again.

But I’m not convinced the goal posts moved more than a couple of years out for the driven folk, on average. Other than education loans, the rest are still solidly capped by income to debt ratios and with the advent of the almighty credit “score” (what brilliant marketing by the way, make going into debt a GAME!) and centralized repayment history.

My folks were as broke as I was at the same ages, and loans were harder to get, so they spent less and did their own trades type work. And some kids watched and learned and also do it today, and buckle down and pay off the house they said they wanted to OWN.

Because somewhere we lost the idea that you don’t own anything until the title is in your hand. So if you want to OWN it, get serious and cut the budget to the bone and OWN it. It’ll take about seven years unless you overdid it in the having kids dept and then about ten.

Speaking of budgeting — there’s various estimates floating and people lie — but most numbers say something pushing 80% have never worked from a written budget. It’s simply not possible to hit a major financial goal that takes years that way, in my opinion. Or the success rate is going to be incredibly low. Take your pick. If you can’t see, smell, taste, and feel that house payoff coming seven years out... you’re not going to get there.

Heck people are shocked when I say we bought tires for the car and they were $1000+.

“Oh that hurts!”
“Not really. We saved $27 a month for three years and I managed to get five out of them with proper rotation and an alignment. The money has been there to buy them for three years and I got to use that $27 elsewhere in the budget for two years. I like this brand.”

Like any other skill or goal it takes practice and mistakes. I certainly once was on the “will this week’s paycheck pay this week’s bills” train once, too. The process of extending that view to a month, many months, a year, a few years... took time and raising income with different skills unrelated to the budgeting.

Anywhoo, that’s how I see it. Lifestyle is way higher than our parents for about the same income levels as a ratio to debt.

My dad’s self converted ski van is a long long way from the car I just bought that essentially drives itself via cameras!

And dad had an 18% balloon on his first house on his VA loan. Imagine the wailing and gnashing of teeth about “affordable housing” if banks didn’t have the guarantees they have today. Or the PMI that no longer can be removed at 80% LTV.

He got a new mortgage and avoided the balloon and it all still worked out the same. Seven to ten years to pay it off if you focused on it. He didn’t on that house but did on the next. And then drove some horrid sedan bought used from Chrysler for a decade to do it. He also refused to pay for bad grades in school and told me I’d better go find a job if I didn’t want to be there.

In retrospect, the best thing that ever happened to me. I got mad. “I’ll show him!” I did. Huh. Look at that. He knew his kid.

This is a straight forward take from a personal perspective which I respect but statistics show otherwise and economists and policy makers don't look for the outliers they look for trends and norms. It is without doubt true that personal debt has reached and household debt has reached all time highs.

I'll point you to this quote that appears in the article below for why we really have to address student loans-

"New York Fed economists said the rising delinquencies among borrowers in their 20s and 30s could be related to high levels of student loan debt, which could make it difficult for consumers to afford their bills." Notice how the word "bills" is the denominator-- not luxury car, luxury boat etc... I think that's the important part of of point.

https://www.reuters.com/article/us-...trillion-and-reaches-new-record-idUSKBN20521Z

I agree that going into massive debt is a sign of poor financial literacy( another major problem with our nation is we require students to take multiple absurdly not usable classes but most High Schools allow students to graduate with 0 or 1 economics classes) but the typical American is going into more debt and mostly that's because they want what they want and can't afford it without borrowing. The finish line analogy I used works well because each individual has their own finish line( Like you I bought an affordable Condo as my home and not a hugely unaffordable home) but if your finish line is the huge home, or even any home in some parts of the nation, it is clear that the easiest and most commonly taken path is to go into debt. Whether that's to maintain their status in life or advance their own belief that they are "wealthy" is secondary to the point that it is occurring-- and the outcome of massive debt is not good for the stock market or the future of the nation.

 

[Half Fast]

I wrote that clumsily- What I meant by very few is that it is 100% unquestionable that the highest earners who invest the most have increased their wealth more rapidly. That's what I meant by select few-- clearly 45% is not select few.

That seems mathematically obvious, no? If you don't bet you can't win, and winners who bet the most win the most. I'm not sure what your point is; probably I'm missing something. If a stock goes up 20%, investors see a 20% increase in their wealth whether they own 1 share, 100 shares, or 100,000 shares.

 

[Half Fast]

... but the typical American is going into more debt and mostly that's because they want what they want and can't afford it without borrowing.

I agree that, much like the lottery, the financial system punishes the mathematically impaired and preys on covetousness. I'm not sure that's altogether a bad thing.

...Whether that's to maintain their status in life or advance their own belief that they are "wealthy" is secondary to the point that it is occurring-- and the outcome of massive debt is not good for the stock market or the future of the nation.

Here I disagree. It's not secondary, it's primary. If there's really a problem, it won't be solved by focusing on the effect while ignoring the cause.

 

[jspilot]

I agree that, much like the lottery, the financial system punishes the mathematically impaired and preys on covetousness. I'm not sure that's altogether a bad thing.




Here I disagree. It's not secondary, it's primary. If there's really a problem, it won't be solved by focusing on the effect while ignoring the cause.

But to focus on the cause would be something not "fixable" by policy or economic tools available to policy makers. You can't change human behavior through government policy-- certainly not when it comes to spending. Countries that do tend to fall into "socialism traps" and that's not really what I think anyone wants. If people are going into massive debt to afford items because of their desire to have them or instant gratification-- both absolutely factors and points we agree are huge factors, we can't just-- as a nation-- point our collective fingers at these people and lecture at them about financial responsibility-- it still leaves a lot of Americans in mountains of debt. Here though, I think the main issue is a total lack of financial literacy and most often as the saying goes, "experience often comes after it is needed."

 

[jspilot]

That seems mathematically obvious, no? If you don't bet you can't win, and winners who bet the most win the most. I'm not sure what your point is; probably I'm missing something. If a stock goes up 20%, investors see a 20% increase in their wealth whether they own 1 share, 100 shares, or 100,000 shares.

except you are forgetting the amount of money put into the market is much higher the wealthier you are and the compound nature of investing is wealth builds on wealth. Think of how dividends work as the most obvious way to think about how it works.

 

[Half Fast]

Here though, I think the main issue is a total lack of financial literacy and most often as the saying goes, "experience often comes after it is needed."

YES! So what we can do is address financial dumbassery, er, I mean illiteracy.

 

[Half Fast]

except you are forgetting the amount of money put into the market is much higher the wealthier you are and the compound nature of investing is wealth builds on wealth. Think of how dividends work as the most obvious way to think about how it works.

Sure, of course we can let a bet ride. Compounding works as well on $1 as it does on $1M. Still somehow not getting your point. If the rich get richer, that doesn't prevent the poor from becoming rich, too.

Very few have to be stuck in abject poverty if they're willing to do something about it. I was born po, but through many years of struggle and hard work I've elevated myself to being merely poor, and I'm quite proud of it.

 

[eman1200]

market is rockin' today. I'll bet I made tens if not dozens of dollars today!

 

[Half Fast]

market is rockin' today. I'll bet I made tens if not dozens of dollars today!

Cash those chips quick! It'll likely tank again tomorrow!

 

[Chip Sylverne]

just so ya know....the guy knows a thing or two bout horse manure. lol

Yup....skilled trades are making +$100K/yr in my area. My 20 year old son got his CDL and is driving a trash truck making +$70K....and he's getting the last laugh. Dad wanted him to go to college.

That's all terrific, and I'm glad the kid is doing well. But that's not where the bulk of new jobs are coming from. The bulk of new jobs are coming from health care, government and business services. Not manufacturing that require skilled trades. Look, I agree welders can do very well, but the statistics show it's darn tough to break the $70k mark without a 4 yr degree.

 

[Checkout_my_Six]

electricians, plumbers, and HVAC....also make six figures.

 

[jspilot]

Sure, of course we can let a bet ride. Compounding works as well on $1 as it does on $1M. Still somehow not getting your point. If the rich get richer, that doesn't prevent the poor from becoming rich, too.

Very few have to be stuck in abject poverty if they're willing to do something about it. I was born po, but through many years of struggle and hard work I've elevated myself to being merely poor, and I'm quite proud of it.

Totally agree that working from nothing to something is doable and my point is not that only the wealthy benefit from compound interest— we all do. It’s not an all or nothing game here as some people in the media want us to believe in terms of wealth distribution.

Compound interest can favor the rich because most stocks/investments pay dividends which can be used to reinvest in the stock and therefore if you repurchase the stock with those dividends you get more shares quicker— so your example of 1 dollar earning the same interest is true but it ignores the idea that reinvesting using compound interest benefits wealthy people more in so much as they likely will have more shares of individual stocks and thus benefit from the upward trend of stocks, especially in the past 11 yearsz. You may also be ignoring the idea that wealthy people can invest larger amounts of money earlier in their adult lives and therefore have longer periods for that money to grow and the compounding nature of the growth of the money means it has more time to grow larger and larger. Here’s an article that I think explains this idea pretty well.

https://www.google.com/amp/s/www.cn...hart-changed-the-way-i-think-about-money.html

 

[Half Fast]

Totally agree that working from nothing to something is doable and my point is not that only the wealthy benefit from compound interest— we all do. It’s not an all or nothing game here as some people in the media want us to believe in terms of wealth distribution.

Compound interest can favor the rich because most stocks/investments pay dividends which can be used to reinvest in the stock and therefore if you repurchase the stock with those dividends you get more shares quicker— so your example of 1 dollar earning the same interest is true but it ignores the idea that reinvesting using compound interest benefits wealthy people more in so much as they likely will have more shares of individual stocks and thus benefit from the upward trend of stocks, especially in the past 11 yearsz. You may also be ignoring the idea that wealthy people can invest larger amounts of money earlier in their adult lives and therefore have longer periods for that money to grow and the compounding nature of the growth of the money means it has more time to grow larger and larger. Here’s an article that I think explains this idea pretty well.

https://www.google.com/amp/s/www.cn...hart-changed-the-way-i-think-about-money.html

All true except "wealthy" and "early in their adult lives" very seldom go together. Most people accumulate their wealth over many years. Even inherited wealth rarely happens while the beneficiary is young. I'm 58; I doubt that I'll inherit from my parents for another 10 years at least (and then it won't be very much).

I'm not sure "most" stocks pay dividends, but even so nothing prevents the less-wealthy shareholder from reinvesting, too.

 

[jspilot]

All true except "wealthy" and "early in their adult lives" very seldom go together. Most people accumulate their wealth over many years. Even inherited wealth rarely happens while the beneficiary is young. I'm 58; I doubt that I'll inherit from my parents for another 10 years at least (and then it won't be very much).

I'm not sure "most" stocks pay dividends, but even so nothing prevents the less-wealthy shareholder from reinvesting, too.

Yup all fair and accurate. When I say wealthy I’m talking generational wealth so the top of the top 1%. I totally agree that it’s a problem when poorer people don’t know enough about investing or believe stocks are only for wealthy people. The stock market is the single greatest wealth generator we have and even small amounts invested wisely can grow quicker than keeping your money in your wallet.

Again I wrote clumsily— what I meant in my original post was “ most stocks that do pay dividends.” Sorry for the confusion. Interestingly enough— 53% of the stocks listed for investment do pay dividends( admittedly had to look that up) which is pretty interesting.

 

[Half Fast]

Yup all fair and pretty accurate. When I say wealthy I’m talking generational wealth so the top of the top 1%. I totally agree that it’s a problem when poorer people don’t know enough about investing or believe stocks are only for wealthy people. The stock market is the single greatest wealth generator we have!

Again I wrote clumsily— what I meant in my original post was “ most stocks that do pay dividends.” Sorry for the confusion. Interestingly enough— 53% of the stocks listed for investment do pay dividends( admittedly had to look that up) which is pretty interesting.

Frankly, large-scale generational wealth is so rare that I don't think it's even worth much consideration. This:

...it’s a problem when poorer people don’t know enough about investing or believe stocks are only for wealthy people.​

is true and perhaps the heart of the problem, but I'm afraid it's often willful ignorance and that may not be fixable.

Some years ago, my then bro-in-law was ranting about the huge profits the oil companies were making (and they weren't huge percentages anyway). I said, "So if you think they're raking in such obscene profits, why don't you buy some stock and join in the haul?" He looked at me like I was from Mars.

Honestly, I think this stuff is drilled in from childhood. My son, now 25, started maxing out his contribution to a Roth IRA as soon as he was eligible. He detests debt, and he lives well within his means. If he continues the path he's on, he'll be "wealthy" by middle age or sooner, just by not doing stupid stuff. But that's how he was raised.

 

[1RTK1]

But to focus on the cause would be something not "fixable" by policy or economic tools available to policy makers. You can't change human behavior through government policy-- certainly not when it comes to spending. Countries that do tend to fall into "socialism traps" and that's not really what I think anyone wants. If people are going into massive debt to afford items because of their desire to have them or instant gratification-- both absolutely factors and points we agree are huge factors, we can't just-- as a nation-- point our collective fingers at these people and lecture at them about financial responsibility-- it still leaves a lot of Americans in mountains of debt. Here though, I think the main issue is a total lack of financial literacy and most often as the saying goes, "experience often comes after it is needed."

I agree government is not the one to “apply a fix”, although banks and other institutions should not be loaning money to people that can’t handle the debt.
I also agree that high school students should have more classes on economics, I fortunately learned from my parents

what’s the old saying “shirt sleeves to shirt sleeves in 3 generations”

 

[Chip Sylverne]

electricians, plumbers, and HVAC....also make six figures.

I think your dreaming. Journeymen make in the 25-35 an hour range around here.

 

[wsuffa]

I think your dreaming. Journeymen make in the 25-35 an hour range around here.

Depends on where. Around here, 6-figures is pretty common.

Heck, admin assistants can make upwards of $35/hour around here.

 

[DaleB]

As to the first part above, they’re not maintaining their parent’s lifestyle. They’re WAY above it.

Partly true, partly not. The rest of your novella is fairly accurate. It is my humble opinion that we're (that's "we" in general) the victims of a very, very successful evolution of the sales and marketing to include a whole lot of new techniques and new media. When I was growing up, everyone -- even us kids -- knew that advertising was BS, and had no real purpose other than to talk us into buying things. Now we've had 40-50 years of multi-pronged campaigns to ingrain into our brains that we need to have these things.

In the 70s, and 80s, what was the average family spending on electronic communications? TV, music, phone, etc.? A little bit for the single telephone line in the house -- period. Now figure out your total spend on Internet access, cell service, the current generation of "landline" replacement (if you still have one), satellite and/or cable TV, streaming services for video and audio, satellite radio (for all the cars, of course!). All of it. We're at a few grand a year, and we're cheap. I know our neighbors are spending at least 300-400 per month on all this stuff, maybe more. Yes, we're absolutely getting some benefit from some of it, but it's mostly just a money suck. Once you add up that number and it sinks in, remember all the "membership" fees you're paying for various web sites and all the little add-ons you forgot.

Our youngest and his wife have foregone most of that -- and have just paid off every cent of debt they had, excluding their mortgage (and it looks like they're about to refinance that at under 3%).

I wrote that clumsily- What I meant by very few is that it is 100% unquestionable that the highest earners who invest the most have increased their wealth more rapidly. That's what I meant by select few-- clearly 45% is not select few.

Well, yeah. It's that compounding thing. This is not unfairness, it's simple math. Investing and building wealth takes a lot of time and a whole lot of patience. The growth is nearly imperceptible at first, but as time goes on it accelerates. When I turned 39, we had a mountain of high interest debt, no excess cash, and zero savings of any sort (including retirement accounts -- not one penny). Finally started saving in a 401(k), thank you God for tanking my company so I had to get a real job. It took years before it was anything more than a sad, sad joke. Now I'm trying to figure out of I can safely retire a couple years early without having to cut back or put off vacations. But yeah, we spent a lot of years in that "stock market means squat to us because we have nothing" demographic.

Of course we know people who are our age and still probably have nothing, or close to it, for retirement and will have a very rude shock when they need to figure out how to live on Social Security checks. It sucks. If only we (again, that "we" in general) put as much effort into financial education, or really anything else, as we do into marketing and advertising.

 

[Checkout_my_Six]

Depends on where. Around here, 6-figures is pretty common.

Heck, admin assistants can make upwards of $35/hour around here.

they must not pay much in Mt. Airy.....

 

[geezer]

jspilot said:

Compound interest can favor the rich because most stocks/investments pay dividends which can be used to reinvest in the stock and therefore if you repurchase the stock with those dividends you get more shares quicker— so your example of 1 dollar earning the same interest is true but it ignores the idea that reinvesting using compound interest benefits wealthy people more in so much as they likely will have more shares of individual stocks and thus benefit from the upward trend of stocks, especially in the past 11 yearsz. You may also be ignoring the idea that wealthy people can invest larger amounts of money earlier in their adult lives and therefore have longer periods for that money to grow and the compounding nature of the growth of the money means it has more time to grow larger and larger. Here’s an article that I think explains this idea pretty well.

In 1947 my Dad drove a 1936 Buick, obtained used, and lived in a 4 bedroom house with his parents, a wife, and 3 kids. 27 years of mortgage remaining on the house, car free and clear. We had one radio, 2 fans, and central heat. We lived in a nice neighborhood, and Dad was a very high paid electrician, specializing in fully automated production lines, installation and maintenance. We had a home made 4X8 trailer for camping trips.

Today, I have 2 cars, and a pickup truck, one bought new, two boats on trailers, 2 large flat screen TV's, 3 bedroom air conditioned house with no relatives living with us, and it is paid for. I have internet, cable TV, and 4 computers. My retirement is from a defined benefit plan, with a stock portfolio which provides the money it pays. That stock is part of the huge portion of the total stock market that is not owned by "people", but by "Rich Trusts". This is similar to most retirement plans except Government ones. The Federal Government has made the regulations so expensive for cost of living increases to be included in such plans that they seldom exist outside Government plans. Clearly, I have a much better "Middle Class Life" than my Father.

Proposals to tax those "Trusts full of stock" scare me, as they would make my retirement plan insolvent in a relatively short time. As it is, I receive the same number of depreciated dollars now as I did 20 years ago. Fortunately, my Social Security is inflation indexed, and will soon be larger than my pension. The SS is more than it might have been for others, as I had W2 income from 16 years old, to 70. inconveniently, my Dad died while I was a teenager, so with a single, working Mom, if I wanted to buy anything, I earned money first, then bought it. An exception was my bike, at 14, I borrowed the money for that from my manager and paid it off from my paper route earnings.

As I look around me and see what my neighbors consider "necessities" and go into debt to buy, I am appalled. 30% of the houses on my street have changed hands in bankruptcy sales in the last ten years. One neighbor skated around eviction several times, but drove a Mercedes sport coupe, then a Lexus, and now, a high end SUV. All their cars cost more than my most expensive one.

By the standards of some, half of my neighbors are on the edge of poverty, with no investments or money in the bank, plus heavy debts, but they drive late model cars and SUV's. I have only one neighbor who might own any stocks or bonds ( I do know all my neighbors, and actively approach them and get to know them as they move in). As a Boeing shareholder, I have taken a beating in the market in the past year, but hey, if you are a rich stockholder, you can afford it!

 

[Chip Sylverne]

they must not pay much in Mt. Airy.....

Then somebody oughta tell the folks looking to hire in Frederick, because the majority of the journeyman HVAC and plumber jobs advertised there pay no where near six figures. But what do I know, I do the work myself anyway.

 

[Checkout_my_Six]

Then somebody oughta tell the folks looking to hire in Frederick, because the majority of the journeyman HVAC and plumber jobs advertised there pay no where near six figures. But what do I know, I do the work myself anyway.

well....they don't start there....but, in a few years they're there.


btw....you should give yourself a raise.

 

[denverpilot]

Now we've had 40-50 years of multi-pronged campaigns to ingrain into our brains that we need to have these things.

But we didn’t get stupider and fall for it, right?

I mean how could we with so many more people enslaved to debt from their “higher” educations?

 

[denverpilot]

Then somebody oughta tell the folks looking to hire in Frederick, because the majority of the journeyman HVAC and plumber jobs advertised there pay no where near six figures. But what do I know, I do the work myself anyway.

It’s way higher here than there also. Boom building town.

There’s a reason the word journey is in it, right?

 

[denverpilot]

This is a straight forward take from a personal perspective which I respect but statistics show otherwise and economists and policy makers don't look for the outliers they look for trends and norms. It is without doubt true that personal debt has reached and household debt has reached all time highs.

Not sure which part you think was an outlier. Being broke, working my ass off, or everyone in my neighborhood doing the same?

Which statistics and what outlier?

The article basically describes ripping off kids, which is a despicable behavior of quite a large number of adults in academia.

 

[jspilot]

I agree government is not the one to “apply a fix”, although banks and other institutions should not be loaning money to people that can’t handle the debt.
I also agree that high school students should have more classes on economics, I fortunately learned from my parents

what’s the old saying “shirt sleeves to shirt sleeves in 3 generations”

Right I mean I see it every day I teach my high school economics class— these seniors in High School know nothing about even basic fundamentals and it’s terrifies me about what this means in the long term. I know historically schools have relied on parents to teach kids about money and that’s all well and good but no offense to the physics experts out there but everyone of us needs to how to make smart investing decisions way more than how to calculate the relative velocity of a falling object.

 

[jspilot]

Not sure which part you think was an outlier. Being broke, working my ass off, or everyone in my neighborhood doing the same?

Which statistics and what outlier?

The article basically describes ripping off kids, which is a despicable behavior of quite a large number of adults in academia.

I think my point is being misunderstood and I’ll take the blame for that. I’m not suggesting we need o redistribute wealth or that working from nothing to something and then something to a lot of things is not possible. It is— but averages are calculated for a reason and mathematically speaking you obviously need to have people above the average and below the average in order to reach an average. My point is, if the average US household has over 8000 dollars in credit card debt and household debt of 137,000 dollars( both numbers looked up) we can’t just imagine that “because I did it the right way everyone should do it that way.” That’s short sighted and a bit self indulging and it’s certainly not the way economic policy should be driven. This coming from someone who “did it the right way” and pays off my credit car debt each month, has an affordable mortgage, pays a low student loan and owns my car. I wish everyone in America achieved economic goals the way we did it but that’s just not reality.

So what does this mean for the economy and the stock market. Well to me, as I tried to explain earlier, the only possible way for the Fed to prop up the average American’s wealth is to create ways to allow for the borrowing of money at incredibly low rates so as to allow Americans to make major life purchases for next to nothing. Real interest rates would crush the average American and bring massive consequences to everyone’s pocket. That’s a harsh punishment for those who did “not do it right” and would hurt those of us that “did it right.”

We’ve had accommodating economic policy in this country for going on 12 years now and there is no going back. The absolutely terrifying proposition is what happens when money becomes free to borrow and banks can’t remain open because they can’t make money. We are not there yet but it could be not as far off as we think.

 

[jspilot]

Partly true, partly not. The rest of your novella is fairly accurate. It is my humble opinion that we're (that's "we" in general) the victims of a very, very successful evolution of the sales and marketing to include a whole lot of new techniques and new media. When I was growing up, everyone -- even us kids -- knew that advertising was BS, and had no real purpose other than to talk us into buying things. Now we've had 40-50 years of multi-pronged campaigns to ingrain into our brains that we need to have these things.

In the 70s, and 80s, what was the average family spending on electronic communications? TV, music, phone, etc.? A little bit for the single telephone line in the house -- period. Now figure out your total spend on Internet access, cell service, the current generation of "landline" replacement (if you still have one), satellite and/or cable TV, streaming services for video and audio, satellite radio (for all the cars, of course!). All of it. We're at a few grand a year, and we're cheap. I know our neighbors are spending at least 300-400 per month on all this stuff, maybe more. Yes, we're absolutely getting some benefit from some of it, but it's mostly just a money suck. Once you add up that number and it sinks in, remember all the "membership" fees you're paying for various web sites and all the little add-ons you forgot.

Our youngest and his wife have foregone most of that -- and have just paid off every cent of debt they had, excluding their mortgage (and it looks like they're about to refinance that at under 3%).


Well, yeah. It's that compounding thing. This is not unfairness, it's simple math. Investing and building wealth takes a lot of time and a whole lot of patience. The growth is nearly imperceptible at first, but as time goes on it accelerates. When I turned 39, we had a mountain of high interest debt, no excess cash, and zero savings of any sort (including retirement accounts -- not one penny). Finally started saving in a 401(k), thank you God for tanking my company so I had to get a real job. It took years before it was anything more than a sad, sad joke. Now I'm trying to figure out of I can safely retire a couple years early without having to cut back or put off vacations. But yeah, we spent a lot of years in that "stock market means squat to us because we have nothing" demographic.

Of course we know people who are our age and still probably have nothing, or close to it, for retirement and will have a very rude shock when they need to figure out how to live on Social Security checks. It sucks. If only we (again, that "we" in general) put as much effort into financial education, or really anything else, as we do into marketing and advertising.

Right and I want to clarify, my arguement does not come from a fairness perspective, it comes from a economic perspective. I don’t support redistributing wealth at all. That’s not the answer. I 100% believe the answer is financial education and I’m trying to do my part by teaching economics to seniors in High School everyday!