Economy crash =/= stock market crash?

adindas

Another Green day today. And CBOE Volatility Index keep coming down 

BrockStoker

Big banks set aside $4 billion for a recession. Investors are more optimistic

Crypto surging, analysts saying biotech is "red hot". Looking like risk is back on.

peter021072

I'm usually a fan of Paul Lewis, presenter of R4 Money-Box, but he has stirred up criticism with some of his his 10 golden rules. For one he writes:

"I don’t invest. This has probably cost me a lot of money over the past 10-12 years when I could have invested my pension. My problem is that the fear of losing money is so much greater to me than the pleasure of making it, that I’m much happier when my money is just sitting there getting a little bit bigger every year. And of course, cash seems a pretty sensible option today, when you can earn 4.5 per cent over five years with no risk – there really isn’t an investment that will ever guarantee you that much." 

I think this reflects how many people, especially those on lower incomes who can't afford to lose feel about investing. Trouble is, 4.5% guarantees you lose money in real terms!  How many people on here adjust their investment returns for inflation?

adindas

peter021072 said:

I'm usually a fan of Paul Lewis, presenter of R4 Money-Box, but he has stirred up criticism with some of his his 10 golden rules. For one he writes:

"I don’t invest. This has probably cost me a lot of money over the past 10-12 years when I could have invested my pension. My problem is that the fear of losing money is so much greater to me than the pleasure of making it, that I’m much happier when my money is just sitting there getting a little bit bigger every year. And of course, cash seems a pretty sensible option today, when you can earn 4.5 per cent over five years with no risk – there really isn’t an investment that will ever guarantee you that much." 

I think this reflects how many people, especially those on lower incomes who can't afford to lose feel about investing. Trouble is, 4.5% guarantees you lose money in real terms!  How many people on here adjust their investment returns for inflation?

No risk no reward.

These are options that people will need to choose. If you stay on saving it is guaranteed you will lose your money to inflation. If you stay invest the history of the stock market has shown that in the long run the stock market has always gone up and beat the return you get from saving and/or bond. So there is very high probability, that you will beat inflation and multiplying your profit through compounding. Let alone he is talking about 10-12 years. No bear market in the history have ever lasted that long.

Currently savings are attractive. But what about a few years later? People are not restricted to either saving or invest option as people could do both at the same time and rebalance it, adjusting their risk vs reward.

This is a good quotation from a proven billionaire investor

And from the intrepid Romans about taking risk : "Fortune Favour the Brave"

But people do not take unnecessary risk for nothing. Also people will only risk the money they could effort to lose.

masonic

peter021072 said:

I'm usually a fan of Paul Lewis, presenter of R4 Money-Box, but he has stirred up criticism with some of his his 10 golden rules. For one he writes:

"I don’t invest. This has probably cost me a lot of money over the past 10-12 years when I could have invested my pension. My problem is that the fear of losing money is so much greater to me than the pleasure of making it, that I’m much happier when my money is just sitting there getting a little bit bigger every year. And of course, cash seems a pretty sensible option today, when you can earn 4.5 per cent over five years with no risk – there really isn’t an investment that will ever guarantee you that much."

In fairness, at least he is now referring to it as a mistake and acknowledging it has caused him to lose out. I remember the original "research" he promoted suggesting that cash beats shares over the majority of 5 year periods. It is well worth a read to understand the major flaws (*cough* FTSE100 *cough*)

https://paullewismoney.blogspot.com/2016/06/cash-vs-shares.html

It would be interesting to see an update on this study.

peter021072 said:

I think this reflects how many people, especially those on lower incomes who can't afford to lose feel about investing. Trouble is, 4.5% guarantees you lose money in real terms!  How many people on here adjust their investment returns for inflation?

Returns after inflation tends to be the standard when referring to investments. But it is important to understand that you can't know for sure how that 4.5% rate today will be measure up to inflation, because inflation over the time you held that account will only be known with hindsight. Real returns of both cash and other asset classes will be unknown until after the end of the period being measured because the inflation figures are published a month or two in arrears. Today's inflation percentage relates to inflation over the previous 12 months. We are still waiting for the annual figure from December 2021-December 2022.

If you are looking at your personal investment returns, then the best thing to measure against is your personal rate of inflation, which could differ significantly from official figures. I'm an advocate of tracking both.

Bravepants

Traditional savers are drawn by higher interest rates, but do often forget to take inflation into account. I believe that many people have no idea what inflation is or how it relates to interest rates! They have simply followed their parents/grandparents "wisdom" of keeping cash in a tin box under the bed, or a bank account. My grandmother fell foul of inflation when she chose to take her widow's pension at a flat rate in 1978.  Because she would get more in the short-term she neglected the long term rises with inflation. She saw prices rise in her lifetime but didn't really understand the link between interest rates and inflation, pension income. 

Now, I'm a pretty well educated person, but I was also the same for a while. I wasn't interested in how the economy worked until I began to invest my money in my forties. So I thought of interest rates without making the link to inflation. I didn't understand the link between the two. Now I'm a more rounded sensible adult and have actually begun to take an interest in the world, rather than having my face in a computer screen doing my job and making money and performing the daily rituals of living, I have the time and energy to think about things properly.

Simply being taught about such things at school (although probably boring at the time) would have actually given me and others a better chance at making these important links. Hearing about it on the news is pointless without actually some knowledge about how it all works. 

adindas

https://www.barrons.com/articles/what-to-know-today-51673427144 Jamie Dimon Is Changing His Tune About an Economic Hurricane. He’s Not Alone. Jan. 11, 2023

"He clarified Tuesday that maybe he shouldn’t have said last year that an “economic hurricane” is coming"

Completely different tone with his previous tone

https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html

Jamie Dimon says ‘brace yourself’ for an economic hurricane caused by the Fed and Ukraine war. Wed, Jun 1 2022.

Type_45 frequently quote Jamie Dimon to cast his prophecy about 80% fall in the stock market by the end of last year.

adindas

BrockStoker said:

Big banks set aside $4 billion for a recession. Investors are more optimistic

Crypto surging, analysts saying biotech is "red hot". Looking like risk is back on.

It seems to me the consensus is that if there is a recession it will be a mild recession. 

This is also echoed by Nobel Prize-winning economist Paul Krugman said "maybe his worries about the outlook were overblown as well. A soft landing is more likely than it seemed just a few months ago, he wrote in his New York Times column Tuesday."

https://www.barrons.com/articles/what-to-know-today-51673427144

Similar to Richard Thaler view, another Noble lauriate in economics. He has been saying that since August 2022

https://www.cnbc.com/2022/08/25/richard-thaler-says-nothing-in-us-economy-resembles-a-recession-.html
It has been frequently quoted in the past that the FED might intentionally want to put the US economy into mild recession to control inflation. But the inflation is now coming down. So whether there is a need for it now, it is still questionable.

adindas

Another Comment from Jamie Dimon today. Those who do not know,  Jamie Dimon has been the chairman and CEO of JPMorgan Chase since 2005. One of the largest bank in the world (if not the largest) in terms of total assets under management (AUM)

https://www.youtube.com/watch?v=o3p9EFQh5kM JPMorgan CEO Jamie Dimon: a soft landing is still likely. ;CNBC Television  Feb 23, 2023

https://www.youtube.com/watch?v=R0uGgLIm12A he always has a recession playbook, but isn't using it right now CNBC Television Feb 23, 2023

It is entirely different tone with what he said last year. https://www.cnbc.com/2022/06/01/jamie-dimon-says-brace-yourself-for-an-economic-hurricane-caused-by-the-fed-and-ukraine-war.html

Jamie Dimon says ‘brace yourself’ for an economic hurricane caused by the Fed and Ukraine war. Wed, Jun 1 2022.

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Oh no, not this thread again