5 As we teeter on the brink of collapse, let’s consider why we might still be right to do what we do. Remember those books about responsible financial planning that tried to show you the power of compound interest and encourage you to start saving up money from an early age? Isn’t it amazing this bankster propaganda is still being spread despite the falsity of every one of its assumptions?
Let’s take one of the classic examples, shall we?
“If Mary started saving $40 a week from the age of 35, at seven percent interest by age 65 she would have $66,768. With compound interest, however, she would have $210,232.
If Abbey began saving when she left home at 18, putting just $20 away each week and earning seven percent on her savings, by the time she was 65, with compound interest, she would have $366,361 in her bank account.
Twenty dollars today can be worth a whole lot more in future. Considering most people have $20 they won’t miss too much, it makes sense to start tucking it away and getting it working for you.”
This is the most sick and retarded thing I’ve ever seen and I watch some pretty weird porn. Assuming an interest rate of 7% in a savings account combined with nominal inflation of zero and effective inflation of zero is pretty dark and twisted. The current interest rate is gonna be less than 2% for the foreseeable future, and while we may see nominal deflation, I kinda doubt we get into negative numbers for long. What fucking bank has 7% interest? What mutual fund is grinding out 7% a year in this market? What the fuck are you talking about, financial planning website?
When traders talk about risk management we usually mean not blowing up. This is all well and good. When the average “square” investor talks risk management, unless they’re buying ammo and canned goods they have no concept of what constitutes a safe investment. It’s really simple: these days there are no safe investments. You have to jump from one lily-pad to the next and constantly fine tune the balance between stocks, cash, bonds, real estate, end-of-the-world puts, and maybe even something really bizarre like precious metals. I don’t think any of them can be “set and forget” anymore. The expression “safe as houses” was really ruined for everyone forever in the 2008-2009 crash, precious metals bulls may get their comupence in the strangest way if/when there’s a market flush and valuations become realistic again, bonds obviously suck but people are going bananas for the lowest rates ever because they can at least preserve capital but as soon as the end of the world doesn’t happen people are gonna wake up, and long, out-of-the-money end-of-the-world-puts can see 200-300% ROI in a week, and if they’re weakening (not likely for now) you can get it down to 1% of portfolio or something, so you’re not looking at any serious losses even if they should all expire worthless.
But again, constant tinkering with the ratios is what’s needed to actually be even semi-safe: I plan on sliding around a range of 5-10% in precious metals selling off down to 5% when there’s a profit, same 5-10% with bonds, being at 10-30% in equities/calls, 10-30% in the meanest puts alive and keeping the rest in cash ready to be deployed for swings and shitty slumlord property my criminally-minded family bought/plans to buy at the local market bottom. Finally, I have 500 bucks in my savings account that I’m too lazy to get out and it’s costing me like 30 dollars a year in administrative fees. But with friendly policies like that and record interest levels, I’m sure they’ll be seeing a reverse bank run as Americans who are fearing uncertainty rush to put their money in savings accounts.
Now, as for my portfolio proper, this is the less than exclusive list of my current holdings:
SPY October 124 puts (showing 34% profit)
SPY January 124 puts (Showing 18% profit, lots of padding)
RSH January 7.5 puts (Showing 70% profit, gift that keeps on giving)
GME July 21 puts (Showing 60% profit, added more on Thursdays bizarre spike)
ABT (Held for 20 years, no idea what total profits are: Never touched it, pays strong dividends, global pharma, solid growth)
THQI stock (<1500 dollar position, and showing 5% loss, but totally unaffected by a market crash since they already crashed)
TTM stock (Ta-Ta Motors, Indian car manufacturer, <1500 dollar position showing 2% profit, India handles GDP slowdowns better than China because of less infrastructure development, lower lever of industrialization, more headroom)
I’m about 70% cash, now which is a big swing from 2% cash on market close on Thursday as I was shaking and vomiting but throwing all my cash at 132 weekly puts…. but fuck you all, robots can only delay the bad news for so long before capitulating. This is the part where my script cuts off, so I’m obviously bearish but I feel like I’ve already made my crash money and don’t want to push it further.
5 Responses to “Compound Interests”
John Silb
I’m bearish, but when I start seeing posts that start with “as we getter on the brink of collapse”….oh boy.
I hate this. I don’t want to buy on Monday morning. But now, especially on a down open, I have no choice but to buy stocks. And all because of “as we getter on the brink of collapse.”
Smerdyakov
My friendly advice is “don’t be a hero.” Like, in 1944 you don’t want to go “Everyone’s saying this Hitler fellow will lose the war and the fundamentals support it, but I’m a contrarian! Time to enlist in the SS!”
You don’t need to make the super-genius contrarian move: at this point we’re looking at small downturn followed by temporary bottom or larger flush followed by policy action followed by more stable bottom.
The question I ask bulls every day is: why should the stock market be going up when realistically the prospects for future profits have diminished in the near term and there needs to be some serious global restructuring? Fucking…forget technical analysis, forget being a clever contrarian, take look at the actual, physical building blocks of the world economy. Given their current configuration, why should the S&P be higher now that it was three or six months or even a year ago? Why should we be more optimistic now than we were then, knowing what we know now, with the data we have now?
If you can’t answer that question in a detailed and specific way you shouldn’t buy on Monday. All I’ve seen from the bulls is a lot of handwaving and shit about how being “contrarian” is the smart play even when they have no underlying basis for their opinion.
Ricky Roma
Would you be able to find decent answers to these questions on 10/4/2011? The world was ending then too… Just my opinion but it’s never as easy as ‘there’s no reason for the market to go up from here’. I don’t pretend to know the answer, as most of the macro stuff is way above my level of knowledge
smerdyakov
Markets have been going up since then based on optimism that a solution would be found in the next six months, so the can was being kicked further down the road. Now we’re at that exact point and there have not only been no solutions, we now know all of that optimism across the board was misplaced and that we’re not going to be able to kick this down the road another six months. I was very bearish at the beginning of the year but by mid January I switched to the bull side with the idea that if no concrete good news came down the pipeline it should be considered a hope-bubble. Thus, on about May tenth I decided the party was over and all of this years gains have been based on a mirage. It is that easy: if global real economic growth is slowing down or reversing, debt loads are increasing, and political problems are worsening, the STOCK MARKET SHOULD NOT BE GOING UP, NO MATTER WHAT THE TECHNICALS SAY! This is doubly true if all the reasons people give for why it is are dumb, bereft of hard evidence, and seem to be based on a series of rumors and vague hopes that prove to be unfounded, as has been the case in this market…
John Silb
Teeter, not getter. MotherFUCKING iPhone should stop correcting my mistakes.