Author Topic: The Earnings Mirage  (Read 8420 times)

NorCal

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Re: The Earnings Mirage
« Reply #50 on: July 30, 2019, 03:01:21 PM »
If the example is job losses related to autonomous vehicles, here's a thought experiment for you.

How many jobs were eliminated by the invention of the automobile?

How many people made products related to horse transport?  Think of all the carriages, saddles, horseshoes, stables, and other related products involved in outfitting horses for transportation.
How many people cared for horses?  Horses required veterinary care, and someone to clean the stable, and have someone to feed them.
How many farmers grew hay to feed the horses?
How many people were required to transport goods from point A to point B pre-automobile? 

I have a strong suspicion that the proportion of population who lost jobs related to the invention of the automobile is MUCH larger than the current proportion of truck drivers to the total population.

Did the invention of the automobile lead to mass unemployment?  Why or why not?


Also, keep in mind that they haven't even developed reliable autonomous trains yet.  Expectations for the development of autonomous cars are wildly unrealistic.

sherr

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Re: The Earnings Mirage
« Reply #51 on: July 30, 2019, 03:47:05 PM »
Did the invention of the automobile lead to mass unemployment?  Why or why not?

One difference is that the horse->engine transition was gradual over ~50 years. That's an entire career length, plenty of time for workers to phase out. In the US the average age of cars is 11.8 years; that's a much faster phase-out period even before you start adding economic pressure to get rid of the expensive drivers.

Another is that we're not just talking about autonomous vehicles. Automation is transforming industries practically everywhere. Coal miners, factory workers, drivers of various stripes, farmers, etc, these careers are all looking like they might be seriously downsized in the next few decades. What are blue-collar workers to do when all of their jobs disappear? They can't all become cabana boys and personal assistants to the upper-class robot builders and factory owners. (And yes, we'll still need plumbers and such, but not in much larger numbers than we have already).

Personally I think the answer has already been and will continue to be the increase of make-work bureaucratic positions. The TSA is basically just a massive work program already, I expect to see a lot more of that.

vand

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Re: The Earnings Mirage
« Reply #52 on: July 30, 2019, 03:51:23 PM »
This is why I'm not too worried about improvements to productivity through automation - as we've seen, people don't say "well I have everything I need for cheap, I'll just stop buying stuff".  No, what happens is that as the basic needs are met, then people almost immediately start to spend more and more money on nicer stuff, including luxuries.  And as we've seen from the super rich, there's almost no upper limit to what level can escalate their spending to. 

So I think as the basics are more and more automated and cheaper and cheaper, it'll just result in whole scale lifestyle escalation.  And that shift will dictate where the new jobs are.

Assuming, of course, that wages keep up.   We're all familiar with the Luddites, the English textile workers who attacked machines in a failed attempted to save their jobs.  The take home message is usually that instead of the job pie being finite, the lesson here is that by becoming more efficient the job pie actually expands.  Which is objectively true.
 And "Luddite" is usually a pejorative term today.   But the Luddites weren't entirely wrong.  While the job pie expanded, the wage pie didn't.  While GDP in England increased, wages for those displaced workers didn't recover for something like sixty years.   That's a long time to wait for lifestyle escalation.   It is not a smooth linear transition.   And as I mentioned above, a fair amount of violence was involved as well. 

Someone on this board (I forget who, sorry) pointed out that back in the day, when 90% of the population was doing manual labor, the Bill Gates, Albert Einsteins, and Pablo Picassos of the day were hoeing beets instead of creating great things.   As technology has freed people up from manual, repatitive tasks, that has allowed the Bill Gates, Albert Einsteins, and Pablo Picassos of our day to pursue their great endeavors.   That's surely a good thing. 

But we're also to a point where not everyone has the skill, talent, knowledge, and potential to pursue great endeavors.   If you are a truck driver today, you likely don't have many better job prospects.  You aren't going to get a second career as a programmer or graphic artist.   Maybe an Uber driver, or working for Rover.com, at a fraction of your former wage.

Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Sure, on an individual basis some people are not so adaptable and will not be able to earn as much as before once their industry goes into decline. What should matter is the net effect on society, not the effect on any particular group. There are always winners and losers.. life doesn't come with guarantees that you will always be employed and your skills highly sought after. Ultimately that is what capitalism is about - it most greatly rewards those who are best able to adapt to meeting the needs of the marketplace.

Buffaloski Boris

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Re: The Earnings Mirage
« Reply #53 on: July 30, 2019, 05:53:39 PM »
Did the invention of the automobile lead to mass unemployment?  Why or why not?

One difference is that the horse->engine transition was gradual over ~50 years. That's an entire career length, plenty of time for workers to phase out. In the US the average age of cars is 11.8 years; that's a much faster phase-out period even before you start adding economic pressure to get rid of the expensive drivers.

Another is that we're not just talking about autonomous vehicles. Automation is transforming industries practically everywhere. Coal miners, factory workers, drivers of various stripes, farmers, etc, these careers are all looking like they might be seriously downsized in the next few decades. What are blue-collar workers to do when all of their jobs disappear? They can't all become cabana boys and personal assistants to the upper-class robot builders and factory owners. (And yes, we'll still need plumbers and such, but not in much larger numbers than we have already).

Personally I think the answer has already been and will continue to be the increase of make-work bureaucratic positions. The TSA is basically just a massive work program already, I expect to see a lot more of that.

Another thing to keep in mind is automation allows people to live more autonomously. E.g. 3D printing. If you can live on pennies, is having a job all that relevant ?

PDXTabs

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Re: The Earnings Mirage
« Reply #54 on: July 30, 2019, 06:26:50 PM »
And yet there are over 3 million people that will lose their good middle income jobs if they are all automated. But you are right about one thing: young people know it and very few want to jump in at this point.

The manufacturing of automated trucks to supplant 3 million jobs will in itself create jobs.

Sure, and the Luddites were ultimately unsuccessful and I'm sure that many of them found new jobs, but not before five years of violence than required the British Army to intervene. Similar examples of violence in labor protests abound in the United States. There is absolutely no reason to think that "this time will be different."


NorCal

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Re: The Earnings Mirage
« Reply #55 on: July 30, 2019, 09:09:41 PM »
Did the invention of the automobile lead to mass unemployment?  Why or why not?

One difference is that the horse->engine transition was gradual over ~50 years. That's an entire career length, plenty of time for workers to phase out. In the US the average age of cars is 11.8 years; that's a much faster phase-out period even before you start adding economic pressure to get rid of the expensive drivers.

Another is that we're not just talking about autonomous vehicles. Automation is transforming industries practically everywhere. Coal miners, factory workers, drivers of various stripes, farmers, etc, these careers are all looking like they might be seriously downsized in the next few decades. What are blue-collar workers to do when all of their jobs disappear? They can't all become cabana boys and personal assistants to the upper-class robot builders and factory owners. (And yes, we'll still need plumbers and such, but not in much larger numbers than we have already).

Personally I think the answer has already been and will continue to be the increase of make-work bureaucratic positions. The TSA is basically just a massive work program already, I expect to see a lot more of that.

Another thing to keep in mind is automation allows people to live more autonomously. E.g. 3D printing. If you can live on pennies, is having a job all that relevant ?

Don't overestimate automation.  We read all of these pie-in-the-sky articles about how much will be automated. 

I deal with systems automation on a daily basis, and am amazed at how little it actually accomplishes.  Or more precisely, I'm amazed how much labor is required to maintain an "automated" system. 

Don't get me wrong, automation will decrease the marginal amount of labor to produce X more units.  But the media and press releases overstate the benefit to cost ratio by at least 100:1.  Typically, automating a process will improve quality (you'll get fewer errors), and decrease the marginal cost of producing additional units.  But the overall effective cost will typically be about the same.

My neighbor is my favorite example.  He bought a 3d printer and made a model spaceship for his wife (she works in aerospace).  This dude has been in the backyard trying to correctly sand and paint this simple 3d printed spaceship for at least 3 weeks.  Apparently, sanding 3d printed models is really difficult.  I could have made the same thing on my lathe in less than a day.

Here's a timely article on the topic:

https://www.sfgate.com/technology/article/robot-restaurants-barista-pizza-san-francisco-14103302.php

Montecarlo

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Re: The Earnings Mirage
« Reply #56 on: July 30, 2019, 09:38:21 PM »
Thereís basically no reason not to hold 20% bonds with valuations at high multiples.  Historically the returns difference between 100% equity and 80/20 is negligible.  So holding 20% bonds now and scaling up equities as valuations unwind makes a lot of sense.

If your still accumulating the multiples really donít make much a difference.  If youíre considering retiring now and youíre not really fat, then I think youíre taking on a shit-ton SORR.

Telecaster

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Re: The Earnings Mirage
« Reply #57 on: July 31, 2019, 10:08:01 AM »
Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Wages are determined by supply and demand.  Worker's wages have been flat for 45 years in the United States.  Graph below, won't embed for some reason:

https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg

Wages are independent of productivity unless supply of labor is constrained, either because of lack of skilled workers, or because of collective bargaining, government regulation/programs, or some other cause of labor shortage.  At that point, yes wages can rise with productivity.  But it most definitely does not happen automatically.

Quote
Sure, on an individual basis some people are not so adaptable and will not be able to earn as much as before once their industry goes into decline. What should matter is the net effect on society, not the effect on any particular group.


I agree.  We know from history the net effect on society from these types of events can be extremely negative.  Up to and including violent overthrow of the government.    It would be foolish to assume it can't happen again.   



Buffaloski Boris

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Re: The Earnings Mirage
« Reply #58 on: July 31, 2019, 10:17:33 AM »

Don't overestimate automation.  We read all of these pie-in-the-sky articles about how much will be automated. 

I deal with systems automation on a daily basis, and am amazed at how little it actually accomplishes.  Or more precisely, I'm amazed how much labor is required to maintain an "automated" system. 

Don't get me wrong, automation will decrease the marginal amount of labor to produce X more units.  But the media and press releases overstate the benefit to cost ratio by at least 100:1.  Typically, automating a process will improve quality (you'll get fewer errors), and decrease the marginal cost of producing additional units.  But the overall effective cost will typically be about the same.

My neighbor is my favorite example.  He bought a 3d printer and made a model spaceship for his wife (she works in aerospace).  This dude has been in the backyard trying to correctly sand and paint this simple 3d printed spaceship for at least 3 weeks.  Apparently, sanding 3d printed models is really difficult.  I could have made the same thing on my lathe in less than a day.

Here's a timely article on the topic:

https://www.sfgate.com/technology/article/robot-restaurants-barista-pizza-san-francisco-14103302.php

Great insight and thanks for the article, which was an interesting read.  Iím curious what you think about some of the less sexy, relatively low tech automation thatís been coming out of late. Such as the stuff that open source ecology has been doing.  If I can easily and cheaply semi-automate gardening for example, that allows me to be much more self reliant at a lower cost. Same with manufacturing in-home gizmos. I just wonder if weíre on the cusp of being able to maintain a decent ďmiddle classĒ lifestyle at a radically lower cost than even what this frugal bunch is used to.

Telecaster

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Re: The Earnings Mirage
« Reply #59 on: July 31, 2019, 10:44:57 AM »
Don't get me wrong, automation will decrease the marginal amount of labor to produce X more units.  But the media and press releases overstate the benefit to cost ratio by at least 100:1.  Typically, automating a process will improve quality (you'll get fewer errors), and decrease the marginal cost of producing additional units.  But the overall effective cost will typically be about the same.

Quick anecdote along those lines:   My now early retired BIL was a rocket engineer and started his career back in the days when parts were drawn on paper, instead of computer (sounds like a long time ago, but really wasn't).   Back in the day, they would draw a part by hand, maybe five times before they got to the final version.   Now they draw it maybe 50 times.   Same amount of time is spent drawing, but the final product is better. 

Tyson

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Re: The Earnings Mirage
« Reply #60 on: July 31, 2019, 11:13:32 AM »
Don't get me wrong, automation will decrease the marginal amount of labor to produce X more units.  But the media and press releases overstate the benefit to cost ratio by at least 100:1.  Typically, automating a process will improve quality (you'll get fewer errors), and decrease the marginal cost of producing additional units.  But the overall effective cost will typically be about the same.

Quick anecdote along those lines:   My now early retired BIL was a rocket engineer and started his career back in the days when parts were drawn on paper, instead of computer (sounds like a long time ago, but really wasn't).   Back in the day, they would draw a part by hand, maybe five times before they got to the final version.   Now they draw it maybe 50 times.   Same amount of time is spent drawing, but the final product is better.

Yeah, I totally agree that stuff happens.  I also like to watch and read historical stuff, and it always hits me when I watch an adaption of something like War & Peace, or any of the Shakespeare plays, back in the day, just how primitive and uncomfortable their lives were.  Even the Kings didn't have the ability to control the temperature in their castles, or good access to health care, or even the ability to get some Chinese food just because the mood struck him.  These are all things that are so baked into our common, every day experience, that we don't even notice it.  In many respects, we live literally better than the richest people in the past, and we're blind to it. 

Which is why I'm not too worried about automation taking over and making everything for super cheap with little labor - we'll just find more things to consume and to escalate our lifestyles too. 

Sure, some people will be left behind but that's how it always is and I don't think we could change that even if we wanted to.  That's just the nature of human beings re: change. 

NorCal

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Re: The Earnings Mirage
« Reply #61 on: July 31, 2019, 11:45:11 AM »

Don't overestimate automation.  We read all of these pie-in-the-sky articles about how much will be automated. 

I deal with systems automation on a daily basis, and am amazed at how little it actually accomplishes.  Or more precisely, I'm amazed how much labor is required to maintain an "automated" system. 

Don't get me wrong, automation will decrease the marginal amount of labor to produce X more units.  But the media and press releases overstate the benefit to cost ratio by at least 100:1.  Typically, automating a process will improve quality (you'll get fewer errors), and decrease the marginal cost of producing additional units.  But the overall effective cost will typically be about the same.

My neighbor is my favorite example.  He bought a 3d printer and made a model spaceship for his wife (she works in aerospace).  This dude has been in the backyard trying to correctly sand and paint this simple 3d printed spaceship for at least 3 weeks.  Apparently, sanding 3d printed models is really difficult.  I could have made the same thing on my lathe in less than a day.

Here's a timely article on the topic:

https://www.sfgate.com/technology/article/robot-restaurants-barista-pizza-san-francisco-14103302.php

Great insight and thanks for the article, which was an interesting read.  Iím curious what you think about some of the less sexy, relatively low tech automation thatís been coming out of late. Such as the stuff that open source ecology has been doing.  If I can easily and cheaply semi-automate gardening for example, that allows me to be much more self reliant at a lower cost. Same with manufacturing in-home gizmos. I just wonder if weíre on the cusp of being able to maintain a decent ďmiddle classĒ lifestyle at a radically lower cost than even what this frugal bunch is used to.

My belief is that most people dramatically overestimate the benefits of automation short term, but dramatically underestimate them long term.

My work involves automating corporate finance processes.  In my last company, I brought in new software that replaced big spreadsheets and dramatically improved the quality and quantity of reporting that could be generated.  The software did cost a decent chunk of money, and it took effort to maintain.  But just because we could simplify our reporting didn't mean we could lay off people.  Our monthly financial package just exploded from 10 pages to 140 pages.  It could be produced in less time, and had fewer errors.  But there were no labor savings.

Most automation work along these lines.

Where the benefit arises is over time.  They will have to hire fewer accountants over time as the company grows.  So accounting will shrink over time as a percent of the business.

There's zero savings benefit in year 1.

But in year 10, there's extra dollars available to the business.  Any business with growth prospects doesn't actually "save" this money.  They re-invest it in other growing parts of the business.  Instead of hiring new accountants, they're out hiring salespeople or operations people, or someone that can help grow the bottom line.

In terms of automating gardening, it's absolutely possible to produce more with less effort.  But I'm skeptical that large percentages of the population will turn into food-producing homesteaders.  Most households (Mustachians are an exception here) are looking for automation that will give them more hours in the day, as opposed to more projects like gardening.

EvenSteven

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Re: The Earnings Mirage
« Reply #62 on: July 31, 2019, 11:59:56 AM »
Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Wages are determined by supply and demand.  Worker's wages have been flat for 45 years in the United States.  Graph below, won't embed for some reason:

https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg


The price of EVERYTHING is determined by supply and demand, but demand for labour only exists because of the productivity it brings. This is first grade stuff.

I'm only in kindergarten so forgive the question, but why do you think wages and productivity have been uncorrelated for the last 50 years?

J Boogie

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Re: The Earnings Mirage
« Reply #63 on: August 01, 2019, 10:56:29 AM »
Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Wages are determined by supply and demand.  Worker's wages have been flat for 45 years in the United States.  Graph below, won't embed for some reason:

https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg


The price of EVERYTHING is determined by supply and demand, but demand for labour only exists because of the productivity it brings. This is first grade stuff.

I'm only in kindergarten so forgive the question, but why do you think wages and productivity have been uncorrelated for the last 50 years?

Because man-hours (or person-hours) have become less and less neccessary to achieve productivity gains.

Automation causes wage stagnation (and wage shrinkage) as companies put pen to paper to see what the tipping point is to invest in automation. Cheap borrowing tips the scales even further, and the laid-off GED/HS degree employees increase the cheap labor supply even further making wages even lower. Meanwhile company productivity is through the roof.

Wages have grown for those who help companies achieve productivity gains, and wages have shrunk for those who perform basic tasks. Wages for those who perform more complex tasks that are harder to automate/not worth automating have probably seen their wages rise in line with inflation.

EvenSteven

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Re: The Earnings Mirage
« Reply #64 on: August 01, 2019, 11:13:32 AM »
Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Wages are determined by supply and demand.  Worker's wages have been flat for 45 years in the United States.  Graph below, won't embed for some reason:

https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg


The price of EVERYTHING is determined by supply and demand, but demand for labour only exists because of the productivity it brings. This is first grade stuff.

I'm only in kindergarten so forgive the question, but why do you think wages and productivity have been uncorrelated for the last 50 years?

Because man-hours (or person-hours) have become less and less neccessary to achieve productivity gains.


Doesn't this lead to a higher production per man-hour? So if wages are determined by the marginal productivity, and the marginal productivity is going up, shouldn't wages also be going up?

J Boogie

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Re: The Earnings Mirage
« Reply #65 on: August 01, 2019, 01:11:14 PM »
Wages are determined by marginal productivity. Having automation in place and capital at your disposal raises your productivity which in turn raises real wages. That is what drives real wage growth over time.

Wages are determined by supply and demand.  Worker's wages have been flat for 45 years in the United States.  Graph below, won't embed for some reason:

https://en.wikipedia.org/wiki/Real_wages#/media/File:US_productivity_and_real_wages.jpg


The price of EVERYTHING is determined by supply and demand, but demand for labour only exists because of the productivity it brings. This is first grade stuff.

I'm only in kindergarten so forgive the question, but why do you think wages and productivity have been uncorrelated for the last 50 years?

Because man-hours (or person-hours) have become less and less neccessary to achieve productivity gains.


Doesn't this lead to a higher production per man-hour? So if wages are determined by the marginal productivity, and the marginal productivity is going up, shouldn't wages also be going up?

Yes, for those doing work that is not automatable.

There's a dichotomy in wages. Automatable task wages are plummeting, other wages are going up. Combined, wage growth looks something like stagnation.

For those whose tasks can be automated, they compete on price with machines.

Automation has flooded the market, creating a nearly infinite supply of basic task executers. The value per man-hour has plummeted.

The reason many unskilled workers still have these low paying automatable jobs is probably just inability to access capital and inept management unaware of automation potential. But the wages are plummeting because there are plenty of unskilled workers to choose from.


habanero

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Re: The Earnings Mirage
« Reply #66 on: August 01, 2019, 01:25:06 PM »

Automation has flooded the market, creating a nearly infinite supply of basic task executers. The value per man-hour has plummeted.

The reason many unskilled workers still have these low paying automatable jobs is probably just inability to access capital and inept management unaware of automation potential. But the wages are plummeting because there are plenty of unskilled workers to choose from.

There was a big story in the Times some time ago where they pointed out that a lot of automation happens not because it's cheaper but because employers couldn't find dependable labor. There was no real shortage of folks applying for jobs, but an awful lot turned out to be basically unemployable. Factories installed robots to maintain production, not to get rid of workers. Workers would (at least still) be cheaper, they just couldn't find any.

There is also some irony that while there is a lot of worry about automation taking jobs, the unemployment rate in the US is at its lowest.


Montecarlo

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Re: The Earnings Mirage
« Reply #67 on: August 01, 2019, 07:53:06 PM »
You also canít forget that a lot of policies that ostensibly are to help labor actually encourage automation.

Medicare, social security, minimum wage, employer mandate...

freedomfightergal

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Re: The Earnings Mirage
« Reply #68 on: August 02, 2019, 08:29:34 AM »
I think the motivation for automation is purely economical & consistency.  The trucking industry supposedly will save $168 Billion per year, be cheaper & safer. Because of the anticipated savings there's a massive push to expedite it happening. 

https://www.theguardian.com/technology/2016/jun/17/self-driving-trucks-impact-on-drivers-jobs-us

I think a lot people don't know the extent of the automation. But you see it everywhere you go.  No need to check in with a person at the airport - just use the computer kiosk.  Staff-less supermarkets are happening, robots in Amazon warehouses etc.  I think Automation is great and we should enjoy the benefits.  The problem is the accelerating job losses, that won't result in good alternative jobs - well maybe a fraction of the lost ones.  Sure there'll be plenty of Gig jobs, because that's cheap for the companies, but hard to live on eg Rover.com Uber.com Dash etc

I see two big problems in the pipeline

1. High unemployment, means not much cash and therefore not much spending in the economy leading to a monumental stock market crash.  Leading to rioting and a Mad max scenario.

2. This is not a mainstream talking point.  Only one Candidate is talking about it (Yang), no one else is.  Since we can see it coming down the road, we could plan well and reduce the pain of the change.  I think increasing/boosting trade school options & other non likely 'automatable' jobs like nursing etc.  But still I think we need a UBI to buffer the transition and change the dynamic of our economy for the good of the people.


https://www.theguardian.com/technology/2016/jun/17/self-driving-trucks-impact-on-drivers-jobs-us

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #69 on: August 02, 2019, 01:27:02 PM »
I don't agree that automation will lead to unemployment.

Other labor rich sectors of the economy will provide employment.

For example, a boon in green technology  could mean a huge demand in solar and wind power installers.

If the federal government can tap into some tax money there might be an increased demand for child care providers for working mothers who get federal subsidies to pay for skilled professionalized child care centers.

sherr

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Re: The Earnings Mirage
« Reply #70 on: August 02, 2019, 08:15:46 PM »
I don't agree that automation will lead to unemployment.

Other labor rich sectors of the economy will provide employment.

For example, a boon in green technology could mean a huge demand in solar and wind power installers.

You chose an awful example to try to prove your point. Any new power plant (solar, nuclear, coal, wind, whatever) will require temporary labor to construct it. So sure, there are those jobs, and then when they're done they can move on to the next plant.

However traditional power plants require a large staff with 24-hour coverage to keep things up and running at the actual plant, not to mention all the jobs that are downstream from them relating to mining and transporting the fuel. Solar and wind power mostly just sit there and do their thing. Those are exactly examples of the types of good, stable, high-paying, blue-collar jobs that are disappearing and not being replaced.

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #71 on: August 02, 2019, 08:46:22 PM »
"The recently published Department of Energy 2017 U.S. Energy and Employment Report shows that clean electricity jobs are no doubt the engine that drives Americaís electric energy economy, outstripping the number of paychecks provided by the fossil fuel industry by at least five to one. While that doesnít mean fossil fuel generation is gone, it certainly means that if you are a politician looking for ways to grow jobs for the long term in your community, clean energy is the path to take."

https://www.nrdc.org/experts/lara-ettenson/us-clean-energy-jobs-surpass-fossil-fuel-employment

Montecarlo

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Re: The Earnings Mirage
« Reply #72 on: August 02, 2019, 09:39:08 PM »
"The recently published Department of Energy 2017 U.S. Energy and Employment Report shows that clean electricity jobs are no doubt the engine that drives Americaís electric energy economy, outstripping the number of paychecks provided by the fossil fuel industry by at least five to one. While that doesnít mean fossil fuel generation is gone, it certainly means that if you are a politician looking for ways to grow jobs for the long term in your community, clean energy is the path to take."

https://www.nrdc.org/experts/lara-ettenson/us-clean-energy-jobs-surpass-fossil-fuel-employment

Quote
All told, nearly 1 million Americans are working near- or full-time in the energy efficiency, solar, wind, and alternative vehicles sectors. This is almost five times the current employment in the fossil fuel electric industry, which includes coal, gas, and oil workers.

I have a hard time believing only 200K Americans work in the fossil fuel industry.

ChpBstrd

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Re: The Earnings Mirage
« Reply #73 on: August 02, 2019, 09:52:45 PM »
Which is why I'm not too worried about automation taking over and making everything for super cheap with little labor - we'll just find more things to consume and to escalate our lifestyles too. 
 

While shopping for a Honda Fit a many years ago, I was surprised to learn that they no longer make this most basic of cars with hand-crank windows. To obtain a manual transmission and avoid the $1200 "sport" package, I had one shipped in from another state.

The point of this anecdote is that even though inflation-adjusted wages have been flat for decades, the amount of luxury and the level of quality that can be bought has skyrocketed. Today's cheapest cars, which many millions of people would be embarrassed to drive, have amenities and a level of durability that in our parents' generation was only available in luxury cars like Mercedes, BMWs, Porches, and Cadillacs.

As the production of car bodies and assemblies started to be done by robots, new jobs were created to supply better quality and more amenities. If you were in the business of making heated power mirrors, you went on a multi-decade hiring spree as your product became standard.

Similar stories exist in textiles, agriculture, energy... basically any product.

As products require fewer and fewer jobs to produce, their price falls to the point that consumers have more money for additional products. E.g. as robotics made cars cheaper to assemble, consumers bought more luxuries with the savings. Meanwhile, additional jobs were created to supply those luxuries.

E.g. Avocados used to be unavailable in the U.S. but now a whole airborne supply chain ensures they are present in every grocery store. These are new jobs.

vand

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Re: The Earnings Mirage
« Reply #74 on: August 05, 2019, 02:34:28 AM »
The fear of machinery replacing labour is one which is rooted in the most basic fallacy in economics: that The Pie is of fixed and finite size.. and therefore person A's gain (in this case the owner of the machinery) is person B's loss (the labourer whose job is replaced by the machine).

The Pie can be grown as large as our abilities and knowledge are able to grow it, both on a total and a per-person basis.

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Re: The Earnings Mirage
« Reply #75 on: August 05, 2019, 08:22:06 AM »
The fear of machinery replacing labour is one which is rooted in the most basic fallacy in economics: that The Pie is of fixed and finite size.. and therefore person A's gain (in this case the owner of the machinery) is person B's loss (the labourer whose job is replaced by the machine).

The Pie can be grown as large as our abilities and knowledge are able to grow it, both on a total and a per-person basis.

Which is EXACTLY why indexing makes so much sense.  There will never be a "top" in stocks because we're not just shuffling money around from A to B, the pie is actually growing and thus we'll always be getting richer from stocks. 

vand

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Re: The Earnings Mirage
« Reply #76 on: August 05, 2019, 01:41:15 PM »
The fear of machinery replacing labour is one which is rooted in the most basic fallacy in economics: that The Pie is of fixed and finite size.. and therefore person A's gain (in this case the owner of the machinery) is person B's loss (the labourer whose job is replaced by the machine).

The Pie can be grown as large as our abilities and knowledge are able to grow it, both on a total and a per-person basis.

Which is EXACTLY why indexing makes so much sense.  There will never be a "top" in stocks because we're not just shuffling money around from A to B, the pie is actually growing and thus we'll always be getting richer from stocks.

I have nothing against indexing. I do have something against indexers who think that valuations aren't important, or that their method of investing is the be all and end all.. my "Active" portfolio (dirty word around here, I know) has outperformed its benchmark FTSE350 by +16% since I started measuring it 10 months ago, with a VaR of 1.33% vs 1.14% for the benchmark).
« Last Edit: August 05, 2019, 01:43:46 PM by vand »

Buffaloski Boris

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Re: The Earnings Mirage
« Reply #77 on: August 05, 2019, 04:40:29 PM »

I have nothing against indexing. I do have something against indexers who think that valuations aren't important, or that their method of investing is the be all and end all.. my "Active" portfolio (dirty word around here, I know) has outperformed its benchmark FTSE350 by +16% since I started measuring it 10 months ago, with a VaR of 1.33% vs 1.14% for the benchmark).

Not bad. I like that youíre contrarianing the contrarians. (New verb!!!)

Let me ask you a question: what are your long term thoughts on the UK and DE markets? Iím looking to get away from the US market somewhat and donít like the ďall the world or none of itĒ international portfolios. I prefer looking at specific countries.

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Re: The Earnings Mirage
« Reply #78 on: August 06, 2019, 02:58:45 AM »

I have nothing against indexing. I do have something against indexers who think that valuations aren't important, or that their method of investing is the be all and end all.. my "Active" portfolio (dirty word around here, I know) has outperformed its benchmark FTSE350 by +16% since I started measuring it 10 months ago, with a VaR of 1.33% vs 1.14% for the benchmark).

Not bad. I like that youíre contrarianing the contrarians. (New verb!!!)

Let me ask you a question: what are your long term thoughts on the UK and DE markets? Iím looking to get away from the US market somewhat and donít like the ďall the world or none of itĒ international portfolios. I prefer looking at specific countries.

I think the general outlook for equities will be much more difficult over the next 10-15 years than they have been for the last 10-15, based on current valuation an also an ageing demographic as baby boomers start to retire.. the group with the most purchasing power will go from net accumulators of stocks to net distributors. Given these headwinds I think equities will do well to meet even half their historic returns over the next decade, and the chance of flat or negative return should not be ruled out.

I have always preferred value plays, and I UK/DE for this reason, and in fact most international markets are more reasonably priced that the US, so I expect a better long term performance from them going forward, but right now the bull market is more in love with the promise of future growth than it is with the assurance of current value, so what is cheap remains cheap.

But just because the long term outlook is not great, that doesn't mean you can't still do well from stocks. It just means you are likely to do less well if you dump all your money in the market and leave it there. The next bear market will destroy a lot stock bulls who think stocks only ever go up and have never invested through a bear market, but it will also create lots of opportunities too if you have the wherewithall to buy the bargains that will be on sale at that time. It will be one hell of a ride down, and one hell of a ride back up. If you can just continue to keep buying heavily through the period of turmoil then the bear market becomes your friend and you will come out much better than just a flat trajectory of tepid growth. My best performing fund in the last 5 years has been a commodities fund.. which if you look at the headline number you would wonder just how, but what it did was lost 2/3rds as I started buying it (remember oil crashed to $26), and I was just slugging money into this fund all the way through the crash and subsequent recovery.
« Last Edit: August 06, 2019, 03:36:43 AM by vand »

Buffaloski Boris

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Re: The Earnings Mirage
« Reply #79 on: August 06, 2019, 05:02:09 PM »

I have nothing against indexing. I do have something against indexers who think that valuations aren't important, or that their method of investing is the be all and end all.. my "Active" portfolio (dirty word around here, I know) has outperformed its benchmark FTSE350 by +16% since I started measuring it 10 months ago, with a VaR of 1.33% vs 1.14% for the benchmark).

Not bad. I like that youíre contrarianing the contrarians. (New verb!!!)

Let me ask you a question: what are your long term thoughts on the UK and DE markets? Iím looking to get away from the US market somewhat and donít like the ďall the world or none of itĒ international portfolios. I prefer looking at specific countries.

I think the general outlook for equities will be much more difficult over the next 10-15 years than they have been for the last 10-15, based on current valuation an also an ageing demographic as baby boomers start to retire.. the group with the most purchasing power will go from net accumulators of stocks to net distributors. Given these headwinds I think equities will do well to meet even half their historic returns over the next decade, and the chance of flat or negative return should not be ruled out.

I have always preferred value plays, and I UK/DE for this reason, and in fact most international markets are more reasonably priced that the US, so I expect a better long term performance from them going forward, but right now the bull market is more in love with the promise of future growth than it is with the assurance of current value, so what is cheap remains cheap.

But just because the long term outlook is not great, that doesn't mean you can't still do well from stocks. It just means you are likely to do less well if you dump all your money in the market and leave it there. The next bear market will destroy a lot stock bulls who think stocks only ever go up and have never invested through a bear market, but it will also create lots of opportunities too if you have the wherewithall to buy the bargains that will be on sale at that time. It will be one hell of a ride down, and one hell of a ride back up. If you can just continue to keep buying heavily through the period of turmoil then the bear market becomes your friend and you will come out much better than just a flat trajectory of tepid growth. My best performing fund in the last 5 years has been a commodities fund.. which if you look at the headline number you would wonder just how, but what it did was lost 2/3rds as I started buying it (remember oil crashed to $26), and I was just slugging money into this fund all the way through the crash and subsequent recovery.

Thanks for the detailed and thoughtful reply.  Iím eagerly awaiting the next sale on equities. And Iíve noticed that the valuations outside the US are much more attractive. Iím not into commodities (there be dragons!) but I think itís great that youíve made it work.

Itíll be interesting to see what happens to FI as a phenomenon when we hit a severe bear market. Personally I think itíll largely disappear. The remnants will be worthwhile.

I share your views on valuation. Itís an ADHD world. Shiny sells.

One more question for you if youíre inclined. Since Iím an American I have to deal with currency risk. What do you see happening long term to the pound and euro post Brexit?

Thanks again for your reply.

vand

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Re: The Earnings Mirage
« Reply #80 on: August 07, 2019, 03:34:07 AM »

I have nothing against indexing. I do have something against indexers who think that valuations aren't important, or that their method of investing is the be all and end all.. my "Active" portfolio (dirty word around here, I know) has outperformed its benchmark FTSE350 by +16% since I started measuring it 10 months ago, with a VaR of 1.33% vs 1.14% for the benchmark).

Not bad. I like that youíre contrarianing the contrarians. (New verb!!!)

Let me ask you a question: what are your long term thoughts on the UK and DE markets? Iím looking to get away from the US market somewhat and donít like the ďall the world or none of itĒ international portfolios. I prefer looking at specific countries.

I think the general outlook for equities will be much more difficult over the next 10-15 years than they have been for the last 10-15, based on current valuation an also an ageing demographic as baby boomers start to retire.. the group with the most purchasing power will go from net accumulators of stocks to net distributors. Given these headwinds I think equities will do well to meet even half their historic returns over the next decade, and the chance of flat or negative return should not be ruled out.

I have always preferred value plays, and I UK/DE for this reason, and in fact most international markets are more reasonably priced that the US, so I expect a better long term performance from them going forward, but right now the bull market is more in love with the promise of future growth than it is with the assurance of current value, so what is cheap remains cheap.

But just because the long term outlook is not great, that doesn't mean you can't still do well from stocks. It just means you are likely to do less well if you dump all your money in the market and leave it there. The next bear market will destroy a lot stock bulls who think stocks only ever go up and have never invested through a bear market, but it will also create lots of opportunities too if you have the wherewithall to buy the bargains that will be on sale at that time. It will be one hell of a ride down, and one hell of a ride back up. If you can just continue to keep buying heavily through the period of turmoil then the bear market becomes your friend and you will come out much better than just a flat trajectory of tepid growth. My best performing fund in the last 5 years has been a commodities fund.. which if you look at the headline number you would wonder just how, but what it did was lost 2/3rds as I started buying it (remember oil crashed to $26), and I was just slugging money into this fund all the way through the crash and subsequent recovery.

Thanks for the detailed and thoughtful reply.  Iím eagerly awaiting the next sale on equities. And Iíve noticed that the valuations outside the US are much more attractive. Iím not into commodities (there be dragons!) but I think itís great that youíve made it work.

Itíll be interesting to see what happens to FI as a phenomenon when we hit a severe bear market. Personally I think itíll largely disappear. The remnants will be worthwhile.

I share your views on valuation. Itís an ADHD world. Shiny sells.

One more question for you if youíre inclined. Since Iím an American I have to deal with currency risk. What do you see happening long term to the pound and euro post Brexit?

Thanks again for your reply.

Yep, everyone has a plan until they get punched in the mouth... I tend to agree that a lot of FIRE plans will be laid to waste - or at least set back by a decade or so - in the next downturn which will create a lot of forced sellers.   Everyone says that they would like to see a 50% drop in the stock market, but the reality is that this will come with masses of unemployment, so what happens if you don't have a job AND the nestegg you've been squirrelling away takes a huge hit? Not everyone who professes to be greedy when others are fearful will actually be in a position to walk that walk.

I think its a good idea to design international diversification into your wealth plan. Personally I like what gold can do for most portfolios, and I'm a big fan of multi-asset portfolios in general and really understanding why asset allocation is so important. My macro view is that the USD will get weaker over the next few years which will act as a tailwind to hard assets and emerging markets.

Ray Dalio recently wrote a lengthy piece on what the next paradigm could look like - the basic gist being that it is likely to work more opposite to how the current paradigm exists - and how you should adjust your thinking accordingly.

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Re: The Earnings Mirage
« Reply #81 on: August 07, 2019, 12:03:32 PM »

Yep, everyone has a plan until they get punched in the mouth... I tend to agree that a lot of FIRE plans will be laid to waste - or at least set back by a decade or so - in the next downturn which will create a lot of forced sellers.   

When reading various FIRE blogs one gets the impression that X% real return over time is treated as a close to a sure thing, just with some bumps in the road on the way there. There is a big difference between "you can retire in 10 years" vs "you are, based on historical long-time market performance, expected to be able to retire in 10 years". I also think that the next recovery after the next big crash - whenever than comes - is gonna be slow by historical standards. Just because it ain't that easy to see where the stimulus should come from, give that central banks etc have been on steroids for years.

I

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Re: The Earnings Mirage
« Reply #82 on: August 07, 2019, 05:43:28 PM »
When reading various FIRE blogs one gets the impression that X% real return over time is treated as a close to a sure thing, just with some bumps in the road on the way there. There is a big difference between "you can retire in 10 years" vs "you are, based on historical long-time market performance, expected to be able to retire in 10 years". I also think that the next recovery after the next big crash - whenever than comes - is gonna be slow by historical standards. Just because it ain't that easy to see where the stimulus should come from, give that central banks etc have been on steroids for years.

I

For sure.  I'm old enough [kaff, wheeze] to have been through the dot.com bust as well.    The market dropped and was just barely getting back to the 2001 peak by 2007, and then crashed again, and took a few more years to recover.   That was a long hard slog.   

vand

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Re: The Earnings Mirage
« Reply #83 on: August 07, 2019, 05:47:55 PM »

Yep, everyone has a plan until they get punched in the mouth... I tend to agree that a lot of FIRE plans will be laid to waste - or at least set back by a decade or so - in the next downturn which will create a lot of forced sellers.   

When reading various FIRE blogs one gets the impression that X% real return over time is treated as a close to a sure thing, just with some bumps in the road on the way there. There is a big difference between "you can retire in 10 years" vs "you are, based on historical long-time market performance, expected to be able to retire in 10 years". I also think that the next recovery after the next big crash - whenever than comes - is gonna be slow by historical standards. Just because it ain't that easy to see where the stimulus should come from, give that central banks etc have been on steroids for years.

I

Yes, there is a presupposition that the next recession will be a roadbump within the current investing paradigm, but the next paradigm could mean a sustained period of higher inflation, it could mean the petrodollar monetary system is abandoned and the USD loses its reserve currency status, or it could mean the end of the bond bull market with interest rates going to double figures over the next 10-20 year, or it could mean a long period where stocks never manage to get back to their old highs (like Japan or post-1929)... anything is possible.

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #84 on: August 07, 2019, 07:36:29 PM »
There's no magic advantage to being a reserve currency. My understanding from Paul Krugman the economist is that it doesn't confer any special benefits.

vand

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Re: The Earnings Mirage
« Reply #85 on: August 08, 2019, 12:44:46 AM »
There's no magic advantage to being a reserve currency. My understanding from Paul Krugman the economist is that it doesn't confer any special benefits.

That's like people saying there's no special benefits to being born able-bodied, white, in middle class family in a free Western society.

Reserve currency status creates excess demand for your currency beyond what you use for trading goods and services as all commodity markets trade in dollars; every other economy must hold USD reserves if they wish to trade commodities, hence USD is artificially strengthened, the Fed can afford to run lower interest rates without weakening your currency, and the people enjoy an artificially higher standard of living... all because every other other country is obliged to hold USD reserves.

You won't read this narrative on CNN, but it's no coincidence the US Administration has a history of swift rebuke for countries who threaten to bypass the petrodollar system.. they understand the very privileged position they currently occupy.

DadJokes

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Re: The Earnings Mirage
« Reply #86 on: August 08, 2019, 06:03:18 AM »
There's no magic advantage to being a reserve currency. My understanding from Paul Krugman the economist is that it doesn't confer any special benefits.

I'd take anything Krugman says with a huge grain of salt. He's so politically biased that taking any of his economic ideas seriously is difficult.

Buffaloski Boris

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Re: The Earnings Mirage
« Reply #87 on: August 08, 2019, 02:43:18 PM »

Yep, everyone has a plan until they get punched in the mouth... I tend to agree that a lot of FIRE plans will be laid to waste - or at least set back by a decade or so - in the next downturn which will create a lot of forced sellers.   Everyone says that they would like to see a 50% drop in the stock market, but the reality is that this will come with masses of unemployment, so what happens if you don't have a job AND the nestegg you've been squirrelling away takes a huge hit? Not everyone who professes to be greedy when others are fearful will actually be in a position to walk that walk.

I think its a good idea to design international diversification into your wealth plan. Personally I like what gold can do for most portfolios, and I'm a big fan of multi-asset portfolios in general and really understanding why asset allocation is so important. My macro view is that the USD will get weaker over the next few years which will act as a tailwind to hard assets and emerging markets.

Ray Dalio recently wrote a lengthy piece on what the next paradigm could look like - the basic gist being that it is likely to work more opposite to how the current paradigm exists - and how you should adjust your thinking accordingly.

Thanks again. I did look up the piece by Ray Dalio. I thought this quote was a keeper ďThe worst thing one can do, especially late in a paradigm, is to build oneís portfolio based on what would have worked well over the prior 10 years, yet thatís typical.Ē  Sound familiar? VTSAX for the win!

Or not.

Iím awaiting his piece on the ďbarbarous relic.Ē Iím not into Au but hey, Iím up for a good yarn. And his billions sure make a good opening argument. I did find it interesting that heís pitching China stocks of late.

Iím thinking that in times of doubt, and letís face it: Iím doubting the hell out of US equities, diversification across countries and assets is a reasonable proposition.

ChpBstrd

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Re: The Earnings Mirage
« Reply #88 on: August 08, 2019, 09:15:26 PM »
Going to a commodity as a form of market timing is exactly like going to cash. First you have to be right about the timing of your shift into the commodity, and then you have to be right about your shift out if it.

In 2011, practically everyone was convinced that hyperinflation was just around the corner, due to the massive government money printing going on at that time. GLD had rallied from $42 to $180 in the past 5 years. The financial media went wild about how gold might be the only sensible investment in such dangerous times, and how gold was making people millionaires, and how $10,000 an ounce was a reasonable expectation in five years. There was chatter about all the world's gold mines running out, growing demand from India and China, blah blah yada.

Then it dropped over 40%. If you bought in 2011-2013 you're still under water. If you bought in December 2010 and held until now, failing to sell at the appropriate time the next year, you broke even in nominal terms OVER ALMOST NINE YEARS, and in real terms lost 17.5% to inflation BY HOLDING A "SAFE HAVEN".     

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #89 on: August 10, 2019, 06:50:59 AM »

 hence USD is artificially strengthened

That's not an advantage, that's a disadvantage because it makes our exports more expensive, and lowers the GDP.

vand

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Re: The Earnings Mirage
« Reply #90 on: August 10, 2019, 03:33:58 PM »

 hence USD is artificially strengthened

That's not an advantage, that's a disadvantage because it makes our exports more expensive, and lowers the GDP.

That's nonsense because you are only considering one half of the equation. What about your imports? A stronger currency makes your import cheaper. For a net importer like the US a strong currency makes things cheaper, on the whole.

No country in the history of the world has improved its prosperity by devaluing its currency.

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #91 on: August 11, 2019, 08:43:31 AM »
Exporting out of a recession is one of the main ways a country improves the GDP when currency gets devalued.

DavidAnnArbor

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Re: The Earnings Mirage
« Reply #92 on: August 11, 2019, 08:45:41 AM »
What about your imports? A stronger currency makes your import cheaper. For a net importer like the US a strong currency makes things cheaper, on the whole.



When foreign goods get more expensive, customers find domestic sources that are cheaper.

Telecaster

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Re: The Earnings Mirage
« Reply #93 on: August 11, 2019, 11:52:43 AM »
Going to a commodity as a form of market timing is exactly like going to cash. First you have to be right about the timing of your shift into the commodity, and then you have to be right about your shift out if it.

In 2011, practically everyone was convinced that hyperinflation was just around the corner, due to the massive government money printing going on at that time. GLD had rallied from $42 to $180 in the past 5 years. The financial media went wild about how gold might be the only sensible investment in such dangerous times, and how gold was making people millionaires, and how $10,000 an ounce was a reasonable expectation in five years. There was chatter about all the world's gold mines running out, growing demand from India and China, blah blah yada.

Then it dropped over 40%. If you bought in 2011-2013 you're still under water. If you bought in December 2010 and held until now, failing to sell at the appropriate time the next year, you broke even in nominal terms OVER ALMOST NINE YEARS, and in real terms lost 17.5% to inflation BY HOLDING A "SAFE HAVEN".   

Another example is the late 1970s, when double digit inflation was raging away and people flocked to gold for safety.  By early 1980 the price shot up to its inflation adjusted all time high. If you bought gold in 1980, you're still down 33% today.    That's a lot of things, but it ain't safe. 

vand

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Re: The Earnings Mirage
« Reply #94 on: August 12, 2019, 08:26:48 AM »
What about your imports? A stronger currency makes your import cheaper. For a net importer like the US a strong currency makes things cheaper, on the whole.



When foreign goods get more expensive, customers find domestic sources that are cheaper.

Yes, I can see sweatshops being set up in every rural corner of the US  that will be able to churn out manufactured goods for less than China can.. and if they really can the workers will earn China-style wages