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Author Topic: How are you saving for retirement?  (Read 3737 times)
AllenF
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« Reply #40 on: October 27, 2010, 12:21:57 PM »

Did ya'll here what T bonds are getting now days?   The US Treasury is selling negative-rate bonds.  You loss money to buy bonds with the government now.   http://www.ft.com/cms/s/0/dfa5ee7c-e08e-11df-abc1-00144feabdc0.html 
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tshnc01
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« Reply #41 on: October 27, 2010, 12:59:09 PM »

Quote
(ie stock are real assets)
As a share of stock represents a claim against future profits of a company, I do not consider it a "real asset". 

Quote
have you ever notice that some folks that make very little money acquire quite a large nest egg over their lives and that some folks that make huge salaries seem to acquire little beside whatever is the current fad and a large debt?

Absolutely, my guess is that those people that acquired a large nest egg lived below their means and likely avoided taking on very much debt.

Honestly I am not sure that it matters for me to figure out what would happen if everyone took the authors advice (assuming it is correct for the individual) as clearly that will never happen.  We pretty much know that smoking is bad for you, and yet lots of people still choose to smoke.  tecumseh, do you have an opinion about what would happen if "everybody"  took the advice of the author?

Tecumseh, lastly can you give me a specific example of an Austrian economic principle that you view as naive?  I would very much appreciate a specific example as it is very hard to know if I agree with what you are saying as it is a broad generalization (may or may not be true).

Thanks,

...Tim
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tecumseh
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« Reply #42 on: October 27, 2010, 11:23:19 PM »

well first tshnc I don't think anyone I know in economics or finance or business school would go along with the notion that a stock is not a real asset.  that is a pretty ridiculous statement.  this also seemed to be the author your referenced notion?

actually stock prices are based upon the EXPECTATION of future earnings. 

a large tim snip followed by (<) tecumseh response...
Absolutely, my guess is that those people that acquired a large nest egg lived below their means and likely avoided taking on very much debt.

<living reasonable maybe, but debt yea or nay has little to do with it.  the folks generally acquire real assets that appreciate and consume only what they could afford.  if you purchase the right kind of assets borrowing or not borrowing has little to do with the end results.  debt does allow you to leverage equity in the acquisition of assets.  leverage being one of those concepts (in business there are two kinds) that can yield you great rewards. 

Honestly I am not sure that it matters for me to figure out what would happen if everyone took the authors advice (assuming it is correct for the individual) as clearly that will never happen.  We pretty much know that smoking is bad for you, and yet lots of people still choose to smoke.  tecumseh, do you have an opinion about what would happen if "everybody"  took the advice of the author?

<what happens when everyone decides times are tough and it is time to horde assets such as cash and spend nothing?  hording assets may make sense for the individual firm but the net effect of lot of folks following the same strategy leads to a deeper and deeper economic hole they are collectively digging.   keynes suggest this behavior was the bases of his liquidity trap*.  just casually it appear that his hypothetical suggestion to what went wrong then may still be in play today.  almost always (there must be exception for sure) this one size fits all strategy leads to result just the opposite (contrary) of what folks initially though.  contrarian investment thinking is based on this same notion.

<everyone should smoke, it would reduce the mean life span and possible save social security and put a lot of $ into the state and federal coffers.  obesity will likely accomplish the same end (less the tax $ generated).     

Tecumseh, lastly can you give me a specific example of an Austrian economic principle that you view as naive?  I would very much appreciate a specific example as it is very hard to know if I agree with what you are saying as it is a broad generalization (may or may not be true).

<agreeing with me is unimportant.  having a bit fuller understanding of how things work economically is really more my objective.

<I didn't say any of the austrian folks were naive.  I said when someone (anyone) confuses terms, like how money is created or that money is the exact equivalent of wealth, that their notion of how the system works is naive or simplistic (but most times just incorrect). 

<the easiest method to confuse the lay is to intermix ideas like micro and macro economics and suggest that they are one and the same with the objective to come to some predetermined end.

<as far as the Austrian School most folks versed in the the study of economics think the Austrian School will get you no where.  there thinking is very dated and static.  that the school bias is on 'the subjective nature of value' and not 'object value oriented' should tell you something.  in more recent time some of their ilk have made an attempt at being quantitative (which I think went against some of the original Austrian school thinkers) but invariable they have to jump thru some pretty ridiculous hoops to get to the conclusion that they made before they collected their data.  determining the answer before the question is asked or the data is collected is by most considered to be academically dishonest.   

*this statement by Keynes was stated by Keynes as 'this is how it could of happened' and not 'this is how it happened'.  it was a hypothetical answer to why classical economic theory was not working.  Keynes was (by most measure) a real egotist and elitist for certain.  He was clever enough to not only explain how the system worked but could devise in his mind an explanation as to why it did not.


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I am 'the panther that passes in the night'... tecumseh.
tshnc01
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« Reply #43 on: October 28, 2010, 09:01:56 AM »

Tecumseh,

Maybe you should broaden your horizons relative to the people you "know in economics or finance or business school".  Try googling "real asset" and "financial asset".  It isn't just the author of the paper I referenced that has this "notion".  It is a broadly held one.  Financial assets are instruments like cash, bonds and STOCK; they are not REAL ASSETS like land, commodities, manufacturing plants, etc.

And to your point regarding the liquidity trap, you seem to be arguing for the "Paradox of Thrift".  Let's just say that I don't buy into the Paul Krugman view of the world.  In your example I would encourage you to substitute the word "saving" for "hoarding".  Collectively we must repair our "individual" balance sheets (i.e. "save" and pay down our debt), if we want to have the capital needed to create wealth (an increase in production).

...Tim
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tecumseh
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« Reply #44 on: October 29, 2010, 08:30:28 AM »

tim writes:
Maybe you should broaden your horizons relative to the people you "know in economics or finance or business school".  Try googling "real asset" and "financial asset".  It isn't just the author of the paper I referenced that has this "notion".  It is a broadly held one.  Financial assets are instruments like cash, bonds and STOCK; they are not REAL ASSETS like land, commodities, manufacturing plants, etc.

tecumseh:
I will google the two terms.  Just a casual question concerning the last sentence.  Since a stock is a share in some business why would 1 share in some manufacturing plant not be a real asset?

I am trying to visualize a balance sheet (items on the asset side are listed based on liquidity) and it seems to me that the first category of assets are called liquid assets which includes cash (and near cash).  Following this is financial assets and then (at the bottom and left hand side of the ledger) real assets.

basic investment theory is often presented as a choice between cash* (produces no income but is highly liquid) and then between financial assets vs real assets.

*cash is generally thought to be held for two purposes which are 1) to be capable of respond to unknown events and or casualty and 2) take advantage of unexpected investment opportunity. 

 
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I am 'the panther that passes in the night'... tecumseh.
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