The existence of a financial elite hinges on the existence of a non-elite that actually does the work. If workers are putting 25% of their paychecks in an index fund and retire a few years earlier, instead of paying off their too-expensive car loan or something, it will be bad for the current financial elite.

In the end money is just an abstraction to determine who has to do back-breaking work all day, and who doesn't.

Nobody is complaining about people placing their paychecks in index funds though. Index funds are a reasonably good proxy for the future health of the economy, so your gains from it will likely represent real growth. By contrast, gains made from cryptocurrency and speculative stock must be coming from someone's losses.

There was an article on the front page of Hacker News in the last couple days about how index funds were supposedly ruining the economy.

Index funds happen to represent ownership of productive assets, but the assets don't really care who owns them, your investment in an index fund doesn't increase the number of productive assets in the world, likewise with cryptocurrency.

Not directly, but it creates an incentive landscape that encourages the formation of more capital, basically making the potential payoff of starting a company larger and more likely.

On the other hand cryptocurrencies are negative sum. The only way the early folks make money is when late folks put money into the system. At the same time, the house (miners) are constantly extracting massive amounts of actual liquidity. The "sum" of Bitcoin is negative 21,000,000,000 per year. This welfare is extracted by Chinese mining cartels bribing their local governments for access to coal-powered electricity. Enough to offset all of the solar panels installed in the entire world.

The total amount of wasted power per Bitcoin transaction is now 30 days of power for the average household, and generates 100 grams of non-recyclable e-waste.

Eventually, some rich people will notice that they aren't getting as much money from buybacks and dividends as they used to and will place their money elsewhere. It would be relatively more attractive to invest in developing countries or buy PR in the form of charity.

Were.

Index funds were a reasonably good proxy.

They have been completely detached from reality for at least a year, and arguably for several years.

S&P has doubled over the past 5 years. Does that mean the economy has also gotten twice as healthy?

https://www.theatlantic.com/ideas/archive/2021/04/the-autopi...

Somewhat related, I really want to see someone offer some kind of customizable index fund. Let me start with a base index, and then exclude or include companies at will. e.g. start with the S&P 500, kick out companies like Exxon and Facebook and add in Tesla (pre inclusion), while the service auto weights investments appropriately.

You and me both! https://news.ycombinator.com/item?id=25552346

(Also, to your point, as someone commented on that thread this does already exist if you have enough money)

https://support.wealthfront.com/hc/en-us/articles/211005023-...

Maybe, but are you insinuating that no back breaking work would need to be done if money weren’t to exist?

Pretty sure the introduction of money reduces the total amount of backbreaking work to be done. Instead of hauling grain to trade for axe heads and carrying those back to your farm, you carry coins, paper, or in modern times, tap a few buttons on your smartphone.

Money is an abstraction, but the status quo as a whole (monetary policy, capital markets, labor policy) is designed to ensure a supply of labor. Capital begets capital [1], so those who don't have will engage in riskier behavior to get off the wage slave treadmill.

[1] https://news.ycombinator.com/item?id=16592414 ("I think capitalism is much simpler: capital begets capital. Those who have capital will accumulate more capital, almost infinitely, until the capital/income ratio reaches an equilibrium who knows how high (in the absence of major corrections like wars and hyper inflation). Add inherited wealth and low taxes. Capitalism's winners are those who already have capital. Thomas Pickety's book "Capital in the 21st Century" cogently illustrates this using massive tax return based data sets.")

If the grain only ever exists on your farm, it has no value to anyone else whether for coins or axe heads.

But yeah, it's mostly the financial elite freaking out that their kids might actually have to be a wage slave for a living.

That aside, you know what’s averaged returns of 10% that’s simple and hasn’t risked your money going to zero (assuming you have the good sense to buy and hold)?

The stock market. Bog-standard index funds, available to anyone and everyone. VTSAX has returned just about 10% since Jan 1, 2000. Ironically, it’s about double that for the past ten years (since the recession caused it to be roughly even over the first ten years of that span).

The average person doesn’t need to gamble on options to get ahead. They already do have access to products with outsize returns compatible with a level of risk tolerable for one’s retirement nest egg. What we need are jobs that allow the average wage-earner to actually save a meaningful amount of money in these instruments.

Long run even the stock market only averages about 7%, and that isn't simple or safe - but it beats other asset classes on return. Asking for a risk-free 10% is pretty much a fantasy.

One weird thing about the amount of volatility in recent years is that people are simultaneously used to the idea that their "cash savings" earn approximately nothing, but turn their noses up at a 5%-7% return. Historically speaking this irrational.

There are a few cases I can think of immediately where this applies - gambling with novices in Blackjack, for example, is not ideal. They'll screw up the flow of cards and can cause your math to go haywire. The same happens with Hold-em or Omaha Poker - you want people to have enough skill to play the game properly, but if you're looking to fleece them not enough skill to play the game well.

In Blackjack the other players are not really relevant, the count stays the same and on average you will be about equally profitable with or without them. They might increase the variance a little but they reduce the attention the dealer pays on you and my team never minded others on the table.

In Hold'em and Omaha you WANT weaker players, they are in short supply, and you will expect to have an edge against someone that barely knows the rules, too.

Sure, I'm more likely to beat the person that is going all in with a 2 5 off suit but bad beats are incredibly annoying. Over time, in a sit and go situation I'd beat that player, but online and in tournament play I found that was a hazard. I'll take a consistent bad player over a complete novice any day.

I don't know about you, but when I was grinding, I didn't really want to increase variance. I wanted a stable mental state with low focus on multiple tables to maximize the rate of return over that period. I found that alterations in that caused me to play more loosely, which ended up leading to avoidable mistakes, magnified because I'm playing multiple tables at once.

The same thing was true for a tournament. There's a far more limited return from players like this, in part because you meet them early. It's a fact of the online game that people just go all in a lot especially in the beginning, but it ends up being a gauntlet you just need to get through. I wouldn't call them my ideal opponents; it's not what I prefer, it just exists.

Maybe I'm not what you would consider a strong player but I did win consistently enough to feed myself with it for a couple of years, mostly online before it became illegal. It wasn't really my experience that high risk high reward play was the way to go. Most of the people I played with worked to limit variance's effect on their game, not increase it.

Again though, that's just me - not the strongest player ever, you clearly have a different opinion about it. All good.

It doesn't mean you were a bad player, but it sounds like you might have been avoiding some potentially +EV situations due to lack of comfort with trickier opponents/situations. That's fair enough if it worked for you--it's not at all necessary to play every situation perfectly to have a healthy win rate. Towards the end of my poker career I was playing mostly heads-up, which teaches you to be pretty fearless about exploiting any and every edge, and to get comfortable with aggression. But there was a point in my progression where I'd get thrown off as well. And even after I felt like I was pretty damn good, I knew players who were clearly head and shoulders above me, so it's all relative.

When someone just consistently plays bad, that's the ideal situation.

Even your more moderate point you’d rather not have them in the game is totally wrong.

In reality, every professional player loves players who do terrible, random things. Variance might go up, but variance is going to be annoying either way. Other players doing dumb things is where your EV comes from. I’ve only ever heard complaints about crazy players being a hassle from inexperienced amateurs who dabble. Pros want “live ones” in their games.

An actually strong player won’t have that problem.

Disclaimer: chess novice, don't know anything about poker.

An expert playing against beginners might 'lose' 50% of the hands they get involved in still, and make a ton more money on the ones they win. It's the difference between an average of 5 big blinds / hr, and 50 big blinds / hr.

I'm not an expert by the way, I just consider myself an 'advanced beginner', who can count on making $2-4 / hr playing 1/2 no limit at the casino (based on having played maybe 200 hrs of poker in the casino). Not worth it as a way to make money, and I stopped caring enough about poker to invest the time to become better.

But you can see the entire dynamic at a table change when a loose, novice player sits down. Players no longer play against each other as much because they can count on the loose player to raise the stakes, and they're much more likely to capitalize on that.

I once played 1/2 NL uncapped at a casino, a guy sat down and put $1000 on the table. Every other hand he would raise $25-50 preflop, and call re-raises. Got all in pre-flop and pre-turn a bunch of times, every time he bust he put another $1000 on the table. This is exactly the best player to play with. Yes, you have to sit and wait for good cards before getting involved, but if you get something good, you have very good odds of stacking them.

This is a statistical fallacy.

>This is a statistical fallacy.

Yes, "Your blackjack outcome is independent of other player's decision" IS a statistical fallacy. You're correct.

It's pretty easy to prove this.

Is the number of cards in play finite? Yes. Can other people at the table get more cards than they begin with? Yes.

If someone can impact the number of cards left in the deck, wouldn't they have the potential to change your outcome?

Housing prices on average across the US, on an inflation adjusted basis cost the same exact amount per square foot as they did in the 1970s. They're twice as big now. And in areas where they are more expensive, it's driven by cities refusing to allow new construction to match demand. Simply a supply and demand issue, and a zoning issue.

Why do you think the others are specifically because people "close to the king" are able to capture all the effects? That's the part you haven't proven.

And it is just supply and demand, and you've addressed supply but what is driving so much demand, and why do participants in that market have so much more money to be bidding up prices.

And looking at inflation in different targets of money is something that economists do all the time when they divide inflation up between CPI and core CPI ex-volatile commodities. This is just looking at the things that rich people buy and the inflation in those things versus the inflation in the broader economy. We know the rich are getting richer, the gini coefficient keeps on getting more skewed, and the things that rich people buy are getting more and more expensive. You can't call this "inflation" though because economists object because they invented that term and they'd prefer to call it asset bubbles. But cantillon effects describes it a bit better. They're capturing more of the gold and prices are rising in the things that they use it on creating skewed effects in the rise of prices in the economy.

This is something a quick visit to Wikipedia will explain to you. [1]

> Since the 1960s, San Francisco and the surrounding Bay Area have enacted strict zoning regulations. Among other restrictions, San Francisco does not allow buildings over 40 feet tall in most of the city, and has passed laws making it easier for neighbors to block developments. Partly as a result of these codes, from 2007 to 2014, the Bay Area issued building permits for only half the number of needed houses, based on the area's population growth. [1]

They literally built half as many houses as needed.

> ... and why do participants in that market have so much more money to be bidding up prices.

That would be because of the number of high-paying jobs added in the Bay Area.

> At the same time, there has been rapid economic growth of the high tech industry in San Francisco and nearby Silicon Valley, which has created hundreds of thousands of new jobs. The resultant high demand for housing, combined with the lack of supply, (caused by severe restrictions on the building of new housing units) have caused dramatic increases in rents and extremely high housing prices. [1]

Remember, these are outliers as on average across the US, on an inflation adjusted basis, the $/sqft price of housing has not budged since the 1970s. However, zoning rules left the average new house twice as big outside of metros, and regressive policies in metros skewed the supply side of supply and demand.

Thing is, I'm frustrated because you're right to be mad but pinning this on the Fed is pissing into the wind. Put the blame where it's due: deregulate housing construction. Allow supply to grow to meet demand. It's not rocket science.

The only thing the Fed has done to raise the price of houses is decrease interest rates. A drop from 5% APR on a 30-year fixed to 2.5% APR means for the same monthly payment you can afford a house 25% more expensive. Fundamentally however this didn't change the affordability of housing for the borrower class.

The cantillon effect may account for some subset of this wherein wealthy borrowers with easy access to capital are able to take advantage of the lower price of housing (before bid up) and also the lower interest rates. However, I've found zero quantification of this.

[1] https://en.wikipedia.org/wiki/San_Francisco_housing_shortage

[2] https://fee.org/articles/new-homes-today-have-twice-the-squa...

The answer is to increase the total investment rate via infrastructure bills or to just inflate excess corporate savings away with stimulus checks. Inflation will allow the Fed to raise interest rates, which will cut into the corporate savings rate and after that point everything will return back to normal.

Risk is one factor, but not the only one. The main factor in low-risk investment returns is time preference. In essence: People are willing to pay rent (interest) in exchange for access to money now rather than later. Those with savings can earn a profit by renting out their accumulated savings even in a risk-free scenario where return of principle is 100% guaranteed.

[1] https://corporatefinanceinstitute.com/resources/knowledge/tr...

/thread closed

While yields over the past year have been rather low at about 2% due to some very unusual circumstances, and T-bill rates are essentially negative at a mere 0.17% nominal yield, US corporate AAA bonds have a long-term average effective yield of over 4%[0] with essentially no chance of default. This is considerably higher than inflation and nearly risk-free to the investor. These corporations could instead have saved up the amount of the payments and had that money at the end of the bond period, but they wanted the money now rather than later, and that is why they're paying you interest.

[0] https://ycharts.com/indicators/us_coporate_aaa_effective_yie...

I agree, but I also don’t see this sentiment coming from the industry itself, with the exception of some people who go along with that narrative to get some TV time. It really seems to me more like the financial TV media are the ones who feel threatened by the emergence of WSB etc. and portray it as if it’s the sentiment of the broader investing community. But largely that community is just excited by any novelty as it creates opportunities that boring times don’t.

"Professional" and "expert" aren't synonyms. "Amateur" and "novice" aren't synonyms either.

An expert might be glad to go against a novice. But when there are artificial barriers separating "professionals" from "amateurs", barriers that have nothing to do with level of expertise, that's a different story.

It depends on the situation and the game. Some poker professionals don't gamble significant sums with novices because the novices are far less likely to behave in a manner that is predictable according to statistics or some other strategy.

You dont get money because someone else lost some. You get money because you helped stabilizing the market by predicting it right. The losers lose because they predicted it wrong. Its a net gain for everyone who is somehow affected by the market which means basically everyone on this planet. There is no moral problem with winning or with loosing as you help either way.

Also there is no need for anyone to lose, everyone could be right all the time that would give a perfectly stable market, but people are terrible at predicting the future so that will never happens.

there is a huger "we all" that don't.