Joel Mokyr's The Culture of Growth is one of the best economic history books one can read. He has co-authored Two Paths to Prosperity, which is being released November 4. I have a feeling it's going to be even better with more detail. Available for pre order on Amazon:
And to just say, yield curve control is probably coming. The political incentives for pain avoidance are getting high. Adjust your books accordingly, lol. Thanks again Allison, great piece.
Just give every college senior this essay and forget all the text books and lectures!
PS: I wondered if the graph of gold vs S&P and the 10-year was price only for the S&P. If so with dividends reinvested, the comparison would be considerably different.
Gold has one major advantage -- it's not just numbers in a computer which the government can confiscate.
I'm not a conspiracy theorist who thinks any government actually would confiscate bank balances and throw the economy into a tail spin. I know FDR made gold illegal, I know the FDR and Modi both made old currency illegal, and I know government could do it again without any timely court interference. But distrust of government is still a factor in gold's popularity.
So long as Pols are able to take the cream off the top, live high above the voters standard of living, they will for their own selfish reasons tell any number that they will protect them from change, and saying any hardships they face are not their fault and just vote for me and all will be well. AOC and her expensive handbags, Bernie S with his many homes resemble any number of leaders in the past kings, queens, dictators , all who lived high on the hog while down in the valley the story was very much different.
And yes, i agree with you that yield curve management a real risk once Trump is able to give Powell the boot.
Simple brilliance->"if you need more money for retirement, there are three things you can do:
Save more.
Take more risk.
Work longer."
My years in Silicon Valley weren't so wasted after all. I suppose I unwittingly took a risk living there, not knowing it would turn into a dangerously woke place. Choosing where to live involves a risk-reward tradeoff. Same with saving and working more--bot involve a risk-reward tradeoff.
Nothing beats stocks for long term savings. 100% in stocks until near retirement is the superior answer, I agree
But once in retirement and drawing down the savings, retirees face sequence of return risk (SORR). Gold is the ideal ballast to stocks, and has been for decades, at least 75 years, but in particular since we went off the gold standard.
Now that the Fed knows to avoid deflation, gold is in fact a much better ballast for stocks than bonds are.
You can see more backing for my claims at this link from the fantastic website EarlyRetirementNow and its Safe Withdrawal Rate series.
You can see my point for yourself with the spreadsheet from there that rather than the traditional 60-40 stocks-bonds, a 65-35 stocks to gold balance has delivered much higher safe withdrawal rates since 1950.
"Merton always said to me: if you need more money for retirement, there are three things you can do:
Save more.
Take more risk.
Work longer.
That’s it. And economic growth is the same. If we want growth, we must also reduce our debt, work longer (or get younger), and take more risk."
Kind of a strange analogy... whatever one thinks about the relationship between economic growth and national debt, it couldn't possibly be parallel to the relationship between portfolio growth and personal debt. In the case of personal finance, money you save literally goes into your bank account and becomes money you have available for retirement. Money the USG saves doesn't go into America's bank account and literally become economic growth.
The 4th way to attain personal wealth is of course to spend less. And for economies, that translates (roughly) into reducing predation and rent seeking.
Joel Mokyr's The Culture of Growth is one of the best economic history books one can read. He has co-authored Two Paths to Prosperity, which is being released November 4. I have a feeling it's going to be even better with more detail. Available for pre order on Amazon:
https://www.amazon.com/Two-Paths-Prosperity-Institutions-1000-2000/dp/0691265941/ref=sr_1_1?crid=IGS9DBK986VK&dib=eyJ2IjoiMSJ9.XnUKAGNRMHSJr6BDObQPUr11xgnHFxb5IlWkuDtPqpk.hvqgfJQMMYsS-RdYDCTViyj2iSTn3KuO26Vow0ev1tI&dib_tag=se&keywords=two+paths+to+prosperity.+mokyr&qid=1760968078&sprefix=two+paths+to+%2Caps%2C157&sr=8-1
And to just say, yield curve control is probably coming. The political incentives for pain avoidance are getting high. Adjust your books accordingly, lol. Thanks again Allison, great piece.
Harvey
Wasn’t it always the case that American workers had illiquid wealth? During the pension era it probably worked that way too, right?
One of my friend called it the Cookie Diet. Can't we just eat cookies, lose weight and get healthy without all that eating healthy and exercise.
Just give every college senior this essay and forget all the text books and lectures!
PS: I wondered if the graph of gold vs S&P and the 10-year was price only for the S&P. If so with dividends reinvested, the comparison would be considerably different.
Tbf, there are more suc- investors interested in buying gold than inflation-linked bonds.
Gold has one major advantage -- it's not just numbers in a computer which the government can confiscate.
I'm not a conspiracy theorist who thinks any government actually would confiscate bank balances and throw the economy into a tail spin. I know FDR made gold illegal, I know the FDR and Modi both made old currency illegal, and I know government could do it again without any timely court interference. But distrust of government is still a factor in gold's popularity.
So long as Pols are able to take the cream off the top, live high above the voters standard of living, they will for their own selfish reasons tell any number that they will protect them from change, and saying any hardships they face are not their fault and just vote for me and all will be well. AOC and her expensive handbags, Bernie S with his many homes resemble any number of leaders in the past kings, queens, dictators , all who lived high on the hog while down in the valley the story was very much different.
And yes, i agree with you that yield curve management a real risk once Trump is able to give Powell the boot.
Well said post!!
Simple brilliance->"if you need more money for retirement, there are three things you can do:
Save more.
Take more risk.
Work longer."
My years in Silicon Valley weren't so wasted after all. I suppose I unwittingly took a risk living there, not knowing it would turn into a dangerously woke place. Choosing where to live involves a risk-reward tradeoff. Same with saving and working more--bot involve a risk-reward tradeoff.
Nothing beats stocks for long term savings. 100% in stocks until near retirement is the superior answer, I agree
But once in retirement and drawing down the savings, retirees face sequence of return risk (SORR). Gold is the ideal ballast to stocks, and has been for decades, at least 75 years, but in particular since we went off the gold standard.
Now that the Fed knows to avoid deflation, gold is in fact a much better ballast for stocks than bonds are.
You can see more backing for my claims at this link from the fantastic website EarlyRetirementNow and its Safe Withdrawal Rate series.
https://earlyretirementnow.com/2020/01/08/gold-hedge-against-sequence-risk-swr-series-part-34/
You can see my point for yourself with the spreadsheet from there that rather than the traditional 60-40 stocks-bonds, a 65-35 stocks to gold balance has delivered much higher safe withdrawal rates since 1950.
https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/comment-page-3/
This is not my website, nor is the site paid; I’m just a very satisfied consumer of Karsten’s work.
"Merton always said to me: if you need more money for retirement, there are three things you can do:
Save more.
Take more risk.
Work longer.
That’s it. And economic growth is the same. If we want growth, we must also reduce our debt, work longer (or get younger), and take more risk."
Kind of a strange analogy... whatever one thinks about the relationship between economic growth and national debt, it couldn't possibly be parallel to the relationship between portfolio growth and personal debt. In the case of personal finance, money you save literally goes into your bank account and becomes money you have available for retirement. Money the USG saves doesn't go into America's bank account and literally become economic growth.
The 4th way to attain personal wealth is of course to spend less. And for economies, that translates (roughly) into reducing predation and rent seeking.