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  • #76
    People tend to be overconfident about where they think inflation is headed. It’s like the stockmarket, most people’s predictions tend to be wrong.

    Central banks in most DM countries have signalled they want wage inflation to be sustainable in the 2-3% range before tapering monetary stimulus. To me this implies a few more years of financial suppression and punishment for bond holders.

    So currently, my AA is 110% risk assets, -10% bonds. I’m allergic to bonds since last year. My equity portfolio is heavily tilted to EM, international and resources so should do ok if there is further inflation.

    Interestingly, I suspect tech and US stocks are being held up by very low real rates. If these were to rise, I don’t think those advocating higher short term rates would like the results.

    Comment


    • #77
      Originally posted by Dont_know_mind View Post
      People tend to be overconfident about where they think inflation is headed. It’s like the stockmarket, most people’s predictions tend to be wrong.

      Central banks in most DM countries have signalled they want wage inflation to be sustainable in the 2-3% range before tapering monetary stimulus. To me this implies a few more years of financial suppression and punishment for bond holders.

      So currently, my AA is 110% risk assets, -10% bonds. I’m allergic to bonds since last year. My equity portfolio is heavily tilted to EM, international and resources so should do ok if there is further inflation.

      Interestingly, I suspect tech and US stocks are being held up by very low real rates. If these were to rise, I don’t think those advocating higher short term rates would like the results.
      I think what you say is true.

      I do think US stocks are being kept afloat by very low real rates but I would personally be OK with the Fed raising rates and stoping the ridiculousness.

      If stocks are over-valued and interest rates are too low and Inflation is too high, wouldn't the "right" thing for the fed to do be to raise rates, cool the market and curb inflation?

      If the market tanks due to rates being above zero then was it ever really valued correctly to begin with?

      Like raising taxes and decreasing spending to decrease a federal deficit, it might not be popular to raise rates but I think it might be good policy.

      I also agree that bond yields suck (would like to see them rise) and that international is a reasonable allocation to be increasing.

      Comment


      • #78
        Originally posted by Tangler View Post

        Yeah, I have zero debt. Paid off house. Pay cash for cars etc. I agree the peace of mind is a real thing. I think it exists because dying with 20M is less important than increasing the risk of blowing up.

        I do not think many (anyone?) on this forum is a huge risk of blowing up, but docs do it and many do it by getting on the wrong side of compound interest.
        Do you personally know of any medical practitioners who “blew up” because they had too much debt?

        I knew of one female physician who stretched to buy a house in residency and had stress for a year because she was tight on money to fix the plumbing. But things worked out for her.

        The main cause of large losses is large gains. People then become overconfident and apply leverage due to overconfidence.

        I think you have it all wrong. You are terrified of sitting at the gambling table. That in itself does not cause large losses. The large losses occur when you win the tournament, think you are the next world champion and give up medicine to become a pro poker player.

        Leverage has its uses and so does sitting at the table if the opponents are really bad.

        Comment


        • #79
          Originally posted by Tangler View Post

          I think what you say is true.

          I do think US stocks are being kept afloat by very low real rates but I would personally be OK with the Fed raising rates and stoping the ridiculousness.

          If stocks are over-valued and interest rates are too low and Inflation is too high, wouldn't the "right" thing for the fed to do be to raise rates, cool the market and curb inflation?

          If the market tanks due to rates being above zero then was it ever really valued correctly to begin with?

          Like raising taxes and decreasing spending to decrease a federal deficit, it might not be popular to raise rates but I think it might be good policy.

          I also agree that bond yields suck (would like to see them rise) and that international is a reasonable allocation to be increasing.
          I don’t think that is the job of the Fed.
          They interviewed people before the COVID crissis and the feedback was that they had contributed to excess unemployment by having rates unnecessarily high for too many years.

          I once thought as you do. But I don’t anymore. I don’t think it is their job to pick bubbles or overvaluation.

          As far as the current period. It could go longer than we anticipate and my goal is not to buy at the top due to FOMO. I deliberately got debt last year so I will have something to pay off for the next 5 years and hopefully do not go insane within FOMO

          Comment


          • #80
            Do you personally know of any medical practitioners who “blew up” because they had too much debt?

            When I first started practicing , in the group was an 80 year old doc, he could not afford to retire. I left after a year, I heard he died a few years later when he was working.

            Comment


            • #81
              Originally posted by Dont_know_mind View Post

              Do you personally know of any medical practitioners who “blew up” because they had too much debt?

              I knew of one female physician who stretched to buy a house in residency and had stress for a year because she was tight on money to fix the plumbing. But things worked out for her.

              The main cause of large losses is large gains. People then become overconfident and apply leverage due to overconfidence.

              I think you have it all wrong. You are terrified of sitting at the gambling table. That in itself does not cause large losses. The large losses occur when you win the tournament, think you are the next world champion and give up medicine to become a pro poker player.

              Leverage has its uses and so does sitting at the table if the opponents are really bad.
              Well, I don't know how personal to get here. These forums are not "anonymous".

              Screw it. Maybe someone will be helped.

              "Do you personally know of any medical practitioners who “blew up” because they had too much debt?"

              Yes. My dad and my oldest brother.

              Perhaps that is why I am a little extra debt averse?

              "I think you have it all wrong. You are terrified of sitting at the gambling table."

              Maybe you should get a little more info before casting that stone.


              Anyway, My dad is 86. He was terrible with money. He worked as a surgeon for too long, partially because he had money trouble.

              He was a smart guy. Really talented surgeon. Like many docs who fail with money he was overconfident.

              Overconfidence bias = most prevalent of human biases (according to Richard Thaler).

              I won't go into the details but at 80 all he had was his SS and he could not afford his home. Debt + excessive spending = main reasons.

              Imagine an 80 year old retired surgeon who is broke!

              The children (including me) had to try to figure out how to help him keep his house and we did not agree exactly with how to proceed and

              so........long dramatic terrible story short..........

              unfortunately it damaged the relationship his kids have with him and each other. Very complex sad situation.

              Family + money trouble = badness. Totally preventable. Infuriating.

              My oldest brother also blew up because of "leverage". He is also a doc. He is 63, broke, terrible money behavior. Excess spending + Debt = root cause.

              My brother had some health problems at age 60 (needed a CABG and knee replacement) and this made going back to work to service the debt just awful.

              The borrower is servant to the lender. If you still have lots of debt that has been growing for years you become an indentured servant.

              His marriage also fell apart about the same time his health went to poo. He was married in medical school to another doc! Two doc family in cheap south east and boom they blew up. They were married for over 20 years. They spent like congress. Debt for everything.

              Seems impossible. I agree with you. Seems like it could never happen. Then you see it.

              So yes. I do personally know a few people who blew up with debt. Yes it can happen.

              Yes, people who borrow money for giant homes and have ridiculous spending habits and don't pay close attention can blow up.

              Compound interest. This wonderful wealth building tool we use. Get on the wrong side of that, ignore it for years, spend like congress and boom.

              Dave Ramsey is correct. The borrower is servant to the lender. If you still have lots of debt that has been growing for years you become an indentured servant.

              When you no longer can work or want to work you are in a pickle. Hard to fix. Complex behavioral issues. Emotional and sad.

              I think I am like the kid who's dad is an alcoholic and I run around telling the other kids. Please don't drink. Drinking can hurt you.

              Dr North in the classic book: “The Millionaire Next Door”, that is basically my dad and my brother.

              OK, sorry for hijacking the tread.

              Inflation and the Fed:

              If it is not the Fed’s job to raise rates to decrease inflation and cool the stock market when it is out of control, what is the role of the fed?

              Did the Fed create inflation and the over-valued stock market by printing trillions and lowering rates and is it possible they went too far?

              Do you think they can print too much money? Is it at least possible that they went too far with the interest rate of zero and printing $?

              Should they raise rates? Would this not also protect them in the future if we have another pandemic or other annoying thing that hurts the economy?

              If rates are zero does this not decrease their power to intervene during another recession?
              Last edited by Tangler; 11-20-2021, 03:52 AM.

              Comment


              • #82
                Originally posted by Tangler View Post

                Well, I don't know how personal to get here. These forums are not "anonymous".

                Screw it. Maybe someone will be helped.

                "Do you personally know of any medical practitioners who “blew up” because they had too much debt?"

                Yes. My dad and my oldest brother.

                Perhaps that is why I am a little extra debt averse?

                "I think you have it all wrong. You are terrified of sitting at the gambling table."

                Maybe you should get a little more info before casting that stone.


                Anyway, My dad is 86. He was terrible with money. He worked as a surgeon for too long, partially because he had money trouble.

                He was a smart guy. Really talented surgeon. Like many docs who fail with money he was overconfident.

                Overconfidence bias = most prevalent of human biases (according to Richard Thaler).

                I won't go into the details but at 80 all he had was his SS and he could not afford his home. Debt + excessive spending = main reasons.

                Imagine an 80 year old retired surgeon who is broke!

                The children (including me) had to try to figure out how to help him keep his house and we did not agree exactly with how to proceed and

                so........long dramatic terrible story short..........

                unfortunately it damaged the relationship his kids have with him and each other. Very complex sad situation.

                Family + money trouble = badness. Totally preventable. Infuriating.

                My oldest brother also blew up because of "leverage". He is also a doc. He is 63, broke, terrible money behavior. Excess spending + Debt = root cause.

                My brother had some health problems at age 60 (needed a CABG and knee replacement) and this made going back to work to service the debt just awful.

                The borrower is servant to the lender. If you still have lots of debt that has been growing for years you become an indentured servant.

                His marriage also fell apart about the same time his health went to poo. He was married in medical school to another doc! Two doc family in cheap south east and boom they blew up. They were married for over 20 years. They spent like congress. Debt for everything.

                Seems impossible. I agree with you. Seems like it could never happen. Then you see it.

                So yes. I do personally know a few people who blew up with debt. Yes it can happen.

                Yes, people who borrow money for giant homes and have ridiculous spending habits and don't pay close attention can blow up.

                Compound interest. This wonderful wealth building tool we use. Get on the wrong side of that, ignore it for years, spend like congress and boom.

                Dave Ramsey is correct. The borrower is servant to the lender. If you still have lots of debt that has been growing for years you become an indentured servant.

                When you no longer can work or want to work you are in a pickle.

                I think I am like the kid who's dad is an alcoholic and I run around telling the other kids. Please don't drink. Drinking can hurt you.

                OK, sorry for hijacking the tread.

                Inflation and the Fed. If the Feds job is not to raise rates to decrease inflation and cool the stock market when it is out of control what is the role of the fed?

                Did the Fed create inflation and the over-valued stock market by printing trillions and lowering rates and is it possible they went too far?

                Do you think they can print too much money? Is it at least possible that they went too far with the interest rate of zero and printing $?

                Should they raise rates? Would this not also protect them in the future if we have another pandemic or other annoying thing that hurts the economy?

                If rates are zero does this not decrease their power to intervene during another recession?
                I’m sorry if I triggered something there. I was reacting myself in an exasperated way to your anti-debt stance. I like reading your thoughts and other peoples. You lay out your thoughts well.

                I also have/had an anti-debt stance and a more or less hard money attitude. I’m still not sure what the correct stance on it is, but currently I feel it has hindered me.

                I used to look at it as, you try not to make mistakes and not blow up. The way I look at it now is that mistakes are inevitable. I think what leverage mistakes can teach you is that you can be wrong. I’m not sure if others experienced it, but you come to a point where you either take the loss or keep doubling down.

                The fed on printing money, I think that can be a rabbit hole. I think the system has problems but they are doing their best. I think it is very easy to look at correlations and think it means causation. It may seem like the fed are a bunch of serial bubble blowers and engender bubbles or they may just be following the natural progression of interest rates (which would have gone down anyway in the last 20 years). I am not even sure what a bubble is anymore.

                What I was trying to say was that debt does not always have to be a bad thing. I have seen a lot of people miss out in housing because of their debt aversion. I guess every strength can also be a weakness. Maybe I’m too glib about the potential negatives about leverage. It can certainly have negatives and most people will overdo it at some point and be burned. What you learn from that is very individual. Where I am at currently is that it resulted in me being too debt averse and leaving too much on the table.

                I guess we are always reacting to something. So it’s hard to know what is the optimum. I like to take the other side of my bias. Interestingly, my father also took some bad financial risks, and that probably had an effect on me also.

                If it seems like I’m criticising you, it’s more that I do agree with some aspects of your thinking but have come to realise that it’s been a hindrance.

                There is a lot I like about this forum. I like the agreement, but I mostly learnt from where others disagreed with me. I hope I didn’t cause offense though. So I think I would have agreed with you 10 years ago, but today I would disagree. Debt can be harmful, but I think debt can be good too!

                Comment


                • #83
                  Originally posted by Dont_know_mind View Post

                  I’m sorry if I triggered something there. I was reacting myself in an exasperated way to your anti-debt stance. I like reading your thoughts and other peoples. You lay out your thoughts well.

                  I also have/had an anti-debt stance and a more or less hard money attitude. I’m still not sure what the correct stance on it is, but currently I feel it has hindered me.

                  I used to look at it as, you try not to make mistakes and not blow up. The way I look at it now is that mistakes are inevitable. I think what leverage mistakes can teach you is that you can be wrong. I’m not sure if others experienced it, but you come to a point where you either take the loss or keep doubling down.

                  The fed on printing money, I think that can be a rabbit hole. I think the system has problems but they are doing their best. I think it is very easy to look at correlations and think it means causation. It may seem like the fed are a bunch of serial bubble blowers and engender bubbles or they may just be following the natural progression of interest rates (which would have gone down anyway in the last 20 years). I am not even sure what a bubble is anymore.

                  What I was trying to say was that debt does not always have to be a bad thing. I have seen a lot of people miss out in housing because of their debt aversion. I guess every strength can also be a weakness. Maybe I’m too glib about the potential negatives about leverage. It can certainly have negatives and most people will overdo it at some point and be burned. What you learn from that is very individual. Where I am at currently is that it resulted in me being too debt averse and leaving too much on the table.

                  I guess we are always reacting to something. So it’s hard to know what is the optimum. I like to take the other side of my bias. Interestingly, my father also took some bad financial risks, and that probably had an effect on me also.

                  If it seems like I’m criticising you, it’s more that I do agree with some aspects of your thinking but have come to realise that it’s been a hindrance.

                  There is a lot I like about this forum. I like the agreement, but I mostly learnt from where others disagreed with me. I hope I didn’t cause offense though. So I think I would have agreed with you 10 years ago, but today I would disagree. Debt can be harmful, but I think debt can be good too!
                  Thanks. yes.

                  I hate the whole "triggered" thing. You asked a question, I gave you a personal honest answer about a bad outcome.

                  Like M and M maybe someone will benefit. I'm not a victim. Neither are my family members.

                  They just screwed up, and some good can come from it, I hope. It can happen. Just like drugs/alcohol.

                  Also, thanks for the sentiment. Yes, we certainly learn more when we disagree.

                  What you say is very true: "Debt can be harmful, but I think debt can be good too!" Sure. Debt = Risk. Risk amplifies the outcome.

                  Debt can do some good. I never would have gone to medical school without student loans. I never would have bought a home without a mortgage, etc.

                  I think when you are young (< 35) you have a ton of human capital and using debt to buy things that go up in value or to get an education with a good ROI, these things can be intelligent behavior.

                  The problem is people do too much. People spend too much and borrow to facilitate spending and they get sloppy.

                  Rum can do some good, (great in baking) but if you drink it every morning that is probably a bad sign.

                  Debt makes it feel like monopoly money. It takes the pain out. Spending can get out of control. They think: I "need" that big house, new car, nice boat, second home.

                  People need to be cautious and realize that debt = risk.

                  Obviously higher risk = higher possible returns.

                  If you are young, have human capital (lots of working years ahead of you) then it is reasonable to use.

                  Debt: There is a point where it becomes too much and docs don't need to use tons of leverage to win.

                  Banks, CC companies, etc. they are not fools. Debt makes it not hurt to spend and some people eventually screw up:

                  This MRI study from MIT, Stanford and CM scares me:

                  https://www.cmu.edu/homepage/practic...it-hurts.shtml

                  I don't think we disagree on this : "Debt can be harmful, but I think debt can be good too!"

                  Back to the Fed. I frankly wish they were less involved and we had less government.

                  But if they are going to drop rates and print trillions I think they need to at least consider raising rates and stopping the presses when indicators like inflation appear.
                  Last edited by Tangler; 11-20-2021, 04:30 AM.

                  Comment


                  • #84
                    I think both Tangler and dontknowmind are making good points. Very few of us could have gotten anywhere without debt at some point. I have certainly utilized mortgages, student loans, and credit cards. As my human capital dwindled I became more debt averse. I think this is natural. When I was in my 30s I did not pay off either student loans or my mortgage ahead of schedule. I aggressively bought stocks. I really did not know what I was doing but I believe I did the right thing at the time. I am old enough to remember really high inflation when the mindset was we better buy it today because it will be more expensive next week. Now I tend to think especially with tech products if you wait the price is similar but the features improve.
                    I too have seen doctors blow up due to overspending, divorces, and lack of planning. I talked to a friend recently who is still working even tho he is older than me. He has health problems and simply cannot afford to retire. Very sad.
                    If inflation really becomes much higher for long periods it will change a lot of financial plans. I too bought some I bonds. I have not rebalanced for several years in effect letting my equities run. In view of likely raising rates I cannot stomach any more bonds. I am thinking in terms of absolute value rather than percentages on allocation.
                    I am unlikely to take on any debt. I have opened an account at coinbase and am considering a small crypto investment. It would force me learn about it if I owned a small position. Random thoughts.

                    Comment


                    • #85
                      Originally posted by JBME View Post

                      one specific self-interest Tim left out, though covered in his list if I take it broadly, is re-election. The #1 driver of any politician is how this will impact their re-election chances, both in the primary and in the general election. Larry's list is both good and bad for both sides of the ideological spectrum. Instead of everyone liking it and being willing to get hurt on some things so that the entire whole is made better, everyone will instead focus on the glass half empty instead. Very sad. Larry's list is reasonable, not to mention boring, which is why it'll never happen
                      Maybe I did not elaborate sufficiently. The Top 10 Stupid Pet Tricks. This is the mechanism used for soliciting campaign contribution and votes. Messaging. Witty and friendly , bombastic or simply a "saint" for whatever cause that works. Marketing campaign for money to make the candidate "popular". Money and votes count in elections.
                      Perception counts and overrides policy.

                      Comment


                      • #86
                        Debt to fund lifestyle expenses always bad. Debt to invest, either in yourself or assets not always bad. There's a significant difference between the two.

                        Comment


                        • #87
                          Originally posted by Nysoz View Post
                          Debt to fund lifestyle expenses always bad. Debt to invest, either in yourself or assets not always bad. There's a significant difference between the two.
                          True, but using debt always increases risk.

                          Comment


                          • #88
                            When I was younger and just starting out I was more willing to take risks particularly with purchasing rental properties that were totally dependent on a future tenant paying rent. I have too much to lose now but all is well that ends well I guess.

                            Comment


                            • #89
                              Originally posted by Nysoz View Post
                              Debt to fund lifestyle expenses always bad. Debt to invest, either in yourself or assets not always bad. There's a significant difference between the two.
                              But how often do we see people who take on debt to invest in themselves for say medical school but then hang onto that debt to maintain a higher lifestyle. Money is fungible. If you have debt anything you spend is on credit. Sometimes is is a wise choice but most people do not make a choice. They just spend and do not think about it.

                              Comment


                              • #90
                                When student loans resume Jan-March 50million Americans suddenly start having minimum $300 less per month. I think that will have an effect....

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