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Comment by piffey | Hacker News Reader

There's also the saying though of "buy when there's blood in the streets, especially if it's your blood". All got to go up sometime. Just how much capital do you have to wait out the drop?

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He’s not wrong but remember “the markets can remain irrational longer than you can remain solvent” -- ancient financial proverb

That was coined for investment capital that comes with a cost. E.g. (in its simplest) borrowing money to trade with, and then having to make regular payments to maintain your positions.

Assuming you have no pressing needs for your invested capital (e.g. most retail investors), the market cannot actually stay irrational longer than you can remain solvent.

This is true for typical long positions but not for time based options. Some retail investors do buy those too.

Time-based options have a fixed cost which you pay up front. So again, there is no risk of insolvency because you've already paid up front and capped your losses.

Not if your strategy is to short the contracts instead of buying it.

There's also the saying "Don't catch falling knives".

> All got to go up sometime

Well, the companies that don't go bust.

>All got to go up sometime.

Why?

Well, it doesn't really, but if it doesn't then it won't matter much where your money is.

Japan has had stagnant stocks for decades and isn't in collapse.

I view it as such: do you believe we have achieved peak efficiency with regards to production of goods and providing services? If not, there’s room for the economy to grow.

I am not an economist though, this is just my layman’s view.

This isn't quite true. I get what you're saying, but from a technical perspective, it's not accurate. The markets also go up based on the total money supply in the system. If the government takes on a lot of debt, eventually a portion of that makes its way to the stock market, among other places.

You don't actually need to improve efficiency/productivity if the government has tools like the discount rate, open market operations, the ability to alter margin requirements on derivatives, fed funds rate, as well as programs and policies like MMIF, TAF, CPPF, ABCP, TALF, ZIRP, to manipulate the money supply and the velocity/flow rates of money.

The actual question is whether the market thinks that future efficiency gains are on the way or not. If the market does, then that efficiency is already priced in and you can't make any money off of it.

What you actually have to figure out is: is there any unexpected future efficiency gains that the market doesn't expect. You have to know something that the market does not.

> The actual question is whether the market thinks that future efficiency gains are on the way or not. If the market does, then that efficiency is already priced in and you can't make any money off of it.

Isn't this ignoring opportunity cost, uncertainty, etc.? If the expectation of future gains is priced in, wouldn't treasury bonds sell for face value + remaining interest on the secondary market?

I guess they are assuming perfect knowledge.

I'm sure all the players are acting rationally as well!

We're not near any fundamental limits on growth. They exist, but the economy can get a lot bigger before it hits them. I have heard some really daft arguments about it ("the observable universe is finite!") and some less daft arguments ("resource shortages are more likely than asteroid mining within our lifetimes") but all of these predictions are for things a long time in the future.

Or even "our political economy is managed by corrupt morons who would rather see the world burn than deal with our actual problems."

Just because you aren't at the limit doesn't mean that it will go up though

Yes, it does. All of the processes that have driven growth in the past are still working, and they will until they reach their limits. That's what it means for them to have limits. Why would people stop engaging in economic activity while it's still possible to do so?

Because the markets are funded by people and people are irrational.

At the very least wouldn't inflation cause an upward trend even if small?

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