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Comment by wonderwonder | Hacker News Reader

Very curious to see what happens with the US housing / real estate market. I think stocks / equities are going to see a severe down turn this year and a good deal of money is going to leave the market. At the same time inflation is very high so sitting in cash is a loser as well albeit not as bad as riding the markets down. Will that money from the stock market go into real estate or will real estate crash too as the fed raises rates? Will remote work continue and in doing so will it reduce pricing on commercial business offices? Will business offices convert to condos? I have no idea but interested to hear any theories.

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Depends on how much the real estate market is being fueled by the Stock Market. We've seen a bull market now for the last, what, 13 years? Is this continual wealth driving all the other prices upward?

As we saw in 2008/2009, financial markets are linked more so than they tell you. Diversifying your portfolio is a good idea, but having both real estate and stock investments is probably not in fact diversifying.

Include labor and leverage in your thinking on diversification as orthogonal dimensions to asset class. Even rich people can bring their own labor out of reserve when there assets are losing value. When assets appreciate, they can rebalance towards leisure.

The fun bit is that everything is 'overvalued' now - stock market, real estate, even crazy things (many parts of crypto such as NFTs, but also Pokemon cards and other collectables) are through the roof, where will all this money go? money out of a bubble has to go somewhere...

How far are we from the boomer generation leaving the market (one way or another)? This will create a lot of oversupply and negative pressure on prices I would assume - who will buy all their houses in the country, their share in the stock market? The answer to that is that we've been doing that already in the past decade with all the money printing / inflation / devaluation of wealth... not sure where the train stops and who will be left holding the bags.

Anyone buying in between now and the future is holding the bag as value terminally declines. These are structural demographic issues combined with technology deflationary pressures, leading to heat death of asset baskets supported by declining productivity of aging populations. See Japan for a preview.

The juice was squeezed over the last 40-50 years, and those times aren’t happening again [1].

[1] https://ourworldindata.org/uploads/2013/05/Updated-World-Pop...

That’s only true if we cutoff immigration, which is how the US has offset the downsides of lower fertility.

Even if we can’t defer those problems forever, we can slow down the transition, making it less painful than the one experienced by Japan.

Birth rates are down worldwide except in Africa, and if I had to forward look based on current developed world policy (Japan, US, Europe migrant policy), I don’t think the US is going to drastically increase immigration quotas. Again, like Japan. Older citizens will want to keep their culture static, and they weight that higher than economic growth.

I think you're drastically underestimating how many people emigrate to America. As of 2018 44 million Americans were born in another country and immigrated here[0], representing one fifth of the world's immigrants. As a percentage of the US' population (13.7), this is very close to the all time high of 14.8% in 1890. Our immigration wave right now is damn close to the peaks of the Ellis Island period of Italian and Irish immigration in the late 1900s. And that's as a percent of the current population, by total numbers this is the biggest wave ever.

Japan is trying to increase its immigration for the same reasons I mentioned, and they're struggling for the reasons you mentioned. Only 2% of their population is foreign born[1], which is up from past figures, but still a drop in the bucket compared to the US system.

You're totally right that there's going to be political and cultural issues over immigration, there always is. But America has the political and social institutions necessary to maintain a high level of immigration over long periods of time, which can help damped the blow of fertility change even if it's insufficient to fully reverse the trend.

0 - https://www.pewresearch.org/fact-tank/2020/08/20/key-finding...

1 - https://www.oecd-ilibrary.org/sites/e025d47d-en/index.html?i...

Birth rates are predicted to keep going down though, meaning the supply of immigrants will dry up anyway.

There's about 6.5 billion people (and that number is growing!) in developing countries.

You're safe for at least 50 years.

It won't though. The UN's models on the area say that world population will continue to grow (population has momentum) until the end of that century, at which point population growth will be very close to 0, with an estimated population of 10.5 billion people. So even in total numbers, we won't run out of people anytime soon.

Even when global populations begin to fall, we can still keep immigration up. There's nothing at all inconsistent with falling populations and immigration. Economically there might be a lot of pressure for people in places with falling populations to emigrate, because of the economic effects of sudden population drops.

> everything is 'overvalued' now

You are describing hyperinflation. Everything is up, except for salaries. There are two options:

A) accept the prices as real, embrace the inflation, and raise salaries

B) crash the markets and real estate, kill all the crypto-scam economy, keep jobs running with government money

Some kind of mix of both will happen. I doubt that salaries can continue this low when basic needs cannot be covered. And I doubt that it's possible to just rub off so much inflation, some things need to go down. So, we can meet in the middle.

What's happening in much of the world today isn't hyperinflation, it's just fairly high inflation, after a long period of very low inflation.

The two options you describe sound to me like they're only viable in a very centrally planned economy, and are fairly independent of general inflation. You can't really deliberately move prices like that unless you're willing to interfere in markets to the extent that, say, the Chinese government does.

Stock markets will do their own thing. The price of a share of a given company will go up and down based on ever-changing estimates of future earnings of that company.

Real estate demand is fairly inelastic, so prices there won't really go down unless you either massively increase supply (staring down NIMBYs and keeping costs under control - challenging on both counts), or decrease demand (somehow make huge numbers of people move to places with less pressure on housing, kill people's earning and saving potential, convince huge numbers of people to move back in with their parents and/or houseshare with others - also challenging on all counts).

> money out of a bubble has to go somewhere...

Inflation. Food, bills, gas, etc.

> How far are we from the boomer generation leaving the market (one way or another)?

20-30 years, during which time the younger generations will be entering. They are smaller slightly but most countries have immigration which keeps them fairly neutral.

> The answer to that is that we've been doing that already in the past decade with all the money printing / inflation / devaluation of wealth

This is not quite correct. Printing money does create inflation. Cross sector inflation does lead to devaluation of liquidity, but wealth includes more than cash on hand.

Your food and gas bill goes into the income statement of a corporation somewhere, and thus supports stock values. Even if stock prices decline, they will be better value because the companies will be making money

The prices are raising due to fundamental cost. The cost of making your Big Mac or frozen burrito are increased.

Thus, BigCorpFood has to manage price (too expensive and less consumers buy their products) and cost (too much cost means no profit).

BigCorpFood would really like to sell you a hundred frozen burritos at $0.99 that cost them $0.09. That would be ideal.

Less ideal but realistic would be selling you frozen burritos at $2.99 that cost $2.79

Even less ideal - but still workable for short periods of time - is selling you burritos for $2.99 that cost $3.10

What BigCorpFood doesn't want is to sell you frozen burritos at $9.99 that cost $9.79. That is really bad for them. They will sell very few of those burritos, and make almost no profit.

BigCorpFood stock price is more about introducing "New Deluxe Spicy Chicken Burrito, available for $3.10!" that cost $2.75. If eg Beef is getting more expensive and BigCorp can sell you cheaper chicken thigh and save a profit margin, that will help their stock a whole bunch.

ps: Oh, and re "your food/gas prices go into the income statement..".No, they go into the revenue statement. Income = Revenue - Cost.

The money goes around in a big circle. The big mac is pricier because the price of beef went up, for example. So the farmer is making more money. Or perhaps the supplier of feed to the farmer. Somewhere, someone is making more money; it’s not like there’s a link in the supply chain where all the do is set money on fire.

Also: sales is recorded on the income statement, no-one claimed that sales = income.

Right, the income statement does include revenue.

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