What does "discount future promises" mean?

[pedorrero]

I was intrigued by TickTock's* signature which says more or less "Heavily discount future promises of money/benefits."

[* Also a liquor store in suburban Maryland. Probably no correlation, but they sold booze until 1:30 AM, not just midnight like in VA. This was important when we were teens
]

Having been something of the paranoid pessimist and well-steeped in gloom and doom "hard money" reading for much of my life, I thought this would make a good thread for discussion.

I have a selfish interest here too. I'm a trust fund bum, which in investment terms means my retirement income is basically the same league as a privately managed pension fund. Therefore, my retirement's success or failure directly follows the health or illness of the stocks , bonds, and other investments that comprise those type of investments. Also, like many who get a pension, I have zero influence upon the investing or distribution of those assets.

I admit my search skills are lame, and I am a half-ass (a semi-Pedorrero?) when it comes to doing much in the way of w*rk, but the only post by TickTock I found that seemed relevant was the annuity one.

So what follows are just some random ideas of what "discount future promises" could mean...

1. You should be dubious of the promises for future income, whether they come from the government or business.

2. Long-term inflation is one of the worst problems -- fixed payments lose their value over long time periods. On the other hand, works just fine for your mortgage payment.

3. Bankruptcy happens. Sometimes there is an insurance fund or a government bail-out, sometimes not. Consult a wan Enron peon for details. Sub-prime CDO's anyone? Story to follow...

4. The widespread problem of lies and deception. Whether fraud (criminal) or just the traditional posturing and distortions found in business and politics.

5. Promises that become untenable. Government had to renege on many promises over the years. Within the (admittedly long) lifetimes of people still alive, our government has for example, gone off the gold standard, taken silver and even copper out of our coins, and in general has reduces the value of the Dollar by many-fold.

6. Sustainability of future promises: Will Social Security stay solvent? Medicare? Etc. Do you really believe what today's politician says?

It certainly pays to be skeptical about future claims, whether from a used-car sales man or from that smiling salesman financial planner pitching you on the latest fund product.

"She's so fine, there's no telling where the money went." -- Pobert Palmer

[old woman]

I would gladly pay you Tuesday for a hamburger today.

[CyclingInvestor]

"I would gladly pay you Tuesday for a hamburger today." is a future promise

"I would gladly pay you double Tuesday for a hamburger today." is a 50% discounted future promise.

[TickTock]

Quote:

Originally Posted by pedorrero It certainly pays to be skeptical about future claims, whether from a used-car sales man or from that smiling salesman financial planner pitching you on the latest fund product.

Yep. Consider that someone promising you something in the future is all upside for them and downside for you. Do you think you'll get more than what was promised? OTOH, there are a million ways things could go wrong and rationalizations the promiser can use to justify not keeping his promise.

Don't recall where I saw this first, but the quote is "Only trust those who have as much to lose as you if things go wrong".

I keep that thought firmly in mind when someone gives me advice.