Expectations for the US economy

[Stormy Kromer]

I remember Warren Buffet being interviewed and he said something along the lines "If somebody could guarantee me that there would be a recession next year, it wouldn't change how I would invest today"

 

[kgtest]

I feel like the US economy will prevail, as it always does, with business booming. There are ebbs and flows, but profits continue to be had by shareholders, losses also occur and that is the risk of business. Some businesses fail, some succeed, their are winners and losers. I've had mild success in business, not a complete success, not a complete failure, but definitely a grind. I've helped a lot of people along the way, made a little coin, and learned a lot. Our tax codes are setup to benefit business owner's, especially real estate investors (businesses). I'll never forget when I heard a Lawyer make the statement "If I did it all over again, I would become a developer, they get the best tax treatment." It's not easy providing space for families to live, businesses to thrive, and it can be very rewarding...it can also be risky.

I've never had a stock share threaten to come to my house and shoot me over a bad transaction...but I have had tenants do that with the rentals I've owned. I've had some people in business as well, but overall not too bad. One of my more successful business owner friends mentioned he was surprised how much time, money and energy he spends on litigation, lawyers, law, etc. He had no idea when he opened up business that a significant portion of his expenses would be for lawyers and litigation fees. That's the whole risk side of it.

But back to the economy. It will be just fine in the long term. Gas prices will go up, down and sideways, CPI will do the same, inflation will go up and down, jobs will be lost and jobs will be created. I wouldn't want to be a part of any other economy, I love the US economy and my portfolio is proof. No tic-toc stock or toyota stock in this guy's folio, I am 100% US equities. Wouldn't make the bet anyother way.

 

[marko]

That’s a useful reminder. And yet the caveat of “past performance” still holds …

My parents both remembered the Great Depression. They were young, but it shaped their perspective and they passed it on.

My grandparents made a fortune during the Great Depression. My point is, even within your disaster scenarios, there is opportunity.

Turn you head around.

Your parent's perspective has you focused on the negative. IMO your thinking shouldn't be driven by something that happened a century ago. Talk about "past performance"! that's what you're doing.

"Break on through to the other side"

 

[Markola]

That’s a useful reminder. And yet the caveat of “past performance” still holds …



My parents both remembered the Great Depression. They were young, but it shaped their perspective and they passed it on. My dad lectured my brother and I by saying “You will be the man of the family, it is your responsibility to ensure there is always a roof over their heads, food on the table, and clothes on their backs.” Those are part of my foundational values.

Building on Gumby’s Dictum #1, maybe you aren’t diversified enough, OP, as you seem hyper concerned about the future of domestic stocks and bonds. I have a certain comfort in owning a variety of things to feel more bullet proof. Your own choices include International index funds (a weaker dollar might actually help those to be a hedge), real estate, digital assets, a bit of cash, gold, credit lines, multiple streams of part time income, Social Security, and many other things. And maybe pick different infotainment sources, or at least take breaks, which make their profits by keeping you outraged and by bringing you down.

 

[milford]

One thing you are missing is our friend TINA, which I believe is still good ol US's best friend. Yes, we have lots of issues (i.e. debt, inflation, population decline, infrastructure, etc...) but so do almost all other countries in the world. In fact, I would even say other major countries are in worst position than the US in most of these issues (debt - Japan, inflation - EU, pop decline - Japan/China, infrastructure - India), thus the US is what I like to call the best of the worst. This will make the US still an attractive place to invest in the future from people all over the world.

 

[Car-Guy]

I remember Warren Buffet being interviewed and he said something along the lines "If somebody could guarantee me that there would be a recession next year, it wouldn't change how I would invest today"

He probably said that when he was in his 60's or 70s... I wonder if he'd say the same thing now in his 90's. Probably does care much now anyway.

 

[foxfirev5]

My grandparents made a fortune during the Great Depression. My point is, even within your disaster scenarios, there is opportunity.

Turn you head around.

Your parent's perspective has you focused on the negative. IMO your thinking shouldn't be driven by something that happened a century ago. Talk about "past performance"! that's what you're doing.

"Break on through to the other side"

I firmly believe that luck plays a big role. There is no logical reason why I should be alive let alone have the financial success I've experienced. One side of my family prospered during the depression while the other failed. And from what I can tell nobody did anything wrong. That's when I developed my general disrespect for hard work alone as a solution.

 

[slowsaver]

And so I continue to go to work every day with no intention of retiring in the next year or two or three due to my concerns that the causes of the terrific past US economic performance will not hold true for the next 35 years.

Ok, so you have decided not to retire yet. That's fair. Retiring early does require some optimism, which you don't have (for the many reasons that you listed). Plenty of people work until the day they die -- even if they could afford to retire.

 

[SecondCor521]

I'm still a relentless optimist.

AA of 98.5/1.5 and considering just throwing in the towel and going 100/0 since it doesn't really change the numbers much anyway.

I'm watching a lot of Warren Buffett shorts on YouTube and agree with pretty much most of his investing thoughts.

 

[dixonge]

Instead of responding to specific posts, I'll just drop this here:

“In every age everybody knows that up to his own time, progressive improvement has been taking place; nobody seems to reckon on any improvement in the next generation. We cannot absolutely prove that those are in error who say society has reached a turning point – that we have seen our best days. But so said all who came before us and with just as much apparent reason. ... On what principle is it that with nothing but improvement behind us, we are to expect nothing but deterioration before us?”
― Thomas Babington Macaulay, Critical, Historical and Miscellaneous Essays Volume 1

That volume of essays was posted before 1860 and I believe that it still holds true almost 170 years later.

 

[frayne]

Have always been a follower of the John Bogle philosophy of index investing because it is simple and it works. The US economy will do what the US economy always does, change.

 

[jimm100]

One thing you are missing is our friend TINA, which I believe is still good ol US's best friend. Yes, we have lots of issues (i.e. debt, inflation, population decline, infrastructure, etc...) but so do almost all other countries in the world. In fact, I would even say other major countries are in worst position than the US in most of these issues (debt - Japan, inflation - EU, pop decline - Japan/China, infrastructure - India), thus the US is what I like to call the best of the worst. This will make the US still an attractive place to invest in the future from people all over the world.

Yes, I am thankful for TINA, though China is trying to change that.

The story of Japan is instructive: they began to believe their destiny was to grow forever. But anyone who retired in Japan in the late 80s or early 90s based mostly or exclusively on stock market returns likely ran out of money during retirement. tje link below goes to an interesting article that talks about their rise and the causes of their fall/stagnation. Their population stagnation is a key ingredient- they have jobs but no one to fill them which constrains growth. Sound familiar?

Be sure to look at the chart of their stock market: https://www.theguardian.com/world/2...-30-years-since-the-stock-market-bubble-burst

Another experience that informs my perspective: I spent several weeks in Caracas, Venezuela, in 1999 on a business trip. The most common refrain that I heard which haunts me to this day was “When we were a rich county …”. Almost every serious business discussion had multiple people say that multiple times. Venezuela has not returned to being a rich country in the last 20+ years and in fact much of their population is starving. The decline in demand for their heavy crude was a major cause, but they were unable to adjust and adapt because of the widespread expectation that the government would fix everything. They eagerly followed political candidates who promised to fix everything but only enriched themselves and their friends. The Venezuelan people followed one “savior” after another who promised to take from the rich and give to the poor. That has not worked out well for them. All those I encountered were decent, good hearted people, but most of them believed in a paternal government that would take care of them.

Is it possible that could happen in the US? What would that mean to the US stock market and to retirement?

If one summarizes the overwhelming majority of the replies to my posts, almost all of them boil down to “past performance guarantees future results. The US will thrive and grow because that’s what it always has done.”

The Japanese used to think that. The Venezuelans used to think that. We all realize it is a fallacy when evaluating individual stocks or mutual funds or other investments. And yet it is repeated over and over by more than a dozen people, albeit disguised in different ways by each person, as their answer to my question about whether the same conditions that led to the US growth over the past 100 years will continue to exist and result in continuing growth.

Technology and innovation may mitigate the other challenges. That is a source of hope. But the recent layoffs of 10s of 1000s of tech workers has dimmed that star a bit in the present economic conditions. At least Chipotle is hiring, though tech workers would take about a 70% salary reduction to work there.

 

[Gumby]

And? What are you going to do about it? If you want to keep working, then keep working.

 

[marko]

At 114 posts, this thread is the longest and most convoluted justification for OMY I've ever seen.

 

[Koolau]

And? What are you going to do about it? If you want to keep working, then keep working.

At 114 posts, this thread is the longest and most convoluted justification for OMY I've ever seen.

Since it's way too late for OMY for me, I plan to die before it gets too bad. Very comforting. No, wait! NOT so comforting - but probably true though YMMV.

 

[mebden]

For once, Google didn't help. I performed a search on the term, and ended up with a video titled, "How to Slice Cabbage with Martha Stewart"!

Then I thought about it, and all became clear. This reminds me that I have been meaning to visit the former camp at Manzanar, CA which is now a National Historic Site.

That is funny Major Tom as I think Martha Stewart should still be locked up lol

 

[Koolau]

That is funny Major Tom as I think Martha Stewart should still be locked up lol

Don't you believe in 2nd chances? I thank God often for my 2nd (and 3rd, etc.) chances in life. I never did any time, but I sure screwed up when it came to investing. Still I was able to FIRE. YMMV

 

[mebden]

I've posted the following a few times on this forum:

Maybe I'm just getting old, but over my lifetime I've been warned about Communists, nuclear war, over population, running out of oil, running out of food, nuclear power plants, global cooling, global warming, acid rain, the Japanese buying up all of the US, the Saudis buying up all the US, Y2K and global financial collapse among just a few "end of the world as we know it" apocalypses. (oh! and the end of SS)

But here we all are.

You Johnny on the spot Marko I still remember my dad telling me control the things you can control and life will work out as long as you work hard and treat everyone you meet with respect on how you would like to be greeted no matter if its the fast food worker or the president of the united states but 1 thing I did not listen to him about that the stock market is crocked and not to invest in it but I did anyways and I'm glad I listened to my inner self

 

[jimm100]

And? What are you going to do about it? If you want to keep working, then keep working.

I’m going to hope for the best and plan for the worst. No one on this thread has provided a hoped-for “here are drivers of growth that will contribute to continued economic prosperity of the USA”, so OMY at this point

The only goal of my most recent long post was to give others more to think about.

Others may find this site useful:
https://www.abbreviations.com

Iwas not familiar with TINA or OMY. Found them both at that site.

 

[LARS]

Fear of the unknown is just that: fear.

The offset to fear, which is true when it comes to handling retirement as well,is experience.

I have been retired since 1995. I am now in my mid-sixties.

The previous twenty eight years experience has taught me not to worry.

Short of the system collapsing, which will take everyone down who doesn’t own a private island with a landing strip, I will be fine. And I would hazard to guess that anyone that frequents these pages has managed their financial house similar to me, which is to say managed the "wants", and will have nothing to fear about the next thirty years either.

 

[MichaelB]

Another experience that informs my perspective: I spent several weeks in Caracas, Venezuela, in 1999 on a business trip. The most common refrain that I heard which haunts me to this day was “When we were a rich county …”. Almost every serious business discussion had multiple people say that multiple times. Venezuela has not returned to being a rich country in the last 20+ years and in fact much of their population is starving. The decline in demand for their heavy crude was a major cause, but they were unable to adjust and adapt because of the widespread expectation that the government would fix everything. They eagerly followed political candidates who promised to fix everything but only enriched themselves and their friends. The Venezuelan people followed one “savior” after another who promised to take from the rich and give to the poor. That has not worked out well for them. All those I encountered were decent, good hearted people, but most of them believed in a paternal government that would take care of them.

Is it possible that could happen in the US? What would that mean to the US stock market and to retirement?

What happened in Venezuela has nothing to do with demand for their petroleum, which currently has and always has had a very strong international demand. The problem Venezuela faces is it is run by a thugacracy and kleptocracy who have run the country into the ground while terrorizing the populace and stealing everything that wasn’t locked down. The likelihood this happens in the US is quite small. It’s a good lesson in democracy but a terrible reason to change one’s assessment of US economic potential and future.

At 114 posts, this thread is the longest and most convoluted justification for OMY I've ever seen.

Yes indeed, and excellent point.

I’m going to hope for the best and plan for the worst. No one on this thread has provided a hoped-for “here are drivers of growth that will contribute to continued economic prosperity of the USA”, so OMY at this point

The only goal of my most recent long post was to give others more to think about.

Others may find this site useful:
https://www.abbreviations.com

Iwas not familiar with TINA or OMY. Found them both at that site.

We have a list of common acronyms frequently used here https://www.early-retirement.org/fo...slang-frequently-used-on-the-forum-34884.html

 

[Navigator]

Yes, I am thankful for TINA, though China is trying to change that.

The story of Japan is instructive: they began to believe their destiny was to grow forever. But anyone who retired in Japan in the late 80s or early 90s based mostly or exclusively on stock market returns likely ran out of money during retirement. tje link below goes to an interesting article that talks about their rise and the causes of their fall/stagnation. Their population stagnation is a key ingredient- they have jobs but no one to fill them which constrains growth. Sound familiar?

Be sure to look at the chart of their stock market: https://www.theguardian.com/world/2...-30-years-since-the-stock-market-bubble-burst

Another experience that informs my perspective: I spent several weeks in Caracas, Venezuela, in 1999 on a business trip. The most common refrain that I heard which haunts me to this day was “When we were a rich county …”. Almost every serious business discussion had multiple people say that multiple times. Venezuela has not returned to being a rich country in the last 20+ years and in fact much of their population is starving. The decline in demand for their heavy crude was a major cause, but they were unable to adjust and adapt because of the widespread expectation that the government would fix everything. They eagerly followed political candidates who promised to fix everything but only enriched themselves and their friends. The Venezuelan people followed one “savior” after another who promised to take from the rich and give to the poor. That has not worked out well for them. All those I encountered were decent, good hearted people, but most of them believed in a paternal government that would take care of them.

Is it possible that could happen in the US? What would that mean to the US stock market and to retirement?

If one summarizes the overwhelming majority of the replies to my posts, almost all of them boil down to “past performance guarantees future results. The US will thrive and grow because that’s what it always has done.”

The Japanese used to think that. The Venezuelans used to think that. We all realize it is a fallacy when evaluating individual stocks or mutual funds or other investments. And yet it is repeated over and over by more than a dozen people, albeit disguised in different ways by each person, as their answer to my question about whether the same conditions that led to the US growth over the past 100 years will continue to exist and result in continuing growth.

Technology and innovation may mitigate the other challenges. That is a source of hope. But the recent layoffs of 10s of 1000s of tech workers has dimmed that star a bit in the present economic conditions. At least Chipotle is hiring, though tech workers would take about a 70% salary reduction to work there.

The points you raise are valid. The US is certainly different from Japan, but we are subject to the same forces as Japan and other rapidly aging nations. The question is what to do about it. World demographics are changing and will continue to change throughout our lifetimes. I see no alternative but to continue the course, invest with the best information available and realize that returns may be lower than in the past. If innovation makes up for aging demographics, that will be a pleasant surprise. The recent layoffs in the tech sector are nothing more than noise and, IMHO, should play no role in long term planning.

 

[jm67]

The points you raise are valid. The US is certainly different from Japan, but we are subject to the same forces as Japan and other rapidly aging nations. The question is what to do about it. World demographics are changing and will continue to change throughout our lifetimes. I see no alternative but to continue the course, invest with the best information available and realize that returns may be lower than in the past. If innovation makes up for aging demographics, that will be a pleasant surprise. The recent layoffs in the tech sector are nothing more than noise and, IMHO, should play no role in long term planning.

An answer for Japan would be to increase and promote immigration to offset their aging population. But they prefer not to develop a multicultural society. It’s something for us to reflect on as well.

 

[SecondCor521]

I’m going to hope for the best and plan for the worst. No one on this thread has provided a hoped-for “here are drivers of growth that will contribute to continued economic prosperity of the USA”, so OMY at this point

Oh, I missed that. Here's my list in no particular order and I might miss a few:

Capitalism
Democracy
Free markets
Reasonable regulation
Natural resources
Strong military
Patent system
Technology and innovation (related to but distinct from patent system)
Education system
Solid legal system
Excellent medical technology and care
Constitutional / civil / human rights
Decent social safety net
Mostly free trade with a number of other countries
Relatively low tax burden

With every one of the above, one can certainly point out shortcomings and weaknesses and compromises and risks that they won't continue and so forth. Go ahead if you like, but I won't engage in that debate.

We do pretty well or very well overall in all of those areas, and I don't know of another country that does them better than we do in aggregate. And I have spent at least some time in at least 28 foreign countries, so I've seen other places and what they have to offer.

I actually do watch the above items for changes that might indicate that America is in decline. I haven't seen anything that concerns me. Most of the criticisms relate to things that are IMHO tempests in teapots at most, irrelevant at worst, and self-correcting more often than not. To the contrary, I'm pretty darn excited about the rest of my life and I think my kids with decent luck will have great lives.

 

[Samsung4321]

An answer for Japan would be to increase and promote immigration to offset their aging population. But they prefer not to develop a multicultural society. It’s something for us to reflect on as well.

An alternative is massive self replicating artificial intelligence spiked with aggressive 'hormones' to induce 'irrational exuberance'.