Investment returns in the era of the decline

[zbigi]

For anyone who thinks that, for various factors, we're essentially entering an era of decline of civilization - are you still optimistic about returns from your money-producing investments (e.g. stocks, real estate)? Logic dictates that these should have decreased yields and also, due to increases of P/E, their value should also start going down. That makes the money part of the ERE game kinda hard.

[Dave]

See viewtopic.php?t=11213

Short answer: personally no, because 1) my view on the timeline of economic collapse 2) I don't invest in indexes but rather specific companies/industries, and there are/will be pockets of opportunity where some sectors/companies thrive amidst overall decline and 3) price volatility will (still) create asset mispricings that will result in profitable investments.

[Humanofearth]

This thesis is from a set in their ways boomer perspective. Decline of nation states and collectivism as the ruling mentality. Trend towards individuality protected by cryptographically secured property rights rather than nukes and strength of military.

Look into those cryptographically secured property rights for better returns than you’re getting in the old world. Start with btc and eth for the guaranteed bets and sol, luna, avax, matic, atom, some nft/gaming coins for higher risk, higher return than the former.

[zbigi]

I fail to see how something that doesn't even exist can provide returns (yields). It''s possible to buy money on it via speculation, but I'm more interested in buying assets which generate returns (yield) and not just sit there (gold, crypto).

[Humanofearth]

4 Ways to Earn Yield with Cryptographically Secured Property
1. Own burn tokens. BNB takes cut of all trades on its exchange which is then partially used to buy back and burn tokens.
2. Stake coins in security of network by using your coins to validate transactions.
3. Rent out nfts for creating new nfts, hosting events, etc
4. Liquidity farming, get yield on providing tokens to be traded by getting fees from the trade.
Partial list, constantly growing. You can research what is best for you.

[DutchGirl]

1 Way to Earn Yield with Cryptographically Secured Property:

1. Find the greater fool.

PS Admittedly, given that there's a new fool born every 10 seconds, you might actually be very successful with that strategy.

[ducknald_don]

Start with btc and eth for the guaranteed bets ...

Do you really think these are guaranteed bets.

The Bank of England thinks otherwise: https://www.theguardian.com/technology/ ... land-warns

[white belt]

Decline of nation states and collectivism as the ruling mentality. Trend towards individuality protected by cryptographically secured property rights rather than nukes and strength of military.

What evidence have you seen to support that claim? When I look around the world I don't see a trend towards individuality, if anything I see the opposite*. Just look at China for an example of the capability a modern nation state has to suppress individuality (and they control nearly 1/5 of the global population). Also see the rise of populism around the world. But I get it, based on a discussion in another thread I think you will argue that cryptography will protect you from physical violence. I'm not so sure cryptographically secure property rights would do much to put Ukrainians at ease at the moment.

Further, there is a baseline level of energy-intensive infrastructure that is required to use digital currencies. Digital currencies are used for some transactions in collapsed states like Venezuela, but so are USD, pesos, and gold flakes because the internet coverage is often spotty. In a collapse or even short-term crisis, the reliability of such infrastructure declines. In fact, communications infrastructure is one of the easiest critical resources to disrupt by a sophisticated military/para-military threat because it is extremely vulnerable to both cyber and kinetic attacks.


* = Individuality, like conservatism, relies on the assumption of an unlimited resource base. Do you think resource competition will decrease in the coming years?

[Humanofearth]

Do you really think these are guaranteed bets.

The Bank of England thinks otherwise: https://www.theguardian.com/technology/ ... land-warns

You’re quoting the church talking about the printing press in 1500.

[Humanofearth]

This exact forum is an example of you expressing your individuality. You’re able to say what you want without fear of what the monopoly on violence (govt) will do as a result of what you say. This is one expression of the new world. Gdp may decline in the physical realm, China too, the internet is quickly becoming the largest market place world wide in every manner. Failure to see this will lead to focusing too much where the puck was instead of is going. No need to be a doomer , wake up and adapt.

[ducknald_don]

You’re quoting the church talking about the printing press in 1500.

The printing press had a real practical value, crypto currency only seems to enable illegal activity. The gains are from blind speculation.

[Humanofearth]

Cryptographically secured property changes the logic of violence in a more profound way than the printing press. It creates the most free markets known to humans so far in a manner that governments cannot stop. They cannot seize your assets without consent and they will do anything to vilify the technology that protects people from their monopoly on violence. The church once controlled daily life in parts of Europe, people were crucified for what are now known facts. They lost dominance with the printing press as information spread more quickly.

What if you didn’t need a military to protect your property? How would that change the violence that is cost effective to support? Welfare states are in a slow collapse, they need people to hodl their fiat or it loses its power as people exit the fiat ponzi. Backed by guns doesn’t matter as cryptographic signature are more secure with much less ongoing costs compared to a military industrial complex that literally makes nukes.

Read “The Sovereign Individual” for an in depth look at the details.

[jacob]

A decline in economic output could also come from an increase in civilization as people figure they no longer need all that stuff and stopped accepting waste as a natural thing. A decrease in civilization (due to mismanagement or throwing gravel in the wheels) could also cause a decline in economic output but this again could cause a faster decline in the number of people competing for stuff causing prices to go down. There are really very many variables to this.

What I remind myself is that when I buy a financial security like 100sh, I'm giving my money to someone else and then they give me 100sh. This is what I have. I'd be well-advised to think of my possession in terms of 100sh rather than what I'm offered by the market because that offer can be rescinded in about 0.0015 seconds (realistic numbers ). I repeat with empathy. My networth is now measured as 100sh and not what these shares could theoretically fetch in the market.

(Once one understands this, it also becomes clear why calling Elon Mush a billionaire (unless he has 1B sitting in a personal checking account) rather than someone who owns millions of TSLA shares which is an entirely different thing.)

If I have 100sh in a company that pays dividends, they'll sometimes send me $10 which is another kind of security. This I can maybe exchange for stuff at the store at the price the store is quoting me unless of course the shelves are empty due a decline in economic activity. If the company doesn't pay dividends, I'll first have to sell my shares for cash---kinda like someone might sell their fur coat for cash hoping that people will still pay for it---and then sell the cash for groceries or plywood.

Whatever the securities are trading for can be completely disconnected from inherent value. For example, a dollar bill has little inherent value (paper, ink) but it trades for a dollar. Equity or crypto can likewise be completely disconnected from any inherent value. Yet that doesn't matter as long as it's possible to establish a series of trades that will put food on the table and roof over your head.

(Going back to Musk---and I wonder if that might not be the case with some of the crypto too or baseball cards or art for that matter---is the depth/float of the market. Lets say there are 1000sh in the universe and one person holds 990 of those shares. The remaining 10 are due to collective mania considered very awesome and occasionally changes hands at very high prices around $1M each thus establishing the market price. The person holding 990 calculates his networth to just under 1B and feels very rich. However, should he try to sell 10sh, the float immediately doubles... and the price may drop to 500k effectively cutting his "NW" in half. This is why diversifying into a ton of small holders is much more resilient than a few whales. Likewise, if Millennials collectively decide that "stocks" aren't for them, boomers and genxers will not have anyone to sell to and would thus have to rely on dividends from their collection of "sh". As such "generational buy-in" is also important. A big part of why the US stockmarket did so well in the 20th century is that stocks went from a minority interest to becoming mainstream. There's really nothing that physically prevents it from losing that popularity as an asset class again.)

[Qazwer]

Any reading on crypto crimes and kidnappings make the concept of crypto making things secure without a police to protect you is a complicated one. Crypto may protect you from the state as long as the state does not threaten your person ( but then so is any other form of capital). But it does not protect you from an individual threatening your person.

[WFJ]

Have you seen landfills or waste lines in the US this century? How do you define "decline"? If decline is defined by having more goods/services/choices and free time than any generation in human history, then yes, society is in major "decline". Invest in leisure and health-related activities as our world has become so easy and sedentary that many individuals lack the intelligence or awareness to remain active although this activity is no longer needed to sustain human life. Having too much capital and too much free time are signs of success and advancement, not decline. Smart people consume products and service that enhance the utility of their lives (travel/information/leisure/health services) idiots consume products and services that reduce the utility of their lives (FB/debt/fast food/drugs/stress). More people today than at any point in human history have the freedom to join the group of their choice.

Society is not entering the dark ages, rate of development is accelerating, but distribution of rewards are concentrating in fewer and fewer of the most talented. The others can just free ride on the advancements knowing they are better off living today than at any point in human history.

If one invests for decline, they will be left behind.

I also really don't get crypto zealots who naively believe digital collectibles will retain any value during some kind of collapse or society disruption and an end to property rights of physical assets. "Priceless" art is often exchanged for safe travel and survival (equivalent of a few hundred bucks during normal times, 1/1,000,000+ of normal times value) when societies collapse as collectibles have no value if one doesn't survive.

One can do a simple experiment to estimate the value of "property rights" when comparing the value of a diamond in a corrupt third world country and the value when it is priced in the US or any country with property rights. I can only assume most crypto zealots have never lived in a country without property rights (socialist/communist) and don't understand how little these collectibles retain their value without property rights or enforcement.

[zbigi]

Have you seen landfills or waste lines in the US this century? How do you define "decline"? If decline is defined by having more goods/services/choices and free time than any generation in human history, then yes, society is in major "decline".

Decline probably hasn't visibly started in the developed world yet. However, if we continue on our current trends, in may become the reality during our lifetimes.
As one example - for one thing (although this is not a 100%-clear consequence of ecological overshoot), most countries in Europe already have shrinking populations. Less people means less consumers means less profit for the companies we buy stocks in. Meaning, if we (european investors) are investing for the long run, we might already be buying at the peak.

[Humanofearth]

@Jacob
Now what happens if Elon creates his own coin that pays a dividend to the holder’s address in their chosen form? ie-stable coin or btc or eth on matic as a dividend. Could this create a more powerful community or capitalist structure when held directly without any trusted 3rd party? Could this grow in value long term?

Good lesson on liquidity. Don’t buy too many nfts or tiny coins.

@WFJ
Btc is the hardest money to counterfeit ever created. It is nothing like art or nfts. Ultra liquid, send with a QR code with nearly 0 fees and instant using L2 lightning, broadcast from your own private node. This can be used anywhere, including “banned” countries. Add in game theory, what happens when countries and companies adopt it as a treasury reserve asset with fiat, it guarantees a minimum value in fiat and early adopters are rewarded more than late adopters. How about when the money supply gets debased? It’ll somehow still decrease relative to that money supply?

But your country doesn’t have property rights, income taxes are an infringement of property rights. They are not consensual there, your dollars are not yours in the final sense. Neither is your land. It is rented if there are property taxes that must be paid. Countries are not capitalist, maybe Singapore or Litchenstein, not US or Aus.

@zbigi
I believe it already peaked if you divide the value of the stock market by the fiat supply. So the value will continue to increase in fiat terms and give you fiat as cash flow back.

[zbigi]

But your country doesn’t have property rights, income taxes are an infringement of property rights. They are not consensual there, your dollars are not yours in the final sense. Neither is your land. It is rented if there are property taxes that must be paid. Countries are not capitalist, maybe Singapore or Litchenstein, not US or Aus.

That's kind of a red-herring distinction though, as a working society without taxes has never existed yet. (hunter-gatherers didn't have taxes, but they also didn't have property).

[Humanofearth]

Btc has a tax. It’s called a transaction fee. Consumption has a tax on most items as well. Income tax or a holding tax for property, imminent unrealized gains taxes are very different. We’re in the freest market humanity has ever known and you’re leaning pessimistic. I used to be like you and then I started playing with a little, then I got a hardware wallet and it changed everything. I felt in control of my assets for the first time in my life. Private keys to control digital assets change the logic of violence and what taxes are permitted by those being pursued.

[zbigi]

Btc has a tax. It’s called a transaction fee. Consumption has a tax on most items as well. Income tax or a holding tax for property, imminent unrealized gains taxes are very different. We’re in the freest market humanity has ever known and you’re leaning pessimistic. I used to be like you and then I started playing with a little, then I got a hardware wallet and it changed everything. I felt in control of my assets for the first time in my life. Private keys to control digital assets change the logic of violence and what taxes are permitted by those being pursued.

People who impose taxes have lots of guns and can just ban your wallet at any time, and put you in prison if they catch you using it...
Right now, the governments don't care that much, beause crypto is used primarily for speculation and some marginal criminal activity - but you can be sure that, if it ever takes off and people start using it in regular transactions (and evade taxes en masse), crypto will be banned very quickly. It will be either this or a collapse of tax-starved governments...