Post New

https://open.substack.com/pub/snyder/p/the-strongm...

I re-read Professor Snyder’s article this am to try to start to get a handle on things. I’m a bit stunned by the election results, and now I’m wondering if I need to change my views on how to invest in our new situation here in the US.

Have any here lived under a “strongman” type of regime, and if so, how do you navigate such a thing with investments?

I see the market is up pre-market. Guess it’s happy about lower taxes, but long term how is this a good thing for US based investing? How will having Elon able to pull the levers of government in his favor a good thing, if you aren’t invested in his companies?

Be careful of trying to outguess market reactions to politics. Would you expect energy stocks to do better under Trump or Biden? In fact oil is down premarket today while most other sectors are up.

https://www.morningstar.com/columns/rekenthaler-re...

Have any here lived under a “strongman” type of regime, and if so, how do you navigate such a thing with investments?
...
Be careful of trying to outguess market reactions to politics.

The latter sounds like sage advice.

As you ask, investments can do very well, or very badly, under "strongman" regimes. (no comment on applicability)
The key seems to be to invest in large groups that are in favour with the person in charge. If that doesn't present good choices, second best would be to move to small groups way under the radar, or consumer staples.

Jim

The key seems to be to invest in large groups that are in favour with the person in charge.

Wouldn’t Mr. Market have priced the anticipated winners higher than the losers? Others it would be a free lunch.

With Tesla up 12% pre market, Mr Market seems to be anticipating the winners under this new scenario.

But to be clear, I’m not talking about how to trade a short term bounce or decline, but trying to think about a longer 30 year timeline covering my probable life expectancy.

I have been a lazy investor the last 25 years or so, basically invested mostly in Berkshire, with my only foreign exposure coming from whatever foreign firms Berkshire owns. I did this based on the idea that in good or bad times, management at Berkshire would be able to figure it out. But under this new scenario, will Berkshire management have to come to Washington, hat in hand, to declare their allegiance to Elon or something? I’m being a bit reactionary and facetious here, but my point is will the success or failure of a company be more about their personal relationship with who is in charge, and not mostly about earnings from now on?

Will other countries that have resisted sliding into authoritarianism have better returns than the US going forward, or is the slide towards illiberalism going to happen everywhere eventually?

How did you invest during the first Trump administration? And how did it work out?

Maybe one approach would be to watch and see what Berkshire does?

The key seems to be to invest in large groups that are in favour with the person in charge.
...
Wouldn’t Mr. Market have priced the anticipated winners higher than the losers? Others it would be a free lunch.

The "in favour" choices may become more obvious only over time. And of course Mr Market often gets things wrong, or is looking at other criteria.

You can also look at lobby expenditure, that's frequently a good guide to US returns.
http://www.datahelper.com/mi/search.phtml?nofool=y...
The 2011 article is about a firm (Strategas) that proposed to invest in the firms with the highest lobbying spend as a percentage of assets. In their backtest, it beat the S&P resoundingly. In terms of lobbying spend, giving away a million a day for a few weeks isn't much.

As with so many things that work in backtest (and often in reality), the real world financial product based on it has not been exciting. Roughly market tracking since launch a little under three years ago.

Jim

Sat on my ass and watched Berkshire go up.

Do we think it will be the same as the last Trump presidency? Aren’t all the guardrails gone? Complete “immunity” from SCOTUS now?

I think it’s going to be much different this time, but I’m admittedly pissed and emotional right now and probably looking for some assurances that it won’t be all that bad. But I keep wondering how deporting 10 million undocumented immigrants will impact the economy.

But I keep wondering how deporting 10 million undocumented immigrants will impact the economy.

It won't, because it won't happen, because it would be bad for the bottom line.

It's money that matters.

https://www.youtube.com/watch?v=cS06eprlj2I

But I keep wondering how deporting 10 million undocumented immigrants will impact the economy.

The best indication of how the market expects the election to impact the broad economy can be found by viewing the stock market indexes today.

I have a humble suggestion to anyone else that wants to wrap their political fears and anxieties into an investment question: choose your language assuming that half of board members just voted for the guy. He just won a fair democratic election including the popular vote so it’s not a good assumption that everyone will automatically connect with your value system. Thank you.

As a general rule, I don't even TRY to figure out what has moved the price of something in the short term. The market does what it does.

But my goodness, some of today's moves are mystifying.

As a random example, I still have my BFH position, the stock is up 16.3%.
I just can't imagine that it's worth 16% more than it was yesterday, but more to the point, whaa??? A different pres will mean more profit for credit cards?

Jim

I’m a bit stunned by the election results,

Then you have been living in an echo chamber. The winner has been mildly predicted for quite some time now.

Yeah probably so

It was only a fair and democratic election because he won. Remember?

Yeah, funny how all the cheating talk immediately disappeared. 🤦‍♂️

I have a humble suggestion to anyone else that wants to wrap their political fears and anxieties into an investment question: choose your language assuming that half of board members just voted for the guy. He just won a fair democratic election including the popular vote so it’s not a good assumption that everyone will automatically connect with your value system.

Frankly, I could care less about whether someone "connects with my value system."

Does a fair democratic election include over 80 bomb threats to polling locations designed to scare away the "wrong voters" from voting?

Does it include closing voting locations for those same people such that those same people have to stand in line for 6 hours to vote?

I could go on all day, but you get the idea.

These aren't "fears and anxieties." These are facts. And it isn't a difference between political beliefs, it's a difference between right and wrong.

Side note: Just a portion of our retirement savings is up over $40,000 today, but I have to tell you...it feels like dirty money, and the half of this board that might have voted for him is dead to me.

Mark

“ how do you navigate such a thing with investments?”

That’s the Really nice thing about having a majority of our investments in Berkshire for a long time. I/we can sit on our *ss and enjoy more of life. I don’t need to try to overthink it based on who is in the oval office, who controls Congress, where the S&P is, technical analysis,and latest inflation/ interest & unemployment rates.

We are fortunate we have the brightest & best in charge who have seen it all over 8 decades & WEB has reminded us many many times that American dynamism works- no matter who’s in office, crisis or Goldilocks, war or peace. I honestly Try to keep it simple, think long-term and pattern my behavior, decisions & emotions in-line with a couple sages named Warren & Charlie, though I fall well short. Over the decades, those two fellas never seemed to get really worked up. Good lesson for all.

Frankly, I could care less about whether someone "connects with my value system." ... it's a difference between right and wrong.

Perhaps an entirely valid point, but probably one to be made on another board?

Personally I have no problem with a few discussions of possible implications for investing. If the headline corporate income tax goes up or down, it does affect the value of a company measured in dollars, and the value of a dollar. But there is probably no need for discussions of (say) the values or intent of politicians or voters in the US. I visit there maybe once a decade, so the cultural aspects are not my focus.

Jim

But under this new scenario, will Berkshire management have to come to Washington, hat in hand, to declare their allegiance to Elon or something?

I posted this on May 5, 2024. Tesla was about $180. Musk is a big fan of WEB. He often quotes him. He wants WEB to invest in TSLA but I'd guess he'd let him in on Xai if he wanted. (Xai's value has doubled since I wrote the below.) Most notably, Tesla has an auto insurance arm that isn't getting the attention it deserves. If you don't cover connected, electric, autonomous vehicles your days are numbered. Partnering with Tesla insurance would give Geico access to Tesla's superior customer acquisition, billing, monitoring, repair, legal and underwriting technology. I'm of the belief that all American auto companies will end up licensing this from Tesla - if they survive. It also opens up markets outside the United States.

Musk recently said on X that WEB should invest in Tesla. Comments like this from Musk should be taken seriously. Remember the "Should I buy Twitter" statement. I put this in the same category, kind of an invitation.

In the past whenever anyone has speculated that WEB has or will buy Tesla shares I've always said there was a zero chance of that happening. We all know why: circle of competence, price and hard to predict earnings etc. Add WEB's sometimes mildly critical comments about Musk to the list as well.

But, right now there is a unique opportunity presenting itself: Musk wants out of many of the businesses he's in. Not because they are bad businesses - they're great businesses - but because he has better opportunities to focus his attention and limited resources on.

Musk started X.ai about a year ago. They're currently raising 6B at a 20B valuation. (20B out of nowhere ... nice.) Tesla is investing 10B this year on compute. I think Elon needs another 50 or 100B to fund his ambitions in AGI. (No small-ball here.) He seems very focused on AI/robotics and is cutting his Capex at Tesla to preserve the 26B that's already in the bank. (Musk recently commented on when Netflix spun off their DVD business in favor of streaming. He said to apply that logic to Tesla.) He's also commented that Tesla is "pivoting."

I won't go into whether a hard pivot to AI/robotics is a good idea. What's important is that Musk's open to some kind of transaction for his legacy businesses. Specifically, I think that insurance, stationary energy storage, Supercharger/Megacharger and lithium refining might be on the table. Less appealing would be solar and battery production. I could see hundreds of Billions of dollars deployed into these businesses over the next ten years at good rates of return. Combined, they have excellent products with huge and growing TAMs that are complementary to BRKs current businesses.

On the personal side of things. I think WEB and EM have always admired each other. Bill Gates was an issue but that is behind them.

What would a transaction look like? I have no idea. It needs to solve the capital deployment and growth stagnation issue for WEB and the capital needs and focus issue for EM.

Of course there's more speculation than fact in my comments above. A lot of connecting the dots with no clear picture. Still, stranger things have happened. I'll go back into my Tesla/BTC hibernation now.
-----------------------------------------------------
In WEB's words, you don't want to compete with Musk.

In WEB's words, you don't want to compete with Musk.

It's not a comment on Mr Musk at all, but note that just because you don't want to compete with somebody doesn't mean you want to be in business with them.

I sure don't want to compete with Craigslist, the killer of the economics of the world's mighty newspapers, but similarly I don't want to be in business with Craigslist...the profit outlook is not interesting to me.

There is a key point about "disruption" that a lot of people don't fully appreciate. Often a disrupter crushes the giant bloated profitable incumbent...but the disrupter is not an interesting business to own. The wildly profitable classified ad business didn't move to a new upstart company, it just went away. Nobody is making zillions of dollars on long distance calls that used to cost an arm and a leg. You can believe that new company AAA is going to replace old profitable company BBB in their business, and be entirely right, but that is not nearly enough to suggest that an investment in AAA is a good idea.

Possible general rules:
All moats have a finite lifespan. It's not enough to identify a firm with a moat, you also have to estimate its longevity.
When a moat goes away, it doesn't usually pass to someone else, it more often ceases to exist or at least shrinks a lot.

Jim

And then...

...there's Dollar General.

the half of this board that might have voted for him is dead to me.

My spontaneous reaction: "Oh my God"!
Somebody's I just read this to: "Wow"!

So that half are not definitely because of their voting not decent human beings?
At least not human beings worthy of one's attention/communication/compassion?

Wow!

P. S. : I wonder whether, how and when humankind will evolve over that Neanderthalean "My tribe vs. your tribe" thinking.

dealraker:

BAM - buy, sell or hold?

Any other thoughts?

Frankly, I could care less about whether someone "connects with my value system." ... it's a difference between right and wrong.

Perhaps an entirely valid point, but probably one to be made on another board?

Personally I have no problem with a few discussions of possible implications for investing. If the headline corporate income tax goes up or down, it does affect the value of a company measured in dollars, and the value of a dollar.

Agree that we should try to keep the tone civil, and those of us who are happy with the results should make an attempt not to gloat but rather to sympathize with those of you who are upset with the results. The feelings will no doubt be reversed in future elections, so we will have lots of chances to empathize. And both sides should try to follow the Munger aphorism of challenging your judgments about the other side.

As for Berkshire's value, the corporate tax rate (almost certain to go to 15%, I would say), will probably give us another 6 points of earnings. But then there is also the issue of trade policies. While I am quite dubious of the advantages of widespread tariff barriers, there are a few companies who would benefit, and they would be companies based in the US that have a heavy exposure to manufacturing. I can't think of many companies that fit that bill better than Berkshire, with its railroad, its utilities, its oil and gas investments, and its manufacturing sector (Lubrizol, Precision Castparts, Marmon, CTB, etc.) I even wonder if today's 5% gain in Berkshire's share value is ENOUGH.

dtb

Musk is a big fan of WEB. He often quotes him.

Are we talking about the guy who lands rocket boosters as a matter of course? The guy who catches them in midair when they come in for a landing?

Yeah, I'm not gonna doubt him.

Agree that we should try to keep the tone civil, and those of us who are happy with the results should make an attempt not to gloat but rather to sympathize with those of you who are upset with the results.

Um, there's one faction that burns cities when they don't get their way. One faction that says "If you don't agree with me you are dead to me."



Whatever happens with tariffs will be interesting. IIRC, this will be done with the object of bringing production and jobs back to the US. Almost very damn thing you buy on Amazon is made in China.

It sounds crazy to me that we have sooooo much of our stuff and so many materials come from China, while we are also treating them as an enemy. Seems schizophrenic.

Um, there's one faction that burns cities when they don't get their way. One faction that says "If you don't agree with me you are dead to me."



Yes, I believe you are right that there is some asymmetry. People don't dare to put a Trump sticker on their car because they know that it is likely to get keyed, or to put a poster on their lawn because they don't want to endanger their family. I have an Israeli flag on my balcony and I have to wonder whether it is wise. But the people that will one day throw a stone through my window aren't afraid to say 'From the river to the sea' and oddly enough, they are probably right to feel safe.

But for the next few days, I think we should cut them some slack. It hurts to lose, and a little graciousness is in order if you feel like you just won.

dtb

We are living in interesting times. I made more on my BRK paper value today than most Trump supporters earn in a year. I have serious doubts that his policies will help the low income people as much as they benefit the higher incomes voters. However, a map of median income shows a very good correlation of low income to Trump voters (particularly if you remove Utah and New Mexico). I hope he can help the angry poor, but I think they are counting on a bit of a conman.

https://www.visualcapitalist.com/mapped-median-inc...

However, a map of median income

I think it should be median income per household. (Based on a quick check using perplexity.ai)

Aussi

But under this new scenario, will Berkshire management have to come to Washington, hat in hand, to declare their allegiance to Elon or something? I’m being a bit reactionary and facetious here, but my point is will the success or failure of a company be more about their personal relationship with who is in charge, and not mostly about earnings from now on?

Consider post-1989 Russia. Lots of oligarchs created early on, but as the strongman took ever more power, a fair number of them found themselves arrested, exiled, assets seized, and so on. What have you said that the strongman didn't like? What do you own that the strongman wants?

And then...

...there's Dollar General.

Indeed.
DG was down on the massively up day, along with all sorts of other firms that are seen as being in the business of selling imported goods (tariff exposed) to the US public.
Dollar General, Dollar Tree, but also Walmart, Target, Kohl's, Wayfair, Best Buy, etc. And some "goods" brands that don't manufacture in the US, like Nike.

This market reaction is fairly rational - expecting higher sticker prices and lower volumes is presumably more rational than thinking that non-US suppliers will pay any new US taxes on imports. Though that's a bit first-level thinking. Second level, I imagine there may be some even bigger impacts at some US firms that rely heavily on imported intermediate goods, like the way steel tariffs hammered white goods manufacturers a while back. Third level, a lot of firms (like Berkshire) will be affected by a weaker purchasing power by individuals and the general economic drag and accompanying inflation. If almost everything costs more at checkout, people will buy less stuff. It's a pretty general rule: if you tax anything, the economy will generally see less of it. Somehow people never think of that when introducing payroll taxes with euphemistic names like "pension contribution".

There are exceptions. I wonder if we'll see any Giffen goods. Non-luxury goods that counterintuitively rise in demand when their prices rise, because the buyer's decreasing purchasing power requires people to forego the luxury alternatives and forces them to buy more of the non-luxury alternative. This could happen at a dollar store, where sales tend to rise strongly in the second half of a recession.

Jim

As for Berkshire's value, the corporate tax rate (almost certain to go to 15%, I would say), will probably give us another 6 points of earnings. But then there is also the issue of trade policies. While I am quite dubious of the advantages of widespread tariff barriers, there are a few companies who would benefit, and they would be companies based in the US that have a heavy exposure to manufacturing. I can't think of many companies that fit that bill better than Berkshire, with its railroad, its utilities, its oil and gas investments, and its manufacturing sector (Lubrizol, Precision Castparts, Marmon, CTB, etc.) I even wonder if today's 5% gain in Berkshire's share value is ENOUGH.

That seems a little too chipper in my view. I agree down is more likely than up in the short term for corporate tax rates, but future tax rates are still somewhat unknowable, as is the size of any change.

For one thing, most of the value of any stock come from earnings past the ten year mark. Do we have any new information or guesses about those?

I'm more concerned about the argument lacking the tempering you'd get from a pinch of Ricardian equivalence: If some taxes are cut, other things move. Bond yields rise, for example, which worsens the federal budget, which requires some tax or other to be raised, either sooner or (by a lot more) later. In this case, the "push down here (corporate tax)" is apparently going to be accompanied by the "pop up there (taxes on imports)". Every person and company in the US buys a lot of imported stuff, and will therefore not be able to buy the same amount of stuff for the same money. Some will have been close to the line and will go bust. If, as would seem reasonable, tariffs cause inflation to rise and aggregate consumer purchasing power to fall, that is not good for businesses like ours. What one hand takes, another takes away...to some meaningful extent. Maybe less, but maybe more.

Other things being unchanged, does the prospect of a lower corporate tax rate mean a higher value for a share of Berkshire? I imagine so. But I imagine it's not nearly as big as it might at first appear. Other things are far from unchanged.

Jim

He is also a good investor; turned a $130M investment into a $15B gain in a few months.



Musk, who poured at least $130 million into a pro-Trump campaign effort, turned Trump support into yet another full-time job in recent months, funding a swing-state operation to register voters and using his social media platform X to constantly tout his preferred candidate, frequently with misinformation.

Musk’s investment in Trump is already paying off, even though Trump doesn’t take office until Jan. 20.

Tesla
shares soared 15% on Wednesday, adding roughly $15 billion in paper value to Musk’s net worth. The electric vehicle maker faces headwinds in the global market from China-based competitors, declining European sales and consumers’ growing distaste for his political views.


https://www.cnbc.com/2024/11/07/how-elon-musk-stan...

tecmo
...

On the tariff issue, what’s going to happen when dear leader starts using them to threaten certain businesses he doesn’t like? Is that how we want the market to work?

Anyone remember the John Deere threats he made during the campaign?

Manlobbi's idea of increasing allocation to S&P 400/600 trackers seems good. Slightly less in BRK would obv reduce brk-specific risk.

Investing in your home country can be safer/simpler, speaking as someone who thought the modern world was wonderful and was amazed to have a US stock account ~20 years ago and get statements, reports etc posted to the UK ... and then it was forcibly closed by a change in US law. :-(

SA

I have serious doubts that his policies will help the low income people as much as they benefit the higher incomes voters.

1) Politics professes that rich people get rich at the expense of poor people, all other things being equal.

2) Economics professes that a productive economy will benefit everybody in it, all other things being equal.

I think the history of the western world gives much more support to 2) than to 1), especially including the failure of systems that were set up specifically to correct the ills of a world where 1) is more correct.

IMHO,
R:)

"1) Politics professes that rich people get rich at the expense of poor people, all other things being equal.

2) Economics professes that a productive economy will benefit everybody in it, all other things being equal."

Fallacy of false choice and I think that totally mischaracterizes both positions. More ideology there than any reality.

1) Politics professes that rich people get rich at the expense of poor people, all other things being equal.

2) Economics professes that a productive economy will benefit everybody in it, all other things being equal.

I think the history of the western world gives much more support to 2) than to 1), especially including the failure of systems that were set up specifically to correct the ills of a world where 1) is more correct.

False narrative. Economists never "profess" such view.

We know that productivity is not the same across the entire economy. Some sectors are highly productive, while others are not. If you allow people in the highly productive sectors to keep all their gains from increased productivity (i.e., through low taxation), those in the less productive sectors will become worse off. If there are more people in these less productive sectors than in the highly productive ones (and this, in fact, is what the U.S. looks like - most Americans work in the less productive service industry), the population will be worse off overall.

Highly productive sectors will pay higher wages, which forces the less productive sectors to raise wages in response. However, higher wages do not lead to better productivity in these less productive sectors. This would result in either higher labor inputs, stagnant employment, or more expensive goods from the less productive sectors. The problem would be compounded if only the rich benefit from the productivity gains, as this would mean the rest of the population would experience cost increases in the less productive sectors far outpacing the small income gains for people working in those sectors.

Highly productive sectors will pay higher wages, which forces the less productive sectors to raise wages in response. However, higher wages do not lead to better productivity in these less productive sectors. This would result in either higher labor inputs, stagnant employment, or more expensive goods from the less productive sectors.

Nice. Not a lot of posters know about Baumol's cost disease. The labour productivity of a string quartet is no higher than it was 250 years ago, but to keep the violinists on staff you have to pay them enough to keep them from going to work for Microsoft as programmers, so the quartet business is not very profitable.

What's next? discussing Ricardian Equivalance? That might be suited to some recent threads.
"...attempts to stimulate an economy by increasing debt-financed government spending will not be effective because investors and consumers understand that the debt will eventually have to be paid for in the form of future taxes..."
It does rather rely on the analytical intelligence of the median taxpayer. So my view is that (a) sure it works but (b) not for all that long.

Jim

Highly productive sectors will pay higher wages, which forces the less productive sectors to raise wages in response.

The assertion here is that wage increases would make highly productive sectors more attractive to workers in less productive sectors, potentially luring them away, forcing companies in those less productive sectors to increase their wages too in order to retain their workers, correct?

I can theoretically see that being possible in cases where there is little difference in education, experience, and capability requirements between the two sectors, which would easily allow people to jump ship from the less productive sector to the highly productive one. But how often do education & experience & capability align strongly enough to produce such an effect?

I would think a far more common scenario is one where we have two very disparate groups of workers with little overlap in education and experience and capability, limiting the ability to hop ship, thus greatly reducing any "cost disease". Career restaurant cooks for example are no more likely to compete for AI engineer positions just because AI engineers received a wage increase.

However, higher wages do not lead to better productivity in these less productive sectors. This would result in either higher labor inputs, stagnant employment, or more expensive goods from the less productive sectors. The problem would be compounded if only the rich benefit from the productivity gains, as this would mean the rest of the population would experience cost increases in the less productive sectors far outpacing the small income gains for people working in those sectors.

Digressing a little here, but aren't you inadvertently describing exactly what happens when governments force wage increases on companies through minimum wage law increases, especially when the rate of those wage increases exceeds the growth in productivity in less productive sectors?

1) Politics professes that rich people get rich at the expense of poor people, all other things being equal.

2) Economics professes that a productive economy will benefit everybody in it, all other things being equal.

I think the history of the western world gives much more support to 2) than to 1), especially including the failure of systems that were set up specifically to correct the ills of a world where 1) is more correct.

False narrative. Economists never "profess" such view.

Through the 250 years of industrialization in the west, Rich people got way richer, the middle class got way richer, and poor people got way richer.

If 1) above were true, the vast increase of the richness of the rich should have resulted in the FURTHER REDUCTION in the standard of living of the poor. But the opposite is true, historically.

And economists do know this and do point it out all the time.

How is this not obvious?

R:)

Through the 250 years of industrialization in the west, Rich people got way richer, the middle class got way richer, and poor people got way richer.

If 1) above were true, the vast increase of the richness of the rich should have resulted in the FURTHER REDUCTION in the standard of living of the poor. But the opposite is true, historically.

And economists do know this and do point it out all the time.

How is this not obvious?

During the last 250 years we have seen an incredible transfer of wealth from the rich to the poor through government intervention.

Just for an alternate view.

During the last 250 years, but particularly the last under 200 years, we have seen how mankind has found a new source of energy.

Before that, for centuries, power came from biofuels (mostly wood), human labor, domesticated animals, slaves, wind in the form of ship sails and windmills, and water wheels. And that changed very slowly - as did economic growth.

Then, beginning with the development of the steam engine, power started coming from the use of fossil fuels. And that power transformed the productivity of humans. And they all participated in the results - not equally, but all.

Now we've learned that there may be significant impacts from the byproducts of that new source of energy. And we're struggling with how to cope with that versus reducing standards of living in favor of combatting those changes. Some well developed countries are willing to make some sacrifices to those goals. Most, particularly undeveloped countries, are not. Actions speak louder than words.

Economies thrive or fail on energy. The rich-poor division of results is a secondary effect depending upon how their different views of how to govern interact. That's where human nature enters in.

But first, you must increase energy to increase productivity. Even AI requires more energy.

As I say, just an alternate view. Maybe too simplistic - but I don't think so.

Through the 250 years of industrialization in the west, Rich people got way richer, the middle class got way richer, and poor people got way richer.

Is that so? I don't doubt the statement when it's about the last 250 years. But what about the last decades, say the last 30 years?

While the statement might still be true for the first two groups, I am less sure about the third. Why? Because I know how New Zealand (NZ) and Australia were when I immigrated exactly 30 years ago in 1994 to NZ, and know how they are today. Two countries which are on the other side of the world, but still belong to the West, so "industrialization in the west" should apply to them, right?

NZ then in general was much poorer than today as is very much visible already on the streets. Then everybody drove old used cars, imported from Japan, because Japan taxed cars older than I think 8 or 9 years so heavily that it made no sense to keep them, so they were bought very cheap by NZ and Aussi importers and sold on their markets. It was a rare exception to see newer cars. Completely different nowadays. Shiny new or near new cars, for a good part electric ones.

Many more rich people than 30 years ago (partly because of a huge influx of wealthy Chinese), middle class richer than before too.

But: A growing number of poor people. "Poor" of course is a matter of definition. For me if somebody can't afford to live in a house or apartment, but his car (or rather say old wreck) is his home, that someone is poor. 30 years ago that was practically unheard of. Nowadays it's a fact of life for many Kiwis - and the number is growing daily. I am not kidding you. Just watch the scenes at supermarkets in the night. That's where those people stay overnight in their cars. This is not hearsay (you can easily read more about it), I see it just too often in NZ.

The lucky ones are those who have relatives with a house. They then if the house is already full let them stay in their garage. The inhabitants of many garages in NZ are not cars but humans.

And the most depressing fact: Those people are not your typical homeless person who has no job. They usually do have a regular job - but nevertheless can't afford housing!

It's so bad nowadays that there is a growing business to convert cheap old vans into "homes" for "the rich ones of the poor", the ones who can't afford to rent a room, but can afford such a cheap version of a proper campervan.

Why do I mention Australia too? Because I have friends there who are telling me that there also more and more people live in their cars!

I could go on and tell you about - yes, anecdotal evidence only - an elderly Kiwi couple in a supermarket, with her saying to him "I would so much like to have some of those bananas", but not being able to afford them. Etc.

This is my alternative view: Yes, the Rich in the West got richer, the middle class too, but for the poor it at least for a good part looks different - and at least in parts of the West the proportion of poor people is growing fast lately.

How is this not obvious?
See above.

I've spent more than forty years associated with the construction industry working with a manufacturer of plumbing products. Construction codes including fire, plumbing, electrical, structural, and materials have continued to evolve and improve. The finished products are meeting an ever rising minimum threshold bar of safety, energy efficiency, and the ability to survive local environments (hurricanes, earthquakes, fires, etc.). On top of that, urban zoning rules have arisen from essentially no rules in the 1960s to the ever growing list of conformance rules seen in most areas. Note: the insurance industry has been a major "hand" in the development of these construction related rules, thus Berkshire and other insurance companies have benefitted from improving loss exposure as homes have fewer fires, plumbing failure damage, structural damage from environmental events and the like. The zoning aspect has also greatly affected housing land cost aspects. The attached articles shine light on how this has adversely affected the affordable housing marketplace.

https://www.npr.org/2024/02/17/1229867031/housing-...

https://www.nahb.org/blog/2024/04/new-energy-codes...

There is a growing push to roll back some of the most restrictive and/or costly constraints. It will be an on-going challenge as this runs counter to the zoning and construction rules mindset that has become entrenched over the past fifty plus years. The famous playwright, George Bernard Shaw, wrote this apt line that captures the situation: "Hell, they says, is paved with good intentions".

Uwharrie

The lucky ones are those who have relatives with a house. They then if the house is already full let them stay in their garage. The inhabitants of many garages in NZ are not cars but humans.

And the most depressing fact: Those people are not your typical homeless person who has no job. They usually do have a regular job - but nevertheless can't afford housing!

I wonder which policies and/or economic conditions discourage the building of housing for those people?

"How is this not obvious?"

I think you are seriously misrepresenting what politicians say and mean with your number 1. As a result you present a false choice. For example, it would also be possible to set up a system where everyone gets wealthier but the poorer do it at a faster rate.

Is that so? I don't doubt the statement when it's about the last 250 years. But what about the last decades, say the last 30 years? ...

I have no dog in this race, but might as well start with a few numbers rather than anecdotes and impressions.

Globally:
Depending on the precise metric you use, global wealth inequality peaked some date between 1980 and 2000. It has fallen a lot since then.
The global Gini coeffient peaked around 2000 at around 0.72 and has fallen to around 0.67. (that was the second peak at about the same level, the first peak being around 1910)
The ratio to top-10% average income to bottom-50% average income peaked around 1980 at about 53x, having risen most of the time since 1820. It has been falling since the 1980 peak, to about 38. This is now about the lowest (tied with a couple of eras) since around the 1890s.
https://wir2022.wid.world/chapter-2/
This has been primarily due to the fact that a whole lot of destitute people are no longer destitute, but now merely poor. It doesn't say much about the middle classes in rich countries, who simply aren't numerous enough on a global scale to move the needle on this measure. But it does give one some hope--global equality has fallen a lot. A small change in Gini is a very large change on the ground. (a Gini of 1 means one person gets it all)

Within the US:
Flattish trend, overall. The US Gini coefficient after taxes and after transfers has been remarkably flat. 1988=0.416, 2020=0.417. The three year rolling average is up a hair in that stretch, from 0.414 to 0.428, but that isn't a whole lot.

Americans have become richer in terms of income, but it hasn't just been the rich.
The real after-tax after-transfer average income among the top quintile of households rose 2.17%/year 1997-2020: The rich have become a lot richer.
The real after-tax after-transfer average income among the bottom quintile of households rose about 2.01%/year 1997-2020. Americans have helped the poor quite a lot.
The difference is not so large that one would characterize it as "the rich are crushing the poor".

The main reason for the impression is (other than press stories) that the middle three quintiles, the vociferous and numerous middle classes, have done worse than either extreme. Up only 1.39%/year in those 41 years.

US data from the Congressional Budget Office, specifically the data tables underlying this presentation https://www.cbo.gov/publication/59510


Since someone mentioned New Zealand, the pre-tax income inequality has indeed risen, relative to lows in the early 1980s. Similar to the effects above, it is a little more equal than the ~2000 peak.

But looking at more history, inequality fell a LOT from the 1920s (start of this particular table) to the 1980s, and fairly steadily. The rise since the 1980s has brought it only back up to the levels typical of a point on that trend around 1940. From a different source (inequality.org.nz), the really bad times were the 19th century. The income share of the top 1% has fallen from 65% (!) in 1893 to 25% in 2018. (25% being pretty typical for most periods since the last 1930s, other than a more egalitarian stretch around the '65-'85.
I suspect the after-tax after-transfers figures would be very much flatter in the last 50 years. Like most countries (and more so than many), New Zealand has a lot of social programs which make life a little easier for the less well off, and the number of such facilities is higher than it was.

Overall, I think a lot of the (often false) consensus about inexorably rising inequality is that middle class in rich countries haven't done as well as some other groups in recent years (the rich, the rich-world poor, and the impoverished), and nobody pays much attention to anyone other than the middle classes in rich countries. Despite the press, there are formerly very poor people in a lot of places you might not immediately expect. I was searching on line for a fairly high tech product this morning, and it is made only in Colombia. 70% of the folks in Kenya use mobile banking.

The plutocrats are certainly having a great time, and (as always) doing what they can to make sure the rules sustain this happy (for them) situation. But in some ways things are getting better, and they are sort of fighting a rearguard action.

Jim

I wonder which policies and/or economic conditions discourage the building of housing for those people?

One over-arching one:

There is an unfortunate effect that once you are a homeowner, it is in your financial best interests to keep population density as a low as possible near you, as property values in any given location rise with lower density. As the homeowner population gets to a certain fraction of the population, zoning and building rules can't be made to their detriment. In most places anywhere near someone would want to live, it's impossible to get a permit to build any kind of higher density housing.

Needless to say, housing that most folks can afford is somewhat higher density. Whether rich or poor, land near where you probably want to live and work isn't cheap, so without a modicum of density, you'll always have a shortage of housing.

Jim

Below is from the reference in Jim's post. It may help explain some local issues.

While inequality has increased within most countries of the world, Over the past two decades, global inequalities between countries have declined. The gap between the average incomes of the richest 10% of countries and the poorest 50% of countries dropped from around 50 to a little less than 40. At the same time, inequalities increased significantly within countries. The gap between the average incomes of the top 10% and the bottom 50% within countries has almost doubled, from 8.5 to 15. This strong rise of inequalities within countries has meant that, despite economic catch-up and strong growth in the emerging world, the world remains particularly unequal to today. It has also meant that inequalities within countries are now even larger than the strong inequalities that are observed between countries.

Below is from the reference in Jim's post. It may help explain some local issues.
While inequality has increased within most countries of the world...


And also, perhaps the biggest factor, inequality simply *hasn't* increased in a lot of places, if you measure in terms of what you can spend -- after-tax after-transfers income. A lot of folks see stories about rising inequality and think the government in question should DO SOMETHING. Well, a lot of them are.

Widest date spreads handy for each:
Income share of 10% after taxes and transfers has fell from 26.5% to 23.4% in France, 1970-2020.
Income share of 10% after taxes and transfers has fell from 30.3% to 29.4% in China, 2002-2018.
Income share of 10% after taxes and transfers has fell from 43.1% to 34.5% in Brazil, 2001-2022.
Income share of 10% after taxes and transfers has fell from 23.0% to 22.8% in Canada, 1971-2019.
It's even down in a lot of places you might not expect, like Russia, Chile, South Africa.

A lot of countries are basically flat over time on that metric, a few little squiggles but no real trend. Some others are higher than at the start of the data, but peaked around 2000 and have fallen since, like UK. Some others have seen it rise a bit, but it's a pretty low value, like Finland, Denmark, Sweden, Germany.

All in all, the story of rising inequality, even within countries, is mostly just...a story.

Jim

Jim provided this link:
https://wir2022.wid.world/chapter-2/

What Aussi found in this reference tells a different story than Jim's summary of it, which focuses on global inequality, but leaves out what it says about within-country inequality. Additionally to what Aussi quoted and underlining it for example this, which also tells the other side of the story:

We find that within inequality (as measured by this indicator) increased gradually between 1820 and 1910, then sharply declined between 1910 and 1980, and finally rose again between 1980 and 2020. This is the familiar pattern, found in the United States and Western Europe in the context of the new wave of historical research on inequality. A similar pattern has also been found in Japan, India, Russia, China, Latin America, South Africa, among other places, so it is not surprising that we find it here at the global level. Note that the rise of within-country inequality since 1980 apparently reached a sort of plateau between 2010 and 2020 (and has not turned back so far).

Perfectly in line with the not just anedoctal NZ (and Aussi) housing crisis of the poor and as Aussi says pointing to a possible explanation.

From perplexity which then referenced Pew.

https://www.pewresearch.org/social-trends/2020/01/...

The Congressional Budget Office (CBO) offers an alternative estimate of income inequality that accounts for federal taxes and a more comprehensive array of cash transfers and in-kind services than is possible with Current Population Survey data. The CBO finds that the Gini coefficient in the U.S. in 2016 ranged from 0.595, before accounting for any forms of taxes and transfers, to 0.423, after a full accounting of taxes and transfers. These estimates bracket the Census Bureau’s estimate of 0.481 for the Gini coefficient in 2016. By either estimate, income inequality in the U.S. is found to have increased by about 20% from 1980 to 2016 (The Gini coefficient ranges from 0 to 1, or from perfect equality to complete inequality). Findings from other researchers show the same general rise in inequality over this period regardless of accounting for in-kind transfers.

Yet another alternative is to focus on inequality in consumption, which implicitly accounts for all forms and sources of incomes, taxes and transfers. Some estimates based on consumption show that inequality in the U.S. increased by less than implied by estimates based on income, but other estimates suggest the trends based on consumption and income are similar. Empirically, consumption can be harder to measure than income.

We have been discussing income inequality. Wealth inequality has also changed. From perplexity:

Wealth Inequality
Wealth inequality has also increased. By 2021, the top 10% of Americans held nearly 70% of U.S. wealth, up from about 61% at the end of 1989.
The median wealth of upper-income families increased by 85% from 1983 to 2001, outpacing the gains of lower- and middle-income families. For example, the median wealth of middle-income families increased by 42%, and that of lower-income families by 67%, during the same period.

Aussi

For those whose interest in inequality extends to its general place in human history, let me put in a word for Walter Scheidel's remarkable book, The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century (Princeton).

https://press.princeton.edu/books/paperback/978069...

Baltassar

"Better never means better for everyone. It always means worse, for some." -Margaret Atwood, The Handmaid's Tale

Since 2020, the richest 1% have secured nearly twice as much new wealth as the rest of the world combined,
which has contributed to both extreme wealth and extreme poverty increasing simultaneously for the first time in 25 years.
This concentration of wealth suggests that while the rich accumulated more wealth, it did not translate into benefits for poorer populations.
(Wealth inequality has a negative, statistically significant effect on economic growth.)

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." -Warren Buffett

Among the G7 countries, the U.S. exhibits the highest level of income inequality.
The wealth gap between America’s richest and poorer families more than doubled from 1989 to 2016.

In the U.S. Middle-class incomes have grown at a slower rate than upper-tier incomes over the past five decades.
Nearly 1/3 of Americans, approximately 31%, have a net worth of $0 or less.
Approximately 10% of U.S. households have a negative net worth, meaning their debts exceeded their assets.

"There's no question that we've had a trend toward growing inequality and that this trend can shape and determine the ability of different groups
to participate equally in a democracy and have grave effects on social stability over time." -Janet Yellen

https://www.minneapolisfed.org/article/2021/the-my...

https://www.oxfamamerica.org/explore/stories/top-5...

https://www.aspeninstitute.org/blog-posts/thirteen...

https://docs.iza.org/dp7733.pdf

As with any statistic, sometimes there are unexpected nuances in the details. Since someone brought up Sweden having seen an increase in inequality I thought I would share a little more detail about this specific example.

Sweden has received in round numbers about 10% of its population in immigration from mostly poor countries over the past decade or so.

This has probably had the effect of decreasing global inequality as being in the bottom half in Sweden is quite comfortable compared to many of the poorer countries.

At the same time, it has also most probably increased local inequality even after taking into account quite generous social programs for the recently arrived.

So here is an interesting example of a country which has followed a policy mostly championed by the political side who is most passionate about inequality, resulting in an increase in national inequality.

Americans have become richer in terms of income, but it hasn't just been the rich.
The real after-tax after-transfer average income among the top quintile of households rose 2.17%/year 1997-2020: The rich have become a lot richer.
The real after-tax after-transfer average income among the bottom quintile of households rose about 2.01%/year 1997-2020. Americans have helped the poor quite a lot.
The difference is not so large that one would characterize it as "the rich are crushing the poor".

Moreover, a point that is often neglected on this topic is that of income -mobility-.

It's extremely common for media outlets & research institutes to treat income percentiles as static groups of people when analyzing time series of income growth/share changes over time, but the movement & composition of the people in these groups is anything but static, and not taking that into account paints a skewed picture.

For example, let's suppose the US had the most amazing income mobility possible, with virtually everyone becoming extremely rich in their working careers, yet each person started their careers at today's minimum wage. Income inequality measures would still show terrible income inequality between the poorest (those newest in their careers) and the richest (those later in their careers), yet I think most would consider this a resounding success story rather than a problem.

To properly analyze income mobility, income of the -same- people must be measured and tracked over a series of years.

In a recent study on it, 63% of US children born to parents in the bottom income quintile (bottom 20%) ended up better off than their parents in higher quintiles than their parents. And interestingly, there's not just significant upward mobility of the poor, but also significant -downward- mobility for the top 20% of income. 62% of children whose parents were in the top 20% income ended up in -lower- quintiles than their parents. In fact, almost 1 in 10 children whose parents were in the top 20% of income actually ended up in the bottom 20% for income.

This result also mirrors studies I've seen on income mobility which track specific individuals over time and their own income changes from decade to decade, rather than comparing children's income to their parents.

This result demonstrates that upward mobility for the poorest is as-strong as downward mobility for the richest, which I think is exactly what we'd want to see in a merit-based country founded on equal opportunity (not equal outcomes). And I believe this is a far better gauge of the health of opportunity within the US than income inequality metrics.

Source: https://www.cato.org/commentary/upward-mobility-al...

This result demonstrates that upward mobility for the poorest is as-strong as downward mobility for the richest, which I think is exactly what we'd want to see in a merit-based country founded on equal opportunity (not equal outcomes). And I believe this is a far better gauge of the health of opportunity within the US than income inequality metrics.


That is an interesting dimension to this debate.

So we have intra-country vs inter-country (more intra-country disparity, less inter-country disparity as poor nations catch up a bit to rich countries), the importance of after-transfer measures of income (or of spending) as opposed to pre-tax pre-transfer (with less disparity if you count this), more success of the rich and the poor at the expense of the middle, the importance of wealth as opposed to just income (more disparity here), and the fact that income mobility is also important (with young people naturally having less income than older people; age-adjusted GINI would be interesting to do.*)

Just one point - it should come as no surprise that upward mobility for the poorest is as strong as downward mobility for the richest: when we are talking about percentiles, it really can't be otherwise. You can't have previously poor people moving out of the bottom 20 percentile group without having an equal number of previously richer people moving into that group. And for the richest 20 percentile (most of us included, probably), it is unsurprising that there is some downward mobility. After all, if you're in the top 20 percentile, you can only go down, and some people will. And lots of offspring of that top group will not really need to work at getting a lot of income, since they may well inherit a lot of wealth.

It's a complex subject.

*As usual, if I thought of it, someone else did already:

Because of data availability, many researchers are forced to work on cross-sectional distributions of income and wealth. For example, all the frequently used datasets in both the Luxembourg Income Surveys and the Luxembourg Wealth Surveys are crosssectional. This is problematic because both theoretical models and empirical results suggest a strong relationship between age and income and age and wealth holdings (see, for example, Davies and Shorrocks [2000]). Both relationships are firmly established as increasing to a certain midlife age and then decreasing thereafter.1 Hence a snapshot of inequality within a country or other geographical area runs the risk of providing a misleading picture of the differences in lifetime wealth or income of its citizens. Because the income and wealth profiles differ across countries, the inequality ranking of countries may also be affected by differences in transitory income or wealth attributable to 1. The income profile is likely to have its peak earlier than the wealth profile. c ⃝2012 StataCorp LP st0266394 Adjusting for age effects in cross-sectional distributions life-cycle factors. For these reasons, it has long been argued that age adjustments of inequality measures based on cross-section data are necessary (see, for example, Atkinson [1971]).2. https://journals.sagepub.com/doi/pdf/10.1177/15368...

The biggest reason that the rich get richer, and the poor stay poor is a result of basic arithmetic. The rich need to pay only a small fraction of their income and net worth on living expenses, while the poor need to pay essentially all of their income and net worth just to stay live. Consider a person with $100 million in net worth and no job. He or she probably makes about 7% of net worth per year from investments and spends maybe 1% of net worth on expenses, for an increase of 6%/year or so in net worth. By contrast, a person with basically no savings and earning $30,000 from a job (twice the federal minimum wage) spends all of his or her earnings on living expenses, for an increase of 0% in net worth.

The rich need to pay only a small fraction of their income and net worth on living expenses, while the poor need to pay essentially all of their income and net worth just to stay live. Consider a person with $100 million in net worth and no job. He or she probably makes about 7% of net worth per year from investments and spends maybe 1% of net worth on expenses, for an increase of 6%/year or so in net worth.


It is quite logical and surely true that a rich person only NEEDS to spend a small part of her income and net worth on living expenses. But it doesn't follow that that is what they actually do.

I don't know anyone with $100m, but I know quite a few people with about $5-10m, i.e. in the top 1 percentile, and I can assure you that none of them follows the 1% rule by spending only $50,000 to $100,000 on living expenses. And I doubt that many people with $100m limit themselves to spending $1m a year, either. They find all sorts of ingenious ways to boost their spending, quite sensibly, I suppose, because you can't take it with you. And many go too far along these lines, which is the only way you can explain the significant downward mobility of the top earners, making room for the upward mobility of the less wealthy.

Many of us aspire to have $10m or $100m (I would settle for 10!, if the gods are listening!), while continuing to spend miserly as we have up to now, but that's not what most rich people seem to end up doing.

dtb

I re-read Professor Snyder’s article this am to try to start to get a handle on things. I’m a bit stunned by the election results, and now I’m wondering if I need to change my views on how to invest in our new situation here in the US.

Have any here lived under a “strongman” type of regime, and if so, how do you navigate such a thing with investments?

I see the market is up pre-market. Guess it’s happy about lower taxes, but long term how is this a good thing for US based investing? How will having Elon able to pull the levers of government in his favor a good thing, if you aren’t invested in his companies?


The world is changing ... and fast. The economy will evolve much faster under Trump/Musk.


I'd say legacy media is toast. Legacy finance is toast. Legacy labor is toast. Legacy defense is toast. Legacy transportation is toast. Legacy communications will face challenges. Knowledge based businesses will face challenges. Retail will continue its slide.

Buying a business for 10X earnings sounds like a good deal unless ten years from now they'll be in serious decline. A large segment of the economy falls into that category. Cigar butt investing is not what I'd be doing.

Needless to say, housing that most folks can afford is somewhat higher density.

One of the odd things in the USA is that some of the most dense housing areas are ALSO some of the most expensive housing areas. NYC, urban LA, for examples.

with virtually everyone becoming extremely rich in their working careers

What percent of them ("virtually everyone") do you think would have above median wealth? What percent of them would have significantly above median wealth? (think carefully before answering)

One of the odd things in the USA is that some of the most dense housing areas are ALSO some of the most expensive housing areas. NYC, urban LA, for examples.


It's not so odd...there are places people want to live. High demand per unit drives up price per unit, and increases the profitability of whatever density increases might be allowed, so the density tends towards the maximum the zoning and NIMBY situations will allow. Once the density has hit its allowable limit, prices can keep rising so long as the fashionability holds up.

Interesting that you mention LA, though--it's quite the outlier. Yes, the average density is reasonably high, but it has an oddly diffuse population distribution, so LA's average is accomplished more through a very big area of medium to medium-high density rather than a more common dense core surrounded by low density. In the "total urbanized area" of LA, the most densely populated 20% of land will get you about 64% of the total population. Using the same "total urbanized area" definitions, the densest 20% of the urbanized area will get you about 88% of the population of San Francisco, and about 82% in New York.

I speculate that, by comparison to other cities, LA also doesn't have the same usual concentration of small area(s) of super high demand and super high prices towering over the demand and prices in the areas that are only a bit less desirable. In London, average house prices around Bond Street Station are about 4.2 times those around Baker Street Station, the next tube stop along. A very pleasant 17 minute walk between the two. There is of course no direct comparison for LA, as nobody would ever walk for 17 minutes to test it : )

Jim

<<One of the odd things in the USA is that some of the most dense housing areas are ALSO some of the most expensive housing areas. NYC, urban LA, for examples.>>

It's not so odd

In that case it is at odds with your previous statement of "Needless to say, housing that most folks can afford is somewhat higher density." If dense areas are necessary so that most folks can afford it, but dense areas are among the most expensive, then you are essentially saying that there is no solution to these housing issues. And that was the point I was trying to make.

In London, average house prices around Bond Street Station are about 4.2 times those around Baker Street Station, the next tube stop along.

But neither Bond Street NOR Baker Street are affordable to the median (or even twice the median or even three times the median) wage earner!

As you ask, investments can do very well, or very badly, under "strongman" regimes. (no comment on applicability)
The key seems to be to invest in large groups that are in favour with the person in charge.

Just revisiting my post from a while ago. I hope I'll be forgiven.
The subject of the thread was not US politics, but it's hard not to notice that Mr Musk seems to be in favour, and consequently a bet on the companies he promotes has worked very well for those who placed "in favour" bets even after the election result was known, so it seems to have been an actionable idea not requiring a crystal ball.

"Donald Trump, long an implacable opponent of electric vehicles, has recently changed his tune. “I’m for electric cars,” he said at a rally in Atlanta, Georgia, in August, adding with exemplary candour: “I have to be because Elon endorsed me very strongly, so I have no choice.”
(from the FT Nov 23)

So, bet the bromance! Musk and crypto are the obvious plays, but things like GEO (prisons) have done very well.

Of course, for the more cynical, there is this approach: just invest in the firms spending the most on lobbying, on the theory that they wouldn't do it if it didn't pay.
http://www.datahelper.com/mi/search.phtml?nofool=y...
(maybe paywalled) https://www.economist.com/finance-and-economics/20...

Jim

Just revisiting my post from a while ago. I hope I'll be forgiven.
The subject of the thread was not US politics, but it's hard not to notice that Mr Musk seems to be in favour, and consequently a bet on the companies he promotes has worked very well for those who placed "in favour" bets even after the election result was known, so it seems to have been an actionable idea not requiring a crystal ball.


Adoption and regulatory certainty are the two variables that I think drive Bitcoin. (I distinguish between BTC and crypto. I don't look at crypto or have an opinion on them. None of them have the scarcity feature of BTC which is IMO a necessary characteristic.) Trump's election is a game changer. If this isn't actionable I don't know what is. (A few days ago I sold my Tesla options and put half into BTC. I'm all the way at the top of my comfort level for one investment. The other half into cash.) Trump has said that they won't be selling their BTC. The USG is saving in BTC. Also, good chance they'll be funding a strategic reserve. Think gold or oil. Adoption and regulatory certainty. I'm prone to hyperbole I know, but in seismology terms this isn't a tremor ... it's the freakin' big one.

Regarding Musk. Biden and the media have had their boots on his neck the last four years. He doesn't bend the knee easily. To neutralize the media he became the media and to deal with Biden he had him and Kamala unelected. Musk doesn't want special treatment from Trump he wants fair treatment. The election might be actionable for Tesla in the short run but it's their product roadmap (not their current lineup) that is mostly driving the price. They're disrupting energy with their stationary batteries, transportation with their autonomous electric EVs and trucks, labor with their humanoid robots and human intelligence with their AI data centers. Price matters, but I see this becoming the most valuable company in the world. Or, not.

Post New

Berkshire Hathaway FAQ

---

Contact Shrewd'm
Contact the developer of these message boards.