100% investing, 0% politics. I love it... 100% Clean Info from noise and personal opinion based in a Philosophy that I support or not. That is elegant and intelligent. Cheers!
Cars today, if maintained, can last much longer than cars in the past. They are also much more advanced and safe which I think justifies their cost. Housing, on the other hand, hasn’t really advanced in any significant way; why is it so much more expensive?
Matt; This is a very well thought out, and presented lecture (video). I wish it was an hour long. You simplified the concept of inflation and explained the false security of holding cash. Great educational content.
My grandparents never invested anything, the same with my parents. So, I am the very first one out of the generations of not investing people with the money I started investing at the age of 36. From every paycheck! It was almost nothing for the first 12 years, and now at the age of 51 I can see myself happy retiring at the age of 60. Compound interest! It is a miracle!
It drives me nuts when people compare house and car prices today to 40, 50, or 60 years ago. If you want to build a 1300 sq ft 3 bed 2 bath without ac, the lowest energy efficient windows you can find, slap on some lead paint, put some asbestos tiles in, and have incandescent bulbs that burn out every year because the electric isnt grounded, then I'm pretty sure you could build some real cheap houses today. Yes houses and cars are expensive today compared to in the past, but your basically getting a space ship compared to what you got 60 years ago.
Sure but the point is that your wages and wealth aren’t growing at the same rate unless you do something to get there. Spaceship or not. If you’re arguing that the “quality” of our average consumption has gone up and we need to pay accordingly…are you saying that our “average earnings” should go up as well or folks should simply lower their expectations? My approach is - this is the reality we live in. You don’t have to agree, you don’t have think it’s right or comparable - but it’s the facts. Here’s how you reach your goals in spite of those facts. Again we can argue right / wrong / comparable or not. The point is to help people be able to afford this stuff
Sure investing is the best way to build long term wealth over the course of your life. There is no disagreement there, but yea people need to lower expectations when it comes to houses, cars, vacations and so forth. When you buy a car today, its not the same buying a car 40 years ago so you're going to have to make it last longer or buy a cheaper lower quality car. Same with houses the average has moved up so you have to buy older or smaller. The average standard is much higher today , so people need to work a lot harder to meet those higher standards, or lower their standard.
Its crazy people worry about returns in the stock market when inflation is a guaranteed value reduction on your money. I pretty much know a very small handful of people in my life that think investing is smart, and to me thats scary
Great points! I'd also say the growth in the M2 isn't so much about the Fed but more about Federal government spending. Overlaying Federal spending chart over the M2 chart and they're pretty much in lockstep with each other. Deficit budgeting (which seems to be the only kind of budget we have these days) is followed by the Treasury selling bonds to fund that deficit spending resulting in M2 growth. The Fed contibutes in some degree at times when they step in to buy Treasuries. That obviously puts money into circulation but the intention is more about supporting Federal government spending when normal channels can't absorb the volume of Treasuries brought to auction.
This is interesting, so the selling of bonds is effectively adding to the money supply? My understanding of how the Fed impacts it is through setting monetary policy / interest rates that drive economic activity. As they go down, loan activity goes up, as loans are originated, money supply increases (effectively created out of thin air by the bank as a liability for the consumer). As rates go up, loan activity goes down, assuming net loans paid are higher than loans originated, supply should in theory go down. I'm not as familiar with how the Treasury bond stuff works and impacts the number - but I'm assuming it's similar to what I stated above, just at the government level. The Treasury bond is the "loan" being paid back that effectively increase the total "money" in circulation. Is this correct?
Selling Treasuries to finance deficit spending can certainly increase M2 . If one looks at M2 between 2020 and 2022, M2 increased 40% and largely a result of federal spending associated with pandemic stimulus (even as the Fed tightened monetary policy with rate increases). That deficit spending is supported through Treasury sales. Additionally, foreign entities own a tremendous amount of treasuries ($8 trillion per the US Treasury as of 01/2024). Those purchases add to M2 once filtered through the Treasury to support deficit spending. This is essentially new money coming into the domestic supply in exchange for Treasury paper. In fact, in the past year, Treasuries held by foreign entities increased by $1 trillion. So it's not just Fed monetary policy that drives M2 it's also the federal government's need for funds and the source from which those funds eminate. As far as I know, the Fed doesn't control the issuance of Treasuries nor do they restrict the source of the funds that purchase those Treasuries. That's not to say Fed monetary policy doesn't come into play as was highly evident when they maintained near zero rates and borrowed money appeared out of nowhere. But the federal government's habitual increasing deficit spending habit and the need to finance such is certainly a contributor and one of some consequence.
@@bruceanderson8179 In theory, shouldn't any money created by the fed to participate in bond activity be removed once the fed closes these positions? I always feel like this is something lost in complaints about reserve banks. In theory, any money added should eventually be removed, however in practice the fed may never get enough opportunity between crises to fully liquidate their positions (which as I understand it is how it is supposed to work) and remove their money from the supply.
Certainly the Fed plays a major role in seeing that Congressional funding needs are met through purchase of Treasuries and it has swollen the Fed's balance sheet. It remains, however, Congressional appropriations over and above revenue that necessitates expanding the money supply to support spending. Most recently one can see the tremendous growth in M2 resulting from Congressional intitiatives during the pandemic. Conversely when deficit spending was somewhat muted during the 90s M2 was pretty stable. Since then, as you aptly put it, there are crises that Congress addressed by passing legislation to authorize spending and M2 for the most part has grown as a result. Unfortunately, we're at a point with the cost of servicing debt has grown so much it will become increasingly difficult to keep deficit spending, and in turn, the money supply in check.
it's a really good message for young people and it's never too late to start. investing has become my favorite hobby, next to pulling weeds and working around the house 😆
I’d be retiring or working less in 8 years, and considering this financial recession, I’m deciding to begin taking up skilled trades. I’m curious to know best how people spilt their pay, how much of it goes into savings, spendings or investments, I earn about $140k per year but nothing to show for it yet.
Except for one thing... In 1959 the dollar was a silver certificate, and paper dollars could be exchanged for about 3/4 oz of silver at any bank. Today that 3/4oz of silver would be worth about $20 in Federal Reserve Notes.
That’s cool, but I think the point still remains. In order for you to realize that you’d have to had exchanged it to the silver piece by a certain point in time, held it, and then converted back to dollars now then right? So…kind of like investing?
@@mattderron half was. It wasn't really anything like investing back then, because it was just the normal coinage. The normal dimes, quarters, half dollars and dollar coins were all 90% silver until 1964. Cashing it in now to get more than $1 for it would be like selling an investment.
@@Sylvan_dB cash is not supposed to be an investment. Everyone just storing silver dollar notes in a vault or mattress results in deflation which causes massive economic problems.
@@ario2264 Deflation causing problems is a myth. Think about it for yourself instead of repeating the babble intended to excuse the behavior of the central bank. How much problem has deflation in tech caused over the past 60 years? None. Deflation is a natural consequence of increasing productivity and is a good thing.
@@Sylvan_dB deflation or reduction in prices in specific areas isn't a problem, the problem is overall deflation. it just encourages hoarding, which is not investment. Low steady inflation encourages investment.
Nice perspective to the audience, thanks. Please consider a follow-up video or two on the variability of risk/returns between differing investments. I have friends whom are scared of the short variability of stocks and stock etf’s and prefer the lower bounciness of bonds and stability of holding to maturity. However holding for a longish term has given me a far larger annualized compound return over 10ish years.
I took part of my mom’s inheritance and gave it to her grand children, (my daughter, niece and nephew) in the form of FXAIX. My adult daughter already invests at Fidelity. My niece and nephew are 15 so my brother opened accounts for them. Most of my experiments fail, but we’ll see.
YES!!! This is the reason why I've started investing recently. Thank you for awesome videos always!! "You should be afraid of taking risks and pursuing something meaningful. But you should be more afraid of staying where you are, if it's making you miserable." - Dr. Jordan B. Peterson
Slightly off topic. But my strategy has been to start as income dividend growth focused. Next year I'll start building into a 50/50 value & growth pie 2 ETFs and use to tax loss harvest annually as needed if applicable. My 401k is mostly us total stock market and will lean to growth.
two questions on this - on what timeframe are you expecting those to outperform and what is the catalyst for their outperformance other than "they're cheaper now"? I understand the thought process of "S&P 500 / large cap is overvalued right now" and small-caps likely gaining ground due to value (I don't necessarily agree but I understand). But for emerging markets, US indexes have greatly outperformed over the past 40 years or so, with the exception of after the dotcom bubble. Are you assuming the market is similar now?
Great video bro. This information is why I am a Bitcoiner. Bitcoin is volatile, but not risky. It can’t be debased the way the U.S. dollar is debased. I’m a diversified Bitcoiner though. 25% BTC 25% Tesla 25% S&P500 and 25% SOXQ
Are you suggesting a fixed money supply? Stop fractional lending? During economic crisis we just sit in "money gridlock" while everyone hoards whatever money they have? Haven't we seen these things already multiple times throughout history?
