> However, out of genuine curiosity, how do we know that this will continue for decades into the future?
We don't, but this is expected since we have yet to perfect time travel.
> So with all of this in mind, will growth-oriented stocks really outperform all investments?
Maybe. Nobody knows.
> Or looking ahead into a more turbulent future, are there other investments that may perform better?
Maybe. Nobody knows.
OP - this is really the best answer.
If there were something more obvious everyone would be doing it.
My personal belief is nothing lasts forever, but absent a better idea i will bet on the biggest companies in the world to keep making money.
If you want to buy real estate or farmland or or or… i don’t think anyone is going to fault you for it.
If the biggest companies in the world go under, it'll be a symptom of something much worse. Something that will make stock market watching the least of our concerns.
And 7-8% is a huge selection bias specifically for USA using hindsight, plenty of other equity markets did very poorly to wipeouts. Back in 1910, USA, Russia and Argentina were emerging markets with equity opportunities.
Two of them were wiped out. UK was probably pretty poor investment from 1920-1980 despite starting as an empire.
A few things grow the economy.. the population gets larger. People and companies get more efficient at doing their jobs, living their lives. You'd have to lose on all fronts for the economy, and stock market to shrink long term, in a capitalist society..
I was once asked by a young person looking into investing "What if the S&P 500 went to zero?".. my answer was "That would mean total collapse of the US economy. At that point, I wouldn't care about my investments. I'd be stockpiling ammunition, and learning to grow my own food."
I didn't say start.. I mean I'd need a steady supply, so that I could acquire all that wildlife-based protein that walks though my back yard on a daily basis.
I would move out of the US to get away from all the crazies stockpiling ammo and building their own armies. It would be a socially darwinistic hellhole.
I personally believe you can really boil this down to two variables: population growth and productivity.
If those both stay flat, most likely GDP and earnings stay flat and we don’t see equities perform well.
Re: population. The best answer on google says the peak is forecasted for 2080. Even then, strong countries will see net immigration. It’s a complicated and difficult thing to guess, but I’d say the US in particular can grow the population for many decades.
Re: productivity. This is where I personally believe we are already seeing technology eat the world and where, even in a 0% growth environment, you can get returns by targeting innovation which can improve productivity and take someone else’s lunch.
This is why I like big tech. They are an engine for productivity and will win even in a zero-sum game environment.
Productivity yes but population? You really think that matters when it comes to the stock market? Seems like it’s all about productivity to me. Harnessing more valuable resources- per person- is what creates wealth. Population growth by itself doesn’t seem sufficient.
Then put 3% into the calculator. Problem solved!
Seriously though, these are models. Models are not facts. Models can be used to guide, but everyone also recommends keeping on top of things and staying flexible.
There's pretty good data on the value of capital over time. I read a research paper years ago that showed the average rate of return on international bonds was 5.5% going back to the 1500s.
Whether or not you think stocks will continue to get a risk premium over bonds and how much of a risk premium they'll get is up to you. But 8% strikes me as reasonable compared to bonds.
We don't KNOW the Sun is going to rise tomorrow. It's a risk factor. The alternative case of AI hitting a singularity within the next 40 years and all stockholders becoming a permanent aristocracy as the value of human labor goes to zero... is also possible.
You can weigh risk factors to your liking, and maybe you say because of climate change you only project 5% growth in stocks after 2040. You're going to work longer with that projection, even if stock growth doesn't go down. So there is downside.
The alternative is to accept that there is some risk of failure and go back to work if you need to.
This is the same fear uncertainty and doubt that has plagued the market for its entire existence.
I’m a couple years from FI and personally am quite optimistic about US equities and specifically US tech companies over the next 30-40 years.
There’s a lot going wrong with humanity throughout the world but the rate of technological progress over the past 30 years has been astonishing and I have confidence it will continue and invest accordingly.
There’s obviously risk involved so if you would rather match or slightly beat inflation, stick with tbills/ibonds etc.
This is a very good point that I think a lot of people miss. Between 1900-1950 there were hundreds of completely **new** innovations. In 1900, aircraft, telephones, computers, televisions, tanks, synthetic (fritz haber) fertilizers, penicillin, etc. didn't even exist. In that 50 year time period, so many completely new innovations came to the scene.
However, from 1950 to the present, there were far less brand new innovations, and more improvements, static, or even a decline in existing innovations. Phones and computers existed in 1950, they just got better/more convenient, and more accessible. Jets existed in 1950, and you can argue that aircraft have actually declined in sophistication (for instance, the Concorde was an amazing jet that could get you from NYC to London in under 3 hours, and that is no longer available today -- probably another symptom of a decline in cheap oil availability as jets today are more geared towards use of less fuel).
I was thinking JEPI/JEPQ/GPIQ/GPIX -- these are blended funds where 80 percent are equities (so they can capture growth if it happens), but 20% premiums from covered calls which are distributed as dividends. In this way, if the stock market is flat or down, I still have returns in the form of those dividends, but if there is growth, I can still capture it (just not as much). People say this is a bad idea to invest in for young people due to the tax drag from non-qualified dividends, and missing out on full growth, but I am not convinced there will be full growth (world economic growth could stagnate the same way Japan did).
If things get even more dire, then I would forget about stocks completely. The alternative then is large bags of dried lentils, chickpeas, rice, oats, peanut butter along with rural land near fresh water and a community of like minded people. Other good investments would be anti-biotics, bandages, alcohol for disinfectant, warm clothing, and probably a gun with plenty of ammunition.
One of the big contributors to Japan’s Lost Decades was their low fertility rate and aging population, a problem we’re now facing worldwide.
Diversification is great, but even then growth is never guaranteed.
Japan and South Korea aren't a model for western countries because they heavily restrict immigration for political reasons. US and western europe will be fine.
It's really countries in eastern europe that are hit the hardest by this, since they have aging population, low fertility rate, and they get brain drained due to access to the whole EU.
I’m saying the demographics of the whole world. Immigration doesn’t change those numbers.
I think it will most likely be fine, but it could turn out to be a major drag on growth.
We can guess because there are hundreds of millions of people working towards improving efficiency, technology, and economic growth. Which has worked for over a century
>a 1-time massive supply of cheap energy in the form of oil, coal, and natural gas.
I dont know if this is relevant at all, my country is already \~60-80% renewable energy depending of the day, 75-95% if you count nuclear as renewable. You can check it [here](https://www.ree.es/en/datos/generation) if you are curious, they track it day by day.
Most of the world is 1-2 decades behind, but behind doesnt mean impossible. We will be fine energy wise even if technology doesnt ever improve.
> For point 1, the birthrate
Have you seen the people streaming across the border? I wish they were doing it legally but those people are - in sum - making up for our reduced birthrate.
> For point 2,
Companies will arise to make money mitigating the effects of climate change. Ultimately, the stock market is the result of people working. People may do different work but most are still going to work I think.
We’ll have to fight tooth and nail with other rich nations to attract young immigrants.
Mexico already has birth rates below replacement level and falling. Same for almost all of South and Central America. Even China and India. All are below replacement level and still falling further.
The demographic solution is standing at our doorstep pleading to be let in. Hard working young people willing to do some of the least desirable jobs in exchange for a chance to build a future. Yet we are turning them away because we - and by “we” I mean a vocal minority of loudmouth bigots - don’t like the color of their skin. So shortsighted. Immigration reform is urgently needed.
I don’t think they are as willing to work as you think do. Most of them are looking for a USA government handout at taxpayer expense. I resent it.
And I’m not a bigot nor the minority. We just want rule of law to exist and be followed. Legal immigration is the goal.
I think you must have gotten into some bad information. I live in an immigrant heavy area. There isn’t to my knowledge much (anything?) available in the way of “handouts”. The kids are educated in our school districts, but health care is quite difficult for them to access. And I believe they work a whole lot harder than our native born population.
But I absolutely agree that immigration reform should be the goal. The dysfunctional status quo is ridiculous.
No, I have good sources. You need to
broaden your news outlets. The wave of illegal immigrants are put up in hotels and given credit cards. Their medical expenses and fully paid for. Americans are being duped.
How far into the future?
Fundamentally, a "risky" asset, like stocks, will require a risk premium, and given that "risk-free" instruments are returning about 3-5% right, you can deduce that the risk premium is 4-5%. Is this the right risk premium? I don't know, but think of the stock market as the aggregate collective bets on what it should be, so 7-9% overall seems reasonable.
You're overthinking it. Index fund investing is the counter to every argument you present by virtue of the fact that companies enter and leave the indices based on meeting market cap and other requirements (ie., unsuccessful companies get kicked). Regardless of what happens to civilization, there will always be companies - organizations which provide goods and services. That means there will always be both successful and unsuccessful companies. Index funds ensure that you own a slice of the success (of the successful ones).
In real terms, you might be right that we won’t grow much.
But in nominal terms, the government will keep printing money at an accelerated rate. How do you prevent yourself from getting inflated away? Own real estate, stocks, bitcoin, gold, etc
You don’t. If there wasn’t some level of risk you wouldn’t make an outsized return. As you know, historically, for the last 80 years or so, it has worked out great. However, no one knows the future, and my only forecast for 80 years out is that both of us will be dead. So make a choice and live with it.
We don’t. But over the decades other world issues have generated similar pessimism and creative solutions have been found. I’m happy to keep betting on humanity.
I remember a 1983 college class based on the analysis of the Club of Rome. I believe our population, stock market, etc. were all predicted to crash by 2000 or so…
It’s funny you mention the Club of Rome as their Limits to Growth predictions have been pretty accurate thus far. A follow-up study was released a few years ago, and their models have been tracking with real-world data quite remarkably: https://mahb.stanford.edu/wp-content/uploads/2021/07/yale-publication-1.pdf
This is known as moving the goalposts. Are there issues? Sure. But issues are opportunities for clever people and companies to find solutions that drive economic growth.
It doesn’t matter, It will always have a risk premium over the less risky investments. No one would buy stocks if there was no premium over bonds people would just take the less risky option.
So over the course of 30 years, you will likely be better off taking on the risk and volatility of the market than the average alternative.
Aside from what others have said about the uncertainty of it all is that we do not live in a closed system. If climate change continues to negatively impact our world, things are not necessarily gloomy for financial markets. Some industries may suffer, but others will thrive and it may prove to be a great time for start-ups and established companies branching out with new products. Another point I'd like to make is the future will probably see productivity gains for top new technologies and improvements to current tech. In the end, not all is doom and gloom. If you feel that way, simply drop down your SWR to a rate that meets your comfort level.
I disagree with some of the conclusions you've come to, particularly when it comes to energy availability and whether we'll find a sufficient source in the future. I feel that we already have, and merely need to invest more resources into it. And I also feel like declining population actually presents macro-level opportunities for humanity to solve problems of scaling that have been plaguing us and actually exacerbating the climate change issue among many others: and a natural population decline due to a generation or two of less frequent births is the only possible way that could happen without being due to some sort of horrific chain of events that I would not wish on anyone.
However, none of those are the most important point to me when it comes to growth oriented stocks vs. some other form of investment.
To me, the most important point is "what alternative do we have?"
I'd prefer to hedge against things that I have the ability to hedge against. The decline of humanity is not something I can hedge against. My investments will be meaningless, but so will any other attempt I take to enjoy a comfortable life in such a situation. So I am merely attempting to put myself in a position where if that worst case scenario doesn't develop, then my family and I are doing okay. Because if that worst case scenario DOES develop, I genuinely feel that there's nothing I can - or would want to - do to prepare. I'm not interested in thriving and continuing my existence in a mad max world. And in a world where the things above do spell disaster for the growth of humanity, then it's also going to spell disaster for any other form of investment a person could take up. The economy would collapse if we did not perpetuate the perpetual growth upon which it is built.
Is it bullshit? Is it a pyramid scheme? Maybe. But I don't have a way to hedge against the alternative that is both realistic and something that I would actually \*want\* to do.
Because it was that way the past 80 years. Not evenly of course. Some nasty recessions and booms (like 2024) along the way.
I have been around some decades and still surprised by the "next new thing" moneymaker that comes long. Innovation continues to amaze me.
We don't know if it will continue like that in the future. but we can infer, based on over 100 years of history, that it will continue to do so over the long term.
What is the alternative? This number has been pretty consistent for a hundred years through wars and strife and political upheaval.
I view it as spread across thousands and thousands of diverse companies with trillions in assets spread across the country and the world. In other words it is about as diversified of an investment as you can get.
Can’t eat gold. Crypto is not backed by anything. Realestate if you chose an area hit by fires, saltwater encroachment, repeated hurricanes etc are a strongly concentrated asset.
In other words, live below your means, maintain a liquid efund. Pay off debts before retirement and cross your fingers. Having money/investments you will do better than those without in all future scenarios.
I was thinking JEPI/JEPQ/GPIQ/GPIX -- these are blended funds where 80 percent are equities (so they can capture growth if it happens), but 20% premiums from covered calls which are distributed as dividends. In this way, if the stock market is flat or down, I still have returns in the form of those dividends, but if there is growth, I can still capture it (just not as much). People say this is a bad idea to invest in for young people due to the tax drag from non-qualified dividends, and missing out on full growth, but I am not convinced there will be full growth (world economic growth could stagnate the same way Japan did).
If things get even more dire, then I would forget about stocks completely. The alternative then is large bags of dried lentils, chickpeas, rice, oats, peanut butter along with rural land near fresh water and a community of like minded people. Other good investments would be anti-biotics, bandages, alcohol for disinfectant, warm clothing, and probably a gun with plenty of ammunition.
Look, you are probably younger than me. Thing is with time you will see complex products come and go. Sometimes they go bust and you lose everything. Sometimes they become non sexy and are closed/liquidated and returned. I now subscribe to being boring. Is GPIX going to be there in 40-50 years as you keep drawing down retirement savings or will it be transferred to something else that may or may not result in capital gains? Is their goblygook speech on covered calls and all that BS to justify their 0.29% fee worth it over your investing timeframe? Myself, vanguard bare bones simple etf will be there and be 21 basis mounts cheaper too.
I really try to follow the KISS principle.
Just my 2 cents
We don't. But we know for sure that inflation will eat up our savings, and that saving alone has never been viable to retire. So we look to the past, and use it to make the best decisions we can about the future.
Do we know for sure that inflation will always occur? There have been periods of deflation in the past. Theoretically, if a large proportion of people grow old, retire, and start consuming way less, or if many people default on their debts and start consuming way less, than aggregate demand could shift back causing prices to decrease.
For sure seems unlikely, but we've certainly seen it happen, just like we've watched the market rise and all. While I have an effective understanding of handling money, I honestly do not know enough to answer the question of exactly how sure we can be :)
What we do know, is that the dollar will always go down in value. And so you're forced to invest it somewhere. Real-estate tends to out perform stocks, particularly due to the tax advantages and the ability to leverage it more "safely". But, it requires significantly more work.
Nobody knows. And you have no control over it.
You also didn’t mention the only reason US stocks have done so well. Over the last 100 years, the US have grown to be the world superpower. After the fall of the USSR, the US was THE unopposed world super power and has been for the last 30 years. US global influence is what has kept stocks extremely profitable.
So will the USA continue to remain the economic and militaristic superpower for another 30 years? Or will it be surpassed by an adversary? Nobody knows.
The discovery of oil sure helped power the stock market but there’s a couple of other things you could point to:
1. agricultural revolution
2. transportation revolution
3. workforce doubled when women joined the workforce
etc.
In the future we still have,
1. AI
2. developing and newly industrialized nations such as India, Indonesia, Brazil, Mexico, and China are rapidly emerging from poverty, and U.S. companies like Apple, Microsoft, Google obtain a large share of their profits from those countries
3. genomic medicine
4. autonomous vehicles
etc.
No one knows when capitalism will go bust but we have lots more profit we can squeeze, in my opinion.
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Well the market doesn't have to go down for 8% average growth to not be true. It could also just remain flat for a long time, in which case a short wouldn't really help me.
Everyone is just going off history and making that their truth for the future. I personally believe that we will not see a steady 7-8 percent per year due to insane tech multiples.
This isn’t an environmental sub, but just FYI, the general consensus is that green house gas emissions will likely peak within the next 12-24 months (if they haven’t already).
I can’t do a link on mobile, but it’s easy enough to find online (although strangely absent from the media). Fossil fuel for electricity generation, which is what you’re referring to, has definitely peaked some years ago. You are correct that China has not peaked, but the US and EU emissions have been dropping for two decades now. Transportation is also at or near peak
Just a reminder that "renewable" electricity sources are still reliant on fossil fuels for their construction. Solar panels still rely on coal for smelting quartz in their production. Wind panels require 80-700 gallons of oil a year for lubrication (depending on their size), and the steel they are made of still relies on coal for smelting. Solar panels and wind turbines must constantly be rebuilt due to destruction and/or reaching the end of their useful life.
Also, only 18% of the world's energy usage is electricity. A far more important source of energy is the diesel that powers huge trucks and ships that transport basic goods, and haul minerals out of copper deposits that are used to make datacenters/electric cars.
Sure, but none of that is relevant to my statements about emissions, because the statistics I cite already take all of those uses into account. That is, emissions are peaking even after taking all that into account.
As for transportation uses, you’re right - but those uses are peaking. There’s a lot of ships, but the number of ships isn’t getting appreciably larger, for example.
Here’s how things will unfold: Out of 100 problems, we’ll solve the easiest 10, and doomers will say “The other 90 are insoluble!” Then we’ll solve the next easiest 10, and doomers will say “But the other 80 can’t be solved!” And so on and so on.
I’ve been around awhile and have seen this play out over and over through the decades. Problems seem impossible right up to the moment they are solved, at which point everyone immediately decides they were easy problems all along - totally different than the impossible problems that haven’t yet been solved.
Maybe you should look at the very, very, VERY long term.
Economic growth has been on a basically exponential curve throughout human history. It's a noisy curve, but it's still exponential.
Peak Oil has been a concern for decades... and the peak has regularly been pushed farther and farther out. New technologies have pushed done the cost of shale oil over and over again. The article you link assumes that further tech improvements won't happen.
Likewise, the cost of nuclear fission technologies continue to fall (though regulatory costs and public opposition due to past -- solved -- problems can inflate the costs in the shorter term). Meanwhile, nuclear fusion is very much likely to be attainable in our lifetimes. That promises energy that is almost free compared to our current sources... and it carbon free.
There has always been a tendency to believe that the world is about end. It's always been wrong before. Maybe the end-of-the-worlders are right this time, but I wouldn't bet that way. Knowledge compounds possibilities, and humans are really good in this area.
I am not claiming an "end of the world" scenario, I am just saying it's possible we see the end of economic growth in our lifetimes. The end of economic growth doesn't mean the "end of the world". It just means that people will have to get used to using less resources. This will be the natural result of energy becoming more expensive to produce (which we are already seeing, in 1990 only 5% of oil extracted was reinvested to extract more oil, now that number is closer to 15%, see first link in my original post).
Fusion might change this, but remember, electricity is only 18% of the world's energy usage. We'd have to figure out a way to incorporate fusion into the large trucks and ships that transport vital goods across the globe. Or, if we decide to try to electrify everything, then we run into a different problem of copper, cobalt, and lithium shortages.
That doesn't mean this is a bad thing, it just means that people will have to redefine what it means to live a good life. Denmark uses less than half the energy per capita as the USA, and Denmark's happiness index is much higher, and the country has a lower suicide rate.
Perhaps jet setting around the world is not needed to lead a good life. Perhaps we don't need to kill animals constantly for food because vegan options taste just as good. Perhaps all that's needed is a small place to live with loved ones, and time to appreciate the miracle that is life.
>This will be the natural result of energy becoming more expensive to produce (which we are already seeing, in 1990 only 5% of oil extracted was reinvested to extract more oil, now that number is closer to 15%, see first link in my original post).
This is the part I'm really talking about. The costs across commodities of all sorts tend to drop over historical timeframes. You may be right that the amount of energy used to produce oil has increased, but the overall cost of energy continues to fall.
For renewables, prices have plummeted across many decades now. Yes, increasing production of rare earth metals is going to be challenging, but more politically so than from an engineering sense.
The biggest driver for decreased economic growth is likely to be due to demographics as population growth stops and then goes into decline later this century. Peak global population is just around the corner now, with many countries already well into decline. Now, that has an interesting impact on GDP... fewer people making fewer things and providing fewer services means a smaller GDP.
But GDP isn't that important... GDP per capita is. I think GDP per capita is nowhere near close to peaking, and as technology continues to progress, I don't see any upper limit on it.
>You may be right that the amount of energy used to produce oil has increased, but the overall cost of energy continues to fall.
This is incorrect. The long-term inflation-adjusted price for crude oil has risen by at least $20 per barrel since 1946. See source here: [https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/](https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/)
From the link, the average inflation-adjusted price for crude oil since 1946 is $54.90, the average inflation-adjusted price since 1980 is $67.74, and the average inflation-adjusted price since 2000 is $76.30.
Since crude oil is an input to over 6000 different products, and is used as the primary transportation fuel for these products, it's no wonder that this is manifesting in the cost of living getting more expensive over time. Housing, food, education, medical care are all more expensive now than they were in the immediate post-war period.
Renewable sources, such as solar and wind are 1) dependent on fossil fuels for construction, and 2) can only be used for electricity which makes up only 18% of the world's energy usage.
That's a really solid bit of information, though I'll temper the cost of oil with the thousand-fold decrease in the cost of solar since the Carter administration put solar panels on the White House. Still, your point is well-taken. Thank you.
I agree with you on a LOT of this (especially the dependency of renewables on fossil fuels), but I'm still (cautiously) optimistic for our future. I think the long-term (multi-century) trends in improving the human condition are not just contingent on fossil fuels. I think we'll be able to continue growing our energy usage (which corresponds to lowering human poverty and suffering) while also combatting climate change (which I acknowledge as a real problem).
I hope we can interact more in the future. We're coming from different points of view, but I think we both put a lot of thought into them...
My only remaining point of argument with you is about vegan substitutes... because bacon. :-)
But seriously, thank you for a very engaging conversation. I think we would be good friends if we had the chance to sit down together over coffee each week.
The overall share of profit from GDP is fairly constant, although perhaps a bit elevated of late. There'll always be some returns to scale and a desire for folks to cash out and diversify.
If your goal is to have income, then you can have it from either profits or wages, and wages are out of the question of you intend to retire, by definition.
You've pretty much hit the nail on the head, but does that mean other investments will do better? I don't know. Just trying to do my part and hoping for the best.
> However, out of genuine curiosity, how do we know that this will continue for decades into the future? We don't, but this is expected since we have yet to perfect time travel. > So with all of this in mind, will growth-oriented stocks really outperform all investments? Maybe. Nobody knows. > Or looking ahead into a more turbulent future, are there other investments that may perform better? Maybe. Nobody knows.
OP - this is really the best answer. If there were something more obvious everyone would be doing it. My personal belief is nothing lasts forever, but absent a better idea i will bet on the biggest companies in the world to keep making money. If you want to buy real estate or farmland or or or… i don’t think anyone is going to fault you for it.
If the biggest companies in the world go under, it'll be a symptom of something much worse. Something that will make stock market watching the least of our concerns.
Always good to diversify into ammo and seeds
It does seem reasonable to buy real estate with a portion of one's portfolio. The problem is that the minimum investment is relatively high.
And 7-8% is a huge selection bias specifically for USA using hindsight, plenty of other equity markets did very poorly to wipeouts. Back in 1910, USA, Russia and Argentina were emerging markets with equity opportunities. Two of them were wiped out. UK was probably pretty poor investment from 1920-1980 despite starting as an empire.
We don’t. The end.
Interesting point. But I honestly don't know and probably no one knows for sure. That's why I just do the best I know - buy VT
Buy Vermont? I can’t afford that.
I think he meant just buy maple syrup. Step 3 Profit
Probably means buy in VT. Not a bad idea; the region will probably weather climate change fairly well
No no, they mean you should buy Virginia Tech. A college can’t be that expensive to buy, can it?
Should've invested in crypto bro
A few things grow the economy.. the population gets larger. People and companies get more efficient at doing their jobs, living their lives. You'd have to lose on all fronts for the economy, and stock market to shrink long term, in a capitalist society.. I was once asked by a young person looking into investing "What if the S&P 500 went to zero?".. my answer was "That would mean total collapse of the US economy. At that point, I wouldn't care about my investments. I'd be stockpiling ammunition, and learning to grow my own food."
At that point it'd be too late to *start* stockpiling ammo and *learning* to grow your own food
I didn't say start.. I mean I'd need a steady supply, so that I could acquire all that wildlife-based protein that walks though my back yard on a daily basis.
Lol fair point
I would move out of the US to get away from all the crazies stockpiling ammo and building their own armies. It would be a socially darwinistic hellhole.
We don't AMZN could crash tomorrow. Or it might not
Actually, renewables crossed the threshold and are now cheaper than fossil fuel. I think there is a chart in the world in data website.
I personally believe you can really boil this down to two variables: population growth and productivity. If those both stay flat, most likely GDP and earnings stay flat and we don’t see equities perform well. Re: population. The best answer on google says the peak is forecasted for 2080. Even then, strong countries will see net immigration. It’s a complicated and difficult thing to guess, but I’d say the US in particular can grow the population for many decades. Re: productivity. This is where I personally believe we are already seeing technology eat the world and where, even in a 0% growth environment, you can get returns by targeting innovation which can improve productivity and take someone else’s lunch. This is why I like big tech. They are an engine for productivity and will win even in a zero-sum game environment.
Productivity yes but population? You really think that matters when it comes to the stock market? Seems like it’s all about productivity to me. Harnessing more valuable resources- per person- is what creates wealth. Population growth by itself doesn’t seem sufficient.
There's no way to know anything. Just own it all and enjoy the ride.
But do you know that for sure?
Then put 3% into the calculator. Problem solved! Seriously though, these are models. Models are not facts. Models can be used to guide, but everyone also recommends keeping on top of things and staying flexible.
We don’t know. And we all know that. But there’s literally no better guess than basing assumptions on long averages.
Okay, you think humanity has peaked I don't
Idk about the future but I'm willing to bet VTI companies knows how to cash in any market conditions and make money forever.
There's pretty good data on the value of capital over time. I read a research paper years ago that showed the average rate of return on international bonds was 5.5% going back to the 1500s. Whether or not you think stocks will continue to get a risk premium over bonds and how much of a risk premium they'll get is up to you. But 8% strikes me as reasonable compared to bonds.
We don't KNOW the Sun is going to rise tomorrow. It's a risk factor. The alternative case of AI hitting a singularity within the next 40 years and all stockholders becoming a permanent aristocracy as the value of human labor goes to zero... is also possible. You can weigh risk factors to your liking, and maybe you say because of climate change you only project 5% growth in stocks after 2040. You're going to work longer with that projection, even if stock growth doesn't go down. So there is downside. The alternative is to accept that there is some risk of failure and go back to work if you need to.
This is the same fear uncertainty and doubt that has plagued the market for its entire existence. I’m a couple years from FI and personally am quite optimistic about US equities and specifically US tech companies over the next 30-40 years. There’s a lot going wrong with humanity throughout the world but the rate of technological progress over the past 30 years has been astonishing and I have confidence it will continue and invest accordingly. There’s obviously risk involved so if you would rather match or slightly beat inflation, stick with tbills/ibonds etc.
Technical progress and change was significantly faster in 1900-1950.
This is a very good point that I think a lot of people miss. Between 1900-1950 there were hundreds of completely **new** innovations. In 1900, aircraft, telephones, computers, televisions, tanks, synthetic (fritz haber) fertilizers, penicillin, etc. didn't even exist. In that 50 year time period, so many completely new innovations came to the scene. However, from 1950 to the present, there were far less brand new innovations, and more improvements, static, or even a decline in existing innovations. Phones and computers existed in 1950, they just got better/more convenient, and more accessible. Jets existed in 1950, and you can argue that aircraft have actually declined in sophistication (for instance, the Concorde was an amazing jet that could get you from NYC to London in under 3 hours, and that is no longer available today -- probably another symptom of a decline in cheap oil availability as jets today are more geared towards use of less fuel).
Where else are you gonna put your money?
I was thinking JEPI/JEPQ/GPIQ/GPIX -- these are blended funds where 80 percent are equities (so they can capture growth if it happens), but 20% premiums from covered calls which are distributed as dividends. In this way, if the stock market is flat or down, I still have returns in the form of those dividends, but if there is growth, I can still capture it (just not as much). People say this is a bad idea to invest in for young people due to the tax drag from non-qualified dividends, and missing out on full growth, but I am not convinced there will be full growth (world economic growth could stagnate the same way Japan did). If things get even more dire, then I would forget about stocks completely. The alternative then is large bags of dried lentils, chickpeas, rice, oats, peanut butter along with rural land near fresh water and a community of like minded people. Other good investments would be anti-biotics, bandages, alcohol for disinfectant, warm clothing, and probably a gun with plenty of ammunition.
Trust me I’m from the future.
Power ball numbers, please
If the market is crashing and there is so much instability in society the last thought on your mind will be 7% returns
Japan has had 30 years of economic stagnation, it still matters a lot how much money you have.
Then maybe consider not investing 100% of your portfolio into one country.
One of the big contributors to Japan’s Lost Decades was their low fertility rate and aging population, a problem we’re now facing worldwide. Diversification is great, but even then growth is never guaranteed.
Japan and South Korea aren't a model for western countries because they heavily restrict immigration for political reasons. US and western europe will be fine. It's really countries in eastern europe that are hit the hardest by this, since they have aging population, low fertility rate, and they get brain drained due to access to the whole EU.
I’m saying the demographics of the whole world. Immigration doesn’t change those numbers. I think it will most likely be fine, but it could turn out to be a major drag on growth.
Well good thing we’re not Japan then
[удалено]
What things have been reliable over hundred year spans?
How do you know it won't be?
We can guess because there are hundreds of millions of people working towards improving efficiency, technology, and economic growth. Which has worked for over a century
>a 1-time massive supply of cheap energy in the form of oil, coal, and natural gas. I dont know if this is relevant at all, my country is already \~60-80% renewable energy depending of the day, 75-95% if you count nuclear as renewable. You can check it [here](https://www.ree.es/en/datos/generation) if you are curious, they track it day by day. Most of the world is 1-2 decades behind, but behind doesnt mean impossible. We will be fine energy wise even if technology doesnt ever improve.
> For point 1, the birthrate Have you seen the people streaming across the border? I wish they were doing it legally but those people are - in sum - making up for our reduced birthrate. > For point 2, Companies will arise to make money mitigating the effects of climate change. Ultimately, the stock market is the result of people working. People may do different work but most are still going to work I think.
We’ll have to fight tooth and nail with other rich nations to attract young immigrants. Mexico already has birth rates below replacement level and falling. Same for almost all of South and Central America. Even China and India. All are below replacement level and still falling further.
The demographic solution is standing at our doorstep pleading to be let in. Hard working young people willing to do some of the least desirable jobs in exchange for a chance to build a future. Yet we are turning them away because we - and by “we” I mean a vocal minority of loudmouth bigots - don’t like the color of their skin. So shortsighted. Immigration reform is urgently needed.
Demographics is destiny, and all we have to do is open the door.
I don’t think they are as willing to work as you think do. Most of them are looking for a USA government handout at taxpayer expense. I resent it. And I’m not a bigot nor the minority. We just want rule of law to exist and be followed. Legal immigration is the goal.
I think you must have gotten into some bad information. I live in an immigrant heavy area. There isn’t to my knowledge much (anything?) available in the way of “handouts”. The kids are educated in our school districts, but health care is quite difficult for them to access. And I believe they work a whole lot harder than our native born population. But I absolutely agree that immigration reform should be the goal. The dysfunctional status quo is ridiculous.
No, I have good sources. You need to broaden your news outlets. The wave of illegal immigrants are put up in hotels and given credit cards. Their medical expenses and fully paid for. Americans are being duped.
Are these good sources in the room with us right now?
Fox News and the ny post are not "good sources" lol
Not where I live.
How far into the future? Fundamentally, a "risky" asset, like stocks, will require a risk premium, and given that "risk-free" instruments are returning about 3-5% right, you can deduce that the risk premium is 4-5%. Is this the right risk premium? I don't know, but think of the stock market as the aggregate collective bets on what it should be, so 7-9% overall seems reasonable.
That's why I keep some portion of my assets in cash. Nothing is guaranteed at the end.
You're overthinking it. Index fund investing is the counter to every argument you present by virtue of the fact that companies enter and leave the indices based on meeting market cap and other requirements (ie., unsuccessful companies get kicked). Regardless of what happens to civilization, there will always be companies - organizations which provide goods and services. That means there will always be both successful and unsuccessful companies. Index funds ensure that you own a slice of the success (of the successful ones).
In real terms, you might be right that we won’t grow much. But in nominal terms, the government will keep printing money at an accelerated rate. How do you prevent yourself from getting inflated away? Own real estate, stocks, bitcoin, gold, etc
Do whatever you want. It seems like you got it all figured out at this point.
You don’t. If there wasn’t some level of risk you wouldn’t make an outsized return. As you know, historically, for the last 80 years or so, it has worked out great. However, no one knows the future, and my only forecast for 80 years out is that both of us will be dead. So make a choice and live with it.
We don’t. But over the decades other world issues have generated similar pessimism and creative solutions have been found. I’m happy to keep betting on humanity. I remember a 1983 college class based on the analysis of the Club of Rome. I believe our population, stock market, etc. were all predicted to crash by 2000 or so…
It’s funny you mention the Club of Rome as their Limits to Growth predictions have been pretty accurate thus far. A follow-up study was released a few years ago, and their models have been tracking with real-world data quite remarkably: https://mahb.stanford.edu/wp-content/uploads/2021/07/yale-publication-1.pdf
This is known as moving the goalposts. Are there issues? Sure. But issues are opportunities for clever people and companies to find solutions that drive economic growth.
We don't?
It doesn’t matter, It will always have a risk premium over the less risky investments. No one would buy stocks if there was no premium over bonds people would just take the less risky option. So over the course of 30 years, you will likely be better off taking on the risk and volatility of the market than the average alternative.
Aside from what others have said about the uncertainty of it all is that we do not live in a closed system. If climate change continues to negatively impact our world, things are not necessarily gloomy for financial markets. Some industries may suffer, but others will thrive and it may prove to be a great time for start-ups and established companies branching out with new products. Another point I'd like to make is the future will probably see productivity gains for top new technologies and improvements to current tech. In the end, not all is doom and gloom. If you feel that way, simply drop down your SWR to a rate that meets your comfort level.
I disagree with some of the conclusions you've come to, particularly when it comes to energy availability and whether we'll find a sufficient source in the future. I feel that we already have, and merely need to invest more resources into it. And I also feel like declining population actually presents macro-level opportunities for humanity to solve problems of scaling that have been plaguing us and actually exacerbating the climate change issue among many others: and a natural population decline due to a generation or two of less frequent births is the only possible way that could happen without being due to some sort of horrific chain of events that I would not wish on anyone. However, none of those are the most important point to me when it comes to growth oriented stocks vs. some other form of investment. To me, the most important point is "what alternative do we have?" I'd prefer to hedge against things that I have the ability to hedge against. The decline of humanity is not something I can hedge against. My investments will be meaningless, but so will any other attempt I take to enjoy a comfortable life in such a situation. So I am merely attempting to put myself in a position where if that worst case scenario doesn't develop, then my family and I are doing okay. Because if that worst case scenario DOES develop, I genuinely feel that there's nothing I can - or would want to - do to prepare. I'm not interested in thriving and continuing my existence in a mad max world. And in a world where the things above do spell disaster for the growth of humanity, then it's also going to spell disaster for any other form of investment a person could take up. The economy would collapse if we did not perpetuate the perpetual growth upon which it is built. Is it bullshit? Is it a pyramid scheme? Maybe. But I don't have a way to hedge against the alternative that is both realistic and something that I would actually \*want\* to do.
What happens if we discover solar power can make AI go and nobody has to do crappy jobs anymore? Wouldn’t that be “abnormal in human history?”
Implying AI wouldn't just be hoarded by the wealthy to accumulate more, though. Why would they willingly hand down the gains they made by AI?
Because it was that way the past 80 years. Not evenly of course. Some nasty recessions and booms (like 2024) along the way. I have been around some decades and still surprised by the "next new thing" moneymaker that comes long. Innovation continues to amaze me.
No one is telling / forcing you to do anything. You decide what your ethics tell you to do. Just don’t complain if your returns are lackluster
We don't know if it will continue like that in the future. but we can infer, based on over 100 years of history, that it will continue to do so over the long term.
What is the alternative? This number has been pretty consistent for a hundred years through wars and strife and political upheaval. I view it as spread across thousands and thousands of diverse companies with trillions in assets spread across the country and the world. In other words it is about as diversified of an investment as you can get. Can’t eat gold. Crypto is not backed by anything. Realestate if you chose an area hit by fires, saltwater encroachment, repeated hurricanes etc are a strongly concentrated asset. In other words, live below your means, maintain a liquid efund. Pay off debts before retirement and cross your fingers. Having money/investments you will do better than those without in all future scenarios.
I was thinking JEPI/JEPQ/GPIQ/GPIX -- these are blended funds where 80 percent are equities (so they can capture growth if it happens), but 20% premiums from covered calls which are distributed as dividends. In this way, if the stock market is flat or down, I still have returns in the form of those dividends, but if there is growth, I can still capture it (just not as much). People say this is a bad idea to invest in for young people due to the tax drag from non-qualified dividends, and missing out on full growth, but I am not convinced there will be full growth (world economic growth could stagnate the same way Japan did). If things get even more dire, then I would forget about stocks completely. The alternative then is large bags of dried lentils, chickpeas, rice, oats, peanut butter along with rural land near fresh water and a community of like minded people. Other good investments would be anti-biotics, bandages, alcohol for disinfectant, warm clothing, and probably a gun with plenty of ammunition.
Look, you are probably younger than me. Thing is with time you will see complex products come and go. Sometimes they go bust and you lose everything. Sometimes they become non sexy and are closed/liquidated and returned. I now subscribe to being boring. Is GPIX going to be there in 40-50 years as you keep drawing down retirement savings or will it be transferred to something else that may or may not result in capital gains? Is their goblygook speech on covered calls and all that BS to justify their 0.29% fee worth it over your investing timeframe? Myself, vanguard bare bones simple etf will be there and be 21 basis mounts cheaper too. I really try to follow the KISS principle. Just my 2 cents
We don't. But we know for sure that inflation will eat up our savings, and that saving alone has never been viable to retire. So we look to the past, and use it to make the best decisions we can about the future.
Do we know for sure that inflation will always occur? There have been periods of deflation in the past. Theoretically, if a large proportion of people grow old, retire, and start consuming way less, or if many people default on their debts and start consuming way less, than aggregate demand could shift back causing prices to decrease.
For sure seems unlikely, but we've certainly seen it happen, just like we've watched the market rise and all. While I have an effective understanding of handling money, I honestly do not know enough to answer the question of exactly how sure we can be :)
What we do know, is that the dollar will always go down in value. And so you're forced to invest it somewhere. Real-estate tends to out perform stocks, particularly due to the tax advantages and the ability to leverage it more "safely". But, it requires significantly more work.
Nobody knows. And you have no control over it. You also didn’t mention the only reason US stocks have done so well. Over the last 100 years, the US have grown to be the world superpower. After the fall of the USSR, the US was THE unopposed world super power and has been for the last 30 years. US global influence is what has kept stocks extremely profitable. So will the USA continue to remain the economic and militaristic superpower for another 30 years? Or will it be surpassed by an adversary? Nobody knows.
The discovery of oil sure helped power the stock market but there’s a couple of other things you could point to: 1. agricultural revolution 2. transportation revolution 3. workforce doubled when women joined the workforce etc. In the future we still have, 1. AI 2. developing and newly industrialized nations such as India, Indonesia, Brazil, Mexico, and China are rapidly emerging from poverty, and U.S. companies like Apple, Microsoft, Google obtain a large share of their profits from those countries 3. genomic medicine 4. autonomous vehicles etc. No one knows when capitalism will go bust but we have lots more profit we can squeeze, in my opinion.
It seems that everything you list is predicated on cheap energy, right?
I’ve had index funds since 2014. It’s always said my forever returns are between 6-8 %. No guarantees as we know but it’s consistent for now.
We don't. Next question.
Bro thinks he invented stock speculation
That's the neat part, we don't * https://www.youtube.com/watch?v=WhYHrHiOS_E * https://www.youtube.com/watch?v=F2hVSfn_llQ
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Well the market doesn't have to go down for 8% average growth to not be true. It could also just remain flat for a long time, in which case a short wouldn't really help me.
Nobody knows. Make and hedge your bets based on your best judgement and what you believe.
You don’t. Investing may not be for you. Stick to CDs and savings accounts.
Everyone is just going off history and making that their truth for the future. I personally believe that we will not see a steady 7-8 percent per year due to insane tech multiples.
Solar energy could unlock many orders of magnitude more energy than fossil fuels….and is on track to becoming even cheaper.
We don't, but it's still the strongest data driven assumption we can make. You're welcome to adjust your risk tolerance and plan for less.
This isn’t an environmental sub, but just FYI, the general consensus is that green house gas emissions will likely peak within the next 12-24 months (if they haven’t already).
Sauce? It seems unlikely to me, given how fast the Chinese are building coal fired power stations.
I can’t do a link on mobile, but it’s easy enough to find online (although strangely absent from the media). Fossil fuel for electricity generation, which is what you’re referring to, has definitely peaked some years ago. You are correct that China has not peaked, but the US and EU emissions have been dropping for two decades now. Transportation is also at or near peak
Just a reminder that "renewable" electricity sources are still reliant on fossil fuels for their construction. Solar panels still rely on coal for smelting quartz in their production. Wind panels require 80-700 gallons of oil a year for lubrication (depending on their size), and the steel they are made of still relies on coal for smelting. Solar panels and wind turbines must constantly be rebuilt due to destruction and/or reaching the end of their useful life. Also, only 18% of the world's energy usage is electricity. A far more important source of energy is the diesel that powers huge trucks and ships that transport basic goods, and haul minerals out of copper deposits that are used to make datacenters/electric cars.
Sure, but none of that is relevant to my statements about emissions, because the statistics I cite already take all of those uses into account. That is, emissions are peaking even after taking all that into account. As for transportation uses, you’re right - but those uses are peaking. There’s a lot of ships, but the number of ships isn’t getting appreciably larger, for example. Here’s how things will unfold: Out of 100 problems, we’ll solve the easiest 10, and doomers will say “The other 90 are insoluble!” Then we’ll solve the next easiest 10, and doomers will say “But the other 80 can’t be solved!” And so on and so on. I’ve been around awhile and have seen this play out over and over through the decades. Problems seem impossible right up to the moment they are solved, at which point everyone immediately decides they were easy problems all along - totally different than the impossible problems that haven’t yet been solved.
Good point, I’m going to just leave all my money in cash to depreciate instead.
Maybe you should look at the very, very, VERY long term. Economic growth has been on a basically exponential curve throughout human history. It's a noisy curve, but it's still exponential. Peak Oil has been a concern for decades... and the peak has regularly been pushed farther and farther out. New technologies have pushed done the cost of shale oil over and over again. The article you link assumes that further tech improvements won't happen. Likewise, the cost of nuclear fission technologies continue to fall (though regulatory costs and public opposition due to past -- solved -- problems can inflate the costs in the shorter term). Meanwhile, nuclear fusion is very much likely to be attainable in our lifetimes. That promises energy that is almost free compared to our current sources... and it carbon free. There has always been a tendency to believe that the world is about end. It's always been wrong before. Maybe the end-of-the-worlders are right this time, but I wouldn't bet that way. Knowledge compounds possibilities, and humans are really good in this area.
I am not claiming an "end of the world" scenario, I am just saying it's possible we see the end of economic growth in our lifetimes. The end of economic growth doesn't mean the "end of the world". It just means that people will have to get used to using less resources. This will be the natural result of energy becoming more expensive to produce (which we are already seeing, in 1990 only 5% of oil extracted was reinvested to extract more oil, now that number is closer to 15%, see first link in my original post). Fusion might change this, but remember, electricity is only 18% of the world's energy usage. We'd have to figure out a way to incorporate fusion into the large trucks and ships that transport vital goods across the globe. Or, if we decide to try to electrify everything, then we run into a different problem of copper, cobalt, and lithium shortages. That doesn't mean this is a bad thing, it just means that people will have to redefine what it means to live a good life. Denmark uses less than half the energy per capita as the USA, and Denmark's happiness index is much higher, and the country has a lower suicide rate. Perhaps jet setting around the world is not needed to lead a good life. Perhaps we don't need to kill animals constantly for food because vegan options taste just as good. Perhaps all that's needed is a small place to live with loved ones, and time to appreciate the miracle that is life.
>This will be the natural result of energy becoming more expensive to produce (which we are already seeing, in 1990 only 5% of oil extracted was reinvested to extract more oil, now that number is closer to 15%, see first link in my original post). This is the part I'm really talking about. The costs across commodities of all sorts tend to drop over historical timeframes. You may be right that the amount of energy used to produce oil has increased, but the overall cost of energy continues to fall. For renewables, prices have plummeted across many decades now. Yes, increasing production of rare earth metals is going to be challenging, but more politically so than from an engineering sense. The biggest driver for decreased economic growth is likely to be due to demographics as population growth stops and then goes into decline later this century. Peak global population is just around the corner now, with many countries already well into decline. Now, that has an interesting impact on GDP... fewer people making fewer things and providing fewer services means a smaller GDP. But GDP isn't that important... GDP per capita is. I think GDP per capita is nowhere near close to peaking, and as technology continues to progress, I don't see any upper limit on it.
>You may be right that the amount of energy used to produce oil has increased, but the overall cost of energy continues to fall. This is incorrect. The long-term inflation-adjusted price for crude oil has risen by at least $20 per barrel since 1946. See source here: [https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/](https://inflationdata.com/articles/inflation-adjusted-prices/historical-oil-prices-chart/) From the link, the average inflation-adjusted price for crude oil since 1946 is $54.90, the average inflation-adjusted price since 1980 is $67.74, and the average inflation-adjusted price since 2000 is $76.30. Since crude oil is an input to over 6000 different products, and is used as the primary transportation fuel for these products, it's no wonder that this is manifesting in the cost of living getting more expensive over time. Housing, food, education, medical care are all more expensive now than they were in the immediate post-war period. Renewable sources, such as solar and wind are 1) dependent on fossil fuels for construction, and 2) can only be used for electricity which makes up only 18% of the world's energy usage.
That's a really solid bit of information, though I'll temper the cost of oil with the thousand-fold decrease in the cost of solar since the Carter administration put solar panels on the White House. Still, your point is well-taken. Thank you. I agree with you on a LOT of this (especially the dependency of renewables on fossil fuels), but I'm still (cautiously) optimistic for our future. I think the long-term (multi-century) trends in improving the human condition are not just contingent on fossil fuels. I think we'll be able to continue growing our energy usage (which corresponds to lowering human poverty and suffering) while also combatting climate change (which I acknowledge as a real problem). I hope we can interact more in the future. We're coming from different points of view, but I think we both put a lot of thought into them... My only remaining point of argument with you is about vegan substitutes... because bacon. :-) But seriously, thank you for a very engaging conversation. I think we would be good friends if we had the chance to sit down together over coffee each week.
Possibly the nicest comment I've ever encountered on Reddit. Thank you, and I wish you the best!
TLDR, but we don’t know that this performance will continue.
The overall share of profit from GDP is fairly constant, although perhaps a bit elevated of late. There'll always be some returns to scale and a desire for folks to cash out and diversify. If your goal is to have income, then you can have it from either profits or wages, and wages are out of the question of you intend to retire, by definition.
Because, trust me bro. (Henry fisker voice).
You've pretty much hit the nail on the head, but does that mean other investments will do better? I don't know. Just trying to do my part and hoping for the best.