Is economic growth slowing down permanently?

[Bonam]

I hope so.

I'm a buyer for the next 20+ years.

Nothing better for me than a long drawn out bear market. Followed up with a bull market when it comes time to retire.

Hah, that was meant as a joke... you know, how people always think this time is different, because they've forgotten the last 100 times the exact same thing happened.

I too would love a nice 50% drop in the S&P like we had in 2008. That's a once or twice in a lifetime buying opportunity there. Sadly I had very little capital in 2009, having just finished university. Doubt we'll see another drop that big any time soon though.

[jacee]

As long as resources are available and populations keep expanding ...

Resources are finite.

The earth's ability to sustain a population is finite.

Looks like we need a plan other than growth, wouldn't you say?

.

Edited February 12, 2016 by jacee

[jacee]

Not to mention trillions in savings over oil wars in the middle-east ...

How do we get rid of the war industry that sustains war for profit?

Edited February 12, 2016 by jacee

[sharkman]

Hah, that was meant as a joke... you know, how people always think this time is different, because they've forgotten the last 100 times the exact same thing happened.

I too would love a nice 50% drop in the S&P like we had in 2008. That's a once or twice in a lifetime buying opportunity there. Sadly I had very little capital in 2009, having just finished university. Doubt we'll see another drop that big any time soon though.

Didn't it drop almost 50% back in the early 2000's? I lost a big chunk of my RRSP's that were in mutual funds.

[Bonam]

Didn't it drop almost 50% back in the early 2000's? I lost a big chunk of my RRSP's that were in mutual funds.

Yeah, in 2000 the market dropped 47% from it's all time high of ~1527 down to ~800. So not quite the 50% threshold but pretty close.

In 2009, the market hit 683 after attaining an all time high of 1561, a 56% drop.

But before that, you have to go all the way back to the Great Depression to find another drop of 50% or more from an all time high (that drop was ~80%).

Today, we're only 13% off the all time high, and drops in the 10-20% range happen every couple of years historically.

Edited February 12, 2016 by Bonam

[sharkman]

It looks like Black Monday saw a drop of 45% by the end of October. So major drops have occurred about once every decade since the 80's. I'm not an end is near guy, I'm just saying beware of the next one.

[Bonam]

Cool, well if it drops that much again, all the better the buying opportunity will be

[sharkman]

Exactly. Not sure why you keep on insisting a big drop won't happen again, and then kind of hope it will. If you keep up on what's going on around the world economically speaking, none of this should surprise you.

[msj]

Exactly. Not sure why you keep on insisting a big drop won't happen again, and then kind of hope it will. If you keep up on what's going on around the world economically speaking, none of this should surprise you.

Not to put words in Bonam's mouth, but since he and I seem to share a similar philosophy when it comes to investing, I will hazard some guesswork here:

Forecasts are for idiots. I can no better predict what will happen tomorrow, next month, next year, ten years from now than anyone else.

And anyone else is at least as big an idiot as I am.

But, I can look back and see what history tells us. Human nature has not changed in millennia so it is reasonable to make some inferences and let the power of time and compound interest do the heavy lifting.

Sure, I would like to think that I can tell when a market is at its top and at its bottom.

But I know, from experience, this is not the case.

So, I just merrily plug along with my automatic monthly savings withdraws and invest it according to my investment plan.

Over the long run, economies tend to grow, which means investments such as stocks tend to go up.

As my signature states: My biggest takeaway from economics is that the past wasn't as good as you remember, the present isn't as bad as you think, and the future will be better than you anticipate. Morgan Housel http://www.fool.com/...sure-about.aspx

Based on reflection and experience, Housel has nailed this.

[Bonam]

Not to put words in Bonam's mouth, but since he and I seem to share a similar philosophy when it comes to investing, I will hazard some guesswork here:

Forecasts are for idiots. I can no better predict what will happen tomorrow, next month, next year, ten years from now than anyone else.

And anyone else is at least as big an idiot as I am.

But, I can look back and see what history tells us. Human nature has not changed in millennia so it is reasonable to make some inferences and let the power of time and compound interest do the heavy lifting.

Yep pretty much. Regarding history: that's why I say another 50% drop in the next few years is unlikely (of course, not impossible) - this isn't a prediction, but just a statement of probabilities. Such drops tend to be few and far between, historically. But, if such a drop did happen, it would be a great buying opportunity. Not sure what sharkman didn't understand about that.

[69cat]

Dont over look what cheap credit has done this time around, many stocks have been overvalued as a result. Companies have borrowed extensively to pay dividends or buy back shares. Look up stocks like LinkedIn, Kinder Morgan, and Amazon. But generally most stocks are worth looking into to see some things that are of concern. Will the cheap credit allow the typical investor to feed money into the markets and thus continue the over valuation trend or will major companies fold due to borrowing too much cheap credit?

Pension funds have been shredded the last year. Funds that were short 25% of their obligations a year ago are going to be much farther off now. I would like to see a long bear market too but there are a lot of investments that were counting on steady growth to have a fighting chance of meeting obligations.

Each cycle is different but i am concerned with corporations simply running out of money and disappearing. When investors start running then that happens. There are other places to invest then over valued stocks. A recession right now will see more money running then more money going in. S&P needs to drop a ways yet before stocks become a bargain. Too much cheap credit has distorted valuations.

Regarding GDP, as i understand it, government spending counts towards GDP. This is not a sustainable way to meet growth targets.

[-1=e^ipi]

Moore's law is dead.

http://www.nature.com/news/the-chips-are-down-for-moore-s-law-1.19338

[eyeball]

Somebody better tell the economists...they also still seem to be under the impression the planet is limitless.

[69cat]

Government needs the memo first. Expecting that low or negative interest rates combined with deficit spending will ride through the lull till the next rise is all based on consumption inceasing in the future. Problem is that the consumer has already consumed all it can in the immediate time frame and stole from the future too.

But governments will still increase spending and continue increasing the welfare state spending thus hiding the true realities of supply/demand. More consumers will mean more government revenue till they have no job to support it and neither the government handouts to do so also. A good old fashioned war will always fix that supply/demand problem as it has numerous times in the past. Does supply/demand in regards to population remain a capitalistic concept? Or is it more of a universal law that capitalism simply follows?

[Bonam]

Moore's law is dead.

http://www.nature.com/news/the-chips-are-down-for-moore-s-law-1.19338

The article talks about hitting a limit in the 2020s. Other than that, it just talks about companies no longer releasing a joint roadmap that centers around Moore's law... not that companies won't continue to work on making smaller transistors.

The main problem with packing more transistors in the same volume, for now, is heat. But there are materials besides silicon which can switch with much lower thermal losses.

People have been predicting the end of Moore's law for a long time and it hasn't happened yet. We still have several more doublings left before existing paradigms hit a wall with quantum physics. And after that, there are other paradigms. As long as there is demand for faster and denser computing, the technology to enable it will be developed. Of course, if the demand runs out, companies won't invest the tens of billions needed for each next step. So the question isn't really whether Moore's law can continue, but whether there will be enough demand to incentivize companies to put in the billions in R&D and infrastructure... and given that we are still in the early part of the transition to cloud computing, big data, mobile computing, etc, I think there will be plenty of demand drivers.

You still about an order of magnitude improvement in GPUs to render multiple 8k images at 120-240 Hz, which you'll need for VR which seems to be increasingly in the plans of many major companies. Government agencies and research companies still need orders of magnitude more computing power for numerical simulations for science research, weapons research, etc. Cloud service providers need cheaper, faster, more reliable data storage that takes less physical space. And the emerging field of nanotechnology will need tiny processors that can fit inside devices just a few hundred nanometers across. There are just a few examples of demand drivers for continued improvement.

That's not to say there might not be some hiccups along the way or some slowing to solve harder physical problems, but we are far, far, away from reaching the point where we stop shrinking computational elements.

[dre]

The article talks about hitting a limit in the 2020s. Other than that, it just talks about companies no longer releasing a joint roadmap that centers around Moore's law... not that companies won't continue to work on making smaller transistors.

The main problem with packing more transistors in the same volume, for now, is heat. But there are materials besides silicon which can switch with much lower thermal losses.

People have been predicting the end of Moore's law for a long time and it hasn't happened yet. We still have several more doublings left before existing paradigms hit a wall with quantum physics. And after that, there are other paradigms. As long as there is demand for faster and denser computing, the technology to enable it will be developed. Of course, if the demand runs out, companies won't invest the tens of billions needed for each next step. So the question isn't really whether Moore's law can continue, but whether there will be enough demand to incentivize companies to put in the billions in R&D and infrastructure... and given that we are still in the early part of the transition to cloud computing, big data, mobile computing, etc, I think there will be plenty of demand drivers.

You still about an order of magnitude improvement in GPUs to render multiple 8k images at 120-240 Hz, which you'll need for VR which seems to be increasingly in the plans of many major companies. Government agencies and research companies still need orders of magnitude more computing power for numerical simulations for science research, weapons research, etc. Cloud service providers need cheaper, faster, more reliable data storage that takes less physical space. And the emerging field of nanotechnology will need tiny processors that can fit inside devices just a few hundred nanometers across. There are just a few examples of demand drivers for continued improvement.

That's not to say there might not be some hiccups along the way or some slowing to solve harder physical problems, but we are far, far, away from reaching the point where we stop shrinking computational elements.

We can make a transistor now that consists of a single phthalocyanine molecule surrounded by 12 atoms. Once we can build a chip with those Moores law is pretty much done.

[Bonam]

We can make a transistor now that consists of a single phthalocyanine molecule surrounded by 12 atoms. Once we can build a chip with those Moores law is pretty much done.

Well, even that takes us through ~4 more doublings.

But, that's not necessarily the limit. Who is to say that a molecule surrounded by some atoms can't be made to function as multiple transistors simultaneously rather than just 1? Who is to say that a certain arrangement of quarks can't be made to function like a transistor?

[sharkman]

Dont over look what cheap credit has done this time around, many stocks have been overvalued as a result. Companies have borrowed extensively to pay dividends or buy back shares. Look up stocks like LinkedIn, Kinder Morgan, and Amazon. But generally most stocks are worth looking into to see some things that are of concern. Will the cheap credit allow the typical investor to feed money into the markets and thus continue the over valuation trend or will major companies fold due to borrowing too much cheap credit?

Pension funds have been shredded the last year. Funds that were short 25% of their obligations a year ago are going to be much farther off now. I would like to see a long bear market too but there are a lot of investments that were counting on steady growth to have a fighting chance of meeting obligations.

Each cycle is different but i am concerned with corporations simply running out of money and disappearing. When investors start running then that happens. There are other places to invest then over valued stocks. A recession right now will see more money running then more money going in. S&P needs to drop a ways yet before stocks become a bargain. Too much cheap credit has distorted valuations.

Regarding GDP, as i understand it, government spending counts towards GDP. This is not a sustainable way to meet growth targets.

I've heard much the same analysis from other sources, and only time will tell, but things are starting to add up.

[msj]

I've heard much the same analysis from other sources, and only time will tell, but things are starting to add up.

This is called the recency effect.

The markets have been doing poorly the past several months therefore we are all going to hell in a basket!

As a student of history, I know we have been here before. At certain times things look as dire as 69cat says.

At other times, things look so good that "this time is different."

The key is to balance off these two emotions and apply a rational view of the world: things are not as bad as many think when times are dark and things are not as good as people think when times are great.

[dre]

Well, even that takes us through ~4 more doublings.

But, that's not necessarily the limit. Who is to say that a molecule surrounded by some atoms can't be made to function as multiple transistors simultaneously rather than just 1? Who is to say that a certain arrangement of quarks can't be made to function like a transistor?

You're right, ho knows what the future holds.But some of these advances will require whole new areas of scientific research and will have to be baked from scratch. It seems really arbitrary me to suggest that each doubling will take 18 months as Moore's law suggests.

[Bonam]

You're right, ho knows what the future holds.But some of these advances will require whole new areas of scientific research and will have to be baked from scratch. It seems really arbitrary me to suggest that each doubling will take 18 months as Moore's law suggests.

I agree the rate of doubling is slowing down and likely will continue to as we approach the limit of the current paradigm. But once we enter some new paradigm it will likely speed up again as we go through all the iterations of that until the next physical limit is approached. Silicon semiconductor circuits are not the first computing technology mankind invented, and neither will they be the last.

Edited February 18, 2016 by Bonam

[dre]

I agree the rate of doubling is slowing down and likely will continue to as we approach the limit of the current paradigm. But once we enter some new paradigm it will likely speed up again as we go through all the iterations of that until the next physical limit is approached. Silicon semiconductor circuits are not the first computing technology mankind invented, and neither will they be the last.

Eventually you'll probably just be able to buy a mod for your own brain so that computers are obsolete. Or a plant on your desk that you just have to water once in a while.

Edited February 18, 2016 by dre

[69cat]

I know what you say msj, it is hard to see both sides of the same coin at the same moment. I dont intend to purposely speak negatively but when one looks at the basic fact that negative interest rates are becoming the norm and talk of more negative rates and not less (this is open talk, not fear mongering doomsdayers saying more NIRP is coming) then it is hard to be optomistic and say everything is ok so go spend your money.

An economy runs on people earning a dollar for their efforts and spending it where they desire. When an entity wants more spending they offer credit, when they want more spending yet they offer cheap credit, when they want more spending yet they pay you to take credit. At some point in this escalation it should be possible to step back and see some degree of concern. Though i expect there will be many who celebrate that they are being paid to borrow money.

[eyeball]

Though i expect there will be many who celebrate that they are being paid to borrow money.

I guess in today's bizarro world it stands to reason (?) the wealthiest will be jumping the hardest on this bandwagon.

[69cat]

I would think the low income earner would jump on that bandwagon first, is not NIRP another way to make socialism work? The low income people can be paid to borrow money, buy a house, car, what ever crap they desire. The wealthy who have invested in themselves and worked hard, made lifestyle adjustments as needed moved to pursue opportunities and were fiscally responsible get the benefit of paying money to keep their savings.

No doubt people felt "hard done by" will blame the wealthy once again for their own lot in life.

I have been a saver all my life, put my self through tech school that way, bought my car that way, invested in business that way. But now someone with no ability to manage their life at all will be able to live the life they always wanted the government to give them.