[extropy-chat] 'a process of non-thinking called faith' 2 (2)

[Eugen Leitl]

On Sun, Nov 26, 2006 at 11:31:06AM -0500, Rafal Smigrodzki wrote:

> ### It is quite a common belief among economists that the rate of
> productivity growth is the single most important determinant of
> economic performance in the long term. Since productivity has been
> more or less steadily going up for a couple centuries, the bulk of

Productivity certainly goes up, and of course the total integral
over physical things of value goes up as well, but not exponentially
as compound interest goes. After each readjustment it takes a while
until the gap between both functions starts growing exponentially,
ultimatively requiring a new readjustment. A new readjustment is
at the door.

> investors who position themselves to benefit most closely from rising
> productivity have over the long term outperformed most other
> investors. This is especially striking in the last few decades, as
> productivity started growing even faster than before. Thanks mainly to

There are some high-amplitude but rare events in the markets, which
tend to vanish from individual investor and collective memory (things
which happen each ~70 years or so).

> productivity gains (which make investment a positive sum game), the
> bulk of investors gain rather than lose, which is why there are still
> investors around.
> 
> Given the expected explosive growth in productivity in the next two to
> three decades right up to the singularity, the prudent investor should
> do what the bulk of investors do - buy index funds, especially the
> ones tied to countries and branches with the highest expected
> productivity growth.

Usually, this is very good advice. However, it takes some 20 years
for the markets to reach performance prior to the crash if you buy 
in just before the crash. All the signs are pointing to such a crash
within a short (few years, less than a decade) time. A crash is
also an opportunity, of course.

I would still bet one third of my assets (easy for me to say,
since I have no assets to game) on an index funds, but
one with hand-picked companies and natural resource shares.

-- 
Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org
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