The Death of Saving and Investing

1/13/2020 The Death Of Saving And Investing | Seeking Alpha
The Death Of Saving And Investing

Dec. 19, 2019 4:49 PM ET79 comments | 20 Likes
by: Paulo Santos
Summary
The U.S. no longer seems a place for investing or saving.
Neither does Europe seem a place where you can rationally save, though some
investing opportunities likely remain in the old continent.
So, is saving and investing dead? Perhaps not.
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There are more markets out there
There are two very obvious trends taking place in the world today, in some places more
aggressively than others, but generally happening nearly everywhere.
Those trends are as follows:
Very low interest rates (the U.S.) or even negative interest rates (Europe). The
situation is so dire in Europe that banks are starting to pass the negative interest rates
to depositors. That means, if you have a (large) deposit at a bank, it can start shrinking
on its own. And as stupid as it might seem, there are already places where debtors
see their loans decrease over time (without payment).
https://seekingalpha.com/article/4313426-death-of-saving-and-investing 1/18
A large movement towards passive investing. This is where investors, disillusioned

with active management, simply buy a fund mimicking an index (in the U.S., often the
S&P 500). Or they buy some kind of ETF or sectorial fund, which often also be
passively indexed.
These trends can also reinforce each other. Money earns nothing in the bank or if invested
in bonds. So, "there is no alternative" but to buy stocks. So, more money goes into
passive investing. This is also made worse by the fact that interest rates can be low, but
inflation isn't really all that low:
In the U.S., inflation runs at 2.1%. This is effectively higher than either the Fed Funds
rate (1.75%) or the 10-year government bond yield (1.95%). So, for all effects, real
interest rates are negative in the U.S.
In Europe, it's worse. Inflation runs at 1.3%. But the ECB benchmark rate is 0% (with
the deposit facility at -0.50%) and a typical central European 10-year rate is -0.21%
(Germany) to 0.05% (France).
Very low (or negative) interest rates mean saving makes little sense. If savings are
remunerated at negative real interest rates, the savings' buying power decays over time.
But does the death of saving mean the rise of investing?
Not really. A stock market that's driven by passive investment and momentum/relative
valuation isn't really an investor's market. This is so because a definition of investment (as
opposed to speculation) would require that the asset you're investing in be able to
remunerate your investment over time, even in the absence of a market for the asset.
This is as opposed to speculation, where the expectation of a return comes from the
possibility of selling the asset at a higher price to another market participant. Well, both
"passive investment" (at high enough multiples) and relative valuation (at high multiples)
are unable to provide returns without other participants paying higher.
Passive investment requires a market to sell into (at least higher than the initial price
minus received dividends) at some point. Relative valuation does not care about the
asset's ability to remunerate the investment. Both require other market participants to
provide the returns.
Of course, when it comes to passive investment and a long enough timeframe, such a
return seems assured by population growth and productivity improvement. But even that is
not a certainty. The Japanese Nikkei remains, today, below the highs it hit back in 1990,
29 years ago.
I would thus argue that what we're seeing today is indeed the death of both saving and
investing - at least when it comes to the U.S. (investing and saving) and Europe (saving).
This is made even more obvious because indexation (the passive investment wave) is
producing a strong downwards effect on value in general (typically, stocks which weight
less in the indexes or aren't in the indexes at all).
That said, I don't expect this death (of either investing or saving) to be permanent or for it
to have spread everywhere. I can offer a few examples where investing or saving can still
be done by the common public.
There Are Alternatives

Saving
Consider saving. It would seem that everywhere you look, interest rates are near zero or
zero. But that's not actually true.
As it happens, in Russia - whose economic aggregates rival the best in developed

markets - you can still get a 4-6% interest rate on a liquid current account, or up to 6.5%
on a savings account.
This is in a country whose inflation rate is now 3.5% and heading lower. So, real interest
rates in Russia are still quite positive, even for common current accounts.
Investing
The huge passive wave has led to a tremendous outperformance by large capitalizations
versus small capitalizations (which aren't in the indexes). Or the U.S. versus international
markets (since the passive wave is strongest in the U.S., and smaller international equities
aren't in the U.S. indexes).
This means that many equities outside of the U.S. main indexes can actually be had for
historically low valuations, even outside of emerging markets like Russia. These
valuations are low enough that investing in such equities is likely to produce significant
returns even if the investment is never sold. That's investment, so investing isn't dead
there.
Eventually
Eventually, the U.S. markets will experience a downward move where reasonable
valuations will be re-established. This typically coincides with a recession, and even a mild
recession will do. Then, common investing will return. The same is to be said about
interest rates, but that might take longer than the stock market again providing reasonable
investing opportunities.
Right now, though, it's very hard to justify paying 7x-8x-10x-15x-20x-30x EV/EBITDA for
decent to good U.S. businesses, when similar quality can be found outside of the U.S. at
2.5x-5.0x EV/EBITDA multiples. I even find it hard to comment on positive developments
on some U.S. companies, when I know as a matter of fact that those companies trade at
massive premiums (I mean twice, three times more expensive or worse) to other equally
good foreign businesses.
Conclusion
I don't think we can easily talk about saving or investing making a lot of sense in the U.S.
right now. And I don't think we can talk about saving making any sense in Europe right
now (there are still arguably some investment opportunities, on account of the markets
having favored the U.S. so much).
However, this only applies to those markets. Outside of the U.S. and Europe, both saving
and investment opportunities still exist, as noted.
P.S. Can't even name a large European ETF? That's part of the reason why valuations got
so out of whack between the U.S. and Europe as well.
Idea Generator is my subscription service. It's based on a unique philosophy (predicting

the predictable) and seeks opportunities wherever they might be found, by taking into
account both valuation (deeply undervalued situations) and a favorable thesis.
Idea Generator has beaten the S&P 500 by around 33% since inception (in May 2015).
There is a no-risk, free, 14-day trial available for those wanting to check out the service.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72
hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than
from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I do have positions outside the U.S. market made according to the logic stated in the article.
Comments (79)
The Biggest Lilliputian

Contributor
Great article! I'd only add that excess liquidity available to institutional investors from artificially suppressed
interest rates is driving both long and short positions to greater extremes, which I believe further accelerates the
U.S./ex-U.S. gap mentioned by Paulo. I believe this affects domestic companies too, with out-of-favor sectors
getting punished more than usual and favored sectors being buoyed excessively.
25 Dec 2019, 11:36 AM
Mike Cutler
Contributor PREMIUM
One of the reasons for out of favor sectors is that cheap money has increased production, but demand
has not keep up with the added supply. This has depressed prices and made those sectors perform
poorly. Yet continued cheap financing keeps those companies alive and production increasing. Which
results on lower inflation, and more easy monetary policy. economics 101 is flipped on its head.
oil/natgas/energy sector is a classic example of this. You could blame Amazon for all the retail Carnage
and you'd be right. But the Fed is to be blamed here as well. We have low prices because of low rates and
easy money. That's also why we have low wages and higher wealth gaps and low unemployment.
29 Dec 2019, 11:34 AM
Ben Gee
Are Chinese still save over 30% of GDP?
23 Dec 2019, 06:12 AM
auto44
@Paulo Santos
Thank you for your article. It would seem that Warren Buffet agrees with you as to over valuation of the stock
market in that he is holding one hundred and some odd billion in cash which he hates doing, His self discipline in
this matter reinforces what you are saying and we folks should take lesson from you. I don't always agree with you
but you are always a voice of reason and there is always something insightful to be gained from your writings.
Thanks again.
A.
20 Dec 2019, 01:00 PM
WorkingJoe
Record low interest rates won't last forever. My best take on why they're so low is that open economies just import
other countries' rates. Japan started it all off by trying to buck the trend of their lost decades of growth with
monetary stimulus after stimulus. This "carry trade" meant you could buy fairly stable yens very cheap and then
convert them into dollars and invest them where there was growth. This can't last as cheap rates encourage
riskier behavior.
There's Amazon and Walmart undercutting each other and the transformation of the whole retail sector. It once
employed a huge percentage of the population but now that consumers can compare prices worldwide they buy
from the cheapest seller and not from their isolated local vendor. Eventually easy growth from supply-chain
management and consolidation and other cost-cutting could soon disappear but it's always hard to say.
There's technological innovation which is digital-izing everything that can be digitalized (music, video, pictures,
search services, etc.) and it always gets better and cheaper. This one is too complicated and could fill books...it's
hard to say how long the current rate of technological change could go on.
Rapid growth causes mal-distribution of wealth and there's currently the biggest disparities in wealth distribution
since the Gilded age with just 10 of the richest people (Bill Gates, Warren Buffett, the Bezos, the Waltons, etc.)
earning more than the rest of the US population. This encourages socialists like Jeremy Corbyn, Bernie Sanders,
and Elizabeth Warren.
There's outsourcing, immigration, automation, temp work and other pressures on reducing wages (which is
usually the biggest cost for most businesses). The rise of nationalism, parochialism, racism, and populism (think
Marine Le Pen, Donald Trump, Brexit, Geert Wilders, Italy's Five Star Movement, Viktor Orban, etc., etc.) is best
explained as a backlash to these developments. There has to be limits put on these pressures on wages. The
current unemployment rates don't properly reflect the hurt people feel...there's supposedly record-low
unemployment but there's under-employment (part-time work when people want full-time) and vast
transformations in the quality of work and no work security as employers can use the threat of outsourcing and
automation. These two trends are at loggerheads with each other and something has to give.
There's venture funds, private equity funds, powerful pension funds, sovereign wealth funds, FDI from everyday
investors, etc. all sloshing around looking for growth but few solid low-risk opportunities. With people chasing
growth they're putting cheap funds into riskier and riskier securities. This has happened before with petro-dollars
from the oil shocks which were put in US banks which carelessly lent them to emerging markets and resulted in
the debt crises of the 1980s, the Chinese reserve funds which helped fuel the sub-prime crash, etc. This won't last
either. We could see sovereign defaults in Italy, Hungary, Indonesia, Ukraine, Iraq, etc. and in repeat offenders like
Venezuela, Argentina, Portugal, Brazil, etc. This should bring rates back up.
20 Dec 2019, 11:56 AM
crayfishx4
You certainly do like pushing Russia as an investable idea... I feel more comfortable with a super broad , low-cost
world ex-US fund... and some intl small caps funds, than with a Russian ETF of any sort..
That said, I agree on your skepticism on some of the US valuations at the moment, although some pockets of
value still exist perhaps; even more so In Europe. Overall I like the idea of moving more new money into intl
stocks
20 Dec 2019, 10:08 AM
Paulo Santos
Contributor PREMIUM Marketplace Guide
Author’s reply » The world ex-US isn't necessarily very cheap. Some emerging markets like Brazil or
India are actually quite expensive. Brazil looks even worse because it might blow up.
There are pockets of value in the U.S. in absolute terms, but they pale in comparison to value outside the
U.S.
20 Dec 2019, 10:13 AM
Jack Reacher
There is a reason for the "under value" outside of the US.
Do you think no one else sees this? Then if it were so undervalued, it would be bid up.
20 Dec 2019, 11:00 AM
Paulo Santos
Author’s reply » Jack, it wasn't always like this. The differences even for similar businesses are now often
extraordinary. There's no reason for that.
20 Dec 2019, 11:47 AM
crayfishx4
world ex-US is NOT mostly Brazil and India... they play a small part in that universe relatively speaking.
I agree with the latter comment again, although currency risks mitigates that value differential in my
opinion
20 Dec 2019, 11:50 AM
Paulo Santos
Author’s reply » cray, EUrope is also mixed, some value, some relative value, some expensive stuff ... of
course, on developed markets the US tends to be the most expensive. But taking everything ex-US does
reduce the value you get, versus looking for extreme bargains (which exist)
20 Dec 2019, 11:58 AM
auto44
@Jack Reacher The efficient market hypothesis is never 100% correct. Fortunes are made by those who
correctly value the individual trees in the forest. Both those kinds of trees and those kinds of individuals
are rare, but they are always there unrecognized until they are finally bid up by Johnny-come-latelies.
20 Dec 2019, 01:10 PM
Jack Reacher
There is reason: location.
20 Dec 2019, 02:55 PM
Jack Reacher
You lost me at efficient market hypothesis, as i am not a student of it.
And, unless you plan on sending all those migrants home from Europe, that place is changed forever.
What good is the nicest house in the worst neighborhood?
20 Dec 2019, 02:57 PM
auto44
@Jack Reacher
Hi jack, The efficient market theory basically says that with so many eyeballs on information that is
available no good deal goes unnoticed. Warren Buffet, Monish Pabri,Charley Munger, and Peter Lynch
among others got very rich on information that was available to everyone but unnoticed. When Howard
Mark's son came to him and told him about Tesla his question was who doesn't know that. Aristotle
Onassis said to get rich you have to know something no one else knows. So your statement is that if they
are so undervalued they would be bid up is true sometimes but when it is untrue there in lies the
opportunity.
Most. of us here at seeking alpha are students or we would spend our time some where else.
21 Dec 2019, 07:11 PM
Jack Reacher
The chances that we know something no one else knows are small.
Very small. So small, not worth looking for.
Yes, I'm familiar with the efficient market theory.
23 Dec 2019, 10:39 AM
auto44
@Jack Reacher Tell that to Warren Buffet and the others
26 Dec 2019, 04:05 PM
Buyandhold 2012
The death of saving and investing.
WHAT?
I have been saving and investing since I was 14. And I am now 64.
And I plan to continue to save and invest for another 50 years.
As Oprah would say, saving and investing is a good thing.
Are there really people who don't like to save and invest?
That's just not right.
20 Dec 2019, 09:46 AM
Paulo Santos
Author’s reply » Buyandhold, but there were a few times where investing got really absurdly expensive
(like the dotcom bubble). Saving being destroyed through zero or near zero interest rates is new.
20 Dec 2019, 10:14 AM
Finch212
PREMIUM
Do you mind my asking if you are buying the market currently? If so, what do you like? Or do you "time"
the market and hold back?
20 Dec 2019, 12:59 PM
nyul747
"As Oprah would say"
Lol. Since when is Oprah an investment guru of some kind?!
But otherwise I agree, it's a good thing to save (and invest but not in the USA right now).
20 Dec 2019, 01:36 PM
Paulo Santos
Author’s reply » As the article says, I'm buying mostly foreign (ex-US) stuff at this point. There are
extremely low valuations out there for quality businesses ... they're just not in the US markets.
20 Dec 2019, 02:21 PM
Buyandhold 2012
Finich212,
Right now I like Bristol Myers Squibb.
But I am not a shareholder yet.
20 Dec 2019, 03:30 PM
Tranquilo
Good article Paulo.
From your conclusion one could think in an inverse ETF.
Does it make sense in the medium term ?
20 Dec 2019, 07:47 AM
Paulo Santos
Author’s reply » No, inverse ETFs work badly for anything but the shor term.
20 Dec 2019, 08:37 AM
Petja Ylitalo
In current money system, role of interest rates is to balance saving and consumption.
Too much consumption -> you can´t buy things even if you have money (starts with inflation).
Too much saving -> unemployment because people don´t want to buy things as much as are produced.
USA is pretty balanced, but in Europe you still have high unemployment, and no problems with high inflation or
lack of things to buy, so interest rates are still too high.
I don´t really see USA markets being expensive in general. Oil&Gas is very cheap. Shipping is cheap. Mining,
airlines, and financials, steel are pretty cheap.
Sure, there are also many expensive sectors, it´s a split market.
20 Dec 2019, 03:41 AM
Paulo Santos
Author’s reply » Cyclicals are harder to gauge on whether they're cheap or not ... low multiples on a very
long expansion might be warranted
20 Dec 2019, 08:37 AM
Petja Ylitalo
You are generally right: in a downcycle they should trade on low price/assets, while earnings are negative.
In an upcycle they should trade on a high price/assets, while price/earnings is low.
But especially in energy you now have low price/assets combined with low price/earnings, and improving
fundamentals.
For example RingEnergy: 17% earnings/price, 298% equity/price, and that is with earnings depressed by
a (small) downcycle which is ending.
seekingalpha.com/...
20 Dec 2019, 09:34 AM
Paulo Santos
Author’s reply » Petja, while crude and natural gas production in the U.S. keeps exploding, it's far from
certain we saw an end to the energy cycle. Things CAN turn down and be very ugly in energy.
20 Dec 2019, 10:15 AM
Petja Ylitalo
Production is going down currently.
Sure, someday it will go up again, that is life of cyclicals. But pricing of assets is at levels lower than
2009/2016, while companies are profitable and prices of oil&gas improving.
20 Dec 2019, 10:24 AM
Paulo Santos
Author’s reply » Petja it's still going up, very quickly
20 Dec 2019, 10:27 AM
Petja Ylitalo
Best forward indicator for USAnian oil production is count of frac spreads doing completions, here is a
chart comparing those:
twitter.com/...
Here is newest frac spread count:

blogs.pvmic.com/...
Also there is the drilling rig count, which has a longer time delay to production, but is also an reliable
indication of whether oil companies are planning to increase or decrease production:
www.investing.com/...
Latest weekly production figure was down by 0.1MBrl/day, while i am not sure it will start going straight
down from now, i´m 90% sure that 3 months from now oil production in USA will be lower than now (and i
consider my guesses of probabilities pretty well calibrated, have been following up on them afterwards).
20 Dec 2019, 10:57 AM
Paulo Santos
Author’s reply » The rig count was more of an indicator when productivity wasn't going up so much (per
well and per rig).
Completions can offer something short term, but if wells are being drilled but not completed, that's also a
problem.
Yes, crude production might stop going up and start heading down in a matter of months. We should also
start seeing bankruptcies.
20 Dec 2019, 11:48 AM
Petja Ylitalo
Because of low rig count, drilled & uncompleted well count is also going down, though still high:
www.eia.gov/...
Though remember that bankruptcies will only mean that production changes owners.
20 Dec 2019, 01:27 PM
Paulo Santos
Author’s reply » Not just that production changes owners ... previously to, and during, bankruptcy there
will also be a lot less money to put into capex. And shale wells see rapidly falling production.
20 Dec 2019, 02:22 PM
Jeremy Robson
Contributor
This is going to go on for many years. It is not going to be a short term phenomenon.
20 Dec 2019, 02:12 AM
Paulo Santos
Author’s reply » Possibly, but it's already not a short-term phenomenon ... it's been going on for a while.
20 Dec 2019, 02:27 AM
SWinCA
By the way - as always it is a market of stocks, not simply a stock market. There are plenty of good names, with
good dividends to be bought today at very reasonable prices - if one is so inclined.
Not everything in our market can be dismissed as "greater fool" theory on buying high and selling higher.
19 Dec 2019, 10:48 PM
Paulo Santos
Author’s reply » Even the good names with good dividends have problems with them, such as leverage,
which make them wildly more expensive than the alternatives.
20 Dec 2019, 12:39 AM
SWinCA
Even the good names with good dividends have problems with them,
------------------------------
Yep. America is a lousy place to own stocks. Clearly.
20 Dec 2019, 02:01 AM
Paulo Santos
Author’s reply » SWinCA, no, it's been a wonderful place to own stocks. Which is why they got so
massively more expensive than elsewhere. Really, the differences are jaw dropping.
20 Dec 2019, 02:27 AM
SWinCA
I would rather have a fixed 30 year mortgage for 3-4% and get nothing on whatever emergency cash I might keep
on hand in a "savings" account - than the old days of a 4% interest savings account and a 12% mortgage.
And I am more than happy with the investment returns of recent years.
19 Dec 2019, 10:44 PM
Paulo Santos
Author’s reply » The mortgages in Europe are at 0%, along with the deposits.
20 Dec 2019, 12:39 AM
SWinCA
So we should move to Europe?
20 Dec 2019, 02:02 AM
Paulo Santos
Author’s reply » Just saying that the expensive mortgages are something of a US phenomenon.
As are expensive air fares, healthcare, mobile service and a host of other things ... some seem to indicate
the markets have been failing in the US, somehow. Possibly, regulation has been set in a way that stiffles
competition in many sectors.
20 Dec 2019, 02:29 AM
pnin
PREMIUM
I'm not sure that 'expensive mortgages are something of a US phenomenon' is accurate. More like
European mortgages are cheap.
I am looking at a ranking of 98 countries by average rate on a 20 year mortgage, and 22 of the 26 lowest
mortgage rates are from Europe. The US is 38th out of 98 countries.
And of course there are many things far less expensive in the US than in Europe....incluing gas,
electronics, clothing, yada yada yada.
best.
20 Dec 2019, 07:47 AM
Paulo Santos
Author’s reply » pnin, I mean more versus prevailing interest rates, and not the absolute rate itself.
20 Dec 2019, 08:38 AM
kleten
possibly because there's no competition.... mega mergers, bailouts, and no anti-competitive enforcement.
20 Dec 2019, 09:28 AM
Tom Gooch
@Paulo Santos ...."some seem to indicate the markets have been failing.."
I've been increasingly mystified by that for several years now. I think it may be stealth capital flight from
Asia, mostly China, and Europe to the US. Combine that with Zirp infinitum, andless stock buybacks using
cheap debt, etc., etc., it's become difficult to set a plausible, sound financial course using traditional tools
and assumptions...kinda like trying to use a pocket compass to find one's way in a magnetite mine.
21 Dec 2019, 10:07 PM
Paulo Santos
Author’s reply » Tom, in that phrase I was actually referring to markets for goods and services. In the US,
it seems lots of markets have seen competition vanish and are exhibiting strangely high prices and
margins, versus what would otherwise be expectable (for commoditized goods and services).
22 Dec 2019, 02:03 AM
Tom Gooch
@Paulo Santos I understand, but I still think the Occam's razor answer to the mystery may be just an
extended period of incredibly easy access to capital...and debt.
Central bank heroics have not altered the only three means public firms have to pay their bills and grow:
1. Issue stock...no can do in a buyback world. Dilution is now anathema. It instantly increases p/e ratios
and puts comp plans at risk.
2.Borrow: Using Warren Buffet's analogy, it's been flood tide for cheap debt for a decade now. A lot of
marginally viable firms are swimming naked in it and producing marginally viable but comfortably familiar
products and services.
3.Earnings: The perennial least-favorite and most demanding involves fielding a better product or service
for less and providing better support...boring, and now become a distant third among the three, simply
because the disciplining fear of all public firms, bankruptcy, has receded. Interesting times...
22 Dec 2019, 11:58 AM
ET180
"such a return seems assured by population growth and productivity improvement."
I suspect that population growth in the developed world will slow and eventually go negative as adults have more
options and interests competing with their time vs raising kids. kids are expensive and there's also a climate
change push against having them. most likely what will happen is the type of person who rarely finds themselves
"bored" will have fewer kids and the people who don't think though their decisions will continue to have more kids.
as far as productivity growth, that will probably happen though automation
19 Dec 2019, 09:32 PM
farwest
First-world population growth has slowed dramatically and is negative in many.countries, posing
existential long-term issues.
Japan is set to lose.half its population this century - is it any wonder their investment returns are dismal?
Think about how much excess housing stock/factories/infrastructure there will be - rural areas are already
empting out.
What happens if the US cuts immigration as MAGAts so/desperately want? The only reason US still has
growing population is due to immigration. The US will then face same long-term issues of declining
population and a much older population.
20 Dec 2019, 10:26 AM
The Biggest Lilliputian

Contributor
Not true, the U.S. has a native replacement rate >2.2.
Depopulation can but does not necessarily cause the effects you cite. Japan is not the only country to
decrease or stagnate in population. Depopulation in 14th century Europe was an economic boon.
I suggest you undertake considerably more reading into economics and history prior to forming your
opinions.
-A Trump supporter
25 Dec 2019, 11:21 AM
Mark Alexander
Contributor
@Paulo Santos
Nice article. It may still be a great investment, but I wish Russia were a little less corrupt. You have argued that it
is not that that bad, and maybe you are right, but it is a problem. Of course, if Russia were less corrupt, valuations
would probably not be so cheap.
19 Dec 2019, 08:42 PM
nyul747
Like Cape10 being 31 in the US currently? No
19 Dec 2019, 11:43 PM
Richard Hanbali
Thank you Paulo for bringing such a very very important & Huge trend that's having a major impact on on the well
being of the baby boomer & future generations .. Hopefully lots of your readers will add their true sentiments as
how we should move forward
19 Dec 2019, 07:22 PM
PrincePreston
Theoretically it is all well and good to discuss Rubles as a place to park cash, temporarily. Given the fact that all
(100.00%) currencies have lost considerable buying power over time, I would ask: why take the risk of losing half
your buying power during the next crisis? France has devalued its currency something like 50 times in 150 years,
and the Pound Sterling has been a dismal place to park cash for generations.
Ask Bill Browder what he thinks about the risks of investing in any Russian security, and his story will make places
like Argentina look like a safe haven. Argentina went from 1 Peso per $1 USD in 2000, to 60 to $1 today. When I
was a kid, the Official rate for Rubles to dollars was over 1R to $1, in 1968, -- now after many periodic
devaluations, it is more like 62R per $1. Those historic results make it seem like a sound investment strategy to
"invest" in Lottery Tickets.
19 Dec 2019, 07:19 PM
nyul747
Browder is a fraudster, this was uncovered by the German Spiegel Magazine recently:
www.spiegel.de/...
19 Dec 2019, 11:37 PM
Paulo Santos
Author’s reply » Russia has had horrid fundamentals for an entire century, and that led to the Ruble
imploding. Today, it's quite different. It has a budget surplus and little government debt. This isn't an
environment where the Ruble will lose value (versus other currencies).
20 Dec 2019, 12:41 AM
tymurch
saving in europe: take ypur pay check and buy silver and gold. Gold is or was at all time highs this year in many
currencies around the world.
19 Dec 2019, 07:15 PM
HaroldRamis
you're not Putin in disguise are ya ?
19 Dec 2019, 06:29 PM
Mike Cutler
Contributor PREMIUM
Paulo - interesting points that made me think about this problem a bit differently:
1) The Fed, myself and others wonder why inflation is so low, even with massive monetary support. But as you
point out, inflation is higher than interest rates, so we do have inflation. Growth is so slow and interest rates are so
low, it just doesn't seem like inflation because inflation is so low compared to historical. But we do have inflation
that is eating away at buying power faster than saving rates are adding to buying power.
2) Low rates have gutted productivity by attracting free capital to low productive endeavors and kept zombie
companies alive with low debt costs. That makes the investment environment even worse.
3) Personally, I LIKE the business cycle. There's nothing like a good ol' fashion recession to clear out the dead
wood companies, get people anxious to work again, make investors appreciate risk again thereby allocating
capital to the highest productivity gaining ideas, etc. Business cycles also have a way of equalizing wealth gaps.
But the governments and feds of the world want to erase the business cycle, at the expense of all those
aforementioned benefits. The best thing that could happen long-term is for a good downturn now. If you look at the
successful companies today, most of them got their start during a recession. That is where creativity, careful
investing, people who want to go to work, and opportunities meet to create the future.
19 Dec 2019, 06:05 PM
Orion Pax Roosevelt

Well said.
19 Dec 2019, 11:36 PM
Paulo Santos
Author’s reply » On inflation, we should notice that the current money printing is directed at buying
assets. In the past, the money printing that generated a lot of inflation was directly to monetize state
spending, rapidly increasing state spending does cause inflation.
20 Dec 2019, 12:42 AM
krk
Reg. Inflation/deflation, an MMT perspective:
As per MMT, rate hikes are price hikes, and since the price of money is the most important price in the
economy, it percolates through to everything else and as long as the government continues to borrow,
when it pays a higher rate, it produces more income for rest of the economy. When such an increase in
incomes are not accompanied by an offsetting increase in output, inflation results.
And conversely central banks using low rates as a way to induce inflation is actually resulting in deflation,
as first there is less interest income being paid by the government into the economy and further it allows
zombie unproductive enterprises to continue to survive. Overproduction presses down prices. Easy
access to debt prolongs the life of marginal firms. They don’t go broke but, finding ready access to
speculative-grade credit, carry on, thus adding to the physical volume of production and therefore to the
overhead weight on prices.
Seems like Turkey is putting these ideas into practice as it has embarked on rate cuts to lower inflation.
20 Dec 2019, 12:17 PM
Steven Bell
Contributor
If we continue to print money than it has to go somewhere. I have been thinking that the U.S large caps have
been overextended for a while. I still like U.S mid-caps (IJH) and also small caps.
The Russian trade you are talking about are for Rouble deposits not USD right? You then would have to keep in
mind the exposure to oil and geopolitical risks too. If that's all worth it the easiest way would be to do it with futures
I'd think.
19 Dec 2019, 05:35 PM

ET180
The small caps trading at high P/E. S&p also high, but small caps even higher. lots of optimism already
priced in...
19 Dec 2019, 09:49 PM
Paulo Santos
Author’s reply » Correct, Ruble deposits
20 Dec 2019, 12:42 AM
Sir V-i-val
Russia should be aa great country to invest in .....oil is going up and the ruble is one of the most undervalued
currencies according to the Big Mac index....
19 Dec 2019, 05:28 PM
ET180
that's why their currency is undervalued. their economy too tied to oil
19 Dec 2019, 09:48 PM
nyul747
Russia is one of the least indebted countries in the world when you consider government, private and
corporate debt together it's 78% of GDP in Russia, while 250% of the GDP in US and the euro zone:
stats.bis.org/...
19 Dec 2019, 11:21 PM
farwest
Oil is not going up - it's in a long secular decline and economies tied to oil prices are going to be in trouble
20 Dec 2019, 10:09 AM
ET180
@nyul747
Saudia Arabia also has a low debt to GDP...would you want to invest there?
20 Dec 2019, 01:16 PM
nyul747
I don't know anything about Saudi, so this is irrelevant to me.
20 Dec 2019, 01:29 PM
georgitsonef
Same is Bulgaria :)
24 Dec 2019, 09:55 PM

casper77
Good points. However
" 1990, 39 years ago", maybe it is 29 years ?
19 Dec 2019, 05:15 PM
Mike Cutler
Contributor PREMIUM
29 years, 39 years, Japan is a disaster investment regardless.
19 Dec 2019, 05:57 PM
Paulo Santos
Author’s reply » Typo, will ask for a correction, thanks
20 Dec 2019, 12:44 AM

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1/13/2020 The Death Of Saving And Investing | Seeking Alpha

The U.S. no longer seems a place for investing or saving.

So, is saving and investing dead? Perhaps not.

There are more markets out there

Those trends are as follows:

A large movement towards passive investing. This is where investors, disillusioned

There Are Alternatives

As it happens, in Russia - whose economic aggregates rival the best in developed

Idea Generator is my subscription service. It's based on a unique philosophy (predicting

The Biggest Lilliputian

25 Dec 2019, 11:36 AM

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21 Dec 2019, 07:11 PM

Yes, I'm familiar with the efficient market theory.

23 Dec 2019, 10:39 AM

26 Dec 2019, 04:05 PM

And I plan to continue to save and invest for another 50 years.

As Oprah would say, saving and investing is a good thing.

That's just not right.

20 Dec 2019, 09:46 AM

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Right now I like Bristol Myers Squibb.

But I am not a shareholder yet.

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Here is newest frac spread count:

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Yep. America is a lousy place to own stocks. Clearly.

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