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Why is the stock market rallying when the economy is so bad?

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Re: Why is the stock market rallying when the economy is so bad?

#221

Post by shostack »

aazaa wrote: post #139

> Measures by the Fed and U.S. government have underpinned the recent rally across markets. The Fed made it clear it was willing to step in to buoy the economy. Why bet against the market when the central bank is willing to do that? The Fed has gone far further than just this. The Fed is going to buy as many assets as it takes. Treasuries. Corporate bonds. Junk bonds. Munis. It'll buy the assets directly. It'll buy t…

Another factor to consider...there are other nations that are actively working to undermine the strength of the dollar as the global reserve currency. If they can sufficiently erode trust in the US financial machine, much bigger problems arise.

Re: Why is the stock market rallying when the economy is so bad?

#222

Post by gjs278 »

myth_drannon wrote: post #21
magicsmoke wrote: post #9

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…

Australian, South Korean and New Zealand's currencies jumped in value because they handled the pandemic very well and are now very attractive investments.

australian dollars have been shedding value for years

Re: Why is the stock market rallying when the economy is so bad?

#223

Post by esoterica »

loufe wrote: post #123
kerkeslager wrote: post #99

Because the stock market doesn't represent the economy as most people experience the economy. First, a lot of companies don't pay out dividends or buy back stock these days, so as time passes, removing their stock price from the price at IPO, their stock price becomes based on perception--not even perception of the reality of the company's value, but perception of the stock's value, which is increasingly just specula…

>First, a lot of companies don't pay out dividends or buy back stock these days As I understand it, a good chunk of of the reason stock prices were originally so high before the crash 2 months ago was that stock bybacks were at an all time high (though of course this doesn't mean every company is doing them). Part of the reason companies are so vulnerable is that a large chunk profits were being used to undertake the…

Why bother with a rainy-day fund? If your company has a long-term viable business you can borrow money to survive a temporary crisis. If your company's business model is permanently ruined then you are better off calling it quits and shutting the company down than setting your cash reserves on fire trying to rescue a dead company.

During a credit crisis a viable business might have trouble raising money, but with the Fed indicating that they are willing to throw money out of the proverbial helicopters, maybe people don't consider that a real concern any more.

Re: Why is the stock market rallying when the economy is so bad?

#224

Post by everybodyknows »

Hydraulix989 wrote: post #50
magicsmoke wrote: post #9

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

For small investors, I suggest US Treasury I-bonds: inflation protected, liquid after one year.

This of course is, after paying off all high-rate debt, and maxing out 401k contributions.

Re: Why is the stock market rallying when the economy is so bad?

#225

Post by sigstoat »

Auracle wrote: post #115
grecy wrote: post #94

Earlier quoted context omitted.

37% of Americans struggle with hunger [1] and 57% of Americans have less than $1000 in savings. [2] Would you be buying stocks if you didn't have enough to eat? [1] https://www.feedingamerica.org/hunger-in-america/facts [2] https://finance.yahoo.com/news/58-americans-less-1-000-09000... EDIT: Apologies, first should be 37 million Americans (NOT 37%)

It probably doesn’t apply to those struggling with hunger, but just because people don’t have savings doesn’t mean they don’t have expendable income. It could just as easily mean they prioritized stuff over savings, and I bet that’s the case for most of them.

https://www.cnbc.com/2019/12/12/americans-spend-over-1000-do...

Re: Why is the stock market rallying when the economy is so bad?

#226

Post by SpicyLemonZest »

kitotik wrote: post #204
mobilefriendly wrote: post #91

Earlier quoted context omitted.

There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.

Sorry I’m not sure I understand the point you are making. Most models have the numbers of Americans living in poverty or lower class as above 50% of the US population. It’s unlikely if even what they term “lower-middle class” owns real estate.

Any model describing the median American as “lower class” is being unreasonable. Most Americans - not all, but most - live a comfortable life.

Re: Why is the stock market rallying when the economy is so bad?

#227

Post by [deleted] »

TAForObvReasons wrote: post #36
chiefalchemist wrote: post #30

Earlier quoted context omitted.

It's all about risk vs return. Furthermore, in the current environment of high adversity, and increased scarcity there will eventually be innovations. Some of those will translate into products and profits.

The problem is perception. Stocks are increasingly seen as a risk-free play, backstopped by a Fed that will take drastic action if prices fall. In that world, why bother innovating? Why bother investing in innovation when the risk-free play has a huge positive expected return?

[deleted]

Re: Why is the stock market rallying when the economy is so bad?

#228

Post by kgwgk »

californical wrote: post #174
tayo42 wrote: post #122

Earlier quoted context omitted.

> a lot of companies don't pay out dividends or buy back stock these days, so as time passes, removing their stock price from the price at IPO, their stock price becomes based on perception ignorant question, if true, how is this not the worlds biggest ponzi scheme? Are we just betting on the possibility of dividends in the future? It just seems illogical. The fraction of meaningless ownership as a shareholder can't…

I am right with you, I've never understood what the actual purpose to owning shares is other than "their price goes up when the company is expected to do well" -- but what do you get for that price being higher? Without dividends the whole idea of stocks makes no sense to me. With dividends, I would think "I'll buy this stock for $100 with the expectation that I'll get a $10 dividend next year, a $12 dividend the yea…

You are not forced to hold onto non-dividend paying stocks, you can sell them gradually to create "dividends" for yourself. As a first order approximation, buying a $100 stock that gives you a $5 dividend but stays at $100 is not different from buying a stock that doesn't distribute a dividend but appreciates 5% every year.

Re: Why is the stock market rallying when the economy is so bad?

#229

Post by vadym909 »

chrispeel wrote: post #125
vadym909 wrote: post #31

Earlier quoted context omitted.

I'm surprised the average Americans (the 90%) don't get that they are providing insurance to the 86% wealth of the top 10%, but get almost none of the gains.

> I'm surprised the average Americans (the 90%) don't get that they are providing insurance to the 86% wealth of the top 10%, but get almost none of the gains. Are you so sure that they don't get this? I guess that many do understand it and either would like a much more inequality-reducing tax structure, or envision themselves as (somehow!) becoming part of the top 10%.

Ofcourse a small portion will always be ambitious, enterprising and expect to join the 10%. But we are all convinced (and I assumed this too) that the stock gains are good because it helps average Americans increase their 401k, but the stock ownership ratio is so skewed to affect the majority. If the stock market crashed, it wouldn't really afffect most American's net worth which is so interesting? I'm sure companies will shut down and there's be trickle down job losses but that can happen in stock boom times too (like now). A quick Google search showed where this number comes from https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

Re: Why is the stock market rallying when the economy is so bad?

#230

Post by schaefer »

encoderer wrote: post #199
paulpauper wrote: post #183

An increasingly large % of the economy is concentrated in a handful of highly profitable, efficient tech companies and multinationals such as Walmart, Microsoft, Amazon, Google, and Facebook. Stimulus $ is pure bottom line growth for these huge companies as smaller businesses close. Also, huge growth in business to business commerce, bypassing consumer spending altogether. Facebook and Google selling ad space to othe…

Yes, all this, plus most of those out of work today are doing fine because of the stimulus and additional $2400 a month in unemployment from the federal govt. I know family members who are making more at home now than they do when they are working.

i qualify and filled for unemployment benefits over a month ago after a several hundred employee layoff at my company. I still have not seen a penny. Many others I've talked to in my state are in exactly the same position.

in Nevada, the department of employment has dropped business hours to just three days a week. there are no queues when you call in. there is no "your call will be served in the order this call was relieved". there is only the busy signal. day after day - the busy signal.

people's ability to actually work with the employment office differs dramatically state by state.

please don't generalize. Platitudes about how the unemployed are "doing just fine" aren't universally true. Many of us are watching personal savings vanish week by week while with no resolution in sight.

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