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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?

#281

Post by eanzenberg »

peterangular wrote: post #238
chrispeel wrote: post #125

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. 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%.

> or envision themselves as (somehow!) becoming part of the top 10% I don't disagree with you but want to add some insight to this... My entire life I've been told the lie that if I "just work harder" I can be rich etc. Most of America thinks about themselves in this same way, and it's taken me years of traditional employment + risky startup opportunities to realize that no, success is not guaranteed if you "just wor…

Nice anecdotes! Here’s some more. Everyone I know who’s “made it”, top 10% came from poor or lower-middle class beginnings.

Probably more a factor of where you came from, who you know, etc.

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

#282

Post by shawnz »

telaelit wrote: post #239
jl2718 wrote: post #195

Earlier quoted context omitted.

This is not at all the situation. Reality is the 1% (wealth) making the 10% (income) pay for the 90% (both) to support their investments with consumption and debt.

Trickle down economics doesn’t work. If it did then wages would have increased in the past 40 years, but they’ve remained stagnant while the rich get richer and cost of living skyrockets. But if you prefer to lick the boots of our plutocratic overlords, feel free

Do you think a typical middle class American would rather be living in the world as it was 40 years ago though? Or today's world, full of technology and infrastructure that was funded by the rich?

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

#283

Post by sidlls »

rvcdbn wrote: post #268
chrispeel wrote: post #125

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. 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%.

"39% of Americans will spend a year in the top 5 % of the income distribution, 56 % will find themselves in the top 10%, and 73% percent will spend a year in the top 20 %." from https://medium.com/incerto/inequality-and-skin-in-the-game-d... :

What are these numbers actually taken from? I'm betting the vast majority of this is counting the sale of a home or a one-time windfall (e.g. small inheritance, gambling winnings) as income for "a year", but I'm not going to buy the book just to see.

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

#284

Post by schkkd »

coffeemug wrote: post #111
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…

> [...] 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 [...] John Maynard Keynes developed this idea (that came to be known as Keynesian beauty contest[1]) in 1936. This isn't a new property of the market, it has always been the case. > when companies do pay dividends or buy back stock, it's sometimes d…

They have to sell something only if the Fed don't give them money (and dilute the share of the lower 90% as a side effect).

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

#285

Post by bobbyi_settv »

kelnos wrote: post #251
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…

Corporate bonds are... interesting... now. I've been looking at airline bonds that mature in the next 6 to 18 months. Quite a few of them have yields-to-maturity north of 7%. I figure airline bonds aren't super risky (at least for the majors in the US), since the US gov't will prop them up until the end of time. Some of these aren't rated investment-grade anymore, but I don't particularly trust the ratings to be all…

Just because you believe the government won't let the airlines go away doesn't ensure that the bonds are safe. Sometimes keeping a company in business involves a restructuring such that those bonds won't pay out as you're expecting.

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

#286

Post by masnao »

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…

> cash: eaten by inflation.

americans haven't had real inflation since the military backed greenback. it will be very interesting to see how much that outdated system can hold after being stretched so much by the feds (fed and federal govt).

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

#287

Post by zanny »

6gvONxR4sf7o wrote: post #191
JMTQp8lwXL wrote: post #148

Earlier quoted context omitted.

Does this also mean that the market fundamentally thought, during the Global Financial Crisis, that the sum of the total future discounted cash flows permanently fell significantly? I'd like to see how this concept would explain 2008. If it can, it further strengthens the thesis.

Partly, that's where the "discounted" part comes in. The further out a profit, the less it factors into today's price. The other part, and this took me forever to realize, is how much "expectation" matters, in the sense of information. If on Monday, I flip a fair coin to decide whether or not to dissolve my business, and then tell you what the coin landed on on Wednesday, then the amount you'll pay for a share in my…

This implies that Wall Street fully expects a total rapid recovery from 20-30% unemployment and near instant realization of demand for everything again in short order. Including planes, restaurants, vacations, tourism, etc.

I'd love to know what insider info they have passing around because I don't see the people losing their homes due to a failure to pay rent buying new cars for Christmas.

Its that or capital realizes the working poor are so divorced from their economy that they can ignore the destitution of the muggles while their fantasy numbers game chugs along in perpetuity. Which it probably can. Not like anyone owns a pitchfork anymore.

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

#288

Post by matthewdgreen »

kube-system wrote: post #189
bamboozled wrote: post #154

Earlier quoted context omitted.

Why did it dip in the first place then? Within the first few weeks of Covid19 the circuit breakers were dripped many times, if the market is so forward looking, what happened then?

There is a difference between being forward-looking and being able to predict the future. Nobody thought the American economy was going to shut down, until it became clear that was going to happen. That was when we hit the circuit breakers.

Arguably the actual economic outcome has been worse than most people would have predicted back during those crazy days in March. The US's management of the pandemic has been worse than most of us could have predicted. And yet stocks are up.

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

#290

Post by [deleted] »

chiefalchemist wrote: post #263
hannasanarion wrote: post #254

Earlier quoted context omitted.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

Nah. That doesn't guarantee a return. It might mitigate the downside but there's still risk. No one takes on risk to break even. You invest for a return. Stopping a slide yesterday has little to do with getting a return tomorrow. The future. New products. New ideas. Etc. That's where a return comes from. Not the Fed.

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