Why is the stock market rallying when the economy is so bad? • Hacker News Board

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

#301

Post by newshorts » Sun, May 10, 2020, 9:30 PM UTC

melbourne_mat wrote: post #206

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…

"consumer spending growth from the top 10% is enough to offset loses in the bottom 90%" Bold prediction - let's check back in a year or two!

It’s also Apples to oranges.

Consumers in the top 10% don’t buy the same kinds of thing the bottom 90% do.

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

#302

Post by matthewdgreen » Sun, May 10, 2020, 9:31 PM UTC

kube-system wrote: post #203

fzeroracer wrote: post #150

Earlier quoted context omitted.

Doesn't this argument mean that the stock market should in theory be recession proof? If stocks are looking forward several decades, then it should be factoring in the recovery from any recession we face. Which as we've seen during various recessions doesn't seem to hold true.

No, because traders don’t price the market as a whole, they price individual stocks. Some stocks will never recover, and some of that recovery will be companies that don’t exist yet. While these things might offset to create a market recovery, there’s no way to price in the expected cash flow for a company that doesn’t exist.

Traders can certainly spread their bets across many companies representing a business sector, and routinely do so. This "a few firms might go bankrupt so this explains why entire sectors experience massive volatility that isn't justified by long-term revenue expectations" claim seems like someone trying to rationalize irrational human behavior.

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

#303

Post by ericd » Sun, May 10, 2020, 9:31 PM UTC

closeparen wrote: post #270

Hydraulix989 wrote: post #50

Earlier quoted context omitted.

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

Because the priority order is: a) Consumption spending b) Real estate c) Stocks When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks. Making sacrifices on housing in favor of your stock portfolio is of course possible…

Do people actually get family pressure to remodel their kitchen?

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

#304

Post by californical » Sun, May 10, 2020, 9:32 PM UTC

kgwgk wrote: post #228

californical wrote: post #174

Earlier quoted context omitted.

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.

Thanks for the response! I guess my issue is that there's no actual value in owning non-dividend shares for any amount of time. So I can sell the stock to someone else, but what are they paying me for? The opportunity for the value to increase more? Why is someone interested in paying me more than I paid? I feel like there's never any real money that's made back by owning those shares. What's the goal?

Removed from the stock market, if I privately invest in a company for $1m for 10% of the company, it's because I'm hoping that someone else will see that the company has value and purchase it, giving me 10% of that future purchase price. The company sells a product of some sort, and I have a 10% vote in what they do with that money, which I'm hoping is to sell to a larger company.

Is the goal the same on all of these non-dividend paying companies -- to be bought by a bigger company? Because otherwise there's no value in the shares except speculation itself, which seems pointless to me

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

#305

Post by celticninja » Sun, May 10, 2020, 9:32 PM UTC

shawnz wrote: post #282

telaelit wrote: post #239

Earlier quoted context omitted.

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?

what technology and infrastructure was funded by the rich? I think you mean funded by the tax payer, rich and poor alike, but the poor pay a higher percentage of income in tax.

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

#306

Post by Jommi » Sun, May 10, 2020, 9:32 PM UTC

rglover wrote: post #255

anthony_doan wrote: post #73

Earlier quoted context omitted.

I think the second dip is coming (the first being in March). With the flu season and covid19 resurgence and the market is going to realize those unemployment rate means a lot of people aren't going to buy stuff.

This is the alarm that keeps going off for me from getting too optimistic. If it's accurate that 78% of the U.S. was already living paycheck to paycheck [1] and many haven't made a dime in two months, it doesn't matter if there's pent up demand for things. There's just no money to buy them. [1] https://www.cnbc.com/2019/01/09/shutdown-highlights-that-4-i...

This often mis-repeated paycheck to paycheck statistic needs to die.

Do you even read your sources fully?

> 51 percent of those making less than $50,000 usually or always live paycheck to paycheck to make ends meet

This is from the lowest income bracket in the 2017 survey.

It tells us 0 about how many are in the "usually" category.

It tells us 0 on does this account for investments or not.

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

#307

Post by ForHackernews » Sun, May 10, 2020, 9:34 PM UTC

shawnz wrote: post #282

telaelit wrote: post #239

Earlier quoted context omitted.

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?

Is this even a question? 40 years ago housing, healthcare and education were vastly more accessible than they are today. Middle class jobs paid wages that could produce a middle class standard of living. The only thing you'd miss out on would be a bunch of hollow digital toys.

Would I trade my iphone to be able to own a house and have my children go to college? Of course! Who wouldn't!?

In 1985, in-state tuition and fees at UC Berkeley cost $1,296/year[0] (inflation-adjusted that would be $3,052 in 2020 dollars) Today, it actually costs $14,000/year[1] (plus an extra $16k room and board, but let's compare apples to apples).

[0] https://www.dailycal.org/2014/12/22/history-uc-tuition-since...

[1] https://admission.universityofcalifornia.edu/tuition-financi...

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

#308

Post by [deleted] » Sun, May 10, 2020, 9:35 PM UTC

dasudasu wrote: post #116

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…

I don't think it's unreasonable to not want to be holding cash (if one doesn't need it) in the face of so many monetary injections. 2008 showed us that all this stimulus money eventually ends up in assets, aka trickle-down economics, but in reverse. If have been buying since the lows, you're just front-running the FED. The worse is over in that it is now very unlikely that the stock market will retest the lows in nom…

[deleted]

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

#309

Post by throwaway743 » Sun, May 10, 2020, 9:35 PM UTC

sacred_numbers wrote: post #192

steveeq1 wrote: post #108

Earlier quoted context omitted.

There are considerable financial incentives to "fudge the numbers" regarding corona. It's to the point where if someone has a stroke, and he has corona, it will be counted as a "corona death".

That may be true, but the evidence mostly is pointing in the direction of undercounting COVID deaths. In northern Italy the official death count was less than half of "excess deaths", with the worst-hit areas having the most excess deaths. Certainly some of the excess deaths are due to people avoiding hospitals, or higher stress levels, but a lot are due to COVID deaths at home, or undiagnosed COVID deaths. Also, we…

> Also, we still don't really understand this disease enough to know what effects it has on the body.

This is especially worrying, now that the US military is barring previously hospitalized COVID survivors from enlisting and not allowing waivers.

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

#310

Post by OatsAndHoney » Sun, May 10, 2020, 9:35 PM UTC

legobridge wrote: post #186

I'm new to reading paywalled articles and the HN FAQs said it was ok to ask for help in the comments. Can someone please help me out? I really want to read this article.

Apple News, it's the cheapest way to get the WSJ, or subscribe to WSJ on their website.