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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?

#321

Post by catalogia »

jjoonathan wrote: post #141
catalogia wrote: post #98

Earlier quoted context omitted.

Unless you think the bombs are going to fall, you'd be better off getting some sort of cabin than a bunker. Living underground has a lot of challenges; it's expensive to build down there and you'll constantly be fighting moisture and mold.

I think the threat model is packs of desperate people looking to take your stuff, not bombs.

Being underground won't help much if your assailants decide to smoke you out. To stop that you'd need to shoot back or have a very robust and well designed fortification, with air filtration and redundant hidden vents. If you were committed to fighting back, an above ground fortification made out of reinforced concrete would be easier/cheaper to construct and would probably give you a better view of your surroundings. You'll also need several people you trust living there with you, so you could keep lookouts stationed around the clock and cover for each other.

All in all, it seems like a hopeless scenario. A better approach is probably to make friends with your neighbors and try not to look like you have anything worth stealing.

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

#322

Post by karatestomp »

ericd wrote: post #303
closeparen wrote: post #270

Earlier quoted context omitted.

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?

My wife’s side pressure her (me) to “upgrade” her wedding set every few years. WTF. They’re terrible with money, of course, and constantly make passive-aggressive comments about who’s spending what. I don’t think they even realize they’re doing it, it’s just a really, really awful and deeply middle-class-anxiety attitude they’re stuck in.

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

#323

Post by Blammar »

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%.

Possibly because they haven't read this book (https://en.wikipedia.org/wiki/The_Wealthy_Barber) or understood it.

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

#324

Post by will4274 »

zanny wrote: post #287
6gvONxR4sf7o wrote: post #191

Earlier quoted context omitted.

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 realiz…

There may not be as many new cars for Christmas, but it's important to keep in mind that the US economy was doing extraordinarily well prior to the pandemic - with unemployment at 3.5%, the average person in the labor market was employed for more than 50 weeks out of a 52 week year - in fact, so many people were employed that companies were starting to have to raise the amount of money they offered to workers, because they couldn't find anybody desperate for a job.

Put differently, we shut down ~20% of our economy. We'll probably restore most of that - around 15% - retail, restaurants, gyms - and our economy was doing so well that losing the remaining 5% is a blow we can take - most of those will migrate to other industries that were hiring (e.g. Amazon). 2021 will look more like 2013 (a recovery in progress) than like 2017 (a boom) or 2009 (a recession).

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

#325

Post by 6gvONxR4sf7o »

zanny wrote: post #287
6gvONxR4sf7o wrote: post #191

Earlier quoted context omitted.

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 realiz…

> 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 don't follow. Could you explain how what I said implies that? And what time scale are you referring to when you say "rapid" and "near instant?"

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

#326

Post by matthewdgreen »

ryansmccoy wrote: post #274

While there are some good explanations already mentioned, the bottom line is that stock prices are forward-looking in the sense that investors buy and sell stocks not based on what happened yesterday or what is happening today, but rather based on their expectations for the future (6-12 months ahead). So, basically, the market is signaling that on a whole (i.e. weighted average growth of all the companies in the S&P…

The stock market is signalling that it believes 6-12 month revenue expectations for the S&P 500 today [14.7% official unemployment, consumer spending trashed, entire sectors facing months of uncertainty] are roughly the same as they were in October 2019 [3.6% official unemployment, consumer spending rising]. This does not seem a logical conclusion, and so people (in this thread) are asking whether the market is functioning correctly.

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

#327

Post by cm2187 »

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…

At the end of the day, stock prices have to be justified by earnings. A massive over valuation isn’t sustainable for very long.

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

#328

Post by tinyhouse »

d_burfoot wrote: post #178

I work at a big tech company. One of the big realizations we've made is that WFH is not killing our productivity - it may actually be increasing it. If that is widely true, it has huge implications, and points towards an enormous amount of value that can be unlocked, by allowing professionals to work wherever they want (presumably in lower CoL locales). This article indicates that the housing crisis costs the US econ…

I've been thinking about this for a while. It makes sense that if people don't need to commute they have more flexibility in choosing where to live. On the other hand, there will still be richer/safer towns with better schools where most people want to live in.

Where I live there's been a booming of new construction for office space and very expensive rents. Some small companies I know moved to work remotely cause they couldn't afford renting an office anymore. It's been puzzling why this is happening given the rise of remote work (pre COVID-19). Part of it is FANNG companies which all expanded like crazy in recent years, including many new multibillion dollar offices.

Interesting you say you work in a big company. I find remote work to be more challenging in big companies. Productivity is not the issue. The main issue is visibility to other parts of the org. Working remotely you don't get to bump into people from different teams. There are ways to make it happen remotely too, just more challenging when there are so many people.

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

#329

Post by cm2187 »

bobbyi_settv wrote: post #285
kelnos wrote: post #251

Earlier quoted context omitted.

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.

Like United Airlines.

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

#330

Post by karatestomp »

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…

The biggest tax advantages for investing go to the rich, who can arrange their businesses and finances to max out retirement accounts, and very highly paid professional with fat 401k matches. No matter how someone with a normal salary and a 2% match tries they cannot get anywhere near maxing out a 401k, due to how they’re structured (over 50% of the max can only come from an employer, and the employee can’t make that up on their own). They benefit the already-well-off much more than the middle class or poor. So there’s discouragement to savings built into our tax law (or stronger-than-appropriate encouragement available only to the already-doing-quite-well, if you prefer)
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