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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?

#331

Post by somebodythere »

changchuming wrote: post #87
ramraj07 wrote: post #43

Earlier quoted context omitted.

There's still a real possibility that there might actually be a full recovery - what's closing is small businesses, not megacorporations. The rich seem to do just fine even now. Even if most individual restaurants close, some will open back up, and more chains will move back in. In every scenario I can imagine, one thing seems inevitable - most people in this world are going to get poorer and suffer more. But I'm not…

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.

> Unless you institute some kind of universal basic income

More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

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

#332

Post by Consultant32452 »

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…

How many blue collar millionaires do you know? My two anecdotes are one guy who opened a machine shop with his dad in their very lower middle class garage and one guy who worked his way up to having a few taco bell franchises from the bottom rung. If you don't know those kinds of millionaires, your perception of the world might be tinted by being in a career path that is popular for a certain category of children of wealthy families.

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

#333

Post by wodenokoto »

closeparen wrote: post #276
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.

>average Americans (the 90%) In what sense is 90% average?

You have 100 items, 5 are zero, 5 are 100 and the rest are 50. Your average is 50, and 90% of your items are average. These are your average items (the 90%)

In this case, though, average is meant in its colloquial form of another way of saying "normal".

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

#334

Post by mrep »

JMTQp8lwXL wrote: post #319
xg15 wrote: post #133

Earlier quoted context omitted.

> The stock price might remain tied to the performance of the company in broad strokes, but without regular dividends, sales, or buybacks to tie the stock back to the company, there's nothing to keep it from becoming disproportionate with regards to the company's value.[1] Total stock market noob here, so apologies if this is a dumb question - but I've wondered this for quite some time: There seem to be some extremel…

Apple one day might start paying dividends. As the company matures, and growth slows, returning value to shareholders (if no better options exist) is a wise use of capital. Value can be returned via dividends, but also through share buybacks.

Apple returned 81 billion dollars to shareholders last year: "During its latest fiscal year that ended in September, Apple bought back $67 billion in stock and paid out $14 billion in dividends" [0].

[0]: https://www.barrons.com/articles/apple-stock-buyback-dividen...

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

#335

Post by tathougies »

mobilefriendly wrote: post #91
kitotik wrote: post #62

Earlier quoted context omitted.

Because many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.

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.

> , 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.

Given that stock ownership is about 55% of the public, the median household likely has at least a few shares.

https://news.gallup.com/poll/266807/percentage-americans-own...

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

#336

Post by jbay808 »

fzeroracer wrote: post #150
clomond wrote: post #132

Because a company’s stock price is in theory what the market expects is the sum of the total future discounted cash flows that unit of “equity” generates. [1] This means that fundamentally, stocks are forward looking several decades and beyond. The economy right now might be bad but if the expectation is that there is a slow and long recovery lasting 2 years, if a company is expected to be operational, profitable and…

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.

It should also be factoring the expected future recessions in, so when one comes along, the stock price should barely move!

But I don't think that market participants are nearly good enough at prediction for that to happen.

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

#338

Post by quietbritishjim »

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.

Genuine question: if a company didn't pay out on its bond, that's a default; how can it default without going bankrupt?

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

#339

Post by awinder »

kazen44 wrote: post #171
awinder wrote: post #74

Earlier quoted context omitted.

Man this site is harsh some times, I think there is a lot of depth to this question. It’s easy to look at statistics and say that it’s because of massive wealth imbalances and that is 100% an accurate statement. But from experience / polling there’s also a ton of people who have bad financial hygiene, people who could & should be way more invested and aren’t. So I think there’s also very big educational issues at pla…

Also, what if people don't want to be part of the very system which causes wealth inbalance? or is the stockmarket a "the only way to lose is not to play" kind of deal?

The not being a part of a system bit is tricky. One of the more exciting emergent trends in finance imo is ESG etfs which pick stocks based on good environmental, social and corporate governance criteria. So there is already this idea that capital should have organization patterns for people who value this & I hope that iterates in really positive ways.

But yeah I’d trend towards “the only way to lose is not to play” side of things. It’s really hard to find other ways to efficiently save/grow your money, interest rates are crushed for saving money outside of the market.

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

#340

Post by zhoujianfu »

ramraj07 wrote: post #43
nkurz wrote: post #2

https://archive.is/cmMx5 It's a decent article. Here are their 5 reasons: 1. Bets on a “V-Shaped” Recovery 2. Market Leaders Keep Rising 3. Corporate-Earnings Expectations Remain High 4. Old Habits Die Hard 5. The Fed’s Backing Personally, I'm betting we're still headed to a bloodbath, but slowly. This quarter's earnings are expected to be terrible, so this is already priced in. But the market is expecting a recovery…

There's still a real possibility that there might actually be a full recovery - what's closing is small businesses, not megacorporations. The rich seem to do just fine even now. Even if most individual restaurants close, some will open back up, and more chains will move back in. In every scenario I can imagine, one thing seems inevitable - most people in this world are going to get poorer and suffer more. But I'm not…

I agree... Covid is actually making the world more “efficient”, in the sense people are only doing the things that really “matter”, but the problem is it’s a big shake-up and there are going to be a lot of losers to go along with the winners.

That’s why I think we REALLY need to take the opportunity to pass a real UBI. So everybody gets to enjoy the efficiency gains.

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