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?
Going bankrupt means lenders and shareholders are wiped out but the company can be restructured and continue operating.
I notice that modern companies don't pay dividend anymore. They optimize for growth and survival, which makes sense. Google and Apple have so much cash that they wouldn't really need to make money for years, and they would still survive. Paying dividend is kinda okay, at best. Buying back stock is a bit better. The best is to just keep th cash. Don't get me wrong. As a shareholder, I like it. But it's bad for the com…
What? Most companies do return money to shareholders and for your 2 examples, Apple returned 81 billion dollars to shareholders last year [0] and Google started a 25 billion dollar buyback last year [1].
If every American worker started buying $100 worth of stock per month, they could start chiseling at that 86% number. Not every worker has the financial means to do so, but many could if they practiced financial constraint (delaying consumption now, in exchange for greater consumption later). To the extent it is feasible, it would be wonderful to see Americans fight back against wealth inequality by buying the owners…
Considering many American workers are in debt with high interest rate products (sub-prime car loans and credit cards), those would first have to pay the interest on their debt on top of the capital gains on the $100 when they sold it (provided they invest wisely). In other words, it makes no sense to invest when the return wont consistently match your debt interest payments.
Depends on the type of debt, which is individual to the consumer. Mortgage, auto, and student loan debt compose 88% of consumer debt. [0]
These types of debt typically have low interest rates. Market returns for the past decade have exceeded the interest rates. Paying the minimums, and investing the difference? The consumer would be ahead. 12-15% YoY stock returns compound faster than 4% mortgage debt.
At the end of the day, stock prices have to be justified by earnings. A massive over valuation isn’t sustainable for very long.
Why? A lot of the value of a stock is ability to resell at a high price later. If everyone (including U.S. Fed and gov) agrees to continue to push prices high for the forseeable future, then it seems like prices can lose connection to e.g. ownership in a company.
> 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…
It's not about working hard, it's about working smart (i.e. choosing the right things to work on).
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…
To OP: That does not make a compelling argument that the stock market rally will continue. Consumer spending is 70% of the U.S. economy. And we have an unemployment rate of over 15% on its way to 20%, the worst in 80+ years. We are seeing many areas of consumer spending rapidly decline if not stop altogether. Delinquencies in mortgages, car loans and credit are expected to skyrocket. Also, the wealthy have a lower ma…
perhaps a lower marginal propensity to consume, but bigger purchases make up for it. A millionaire remodeling his home for example or buying a Tesla.
> 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…
I think you defined perfectly the defining problem of this generation in the US: nepotism. It is the root cause of so many structural problems that we see as unrelated. In particular the failure of the press to do their job and hold the powerful accountable. Not so easy when you went to the same school as them; got an internship thanks to them; were at a NYC roof party with them last week. Positions once available to…
At the end of the day, stock prices have to be justified by earnings. A massive over valuation isn’t sustainable for very long.
I wonder. Investing is all about relative yield. If stocks return 0.5% and treasuries return -4%, stocks will sustain higher ratios than the historical mean. But I’m putting my money where your mouth is and betting on a correction.
True but you are taking say a -30% loss risk for only 0.5% expected return. I don’t think any risk manager is going to be very comfortable with that risk/reward.
> 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…
what seems very weird to me (as a non US citizen), is that most working class people in the US seem convinced the 'american dream' is synonymous with being a millionare/billionare and introducing legalization to level the playing field of the latter will hurt their own changes at becoming part of the former. It might also be the reason social democratic/socialistic parties never got a foothold in the US post world wa…
is that most working class people in the US seem convinced the 'american dream' is synonymous with being a millionare/billionare
That's true, but I have no idea where it came from. "The American Dream" was never about becoming a millionaire, it was the idea that you could start with nothing and have a nice, comfortable middle class existence in the US.
> 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…
The issue is not that these cases exist, but that they are sold as being the standard, which they're clearly not. To became wealthy coming from a poor background requires a lot of effort, sense of opportunity, and frankly, luck. But all this is sold as something at grasp to anyone in this country, which is clearly false.