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?

#371

Post by shuckles » Sun, May 10, 2020, 10:10 PM UTC

sidlls wrote: post #283

rvcdbn wrote: post #268

Earlier quoted context omitted.

"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.

Russ Roberts has a fairly thorough treatment of composition effects impacting income statistics: https://medium.com/@russroberts/do-the-rich-capture-all-the-...

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

#372

Post by christophilus » Sun, May 10, 2020, 10:10 PM UTC

glofish wrote: post #294

masnao wrote: post #286

Earlier quoted context omitted.

> 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 it will be very interesting to see how much that outdated system can hold after being stretched so much by the feds (fed and federal govt).

not true at all. The inflation has been gigantic, when expressed in as the price of owning a home or getting educated. the traditional measures of inflation expressed in the price of other goods are not capturing the real story. Those good are much cheaper today and mask the actual decrease in purchasing power.

Agreed: home, college, basic surgery... Some of our costs are through the roof. Others have been kept low due to technology, hyper optimization, or leveraging slave wages in a developing country.

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

#373

Post by refurb » Sun, May 10, 2020, 10:10 PM UTC

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... :

Thanks for the link.

These stats just backup what I've always heard - the top 10%, 1%, whatever, is not static. Neither is the bottom 10%. Many people usually start their careers at the bottom (i.e. college student working part time) and then eventually make it into the middle class and plenty make it further than that. Of course, some never make it out of poverty.

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

#374

Post by shuckles » Sun, May 10, 2020, 10:11 PM UTC

Barrin92 wrote: post #272

tryptophan wrote: post #249

Earlier quoted context omitted.

But...wages have increased over the past 40 years...and at a greater rate than in Europe/Aus/other developed.

real wages for the bottom 80% have not budged much[1], and are pretty much non-existent for the bottom 40-60% of the distribution. The US has higher wages but mostly as a function of some sort of Baumol's cost disease. Increases in healthcare and education spending drive wages but they also drive costs. It doesn't really reflect a net gain in standards of living as hard stats like life expectancy show. the US has a l…

Most of these charts ignore non-wage income such as employer paid healthcare. https://medium.com/@russroberts/do-the-rich-capture-all-the-...

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

#375

Post by paulpauper » Sun, May 10, 2020, 10:11 PM UTC

kgwgk wrote: post #247

paulpauper wrote: post #167

Earlier quoted context omitted.

It is really not a mystery why the market has done so well and will continue to do well. Corporate profits, especially in the tech sector, are at near record highs, much higher than during the 90s. Companies like Walmart are printing cash, and that money goes into buybacks, dividends ,or shareholder equity. Either way, shareholders benefit and this is magnified by very low inflation, so the real return is even higher…

Corporate earnings have been flat for over a year, so they don't really explain why the S&P 500 still went up 15% from the 2018 highs. And now expectations are down substantially and even for 2021 are below 2018 levels.

if a $100 billion dollar company generates $10 billion of profit annually, then that is 10% returned to shareholders every year even if there is no earnings growth.

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

#376

Post by refurb » Sun, May 10, 2020, 10:12 PM UTC

Barrin92 wrote: post #272

tryptophan wrote: post #249

Earlier quoted context omitted.

But...wages have increased over the past 40 years...and at a greater rate than in Europe/Aus/other developed.

real wages for the bottom 80% have not budged much[1], and are pretty much non-existent for the bottom 40-60% of the distribution. The US has higher wages but mostly as a function of some sort of Baumol's cost disease. Increases in healthcare and education spending drive wages but they also drive costs. It doesn't really reflect a net gain in standards of living as hard stats like life expectancy show. the US has a l…

Total compensation (wages + benefits) has drastically increased over the past few decades, even for the low incomes levels.

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

#377

Post by 2019-nCoV » Sun, May 10, 2020, 10:13 PM UTC

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…

American institutions should be controlling for this inherit classism, instead, the most prestigious continue to employ race-based selection criteria.

Middle-class America seems to have a particular disdain for the less well off.

This divide is the driving force behind Trump. It's the same divide we're seeing play out now over reopening the economy. Suburbanites with cushy WFH jobs, chastising the poor who have been laid off, as they have the audacity to want to put food on the table tonight.

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

#378

Post by refurb » Sun, May 10, 2020, 10:13 PM UTC

cm2187 wrote: post #327

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.

Stock prices are forward looking - what do you expect the stock to do in the future.

That's how you end up with companies with negative net income having valuations in the billions.

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

#379

Post by Consultant32452 » Sun, May 10, 2020, 10:13 PM UTC

coliveira wrote: post #370

Consultant32452 wrote: post #332

Earlier quoted context omitted.

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.

Of course luck plays a role in everything. It's merely luck that I've never been run over by a bus, or any number of other problems. But can you help me understand how a lot of effort and a sense of opportunity is not available to the common person?

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

#380

Post by christophilus » Sun, May 10, 2020, 10:14 PM UTC

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.

Sounds like you’re in the minority, but I think you’re right. Mega caps are built on the foundation of a broad consumer base that has been eroded faster than at any other time in history. Even those who seem insulated will feel the effects when their mega cap customers begin cutting costs because of their exposure to the consumer markets.