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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?

#431

Post by dharma1 »

JMTQp8lwXL wrote: post #363
birdyrooster wrote: post #313

Earlier quoted context omitted.

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. [0]: https://w…

I don't think it's wise to project guaranteed 13-15% stock market returns, or suggest it's better than paying off debt. It may have been the case last few years of the cycle, but may well not be the case for the next 5 years.

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

#432

Post by shuckles »

Barrin92 wrote: post #410
shuckles wrote: post #374

Earlier quoted context omitted.

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

It seems like Russ is trying to make a fundamentally different point in that piece than people generally try to make. His main point seems to be that, if you track people over the last 30 years, they have made economic progress individually. That to me seems extremely obvious though. Someone who is 50 or 60 is almost certainly going to be in a better financial position than the same person at 30, as many people tend…

No it also looks at income across generations within quartiles, e.g. "But [incomes of] 93% of the children in the poorest households — those in the bottom 20% — surpassed their parents...Julia Isaacs’s study for the Pew Charitable Trusts looking at the late 1960’s up to 2002 finds that children raised in the poorest families made the largest gains as adults relative to children born into richer families."

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

#433

Post by esoterica »

talkingtab wrote: post #418

It would make sense if the stock market was a self-organizing Ponzi scheme. Let's say I have $10 million in the stock market. I know that if I sell as the market is going down, I may well encourage other people to sell. The market may plunge and all of my stock will be worthless. If I buy at a crucial time - when the market has paused in the process of dropping, I may well influence the market to go up instead. The g…

> I know that if I sell as the market is going down, I may well encourage other people to sell. The market may plunge and all of my stock will be worthless. If I buy at a crucial time - when the market has paused in the process of dropping, I may well influence the market to go up instead.

That is simply not how the market works. Trying to buy when the market has "paused" is not going to trick the other market participants into thinking that the market has bottomed out and the crash is over and that everyone should start buying again. Volatility in a bear market is normal, and the stock market going up for a couple days in the middle of a crash is not going to convince anyone but the most gullible retail traders that the crash is definitively over.

> but if it is true that 10% of the population controls 86% of the stock

10% of the population is 30 million people.

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

#434

Post by Consultant32452 »

2019-nCoV wrote: post #417
Consultant32452 wrote: post #406

Earlier quoted context omitted.

Okay, more than half of the people at the bottom rise up out of it. And less than half of the people at the top stay at the top. What are you hoping for? Please be as specific as possible. And what does this have to do with whether a lot of effort and a sense of opportunity is available to the common person?

Most every other developed nation has greater social mobility than the US [1]. Why can't the US reach Scandinavian levels of social mobility? [1] https://markets.businessinsider.com/news/stocks/ranked-the-s...

A full explanation is too complicated for a single post. But here's two good starters.

https://wtfhappenedin1971.com/

https://www.ineteconomics.org/perspectives/blog/how-why-gove...

Now that we've addressed your off topic question. Could you please try to explain how hard work 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?

#435

Post by Glyptodon »

JMTQp8lwXL wrote: post #273
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%.

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…

Even if they all did that, they still end up buying after all the really wealthy get in, whether it's investment bankers, venture capital, hedge funds, or whatever else, normal income people just end up buying from the 1% and 0.1% who got in privileged and early. Add on top of all that, think about all the investments with minimums that are thousands of dollars and it's obvious that regular money will always be behind even if its investing maximally because less money always has fewer opportunities.

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

#436

Post by fullito »

Why is that hard to understand?

What else should i suddenly do with my money if i invested it in the stock market?

I mean srsly getting it out now to do nothing with it means losing money. If i invest long termish, even if corona hits hard, after it hit, live continues and the economy will recover.

We lost 2 years of stock market growth anyway. Thats a shit tone of money.

As bad as it sounds, the worst two things from corona are: people dying and business not conducted. People dying also means reduced cost for the economy due to less old people (more working people ratio) and less sick peole/health insurance costs after. The other thing might mean that we clear out unhealthy businesses. But who pays the bill? People who had money before probably. All others hit the base line of social security.

Lets see how it plays out. To be honest, i don't have a better idea and as i don't need to get it out now, i will keep it where it is.

And rallying it is because live goes on.

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

#437

Post by aeturnum »

WalterBright wrote: post #403
ComputerGuru wrote: post #400

Earlier quoted context omitted.

That’s entirely orthogonal though, isn’t it?

The point is they are participating in the stock market and benefiting from its gains.

I mean, if 0.1% of your savings is in the market, you're "participating" in some sense, but not with any real impact. My sense is that, for the great majority of people in the United States, the stock market's value doubling would mean little for their financial health. Having a retirement fund that goes from $10,000 to $20,000 (or even $100,000 to $200,000) has a relatively small impact on the prospect of retiring [1].

[1] Depends on circumstance, but people are generally supposed to have at least $1,000,000 in savings by 67. https://www.nerdwallet.com/investing/retirement-calculator

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

#438

Post by pedalpete »

nerdponx wrote: post #402
changchuming wrote: post #87

Earlier quoted context omitted.

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.

Doesn't this depend on the company? Demand for agriculture, petroleum, and financial services (among many other things) are fairly inelastic. People are going to consume all of that stuff regardless of how financially well-off they are.

Demand for agriculture is inelastic, but I don't think the same of petroleum or financial services.

Without travel, demand for petroleum has dropped significantly, to the point it was below 0 for a short time.

Financial services can come to a screeching halt as well if people stop buying on credit or taking loans out on housing and cars. Maybe I'm being short-sighted in only considering the consumer aspect here.

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

#439

Post by maest »

WalterBright wrote: post #367
zapita wrote: post #358

Earlier quoted context omitted.

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…

> nepotism 85% of American millionaires are self-made. "The Millionaire Next Door" by Stanley

Is there any data on where wealth increase has come from for those people?

e.g. started own business, vs savings + stock market, vs investing in real estate.

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