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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?

#461

Post by bluquark »

awinder wrote: post #339
kazen44 wrote: post #171

Earlier quoted context omitted.

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”…

I'm a lot more cynical about the trend. ESG funds serve the sell-side's desire to charge higher expense ratios and the buy-side's desire to feel clean and ethical. It's much less clear that they have had any positive impact on corporations' behavior (or even stock prices).

The "G" is also there mostly because it's the only thing that can be quantified across every company. For that reason it dominates the sampling, even though most values-driven investors care much more about the E and S.

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

#462

Post by peterangular »

2019-nCoV wrote: post #377
peterangular wrote: post #238

Earlier quoted context omitted.

> 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…

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

Hell as someone who's struggled early-on... Poor America seems to have a particular disdain for the less well off too. I feel like I'm constantly surrounded by entitlement regardless of the person - and I'm no better as I am constantly trying to quash my own crap attitude with this... We were brought up this way across the board, to the point that I'm convinced childish entitlement is in our DNA as a country.

It's just a whole bunch of finger pointing while ignoring the elephant in the room... but hey people seem to get off on the hate so the folks in charge keep us divided and subdued to their interests.

Not disagreeing - just my own take being exposed to many diverse backgrounds rich/poor, rural/metro, etc etc. Everyone wants to point a finger because it's MUCH easier than acknowledging difficult societal problems/self-reflection.

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

#463

Post by nthj »

WalterBright wrote: post #365
peterangular wrote: post #238

Earlier quoted context omitted.

> 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).

Also, part of working smart is owning meaningful equity in a business likely to generate meaningful returns. Startups are high risk, high reward, and if the GP doesn't care for how their luck has played out at startups, there are many other lower-risk opportunities to build equity: writing books, teaching, consulting, a bootstrapped SAAS app... and plenty more outside of the software engineering landscape.

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

#464

Post by justicezyx »

eanzenberg wrote: post #456
Glyptodon wrote: post #426

Earlier quoted context omitted.

Yeah, people always say "Why should I pay more in taxes? It's not fair, they should be flat and the same for everybody!" and I'm always like "Do you have just as much to lose in a French Revolution scenario? You should be happy to pay more if it leads to more social stability."

The top 1% pay something like half our taxes. What share do you think is fairer?

How about equally to their share of national income?

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

#465

Post by kalleboo »

eanzenberg wrote: post #456
Glyptodon wrote: post #426

Earlier quoted context omitted.

Yeah, people always say "Why should I pay more in taxes? It's not fair, they should be flat and the same for everybody!" and I'm always like "Do you have just as much to lose in a French Revolution scenario? You should be happy to pay more if it leads to more social stability."

The top 1% pay something like half our taxes. What share do you think is fairer?

It should be in proportion to how many % of the wealth they own. So more like 90%

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

#466

Post by nostrademons »

eanzenberg wrote: post #455
listenallyall wrote: post #428

Earlier quoted context omitted.

>> a stock market crash would blow up a lot of retirement planning The low interest rates we've experienced over the last decade, which have only gotten lower as of late, have actually blown up retirement plans. Used to be, $500,000 saved at 8% meant you could retire off the $40k interest + social security. It also meant that growing a savings account into $500,000 was not out of reach, even on a modest income. This…

Which is a good thing to me. I’d rather people “work” to earn rather than easily collecting rent through interest. Work in quotes since applying capital in risky investments is work compared to stashing money in an interest bearing account.

Also shows why having everybody "earn" a living off interest & investment income isn't feasible - if everybody's doing that, nobody's doing the work that generates the cash to pay the interest in the first place.

The best you could hope for is a younger generation of increasingly productive new workers being able to spin off enough profits to provide a return on the capital that generated that productivity. But the demographic time-bomb of relatively few Homelanders supporting relatively many Baby Boomers is going to upend that, and the stagnating productivity of the last couple decades isn't going to help.

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

#467

Post by agilebyte »

odiroot wrote: post #293
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…

> Bonds: Near 0% interest rate, practically no better than holding cash. You can still buy bonds of a bit less-developed nations. E.g. "new" EU nations. They usually offer better RoI than Western EU bonds.

That introduces the risk of currency exchange, unless you find bonds that are hedged to your local currency.

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

#468

Post by jcranmer »

maest wrote: post #441
JMTQp8lwXL wrote: post #363

Earlier quoted context omitted.

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…

You're arguing for taking out loans to invest in the stock market, which sounds irresponsible to me.

Actually, corporations do do things like borrow to pay dividends or buy back stock... because they get to deduct debt from their taxes. Individuals can take advantage of this with mortgages: your mortgage interest is deductible. [1]

Not all debt is equivalent: credit card debt and payday loans are examples of pretty punitive debt that really should be avoided. The return on investment from paying off debt is roughly equivalent from the interest on your debt; if it's lower than you can get by investing elsewhere, then it may make sense to invest elsewhere, especially when you factor in second-order effects like tax laws.

[1] For the record, I think the tax-advantaged nature of debt is absolutely inane and should be removed. But that is unlikely to be politically feasible.

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

#469

Post by bluquark »

WalterBright wrote: post #401
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…

Buying stocks has never been more democratic. Anyone with $100 can buy stocks. No brokerage fees, and fractional shares are now common. We also just passed what in hindsight will likely be seen as a historic buying opportunity.

> We also just passed what in hindsight will likely be seen as a historic buying opportunity.

Almost as likely to be a historic selling opportunity. The 35%-ish bottom isn't close to the bottom of the really huge recessions (and every non-stock-price signal is saying "really huge recession"). And the volatility we just saw resembles the movements from early 2008 to summer 2008.

Of course, the market can stay up in defiance of any bad news for years at a time, too, if the participants want. We won't have the hindsight until we have the hindsight.

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

#470

Post by HPsquared »

pineaux wrote: post #220
xondono wrote: post #153

Earlier quoted context omitted.

Exactly, you get rich by doing what the rich want, not what most people want, that’s why Lamborghini owns Volkswagen! Wait..

You think Volkswagen makes cars for the poor? Show me a poor person who can buy a new car and I will show you someone who is borrowing.

"Cars for the rich" is not their MO.
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