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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?

#611

Post by Supermancho »

eanzenberg wrote: post #585
hannasanarion wrote: post #254

Earlier quoted context omitted.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

False, most of the stimulus went to 1) direct payments to the bottom 90% and 2) small businesses with less than 50 employees.

That was a later program. You're misunderstanding because he used the word "stimulus". There were multiple rounds. The first, was a huge corporate giveaway.

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

#612

Post by Natsu »

freehunter wrote: post #450
lotsofpulp wrote: post #345

Earlier quoted context omitted.

Seems very difficult to evade location and transaction tracking, both which governments have very easy access to, but the rank and file do not.

That’s assuming a French Revolution style uprising, which is probably unrealistic. What is very realistic, however, is an increase in “lone wolf” terrorist attacks targeted at rich and/or powerful people. You don’t need a thousand people rolling a guillotine down the street when one person with an off-the-shelf drone could inflict just as much damage. Sure the police would find them quick, but one thing the American…

> We’ve seen it recently, where a single man shut down CNN and I think some other news stations just mailing poorly-made bombs to the media and politicians.

That case always struck me as really odd. That guy was under surveillance the whole time and was caught in a sting operation. I think they even helped him build the devices. For what reason did they actually let him mail them? Surely, given that they were in on the entire plot, they could have simply arrested him before the devices were actually mailed.

He only has to take some material step forward in terms of the plot to get arrested for conspiracy as far as the law goes. Letting those reach the mailbox seems like a major failure on their part.

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

#613

Post by Supermancho »

malandrew wrote: post #601
hannasanarion wrote: post #254

Earlier quoted context omitted.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

> Investors know that the government will do anything to underwrite their risk. The FED only steps in for once in a lifetime risks that impacts the market broadly. Any risk specific to individual firms, which is all the risk between these broad market events.

> The FED only steps in for once in a lifetime risks that impacts the market broadly.

Those risks overlap. It's not effectively once-in-a-lifetime, as of the last century.

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

#614

Post by unusual_whales »

A lot of this also seems to be insider knowledge. It is said that QE is the greatest wealth transfer tool on the earth. I truly believe that.

If you look at who the stimulus is meant to support, it isn't the mom/pop shops (which incidentally is good for the stock market as the companies get bigger).

I tried to capture this unusual insider activity here: https://twitter.com/unusual_whales

If you look at the companies that are "growing" or have calls, it is always those supported by the government. Take note!

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

#615

Post by partiallypro »

JKCalhoun wrote: post #128
bb2018 wrote: post #13

Earlier quoted context omitted.

I agree. Also, I know it is hip to say that Wall Street is short-sighted, but in reality it is one of the the few fields where people routinely think decades at a time. If you run a large pension fund or investment account you were already risk-weighted and if the cash isn't needed for 10+ years you'd much rather own a slice of the world's largest companies ten years from now instead of gold or cash under a mattress.

I feel like there is a decade of guillotines in the future that they are either not seeing or are looking way past. But then I've always been cynical about the growing divide between the uber-wealthy and the other 99% of this country.

I want to know why this "guillotine" thing has become so big recently? It has largely been Bernie/DSA people. I find it a bit disturbing. I've seen even very innocent things like simply being a landlord as "guillotine" worthy on social media. This is pre-COVID. While most landlords are actually middle class people trying to make a side income. I don't think people actually know what they are asking for, they want revenge on a perceived (false) notion, not reform to make it better; it's a very dangerous path.

I would bet if the far right were making this type of threat, it wouldn't be brushed under the rug.

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

#616

Post by Supermancho »

losvedir wrote: post #448
Glyptodon wrote: post #435

Earlier quoted context omitted.

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 behin…

No, this is just atrociously wrong. It pains me to see because the post you're responding to about getting everyone to chip in a small amount to investments every month is one of my pet goals that I've helped many friends with. Everything you've said is wrong. I don't know what you mean by "getting in after all the really wealthy get in"... VCs, IPOs? That's not even close to necessary. Investing in simple index fund…

>> less money always has fewer opportunities.

That's a fact of the US system.

> I don't know what you mean by "getting in after all the really wealthy get in"... VCs, IPOs? That's not even close to necessary.

That's a strawman. What's necessary, isn't the subject.

> And "all the investments with minimums in the thousands"? Well... don't buy those!

The wealthy have more opportunity, got it. Pointing to some other instrument, saying "it's also good" is not a correction.

> Everything you've said is wrong.

If you find yourself saying this, you're probably about to say something stupid. It's trite nonsense.

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

#617

Post by UncleMeat »

eanzenberg wrote: post #582
macintux wrote: post #533

Earlier quoted context omitted.

Income != wealth

Income is taxed.

The wealthy produce more income via capital gains, which are taxed at lower rates. They also have greater access to tax deferred and tax free options. A married couple of high earners with a good retirement plan at work can put nearly 150,000 annually in accounts that grow tax free.

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

#618

Post by jotm »

RickJWagner wrote: post #570
JKCalhoun wrote: post #128

Earlier quoted context omitted.

I feel like there is a decade of guillotines in the future that they are either not seeing or are looking way past. But then I've always been cynical about the growing divide between the uber-wealthy and the other 99% of this country.

At least in the US, today's poor have smart phones, air conditioning, refrigerators, and better health than any other time in history. Comfort-wise, things are at historic 'best' levels. Why would anyone in their right mind give up their life for a revolution under these conditions?

Presumably that would be after they lose all that because they can't pay for it anymore.

Then again, judging by the downvote happy people here, there may not be enough braincells left for a successful revolution.

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

#619

Post by reducesuffering »

rewgs wrote: post #483
Hydraulix989 wrote: post #50

Earlier quoted context omitted.

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

In addition to everything else said in this thread -- all good stuff -- it's worth noting that there's often an upfront expense that's hard to overcome in order to invest in the stock market in any sort of meaningful way. For example, some of the stocks recommended by the likes of Mr Money Mustache require a $3,000 minimum first-time investment. That's a big hurdle for some, myself included. I'm in music and media, n…

MMM is definitely recommending Vanguard mutual funds, either VFIAX (US 500 biggest) or VTSMX (total US market). But the ETF's are equivalent and can be purchased fractionally literally $1 at a time. I.e: Open robinhood brokerage, purchase $1 of VTI (ETF equivalent of VTSMX)

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

#620

Post by tfehring »

xcasperx wrote: post #146
toohotatopic wrote: post #14

Earlier quoted context omitted.

Even if there is a second wave, there will be a time after Corona eventually. There won't be any new players by then so the market shares will almost be unchanged. Stock prices are discounted future profits for about 15 to 20 years. Those profits are still there when Corona is over. From that perspective, why should share prices fall by more than 5-10% for every year that Corona is locking down the economy? *edit: If…

This is assuming a (or near) 100% efficient market. Which it definitely is not. Analysts use different methods to discount cash flows: https://www.investopedia.com/articles/professionals/072915/d... Finding R (what to discount by) can be difficult to do: https://www.investopedia.com/articles/investing/021015/advan... I don't work in IB or PE so take what I put with a grain of salt, just what I've learned. Also, you k…

There's a pretty good technical illustration of how the discount rate impacts stock prices here [0].

This does provide one plausible answer to the headline question from TFA: Corporations' expected future profits are lower than they were pre-COVID, but the valuation discount rate is lower because the expected future return for assets in general is lower, so the present value of corporations' expected future profits is the same-ish as it was pre-COVID.

[0] https://johnhcochrane.blogspot.com/2018/02/stock-gyrations.h...

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