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

Post by evandijk70 » Mon, May 11, 2020, 6:31 AM UTC

Galanwe wrote: post #665

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…

If you allow me to complement your breakdown: - bonds: Definitely not 0% interest rate, definitely better than cash. You can expect around 1.5% in the US for IG bonds. This is all relative to the default risk of course, the stronger your central bank, the less risky are the bonds, the less interests you earn. - Real estate: you don't have to own it directly. This exposes yourself to a huge idiosyncratic risk. You can…

Post by annexrichmond » Mon, May 11, 2020, 6:38 AM UTC

expialidocious wrote: post #569

eloff wrote: post #45

Earlier quoted context omitted.

It's not just likely, I worry you won't even get out of the first wave. With everyone pulling in literally 50 different directions and and no leadership from the top this might just bounce between states like the proverbial hot potato. I feel bad for you guys watching from the north here.

If you're Canadian and you think you have this beat, you're wrong. https://www.endcoronavirus.org/countries

Post by chii » Mon, May 11, 2020, 6:43 AM UTC

peteretep wrote: post #447

quietbritishjim wrote: post #338

Earlier quoted context omitted.

Genuine question: if a company didn't pay out on its bond, that's a default; how can it default without going bankrupt?

I believe what you’re missing here is a “Chapter 11 Bankruptcy”, as opposed to a “Chapter 7 Bankruptcy”. Chapter 11 means the business keeps running, but the owners lose their money, Chapter 7 is what most of the world considers to be a bankruptcy / going bust / liquidation. Uncle Sam probably doesn’t care if Delta does a Chapter 11, as long as the planes keep flying.

Post by knolax » Mon, May 11, 2020, 6:45 AM UTC

arghnoname wrote: post #566

lotsofpulp wrote: post #460

Earlier quoted context omitted.

> most will probably become wealthy again. Source?

There's a book that attempts to look at this called, "The Son Also Rises." It tracks wealth by surnames and argues that the ability to gain (or regain) wealth is inheritable. This thesis is in contradiction to some of the ways I've experienced the world, but it is a source supporting the parent's claim. For my own political inclinations I'd be happy to hear many others that support the opposite claim.

Post by chii » Mon, May 11, 2020, 6:48 AM UTC

cm2187 wrote: post #368

christophilus wrote: post #355

Earlier quoted context omitted.

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.