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?

#771

Post by _v7gu » Mon, May 11, 2020, 12:09 PM UTC

jdavis703 wrote: post #568

eanzenberg wrote: post #458

Earlier quoted context omitted.

Strip the wealthy if their wealth and most will probably become wealthy again. If you don’t call it intelligence what would you call it.

American wealth is closely tied to how wealthy a given persons parents were [0]. Given this, I’m skeptical that the wealthy would become wealthy again. The counterpoint is the richest Southern families quickly recovered their positions in the years after the Civil War [1]... but that relied heavily on racist policies, and of course these families still owned capital like land. 0: http://www.pewtrusts.org/~/media/asse…

Wealth is (obviously) corralated with many properties that make it easier to gain wealth. To look at the effect of parents' wealth (and solely that) on children, you need to look into lottery winners or Bitcoin/APPL holders.

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

#772

Post by neskiredk » Mon, May 11, 2020, 12:12 PM UTC

thechao wrote: post #278

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…

The original formulation of the statement of “work hard and you’ll make it” was created in the context of 17th-19th c. Europe, where no matter how hard you worked, if you weren’t landed gentry, you simply could not make it. The idea was that any opportunity existed. The universalist position you described is a rosy reimagining of a history that never was.

Precisely, My ancestors left Denmark and Sweden. Hundreds of thousands left doing the later period of the 19th century. Mainly because how the land was distributed and taxed in such a way that you could never get ahead.

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

#773

Post by matthewdgreen » Mon, May 11, 2020, 12:12 PM UTC

javagram wrote: post #552

matthewdgreen wrote: post #302

Earlier quoted context omitted.

Traders can certainly spread their bets across many companies representing a business sector, and routinely do so. This "a few firms might go bankrupt so this explains why entire sectors experience massive volatility that isn't justified by long-term revenue expectations" claim seems like someone trying to rationalize irrational human behavior.

Ok, but take the airline sector for example. Maybe one or more of the airlines will go bankrupt. Maybe they all somehow survive. The price of Delta, United, American etc. gets discounted because the risk of each individual stock being bankrupted is high. But they don’t go to 0, because there’s also a chance each of the airlines might somehow survive to next year and go back to profitability. If all the airlines go ba…

It’s much more likely that the other incumbent airline businesses just soak up that business, or the loss of competition sees price hikes across the board. Airlines are hard to spin up.

TL;DR if the sector as a whole is healthy, and you’re willing to balance an investment portfolio across the whole sector, then your exposure to future revenues should be fairly healthy even if one company goes bankrupt. But you’re absolutely right that prices don’t behave as though this is the case.

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

#774

Post by matthewdgreen » Mon, May 11, 2020, 12:17 PM UTC

kube-system wrote: post #517

matthewdgreen wrote: post #288

Earlier quoted context omitted.

Arguably the actual economic outcome has been worse than most people would have predicted back during those crazy days in March. The US's management of the pandemic has been worse than most of us could have predicted. And yet stocks are up.

That could be. Although I'd argue the opinions of "most people" are not always relevant to market moves, because most people are not controlling most of the money. Regardless, the factors you mention are only two of the many factors that affects the value of stocks. The reason that causes a crash isn't necessarily the inverse of the reason it may go back up. Poor management of the pandemic isn't necessarily a reason…

If we assume that the market is rationally pricing future revenues (and I don’t personally assume that at all right now) then you have to look at early March as a prediction that things were about to get extremely terrible in a hurry. As a macroeconomic prediction, that seems like it’s actually a pretty good prediction —- based on where things are in the real economy. But the stock market has since decided that the actual outlook is about the same now as it was in October 2019 on the tail of a record expansion with 3.6% unemployment. That doesn’t seem so reasonable anymore.

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

#775

Post by tarsinge » Mon, May 11, 2020, 12:20 PM UTC

jhallenworld wrote: post #63

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…

Faith in humanity: buy stocks. No faith in humanity: buy gold. Large cap stocks are to some degree an international investment. REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.

> Faith in humanity: buy stocks. No faith in humanity: buy gold.

Nothing like a good oversimplified false dilemma for a complex economic situation. Don’t give the secondary stock market a greater purpose than what it is.

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

#776

Post by tarsinge » Mon, May 11, 2020, 12:21 PM UTC

xtiansimon wrote: post #69

jhallenworld wrote: post #63

Earlier quoted context omitted.

Faith in humanity: buy stocks. No faith in humanity: buy gold. Large cap stocks are to some degree an international investment. REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.

> Faith in humanity: buy stocks. No faith in humanity: buy gold. Speaking to a friend who bought stocks recently, they said, "I'm bullish on America." I might say if you are the opposite of bullish, then buy gold. And if you have no faith in humanity, buy a survivalist bunker.

The stock market is not the economy, don’t make a false dilemma on being bullish on America or not. You can totally be bullish on America and imagine a reset of the prices on the secondary market.

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

#777

Post by truculent » Mon, May 11, 2020, 12:44 PM UTC

taneq wrote: post #723

partiallypro wrote: post #615

Earlier quoted context omitted.

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 rev…

It seems popular among certain sociopolitical groups to see other people getting nice things and feel entitled to getting those same nice things yourself, without regard for any effort expended or risks taken by the first group. It's pure "you have, I see, I want, I should be able to take".

I suggest you try a little harder to understand things before you comment on them lest you be mistaken for a fool

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

#778

Post by orestarod » Mon, May 11, 2020, 12:52 PM UTC

ajuc wrote: post #724

sidlls wrote: post #295

Earlier quoted context omitted.

That cuts both ways, so to speak. Drones and even more advanced technology can replace guillotines as easily as it can be used to have a smaller police force of the kind you mention. I think some people don't quite understand what people are capable of when they are truly desperate. Right now, in most of the western world, people aren't at that point. But when they get there, billionaires' ability to hide on islands…

System controls internet, phone network, electricity, food and oil delivery. IF you want to stop a revolution in 21st century just shutdown everything and blockade roads. How long till people start dying? A week? What are the rebels gonna do? Assauls tanks and machine guns? Or starve/freeze/cook to death without electricity/oil/food? The American delusion of aremd citizens defending constitution is just that - a delu…

On the other hand, you have seen the mighty US army not being able to suppress a few guys wearing flip flops in Middle East. So, if things get real nasty you won't have people "begrudgingly returning to their jobs". If that thing is possible to happen, there would BE no revolution in the first place, as the conditions would be not harsh enough.

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

#779

Post by loufe » Mon, May 11, 2020, 1:02 PM UTC

esoterica wrote: post #223

loufe wrote: post #123

Earlier quoted context omitted.

>First, a lot of companies don't pay out dividends or buy back stock these days As I understand it, a good chunk of of the reason stock prices were originally so high before the crash 2 months ago was that stock bybacks were at an all time high (though of course this doesn't mean every company is doing them). Part of the reason companies are so vulnerable is that a large chunk profits were being used to undertake the…

Why bother with a rainy-day fund? If your company has a long-term viable business you can borrow money to survive a temporary crisis. If your company's business model is permanently ruined then you are better off calling it quits and shutting the company down than setting your cash reserves on fire trying to rescue a dead company. During a credit crisis a viable business might have trouble raising money, but with the…

That's a fair point. In theory, or at least in my imagination of running a large business, I still think there is value in keeping a rainy-day fund - but you're certainly right that it doesn't seem like any large companies, aside from those flush with cash like Apple, practice

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

#780

Post by gvjddbnvdrbv » Mon, May 11, 2020, 1:06 PM UTC

throwaway743 wrote: post #309

sacred_numbers wrote: post #192

Earlier quoted context omitted.

That may be true, but the evidence mostly is pointing in the direction of undercounting COVID deaths. In northern Italy the official death count was less than half of "excess deaths", with the worst-hit areas having the most excess deaths. Certainly some of the excess deaths are due to people avoiding hospitals, or higher stress levels, but a lot are due to COVID deaths at home, or undiagnosed COVID deaths. Also, we…

> Also, we still don't really understand this disease enough to know what effects it has on the body. This is especially worrying, now that the US military is barring previously hospitalized COVID survivors from enlisting and not allowing waivers.

Given the effects of Covid on the age range of people wanting to join the military this policy seems rather pointless. Very few people will be affected.