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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?

#781

Post by cs702 »

proverbialbunny wrote: post #699
cs702 wrote: post #297

What truly boggles my mind is this: * Personal consumption expenditures constitute 67% to 68% of US GDP every year: https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri... * Business revenues are the flip-side of those consumption expenditures, because every dollar consumers spend, to a close approximation, is a dollar of revenue for some business -- whether it's your Aunt Tilly's burger joint, your local mov…

It's not cleanly divisible across companies. Some will get hit very hard while others will be nearly effected, similar to unemployment right now. Some people are untouched and others are hit hard.

Yes, of course, but think beyond the immediate consequences.

If that -30% collapse in consumer spending affects mostly, say, half of all businesses, that half will see its consumer revenues collapse by around twice as much, or -60%. Most of those businesses will fail and most of their employees will be out of a job, contributing to a greater collapse in consumer spending.

The economy seems to me unlikely to be able to "repurpose all those human atoms" quickly enough, as many people are and will be understandably afraid of returning to work before there's a treatment or vaccine.

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

#782

Post by blaser-waffle »

mixmastamyk wrote: post #701
arcticbull wrote: post #681

Earlier quoted context omitted.

> You can expect around 1.5% in the US for IG bonds. Sure, but the fed's target inflation rate is around 2%. That means you're in fact losing 0.5% of your purchasing power per annum. That's just losing money slower. There is in fact, no alternative.

Also the interest will be taxed.

Depends on the bonds. Bonds issued by the government (local/municipal/etc.) are often not taxed as an incentive to get you to lend money to the government.

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

#783

Post by davidw »

nostrademons wrote: post #72
davidw wrote: post #66

Earlier quoted context omitted.

I was already worried about what might happen with this election, but the pandemic is likely to make things worse. My wife and I have been discussing logistics to get somewhere safer in the event of different scenarios, but at the end... it's just difficult to predict what might happen and where.

If the U.S. collapses so does the whole world. Many regions in the globe (eg. Israel & the Middle East, Eastern Europe, the East Asian archipelago) are stable because of the threat of U.S. intervention if a large regional power decides they want to dominate the region. Take away that threat and you're going to get some very quick invasions as local powers seek to take advantage of the situation. Plus the U.S. dollar…

There are just too many "unknown unknowns" for me to really do a good job of contemplating any of it. We might end up like Venezuela, Hungary or Russia, with some of the trappings of a democracy, but not the real thing. If he loses the election and there is violence, who knows how that goes, how much of it there is, and where...

Feels weird to write all this. I'm not much one for "wild" sounding theories, but all this feels like it's coming to a head, and things may change a lot.

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

#784

Post by eloff »

expialidocious wrote: post #749
annexrichmond wrote: post #674

Earlier quoted context omitted.

This is a naive way to interpret the situation -- it doesn't even account for testing rate or death rate.

What's naive is to complacently and condescendingly assume that Canada is handling this any better. It doesn't look that way from my province.

There was no condescending.

I'm out west where we got luckier and maybe also managed it better. But Canada had the advantage of strong leadership at this time and only ten provinces that are mostly on the same page.

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

#785

Post by blaser-waffle »

chad_strategic wrote: post #606
chad_strategic wrote: post #164

Earlier quoted context omitted.

Scream this from the rooftops.

https://www.amazon.com/Creature-Jekyll-Island-Federal-Reserv... To all the economists that like to pontificate on the market structure / monetary policy and what not on this site, feel free to read a book about the history of the federal reserve. It also covers the theory of money thru out the ages. No mater what side you are on this will provide a detailed history of Congress, Federal Reserve, politics and the polit…

The other half of the battle is lasers (25% blue lasers, 25% red lasers)

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

#786

Post by blaser-waffle »

lotsofpulp wrote: post #260
tryptophan wrote: post #249

Earlier quoted context omitted.

But...wages have increased over the past 40 years...and at a greater rate than in Europe/Aus/other developed.

Comparing US wages to countries that have far greater social safety nets and healthcare is impossible. And volatility of wages and the insecurity of not knowing if you will have stable work (and hence healthcare) or not is a more important metric, although also impossible to measure. But not impossible to feel and see the results of.

> Comparing US wages to countries that have far greater social safety nets and healthcare is impossible.

No, it's not impossible. I'm from the US and live in Canada and it's essentially comparing the lower US tax rate + health care premiums and expected unemployment benefits.

For the record, the US is clearly cheaper for a slim 30 something with no kids and no medical issues -- like ~27,000 bucks or so per year, when I compared WA to AB. When you start adding kids and getting 60+ that changes, and long term it may be a better deal up north, but in the short term I'd rather do STEM in a state with no income tax.

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

#787

Post by shawnz »

celticninja wrote: post #741
shawnz wrote: post #344

Earlier quoted context omitted.

> the poor pay a higher percentage of income in tax They certainly don't pay a higher absolute dollar value of the total taxes received by the government though.

and your point is what? paying a higher percentage of their income makes life harder for them, than it does for the rich paying a higher dollar value but lower percentage of total income.

The point is that infrastructure was mainly paid by the rich, not that life is easier for the poor.

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

#788

Post by blaser-waffle »

lumost wrote: post #521
tinco wrote: post #457

Earlier quoted context omitted.

Neither Theranos nor WeWork were trying to solve rich people problems.

arguably, they solved a problem of where to stick money to try and get a greater than x% return. To do so both companies took on insane levels of risk by trying to solve impossible business/science problems on the basis that they could maybe just spend enough money and fake it till they made it. In WeWork's case some rational investors may have thought that they'd end up with a monopoly on B-tier office space as a fa…

> they solved a problem of where to stick money to try and get a greater than x% return

That is literally any company, be they large or startup, that is trying to attract investment. These were both "disruptive" types that had the backing of a few notable investors and interested parties, and looked juicy to those who could stomach the risk.

Theranos was trying to solve blood testing problems, to make them quick, cheap, and to disrupt the handful of companies that dominate the medical testing field. The whole idea was that poor folks could get a cheap, reliable blood test at Rite-Aid.

WeWork was an REIT designed to resell coworking space to low-to-mid scale clients; rich people and big companies aren't getting coworking space, they're just getting their own private offices.

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

#789

Post by quickthrowman »

fiachamp wrote: post #127
kerkeslager wrote: post #99

Because the stock market doesn't represent the economy as most people experience the economy. First, a lot of companies don't pay out dividends or buy back stock these days, so as time passes, removing their stock price from the price at IPO, their stock price becomes based on perception--not even perception of the reality of the company's value, but perception of the stock's value, which is increasingly just specula…

I would add another factor lots of people overlook: the trend towards index investing. In the past, asset management involved actually analyzing the performance of a business, now it’s just trillions of dollars allocated merely by market cap. Index investing makes everyone QEs bitch - the end game for it is what we’re about to experience.

How do you thinking the individual underlying shares of an equity index fund are valued? The performance of a company is analyzed, and market participants buy or sell shares and derivatives based on their analysis. You can make the argument that an over-reliance on indexing leads to less price discovery, but I don’t buy it.

The people shrieking the loudest about passive indexing are active fund managers.

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

#790

Post by shibeouya »

war1025 wrote: post #102
ethbro wrote: post #60

Earlier quoted context omitted.

My $0.02, we're going to see bifurcation that the market hasn't fully priced in. Not a good time to be in broad ETFs. Highly likely: Coronavirus is going to be circulating until the end of 2021 (based on transmissibility & vaccine timeline). We'll have better therapeutics to blunt the symptoms. But steps required to (intermittently) re-suppress transmission (NYC is ~20% exposed? So at minimum 1-2 more spike repeats)…

One interesting possibility is that the people most likely to get infected (different from most vulnerable if infected) are going to get infected this first round. What that potentially means is that they will act as effectively a fire-break for the broader population. Basically a burning of the highest throughput avenues for mass spread. If true, that would mean we get lots of localized outbreaks, but the probabilit…

There are recent research papers supporting that theory, and lowering the threshold for herd immunity much lower to 30-40%

If that is the case then places like NYC are probably pretty close.

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