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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?

#811

Post by softawre »

quickthrowman wrote: post #789
fiachamp wrote: post #127

Earlier quoted context omitted.

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.

Managed versus index is to me, open source versus closed source.

With managed funds, you have lots of participants out there eyeing the value of businesses. Everybody can make a buck by taking a peek.

With Index funds, we all have to trust that S&P is doing the right thing.

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

#812

Post by proverbialbunny »

cs702 wrote: post #781
proverbialbunny wrote: post #699

Earlier quoted context omitted.

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 t…

Previously when we have large problems like this, companies are not allowed to loan out so much debt it would bankrupt many non-startups. If it's different this time, it's because companies are allowed to loan at far more than they should be able to. The last time companies (and people) were allowed to loan out so much it caused major problems was 1929.

The Spanish Flu crashed the stock market pretty badly with a quick recovery in the 1910s similar to today, but loaning was not crazy then so it didn't hurt the economy in the long term.

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

#813

Post by marcusverus »

Joof wrote: post #591
marcusverus wrote: post #563

Earlier quoted context omitted.

Advocates of big government love these metrics that have been put through the academic ringer, so-as to spit out whatever tortured output is expected. Why look at this kind of esoteric figure at all? Why not look at, you know, real numbers? Spending as percentage of GDP: Denmark - 52% of GDP Norway - 55% of GDP Finland - 53% of GDP Sweden - 50% of GDP Iceland - 42% of GDP Average - 50.5% USA - 22% of GDP What does al…

Okay, but are they worse off because they can't afford as much stuff? They don't seem to be in more poverty, they're healthier, more fit and highly educated. I can spend an extra 20k as well or poorly as I like.

That 'extra 20K' of income is easy to sneeze at for the affluent, but it means that Americans have ~40% more disposable income. That's huge.

> They don't seem to be in more poverty

They're clearly not 'more in poverty'. The point is that they spend (the US equivalent) of Trillions of dollars per year for comparable outcomes.

>They're healthier, more fit and highly educated.

This is a matter of culture, not economics. The US already spends more per pupil than all of the 'top 5' nations, with worse outcomes. [0]

[0]https://data.oecd.org/eduresource/education-spending.htm

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

#814

Post by jbay808 »

WalterBright wrote: post #754
jbay808 wrote: post #714

Earlier quoted context omitted.

The market has done great since 2008! Wonderful time to have already had a lot of money on hand to invest, for sure. And man, I tell you, all of the houses I bought have gone way up in value, even faster than earnings! What do people even have to complain about?

If you had a regular plan where you invest every year, and don't sell, you would have ridden out the 2008 fiasco just fine.

Yes! But if you were still in school in 2008 and putting your money into food and paying off student loans, the market performance isn't necessarily the thing that impacts your future wealth.

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

#815

Post by 60secz »

nkurz wrote: post #2

https://archive.is/cmMx5 It's a decent article. Here are their 5 reasons: 1. Bets on a “V-Shaped” Recovery 2. Market Leaders Keep Rising 3. Corporate-Earnings Expectations Remain High 4. Old Habits Die Hard 5. The Fed’s Backing Personally, I'm betting we're still headed to a bloodbath, but slowly. This quarter's earnings are expected to be terrible, so this is already priced in. But the market is expecting a recovery…

Yep, this rally seems like an extended Bull Trap. Surprised slow bleed hasn't started yet. Falling knives may likely happen on vaccine bad news and subsequent waves with further bleed outs.

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

#816

Post by tathougies »

kitotik wrote: post #382
tathougies wrote: post #335

Earlier quoted context omitted.

> , and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing. Given that stock ownership is about 55% of the public, the median household likely has at least a few shares. https://news.gallup.com/poll/266807/percentage-americans-own...

That includes 401k and IRAs etc. which obviously very few living outside of middle class have. In addition, stock ownership has been on steady decline for everyone but the upper middle class.

Well you're not wrong on the overall trend over the past twenty years, but over the past four or five, the rate has been trending upward. Most of the downward movement was during the recession, for which it's not obvious that the reason ownership went down is not mainly panic selling (i.e., individual choice and risk tolerance) instead of anything systemic.

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

#817

Post by chad_strategic »

blaser-waffle wrote: post #785
chad_strategic wrote: post #606

Earlier quoted context omitted.

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)

Nice!

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

#818

Post by pmiller2 »

mcv wrote: post #713
pmiller2 wrote: post #575

Earlier quoted context omitted.

How many rich people need to be assassinated to change the balance? Looks like it's about 3: https://www.usatoday.com/story/money/2017/11/08/billionaires... In any case, assassination is probably not the most effective means of wealth redistribution.

Just reverting the tax cuts for the wealthy would already do a lot of good. I also think a steep inheritance tax for inheritances over a certain amount (1 million? 10 million?, 100 million?) to preventing these concentrations of wealth from creating a new aristocracy. But 3 billionaires owning more than the bottom half of the country doesn't have to mean if the bottom half owns nothing: >> "Their $264.1 billion in ho…

Hypothetically, if assassinating Gates, Buffett, and Bezos were a viable method of wealth redistribution, I don't think the idea would be to give everyone $1600. It would probably be more like "we're going to look at the median and top everybody up to that level."

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

#819

Post by malandrew »

chipotle_coyote wrote: post #651
malandrew wrote: post #595

Earlier quoted context omitted.

> our infrastructure is unmaintained Bernie supporters are generally the least likely to get their hands dirty and do the kind of work necessary to build and maintain infrastructure. Pretty much everyone I meet that does that kind of work is Republican. Not saying this is a universal truth, but it's a somewhat accurate generalization. Source for party affiliation by a sampling of occupations: http://verdantlabs.com/p…

Responding to "our infrastructure is unmaintained" with "Bernie supporters won't be in the jobs actually doing the building because I found this cool infographic showing that bartenders lean Democratic and beer wholesalers lean Republican" is beyond mere non-sequitur into genuine weirdness. It's not like our infrastructure problems are new, or weren't remarked on before 2016. They've been building for decades. They w…

Neither bartender nor beer distributor are building infrastructure.

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

#820

Post by wnevets »

tezzer wrote: post #592
WalterBright wrote: post #511

Earlier quoted context omitted.

45% of households have a pension plan.

22% of workers, 13% of private sector workers, and falling.

I probably should have specific average american worker. Retirees aren't important in this context.
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