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?

#841

Post by WalterBright » Mon, May 11, 2020, 7:44 PM UTC

aeturnum wrote: post #829

WalterBright wrote: post #755

Earlier quoted context omitted.

May I suggest examining "if 0.1% of your savings is in the market" again? Like what happened with the other 99.9% of your savings?

Asking about the other 99.9% is a good point! Mostly I was pointing out how meaningless the idea of "participating" is for evaluating the material impact of the market on an individuals' financial wellbeing. We can go back and forth about how theoretical people could invest theoretical savings, but unless you have another source, it seems like the reality we live in is one where 90% of the country share 16% of the st…

The people who do invest in the market are providing the money that drives jobs and economic growth.

You can't separate the two.

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

#842

Post by justin66 » Mon, May 11, 2020, 8:01 PM UTC

WalterBright wrote: post #840

justin66 wrote: post #798

Earlier quoted context omitted.

Without sperging out about the specific percentage: a situation where people have a tiny amount saved for retirement, and almost all their net worth in a house and car, is actually quite common.

Spending on a car is not an investment. It's no joke that a new car loses 30% of its value when you drive it off the lot. Essentially all cars lose value constantly, and that's not even counting the finance costs.

I couldn't agree more. Just trying to explain the situation of someone's pension accounting for such a small portion of their net worth. It's sadly common.

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

#843

Post by jbay808 » Mon, May 11, 2020, 8:16 PM UTC

WalterBright wrote: post #839

jbay808 wrote: post #814

Earlier quoted context omitted.

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.

The 2008 recession didn't last that long.

But paying off student loans probably did.

My point is that "the market did great" means investors did great; doesn't mean that everyone did great.

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

#844

Post by aeturnum » Mon, May 11, 2020, 8:38 PM UTC

WalterBright wrote: post #841

aeturnum wrote: post #829

Earlier quoted context omitted.

Asking about the other 99.9% is a good point! Mostly I was pointing out how meaningless the idea of "participating" is for evaluating the material impact of the market on an individuals' financial wellbeing. We can go back and forth about how theoretical people could invest theoretical savings, but unless you have another source, it seems like the reality we live in is one where 90% of the country share 16% of the st…

The people who do invest in the market are providing the money that drives jobs and economic growth. You can't separate the two.

Why can't you?

The vast majority of businesses are privately held[1]. Those businesses hire most of the people and buy most of the goods. Even for companies that are listed on the markets, the majority of their financial assets come from doing business.

It's true that companies raise money on the public markets to expand and thus hire more people, but the idea that most economic activity happens there is false.

[1] https://www.forbes.com/sites/sageworks/2012/10/01/private-co...

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

#845

Post by fullito » Mon, May 11, 2020, 9:14 PM UTC

anm89 wrote: post #579

fullito wrote: post #436

Why is that hard to understand? What else should i suddenly do with my money if i invested it in the stock market? I mean srsly getting it out now to do nothing with it means losing money. If i invest long termish, even if corona hits hard, after it hit, live continues and the economy will recover. We lost 2 years of stock market growth anyway. Thats a shit tone of money. As bad as it sounds, the worst two things fro…

You are thinking like a small individual investor. Many larger players are highly leveraged. They don't always have the option to ride the lows. These players have wildly more influence over market prices than mom and pop investors who can ride crashes.

Is that then good for me that i can wait it out?

And what is with all those pension fonts etc.?

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

#846

Post by kerkeslager » Mon, May 11, 2020, 9:27 PM UTC

coffeemug wrote: post #111

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…

> [...] 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 [...] John Maynard Keynes developed this idea (that came to be known as Keynesian beauty contest[1]) in 1936. This isn't a new property of the market, it has always been the case. > when companies do pay dividends or buy back stock, it's sometimes d…

> What if 90% significantly cut consumption? Ultimately the companies have to sell their products to somebody.

Well, that's almost the interesting question.

A certain percentage of what the 90% consume, they can't stop consuming. You have to eat. You have to wear clothes. You have to live somewhere. You have to go to the doctor. So there's a whole big chunk that the 90% really can't stop consuming.

And if you want to be in the upper parts of that 90%, you need a computer, a car, a cell phone, college... So there's a bunch more of that where the 90% could stop consuming, but it would be a pretty significant sacrifice.

And for the remainder, there's an entire marketing industry manipulating us to make sure we don't stop consuming. Even as someone who actively tries be aware of marketing and remove marketing from my life I catch myself sometimes falling for it, and buying things I don't want or need. And I'm sure there are times it happens when I don't notice it. A significant part of Hacker News thinks advertisers are just out to help us find products we need!

The proles will never revolt, Winston.

The interesting question isn't really whether people will voluntarily cut consumption. It's more, "What will happen if the bottom 90% loses the income necessary to consume?"

Cynically, I think that won't happen, and the top 10% will just make enough concessions to keep the 90% alive and not revolting. We already see that in things like Amazon's $15 minimum wage: it's not a meaningful wage when Bezos is making $9 million/hour, but they can always make arguments like, "We're paying more than our competitors" and "We're preventing homelessness".

And that's not necessarily a bad thing: I want to see change, but I'd rather see it happen slowly through education and care than quickly with blood running in the streets.

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

#847

Post by kennywinker » Mon, May 11, 2020, 9:51 PM UTC

loco5niner wrote: post #828

kennywinker wrote: post #825

Earlier quoted context omitted.

If you only have $1000 in the bank, it’s not because you can save $1000 / year - it’s because that’s all you can save. And I used 30 years because 61% of americans aren’t 20 years old right now. And this is still the scenario where you don’t have a >$1000 emergency any time during that 45 years. My point is not that investing doesn’t work, my point is that most people don’t have enough capital to be a part of that sy…

> If you only have $1000 in the bank, it’s not because you can save $1000 / year - it’s because that’s all you can save. But at least we all have our big screen TV's and iPhones, right?

Massive eye roll. Yes let's blame the poor for their bad purchasing decisions, instead of idk not getting paid enough?

Like, ok... an entry-level iPhone ($20/month) and a big screen tv ($500, lasts ten years)

That's $50/year + $240/year, call it $300 a year to get an iphone and a big screen tv. Amazing. Are you really here trying to tell me that $300/year is going to make the difference between crushing poverty and a healthy life and retirement?

Now compare that with a $2/hour raise, which amounts to somewhere north of $300/month extra. $3600/year. Yeah, THAT is getting a lot closer to the difference between crushing poverty and a reasonable retirement.

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

#848

Post by lsiebert » Mon, May 11, 2020, 9:57 PM UTC

dorchadas wrote: post #835

changchuming wrote: post #87

Earlier quoted context omitted.

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.

That's exactly why tax cuts to the rich don't make any sense to me. Give tax cuts to the middle and lower classes, they're the ones who go out and actually buy shit, which drives everything else, really.

They make perfect sense if your goal is to enrich the wealthy in the short term.

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

#849

Post by kennywinker » Mon, May 11, 2020, 9:57 PM UTC

WalterBright wrote: post #838

kennywinker wrote: post #825

Earlier quoted context omitted.

If you only have $1000 in the bank, it’s not because you can save $1000 / year - it’s because that’s all you can save. And I used 30 years because 61% of americans aren’t 20 years old right now. And this is still the scenario where you don’t have a >$1000 emergency any time during that 45 years. My point is not that investing doesn’t work, my point is that most people don’t have enough capital to be a part of that sy…

> most people don’t have enough capital to be a part of that system. Most people are not in the bottom quintile of income.

Where are you getting bottom quintile? If you don't have $1000 for an emergency, it doesn't matter what quintile you're in you're still not going to be maximizing the profitability of your excess capital using the stock market

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

#850

Post by mcv » Mon, May 11, 2020, 10:04 PM UTC

pmiller2 wrote: post #818

mcv wrote: post #713

Earlier quoted context omitted.

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."

I'm just looking at what the bottom half of the population gets. There's on average $1600 per person available. And that's apparently also what the average person in the bottom half already has, since together they apparently own as much as these three billionaires.

So that means if you completely equalize the wealth of the bottom 50% of the population after redistributing the wealth of these billionaires, the average person in that bottom half will still only have $3200.

So maybe they can get their car fixed, but they still can't send their kids to college.