The stock market and economy have parted ways • Hacker News Board

Re: The stock market and economy have parted ways

#91

Post by 3pt14159 » Mon, Jul 13, 2020, 3:42 PM UTC

lumost wrote: post #17

3pt14159 wrote: post #13

Earlier quoted context omitted.

It means a massive crash is coming. Money printer go brrr is funny, but it's not capable of propping up the entire market forever. There's a flight to safety that happens when countries really start printing.

If a money printer channels money directly into assets than its entirely feasible that the money printer can drive the asset to an arbitrary valuation e.g. asset hyperinflation. Great for making the economy appear solvent, terrible for everything else.

If this were true, Zimbabwe would have a lucrative stockmarket. It's not true though. A high enough inflation rate damages investor confidence and makes business operations more complex. I means constantly needing to minimize cash on hand in the local currency, or having to price contracts in inflation adjusted dollars increasing risk and mental overhead of doing business. At extremis, it means many market participants refusing to do business in the currency at all. Large economies like Germany have gone to the printers before and it doesn't end well.

Re: The stock market and economy have parted ways

#92

Post by cliffy » Mon, Jul 13, 2020, 3:43 PM UTC

Loughla wrote: post #9

ideals wrote: post #6

The amount of friends I have that are out of work and posting screenshots of robinhood on ig and snap right now is wild. This feels like crypto 2017 all over again. I suppose the difference is there is a real market under it all and retail traders aren't entirely driving this, but they're the ones left holding the bag when the curtain drops.

That's where the FOMO comes in. I, and many, many of my friends, missed out on Bitcoin in college. Many of my friends are posting the same things you state on their social media, and are making it clear they won't be left behind this time. Not sure what all that means, but it's fascinating.

Saying you missed out on Bitcoin is like saying you missed out on a giant ponzi scheme.

Re: The stock market and economy have parted ways

#93

Post by jjcon » Mon, Jul 13, 2020, 3:43 PM UTC

danhak wrote: post #30

SpicyLemonZest wrote: post #12

"FOMO" makes an entirely natural market process sound problematic. If an investor is confident that the economy will fully recover in 2022, they should be willing to buy stock at a very slight discount from fully recovered today, even if current economic conditions aren't great. That's not a psychological trap, just an efficient market.

A very slight discount? As of writing, the Nasdaq is at all time high and the S&P only 5% below. All this with depression-level unemployment.

Unfortunately the people that are unemployed because of all this aren’t (in general) that important to the economy. This will only further push class disparity.

Re: The stock market and economy have parted ways

#94

Post by zaphod420 » Mon, Jul 13, 2020, 3:43 PM UTC

empath75 wrote: post #35

ideals wrote: post #6

The amount of friends I have that are out of work and posting screenshots of robinhood on ig and snap right now is wild. This feels like crypto 2017 all over again. I suppose the difference is there is a real market under it all and retail traders aren't entirely driving this, but they're the ones left holding the bag when the curtain drops.

One of my unemployed friends just told me he's putting everything into bitcoin.

might be a smart move. I'm not going all in, but I am dollar cost averaging my buys and accumulating bitcoin.

Re: The stock market and economy have parted ways

#95

Post by cool_dude85 » Mon, Jul 13, 2020, 3:43 PM UTC

erentz wrote: post #65

danhak wrote: post #38

Earlier quoted context omitted.

This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."

A very large percentage of the market is required to achieve a certain return. Think insurance companies. Giant pension plans. Etc. They have all been forced further and further out the risk curve over the past decade due to low interest rates.

Pension funds aren't required to achieve a certain return. If returns over a long period are below the assumed rate, then the employer simply needs to increase contributions. This is less than ideal but not a requirement in any reasonable sense.

Re: The stock market and economy have parted ways

#96

Post by mattmanser » Mon, Jul 13, 2020, 3:43 PM UTC

thisisnico wrote: post #74

earthtolazlo wrote: post #54

Earlier quoted context omitted.

Has he heard of Tether? It might be worth telling him that the entire cryptocurrency market it being propped up by 10 billion “dollars” of what is essentially Monopoly money.

Market cap of Bitcoin is: 117.81 billion U.S. Market cap of Tether USDT: $9.16 billion Tether would account for 7.8% of all Bitcoin. Not sure if that would count as being propped up. It's significant but not entirely propped up, there is a ton of real money in there too.

Doesn't that make it much worse? Only a certain amount of the tether is real, making it a tiny chunk, that's propping up a small chunk, that's propping up the large chunk.

If the tiny chunk goes, it all goes tumbling down?

Re: The stock market and economy have parted ways

#97

Post by adaisadais » Mon, Jul 13, 2020, 3:44 PM UTC

I spoke to my financial advisor a month ago and he told me he was not worried of a major and sustained drop as FED and Congressional intervention had helped curtail that before it spiraled out of hand.

But I cannot help but see current market prices and see current for lease and boarded up building. I wonder if he was correct. I wonder if the advice he has given me is wrong?

I believe we are about 9months away from the greatest financial disaster of our times. We should be and should have looked at COVID-19 as a war and not as a pandemic and we as a nation should have encouraged others to do the same (as they have). We should have legally declared war on the virus, shut down the economy for three months, passed a massive stimulus, and gone back to business when the “war” was over.

Unfortunately we have weak politicians at every level and extremely divisive leadership at the top. The good news is that we are just as informed and can find truth like never before. The hard part is that the truth is hard to find especially when we have something as large as the stock market lie to us on a day to day basis.

Re: The stock market and economy have parted ways

#98

Post by beagle3 » Mon, Jul 13, 2020, 3:44 PM UTC

secondcoming wrote: post #25

hitpointdrew wrote: post #20

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.” An alternative place to put investments will trigger it. When your options are savings accounts paying 0.25% interest, and treasury notes paying nothing, and CD's being garbage, what are your alternatives for investing? If…

I'm no gold bug, but turn some of your cash into gold.

It is actually very hard to get real gold (especially in a form that you can convert back to cash in the future). Just try to get delivery of a gold bullion. And if you succeed, try selling it into the system again, without losing 30%.

Paper gold is a bet no different than a stock; it is a bet that the system and your counterparty will both be solvent when you need them.

Re: The stock market and economy have parted ways

#99

Post by SpicyLemonZest » Mon, Jul 13, 2020, 3:44 PM UTC

FooBarWidget wrote: post #42

hitpointdrew wrote: post #20

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.” An alternative place to put investments will trigger it. When your options are savings accounts paying 0.25% interest, and treasury notes paying nothing, and CD's being garbage, what are your alternatives for investing? If…

But then why did the stock market perform so badly for so long during 2008?

For a while after 2008, people weren't sure there could ever be a full recovery. To pick one issue, Lehman Brothers went from healthy to dead in basically a few months, and nobody had a good reason why this couldn't happen to any large financial institution. Maybe the risk was unavoidable, and everyone will just have to make investment decisions knowing that the financial system is at constant risk of falling over.

Confidence in this area was restored when the Federal Reserve started doing what are called "stress tests" under the Dodd-Frank Act, where large financial institutions have to prove that even if things turn bad they won't collapse.

Re: The stock market and economy have parted ways

#100

Post by yonaguska » Mon, Jul 13, 2020, 3:44 PM UTC

apta wrote: post #76

Interest is one of the main reasons the economic and financial system is in ruins. It is an exploitative, parasitic practice and we've known that for thousands of years. But some people only care about their pockets.

Let me know when you figure out a better way to put a price on the risk of loaning money.

As evil as you may think interest rates are- without a price on the risk of loaning money- access to loans dry up and only the already wealthy will have access to capital.