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The stock market and economy have parted ways

washingtonpost.com

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Re: The stock market and economy have parted ways

#131

Post by cameldrv »

danhak wrote: post #38
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…

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."

The problem is that cash is also quite risky right now. The money supply expanded by about 80% in the past few months. Stocks are more sensitive to economic conditions but less sensitive to inflation.

Re: The stock market and economy have parted ways

#132

Post by TheOtherHobbes »

baron_harkonnen wrote: post #109
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 think you are absolutely correct and the reason that the stock market is being so weird is quite simply "what else are we doing to do with that money?" The solution for individuals: cash, gold, options, etc, aren't viable solutions for institutional investors. Imagine that you're in charge of a $1 billion fund, what are you going to do? You can't put that into gold, cash or treasury notes. But all sectors are affec…

Today was one of the few times I saw "social unrest" mentioned in this context. I suspect that will happen a lot more over the next few years.

The markets are a wobbling shitpile of unpayable debt just waiting to collapse. That was already true before Covid, but Covid has nailed the coffin shut while the corpse is still alive.

I wouldn't be surprised if the Fed is knowingly goosing the twitching body because the alternative is one of the biggest financial explosions in history. More free speculation vouchers at least buy a little time before the music stops, the bomb goes off, and we all run out of metaphors.

Re: The stock market and economy have parted ways

#133

Post by fatbird »

ed25519FUUU wrote: post #50
secondcoming wrote: post #25

Earlier quoted context omitted.

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

I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food” But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.

In the Argentinian collapse, many preppers found their gold coins useless to trade. No one would give them anything close to fair value for it because no black market seller was able to assay it to verify that it's real gold. Junk gold like jewelry is what really moved, and preppers switched to hoarding rings and necklaces and whatnot.

Re: The stock market and economy have parted ways

#134

Post by grecy »

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.

And the people making those decisions get paid on commission, so of course they want returns, not "safe parking".

Re: The stock market and economy have parted ways

#135

Post by smallgovt »

JoshTko wrote: post #106

One theory is that many small business owners are using their PPP loan money to invest in the market. This is local restaurants with millions of dollars in the bank that can't really invest in their own business due to slow business. If they are fearful of going out of business then taking a shot in the stock market doesn't seem all that risky.

Interesting theory. Is there a way to quantify how evenly investing, say $200B, across the S&P would affect the index's price?

Re: The stock market and economy have parted ways

#136

Post by thisisnico »

abvdasker wrote: post #129
thisisnico wrote: post #66

Earlier quoted context omitted.

They made it easy for the uneducated investor to invest in companies that see the spotlight on the news. You can invest in minutes and for free now, right from your phone. These people don't do any research on the company. They see news stories on the company all the time, and news stories that the stock went up XX% So when you have people casually buying stocks I feel like they get inflated past the point that makes…

Is there recent data on how much investment originates from retail investors? Are there really enough retail investors on Robinhood and elsewhere to push valuations up this high?

That's a good question. My statement was opinion and speculation, but it would be interesting to see this backed up by data, maybe someone here can find data on percentage of a stock like TSLA for example is held by retail investors?

Re: The stock market and economy have parted ways

#137

Post by vladimirralev »

adaisadais wrote: post #97

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 t…

That's amazing. Shortly after the Powell interview, in a speech a wall street insider insisted the whole reason for 60 minutes interview is so that financial advisors can have a leg to stand on in case they get sued for buying stocks into a severe recession with earnings dropping. They just needed the CYA.

Re: The stock market and economy have parted ways

#138

Post by pjc50 »

baron_harkonnen wrote: post #109
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 think you are absolutely correct and the reason that the stock market is being so weird is quite simply "what else are we doing to do with that money?" The solution for individuals: cash, gold, options, etc, aren't viable solutions for institutional investors. Imagine that you're in charge of a $1 billion fund, what are you going to do? You can't put that into gold, cash or treasury notes. But all sectors are affec…

I've been saying this for a while. There is simply a surplus of "forced buyers" for investments, so the price and yield has gone down and down, and there's no real reason why it can't be negative. The only next point is warehousing physical cash, which itself isn't cheap or liquid.

Individuals presented with this crisis could realise the problem, the disastrous future it implies, and turn to philanthropy. Institutions largely can't, and foreign oligarchs won't.

Re: The stock market and economy have parted ways

#139

Post by everybodyknows »

treis wrote: post #53
snarf21 wrote: post #8

The have parted ways because the Fed is buying lots more than just treasuries. There is so much money desperate for returns because interest rates are so low. That is why we have such inflated equities right now. It is a mental game: if people don't know the economy is awful, maybe they won't change their behavior and maybe it will actually get better before they realize it.

The Fed buying bonds isn't pushing Tesla to the 14th largest market cap. It's currently trading $200 per share higher than any analyst recommendation that the WSJ or Yahoo has. Not to mention Hertz, a bankrupt company, has a market cap of 200 million. Something very unusual is going on.

9.5% of float shorted, up 13% mid-day. Short squeeze, methinks.

https://www.marketwatch.com/investing/stock/tsla

Re: The stock market and economy have parted ways

#140

Post by fzeroracer »

3pt14159 wrote: post #13
Loughla wrote: post #9

Earlier quoted context omitted.

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.

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.

Money printer could potentially prop up the market longer if we printed money for the people most hit by the crisis. IE, the small business owners and the poor/middle-class that will and are struggling to pay bills and rent.

Nathan Tankus goes over this one facet quite well [1] which is that essentially landlords are going to burn themselves down trying to extract rent from tenants that will fundamentally be unable to pay due to the coronavirus. Once those people are forced out of their homes then we'll see the crisis hit full speed.

[1] https://nathantankus.substack.com/p/suspending-evictions-is-...

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