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

Re: The stock market and economy have parted ways

#141

Post by pjc50 » Mon, Jul 13, 2020, 4:15 PM UTC

willcipriano wrote: post #123

api wrote: post #84

Earlier quoted context omitted.

Everything is being forced further out on the risk curve. Everything. This also explains wacky basketcase unicorns like WeWork, perpetually unprofitable companies raising round after round, the continued existence of the cryptocurrency world in spite of it being like 90%+ scams, real estate going up in cities where >25% of people are behind on their mortgages, etc. There's no "alpha" anywhere. Money is chasing its ta…

My guess is when the financial economy goes bust and those dollars start chasing real economy assets all the inflation we were assured wouldn't happen due to all the money printing will happen all at once. People act like the big short guys were geniuses to see this trend come out of nowhere. I was a teenager asking questions like "How can housing prices rise nationally at a multiple of wage increases for any sustain…

Once you allow for the fall in interest rates over the past decades, the house price rise looks less surprising. However, there's a weird corollary: what happens when rates go negative?

Re: The stock market and economy have parted ways

#142

Post by cool_dude85 » Mon, Jul 13, 2020, 4:15 PM UTC

jasode wrote: post #128

cool_dude85 wrote: post #95

Earlier quoted context omitted.

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.

>If returns over a long period are below the assumed rate, then the employer simply needs to increase contributions. It's seductive to type out the word "simply" to describe a proposed solution but that doesn't mean it's simple in reality. (My previous comment about supposedly "simple" fixes: https://news.ycombinator.com/item?id=16698821 ) E.g. The employer (the state government) that pays into pension funds for teac…

This doesn't at all address the core point I'm making: that pension funds are not required to achieve a given rate of return in any meaningful sense.

But sure, I agree that there are other ways to handle the situation if the fund doesn't achieve its assumed rate of return. There are other options than increasing employer contributions.

Re: The stock market and economy have parted ways

#143

Post by claudeganon » Mon, Jul 13, 2020, 4:15 PM UTC

baron_harkonnen wrote: post #115

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."

You're thinking about your personal investments, not someone managing a large investment firm or hedge fund. This simple fixes for your personal investments would be seen as absolutely insane in the professional investment world. You can't just tell your clients "oh I put $100 Billion into some nearly 0% interest investments because I think the market is crazy", especially if the DJIA is having record months. Even th…

Isn't some form of this what the Taleb-advised Universa fund is doing?

https://www.bloomberg.com/news/articles/2020-04-08/taleb-adv...

Re: The stock market and economy have parted ways

#144

Post by throwanem » Mon, Jul 13, 2020, 4:15 PM UTC

_Understated_ wrote: post #33

[flagged]

Use archive.today, or wait for the link to it that someone will invariably post very soon after the article is posted on HN.

Re: The stock market and economy have parted ways

#145

Post by FlyMoreRockets » Mon, Jul 13, 2020, 4:16 PM UTC

yonaguska wrote: post #100

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.

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

Collateral.

Re: The stock market and economy have parted ways

#146

Post by cephaslr » Mon, Jul 13, 2020, 4:16 PM UTC

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…

Is part of the issue that there is just too much money has been printed and hoarded and its creating some weird effects?

The government has been printing money for a long time, to stimulate the economy, provide spending money, etc. Due to 80/20 rule, rich get richer effects, etc, a large portion of money the government prints ends up in the hands of a relatively small group who doesn't spend it but rather tries to invest it to get more money. Government prints money again trying to stimulate the economy and again most of it ends up in a few hands. At some point don't you have what we have today? A 1% that owns lots of wealth and doesn't know where to put it while the majority of the economy is still relatively broke? How does it play out? Do the 1% just buy all the assets at some point?

I am not trying to make a statement about inequality but rather curious about the result of printing money for 70 years and having that money end up with relatively few parties each round. Perhaps someone with more knowledge can speak to this.

Re: The stock market and economy have parted ways

#147

Post by chii » Mon, Jul 13, 2020, 4:16 PM UTC

harryh wrote: post #31

isabelc wrote: post #7

The stock market is a popularity contest. A simple mention on the news of a stock can create a buying or selling frenzy over it, and this has been the case for a long time.

In the short run, yes. But in the long run it's a weighing machine.

but then explain why the current prices aren't reflecting a weighing from a few decades ago?

when does "short term" become "long term"?

Re: The stock market and economy have parted ways

#148

Post by javert » Mon, Jul 13, 2020, 4:17 PM UTC

danhak wrote: post #77

javert wrote: post #68

Earlier quoted context omitted.

> instead of parking it safely while this global crisis plays out Because interest rates will never go back up, or if they do, they will be counterbalanced by inflation. This is the view of Ray Dalio at Bridgewater and (presumably) many other very smart people. I'm not that smart, but I agree. Thus, cash and cash obligations are no longer stores of wealth. Equities are, unfortunately. High volatility is just the pric…

Forgive me if I say this sounds awfully like the "new paradigm" / "this time it's different!" phase of a bubble.

Your comment is the equivalent of a defendant in a criminal trial saying, "I'm not guilty," and then prosecutor saying, "Forgive me, but this sounds awfully like what the last guy said, and he murdered his wife!"

In other words, we have to actually look at the evidence.

Re: The stock market and economy have parted ways

#149

Post by JoshTko » Mon, Jul 13, 2020, 4:17 PM UTC

smallgovt wrote: post #135

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?

It wouldn't be evenly distributed. It would disproportionately be invested in well know consumer brand as these would be novice investors.

Re: The stock market and economy have parted ways

#150

Post by cool_dude85 » Mon, Jul 13, 2020, 4:18 PM UTC

ianai wrote: post #73

erentz wrote: post #65

Earlier quoted context omitted.

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.

I wonder how long those pension plans may make their obligations if they start paying short term obligations with their long term principals. I could see something from them triggering a correction.

The current model of having a very large fund that needs to show to an actuary that it's "fully funded" is relatively new. Defined benefit pensions existed for quite a while before "fully funded" pension funds, using a pay-as-you-go system, and could probably survive indefinitely that way if designed right.