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

Re: The stock market and economy have parted ways

#341

Post by Lavery » Mon, Jul 13, 2020, 8:09 PM UTC

subsubzero wrote: post #278

There are some very strange happenings goings on with a small number of stocks. AMZN, TSLA, AAPL and a few others have seen stratospheric gains in the past few months with especially Tesla with no clear reason why. Not trying to knock tesla but there is something that I have never seen happening and given store closures, spiking covid cases and virus antibodies that seem to last months and in some cases weeks these a…

  #1 Interest rates are as low as they have been in an extremely long time, people/institutions want higher returns so they are putting money into vehicles with higher returns(stocks).

This isn't wrong, but it's also worth noting that (regardless of return preference / risk tolerance), higher stock prices are also, partly, a consequence of low interest rates. Stock markets are many things, but one thing they are is a discounting tool, and the discount rate you use is informed by market rates elsewhere. If interest rates are zero, simplistically, equities are the sum of their related cashflows for the next indefinite period of time.

(I'm aware there are other premia I'm not including, but, simplistically)

Re: The stock market and economy have parted ways

#342

Post by yalogin » Mon, Jul 13, 2020, 8:10 PM UTC

I feel like we have taken a turn for the worse in terms of income inequality in the US. The differences between the poor and the rest has been greatly exaggerated by the virus and there is a chasm now.

The lower rung of the economy has no bearing on the stock market as that section doesn't contribute to it. Sectors like tech are entirely created by middle/above middle class individuals for those that are wealthier than them. The stock market is doing well because it has realized this fully. Some sectors like Airlines, retail etc are not doing well because they depend on the lower rung of the economy. I am not sure how this will change.

Re: The stock market and economy have parted ways

#343

Post by brightball » Mon, Jul 13, 2020, 8:10 PM UTC

subsubzero wrote: post #278

There are some very strange happenings goings on with a small number of stocks. AMZN, TSLA, AAPL and a few others have seen stratospheric gains in the past few months with especially Tesla with no clear reason why. Not trying to knock tesla but there is something that I have never seen happening and given store closures, spiking covid cases and virus antibodies that seem to last months and in some cases weeks these a…

Tesla can be explained a little easier I think. People are moving a lot of money out of oil and gas so a natural place to put it is what appears to be the successor to it.

Re: The stock market and economy have parted ways

#344

Post by misja111 » Mon, Jul 13, 2020, 8:11 PM UTC

Quinner wrote: post #246

charwalker wrote: post #205

Earlier quoted context omitted.

Printing money has recently shown to have little impact on inflation. This is likely due in part to lack of consumer spending (can't inflate prices if nobody is buying it anyway) as well as spreading the USD across billions of people in dozens of interconnected economies that base off the dollar. The recent $5 trillion injection from the Fed (buying bad debt/assets) and Treasury (stimulus/PPP) may simply show that we…

Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.

Exactly this. The FED and the ECB have been printing money like crazy for years, however this money did not go to the man in the street but to banks and indirectly to other financial institutions. And those don't spend their money in the grocery store but in the stock market.

The classic economical laws are not broken, they are still in full effect and we see their effect in the inflated share prices.

Re: The stock market and economy have parted ways

#345

Post by toomuchtodo » Mon, Jul 13, 2020, 8:13 PM UTC

pc86 wrote: post #332

toomuchtodo wrote: post #257

Earlier quoted context omitted.

Only half of those over 55 have any retirement savings [1], the other half have no retirement pennies to speak of. While not great for online discussion, I can understand where the sentiment comes (the evidence is clear older generations strip mined the country economically [and continue to do so], pulled the ladder up behind them, and then are shocked when younger citizens are resentful). [1] https://www.gao.gov/ass…

Edit: Disregard the below because I can't do math. But leaving it for context given the response. Boomers by definition are going to be in their late 70's at the absolute youngest. You're talking about their children, who have comparatively little (and is coincidentally why a lot of people hate the Boomer generation).

Baby boomers were born between 1946 and 1964. They're currently between 56-76 years old (roughly 76 million in U.S.). Anything older than that is the “silent generation“ (born 1928 to 1945).

https://en.wikipedia.org/wiki/Baby_boomers

https://en.wikipedia.org/wiki/Silent_Generation

Re: The stock market and economy have parted ways

#346

Post by cure » Mon, Jul 13, 2020, 8:13 PM UTC

Quinner wrote: post #246

charwalker wrote: post #205

Earlier quoted context omitted.

Printing money has recently shown to have little impact on inflation. This is likely due in part to lack of consumer spending (can't inflate prices if nobody is buying it anyway) as well as spreading the USD across billions of people in dozens of interconnected economies that base off the dollar. The recent $5 trillion injection from the Fed (buying bad debt/assets) and Treasury (stimulus/PPP) may simply show that we…

Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.

This. For years now everyone has been saying "where is the (consumer price) inflation"? Meanwhile real estate prices are rising fast (in desirable parts of the country) and the stock market has been on an epic bull run. It's obvious that the inflation is in the asset prices.

This is a dangerous trend. The rich (who tend to own those assets) get richer and and the poor (who rent/live paycheck to paycheck) get more and more desperate. If we don't find a way to reduce the inequality, this is going to mean serious trouble down the line.

Re: The stock market and economy have parted ways

#347

Post by thephyber » Mon, Jul 13, 2020, 8:15 PM UTC

armanboyaci wrote: post #260

bryanlarsen wrote: post #214

Earlier quoted context omitted.

If you invested into the German stock market in 1914, it would have taken over 100 years to get your money back. The America of the past 100 years has been quite exceptional. Using its history to predict the future is not a good idea, IMO.

Are you sure about the German stock market? I've googled and found this https://commons.m.wikimedia.org/wiki/File:CDAX-Kursindex.png

I suspect the parent's statement might be accurate if you invested with another currency.

The problem (or uncertainty) is that both the US and Germany left the gold-backed systems during those years and the exchange rate between our currencies changed quite a bit during the 1914-1924 period (which is probably why your parent chose that year).

If you notice your image's description, it is denominated in 3 different currencies, depending on the years you are looking at.

Re: The stock market and economy have parted ways

#348

Post by filoleg » Mon, Jul 13, 2020, 8:16 PM UTC

snoshy wrote: post #305

subsubzero wrote: post #278

There are some very strange happenings goings on with a small number of stocks. AMZN, TSLA, AAPL and a few others have seen stratospheric gains in the past few months with especially Tesla with no clear reason why. Not trying to knock tesla but there is something that I have never seen happening and given store closures, spiking covid cases and virus antibodies that seem to last months and in some cases weeks these a…

Your speculation doesn't appear unfounded to me, but I think you're painting the picture with too broad of a brush here. AMZN, TSLA, and AAPL (just to limit the discussion to the ones you explicitly mentioned) are tech stocks, but have fundamentally different business dynamics that I would expect to be affected quite differently by the effects of COVID. * AMZN: huge swaths of new and existing are customers moving the…

>AMZN: huge swaths of new and existing are customers moving their shopping online. They stand to profit from this in the short and medium term at least, and I would wager that the change in shopping habits would result in a noticeable number of long term changes sticking.

Don't forget about AWS. With a lot of people being stuck inside due to covid lockdowns, people watch more Netflix and use more online services in general. With AWS powering a gigantic chunk of the modern web, it is no surprise that they are doing so well right now.

Re: The stock market and economy have parted ways

#349

Post by intotheabyss » Mon, Jul 13, 2020, 8:17 PM UTC

TheOtherHobbes wrote: post #132

baron_harkonnen wrote: post #109

Earlier quoted context omitted.

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 alte…

Don't forget that the FED works closely with the WH, so it's in everyone's interest in that administration to keep the music going until the election.

Re: The stock market and economy have parted ways

#350

Post by michaelmrose » Mon, Jul 13, 2020, 8:20 PM UTC

gas9S9zw3P9c wrote: post #189

NotSammyHagar wrote: post #169

Earlier quoted context omitted.

Holy shit. 41x! I'm in the wrong world. Even though I'm in the overpaid-programmer-industrial-complex, in an expensive west coast town with an expensive million dollar house and expensive taxes, I can't imagine what it would take to get into evil and profitable investment vehicles like these hedge funds. I just have no exposure to that world.

I'm curious - why do you call the hedge fund world evil? I hear this quite often but where does it come from? I've worked in both a hedge fund and in tech, and I found the former to be less evil and pretentious. People in finance think and say "I want to make a ton of money" while people in tech say "I want to save the world" while thinking "I want to make a ton of money" - resulting in misaligned incentives and impo…

Whereas a monetary system is an essential aspect of modern civilization many people see major players in our specific system obviously working against the interests of the rest of civilization instead of simply enabling it. It's obvious that not everyone is equally bad or equally culpable but its obvious that there is also an institutional lack of what most people think of as ethics.

Take for example the creation of a market to manipulate the price of commodities most notably wheat.

https://foreignpolicy.com/2011/04/27/how-goldman-sachs-creat...

Sachs is most likely mostly responsible for millions perhaps hundreds of millions of people going hungry and yet a response to outlawing this kind of manipulation provokes this response.

>I asked a handful of wheat brokers what would happen if the U.S. government simply outlawed long–only trading in food commodities for investment banks. Their reaction: laughter. One phone call to a bona-fide hedger like Cargill or Archer Daniels Midland and one secret swap of assets, and a bank’s stake in the futures market is indistinguishable from that of an international wheat buyer. What if the government outlawed all long-only derivative products, I asked? Once again, laughter. Problem solved with another phone call, this time to a trading office in London or Hong Kong; the new food derivative markets have reached supranational proportions, beyond the reach of sovereign law.

This is Bond villain proportions of villainy. We could of course continue in the same vein touching on Banks laundering money for cartels, the housing market collapse, and on and on and on.