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The stock market and economy have parted ways

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Re: The stock market and economy have parted ways

#401

Post by rlucas »

mlthoughts2018 wrote: post #297
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…

I think you are massively incorrect. Equities right now are at a pretty massive discount to future value. If anything I think the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter. The implications of this seem mostly sociological to me. Is that a good s…

> the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter.

If you're right about that we're into revolution territory. If COVID reveals that we've built an economy that not only doesn't care, but doesn't even register the existence of 1/3 of the population, the body politic may have had a poison dose.

Re: The stock market and economy have parted ways

#402

Post by victor106 »

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.

PPP loans have go be used for employee retention.

https://www.sba.gov/funding-programs/loans/coronavirus-relie...

"Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease."

Re: The stock market and economy have parted ways

#403

Post by marvin »

mhuffman wrote: post #375
Spivak wrote: post #368

Earlier quoted context omitted.

Question from someone who has no dog in this fight. If your model is right would it be in you best interest to short their stock or do you believe that the market can "remain irrational" forever?

Yes it would, but I am very, very nervous that the actions of the government and the capricious actions of retail investors would go against me, so I have no stomach to do it. As an example, image that you shorted bitcoin half-way up its rise ... you would be broke! Possibly less than broke! On the other hand, you would have eventually been right, just the timing on a bubble stock (or possible meme stock, in this cas…

There is also the significant risk that you are wrong. I haven't seen this mentioned; maybe it's obvious and you've considered that aspect too.

A short bet means unlimited downside, and if you arrive at 1/5 of the current market cap, there seems like a significant risk the market has seen something you haven't. Tesla was at $200 one year ago.

Guaranteed to be an irrational bubble?

Re: The stock market and economy have parted ways

#404

Post by cool_dude85 »

bpt3 wrote: post #352
cool_dude85 wrote: post #150

Earlier quoted context omitted.

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.

> 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. The PBGC was created because this isn't the case. The issues with Social Security are another example of how pay as you go isn't completely sustainable.

The PBGC is an insurance system. Of course, pension plans haven't always been able to pay out, but the fact that an insurance system exists for them doesn't make them any more of a failure than a savings account backed by FDIC.

And what issues with social security do you mean? The program has taken in more than it's paid out since '83.

Re: The stock market and economy have parted ways

#405

Post by marvin »

twblalock wrote: post #308
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 has always been a popular stock with speculators, hype followers, and Robin Hood users. It had nutty valuations before the pandemic. On top of that, the Model Y is now available and crossovers are by far the best-selling type of vehicle in the United States right now. (It was probably a mistake to come out with the Model 3, a sedan, before the Model Y, a crossover).

>(It was probably a mistake to come out with the Model 3, a sedan, before the Model Y, a crossover)

Maybe. But it seems Tesla has realized very significant production efficiencies on the Model Y contra the Model 3, and given the expected larger volume on the former, it's a big advantage that these design lessons were learned on a model that will carry less of their income.

Changing tooling and production processes for a product that already exists is a very painful strategic gambit. Remember that Tesla's pipeline is bigger than their current offerings; that kind of distraction wouldn't be healthy for their long-term growth.

Greater cash flow from Model Y due to design/manufacturing efficiencies might be a critical strategic advantage.

Re: The stock market and economy have parted ways

#406

Post by paulie_a »

beagle3 wrote: post #98
secondcoming wrote: post #25

Earlier quoted context omitted.

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.

It's incredibly easy to buy gold. I just started dabbling in that area but it's dead simple.

Re: The stock market and economy have parted ways

#408

Post by 8note »

objektif wrote: post #279
pjc50 wrote: post #141

Earlier quoted context omitted.

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?

US will not allow interest rates to go negative.

Is that enshrined in law or something?

Re: The stock market and economy have parted ways

#409

Post by thephyber »

hellisothers wrote: post #89
ed25519FUUU wrote: post #50

Earlier quoted context omitted.

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.

I mean, in world where you’re trying to trade gold for food gold is a “fiat” currency as well. It has no intrinsic value and if we’re struggling to get food and water I’m not going to want to accept anything for my food except strict bartering. If you’re buying gold for the end of the world you’d be better off buying cigarettes and tiny bottles of booze.

Gold isn't a "fiat" currency. It's a commodity that acts as a store of value. A fiat is paper which is asserted to have a specific value (likely unenforceable in a post-apocalyptic world). A commodity has a value because that's what the market will bear.

Gold does have intrinsic value. It's used for electronics plating and for jewelry. Other precious metals can augment gold as commodities, each having different intrinsic values. An example of a metal which might have no intrinsic value in a post-apocalyptic world is platinum or palladium, which are primarily used as catalysts for emissions equipment on cars (no refined petrol => no driving => no need for platinum/palladium).

I think the statement about cigarettes and booze is correct (as well as toilet paper and ammo), except they have different lifespans and durabilities. Also, consumables will get more rare as time goes on (like dollar bills that erode, tear, burn, or are lost), whereas precious metals may keep in-tact.

Re: The stock market and economy have parted ways

#410

Post by cool_dude85 »

erentz wrote: post #358
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.

You’re right. As jascode suggests I think you took a stricter definition of “required” than I intended. We have pension plans buying private equity which should never happen. We have had them selling volatility because they’re desperate to find yield, which should never happen. Etc. When I say required I mean that for whatever management reasons they decide they must continue to target the same returns, and due to th…

Pension managers, and probably all fund managers, make stupid decisions all the time. I suspect especially so in cases where they have to be seen to be actively managing things to justify their salaries.

I don't think it has anything to do with the fact that there's an assumed long-term 8% return. Fund managers in situations where no such assumed returns exist make the same bad decisions all the time too.

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