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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

#431

Post by stult »

mrep wrote: post #361
misja111 wrote: post #344

Earlier quoted context omitted.

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.

Meh, most of what they are buying is just our own governments debt [0]. Now, you can certainly argue investors are buying more equities now that there aren't as many treasury securities to buy, but equity returns aren't even abnormal from historical returns. Inflation adjusted Annualized S&P 500 Returns with Dividends Reinvested for the past 15 years are 6.738% versus 7.690% for the 15 years before that [1]. [0]: htt…

You're comparing one of the strongest economic expansions in US history (1991-2001, brief, small recession, then 2001-2007, stopping at 2005 of course) to a period bookended by two of the worst recessions in US history (2007, 2020). It should be concerning that equity returns don't differ very much. That means they aren't correlated with the underlying economy.

Re: The stock market and economy have parted ways

#432

Post by DeonPenny »

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 doubt this will change though while governments are on their spending spree. AT this point you might even lose money putting money into government bonds.

Re: The stock market and economy have parted ways

#434

Post by apta »

danans wrote: post #224
apta wrote: post #210

Earlier quoted context omitted.

You can expect returns, but not fix them ahead of time as what people do with interest bearing loans (i.e. usury). Loaning money for money is parasitic and immoral. Investing that can incur a profit or a loss is fine in general.

> You can expect returns, but not fix them ahead of time Fixing them ahead of time is an attempt to quantify risk. It doesn't eliminate risk - loan defaults happen. The riskier a loan, the higher the interest rate. As long as the lendee has the option of refinancing with another institution (i.e. there is a competitive market for loans), usury shouldn't be an issue. Usury is an issue when the lendee has no other reso…

You can try to rationalize it in any way you want, however, that does not change the fact that engaging in an interest bearing transaction is parasitic and immoral.

> What other mechanism do you suggest for those?

Pay in installments with 0% interest, for a reasonable period of time, not like we see today that even for auto loans they're giving them out to people who can't afford them over insane periods of time. This is a symptom of a corrupt underlying cause.

The hyper capitalistic economy today is built on consumerism. Pushing people to buy things they don't need. Once we eliminate easy debt, consumerism will go down, prices will stabilize, and producers will be forced to give out 0% interest loans if they want to sell (or people can buy in cash).

For small businesses, they can get investors to pitch in money in exchange for ownership of a specific percentage of the business. This way, the risk is carried by all parties, and both parties expect to either gain or lose, unlike with usurious loans.

Re: The stock market and economy have parted ways

#435

Post by msteffen »

mwfunk wrote: post #276
cephaslr wrote: post #146

Earlier quoted context omitted.

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 in…

Have they been printing money? Has more USD been created, physically or virtually? This is something I don't understand, I'm hoping someone here can explain it. I was under the impression the last 40 years of US deficit spending has been mostly financed by selling US bonds to China, Japan, etc., while counting on growth and inflation to take the edge off when they come due. And selling more bonds instead of defaultin…

Yes--see https://www.investopedia.com/ask/answers/082515/who-decides-... under "How the Fed Creates Money With QE":

"The Fed can indeed create money "out of thin air." To be more precise, it does so with keystrokes on a computer. This was illustrated with its QE program, also known as open market operations. That's when the Fed buys an asset from a financial institution and pays for it with money it simply creates."

Re: The stock market and economy have parted ways

#436

Post by lumost »

blueblisters wrote: post #323
lumost wrote: post #259

Earlier quoted context omitted.

This is true when viewing from an external currency. If I only care about the nominal value of the S&P500 or the nominal price of oil/copper/steel/aluminum/Gold in dollars. Then the nominal price can inflate indefinitely. Historically no one has been able to inflate assets, without inflating the real economy. If the Fed's QE approach is having this effect then even as a dollar spender you would want to hold assets ab…

Contracts and price tags of things you buy are also is nominal dollars. When they change daily, it becomes extremely frustrating for consumer or producers to manage the overheads of these price swings.

This also depends on whether asset price inflation trickles into the real economy. Historical examples where asset prices were multiple orders of magnitude beyond the earning capability of workers include feudalism.

From a pure economics standpoint it's feasible to have a society where only some people can afford an asset, and everyone else pays a comparatively small fee to rent the asset roughly equivalent to their entire disposable income. This is a pretty terrible system overall where assets are allocated to those with money and ROI is bounded by the amount that can be. extracted from a servitude class.

The point of this example is that we should not constrain our economic concerns to simple hyper-inflation, as that can mislead us into thinking that as long as we aren't observing consumer price inflation we can print money indefinitely.

Re: The stock market and economy have parted ways

#437

Post by taurath »

thephyber wrote: post #392
mD5pPxMcS6fVWKE wrote: post #196

Earlier quoted context omitted.

What prevents government from paying their bills, rent and loans forever? Warren Buffett said that US gov can never go bankrupt because it owns the printing press.

> Warren Buffett said that US gov can never go bankrupt because it owns the printing press. Hyperinflation is one way to throw more fuel on the dire that is American society right now. And Trump said the quiet part out loud during his campaign[1] that we don't have to repay the whole debt (normally something that the most powerful people in a country don't say in public). Neither of these ideas works in practice with…

The printers have already gone brrrr:

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

The only reason store-brand sliced white bread isn't $10 right now is that money only went to investors and businesses.

Re: The stock market and economy have parted ways

#438

Post by taurath »

thephyber wrote: post #413
m0zg wrote: post #273

Earlier quoted context omitted.

Wall Street is looking where everyone should - at the deaths. And deaths have been going down since mid-April. It's just that recently (about a month ago) we've massively ramped up testing throughput. We're on track to become the most tested large country in the world in a few weeks. And the "lagging deaths" have so far failed to materialize.

Death counts are important, but only part of the story. Hospitalizations are still extremely problematic because there is permanent health harm. There is also a massive cost to being in the hospital for an American. COVID hospitalizations seem to take between 1-3+ weeks, which costs more than the net worth of the average American. Also, the economic impact is severe and has yet to fully show itself. Lots of employees…

The market is reacting to the fact that half of people in the country don't bother wearing masks in the grocery store anymore, and that disneyworld is open. The market thinks everything will turn out okay.

My bet is we see deaths and disabilities skyrocket through the end of the year.

Re: The stock market and economy have parted ways

#439

Post by taurath »

brahweh wrote: post #385
m0zg wrote: post #273

Earlier quoted context omitted.

Wall Street is looking where everyone should - at the deaths. And deaths have been going down since mid-April. It's just that recently (about a month ago) we've massively ramped up testing throughput. We're on track to become the most tested large country in the world in a few weeks. And the "lagging deaths" have so far failed to materialize.

Interesting - in the barrage of recent pessimism about the US's covid response, I was unaware of its high testing numbers. Nice to have a little good news. https://coronavirus.jhu.edu/testing/international-comparison

We're just seeing the death curve go up. If its not > 1000 a day in a week then the fatality rate is much much lower than expected

Re: The stock market and economy have parted ways

#440

Post by toomuchtodo »

pc86 wrote: post #380
toomuchtodo wrote: post #345

Earlier quoted context omitted.

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

sigh Apparently date math is hard. You're 100% right.

Please accept my reply as it was intended: informative, not snarky or combative.
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