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How can Wall Street be so healthy when Main Street isn’t?

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Re: How can Wall Street be so healthy when Main Street isn’t?

#11

Post by ryansmccoy »

Basically, you can think of the stock market (price) driven by two components: 1) an aggregate of all company profits in the stock market and 2) the cost of borrowing capital (discount rate).

1) Corporate Profits - From what I recall, corporate profits have been flat to down over recent quarters.

2) Discount Rate - The cost of borrowing capital has been falling as governments make access to capital easier for businesses. This has a huge effect on the valuation of the stock market compared to the impact of the profits. This is why the stock market continues to go up. The issue is that if you were to make access to capital harder, thus increasing the discount rate, companies in theory wouldn't be able to borrow as much, and therefore grow as much. Thus, the market would in theory go down, probably alot.

Re: How can Wall Street be so healthy when Main Street isn’t?

#12

Post by giantg2 »

CalRobert wrote: post #5

Where else are you gonna put your money? Stable governments are paying ~0 or negative interest. I'm actually asking, right now I'm just paying off debt but would be curious what people think. If I didn't have the debt I'd probably buy equities (index fund, etc.) like everoyne else.

Commodities could be another option. I think gold and silver aren't great choices right now, but maybe platinum is. Along this same line, real estate has real value to it.

Re: How can Wall Street be so healthy when Main Street isn’t?

#13

Post by treis »

It's really not that complicated. Wall Street doesn't (generally) own businesses on Main Street. Main Street is skewed towards locally owned boutiques, cafes, shops, restaurants and so on. Those are getting killed but it doesn't matter to the S&P 500 because they're not listed there. To some extent it is good for the S&P 500 as the money shifts from those locally owned businesses to the mega corps in the S&P 500.

We've gone from ~4% unemployment to 10-15%. Which sounds bad. But if you flip it around, we've gone from 96% employment to 85-90%. The vast majority of people are still employed and the economy is mostly still humming along.

Re: How can Wall Street be so healthy when Main Street isn’t?

#14

Post by ed25519FUUU »

throwaway_USD wrote: post #3

Easy Congress put on bandannas and robbed the tax payers of about $18,000 each. Congress then turned around and gave taxpayers $1,200 each, of their own money, that total amount can be doubled that to account for the temporary unemployment benefits increase. The rest of the taxpayer money went to the FED so they will guarantee the prices of shit stock...the market can't lower because as many rich CEOs and investors c…

And state and city governments went ahead and took 80% of their covid money to pay themselves or their sinking pensions, etc.

> As part of the Coronavirus Aid, Relief and Economic Security Act signed in March, Sacramento County received $181 million to fund necessary programs or expenses tied to the COVID-19 pandemic ... Of the nearly $148 million that the county has already spent in the last few months, more than $104 million went toward paying for salaries and benefits

1. https://www.sacbee.com/news/local/article244813632.html

Re: How can Wall Street be so healthy when Main Street isn’t?

#15

Post by chubasco »

Because the rules around running a business in the COVID-19 environment have been set such that large companies can afford to comply with them but small business can’t without losing money. So all their employees, and eventually the business owners themselves, bear the brunt of that.

Re: How can Wall Street be so healthy when Main Street isn’t?

#17

Post by SketchySeaBeast »

CalRobert wrote: post #5

Where else are you gonna put your money? Stable governments are paying ~0 or negative interest. I'm actually asking, right now I'm just paying off debt but would be curious what people think. If I didn't have the debt I'd probably buy equities (index fund, etc.) like everoyne else.

After years of squirreling away my cash like someone who spent their entire 20's working minimum wage jobs or in school I finally bought into some index funds. I too don't know what to do with my money - you can't save it (even in less crazy times it's eaten up by inflation), you can't buy bonds right now, so I said to hell with it, I'm not going to time the market, I'm just going to buy in to funds that try to match the S&P and hope that by the time I need it the market will be in a better place than it is today. I don't know what else you can do if you want to try and plan to have money 20 years out.

I'm sure others will have more nuanced options, and I look forward to hearing about them.

Re: How can Wall Street be so healthy when Main Street isn’t?

#18

Post by gazelleeatslion »

CalRobert wrote: post #5

Where else are you gonna put your money? Stable governments are paying ~0 or negative interest. I'm actually asking, right now I'm just paying off debt but would be curious what people think. If I didn't have the debt I'd probably buy equities (index fund, etc.) like everoyne else.

Bitcoin.

But seriously I do agree — despite it being loved by PF/FIRE crowd — parking all your assets in Index funds with no other competitive option is terrifying.

Re: How can Wall Street be so healthy when Main Street isn’t?

#19

Post by ghaff »

giantg2 wrote: post #12
CalRobert wrote: post #5

Where else are you gonna put your money? Stable governments are paying ~0 or negative interest. I'm actually asking, right now I'm just paying off debt but would be curious what people think. If I didn't have the debt I'd probably buy equities (index fund, etc.) like everoyne else.

Commodities could be another option. I think gold and silver aren't great choices right now, but maybe platinum is. Along this same line, real estate has real value to it.

I'd be very nervous about real estate right now. It requires a lot of speculation about long-time remote work and how cities are going to come out of this. That said, it's something I'd keep my eye on.

I agree gold has had a good run up but the adviser on my managed account just sold the gold position.

You can certainly have (and probably should have) some amount in bonds, etc. but the returns will indeed be pretty low. Unless you're super-pessimistic to the point where you just want to put everything under your mattress, it's hard not to have at least a fairly significant share in equities.

Re: How can Wall Street be so healthy when Main Street isn’t?

#20

Post by jshaqaw »

ed25519FUUU wrote: post #14
throwaway_USD wrote: post #3

Easy Congress put on bandannas and robbed the tax payers of about $18,000 each. Congress then turned around and gave taxpayers $1,200 each, of their own money, that total amount can be doubled that to account for the temporary unemployment benefits increase. The rest of the taxpayer money went to the FED so they will guarantee the prices of shit stock...the market can't lower because as many rich CEOs and investors c…

And state and city governments went ahead and took 80% of their covid money to pay themselves or their sinking pensions, etc. > As part of the Coronavirus Aid, Relief and Economic Security Act signed in March, Sacramento County received $181 million to fund necessary programs or expenses tied to the COVID-19 pandemic ... Of the nearly $148 million that the county has already spent in the last few months, more than $1…

You mean to pay for teachers, first responders, etc...? Yes it takes humans to provide services.
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