How can Wall Street be so healthy when Main Street isn’t? • Hacker News Board

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

#51

Post by throwaway_USD » Wed, Aug 19, 2020, 2:16 PM UTC

jshaqaw wrote: post #20

ed25519FUUU wrote: post #14

Earlier quoted context omitted.

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.

>You mean to pay for teachers

This is going to be a very interesting and telling litmus test for the future of the Country in the next few months.

If public schools go the route of remote teaching, which I think they will...then I don't see much choice but for State, County and local governments to go to war against the Teachers Unions and lay waste to upwards of 75% of the teacher workforce. Lets ballpark about 3M teachers losing their jobs and the entire educational system reformed where there is very limited public school in person attendance. As bad as losing 3M jobs would be to the economy, there will be untold negative impacts on children and parents that will have to leave their children unsupervised during the day.

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

#52

Post by ghaff » Wed, Aug 19, 2020, 2:16 PM UTC

giantg2 wrote: post #41

ghaff wrote: post #19

Earlier quoted context omitted.

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 l…

Maybe I don't know what I'm talking about. It seems the real estate market is really hot right now in the NJ/MD/E. PA regions.

It is with people moving out of cities. But a hot market is exactly when you probably don't want to invest, especially when there's at least some possibility that a couple years from now, the exodus from cities will be seen as a panic overreaction.

As for real estate in cities, property prices mostly don't yet reflect people moving out and a likely commercial real estate collapse. The other question is whether, to the degree prices in cities come down, people who have been pining to live in some city will still want to do this with so many businesses permanently gone and city services in shambles.

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

#53

Post by Armisael16 » Wed, Aug 19, 2020, 2:18 PM UTC

SketchySeaBeast wrote: post #39

bradstewart wrote: post #33

Earlier quoted context omitted.

Long term, index funds. Short term, money market (or high-yield savings accounts that do the money market stuff for you).

The money market is high risk, right? And looking at the high yield savings accounts - based upon a quick google the best option if you're American seems to be 1%?

Money markets are extremely low risk. In the 37 years before 2008 only three money market funds had ever failed to return the full investment (“broke the buck”).

You may be thinking of forex trading.

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

#54

Post by kpmcc » Wed, Aug 19, 2020, 2:19 PM UTC

recursivedoubts wrote: post #27

By holding interest rates so low, the Fed has created a double-bind: despite the systemic risks (which are very high) people who have investable cash have two options: the stock market or paying down debt. The stock market is being "invested" in not because it is a good investment at this point (it isn't) but because there is no where else to go. If interest rates ever revert to anything normal, it will get crushed.…

This is one of the only times I’ve seen someone mention a debt jubilee and lay out the case seriously. Happy to see it!

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

#55

Post by svachalek » Wed, Aug 19, 2020, 2:19 PM UTC

SketchySeaBeast wrote: post #39

bradstewart wrote: post #33

Earlier quoted context omitted.

Long term, index funds. Short term, money market (or high-yield savings accounts that do the money market stuff for you).

The money market is high risk, right? And looking at the high yield savings accounts - based upon a quick google the best option if you're American seems to be 1%?

Money market is very low (but not zero) risk which is why it’s suitable for short term savings. And yeah, 1% is about the best rate you’ll find, subject to change at any moment.

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

#56

Post by Miner49er » Wed, Aug 19, 2020, 2:19 PM UTC

big_youth wrote: post #30

treis wrote: post #13

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'…

>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. This is not how it works. The US measures unemployment using levels, the 10-15% are U-3, which only counts people without jobs who are in the labor force. To remain in the labor force, they must…

U-6 was 16.5% in July - it's improving. It was 6.8% pre-COVID, so it's not really any worse off then U-3. It's still about a 10% jump in both.

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

#57

Post by giantg2 » Wed, Aug 19, 2020, 2:21 PM UTC

jshaqaw wrote: post #38

ed25519FUUU wrote: post #31

Earlier quoted context omitted.

Weird, how did they pay these people without emergency covid funding??

Tax revenues which have been decimated by the crisis. Unlike the Federal government which can effectively borrow/print whatever it needs, states and municipals are limited by the real world and either have balanced budget requirements or de facto requirements imposed by the bond market/fiscal realities. The equation is simple. Tax revenues have plummeted while expenses have risen due to the costs of coping with the c…

Also, they are paying a lot of overtime in health related workers or to make up for workers who test positive and for increased cleaning crews, so not only are the hours going up but they are paying the 1.5x rate more often. Sacramento is also relatively expensive and I assume there are a high number of state employees there since it's the capital.

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

#58

Post by AngrySkillzz » Wed, Aug 19, 2020, 2:21 PM UTC

The price of productive assets goes up as interest rates fall, this is a simple NPV calculation.

Interest rates are low, and have been low in the developed world for a while. The reason for this has nothing to do with central bank conspiracy theories. The neutral rate of interest is determined by productivity growth, profitability of available investments, and how much capital there is that can be invested in them. The best a central bank can do is 1. be good at detecting where this equilibrium is and reacting to it, and 2. move interest rates at the margins to smooth out the business cycle.

Think of it this way. If, in the aggregate, an average business would make a real return of 3% per year, then an interest rate above 3% would discourage all but the best business ideas from being pursued. Likewise a lower rate would encourage investment in worse ideas with lower profit margins. This is one way to think about the "neutral rate of interest." It is determined by exogenous facts about the real economy.

Now, we have fewer "profitable ideas" (and lower productivity growth correspondingly), and significantly more savings due to greying populations (people who are older/will live longer require more savings) and cultural tendencies (e.g. higher savings rates in China, Germany). So the neutral rate falls, and the result of that the price of capital goods rises.

Central banks' hands are effectively forced by this situation. If policy maintained an artificially high interest rate when the neutral rate is lower, economic contraction would ensue disadvantaging all parties.

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

#59

Post by schwartzworld » Wed, Aug 19, 2020, 2:21 PM UTC

beervirus wrote: post #21

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…

> Congress put on bandannas and robbed the tax payers of about $18,000 each. On average, sure. But people who don’t earn much money aren’t going to be responsible for that bill because they pay no (or almost no) income tax.

We've proven that the US can write a check whenever it wants, and yet whenever we talk about helping regular Americans with free college or healthcare or UBI the national conversation is "how are we going to pay for it?" Writing a check to wall street to bolster profits while leaving Americans to mostly fend for themselves is still theft.

And if you are working and don't pay income tax it's because your employer is legally allowed to pay you poverty wages.

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

#60

Post by SketchySeaBeast » Wed, Aug 19, 2020, 2:24 PM UTC

Armisael16 wrote: post #53

SketchySeaBeast wrote: post #39

Earlier quoted context omitted.

The money market is high risk, right? And looking at the high yield savings accounts - based upon a quick google the best option if you're American seems to be 1%?

Money markets are extremely low risk. In the 37 years before 2008 only three money market funds had ever failed to return the full investment (“broke the buck”). You may be thinking of forex trading.

> You may be thinking of forex trading.

Yeah, that would be it.