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?

#61

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

evancox100 wrote: post #24

Just from a very theoretical level, low interest rates means the net present value (NPV) of companies, ie their stock prices, are weighted more heavily to future earnings and not just this year's earnings. So if the market is pricing in some return to normalcy, even if it's a year or two out, you wouldn't expect to see much of a hit. Assuming companies can get from here to there without going bankrupt, something the…

This is true but incomplete. The S&P500 is basically at the same level as mid-February, and even if expected earnings for, say, mid-2021 forward are the same as they were in February, the missing earnings between February 2020 and mid-2021 should be reflected in prices.

What's missing is that a decrease in interest rates also directly results in an increase in the NPV of future distributed earnings. That increase seems to have offset the decrease in the expected nominal (undiscounted) value of earnings. But this also makes for lower expected returns in the future: In principle, if interest rates and expected earnings stay the same, the unwinding of that discounting is what drives equity returns.

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

#62

Post by zie » Wed, Aug 19, 2020, 2:26 PM UTC

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.

Paying off debt is absolutely the right move. It gets you a guaranteed return of whatever your APR is.

Debt is a negative bond, while bonds are currently paying around 0%, while terrible, is still way better than a negative #.

After your debt is paid off, then buy TSM(total Stock Market) index funds. I recently came across an example here of what a TSM index fund can do for one's financial life: https://deepnote.com/project/b7be8d06-b84c-4178-b51a-688bef9...

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

#63

Post by mortehu » Wed, Aug 19, 2020, 2:27 PM UTC

the-dude wrote: post #36

jshaqaw wrote: post #34

The bull case is that by mid-1Q we have a vaccine and the crisis is over. Government fiscal and monetary keeps the economy on life support until that happens. If you value a business bottom up and you think 2021/2022 sort of revert back to 2019 then by now in 2020 you are basing your valuations on those numbers and decreasing the equity value where necessary for businesses that took on debt to get through 2020. The F…

AIDS never got a vaccine, SARS and MERS neither.

HIV doesn't cause an effective immune response in the first place, and there's no way to verify that a SARS or MERS vaccine works, because both the intervention and control groups will get zero infections.

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

#64

Post by ghaff » Wed, Aug 19, 2020, 2:33 PM UTC

throwaway_USD wrote: post #51

jshaqaw wrote: post #20

Earlier quoted context omitted.

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 t…

Why do you think remote teaching takes markedly fewer people?

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

#65

Post by giantg2 » Wed, Aug 19, 2020, 2:34 PM UTC

throwaway_USD wrote: post #51

jshaqaw wrote: post #20

Earlier quoted context omitted.

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 t…

It should be interesting.

In a lot of states, it's not legal to leave your kids unsupervised depending on their age. I would guess that if they laid off teachers (which I think is unlikely on a massive scale due to them facilitating the online classes), then those laid off teachers might be hired as tutors or baby sitters.

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

#66

Post by watertom » Wed, Aug 19, 2020, 2:34 PM UTC

Remember the stock market has always been a game, it's never mirrored reality.

I'd say that the institutions that own the majority of stocks, colluded and just decided to sit tight.

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

#67

Post by [deleted] » Wed, Aug 19, 2020, 2:38 PM UTC

the-dude wrote: post #36

jshaqaw wrote: post #34

The bull case is that by mid-1Q we have a vaccine and the crisis is over. Government fiscal and monetary keeps the economy on life support until that happens. If you value a business bottom up and you think 2021/2022 sort of revert back to 2019 then by now in 2020 you are basing your valuations on those numbers and decreasing the equity value where necessary for businesses that took on debt to get through 2020. The F…

AIDS never got a vaccine, SARS and MERS neither.

[deleted]

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

#68

Post by giantg2 » Wed, Aug 19, 2020, 2:41 PM UTC

ghaff wrote: post #52

giantg2 wrote: post #41

Earlier quoted context omitted.

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 th…

I guess I should add that the market has been hot for the past few years and hasn't slowed down. I think the bigger threat to property values will be if interest rates rise significantly. Barring a complete economic collapse, I think raw land or residential rentals should be fine, especially if we see inflation from the current monetary policy.

Personally, I would never buy real estate in a big city. I might be biased since the ones around here are the likes of Trenton, Philadelphia, and Baltimore. City services have been in shambles in these cities for a long time. I don't even like to visit them.

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

#69

Post by jshaqaw » Wed, Aug 19, 2020, 2:44 PM UTC

throwaway_USD wrote: post #51

jshaqaw wrote: post #20

Earlier quoted context omitted.

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 t…

I'm not so sure of this. First of all, remote learning takes just as many teachers as in-person learning unless the education plan is just "watch Khan academy and check in with us in a year." In fact under the hybrid models being proposed in areas like NYC it will take more teachers as the teacher doing in-class learning cannot simultaneously handle remote instruction. There are some decent ed-tech products out there but they can't put education on autopilot.

Second, even if you had the technology to automate remote learning during the crisis, are you going to fire all your teachers only to rehire them in Spring/Summer? No I don't have a crystal ball on the future but I'd be surprised if by Spring we didn't have some form of viable if not 100% effective vaccine. We won't be locked inside forever.

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

#70

Post by GrinningFool » Wed, Aug 19, 2020, 2:44 PM UTC

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…

> Easy Congress put on bandannas and robbed the tax payers of about $18,000 each.

I think you're under the mistaken impression that the debt incurred by the aid packages will somehow get repaid.