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Why is the stock market rallying when the economy is so bad?

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Re: Why is the stock market rallying when the economy is so bad?

#381

Post by refurb »

mobilefriendly wrote: post #91
kitotik wrote: post #62

Earlier quoted context omitted.

Because many Americans can’t even pay their current bills or save literally a single dollar. So fractional shares are irrelevant unless they are free.

There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.

I know plenty of middle class people who stay away from stocks - they don't understand them and view them as very risky investments.

They stick with bonds and such.

Re: Why is the stock market rallying when the economy is so bad?

#382

Post by kitotik »

tathougies wrote: post #335
mobilefriendly wrote: post #91

Earlier quoted context omitted.

There's a gap between those folks, though, and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing.

> , and the median household which earns $63,000 a year but has almost no savings or stock holdings. The median household wealth is $100,000 and that's almost all housing. Given that stock ownership is about 55% of the public, the median household likely has at least a few shares. https://news.gallup.com/poll/266807/percentage-americans-own...

That includes 401k and IRAs etc. which obviously very few living outside of middle class have.

In addition, stock ownership has been on steady decline for everyone but the upper middle class.

Re: Why is the stock market rallying when the economy is so bad?

#383

Post by jcfrei »

somebodythere wrote: post #331
changchuming wrote: post #87

Earlier quoted context omitted.

Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.

> Unless you institute some kind of universal basic income More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

> More than 100% of pre-crisis income for the service industry is being financed through the expanded unemployment and small business grant programs.

Do you have any sources for that claim?

Re: Why is the stock market rallying when the economy is so bad?

#384

Post by refurb »

closeparen wrote: post #270
Hydraulix989 wrote: post #50

Earlier quoted context omitted.

Why are stocks inaccessible to so many Americans? There are fractional shares, and you do not have to be an accredited investor.

Because the priority order is: a) Consumption spending b) Real estate c) Stocks When middle class people hit diminishing returns on electronics and vacations, they upgrade their houses. Appetite for remodeled kitchens and bigger, nicer, better-located houses is voracious, so relatively few people satisfy it and fall through to stocks. Making sacrifices on housing in favor of your stock portfolio is of course possible…

This is very true! I know plenty of people who when they have extra money, investing or saving is the last things on their mind.

Re: Why is the stock market rallying when the economy is so bad?

#385

Post by _7fvc »

This article lists 5 reasons:

1. Bets on a “V-Shaped” Recovery

2. Market Leaders Keep Rising

3. Corporate-Earnings Expectations Remain High

4. Old Habits Die Hard

5. The Fed’s Backing

The market misses an important point: a solution to the Coronavirus threat. It could be a drug, a vaccine, tracing technology. We don't know. The virus can also go away on its own. The market predicts this threat is somehow going away. But I can't predict.

Re: Why is the stock market rallying when the economy is so bad?

#386

Post by aeturnum »

WalterBright wrote: post #351
magicsmoke wrote: post #9

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…

> the richest 10% of America owns 86% of its stocks I don't buy that, as a much larger percentage of stock ownership is pension plans, where ordinary people indirectly own stock.

The 86% number was (more or less - the article says 84%) supported by the times in 2018. Their analysis includes pension plans.

https://www.nytimes.com/2018/02/08/business/economy/stocks-e...

Re: Why is the stock market rallying when the economy is so bad?

#387

Post by clairity »

wallacoloo wrote: post #350
clairity wrote: post #271

Earlier quoted context omitted.

no one who values companies professionally predicts cash flows more than ~5 years out, certainly not decades, because predictions about economies, governments, societies, and institutions are all salient to those future cash flows and those predictions become rapidly worthless as you look further in the future. what happens in practice is that you take the cash flows of year 5 and you annuitize it into the far future…

> no one who values companies professionally predicts cash flows more than ~5 years out > what happens in practice is that you take the cash flows of year 5 and you annuitize it into the far future with the estimated growth rate, and call it a day. How is that not a prediction?

it's done out of tradition, not prediction.

Re: Why is the stock market rallying when the economy is so bad?

#388

Post by sokoloff »

klipt wrote: post #346
kazen44 wrote: post #320

Earlier quoted context omitted.

what seems very weird to me (as a non US citizen), is that most working class people in the US seem convinced the 'american dream' is synonymous with being a millionare/billionare and introducing legalization to level the playing field of the latter will hurt their own changes at becoming part of the former. It might also be the reason social democratic/socialistic parties never got a foothold in the US post world wa…

Home ownership is a core part of the American dream, and in pricey places like the Bay Area, you pretty much have to be a millionaire to own a house. Thanks to inflation "millionaire" doesn't mean as much as it used to. Billionaires are a completely separate class though.

Exactly. Even setting aside the house prices, if you have exactly a million dollars in your retirement account, you should plan on spending only about $40K-$50K per year from that account. That's hardly a luxurious retirement; yet "you're a millionaire!"

Re: Why is the stock market rallying when the economy is so bad?

#389

Post by kulig »

danieltillett wrote: post #354
lotsofpulp wrote: post #205

Earlier quoted context omitted.

Guillotines might have worked well in the past, but with modern weapons and technology, you can use a much smaller portion of the population to suppress a much larger portion of the population. You can pay 10% of the population well enough that they support the top 0.01%, and the top 10% can pay the next 20% to 30% well enough or provide a sufficient probability to move up (or illusion) that they are incentivized to…

This approach works well particularly well if the masses are decapitate by identifying anyone with high intelligence and “inviting” them into the 10% via education. Angry masses without a leader are not going to do anything.

They will only if they get desperate or frustrated enough. Leaders always emerge.

Re: Why is the stock market rallying when the economy is so bad?

#390

Post by ahoy »

WalterBright wrote: post #351
magicsmoke wrote: post #9

> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…

> the richest 10% of America owns 86% of its stocks I don't buy that, as a much larger percentage of stock ownership is pension plans, where ordinary people indirectly own stock.

You greatly overestimate how many americans have pension plans and underestimate how rich the richest americans are
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