Why is the stock market rallying when the economy is so bad? • Hacker News Board

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

#441

Post by maest » Sun, May 10, 2020, 11:23 PM UTC

JMTQp8lwXL wrote: post #363

birdyrooster wrote: post #313

Earlier quoted context omitted.

Considering many American workers are in debt with high interest rate products (sub-prime car loans and credit cards), those would first have to pay the interest on their debt on top of the capital gains on the $100 when they sold it (provided they invest wisely). In other words, it makes no sense to invest when the return wont consistently match your debt interest payments.

Depends on the type of debt, which is individual to the consumer. Mortgage, auto, and student loan debt compose 88% of consumer debt. [0] These types of debt typically have low interest rates. Market returns for the past decade have exceeded the interest rates. Paying the minimums, and investing the difference? The consumer would be ahead. 12-15% YoY stock returns compound faster than 4% mortgage debt. [0]: https://w…

You're arguing for taking out loans to invest in the stock market, which sounds irresponsible to me.

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

#442

Post by wbazant » Sun, May 10, 2020, 11:24 PM UTC

ccffpphh wrote: post #413

coliveira wrote: post #394

Earlier quoted context omitted.

Missiles are similar weapons may be useful against other countries (remember Vietnam, however), but they will not stop revolts inside the country itself. What would the US government do if 80% of the city of New York decided to turn against the government? Throw an atomic bomb in the city? Their time may be running out.

What would New York even do? People here don't believe in firearms, let alone violence. In reality the city would starve within a couple weeks due to siege/blockades if it really united and tried to revolt.

Kropotkin's Bread Book is about exactly that! He claims any revolution will be as successful as its ability to feed everyone, and tries to outline a path to it.

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

#443

Post by tinco » Sun, May 10, 2020, 11:25 PM UTC

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.

I think you're overestimating the value of high intelligence. I don't believe we have any accurate means of identifying potent leaders, not even a 10% slice they might belong to.

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

#444

Post by sandworm101 » Sun, May 10, 2020, 11:26 PM UTC

ComputerGuru wrote: post #400

WalterBright wrote: post #393

Earlier quoted context omitted.

The article shows 45% of American households have a pension plan that's invested in stocks.

That’s entirely orthogonal though, isn’t it?

No. It is comparing different things. The percentage of Americans who own stocks is different that the percentage of stocks owned by americans. Say 90% of americans "own some stock" but they are dirt poor. Their share of the total stocks available could well be 1%. The rich 10% then own 99% of the market AND 90% of the population own some stock. One fact does not negate the other.

Remember that the median income in the US is about 30k. If you have any sort of actual pension plan, there is a good chance you are in the top 10% in terms of net worth.

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

#445

Post by amiga_500 » Sun, May 10, 2020, 11:29 PM UTC

WalterBright wrote: post #401

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…

Buying stocks has never been more democratic. Anyone with $100 can buy stocks. No brokerage fees, and fractional shares are now common. We also just passed what in hindsight will likely be seen as a historic buying opportunity.

Inequality is huge, just because you can buy 0.0000001% of IBM doesn't make that fair/democratic.

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

#446

Post by dharma1 » Sun, May 10, 2020, 11:32 PM UTC

ethbro wrote: post #60

nkurz wrote: post #2

https://archive.is/cmMx5 It's a decent article. Here are their 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 Personally, I'm betting we're still headed to a bloodbath, but slowly. This quarter's earnings are expected to be terrible, so this is already priced in. But the market is expecting a recovery…

My $0.02, we're going to see bifurcation that the market hasn't fully priced in. Not a good time to be in broad ETFs. Highly likely: Coronavirus is going to be circulating until the end of 2021 (based on transmissibility & vaccine timeline). We'll have better therapeutics to blunt the symptoms. But steps required to (intermittently) re-suppress transmission (NYC is ~20% exposed? So at minimum 1-2 more spike repeats)…

Great comment. Coming out of this will take until vaccine (1-2 years) unless this turns out to be less severe than we think and people will just ignore it.

Recovery will be highly company specific and overall reduced consumer spending will hurt even those companies who can operate under social distancing.

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

#447

Post by peteretep » Sun, May 10, 2020, 11:33 PM UTC

quietbritishjim wrote: post #338

bobbyi_settv wrote: post #285

Earlier quoted context omitted.

Just because you believe the government won't let the airlines go away doesn't ensure that the bonds are safe. Sometimes keeping a company in business involves a restructuring such that those bonds won't pay out as you're expecting.

Genuine question: if a company didn't pay out on its bond, that's a default; how can it default without going bankrupt?

I believe what you’re missing here is a “Chapter 11 Bankruptcy”, as opposed to a “Chapter 7 Bankruptcy”.

Chapter 11 means the business keeps running, but the owners lose their money, Chapter 7 is what most of the world considers to be a bankruptcy / going bust / liquidation. Uncle Sam probably doesn’t care if Delta does a Chapter 11, as long as the planes keep flying.

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

#448

Post by losvedir » Sun, May 10, 2020, 11:36 PM UTC

Glyptodon wrote: post #435

JMTQp8lwXL wrote: post #273

Earlier quoted context omitted.

If every American worker started buying $100 worth of stock per month, they could start chiseling at that 86% number. Not every worker has the financial means to do so, but many could if they practiced financial constraint (delaying consumption now, in exchange for greater consumption later). To the extent it is feasible, it would be wonderful to see Americans fight back against wealth inequality by buying the owners…

Even if they all did that, they still end up buying after all the really wealthy get in, whether it's investment bankers, venture capital, hedge funds, or whatever else, normal income people just end up buying from the 1% and 0.1% who got in privileged and early. Add on top of all that, think about all the investments with minimums that are thousands of dollars and it's obvious that regular money will always be behin…

No, this is just atrociously wrong. It pains me to see because the post you're responding to about getting everyone to chip in a small amount to investments every month is one of my pet goals that I've helped many friends with.

Everything you've said is wrong. I don't know what you mean by "getting in after all the really wealthy get in"... VCs, IPOs? That's not even close to necessary. Investing in simple index fund ETFs is fine. And "all the investments with minimums in the thousands"? Well... don't buy those! Again, buy simple index fund ETFs. Most brokerages don't even charge a commission on that, so you can easily add small amounts each month.

People just don't seem to know that investing in the stock market is easily done, and so extremely worthwhile. Income inequality being what it is, the wealthy will probably own more of the stock market for a long time (or always), but that 84% could easily come way down if people just knew what to do!

But I feel like your comment is counter-productive fear mongering that will turn off people on the margin, thinking everything is stacked against them, the "good" investment opportunities aren't available, and so they just shouldn't even try.

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

#449

Post by chiefalchemist » Sun, May 10, 2020, 11:37 PM UTC

dharma1 wrote: post #421

hannasanarion wrote: post #254

Earlier quoted context omitted.

But they are now, and that's what matters. When prices fell the first time, it didn't even take a week before the government passed the largest stimulus ever, 80% of which went to corporations. Investors know that the government will do anything to underwrite their risk.

The mandate of the fed is to have maximum employment and price stability. With the impact of social distancing to businesses there was no other alternative to protect employment rather than fed buying securities so the govt has funds for fiscal stimulus to prop up employers that might otherwise go bust (and may still). The stimulus is intended to protect jobs and livelihoods, not to react to movements in the stock ma…

Agreed. The entire exercise has been about mitigating chaos. A freefalling stock market _and_ overwhelmed hospitals would cascade badly. Any lives saved was a byproduct.

For better or worse, agreed or not, the US' gov diverted - for now? - an implosion. The Fed can't eliminate risk. It also can't guarantee future returns.

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

#450

Post by freehunter » Sun, May 10, 2020, 11:37 PM UTC

lotsofpulp wrote: post #345

sidlls wrote: post #295

Earlier quoted context omitted.

That cuts both ways, so to speak. Drones and even more advanced technology can replace guillotines as easily as it can be used to have a smaller police force of the kind you mention. I think some people don't quite understand what people are capable of when they are truly desperate. Right now, in most of the western world, people aren't at that point. But when they get there, billionaires' ability to hide on islands…

Seems very difficult to evade location and transaction tracking, both which governments have very easy access to, but the rank and file do not.

That’s assuming a French Revolution style uprising, which is probably unrealistic. What is very realistic, however, is an increase in “lone wolf” terrorist attacks targeted at rich and/or powerful people. You don’t need a thousand people rolling a guillotine down the street when one person with an off-the-shelf drone could inflict just as much damage. Sure the police would find them quick, but one thing the American military is really bad at is fighting an enemy that doesn’t dress in military gear and shoot back with military weapons in military formation.

We’ve seen it recently, where a single man shut down CNN and I think some other news stations just mailing poorly-made bombs to the media and politicians. We’ve seen it decades ago with Oklahoma City.

Could a Western population stand up against their government in a real fight? No. Could they inflect the same amount of damage without actually having to stand and fight? We’ve seen it before.