Additional Posts in The Work-Life Bowl
Rising Star
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Is this healthy? I find it bit too much salt
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Pro
Who here watches Selling Sunset on Netflix
Chief
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Governor Vs Mayor R&Rs?
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D1 got it. Though the wider economy and the markets are tied together the markets are really a big casino for people who have a lot more money than us plebs. Most normal people who yell about the market being good and the economy being strong will never even be close to having assets to invest or the knowledge to understand it.
Basically, the Fed thinks Congress left them with sufficient discretion in the mid- to large-business lending program that they do not actually need to enforce the restriction on dividends and buy-backs or the requirement for employee retention, so it is entirely possible these companies shell out $464 billion to shareholders, giving those stocks value.
Rising Star
The stock market is not the economy...
Chief
C1 I think what D1 is saying is that the stock market, as it is now, is not a reliable indicator of economic performance. Id narrow that description to an indicator of investor confidence in the future state of the economy. But these days that confidence is shakier and shakier.
Artificially propped up by government action. The Fed’s is performing 250B worth quantitative easing weekly
Rising Star
The Fed can and will do it indefinitely - at least until the dollar is worthless.
Fed printers go brrrrrrrr
The market already expects the staggering unemployment numbers. It's looking forward to 2 years from now where they expect status quo to return. New information needs to come forward that shakes up the current expectations (i.e. new mutation, mortality higher than expected, extended lockdown of more than a year).
Gotcha - I didn’t know the market would be so long term looking! My idea stems from the fact that a lot(don’t know how much) of trading is done in the hopes of making profit in the near term. High frequency trading, day trading etc. Given how stocks swing based on the news cycle, my thought was that this is a pretty large percentage since I can’t imagine someone in it for the long run could be swayed by a slight lowering of quarterly earnings for eg.
Maybe it’s a bit of both? 50% of a stocks value is decided by short term investors and 50% by long term? It’s hard to believe too many investors out there are using Buffet style value based investing.
QE to support trickle down magic
I’m out here supporting big mulch, big stain, big paint, and big sod industries. 😑
Pro
It’s priced in
Hindsight logic.
Chief
Stock market performance =/= economy or average persons wellbeing. Prior to the pandemic the stock market was at record highs, yet 40% of Americans couldn’t afford a $400 emergency.
In essence it boils down to two points. The first is around fed/govt intervention. We’ve taken unprecedented steps as a govt to backstop the economy and unemployment in order to avoid bankrupting companies and individuals in the short term. The second point, from my perspective, plays off this and is the assumption that this is short term. If we can get through this without a major recession, then the long term cash flows of F500 companies are going to be largely unchanged outside of the first 1-2 years. That’s a big “if,” granted.
I’ll also add that the stock market is down ~20% year to date, so while that’s not recession worthy, I certainly wouldn’t call it unphased.
In short -
Pro
Always go up.
Chief
Keep in mind the companies that the stock market represent. It's the like of Walmart, Amazon, Costco, Dominos, Starbucks, etc. Every local pizza joint or restuarant in your neighborhood will fail long before anything happens to Dominos. Every small/medium sized grocery store in the country could go under, but Walmart, Kroger, and Costco will survive. While every small business you know is struggling to keep people on the payroll, Amazon is aggressively trying to hire hundreds of thousands of people.
We're about to entire a world that's dominated by a handful of companies and no one else will be competitive
Quantitative easing bby! As long as the money machine keeps going whirrrrr the market will behave “irrationally”.
Rising Star
S&P is down 13% on the year, higher if you look at the peak. In an efficient market, that's basically the same as expecting a reduction of a year or two worth of cash flow. But the market doesn't react the way theory tells us, because most people don't understand the theory and therefore don't invest rationally.
Expectations play a very large role, not just actual performance
Also stock market is based on future earnings. Would you buy a company that is closed right now knowing their earnings will be YUGE in the future?
“Animal spirits.” It’s a thing. Look it up.