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How Sick Is the Stock Market?
- venomsnake 11y agoWhich is sad. I really want to see the global economy devastated. It will be quite fun.
- qrendel 11y agoHope this is sarcasm. No one really wins from a recession. Sure you may make some money if you go short at the right time, but it's still better to have moderate wealth in a rich world than be among the richest in a poor one.
- jazzyk 11y agoPeriodic corrections/recessions are a necessary and healthy part of capitalism. Unfortunately, stock markets (and other asset classes) have been vigorously propped up by central banks in recent years (especially so after 2008). Market corrections (and recessions) separate the good from the bad. Right now, there are many banks/companies which should not be in business at all. And they lock up resources which could be used elsewhere, and more efficiently.
- venomsnake 11y agoNot at all - the only way to get to the top of the social ladder is during times of great stress on the system. As a person with no family I can only win. There are no downsides for me. And it is quite fun to see people losing money and fortunes. The look in their eyes when they realize how fragile their world has actually been ...
- happyscrappy 11y agoYour cup may be full now but in the end it will be empty, and you will be taken care of by good people who have no idea you were such an ass.
- brianwawok 11y agopeople that have a lot of cash to buy in can win from a recession.
- aianus 11y ago> it's still better to have moderate wealth in a rich world than be among the richest in a poor one. Source? I'm pretty sure the latter makes you much happier.
- billpg 11y agoWhat would spend your money on?
- aianus 11y agoBribing politicians and law enforcement so I can do what I want, growing my businesses, women. You don't even have to spend it, really. Just knowing you're richer than those around you is enough to make you confident and happy: http://content.time.com/time/health/article/0,8599,1974718,00.html http://content.time.com/time/health/article/0,8599,1974718,0...
- gchokov 11y agoDevastated means you'll run with a machine gun in some mountain and protecting your family. Do you realize this, teen?
- venomsnake 11y agoI lived trough the fall of the Eastern bloc. It was a time of great opportunity there. I want one now too now when I am at proper age to take advantage of similar effects. There was no need for hiding in mountains.
- pjc50 11y agoI assume "take advantage of similar effects" means loot your neighbours?
- venomsnake 11y agoThere was no looting of the neighbors. There was some racketeering though. It was mostly redistribution of the previously state owned enterprises.
- jacquesm 11y agoAnd also sometimes the little guys getting a nice revenge on the banks. Case in point: friend bought a house at a relatively high price + mortgage, then hyperinflation happened, said friend paid off the house with one month's worth of salary.
- aianus 11y agoMy dad did the same. But they didn't really get one over on the banks. For every such mortgage there were 100 people who lost all of their liquid savings. The bankers came out just fine on the other end.
- outside1234 11y agoFYI: the banks also borrow money usually, at low rates (see the amount of interest you are getting on your money at your bank), so their real business is the delta between these lower rates and the rates you pay for the mortgage. so they made money in this transaction as well. its the entity at the top of the debt pyramid that lost money. it was probably the depositors in your case.
- kjdal2001 11y agoThis isn't the place for trolling. From the guidelines: "Be civil. Don't say things you wouldn't say in a face-to-face conversation. Avoid gratuitous negativity." Expressing joy over the suffering of others isn't civil. Lets not turn this into reddit.
- venomsnake 11y agoBut I would also say that in face to face conversation. That is not trolling - I love when markets crash. It was fun during the dot com bust, during worldcom and enron and during 2008 crash. Then watching people do the same mistakes again ...
- gknoy 11y agoSaying that in face-to-face conversation does not make it civil.
- Aqueous 11y ago"Those with antisocial personality disorder tend to antagonize, manipulate or treat others either harshly or with callous indifference." http://www.mayoclinic.org/diseases-conditions/antisocial-personality-disorder/basics/definition/con-20027920 http://www.mayoclinic.org/diseases-conditions/antisocial-per...
- dang 11y agoPlease don't do this here. This subthread detached from https://news.ycombinator.com/item?id=10115439 https://news.ycombinator.com/item?id=10115439 and marked off-topic.
- lesingerouge 11y agoTLDR: not very sick, just very short-sighted, panicky and greedy.
- draugadrotten 11y agoGreed is good as Gordon Gecko put it, and science concurs. http://time.com/41680/greed-is-good-science-proves/ http://time.com/41680/greed-is-good-science-proves/
- Intermernet 11y agoThat Time article is linked on a bunch of fora, but none of them have a link (or reference) to the actual study. Any idea if it's available? I suspect that Time's treatment of it is not as nuanced as the original authors would have liked, and even then, the Time article doesn't actually concur that "Greed is good". They just have that phrase in the headline.
- rgbrenner 11y agoI think this is the paper: http://www.nature.com/ncomms/2014/140326/ncomms4526/full/ncomms4526.html http://www.nature.com/ncomms/2014/140326/ncomms4526/full/nco...
- Intermernet 11y agoThanks, much obliged. I wish articles would provide proper references!
- mikeash 11y agoIf they did that, then more people would read the actual study and realize that the journalistic summary is completely full of it. Can't have that.
- crpatino 11y agoNo, that's what the title says, but it is click bait. What the actual article says is that in social groups with well defined hierarchies, higher ranking members tend to contribute more than average to the common good (though this might be biased due to their role in defense against external threats). This old fashioned notion that the rich are expected to hit above their weight level is called Noblesse Obligue, and it's almost the exact opposite of Gecko's doctrine. What reasons there might be to have come up with such a title/conclusion given the information available? I can only think of one: Assholeness apologetics.
- swagatatay 11y agocan someone explain this article? made no sense to me.
- fnordsensei 11y agoThis is likely to be a small-ish market correction. Short term, it might look like a big dip, but taking into account the massive growth the last few decades, it's not likely to be much.
- ycosynot 11y agoIt says sometimes it goes up, sometimes it goes down, but mostly it seems to go up.
- tim333 11y agoI'm not surprised it made no sense. It's from a school of writing that uses poorly defined dramatic terms like blood-letting and secular bull to make it sound like the author knows something. If you read someone like Buffett who actually makes money trading stocks you get a completely different take and vocabulary.
- amyjess 11y ago"Secular bull market" is a real term with a well-established meaning: https://en.wikipedia.org/wiki/Market_trend#Secular_trends https://en.wikipedia.org/wiki/Market_trend#Secular_trends
- sillygeese 11y agoBasically it's just propaganda. They're using complicated econospeak trying to confuse you into thinking that everything is alright. In reality, nothing has been fixed since 2008, and Western economies are in shambles behind the scenes. It's a confidence game. At this point, investors are close to losing confidence, and when they do, a big crash will happen.
- dsfsdfd 11y agoLook at the ftse 100 over a 30 year time frame and tell me you can't make a guess as to what's coming. Go here and click on 'all' in the zoom menu https://www.google.com/finance?q=INDEXFTSE%3AUKX&ei=qlLcVZHiI4KUUKLsltgO https://www.google.com/finance?q=INDEXFTSE%3AUKX&ei=qlLcVZHi...
- switch007 11y agoBut why? Because of similar events/conditions? Because the two busts were roughly 6 years apart and it's 7 years since the last?
- dsfsdfd 11y agoBecause it looks to me like the stock market has a tendency to follow an exponential curve - or at least a high degree polynomial. I also believe that to a certain extent the stock market is bound to the real world and in the real world growth is currently not following an exponential/high degree polynomial curve. The tension between the two is causing an oscillation to develop which overrides the tendency for high disorder in price movements. In short I think that over long time periods stock markets show some degree of predictability. They are not perfectly disordered because the they are bound to systems operating in the real physical world which display predictable behaviour.
- Aqueous 11y agoUnfortunately the system operating in the real physical world is based around human behavior, which, despite probably following some heretofore undiscovered law or algorithm, is very difficult to predict.
- maaku 11y agoDepends on the granularity. Total stock market return is a measure of the intersection of time valuation with productivity growth, which has remained consistently exponential for the entire archeological record.
- 11y ago
- codingdave 11y agoThe younger you are, the less it all matters, as the trend over a decade or more will always be "up". (If not we have bigger problems.) So if you don't plan on retiring off your investments in the next 10 years, just enjoy the ride. If you do want your money in the next few years, it shouldn't be in stocks.
- dharbin 11y agoSo what you're saying is that past performance is indicative of future results...
- outside1234 11y agoover a long enough time period? yes.
- knodi123 11y agoThe stock market is less than 200 years old. Let's not make any bold predictions about unbreakable trends when we're talking about time periods up to 25% of the age of the market itself. After all, at one time the conventional wisdom was "No football team who plays their home games in a domed stadium will ever win the superbowl." And there were decades of evidence to support that statistical fact!
- freehunter 11y agoYes but that fact doesn't have any scientific basis, it's just pure coincidence. There's no reason why it didn't happen other than the fact that it didn't. The stock market on the other hand, indicates the overall health of the country. It's not a coincidence that it keeps going up as the wealth of the nation goes up. Recently in baseball, all 30 teams played on the same day, and all 15 home teams won on the same day. That hasn't ever happened before. Why hasn't it happened before? Not because of how unlikely it is. It hadn't happened before because it hadn't happened before. Because it happened now doesn't mean it's more or less likely to happen in the future. It doesn't mean baseball is changing. It doesn't mean anything. But a long term downward trend in the stock market? Means death for a nation's economy. Even a short term downward trend does significant damage. Football and the stock market are not as closely related as you may think.
- debacle 11y agoThe stock market is fine. It's probably the healthiest aspect of the global economy right now. All of the bad things about the stock market are because it's the only safe place for investment right now.
- dismal2 11y agoStock market is probably least safe place for investment right now. Why do you think real estate has gone crazy in the past 5 years? Lots of people that I know who manage their money are almost entirely in cash and many of them avoided the carnage last week.
- debacle 11y agoIt costs too much to hold cash.
- zardo 11y agoMost people who pull money in and out of the market fail to outperform the S&P500 in the long term.
- sytelus 11y agoReal estate and stock market performance are actually very co-related but with some delay. If one gets in downturn, other would follow sooner or later. The difference is that real estate can absorb more shocks and it requires consistent long term downturn in stocks before real estate reacts. Typically real estate is not a favorable way to invest money except when you are very long term. It has huge liquidity problem and it usually has lower returns due to maintenance, property taxes, rental churn, natural disasters and property depreciation costs due to aging. For example, if you had invested in real estate in 2007 you would not have broke even until late 2014 (that's 7 years of wait to get 0% profit). There are obviously exceptions, usually in urban area where no new constructions will occur. Also if you are living in the property then you can subtract rental cost that would put you ahead in ~20 year cycle. But if you are investing heavily in real estate as investment you are gambling in even bigger casino than stock market. I would fully expect real estate to go down in drain within next 6 months if stock market doesn't improve. This might cause all the private funds that had been buying up tons of properties to take a flight. This would accelerate the downturn in real estate more severely. Lot of people might get badly burned by this but this time it would be mostly private investors as opposed to people who got subprime.
- limaoscarjuliet 11y agoSay GDP in US is growth 2%, inflation is 3%, and stock market is up 10% a year - where do the extra 5% come from?
- skylan_q 11y agoSimple. Inflation is 8%. :)
- tedunangst 11y agoAnticipation of future growth. Stock price is net present value of sum of future income.
- ant6n 11y agoconcentration of wealth
- ant6n 11y agook let me rephrase - markets represent the economic winners
- parenthesis 11y agoNot all US economic activity is encompassed by US listed companies; not all sales by US listed companies are in the US; the stock market can go up due to multiple expansion as well as by increased earnings.
- rmah 11y agoThe major market indexes are not representative of the overall economy. They are representative of the economic winners. First, public companies tend to be very large. They are the companies that grew at the expense of their competitors. Second, the companies in the major indexes tend to be the winner among public companies. Third, a lot of these larger companies expand overseas, sometimes in higher growth emerging economies. Finally, IIRC, the long-term growth rate of the S&P 500 is 7% or 8% per year. That's about a 2% to 3% premium over GDP growth + inflation. That premium is the "winner" premium.
- 11y ago
- oldpond 11y agoThat chart looks like it's leveling off. They don't say anything about that, and I believe that is the most significant attribute of that chart. They are, of course, trying to suggest behind their techno-babble that the market will keep going up. No surprise they dragged this little gem out to counteract the fear created in the recent correction. A much more interesting analysis could be had from speculating on why it's leveling off. What happens when there's no more debt to buy?
- billpg 11y ago"Playing the stock market is easy. Buy something at random and if it goes up, sell and take the credit. If it goes down, say its a long term investment and hide in the cupboard." -- Milton Jones.
- arca_vorago 11y agoWhat gets me the most is how much everyone buys into the massive ponzi scheme that is the stock market. Look, first you have to realize that most people and entities on the market are only a small blip on the graph compared to the big ones. The central banks, the banks that make up the central banks, and the various offshoot parasitical entities such as financial manipulation agencies and suprainternational corporations, are the real players in the market. Sure, there are ups and downs, and a decent broker here or an ok hedge fund there may get you a reasonable return during the good years. That's not the point though. The real point is that it is a massive ponzi scheme that feeds off of the misery and ineptness of the small players, not only that, but the market itself is manipulated as a way to gain much more substantial power in areas such as actual land ownership and commodities. It's a cycle. Eventually, a few big players who know they have the ability to move entire markets, on a downturn cut losses and on the upturn amplify gains, do so, and then use their gains to grab exponentially more wealth, and power, enabling them to do it even better next time. It's generally the classic Rothschild-Waterloo move. Nathan Rothschild heard back about Waterloo before even the British gov, caused a panic based off his reputation to get the market to plummet, and then turned around and bought it all up for pennies on the dollar. Market manipulation based on secret knowledge the rest of the market didn't have. Then of course my other favourite example is the crash of 1907, (also a perfect example of the power elite rewriting history) The way they teach it is that United Copper was the instigator of the crash and JP Morgan was the generous saviour of the day, but the reality is much different. The panic really didn't kick off until Knickerbocker crumpled... and right as it started to, Morgan was the one who removed lines of credit to Knickerbocker in the first place! They were competitors, and Morgan got rid of them. Then the Treasury intervened and suspended obligatory payments in the large Chicago and NY banks and that was that, the crash was inevitable at that point. Despite that fact, the crash was used to claim that a lack of a central bank was the problem (it wasn't), the National Monetary Commission was formed, which then toured Europe for insight into "proper banking methods". They came back, had the Jekyll island meeting, and shortly after proposed the Aldrich plan, which got shot down because the public was up in arms against the "money trusts". The big bankers then pushed the Aldrich plan with a new name, aka the Federal Reserve Act, financed some groups to tout how much it was needed while pretending to hate it, and then got it passed on December 23 and signed by Woodrow Wilson the same day! I could go on about the reasons why I think it was one of the worst things to ever have happened to the US, especially as it has spectacularly failed in its charge to prevent other crashes/panics, but what are the solutions? I think we need to nationalize the federal reserve, and put control of monetary policy back under the congress where it constitutionally belongs. Until then, we will continue to see Libor scandals, bailouts, hidden bailouts, crashes and fluctuations. We must address the fundamental problems of our economy before we can even begin to address the ponzi scheme that is the stock market. edit: To keep it more on topic, I would be interested in seeing papers on the relationship between the Fed and the stock market, which I guess would be centred around interests rates, the federal funds rate, and dollar exchange rates on foreign markets.