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Interest rates are negative. This causes people to chase and a big factor in this bubble. Companies are borrowing billions for free to do stock buybacks and kee

Interest rates are negative. This causes people to chase and a big factor in this bubble. Companies are borrowing billions for free to do stock buybacks and keep the price going straight up. Nothing lasts forever. When is the big question.

echelon 7y ago
Are people trying to get in and out before the crash to make a quick buck, or are they long and hope to buy at a position cheaper than hypothetical post-recovery prices?
- jliptzin 7y ago
  Time not in the market is more expensive than timing the market.
- Balgair 7y ago
  If r/wallstreetbets is any indicator, they have no plan whatsoever and are total idiots. Given Hanlon's Razor, 9/10 people on the market are similar.
  - earenndil 7y ago
    /r/wallstreetbets is a joke...
    - Balgair 7y ago
      It seems even the mods there aren't so sure everyone knows that: https://old.reddit.com/r/wallstreetbets/comments/f4a5kp/how_to_spot_a_market_bubble/ https://old.reddit.com/r/wallstreetbets/comments/f4a5kp/how_...
- totalZero 7y ago
  I think it's both. This rally has made people think that the market will outperform in the long run, but even those who believe we're in a bubble have some confidence that we haven't gone entirely euphoric yet. I personally believe we have gotten to the brink of chaos. Foxconn has major issues getting employees back to work, and Apple has shut down stores in China, but AAPL stock is up. AMD is taking market share from Intel, but INTC rallied almost 10% on earnings. Iran launched missiles at a couple of bases housing Americans, and the market rallied the next day. Boeing stock is trading more than double where it was when the 737 Max 8 took its maiden flight. Everyone mentions in passing that equity values are inflated but nobody seems to give a damn. Maybe people have gotten burned so many times fading the rally during the past three years that they've just given up on trying to call the top. My money says it's all going to come crashing down eventually. Markets can remain irrational longer than impatient traders can remain solvent, but they have a way of normalizing sooner or later.
  - snarf21 7y ago
    I agree completely. The Fed also can't keep QE programs forever. I think if the Democrats win in the fall, it could be a major trigger. There is no reason to think they won't intend to roll back the tax cuts and push for anti-trust against most FAANG seems likely too. Given how FAANG dominates the S&P, it could spiral quickly. The only question is when and how bad will it be. I think we need a real down cycle because just turning down the burner temporarily means the pop will be even worse.
totalZero 7y ago
Buybacks don't inflate the market cap, in theory. What does happen, however, is that many modern buyback deals include a bid that gets more aggressive as the stock trades down. So in a selloff, the buyback actually supports the stock more than in a rally. This reduces downside volatility and prevents panic. The debt problem is a huge issue, but with interest rates as low as they are, it's not entirely crazy to say "we think we will return more in capital gains from buying our own stock than we will be charged in interest for the loan to do so."

echelon 7y ago

Are people trying to get in and out before the crash to make a quick buck, or are they long and hope to buy at a position cheaper than hypothetical post-recovery prices?

jliptzin 7y ago
Time not in the market is more expensive than timing the market.
Balgair 7y ago
If r/wallstreetbets is any indicator, they have no plan whatsoever and are total idiots. Given Hanlon's Razor, 9/10 people on the market are similar.
- earenndil 7y ago
  /r/wallstreetbets is a joke...
  - Balgair 7y ago
    It seems even the mods there aren't so sure everyone knows that: https://old.reddit.com/r/wallstreetbets/comments/f4a5kp/how_to_spot_a_market_bubble/ https://old.reddit.com/r/wallstreetbets/comments/f4a5kp/how_...
totalZero 7y ago
I think it's both. This rally has made people think that the market will outperform in the long run, but even those who believe we're in a bubble have some confidence that we haven't gone entirely euphoric yet. I personally believe we have gotten to the brink of chaos. Foxconn has major issues getting employees back to work, and Apple has shut down stores in China, but AAPL stock is up. AMD is taking market share from Intel, but INTC rallied almost 10% on earnings. Iran launched missiles at a couple of bases housing Americans, and the market rallied the next day. Boeing stock is trading more than double where it was when the 737 Max 8 took its maiden flight. Everyone mentions in passing that equity values are inflated but nobody seems to give a damn. Maybe people have gotten burned so many times fading the rally during the past three years that they've just given up on trying to call the top. My money says it's all going to come crashing down eventually. Markets can remain irrational longer than impatient traders can remain solvent, but they have a way of normalizing sooner or later.
- snarf21 7y ago
  I agree completely. The Fed also can't keep QE programs forever. I think if the Democrats win in the fall, it could be a major trigger. There is no reason to think they won't intend to roll back the tax cuts and push for anti-trust against most FAANG seems likely too. Given how FAANG dominates the S&P, it could spiral quickly. The only question is when and how bad will it be. I think we need a real down cycle because just turning down the burner temporarily means the pop will be even worse.

totalZero 7y ago

Buybacks don't inflate the market cap, in theory. What does happen, however, is that many modern buyback deals include a bid that gets more aggressive as the stock trades down. So in a selloff, the buyback actually supports the stock more than in a rally. This reduces downside volatility and prevents panic. The debt problem is a huge issue, but with interest rates as low as they are, it's not entirely crazy to say "we think we will return more in capital gains from buying our own stock than we will be charged in interest for the loan to do so."