7 ms·

And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?

by mLuby 7y ago

seanmcdirmid 7y ago
There is always lots of volatility at a bottom. The stock market thought that the Great Depression was over quickly also. At the end of the day, either the market is right or wrong.
- peteretep 7y ago
  How can the market be wrong?! The market is the market.
  - AnimalMuppet 7y ago
    The market today strongly disagrees with the market yesterday.
    - peteretep 7y ago
      That means the market is volatile, not wrong. For the market to be wrong, there has to be some truth against which the market is being measured, and there is only the market.
  - seanmcdirmid 7y ago
    The market is based on information known by people playing it. That information can be wrong, or at least very inaccurate, meaning the market will be in an incorrect position that will have to be corrected when better information is available. Of course, our information is always imperfect, especially about the future but even about the present, so it is constantly being corrected. So maybe being right or wrong is the wrong way to put it.
  - deleted 7y ago
    [deleted]
lihaciudaniel 7y ago
It is unsure if it's the first and last wave
jonathanjaeger 7y ago
There were some bull markets within the Great Depression, so like then, maybe the green days aren't here forever and we'll test new lows.. but for some reason I feel like it'll be bad but we'll be more resilient than the Great Depression (eternal optimist!).
mdgrech23 7y ago
Give it some time - way to early to say it's recovering. Yes it's gone up, like a lot but that may be temporary.
- mraudiobook_com 7y ago
  This is how this one's going to go down, it's the insanity of runaway inflation. We'll all be living in million dollar homes but won't be able to afford an avacado.
voisin 7y ago
Taking the S&P 500 as an example, it is trading roughly where it was last May, so I guess last May’s optimism was actually “worst crisis since Great Depression” pessimism. /s
pjmorris 7y ago
There's a reason for the term 'dead cat bounce.'
- trhway 7y ago
  especially when it is propelled up by $4T...
  - AnimalMuppet 7y ago
    Dead cat rocket? Sure, it goes up pretty well - until the fuel runs out...
baby 7y ago
The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...
- alephnan 7y ago
  It’s rigged insofar that maybe people have insider information we don’t
  - chroem- 7y ago
    There's no downside risk. The USG and Fed will do everything in their power to keep us in a continuous state of "numbers go up." Borrowed billions of dollars to buy your own stock, and now you're underwater? Don't worry! We'll bail you out.
    - monocasa 7y ago
      They're on the edge of what they can do with that and not kick off an inflationary spiral.
      - nradov 7y ago
        No one knows where the edge is. Deflation might be a bigger concern right now due to accelerating loan defaults.
      - mindslight 7y ago
        "Inflationary spiral" is the explicit policy. The assertions seem to be that stocks must always go up, and housing must always go up. That's inflation. Manufactured goods don't go up as much because they continually cost less to make and distribute, usually through offshoring and consolidation, hollowing out local economies.
        7y ago
icelancer 7y ago
If we are focused on job losses (and this article is), then it's a false comparison, since many of these job losses are temporary. Some amount of the contraction should rebound as the disease abates. It's still a massive problem, but the Fed intervening quickly and the fact that many of these jobs are coming back (plus the healthy unemployment payments/bonuses) mean comparing straight up unemployment claims is disingenuous, and the stock market reflects that. Still the SPY500 is down 500 points, which isn't "recovering" yet.
quickthrowman 7y ago
The market is pricing in a smooth recovery without a second wave of infection. It is not pricing in how much this will affect the poor, due to a cultural and class disconnect. I bet 50% of residential renters don’t pay rent for May. It seems we’re wildly overextended, but I booked a loss on some short-term puts today so maybe my judgement isn’t the best. I’m still holding longer dated puts because I think we go down, the pre-pandemic economy is gone, we don’t know what’s left. Edit: There were large outflows from equity mutual funds and ETFs last week. The most ever.
- AznHisoka 7y ago
  Just hearing Powell, members of the Fed and the talking heads in CNBC makes me think they live in some sort of crazy bubble. To think we can bounce back immediately is absolutely bonkers. Half my tenants can’t pay the rent the next few months, some have lost their jobs, layoffs are now happening in non-consumer industries and software spend is mostly halted. Everyone will be cautious in traveling to public venues, let alone spending a lot on frivolous goods for the rest of the year. There just won’t be a quick bounce back. But I guess if you live in the Hamptons and have a nice comfy job interacting with the rich all day, you probably are unaware of all this..
  - sillyconvalley 7y ago
    They don't think we can bounce back, but they sure as hell WANT us to. Why? The market goes up and they profit. Look at what motivates people and then the things they say start to make a lot more sense.
three_seagrass 7y ago
It hasn't. The finance industry is full of well-wishers and optimistic people right now. My complete outsider and uneducated hypothesis is that the fund managers are still trying to figure out what to do in this unprecedented crisis and are watching each other like lemmings. While millions go without jobs and we head towards an inevitable spike in bad debt. My wife watches CSPAN in the background and they dance around the phrase "depression" by calling it the D-word in their commentary.
cloudking 7y ago
Look at the VIX (volatility index), as long as it remains elevated there is fear in the market that further volatility is expected.
ravenstine 7y ago
The stock market isn't the economy. It's related to the economy, but it's not a good measure of how the economy as whole is doing, nor does it say anything about how well the average person benefits from the economy.
avalys 7y ago
One major difference between the Great Depression and the current situation is that the government has made it very clear that they will do whatever it takes to soften the economic ramifications of the pandemic. A huge contribution to the Great Depression was the government’s deliberate inaction. “Regarding the Great Depression...we did it. We’re very sorry...we won’t do it again.” - Ben Bernanke, 2002 Normally government intervention in an economic crisis is opposed by one of the two political parties, for whatever reason - often a desire to avoid rewarding “bad behavior” that led to the crisis in the first place. In this case, the only bad behavior was on the part of the government and their total failure to plan for this scenario, and so the entire political spectrum is willing to spend money in order to fix it. So I think there is optimism not just that the health consequences may not be as severe as was originally forecast, but that there is a path and political consensus for the government to manage the economic fallout as well.
vkou 7y ago
The printing presses injecting four trillion dollars into it over the past few weeks are to thank for that 'recovery'. The fed is lending money to companies that would otherwise be going bankrupt, and is buying junk bonds from anyone they can. The prior owners of the junk bonds then turn around, and spend that money on buying stocks. It's madness.
lisper 7y ago
Stock prices are being propped up in part by easy credit from the Fed, which is a very dangerous position to be in. If investors get spooked at all, the unwinding of this credit bubble will get very ugly very fast. The fact of the matter is that Covid-19 is causing a substantial real loss of productive capacity, and barring some unforeseen breakthrough in treatment options, this is likely to continue for at least a year, possibly two or more. So I'd be very careful not to take too much comfort in the DJIA chart at the moment.
DennisP 7y ago
Look at the stock market from 1930 to 1932, and you'll see a series of dramatic upswings, even while the overall trend was steep down.[1] Lots of people lost fortunes trying to jump back in when they saw the market "recovering." I'm not making any particular prediction for this time. I'm just saying, don't get overconfident just because it's going up lately. [1] https://www.macrotrends.net/2484/dow-jones-crash-1929-bear-market https://www.macrotrends.net/2484/dow-jones-crash-1929-bear-m...
pmoriarty 7y ago
I'd argue that the market was really slow to crash in the first place. It was obvious for at least a month that the pandemic would have a massive impact on the economy due to China shutting down and the near certainty that it would spread all over the rest of the world and cause massive economic damage and loss of life. Yet the market kept on trucking until it finally crashed. If it had really priced in all that information, it would have crashed way sooner.
senectus1 7y ago
ironically the gains made by globalization has made the world more resilient than in the 1930's
tim333 7y ago
I'm part of that - I was buying stocks a couple of weeks ago after nothing for ages. My hypothesis was largely that things are peaking and at the time I thought it will be over soon. I'm a little less optimistic now. I don't think we have much danger of the main failing of the great depression - a collapse of the money supply because governments wouldn't step in. They seem pretty willing now but the virus itself remains a problem.
DiogenesKynikos 7y ago
Or it's priced in the Federal Reserve buying up trillions of dollars in junk debt: https://www.bloomberg.com/news/articles/2020-04-09/fed-unleashes-fresh-steps-for-as-much-as-2-3-trillion-in-aid https://www.bloomberg.com/news/articles/2020-04-09/fed-unlea....

And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?

by mLuby 7y ago

And yet the stock market is already recovering. I guess "worst crisis since Great Depression" has been priced in?

There is always lots of volatility at a bottom. The stock market thought that the Great Depression was over quickly also. At the end of the day, either the market is right or wrong.

peteretep 7y ago
How can the market be wrong?! The market is the market.
- AnimalMuppet 7y ago
  The market today strongly disagrees with the market yesterday.
  - peteretep 7y ago
    That means the market is volatile, not wrong. For the market to be wrong, there has to be some truth against which the market is being measured, and there is only the market.
- seanmcdirmid 7y ago
  The market is based on information known by people playing it. That information can be wrong, or at least very inaccurate, meaning the market will be in an incorrect position that will have to be corrected when better information is available. Of course, our information is always imperfect, especially about the future but even about the present, so it is constantly being corrected. So maybe being right or wrong is the wrong way to put it.
- deleted 7y ago
  [deleted]

lihaciudaniel 7y ago

It is unsure if it's the first and last wave

jonathanjaeger 7y ago

There were some bull markets within the Great Depression, so like then, maybe the green days aren't here forever and we'll test new lows.. but for some reason I feel like it'll be bad but we'll be more resilient than the Great Depression (eternal optimist!).

mdgrech23 7y ago

Give it some time - way to early to say it's recovering. Yes it's gone up, like a lot but that may be temporary.

mraudiobook_com 7y ago
This is how this one's going to go down, it's the insanity of runaway inflation. We'll all be living in million dollar homes but won't be able to afford an avacado.

voisin 7y ago

Taking the S&P 500 as an example, it is trading roughly where it was last May, so I guess last May’s optimism was actually “worst crisis since Great Depression” pessimism. /s

pjmorris 7y ago

There's a reason for the term 'dead cat bounce.'

trhway 7y ago
especially when it is propelled up by $4T...
- AnimalMuppet 7y ago
  Dead cat rocket? Sure, it goes up pretty well - until the fuel runs out...

baby 7y ago

The increase we’ve seen in the last two weeks make zero sense to me. It’s almost making me lose trust in the market as I feel like it’s rigged. We’re in a complete state of unknown, nobody knows when this will be over, unemployment raises like crazy, the US now realizes that coronavirus is hitting them the hardest...

alephnan 7y ago
It’s rigged insofar that maybe people have insider information we don’t
- chroem- 7y ago
  There's no downside risk. The USG and Fed will do everything in their power to keep us in a continuous state of "numbers go up." Borrowed billions of dollars to buy your own stock, and now you're underwater? Don't worry! We'll bail you out.
  - monocasa 7y ago
    They're on the edge of what they can do with that and not kick off an inflationary spiral.
    - nradov 7y ago
      No one knows where the edge is. Deflation might be a bigger concern right now due to accelerating loan defaults.
    - mindslight 7y ago
      "Inflationary spiral" is the explicit policy. The assertions seem to be that stocks must always go up, and housing must always go up. That's inflation. Manufactured goods don't go up as much because they continually cost less to make and distribute, usually through offshoring and consolidation, hollowing out local economies.
      - 7y ago

icelancer 7y ago

If we are focused on job losses (and this article is), then it's a false comparison, since many of these job losses are temporary. Some amount of the contraction should rebound as the disease abates. It's still a massive problem, but the Fed intervening quickly and the fact that many of these jobs are coming back (plus the healthy unemployment payments/bonuses) mean comparing straight up unemployment claims is disingenuous, and the stock market reflects that. Still the SPY500 is down 500 points, which isn't "recovering" yet.

quickthrowman 7y ago

The market is pricing in a smooth recovery without a second wave of infection. It is not pricing in how much this will affect the poor, due to a cultural and class disconnect. I bet 50% of residential renters don’t pay rent for May. It seems we’re wildly overextended, but I booked a loss on some short-term puts today so maybe my judgement isn’t the best. I’m still holding longer dated puts because I think we go down, the pre-pandemic economy is gone, we don’t know what’s left. Edit: There were large outflows from equity mutual funds and ETFs last week. The most ever.

AznHisoka 7y ago
Just hearing Powell, members of the Fed and the talking heads in CNBC makes me think they live in some sort of crazy bubble. To think we can bounce back immediately is absolutely bonkers. Half my tenants can’t pay the rent the next few months, some have lost their jobs, layoffs are now happening in non-consumer industries and software spend is mostly halted. Everyone will be cautious in traveling to public venues, let alone spending a lot on frivolous goods for the rest of the year. There just won’t be a quick bounce back. But I guess if you live in the Hamptons and have a nice comfy job interacting with the rich all day, you probably are unaware of all this..
- sillyconvalley 7y ago
  They don't think we can bounce back, but they sure as hell WANT us to. Why? The market goes up and they profit. Look at what motivates people and then the things they say start to make a lot more sense.

three_seagrass 7y ago

It hasn't. The finance industry is full of well-wishers and optimistic people right now. My complete outsider and uneducated hypothesis is that the fund managers are still trying to figure out what to do in this unprecedented crisis and are watching each other like lemmings. While millions go without jobs and we head towards an inevitable spike in bad debt. My wife watches CSPAN in the background and they dance around the phrase "depression" by calling it the D-word in their commentary.

cloudking 7y ago

Look at the VIX (volatility index), as long as it remains elevated there is fear in the market that further volatility is expected.

ravenstine 7y ago

The stock market isn't the economy. It's related to the economy, but it's not a good measure of how the economy as whole is doing, nor does it say anything about how well the average person benefits from the economy.

avalys 7y ago

One major difference between the Great Depression and the current situation is that the government has made it very clear that they will do whatever it takes to soften the economic ramifications of the pandemic. A huge contribution to the Great Depression was the government’s deliberate inaction. “Regarding the Great Depression...we did it. We’re very sorry...we won’t do it again.” - Ben Bernanke, 2002 Normally government intervention in an economic crisis is opposed by one of the two political parties, for whatever reason - often a desire to avoid rewarding “bad behavior” that led to the crisis in the first place. In this case, the only bad behavior was on the part of the government and their total failure to plan for this scenario, and so the entire political spectrum is willing to spend money in order to fix it. So I think there is optimism not just that the health consequences may not be as severe as was originally forecast, but that there is a path and political consensus for the government to manage the economic fallout as well.

vkou 7y ago

The printing presses injecting four trillion dollars into it over the past few weeks are to thank for that 'recovery'. The fed is lending money to companies that would otherwise be going bankrupt, and is buying junk bonds from anyone they can. The prior owners of the junk bonds then turn around, and spend that money on buying stocks. It's madness.

lisper 7y ago

Stock prices are being propped up in part by easy credit from the Fed, which is a very dangerous position to be in. If investors get spooked at all, the unwinding of this credit bubble will get very ugly very fast. The fact of the matter is that Covid-19 is causing a substantial real loss of productive capacity, and barring some unforeseen breakthrough in treatment options, this is likely to continue for at least a year, possibly two or more. So I'd be very careful not to take too much comfort in the DJIA chart at the moment.

DennisP 7y ago

Look at the stock market from 1930 to 1932, and you'll see a series of dramatic upswings, even while the overall trend was steep down.[1] Lots of people lost fortunes trying to jump back in when they saw the market "recovering." I'm not making any particular prediction for this time. I'm just saying, don't get overconfident just because it's going up lately. [1] https://www.macrotrends.net/2484/dow-jones-crash-1929-bear-market https://www.macrotrends.net/2484/dow-jones-crash-1929-bear-m...

pmoriarty 7y ago

I'd argue that the market was really slow to crash in the first place. It was obvious for at least a month that the pandemic would have a massive impact on the economy due to China shutting down and the near certainty that it would spread all over the rest of the world and cause massive economic damage and loss of life. Yet the market kept on trucking until it finally crashed. If it had really priced in all that information, it would have crashed way sooner.

senectus1 7y ago

ironically the gains made by globalization has made the world more resilient than in the 1930's

tim333 7y ago

I'm part of that - I was buying stocks a couple of weeks ago after nothing for ages. My hypothesis was largely that things are peaking and at the time I thought it will be over soon. I'm a little less optimistic now. I don't think we have much danger of the main failing of the great depression - a collapse of the money supply because governments wouldn't step in. They seem pretty willing now but the virus itself remains a problem.

DiogenesKynikos 7y ago

Or it's priced in the Federal Reserve buying up trillions of dollars in junk debt: https://www.bloomberg.com/news/articles/2020-04-09/fed-unleashes-fresh-steps-for-as-much-as-2-3-trillion-in-aid https://www.bloomberg.com/news/articles/2020-04-09/fed-unlea....