4 ms·

It's pretty insane that the S&P500 is higher than it was during October last year, hell even something like 7% higher than it was last year May. There was a pos

It's pretty insane that the S&P500 is higher than it was during October last year, hell even something like 7% higher than it was last year May. There was a post on reddit joking about a guy going into a coma last year after having purchased a share of an S&P500 ETF, waking up today and hearing the news of a global pandemic, people were told to quarantine at home for more than a month, a quarter million people died, more deaths in the US than 20 years in the Vietnam war, unemployment at 20%. But when he looks at his stock account, it's in the green. It feels like this is trickle-down economics again. Bail-out large companies by issuing cheap money, stock markets stay pumped, big companies don't go bankrupt, and hope employees don't get fired, and give each individual about 1 week of average income in the US as a little boost. Meanwhile, 20% of people have last their jobs, the $1200 hasn't arrived or was already spent.

tartoran 6y ago
I know, this is just terrible. The rich insulated themselves from any risk and in case of calamities like they double up. I don't know what we're on to next.
nickff 6y ago
This could also just be a 'bull-trap', and the major stock indices could collapse soon. There was a major bull-trap at the beginning of the great depression.
- DrAwdeOccarim 6y ago
  I believe it was 6 months long, too...
andysandwich 6y ago
I know this is bad math but just as an estimation: Fed balance sheet increased about $2T, and Congress spent $2.2T so far with more to come. That's at least 20% of GDP ($20T). Optimistic forecast is that the economy shrinks like 30% of GDP, so that's a 10% net reduction in NOMINAL spending/earnings. SPX is down like 15% from it's previous high. The market seems to expect things to return to normal next year, which is probably short-sighted, but it's a market. The real value of any company is down because it's producing less, but the nominal price of the company is inflated by the government spending. So the price of SPX is is not insane (if optimistic), given the government's actions. No comment on whether the actions themselves are sane.
- coryfklein 6y ago
  Exactly. In 12 months from now stocks may even be worth the roughly same dollars they are today, but the surge in money supply means more dollars chasing the same amount of stock anyway. The S&P/Gold Spot charts will be the interesting ones to watch over the next few years. While S&P shows consistent 6-7% returns historically, that's valued against the dollar. When you chart it against gold the returns are closer to 3-4%, and there are periods where S&P goes down in value against gold for years at a time.

tartoran 6y ago

I know, this is just terrible. The rich insulated themselves from any risk and in case of calamities like they double up. I don't know what we're on to next.

nickff 6y ago

This could also just be a 'bull-trap', and the major stock indices could collapse soon. There was a major bull-trap at the beginning of the great depression.

DrAwdeOccarim 6y ago
I believe it was 6 months long, too...

andysandwich 6y ago

I know this is bad math but just as an estimation: Fed balance sheet increased about $2T, and Congress spent $2.2T so far with more to come. That's at least 20% of GDP ($20T). Optimistic forecast is that the economy shrinks like 30% of GDP, so that's a 10% net reduction in NOMINAL spending/earnings. SPX is down like 15% from it's previous high. The market seems to expect things to return to normal next year, which is probably short-sighted, but it's a market. The real value of any company is down because it's producing less, but the nominal price of the company is inflated by the government spending. So the price of SPX is is not insane (if optimistic), given the government's actions. No comment on whether the actions themselves are sane.

coryfklein 6y ago
Exactly. In 12 months from now stocks may even be worth the roughly same dollars they are today, but the surge in money supply means more dollars chasing the same amount of stock anyway. The S&P/Gold Spot charts will be the interesting ones to watch over the next few years. While S&P shows consistent 6-7% returns historically, that's valued against the dollar. When you chart it against gold the returns are closer to 3-4%, and there are periods where S&P goes down in value against gold for years at a time.