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I think you are expressing the problem. The market doesn’t reflect economic reality but instead there are a lot of people who need the markets to stay up so the

I think you are expressing the problem. The market doesn’t reflect economic reality but instead there are a lot of people who need the markets to stay up so their future is secure.

nickff 6y ago
We are all dependent on a variety of complex systems to maintain our standard of living; the stock market is just one of those systems, and it is one of the most highly-visible, and widely reported.
lotsofpulp 6y ago
How is that not reality?
- Ididntdothis 6y ago
  For most people reality is to have a secure job and income. The stock market doesn’t reflect that reality. The fact that it’s going up helps only a minority of the people.
  - lotsofpulp 6y ago
    Yes, but a large enough segment of voters demand their asset prices keep rising, so that’s the reality of what the government will do. Also, the governments themselves are so deeply invested in rising asset prices that their budgets will blow up due to not having money for their defined benefit pension promises.
    - Ididntdothis 6y ago
      Exactly. The market reflects the needs of the participants and gets manipulated that way. It’s not a fact based assessment of economic health.
      - lotsofpulp 6y ago
        Yes, the market is asset prices, so it's only going to reflect the reality of asset prices. Unfortunately, statistics such as how many children get nutritional food or the number of hours parents get to spend with their children or how many families get to eat dinner together aren't optimized for.
  - kansface 6y ago
    Cities and States rely on the market for their pension funds. CA has ~$2 trillion in underfunded obligations ($83K per household)[1]. If the market doesn't magically make up the difference, the state will in the form of new taxes, budget cuts, and restructuring - or it can just go into a debt spiral like Illinois and default in 30 years. Universities rely on the market for their endowments ($500 billionish). When the market goes down, tuition goes up. ~60 million Americans have a 401K worth about $6 trillion. Many of those people are approaching retirement or have already retired. > The fact that it’s going up helps only a minority of the people. You may not be directly helped, but you will definitely feel the pain (eventually) when it goes down. 1. https://us.pensiontracker.org/stateSummary.php?idcode=06 https://us.pensiontracker.org/stateSummary.php?idcode=06
    - deleted 6y ago
      [deleted]
    - lotsofpulp 6y ago
      >You may not be directly helped, but you will definitely feel the pain (eventually) when it goes down. Inflating assets by printing dollars greatly hurts the lower socioeconomic classes by devaluing the only thing they have which is dollars.
- hckr_news 6y ago
  The stock market is not the economy. Jobs market and employment numbers are a better indicator. If the common citizen is unemployed, they won’t have money to spend, business will go bust, and it just makes its way up the chain bringing down the whole system.
- bawana 6y ago
  The performance of financial markets represents an abstract value based on speculation. Stock prices derive from demand that buyers have for those equities. The basis of stock price from the fundamental performance of the underlying company is becoming dwarfed by the belief that the shares have intrinsic value.
trcollinson 6y ago
I am not sure if I agree or disagree but I like where you're going. What is economic reality? That's such a tough definition. A pessimistic view of the economy would say it is horrible because we now have a 14.7% unemployment rate and this is a record. An optimistic view is in an unprecedented time we have a 85.3% employment rate. So, what is an economic reality? One thing I do agree on, the market needs to stay up so as to secure the future of many.
- pbourke 6y ago
  > What is economic reality? Employment and GDP contracting at historic rates. A pandemic that is not close to being over. > One thing I do agree on, the market needs to stay up so as to secure the future of many. So, this is a new thing in the world. It used to be that markets were thought of as a fair playing field* on which price discovery and capital allocation happens. Sometimes markets would go down - a lot - and that was okay. For most people, the market and the economy are separate. The market could crash - as it did in Oct 1987 - without that spilling over too much into the economy at large. Certainly when the market skyrockets the wealth of households below p90 are not dramatically affected. So now, what are markets? Not a fair playing field for price discovery and capital allocation, but something else. And if they're something else, how should we view the long-term prospects for markets to really do anything meaningful at all? Are they just going to keep going up forever, entirely divorced from the performance of the businesses that comprise them? Seems like we're steaming for the icebergs if that is the way forward. * = yes, I know they were never truly fair.
  - trcollinson 6y ago
    > Employment and GDP contracting at historic rates. A pandemic that is not close to being over. I think you've made my point, this is a short term reality, and a pessimistic one. We don't have a model for the long term economic reality of this situation. We only have speculation and guessing. So we have a short term economic reality but nothing more. To say that the US stock market hasn't historically effected the economy at large seems to forget the Great Depression. I believe it is taken as economic fact that the Great Depression started with the crash of the stock market in 1929. There was quite a bit of speculation and the market went up and down all over the place, but finally settled with a huge amount of unemployment and a massive reduction in GDP. We have put into place numerous measures to make sure that doesn't happen again, and we are using them, effectively. Also, I disagree that the markets are entirely divorced from the performance of the businesses that comprise them. Most people don't look at the entire market. We look at indexes. Look at the DJIA. With the exception of Nike, Disney, and Boeing, which of the 30 companies in the index are hit hard by this pandemic? If anything, which of those companies are increasing substantially before of the pandemic? They aren't steaming towards an iceberg. They a solid, recession resistant conglomerates that have substantial production power.

I think you are expressing the problem. The market doesn’t reflect economic reality but instead there are a lot of people who need the markets to stay up so their future is secure.

nickff 6y ago

We are all dependent on a variety of complex systems to maintain our standard of living; the stock market is just one of those systems, and it is one of the most highly-visible, and widely reported.

lotsofpulp 6y ago

How is that not reality?

Ididntdothis 6y ago
For most people reality is to have a secure job and income. The stock market doesn’t reflect that reality. The fact that it’s going up helps only a minority of the people.
- lotsofpulp 6y ago
  Yes, but a large enough segment of voters demand their asset prices keep rising, so that’s the reality of what the government will do. Also, the governments themselves are so deeply invested in rising asset prices that their budgets will blow up due to not having money for their defined benefit pension promises.
  - Ididntdothis 6y ago
    Exactly. The market reflects the needs of the participants and gets manipulated that way. It’s not a fact based assessment of economic health.
    - lotsofpulp 6y ago
      Yes, the market is asset prices, so it's only going to reflect the reality of asset prices. Unfortunately, statistics such as how many children get nutritional food or the number of hours parents get to spend with their children or how many families get to eat dinner together aren't optimized for.
- kansface 6y ago
  Cities and States rely on the market for their pension funds. CA has ~$2 trillion in underfunded obligations ($83K per household)[1]. If the market doesn't magically make up the difference, the state will in the form of new taxes, budget cuts, and restructuring - or it can just go into a debt spiral like Illinois and default in 30 years. Universities rely on the market for their endowments ($500 billionish). When the market goes down, tuition goes up. ~60 million Americans have a 401K worth about $6 trillion. Many of those people are approaching retirement or have already retired. > The fact that it’s going up helps only a minority of the people. You may not be directly helped, but you will definitely feel the pain (eventually) when it goes down. 1. https://us.pensiontracker.org/stateSummary.php?idcode=06 https://us.pensiontracker.org/stateSummary.php?idcode=06
  - deleted 6y ago
    [deleted]
  - lotsofpulp 6y ago
    >You may not be directly helped, but you will definitely feel the pain (eventually) when it goes down. Inflating assets by printing dollars greatly hurts the lower socioeconomic classes by devaluing the only thing they have which is dollars.
hckr_news 6y ago
The stock market is not the economy. Jobs market and employment numbers are a better indicator. If the common citizen is unemployed, they won’t have money to spend, business will go bust, and it just makes its way up the chain bringing down the whole system.
bawana 6y ago
The performance of financial markets represents an abstract value based on speculation. Stock prices derive from demand that buyers have for those equities. The basis of stock price from the fundamental performance of the underlying company is becoming dwarfed by the belief that the shares have intrinsic value.

trcollinson 6y ago

I am not sure if I agree or disagree but I like where you're going. What is economic reality? That's such a tough definition. A pessimistic view of the economy would say it is horrible because we now have a 14.7% unemployment rate and this is a record. An optimistic view is in an unprecedented time we have a 85.3% employment rate. So, what is an economic reality? One thing I do agree on, the market needs to stay up so as to secure the future of many.

pbourke 6y ago
> What is economic reality? Employment and GDP contracting at historic rates. A pandemic that is not close to being over. > One thing I do agree on, the market needs to stay up so as to secure the future of many. So, this is a new thing in the world. It used to be that markets were thought of as a fair playing field* on which price discovery and capital allocation happens. Sometimes markets would go down - a lot - and that was okay. For most people, the market and the economy are separate. The market could crash - as it did in Oct 1987 - without that spilling over too much into the economy at large. Certainly when the market skyrockets the wealth of households below p90 are not dramatically affected. So now, what are markets? Not a fair playing field for price discovery and capital allocation, but something else. And if they're something else, how should we view the long-term prospects for markets to really do anything meaningful at all? Are they just going to keep going up forever, entirely divorced from the performance of the businesses that comprise them? Seems like we're steaming for the icebergs if that is the way forward. * = yes, I know they were never truly fair.
- trcollinson 6y ago
  > Employment and GDP contracting at historic rates. A pandemic that is not close to being over. I think you've made my point, this is a short term reality, and a pessimistic one. We don't have a model for the long term economic reality of this situation. We only have speculation and guessing. So we have a short term economic reality but nothing more. To say that the US stock market hasn't historically effected the economy at large seems to forget the Great Depression. I believe it is taken as economic fact that the Great Depression started with the crash of the stock market in 1929. There was quite a bit of speculation and the market went up and down all over the place, but finally settled with a huge amount of unemployment and a massive reduction in GDP. We have put into place numerous measures to make sure that doesn't happen again, and we are using them, effectively. Also, I disagree that the markets are entirely divorced from the performance of the businesses that comprise them. Most people don't look at the entire market. We look at indexes. Look at the DJIA. With the exception of Nike, Disney, and Boeing, which of the 30 companies in the index are hit hard by this pandemic? If anything, which of those companies are increasing substantially before of the pandemic? They aren't steaming towards an iceberg. They a solid, recession resistant conglomerates that have substantial production power.