11 ms·

I think you are absolutely correct and the reason that the stock market is being so weird is quite simply "what else are we doing to do with that money?" The s

I think you are absolutely correct and the reason that the stock market is being so weird is quite simply "what else are we doing to do with that money?" The solution for individuals: cash, gold, options, etc, aren't viable solutions for institutional investors. Imagine that you're in charge of a $1 billion fund, what are you going to do? You can't put that into gold, cash or treasury notes. But all sectors are affected by this so you can't simply rebalance your portfolio. You can't go out and buy an obscene amount of call options because those would still way too risky at the institutional level. For me this is why the stock market right now is deeply troubling. Not because "the elite's are out of touch", I know quite a few people in finance, people managing these billion dollar portfolios and they also have no clue what's going on. None of these people are delusional about what's going on, they just don't know what to do. What's troubling is that this detachment from reality seems to be based on the fact that the entire financial system is effected and there's no way for it to react in a sane way anymore. I don't claim to have any clue as to how this will play out, but when this reality bubble bursts it's going to be a very extreme event.

TheOtherHobbes 6y ago
Today was one of the few times I saw "social unrest" mentioned in this context. I suspect that will happen a lot more over the next few years. The markets are a wobbling shitpile of unpayable debt just waiting to collapse. That was already true before Covid, but Covid has nailed the coffin shut while the corpse is still alive. I wouldn't be surprised if the Fed is knowingly goosing the twitching body because the alternative is one of the biggest financial explosions in history. More free speculation vouchers at least buy a little time before the music stops, the bomb goes off, and we all run out of metaphors.
- jppope 6y ago
  Totally serious- this is one of my favorite comments on HN ever. I don't completely agree but I love the way you said what you said.
- WrtCdEvrydy 6y ago
  Fed will continue printing until Boomers die off... there is a lot of wealth locked up in 401k that needs to be disbursed. This block votes and they vote often and if their little pennies are threatened, they will vote people out. Edit: If you think these market rises are anything other than a way for the rich to rinse their money before the market bombs, I have a bridge to sell you, it's very pretty.
  - pc86 6y ago
    Imagine referring to an entire generations' life savings as "their little pennies."
    - toomuchtodo 6y ago
      Only half of those over 55 have any retirement savings [1], the other half have no retirement pennies to speak of. While not great for online discussion, I can understand where the sentiment comes (the evidence is clear older generations strip mined the country economically [and continue to do so], pulled the ladder up behind them, and then are shocked when younger citizens are resentful). [1] https://www.gao.gov/assets/680/670153.pdf https://www.gao.gov/assets/680/670153.pdf
      - subsubzero 6y ago
        I don't know, maybe I am out of touch but almost all boomers I know are extremely well off, they started as scientists or other typical professional occupations and now own assets in the millions, basically housing in California and other areas. Prop 13 has helped them(their prop. taxes do not go up) as well as dirt cheap college costs when they went to college. Housing was rather cheap as well considering salaries, I remember my Dad looking at houses in Palo Alto in the mid 90's and they were in the 300's(they are now 3-4M). I feel like gen X and Millennials are really getting the short end of the stick when it comes to alot of essential life costs. Sure economists say inflation is not happening but I think the formula to look into inflation is incorrect as Housing/Medical/College has skyrocketed where a gallon of milk and bread has not jumped in cost.
- tossAfterUsing 6y ago
  > That was already true before Covid I think there's a lot of people who don't remember or realize this. And it bothers me that having conversations now takes so much effort to address that particular part of the context: "they were having econ troubles before covid was on the radar"
- medium_burrito 6y ago
  An alternative to a meltdown is what's been happening since 2008- the poor start killing themselves and maybe they vote for the wrong guy, but the trend doesn't stop. Given that the market says 30% of the workers don't really matter (and remember, that's people participating in the labor market, which is at a historic low IIRC), maybe they just ignored. They can cause some level of social unrest, but the rich are mobile, and the factories are pretty automated. What we'll see soon is more private security and automated security.
- intotheabyss 6y ago
  Don't forget that the FED works closely with the WH, so it's in everyone's interest in that administration to keep the music going until the election.
  - deleted 6y ago
    [deleted]
- aeternum 6y ago
  Some sectors are hard-hit by Covid but others are not. Furniture sales, Grocery, Tech, Entertainment are all doing quite well. Debt is also not necessarily the time-bomb that everyone thinks it is. Debt is tied closely to the overall money supply, and world productivity has been increasing as has population. World debt is about 69 trillion with a population of 7.8 billion. That's under $9k USD per person.
  - harambae 6y ago
    >World debt is about 69 trillion with a population of 7.8 billion. That's under $9k USD per person. That's a bizarre way to cut it for a number of reasons. For example, half of the world lives on less than $5.50 per day [0]. The more relevant statistic is the US national debt is $26 trillion [1] and the additional unfunded liabilities dwarf that. There are 143 million US taxpayers. It's something like $160k per US taxpayer [2]. Much of it can/will be printed away but not without other consequences. [0] https://www.worldbank.org/en/news/press-release/2018/10/17/nearly-half-the-world-lives-on-less-than-550-a-day https://www.worldbank.org/en/news/press-release/2018/10/17/n... [1] https://www.usdebtclock.org/ https://www.usdebtclock.org/ [2] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...
pjc50 6y ago
I've been saying this for a while. There is simply a surplus of "forced buyers" for investments, so the price and yield has gone down and down, and there's no real reason why it can't be negative. The only next point is warehousing physical cash, which itself isn't cheap or liquid. Individuals presented with this crisis could realise the problem, the disastrous future it implies, and turn to philanthropy. Institutions largely can't, and foreign oligarchs won't.
- opportune 6y ago
  The US model of funding retirements is subsidizing (via tax breaks/structures) the middle class to buy into inflation beating assets (only stocks meet this really) or underfunding pensions that need to also beat inflation by buying into equities. There truly is “no alternative” to stocks and, to a lesser extent, real estate. These are the only two major asset classes which can provide sufficient returns to support a middle class or above lifestyle for a very large class of people who do not work or intend to not work in the near future.
cephaslr 6y ago
Is part of the issue that there is just too much money has been printed and hoarded and its creating some weird effects? The government has been printing money for a long time, to stimulate the economy, provide spending money, etc. Due to 80/20 rule, rich get richer effects, etc, a large portion of money the government prints ends up in the hands of a relatively small group who doesn't spend it but rather tries to invest it to get more money. Government prints money again trying to stimulate the economy and again most of it ends up in a few hands. At some point don't you have what we have today? A 1% that owns lots of wealth and doesn't know where to put it while the majority of the economy is still relatively broke? How does it play out? Do the 1% just buy all the assets at some point? I am not trying to make a statement about inequality but rather curious about the result of printing money for 70 years and having that money end up with relatively few parties each round. Perhaps someone with more knowledge can speak to this.
- tomp 6y ago
  It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody. How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening now, while the financial transfer is happening over decades. I don't think this creates a healthy, sustainable dynamic.
  - empthought 6y ago
    > 20% more Where did this number come from? At 4% compounding over 40 years, you will have at least 130% again over what you put in.
    - sudosysgen 6y ago
      The issue is two-fold - assuming that all the money comes at beginning, and forgetting about inflation, and not taking into account the shift in risk towards the later ten years, and assuming that your income stays the same. When taking into account the increase in income both absolute and in real terms after necessary expenses, you realize that a lot more than the majority of the money is invested in the latter 25 years. But yes, it would be more than 20%, though a lot less than 130%.
JKCalhoun 6y ago
> "what else are we doing to do with that money?" TINA
- johnnylambada 6y ago
  Care to define TINA?
  - csixty4 6y ago
    There Is No Alternative
    - WalterBright 6y ago
      Real Estate
      - blaser-waffle 6y ago
        Not a great choice in the era of COVID -- no one is renting or getting AirBnBs. And who knows what will happen to that market once stimulus checks run out and lots of jobless people start getting evicted. And then you need to worry about taxes, maintenance, and, if you want to be a landlord, all of those rule & regs. Or you just drop it in QQQ and try not to think about it too much.
        mixmastamyk 6y ago
        Expensive apts are still filling in our expensive neighborhood in LA. From $2500-4000 a month.
        WalterBright 6y ago
        You might look back on this 5 years from now as the ideal time to buy real estate.
  - dredmorbius 6y ago
    "There is no alternative", as noted. Associated with Mad Mags: https://en.wikipedia.org/wiki/There_is_no_alternative https://en.wikipedia.org/wiki/There_is_no_alternative
mlthoughts2018 6y ago
I think you are massively incorrect. Equities right now are at a pretty massive discount to future value. If anything I think the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter. The implications of this seem mostly sociological to me. Is that a good state of affairs for the world? Could we use those people more productively? The implications are not about the current stock market. Amazon and Microsoft are pretty damn likely to keep growing in value for 10+ more years regardless of any coronavirus situation. That’s an amazing / dumbfounding situation. But it still would imply a rational longterm investors sees those stocks as being attractively priced right now.
- bpt3 6y ago
  > Equities right now are at a pretty massive discount to future value. Using what metric?
- orwin 6y ago
  Production is changing the state of the matter, by transforming, aggregating or displacing said matter. I can tell you that if you shut down 1/3 of the machine, you will see a 1/3 drop GDP.
- rlucas 6y ago
  > the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter. If you're right about that we're into revolution territory. If COVID reveals that we've built an economy that not only doesn't care, but doesn't even register the existence of 1/3 of the population, the body politic may have had a poison dose.

TheOtherHobbes 6y ago

Today was one of the few times I saw "social unrest" mentioned in this context. I suspect that will happen a lot more over the next few years. The markets are a wobbling shitpile of unpayable debt just waiting to collapse. That was already true before Covid, but Covid has nailed the coffin shut while the corpse is still alive. I wouldn't be surprised if the Fed is knowingly goosing the twitching body because the alternative is one of the biggest financial explosions in history. More free speculation vouchers at least buy a little time before the music stops, the bomb goes off, and we all run out of metaphors.

jppope 6y ago
Totally serious- this is one of my favorite comments on HN ever. I don't completely agree but I love the way you said what you said.
WrtCdEvrydy 6y ago
Fed will continue printing until Boomers die off... there is a lot of wealth locked up in 401k that needs to be disbursed. This block votes and they vote often and if their little pennies are threatened, they will vote people out. Edit: If you think these market rises are anything other than a way for the rich to rinse their money before the market bombs, I have a bridge to sell you, it's very pretty.
- pc86 6y ago
  Imagine referring to an entire generations' life savings as "their little pennies."
  - toomuchtodo 6y ago
    Only half of those over 55 have any retirement savings [1], the other half have no retirement pennies to speak of. While not great for online discussion, I can understand where the sentiment comes (the evidence is clear older generations strip mined the country economically [and continue to do so], pulled the ladder up behind them, and then are shocked when younger citizens are resentful). [1] https://www.gao.gov/assets/680/670153.pdf https://www.gao.gov/assets/680/670153.pdf
    - subsubzero 6y ago
      I don't know, maybe I am out of touch but almost all boomers I know are extremely well off, they started as scientists or other typical professional occupations and now own assets in the millions, basically housing in California and other areas. Prop 13 has helped them(their prop. taxes do not go up) as well as dirt cheap college costs when they went to college. Housing was rather cheap as well considering salaries, I remember my Dad looking at houses in Palo Alto in the mid 90's and they were in the 300's(they are now 3-4M). I feel like gen X and Millennials are really getting the short end of the stick when it comes to alot of essential life costs. Sure economists say inflation is not happening but I think the formula to look into inflation is incorrect as Housing/Medical/College has skyrocketed where a gallon of milk and bread has not jumped in cost.
tossAfterUsing 6y ago
> That was already true before Covid I think there's a lot of people who don't remember or realize this. And it bothers me that having conversations now takes so much effort to address that particular part of the context: "they were having econ troubles before covid was on the radar"
medium_burrito 6y ago
An alternative to a meltdown is what's been happening since 2008- the poor start killing themselves and maybe they vote for the wrong guy, but the trend doesn't stop. Given that the market says 30% of the workers don't really matter (and remember, that's people participating in the labor market, which is at a historic low IIRC), maybe they just ignored. They can cause some level of social unrest, but the rich are mobile, and the factories are pretty automated. What we'll see soon is more private security and automated security.
intotheabyss 6y ago
Don't forget that the FED works closely with the WH, so it's in everyone's interest in that administration to keep the music going until the election.
- deleted 6y ago
  [deleted]
aeternum 6y ago
Some sectors are hard-hit by Covid but others are not. Furniture sales, Grocery, Tech, Entertainment are all doing quite well. Debt is also not necessarily the time-bomb that everyone thinks it is. Debt is tied closely to the overall money supply, and world productivity has been increasing as has population. World debt is about 69 trillion with a population of 7.8 billion. That's under $9k USD per person.
- harambae 6y ago
  >World debt is about 69 trillion with a population of 7.8 billion. That's under $9k USD per person. That's a bizarre way to cut it for a number of reasons. For example, half of the world lives on less than $5.50 per day [0]. The more relevant statistic is the US national debt is $26 trillion [1] and the additional unfunded liabilities dwarf that. There are 143 million US taxpayers. It's something like $160k per US taxpayer [2]. Much of it can/will be printed away but not without other consequences. [0] https://www.worldbank.org/en/news/press-release/2018/10/17/nearly-half-the-world-lives-on-less-than-550-a-day https://www.worldbank.org/en/news/press-release/2018/10/17/n... [1] https://www.usdebtclock.org/ https://www.usdebtclock.org/ [2] https://en.wikipedia.org/wiki/National_debt_of_the_United_States https://en.wikipedia.org/wiki/National_debt_of_the_United_St...

pjc50 6y ago

I've been saying this for a while. There is simply a surplus of "forced buyers" for investments, so the price and yield has gone down and down, and there's no real reason why it can't be negative. The only next point is warehousing physical cash, which itself isn't cheap or liquid. Individuals presented with this crisis could realise the problem, the disastrous future it implies, and turn to philanthropy. Institutions largely can't, and foreign oligarchs won't.

opportune 6y ago
The US model of funding retirements is subsidizing (via tax breaks/structures) the middle class to buy into inflation beating assets (only stocks meet this really) or underfunding pensions that need to also beat inflation by buying into equities. There truly is “no alternative” to stocks and, to a lesser extent, real estate. These are the only two major asset classes which can provide sufficient returns to support a middle class or above lifestyle for a very large class of people who do not work or intend to not work in the near future.

cephaslr 6y ago

Is part of the issue that there is just too much money has been printed and hoarded and its creating some weird effects? The government has been printing money for a long time, to stimulate the economy, provide spending money, etc. Due to 80/20 rule, rich get richer effects, etc, a large portion of money the government prints ends up in the hands of a relatively small group who doesn't spend it but rather tries to invest it to get more money. Government prints money again trying to stimulate the economy and again most of it ends up in a few hands. At some point don't you have what we have today? A 1% that owns lots of wealth and doesn't know where to put it while the majority of the economy is still relatively broke? How does it play out? Do the 1% just buy all the assets at some point? I am not trying to make a statement about inequality but rather curious about the result of printing money for 70 years and having that money end up with relatively few parties each round. Perhaps someone with more knowledge can speak to this.

tomp 6y ago
It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody. How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening now, while the financial transfer is happening over decades. I don't think this creates a healthy, sustainable dynamic.
- empthought 6y ago
  > 20% more Where did this number come from? At 4% compounding over 40 years, you will have at least 130% again over what you put in.
  - sudosysgen 6y ago
    The issue is two-fold - assuming that all the money comes at beginning, and forgetting about inflation, and not taking into account the shift in risk towards the later ten years, and assuming that your income stays the same. When taking into account the increase in income both absolute and in real terms after necessary expenses, you realize that a lot more than the majority of the money is invested in the latter 25 years. But yes, it would be more than 20%, though a lot less than 130%.

JKCalhoun 6y ago

> "what else are we doing to do with that money?" TINA

johnnylambada 6y ago
Care to define TINA?
- csixty4 6y ago
  There Is No Alternative
  - WalterBright 6y ago
    Real Estate
    - blaser-waffle 6y ago
      Not a great choice in the era of COVID -- no one is renting or getting AirBnBs. And who knows what will happen to that market once stimulus checks run out and lots of jobless people start getting evicted. And then you need to worry about taxes, maintenance, and, if you want to be a landlord, all of those rule & regs. Or you just drop it in QQQ and try not to think about it too much.
      - mixmastamyk 6y ago
        Expensive apts are still filling in our expensive neighborhood in LA. From $2500-4000 a month.
      - WalterBright 6y ago
        You might look back on this 5 years from now as the ideal time to buy real estate.
- dredmorbius 6y ago
  "There is no alternative", as noted. Associated with Mad Mags: https://en.wikipedia.org/wiki/There_is_no_alternative https://en.wikipedia.org/wiki/There_is_no_alternative

mlthoughts2018 6y ago

I think you are massively incorrect. Equities right now are at a pretty massive discount to future value. If anything I think the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter. The implications of this seem mostly sociological to me. Is that a good state of affairs for the world? Could we use those people more productively? The implications are not about the current stock market. Amazon and Microsoft are pretty damn likely to keep growing in value for 10+ more years regardless of any coronavirus situation. That’s an amazing / dumbfounding situation. But it still would imply a rational longterm investors sees those stocks as being attractively priced right now.

bpt3 6y ago
> Equities right now are at a pretty massive discount to future value. Using what metric?
orwin 6y ago
Production is changing the state of the matter, by transforming, aggregating or displacing said matter. I can tell you that if you shut down 1/3 of the machine, you will see a 1/3 drop GDP.
rlucas 6y ago
> the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter. If you're right about that we're into revolution territory. If COVID reveals that we've built an economy that not only doesn't care, but doesn't even register the existence of 1/3 of the population, the body politic may have had a poison dose.