7 ms·

U.S. Stocks Rise After S&P 500’s Record Close

55 points by devy 6y ago

baron816 6y ago
There’s been a pretty widespread consensus growing in recent years around buying low cost index funds and holding them for the long run. In crises of the past, people would panic sell, which would create a vicious downward cycle. I wonder if what’s going on is that everyone is just riding the market and content to see their stocks dip in the short term, knowing it’d only be temporary. If that is the case, then you also have to wonder what this will do to the long term market. If everyone is only buying and holding (except when they retire), then the market can’t really go down. Or can it?
- DoingSomeThings 6y ago
  This is a fascinating thought. I suppose the key is 'everyone'. Passive investing is premised on the idea that markets rise. And markets rise based on someone providing proper valuation to the stocks in the market. If there's no one doing the picking, does the system fall apart? Possibly consumer, buy-and-hold investors are out-influencing Wall Street traders? I find that hard to believe, but it does seem like a long-term possibility.
- toast0 6y ago
  The market had a big dip in March, so it can go down. I imagine there was plenty of panic selling then. The Federal Reserve did a lot of interventions and what not since then, though.
- helen___keller 6y ago
  > If everyone is only buying and holding (except when they retire), then the market can’t really go down. Or can it? If a recession is bad enough that people have to liquidate investments to pay the bills, investment mentality is irrelevant. As it happens, in this particular recession, office workers who may have money in the market are generally not doing too bad because they can continue to work remote. > (except when they retire) In theory, if the amount of dollars being liquidated through retirees is greater than the amount of dollars being invested by workers (when the entire boomer generation has retired), this could imply that markets go down.
ceejayoz 6y ago
As Kai Ryssdal likes to say, "the stock market is not the economy". https://www.marketplace.org/2019/09/30/the-stock-market-is-not-the-economy/ https://www.marketplace.org/2019/09/30/the-stock-market-is-n... I don't think that's ever been any clearer than it is now.
- oxymoran 6y ago
  The stock market is not the economy, that is absolutely true. But why exactly is that made clearer right now? Considering we have been in a pandemic for 5 months now, I would say we are faring pretty well economically. Consumer spending is back up. Unemployment is going back down. The real estate market is healthy. Prices are stable. There are certainly people and industries not doing well and we should help them. There are also people and industries doing really well right now. I have seen no proof that the overall economy is hurting.
  - ceejayoz 6y ago
    31M people just recently lost the $600 weekly unemployment boost that was keeping them afloat. (https://www.washingtonpost.com/business/2020/08/06/600-dollar-unemployment-benefit/ https://www.washingtonpost.com/business/2020/08/06/600-dolla...) Tens of millions are facing eviction in the coming months. (https://www.cbsnews.com/news/eviction-23-million-october/ https://www.cbsnews.com/news/eviction-23-million-october/) The damage from this is just getting started, we're already in recession, and the stock market is setting all-time highs. It's a bit bizarre.
    - dkdk8283 6y ago
      My customer owns a metal factory and complained about this: the unemployment boost made it impossible for him to fill low level positions as most would make more to stay home.
      - deleted 6y ago
        [deleted]
      - 6y ago
pfortuny 6y ago
When interest rates are 0% it is difficult to find a reasonable mid-to-long term investment. ETF are possibly the only alternative. At least “you are taking the same risk as the market” (roughly speaking).
munificent 6y ago
This isn't much of a surprise. Previous large-scale disasters often destroyed capital. During the Blitz, bombs blew up factories. COVID leaves physical capital almost entirely untouched. It is most harmful to people and in particular the poor who often work "essential" (but undercompensated) jobs, those without healthcare, and small business owners. National restaurant chains can ride it out while sole owner ones with less cushion fold. Small stores die while everyone flocks to Amazon. The pandemic is essentially a net transfer of power to the rich. The stock market is an index of the rich—the wealthiest 10% own 85% of all stock. Of course it's going up.
- hn_throwaway_99 6y ago
  Yeah, I feel like we're realistically far from "eat the rich" land, but I do feel like society is being pushed closer and closer to the precipice. I mean, just take a look at pg's wealth tax post, which while I won't necessarily say was "tone deaf", it was at least woefully out of touch IMO: "You can't add a wealth tax, founders will go elsewhere!" If we don't figure out how to more equally distribute the rewards of capitalism, we may find there are very few people left to buy the goods founders want to sell, unless we all want to do high-end art marketplace startups.
  - deleted 6y ago
    [deleted]
  - cryptica 6y ago
    >> I feel like we're realistically far from "eat the rich" We could have a financier as a main course as well as a dessert.
  - perl4ever 6y ago
    >If we don't figure out how to more equally distribute the rewards of capitalism But trillions are being redistributed and that is why the stock market is up. Creating money out of nothing is a wealth tax.
  - munificent 6y ago
    > If we don't figure out how to more equally distribute the rewards of capitalism We actually have figured it out. It's called "taxes". Taxes are how you do it. There, mystery solved. The problem is that the rich have reached a level of power —through Citizens United, Fox News, disenfranchisement, and just straight up getting richer—that they can prevent taxes that harm them but would benefit the majority of Americans.
AtHeartEngineer 6y ago
I don't see how this could all not fall apart. It seems like the divergence between the stock market and the rest of the economy, is going to be the biggest bubble that has ever been. Personally, I think it's going to be the end of the US dollar.
- jkinudsjknds 6y ago
  I don't think that's likely. The US has enough guns and control of major tech players driving things that it will hold its staying power as the major currency. But let's say you're right. What would the move be to diversify risk? Gold? Real estate?
  - mhb 6y ago
    The permanent portfolio is an investment portfolio designed to perform well in all economic conditions. It was devised by free-market investment analyst, Harry Browne, in the 1980s. The permanent portfolio is composed of an equal allocation of stocks, bonds, gold, and cash, or Treasury bills. https://www.investopedia.com/terms/p/permanent-portfolio.asp https://www.investopedia.com/terms/p/permanent-portfolio.asp
  - catawbasam 6y ago
    Russia, China and Iran are rebalancing toward the Euro.
- oxymoran 6y ago
  The stock market and the economy have never really been converged though. Stock prices are based on nothing more than the supply and demand of the stock itself. That supply and demand has nothing to do with how well a company is actually doing. It usually tracks company performance but if everyone wanted to buy the stock of a bankrupt company, the stocks value would still rise. It’s all an illusion and it never had anything to do with the economy which is actually just the aggregate confidence of consumers and businesses in the future.
  - ntsplnkv2 6y ago
qzw 6y ago
I guess the stock market is the new savings account, at least for the affluent.
- oxymoran 6y ago
  You can invest for free on nearly every trading platform now. If you have any disposable income to save in a savings account(which I am fully aware is the big IF), there is no reason that money can’t be invested in the market. That’s exactly why the market is doing so well.
  - NationalPark 6y ago
    I'm skeptical that new retail investors are having such a big impact, but if there's data available then I could be convinced. If it is true though, then I don't see how it can last with so many of these new investor now being unemployed and losing the $600 a week.
  - deleted 6y ago
    [deleted]
- renewiltord 6y ago
  You can buy fractional stock in an ETF with Robinhood. It's the savings account for everyone. RH revolutionized this with their commission-free trading and app access.
  - ceejayoz 6y ago
    It's not, though. A savings account that might temporarily lose half of its value in a recession isn't a great option for lower income folks.
    - asdff 6y ago
      If your investments lose half their value in a recession you are horribly over-leveraged. In any case, we are back to Feb highs now, and whatever loss you might have sustained no longer exists, unless you sold at the bottom.
m3kw9 6y ago
I think with this pandemic it didn’t destroy economic value as whole but rather shifted value from industries.
hanoz 6y ago
The Fed is printing money and giving it away. The only way for most people to become one of the recipients is to buy stocks.
riffic 6y ago
Did no one just notice the worst collapse in March since the great depression? This is stupid. nothing's real anymore.
- boring_twenties 6y ago
  Did you not notice the trillion or so dollars added to the money supply since March, with 2-3 trillion more expected over the next couple of months?
  - riffic 6y ago
    I'm not ignoring it, everyone else has commented about that so I have no need to repeat it here.
    - boring_twenties 6y ago
      Then why are you acting surprised that stocks are going up, even going so far as to call it "stupid?"
      - riffic 6y ago
        read Taleb. This is extreme fragility, not antifragility.
  - jarym 6y ago
    People get so upset when the monetary expansion is pointed out. S&P is headed to 4k within the next couple of years as the monetary expansion shows no sign of changing.
    - boring_twenties 6y ago
      That's a funny way to spell "months"
  - DoingSomeThings 6y ago
    Given this as the reason, does that mean valuations will plummet once that supply slows down? If the best bet now is "things will keep growing while money is being pumped in", how does that balance out in the future?
AnotherGoodName 6y ago
There's too much weirdness and manipulation in the market not to own stocks right now. Apple, Amazon and Google have all started issuing bonds. For Apple it's the first time they've ever sold corporate bonds. They don't need the cash. It's just that you can sell corporate bonds right now for below inflation so you may as well. As the below article notes they'll use the proceeds for share buybacks. eg. https://www.marketwatch.com/story/apple-pulls-in-pricing-joins-record-corporate-debt-borrowing-spree-2020-05-04 https://www.marketwatch.com/story/apple-pulls-in-pricing-joi... If you're wondering who's buying 30year corporate bonds that have yields lower than pretty much any current inflation predictions, the US Federal Reserve has a new directive under the CARES act to buy into corporate bonds. https://www.marketplace.org/2020/06/16/the-fed-starts-buying-corporate-bonds/ https://www.marketplace.org/2020/06/16/the-fed-starts-buying... If you are in a position to sell corporate bonds right now you can set the rates to well below inflation predictions and they will still sell thanks to government intervention. The real kicker is that the more this is done the more inflation will kick in making it an even better deal. For the common person the only way to get advantage from this ridiculous situation is to own shares in these corporations that are issuing low rate bonds and buying back shares.
- chollida1 6y ago
  > For Apple it's the first time they've ever sold corporate bonds. This just isn't true, Apple has sold debt for as long as their Non US cash position has been material, so they could access their non US cash without having to repatriate(pay US taxes on it) their cash. A simple look on a Bloomberg terminal shows they have outstanding debt from 2014
  - AnotherGoodName 6y ago
    Sorry i'll acknowledge that point. I misinterpreted one of the tech articles where it was stated as the first bond yield at such at low rate since 1980 as being the first bond issue full stop. I think the point still stands as a whole though. When you see things such as "Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen on a U.S. corporate bond at that maturity, according to Refinitiv data, which goes back to 1980." It's worth highlighting the rarity of these circumstances. https://www.reuters.com/article/us-alphabet-bonds/google-owner-alphabet-issues-record-10-billion-bond-at-lowest-ever-price-idUSKCN24Z2PC https://www.reuters.com/article/us-alphabet-bonds/google-own...
mrfusion 6y ago
If you look at the ratio s&p 500 vs gold we are still down a fair amount.
- AnimalMuppet 6y ago
  Perhaps. But why should we consider that a reasonable measure?
  - mrfusion 6y ago
    I guess If you want to use the price of gold as a proxy for the increase in the money supply.
    - AnimalMuppet 6y ago
      But it isn't. The price of gold is a proxy for the fear of the value of money, which is only loosely related to the increase in the money supply.
blaser-waffle 6y ago
TINA -- There Is No Alternative [to stocks] Outside of BTC, gold, and housing in some places, there really aren't any other choices. Government bonds are 0% or negative.

55 points by devy 6y ago

There’s been a pretty widespread consensus growing in recent years around buying low cost index funds and holding them for the long run. In crises of the past, people would panic sell, which would create a vicious downward cycle. I wonder if what’s going on is that everyone is just riding the market and content to see their stocks dip in the short term, knowing it’d only be temporary. If that is the case, then you also have to wonder what this will do to the long term market. If everyone is only buying and holding (except when they retire), then the market can’t really go down. Or can it?

DoingSomeThings 6y ago
This is a fascinating thought. I suppose the key is 'everyone'. Passive investing is premised on the idea that markets rise. And markets rise based on someone providing proper valuation to the stocks in the market. If there's no one doing the picking, does the system fall apart? Possibly consumer, buy-and-hold investors are out-influencing Wall Street traders? I find that hard to believe, but it does seem like a long-term possibility.
toast0 6y ago
The market had a big dip in March, so it can go down. I imagine there was plenty of panic selling then. The Federal Reserve did a lot of interventions and what not since then, though.
helen___keller 6y ago
> If everyone is only buying and holding (except when they retire), then the market can’t really go down. Or can it? If a recession is bad enough that people have to liquidate investments to pay the bills, investment mentality is irrelevant. As it happens, in this particular recession, office workers who may have money in the market are generally not doing too bad because they can continue to work remote. > (except when they retire) In theory, if the amount of dollars being liquidated through retirees is greater than the amount of dollars being invested by workers (when the entire boomer generation has retired), this could imply that markets go down.

ceejayoz 6y ago

As Kai Ryssdal likes to say, "the stock market is not the economy". https://www.marketplace.org/2019/09/30/the-stock-market-is-not-the-economy/ https://www.marketplace.org/2019/09/30/the-stock-market-is-n... I don't think that's ever been any clearer than it is now.

oxymoran 6y ago
The stock market is not the economy, that is absolutely true. But why exactly is that made clearer right now? Considering we have been in a pandemic for 5 months now, I would say we are faring pretty well economically. Consumer spending is back up. Unemployment is going back down. The real estate market is healthy. Prices are stable. There are certainly people and industries not doing well and we should help them. There are also people and industries doing really well right now. I have seen no proof that the overall economy is hurting.
- ceejayoz 6y ago
  31M people just recently lost the $600 weekly unemployment boost that was keeping them afloat. (https://www.washingtonpost.com/business/2020/08/06/600-dollar-unemployment-benefit/ https://www.washingtonpost.com/business/2020/08/06/600-dolla...) Tens of millions are facing eviction in the coming months. (https://www.cbsnews.com/news/eviction-23-million-october/ https://www.cbsnews.com/news/eviction-23-million-october/) The damage from this is just getting started, we're already in recession, and the stock market is setting all-time highs. It's a bit bizarre.
  - dkdk8283 6y ago
    My customer owns a metal factory and complained about this: the unemployment boost made it impossible for him to fill low level positions as most would make more to stay home.
    - deleted 6y ago
      [deleted]
    - 6y ago

pfortuny 6y ago

When interest rates are 0% it is difficult to find a reasonable mid-to-long term investment. ETF are possibly the only alternative. At least “you are taking the same risk as the market” (roughly speaking).

munificent 6y ago

This isn't much of a surprise. Previous large-scale disasters often destroyed capital. During the Blitz, bombs blew up factories. COVID leaves physical capital almost entirely untouched. It is most harmful to people and in particular the poor who often work "essential" (but undercompensated) jobs, those without healthcare, and small business owners. National restaurant chains can ride it out while sole owner ones with less cushion fold. Small stores die while everyone flocks to Amazon. The pandemic is essentially a net transfer of power to the rich. The stock market is an index of the rich—the wealthiest 10% own 85% of all stock. Of course it's going up.

hn_throwaway_99 6y ago
Yeah, I feel like we're realistically far from "eat the rich" land, but I do feel like society is being pushed closer and closer to the precipice. I mean, just take a look at pg's wealth tax post, which while I won't necessarily say was "tone deaf", it was at least woefully out of touch IMO: "You can't add a wealth tax, founders will go elsewhere!" If we don't figure out how to more equally distribute the rewards of capitalism, we may find there are very few people left to buy the goods founders want to sell, unless we all want to do high-end art marketplace startups.
- deleted 6y ago
  [deleted]
- cryptica 6y ago
  >> I feel like we're realistically far from "eat the rich" We could have a financier as a main course as well as a dessert.
- perl4ever 6y ago
  >If we don't figure out how to more equally distribute the rewards of capitalism But trillions are being redistributed and that is why the stock market is up. Creating money out of nothing is a wealth tax.
- munificent 6y ago
  > If we don't figure out how to more equally distribute the rewards of capitalism We actually have figured it out. It's called "taxes". Taxes are how you do it. There, mystery solved. The problem is that the rich have reached a level of power —through Citizens United, Fox News, disenfranchisement, and just straight up getting richer—that they can prevent taxes that harm them but would benefit the majority of Americans.

AtHeartEngineer 6y ago

I don't see how this could all not fall apart. It seems like the divergence between the stock market and the rest of the economy, is going to be the biggest bubble that has ever been. Personally, I think it's going to be the end of the US dollar.

jkinudsjknds 6y ago
I don't think that's likely. The US has enough guns and control of major tech players driving things that it will hold its staying power as the major currency. But let's say you're right. What would the move be to diversify risk? Gold? Real estate?
- mhb 6y ago
  The permanent portfolio is an investment portfolio designed to perform well in all economic conditions. It was devised by free-market investment analyst, Harry Browne, in the 1980s. The permanent portfolio is composed of an equal allocation of stocks, bonds, gold, and cash, or Treasury bills. https://www.investopedia.com/terms/p/permanent-portfolio.asp https://www.investopedia.com/terms/p/permanent-portfolio.asp
- catawbasam 6y ago
  Russia, China and Iran are rebalancing toward the Euro.
oxymoran 6y ago
The stock market and the economy have never really been converged though. Stock prices are based on nothing more than the supply and demand of the stock itself. That supply and demand has nothing to do with how well a company is actually doing. It usually tracks company performance but if everyone wanted to buy the stock of a bankrupt company, the stocks value would still rise. It’s all an illusion and it never had anything to do with the economy which is actually just the aggregate confidence of consumers and businesses in the future.
- ntsplnkv2 6y ago

qzw 6y ago

I guess the stock market is the new savings account, at least for the affluent.

oxymoran 6y ago
You can invest for free on nearly every trading platform now. If you have any disposable income to save in a savings account(which I am fully aware is the big IF), there is no reason that money can’t be invested in the market. That’s exactly why the market is doing so well.
- NationalPark 6y ago
  I'm skeptical that new retail investors are having such a big impact, but if there's data available then I could be convinced. If it is true though, then I don't see how it can last with so many of these new investor now being unemployed and losing the $600 a week.
- deleted 6y ago
  [deleted]
renewiltord 6y ago
You can buy fractional stock in an ETF with Robinhood. It's the savings account for everyone. RH revolutionized this with their commission-free trading and app access.
- ceejayoz 6y ago
  It's not, though. A savings account that might temporarily lose half of its value in a recession isn't a great option for lower income folks.
  - asdff 6y ago
    If your investments lose half their value in a recession you are horribly over-leveraged. In any case, we are back to Feb highs now, and whatever loss you might have sustained no longer exists, unless you sold at the bottom.

m3kw9 6y ago

I think with this pandemic it didn’t destroy economic value as whole but rather shifted value from industries.

hanoz 6y ago

The Fed is printing money and giving it away. The only way for most people to become one of the recipients is to buy stocks.

riffic 6y ago

Did no one just notice the worst collapse in March since the great depression? This is stupid. nothing's real anymore.

boring_twenties 6y ago
Did you not notice the trillion or so dollars added to the money supply since March, with 2-3 trillion more expected over the next couple of months?
- riffic 6y ago
  I'm not ignoring it, everyone else has commented about that so I have no need to repeat it here.
  - boring_twenties 6y ago
    Then why are you acting surprised that stocks are going up, even going so far as to call it "stupid?"
    - riffic 6y ago
      read Taleb. This is extreme fragility, not antifragility.
- jarym 6y ago
  People get so upset when the monetary expansion is pointed out. S&P is headed to 4k within the next couple of years as the monetary expansion shows no sign of changing.
  - boring_twenties 6y ago
    That's a funny way to spell "months"
- DoingSomeThings 6y ago
  Given this as the reason, does that mean valuations will plummet once that supply slows down? If the best bet now is "things will keep growing while money is being pumped in", how does that balance out in the future?

AnotherGoodName 6y ago

There's too much weirdness and manipulation in the market not to own stocks right now. Apple, Amazon and Google have all started issuing bonds. For Apple it's the first time they've ever sold corporate bonds. They don't need the cash. It's just that you can sell corporate bonds right now for below inflation so you may as well. As the below article notes they'll use the proceeds for share buybacks. eg. https://www.marketwatch.com/story/apple-pulls-in-pricing-joins-record-corporate-debt-borrowing-spree-2020-05-04 https://www.marketwatch.com/story/apple-pulls-in-pricing-joi... If you're wondering who's buying 30year corporate bonds that have yields lower than pretty much any current inflation predictions, the US Federal Reserve has a new directive under the CARES act to buy into corporate bonds. https://www.marketplace.org/2020/06/16/the-fed-starts-buying-corporate-bonds/ https://www.marketplace.org/2020/06/16/the-fed-starts-buying... If you are in a position to sell corporate bonds right now you can set the rates to well below inflation predictions and they will still sell thanks to government intervention. The real kicker is that the more this is done the more inflation will kick in making it an even better deal. For the common person the only way to get advantage from this ridiculous situation is to own shares in these corporations that are issuing low rate bonds and buying back shares.

chollida1 6y ago
> For Apple it's the first time they've ever sold corporate bonds. This just isn't true, Apple has sold debt for as long as their Non US cash position has been material, so they could access their non US cash without having to repatriate(pay US taxes on it) their cash. A simple look on a Bloomberg terminal shows they have outstanding debt from 2014
- AnotherGoodName 6y ago
  Sorry i'll acknowledge that point. I misinterpreted one of the tech articles where it was stated as the first bond yield at such at low rate since 1980 as being the first bond issue full stop. I think the point still stands as a whole though. When you see things such as "Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen on a U.S. corporate bond at that maturity, according to Refinitiv data, which goes back to 1980." It's worth highlighting the rarity of these circumstances. https://www.reuters.com/article/us-alphabet-bonds/google-owner-alphabet-issues-record-10-billion-bond-at-lowest-ever-price-idUSKCN24Z2PC https://www.reuters.com/article/us-alphabet-bonds/google-own...

mrfusion 6y ago

If you look at the ratio s&p 500 vs gold we are still down a fair amount.

AnimalMuppet 6y ago
Perhaps. But why should we consider that a reasonable measure?
- mrfusion 6y ago
  I guess If you want to use the price of gold as a proxy for the increase in the money supply.
  - AnimalMuppet 6y ago
    But it isn't. The price of gold is a proxy for the fear of the value of money, which is only loosely related to the increase in the money supply.

blaser-waffle 6y ago

TINA -- There Is No Alternative [to stocks] Outside of BTC, gold, and housing in some places, there really aren't any other choices. Government bonds are 0% or negative.