4 ms·

> Why isn't the stock market reacting at all? Historically, the majority of actors in the stock market had a pessimistic response to negative events. A few out

> Why isn't the stock market reacting at all? Historically, the majority of actors in the stock market had a pessimistic response to negative events. A few outliers discovered that optimism in the face of pessimism has big rewards... word spread, and now everyone is optimistic, all of the time. There is no risk, only rewards of varying sizes. The markets were never based on reality, there was just a period of convergence between the attitudes of people living in reality and the attitudes of market actors. As Warren Buffet didn't once say, "be greedy when others are fearful, and remain greedy when others are greedy. be greedy."

onlyrealcuzzo 5y ago
> A few outliers discovered that optimism in the face of pessimism has big rewards It didn't pay off to be optimistic in 1930. The government got into the business of subsidizing asset prices at all costs after The Great Depression, and especially after The Subprime Crisis in 2008. I don't see this ever changing. But if it does, ignorant optimism probably won't be a good strategy anymore.
- MR4D 5y ago
  > It didn't pay off to be optimistic in 1930. It depends on the timeframe. First, you got a lot in dividends (which were much higher rates than today’s dividends on average). Secondly, by the end of the war, you were at least break even, and by the early 1950’s you probably more than doubled your money. Now, if you had been patient and been optimistic in 1932/3 at the very bottom of the market, you would have made a killing, nearly 10x your investment by the early 1950’s, plus all the dividends! But, I get your point and agree with the rest of your comment.
  - onlyrealcuzzo 5y ago
    If you doubled your money by the 1950s, but inflation more than halved your money, then you didn't even break even, and you definitely did not make a "good" investment. Especially if you have to pay tax on the "profit". Okay - sure - maybe given the environment, "good" investments were few and hard to come by.
- adventured 5y ago
  It also didn't pay to be optimistic in 1968 or in 1998-1999 (perhaps peak optimism, peak irrational exuberance). 1968-1982, the S&P 500 essentially went nowhere. 1998-2012, the S&P 500 essentially went nowhere. Those dead periods represent ~28 out of the last ~53 years. That's a long time for the market to produce mediocre results, especially compared to expectations today. The long-term chart and valuations of the S&P 500 are looking pretty comical at this point, in terms of irrational exuberance in the present. It's pricing in an extraordinary economic golden era of super growth, which isn't going to happen.
  - onlyrealcuzzo 5y ago
    > 1998-2012 This is basically the same as saying 2005-2020. Just because there was a temporary crash for one year, does not mean 1998-2012 was a bad time for investment. The US Government was well into its asset subsidization spree by then. 1999 tech stocks were not a good investment. Other than that, this was a pretty good time to invest.
dmix 5y ago
This has certainly influenced government spending and interest rates as well. There is little differentiation between down times and good economic times, when normally the policy is to ‘save’ during good times to be able to handle the bad times. Markets with very heavy debt and forward speculation have a way of delaying any sort of consequence for actions. It’s almost like a juggling act, which so far has been able to keep going for so long that people are starting to realign their view of moral hazards and not punishing bad debt. China is a great example of this but the US pioneered this stuff with the massive finance industry which is built on this sort of complex financial maneuvering, creating an abstraction layer disconnected from market corrections.
deleted 5y ago
[deleted]
mcguire 5y ago
https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/ https://www.longtermtrends.net/market-cap-to-gdp-the-buffett...

onlyrealcuzzo 5y ago

> A few outliers discovered that optimism in the face of pessimism has big rewards It didn't pay off to be optimistic in 1930. The government got into the business of subsidizing asset prices at all costs after The Great Depression, and especially after The Subprime Crisis in 2008. I don't see this ever changing. But if it does, ignorant optimism probably won't be a good strategy anymore.

MR4D 5y ago
> It didn't pay off to be optimistic in 1930. It depends on the timeframe. First, you got a lot in dividends (which were much higher rates than today’s dividends on average). Secondly, by the end of the war, you were at least break even, and by the early 1950’s you probably more than doubled your money. Now, if you had been patient and been optimistic in 1932/3 at the very bottom of the market, you would have made a killing, nearly 10x your investment by the early 1950’s, plus all the dividends! But, I get your point and agree with the rest of your comment.
- onlyrealcuzzo 5y ago
  If you doubled your money by the 1950s, but inflation more than halved your money, then you didn't even break even, and you definitely did not make a "good" investment. Especially if you have to pay tax on the "profit". Okay - sure - maybe given the environment, "good" investments were few and hard to come by.
adventured 5y ago
It also didn't pay to be optimistic in 1968 or in 1998-1999 (perhaps peak optimism, peak irrational exuberance). 1968-1982, the S&P 500 essentially went nowhere. 1998-2012, the S&P 500 essentially went nowhere. Those dead periods represent ~28 out of the last ~53 years. That's a long time for the market to produce mediocre results, especially compared to expectations today. The long-term chart and valuations of the S&P 500 are looking pretty comical at this point, in terms of irrational exuberance in the present. It's pricing in an extraordinary economic golden era of super growth, which isn't going to happen.
- onlyrealcuzzo 5y ago
  > 1998-2012 This is basically the same as saying 2005-2020. Just because there was a temporary crash for one year, does not mean 1998-2012 was a bad time for investment. The US Government was well into its asset subsidization spree by then. 1999 tech stocks were not a good investment. Other than that, this was a pretty good time to invest.

dmix 5y ago

This has certainly influenced government spending and interest rates as well. There is little differentiation between down times and good economic times, when normally the policy is to ‘save’ during good times to be able to handle the bad times. Markets with very heavy debt and forward speculation have a way of delaying any sort of consequence for actions. It’s almost like a juggling act, which so far has been able to keep going for so long that people are starting to realign their view of moral hazards and not punishing bad debt. China is a great example of this but the US pioneered this stuff with the massive finance industry which is built on this sort of complex financial maneuvering, creating an abstraction layer disconnected from market corrections.

deleted 5y ago

[deleted]

mcguire 5y ago

https://www.longtermtrends.net/market-cap-to-gdp-the-buffett-indicator/ https://www.longtermtrends.net/market-cap-to-gdp-the-buffett...