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NASDAQ is up though. It seems it's up every time there is a problem. How does that work?

jjoonathan 4y ago
Because every time there is a problem the Fed gives them what they want.
scrlk 4y ago
Money printer go brrr to the tune of $300 billion: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They've undone half of the quantitative tightening that's been going on in the last year.
Out_of_Characte 4y ago
Because money and (stock) value is not strictly correlated. A business can lose money but their stock can be up because value depends largely on potential unrealised gain in the future. Then theres the fed making depositors whole again which means any negative sentiment against several banks before the feds involvement will recover. Maybe someone more knowledgeable could weigh in on that last part.
- parineum 4y ago
  > because value depends largely on potential unrealised gain in the future Exclusively actually. Past performance is only relevant to the price as a predictor of future success.
  - tc313 4y ago
    Well, if we’re being nitpicky, balance sheet items such as a large net cash position (a derivative of past success or failure) are also relevant factors in the value of a company.
    - parineum 4y ago
      Sure, as it relates to where the price of the stock price may go in the future.
disgruntledphd2 4y ago
Because bad news is good news. The markets have been high on ZIRP and QE for a decade now, and so when interest rates/inflation increase, the Fed takes action, reducing the price of assets. Good news (more jobs!) means that the Fed will increase rates more (bad news!). Hilariously enough, the actions of the government(s) to bail out various banks are regarded as bad news by the markets which mean good news for asset prices. Yes, it's entirely insane. Welcome to modern capitalism, I suppose.
nostromo 4y ago
Bad news is good news when the only trader that matters is the Fed and his money printer.
FooBarBizBazz 4y ago
We live in a big cold warehouse, heated by an old furnace. This guy "JPow" controls it. The lucky ones, they've staked out places for themselves next to the heat vent, surrounded by broken glass and fences made of twisted rebar. Other squatters shiver way over in the corner by the windows. They regularly lose toes to frostbite. When the squatters really start dying -- mothers wake up to find their babies have turned into frozen meat in the middle of the night -- then "JPow" gives in a little and cranks up the thermostat. The temperature in that far corner of the warehouse might even get above freezing. But for the heat-lords who've got the good turf, man, it's like a day in the tropics. Shorts, flip-flops, Hawaiian shirts, margaritas. Party on! Which is why, of course, it's always good news that plebs are starting to die of hypothermia. Because it means "JPow" has to keep 'em warm, and party time continues. This little parable is, of course, a description of the Cantillon Effect. NASDAQ is particularly sensitive to interest rates. People say it's because Tech is more future-looking, and when rates are high you want profits now. Or maybe it's sensitive just because that's what everyone believes. Either way, when rates go down, NASDAQ goes up. It's weird that people celebrate news that the car is slow, because that means the driver is going to hit the gas. But that's how it be.
- imtringued 4y ago
  >This little parable is, of course, a description of the Cantillon Effect. Except all the proponents of the cantillon effect can't seem to point at where it happens because it happens everywhere in the economy and every single economic actor has their own cantillon effect as anyone who saves demand deposits temporarily destroys money and creates a reverse cantillon effect at every single point in the economy and everyone who spends off their demand deposits causes a forward cantillon effect even if the central bank does nothing, making the whole theory completely useless as a method of blaming the government or central bank. When you consider the fact that commercial banks create commercial bank money and that there's thousands of them competing with each other the cantillon effect becomes more like a conspiracy theory because if the cantillon effect exists, it would be caused by inequality, not the other way around. I have never seen anyone who points out the "Cantillon Effect" complain about too high banking profitability, for example. The Austrian Economists, who love the Cantillon Effect, always appear to demand higher interest rates which increases banking profitability, which immediately exposes their hypocrisy. https://www.aier.org/article/the-mythology-of-cantillon-effects/ https://www.aier.org/article/the-mythology-of-cantillon-effe...
tc313 4y ago
Because interest rates are the overwhelming determinant of general asset prices and bad news for the economy usually leads the Fed to lower/slow the hike in interest rates.

Because every time there is a problem the Fed gives them what they want.

Money printer go brrr to the tune of $300 billion: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... They've undone half of the quantitative tightening that's been going on in the last year.

Out_of_Characte 4y ago

Because money and (stock) value is not strictly correlated. A business can lose money but their stock can be up because value depends largely on potential unrealised gain in the future. Then theres the fed making depositors whole again which means any negative sentiment against several banks before the feds involvement will recover. Maybe someone more knowledgeable could weigh in on that last part.

parineum 4y ago
> because value depends largely on potential unrealised gain in the future Exclusively actually. Past performance is only relevant to the price as a predictor of future success.
- tc313 4y ago
  Well, if we’re being nitpicky, balance sheet items such as a large net cash position (a derivative of past success or failure) are also relevant factors in the value of a company.
  - parineum 4y ago
    Sure, as it relates to where the price of the stock price may go in the future.

disgruntledphd2 4y ago

Because bad news is good news. The markets have been high on ZIRP and QE for a decade now, and so when interest rates/inflation increase, the Fed takes action, reducing the price of assets. Good news (more jobs!) means that the Fed will increase rates more (bad news!). Hilariously enough, the actions of the government(s) to bail out various banks are regarded as bad news by the markets which mean good news for asset prices. Yes, it's entirely insane. Welcome to modern capitalism, I suppose.

nostromo 4y ago

Bad news is good news when the only trader that matters is the Fed and his money printer.

FooBarBizBazz 4y ago

We live in a big cold warehouse, heated by an old furnace. This guy "JPow" controls it. The lucky ones, they've staked out places for themselves next to the heat vent, surrounded by broken glass and fences made of twisted rebar. Other squatters shiver way over in the corner by the windows. They regularly lose toes to frostbite. When the squatters really start dying -- mothers wake up to find their babies have turned into frozen meat in the middle of the night -- then "JPow" gives in a little and cranks up the thermostat. The temperature in that far corner of the warehouse might even get above freezing. But for the heat-lords who've got the good turf, man, it's like a day in the tropics. Shorts, flip-flops, Hawaiian shirts, margaritas. Party on! Which is why, of course, it's always good news that plebs are starting to die of hypothermia. Because it means "JPow" has to keep 'em warm, and party time continues. This little parable is, of course, a description of the Cantillon Effect. NASDAQ is particularly sensitive to interest rates. People say it's because Tech is more future-looking, and when rates are high you want profits now. Or maybe it's sensitive just because that's what everyone believes. Either way, when rates go down, NASDAQ goes up. It's weird that people celebrate news that the car is slow, because that means the driver is going to hit the gas. But that's how it be.

imtringued 4y ago
>This little parable is, of course, a description of the Cantillon Effect. Except all the proponents of the cantillon effect can't seem to point at where it happens because it happens everywhere in the economy and every single economic actor has their own cantillon effect as anyone who saves demand deposits temporarily destroys money and creates a reverse cantillon effect at every single point in the economy and everyone who spends off their demand deposits causes a forward cantillon effect even if the central bank does nothing, making the whole theory completely useless as a method of blaming the government or central bank. When you consider the fact that commercial banks create commercial bank money and that there's thousands of them competing with each other the cantillon effect becomes more like a conspiracy theory because if the cantillon effect exists, it would be caused by inequality, not the other way around. I have never seen anyone who points out the "Cantillon Effect" complain about too high banking profitability, for example. The Austrian Economists, who love the Cantillon Effect, always appear to demand higher interest rates which increases banking profitability, which immediately exposes their hypocrisy. https://www.aier.org/article/the-mythology-of-cantillon-effects/ https://www.aier.org/article/the-mythology-of-cantillon-effe...

tc313 4y ago

Because interest rates are the overwhelming determinant of general asset prices and bad news for the economy usually leads the Fed to lower/slow the hike in interest rates.