3 ms·

The strong job numbers too. On a side note, I find it very sad that strong job numbers make stock plummet. It really is an indication that the stock market is

by d--b 4mo ago

The strong job numbers too. On a side note, I find it very sad that strong job numbers make stock plummet. It really is an indication that the stock market is mostly speculative and not concerned about the actual economy.

JumpCrisscross 4mo ago
> It really is an indication that the stock market is mostly speculative and not concerned about the actual economy Not really. Strong jobs numbers in the midst of 3+ percent inflation means rates should go up. That, in turn, dilates time on future earnings. So making a company's future earnings more-heavily discounted will be a net drag on valuations even if the jobs numbers indicate those numbers, near term and far, will be higher.
- andric 4mo ago
  Yep. Job numbers are the “actual economy” – the actual economy is driven by wages and consumption. Stronger wages → stronger consumption → higher demand-pull inflation. But higher inflation implying that “rates should go up” is central bank doctrine. It’s not a general law of how economies function. Central banks intervening with interest rate adjustments is what distorts the prices of equities downward, when inflation rises. Without central bank intervention, inflation should theoretically push equities higher (a highly-inflated economy driven by rising demand is by definition a well-performing economy!). Central banks intervene because runaway inflation can be harmful to wage-earners (they save in dollars, not assets). But I’m not sure if a 2–3% inflation target is ideal. It seems to me that this arbitrarily low inflation target restricts the growth of the economy in ways that might affect wage-earners, defeating the stated purpose of monetary policy, since higher rates also have the effect of curbing job growth as well as raising the cost of servicing mortgages.
  - JumpCrisscross 4mo ago
    > higher inflation implying that “rates should go up” is central bank doctrine Uh, no. If you have no central bank, more consumption and more employment means more demand for money. Ceteris paribus, that will raise rates. (Our own history with free banking is more complicated since the only inflationary period was driven by specie introduction from California's gold rush. The predominant problem in antebellum America was deflation and bank collapses.) You're correct inasmuch as central banks quicken this reaction, and–when done properly–dampen it. But the fundamental engine is emergent, at least for nominal rates.
  - trumpdong 4mo ago
    > But higher inflation implying that “rates should go up” is central bank doctrine. It’s not a general law of how economies function. Let's put it this way then: the central bank can raise rates or it can crash the economy into a brick wall. In that sense, rates should be raised. We have the least competent regime in history right now though, so they might choose the latter option.
  - EGG_CREAM 4mo ago
    Agreed about the 2-3% target. Seems like a crazy low target for a country that has been, historically, a strong exporter. Or at least seems to want to be an exporter. I wonder if one of the reasons behind this low target rate is that inflation will ultimately decide how expensive government debt is, since under normal circumstances people will want their bonds to at least pay out enough to cover inflation.
- d--b 4mo ago
  tbh, it makes it even sadder. It means the entire economy runs on borrowing to fuel growth. When all that cash is still coming fron QE, it’s gross.
bruce343434 4mo ago
> not concerned about the actual economy. Why would it be? Non dividend stocks only have value because other people think they have value (i.e. greater fool theory). Only dividend stocks have some base value connected to how well the company does. (Higher dividend if it does well, lower if it does poorly.) But they still also have a lot of "greater fool" value. Beyond dividend, stocks have no intrinsic value. Nowadays you don't even get a piece of paper to wipe your ass with anymore, it's all digital.
- andric 4mo ago
  They do have intrinsic value! Growth stocks trade on a multiple of earnings: earnings have intrinsic value.
  - bruce343434 4mo ago
    That's just dividend stocks with more shady. We promise to invest the dividend you would have gotten into ourselves to become more valuable bro. But that will only be reflected in "valuations" that don't directly affect your bank account. It is still the greater fool theory. The worst is growth stocks that are a wrapper around actual dividend stocks. Beyond number going up, what actual concrete utility are you getting? Beyond waiting for the line to go up to eventually sell it to a greater fool, what can you _actually_ do with it? It's not real. It is only real because enough people believe it is real. And they believe it because they want to believe it, because they are greedy and want easy money. Once the market tanks and the greed turns into fear, there will be bagholders and the brokers will be laughing. The people who skim fees and percentages will be cozy. "Now is the time to invest" they will say, because from here the line can only go up! And it will, eventually, because people want to believe, because they are greedy. The only thing the stock market makes money on is greed. That is the thing that drives stock value. Not the economy.
  - torlok 4mo ago
    To who? There's no immediate benefit of holding a stock that doesn't pay out beyond voting rights, or a fraction of company assets. As parent said, you're just hoping to sell it to somebody down the line for more. It's speculation. The market is liquid, and a lot of people believe these stocks have value, but it's still speculation.
energy123 4mo ago
These companies are capex heavy and need to reach into the capital markets to sustain their growth. The cost of capital is correlated with inflation. Why is this the fault of the stock market? Maybe blame the government for diluting the money supply?
quickthrowman 4mo ago
Strong job numbers with rising inflation means potential hikes to the federal funds rate which increases borrowing costs which reduces profitability which means stock prices go down. Strange causality chain, but that’s how Mr. Market thinks.

by d--b 4mo ago

JumpCrisscross 4mo ago

> It really is an indication that the stock market is mostly speculative and not concerned about the actual economy Not really. Strong jobs numbers in the midst of 3+ percent inflation means rates should go up. That, in turn, dilates time on future earnings. So making a company's future earnings more-heavily discounted will be a net drag on valuations even if the jobs numbers indicate those numbers, near term and far, will be higher.

andric 4mo ago
Yep. Job numbers are the “actual economy” – the actual economy is driven by wages and consumption. Stronger wages → stronger consumption → higher demand-pull inflation. But higher inflation implying that “rates should go up” is central bank doctrine. It’s not a general law of how economies function. Central banks intervening with interest rate adjustments is what distorts the prices of equities downward, when inflation rises. Without central bank intervention, inflation should theoretically push equities higher (a highly-inflated economy driven by rising demand is by definition a well-performing economy!). Central banks intervene because runaway inflation can be harmful to wage-earners (they save in dollars, not assets). But I’m not sure if a 2–3% inflation target is ideal. It seems to me that this arbitrarily low inflation target restricts the growth of the economy in ways that might affect wage-earners, defeating the stated purpose of monetary policy, since higher rates also have the effect of curbing job growth as well as raising the cost of servicing mortgages.
- JumpCrisscross 4mo ago
  > higher inflation implying that “rates should go up” is central bank doctrine Uh, no. If you have no central bank, more consumption and more employment means more demand for money. Ceteris paribus, that will raise rates. (Our own history with free banking is more complicated since the only inflationary period was driven by specie introduction from California's gold rush. The predominant problem in antebellum America was deflation and bank collapses.) You're correct inasmuch as central banks quicken this reaction, and–when done properly–dampen it. But the fundamental engine is emergent, at least for nominal rates.
- trumpdong 4mo ago
  > But higher inflation implying that “rates should go up” is central bank doctrine. It’s not a general law of how economies function. Let's put it this way then: the central bank can raise rates or it can crash the economy into a brick wall. In that sense, rates should be raised. We have the least competent regime in history right now though, so they might choose the latter option.
- EGG_CREAM 4mo ago
  Agreed about the 2-3% target. Seems like a crazy low target for a country that has been, historically, a strong exporter. Or at least seems to want to be an exporter. I wonder if one of the reasons behind this low target rate is that inflation will ultimately decide how expensive government debt is, since under normal circumstances people will want their bonds to at least pay out enough to cover inflation.
d--b 4mo ago
tbh, it makes it even sadder. It means the entire economy runs on borrowing to fuel growth. When all that cash is still coming fron QE, it’s gross.

bruce343434 4mo ago

> not concerned about the actual economy. Why would it be? Non dividend stocks only have value because other people think they have value (i.e. greater fool theory). Only dividend stocks have some base value connected to how well the company does. (Higher dividend if it does well, lower if it does poorly.) But they still also have a lot of "greater fool" value. Beyond dividend, stocks have no intrinsic value. Nowadays you don't even get a piece of paper to wipe your ass with anymore, it's all digital.

andric 4mo ago
They do have intrinsic value! Growth stocks trade on a multiple of earnings: earnings have intrinsic value.
- bruce343434 4mo ago
  That's just dividend stocks with more shady. We promise to invest the dividend you would have gotten into ourselves to become more valuable bro. But that will only be reflected in "valuations" that don't directly affect your bank account. It is still the greater fool theory. The worst is growth stocks that are a wrapper around actual dividend stocks. Beyond number going up, what actual concrete utility are you getting? Beyond waiting for the line to go up to eventually sell it to a greater fool, what can you _actually_ do with it? It's not real. It is only real because enough people believe it is real. And they believe it because they want to believe it, because they are greedy and want easy money. Once the market tanks and the greed turns into fear, there will be bagholders and the brokers will be laughing. The people who skim fees and percentages will be cozy. "Now is the time to invest" they will say, because from here the line can only go up! And it will, eventually, because people want to believe, because they are greedy. The only thing the stock market makes money on is greed. That is the thing that drives stock value. Not the economy.
- torlok 4mo ago
  To who? There's no immediate benefit of holding a stock that doesn't pay out beyond voting rights, or a fraction of company assets. As parent said, you're just hoping to sell it to somebody down the line for more. It's speculation. The market is liquid, and a lot of people believe these stocks have value, but it's still speculation.

energy123 4mo ago

These companies are capex heavy and need to reach into the capital markets to sustain their growth. The cost of capital is correlated with inflation. Why is this the fault of the stock market? Maybe blame the government for diluting the money supply?

quickthrowman 4mo ago

Strong job numbers with rising inflation means potential hikes to the federal funds rate which increases borrowing costs which reduces profitability which means stock prices go down. Strange causality chain, but that’s how Mr. Market thinks.