
What Is the Stock Market Even for Anymore? - adrian_mrd
https://www.nytimes.com/interactive/2020/05/26/magazine/stock-market-coronavirus-pandemic.html
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bawana
No matter how much qe the fed does , there will be no inflation. The money
goes to banks and financial institutions. They do not spend it on real goods
and services. Rather they implement financial tools to get higher roi. Thus
too many dollars chase too few financial tools resulting in equity inflation
(a rising stock market) The real market of goods and services is unmoved and
as a result wages and prices are stable (stagnant). The fed only helps banks
because they use a system designed in the 1930s. Back then before credit
cards, internet banking, before the repeal of Glass Steagall, banks drove the
economy by lending to people. (See ‘It’s a Wonderful 𝐋𝐢𝐟𝐞’) To move the
economy, the fed has to put money into the hands of people who will spend it.
Each taxpayer should get a fed account with a monthly stipend of fed-coin.
Fed-coin will have a half-life to encourage people to spend it. Once spent its
value will be fixed as it gets converted to regular dollars

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mixmastamyk
I disagree there will be no inflation. But, it is an indirect effect as you
describe. The half-life idea is intriguing however.

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monkeycantype
A continually decaying value would be complex to manage, but perhaps you could
achieve a similar impact following a version of the approach used in Brazil to
target runaway inflation. (please jump in if you know the details better than
I recall) Prices and salaries were struck in a notional currency the Plano
Real, but in daily life people used the Cruzeiro Real, and a daily price was
struck for the conversion from Cruzeiro real to a Plano Real. Fed bank
accounts balances could be in Cruzeiro Dollars, with a weekly conversion rate
published to Plano Dollars

~~~
toomuchtodo
This Planet Money episode (21 minutes) goes into detail about the scheme you
mention. Excellent listen.

[https://www.npr.org/sections/money/2015/12/02/458222801/epis...](https://www.npr.org/sections/money/2015/12/02/458222801/episode-216-how-
four-drinking-buddies-saved-brazil)

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kgin
There is the famous Benjamin Graham quote, "In the short run, the market is a
voting machine but in the long run, it is a weighing machine."

This article is trying to say "I think the stock market is broken because it
should be a weighing machine at all times, including of factors that aren't
being weighed".

That's a fine argument, but it's misunderstanding how the stock market has
worked up until now.

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appleiigs
I dont get the analogy... What is a voting machine? What is a weighing
machine?

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marton78
See e.g. here: [https://www.albertbridgecapital.com/post/voting-machines-
and...](https://www.albertbridgecapital.com/post/voting-machines-and-weighing-
machines)

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nugget
If I want to invest my money somewhere it will earn a return, what are my
options?

Bonds, CDs, and other fixed income pay very little.

"What about a 50% crash?" people ask (about equity-heavy portfolios.) Given
that the Fed has seemingly adopted an additional mandate of supporting equity
prices (see: 2009, 2012, 2016, 2020), I don't think there's any political will
for a sustained dip in equity prices; therefore, the most rational choice
seems to be to invest into the market.

~~~
toomuchtodo
“TINA”, or “There is no alternative.” to equities.

[https://www.nytimes.com/2019/07/11/business/stock-market-
rec...](https://www.nytimes.com/2019/07/11/business/stock-market-record.html)

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sesuximo
Slightly OT:

I feel like the NYT is no longer breaking big stories/going deep on little
known things. Recently it feels so opinionated and not nuanced at all. Maybe I
only think this because I disagree with a few of the most recent articles I’ve
read, but I wonder if others agree with me (or not).

~~~
kccqzy
Well this is the NYT Magazine, not the NYT proper.

~~~
sesuximo
Fair point for this case

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originalvichy
As a finance and stock market novice, it makes a lot of sense. Buybacks seem
like one of the main contributors to the funneling of money from the working
class to the ownership class.

Is there any way you can ”win”? Staying privately traded and owned?

~~~
mixmastamyk
It's just a more tax-efficient way of distributing dividends. Like how water
tends to find the lowest point. Describing it in class-warfare terms is not
necessarily helpful, as the poor were never participants.

~~~
woodandsteel
It may not be intentional class warfare, but it has the same consequences. The
rationale for lowering taxes was to make it possible for corporations to
invest more and produce lots of better-paying jobs. Instead they took the
money and invested it in stock buy-backs, which benefit only the stock-
holders.

~~~
foldingmoney
I mean, the mandate of a public company is _only_ to benefit the stockholders
by increasing the stockholders' wealth. The question is whether they do that
via growing the business or via returning money to stockholders. The choice to
buy back stock just reflects the apparent lack of good investment
opportunities in the market.

~~~
woodandsteel
The question not if as a corporation they should be doing that, the question
is if the tax cuts should have been passed when the corporations were not
going to do what the tax cutters promised would happen.

~~~
foldingmoney
That's opening a can of worms. Some corporations invested in new
opportunities, some bought back stock. The ones which bought back stock
presumably didn't see any profitable investment opportunities. In the absence
of monopolies (an important caveat), profitable investment opportunities
create value (the service is worth more to the customer than the price, and
the supplier's cost of providing the service is less than the price). A
company could pay one person to dig a hole and another person to fill it back
in, and they'd be creating jobs but they wouldn't be creating value -- that
money would be better spent paying them to do something that people actually
wanted. When a company buys back stock, they're returning capital to their
investors and essentially saying 'we're already doing all we can, your capital
is better allocated elsewhere.' If the government steps in and forces
companies to make investments that don't create value rather than return
capital to investors to be allocated elsewhere, you've created an inefficient
planned economy.

~~~
woodandsteel
It's really much simpler than that. The people who pushed the tax cut said it
would lead to a huge increase in companies making investments that would lead
to more good jobs in the US, and it just didn't happen.

You have the ideological position that what investors do is always good for
the country. It's not. Sometimes it is, sometimes people invest in things like
bubbles that ultimately burst and damage the economy, sometimes they invest
overseas in enterprises that take jobs away from the US, sometimes they waste
money on investments that fail, very often the invest part of their money on
lobbying to get rid of regulations that protect the public, and so on.

I am not saying investment is bad for the country. Often it is good, but it is
not nearly as simple as you think it is, so you need to think things out on a
case-by-case basis, and the gigantic tax cuts that the corporations and rich
people were given was clearly wrong.

~~~
foldingmoney
>The people who pushed the tax cut said it would lead to a huge increase in
companies making investments that would lead to more good jobs in the US, and
it just didn't happen.

Right, so are these the same people you want to have in charge of capital
allocation? Because that's basically what it comes down to.

~~~
woodandsteel
Yes, I think there are a lot of better things the government could be doing
with that money, like building infrastructure, which is in bad shape in the
US.

~~~
foldingmoney
So the people who you don't trust to understand what the effect of a tax cut
will be and/or to lie about it to benefit their rich pals are the ones you
want directing the economy?

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lujim
It is an equity exchange where investors, tax payers, the Federal government,
and the fixed income market subsidize stock buy backs and executive bonuses.

I'm joking but it is alarming how many resources we seem to be sacrificing for
a meager 5-7% average ROI. We are trying to eliminate market corrections at
the expense of ??? who knows. It's cheap capital for business that are
probably creating too many services and products that don't add a ton of value
to anyone's lives.

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nine_zeros
It's a game that is so overweighted on money printed, that no other events in
the game matter anymore.

