
U.S. Stocks Rise After S&P 500’s Record Close - devy
https://www.wsj.com/articles/global-stock-markets-dow-update-8-19-2020-11597829041
======
ceejayoz
As Kai Ryssdal likes to say, "the stock market is not the economy".
[https://www.marketplace.org/2019/09/30/the-stock-market-
is-n...](https://www.marketplace.org/2019/09/30/the-stock-market-is-not-the-
economy/)

I don't think that's ever been any clearer than it is now.

~~~
oxymoran
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
31M people just recently lost the $600 weekly unemployment boost that was
keeping them afloat.
([https://www.washingtonpost.com/business/2020/08/06/600-dolla...](https://www.washingtonpost.com/business/2020/08/06/600-dollar-
unemployment-benefit/)) 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
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.

~~~
mywittyname
I think that explanation is more of a political talking point than reality. I
guess if you make people desperate enough, then they will start looking for
new jobs. But I think he's grossly underestimating what's going on with
society.

Most people on unemployment are laid off. They are not applying for new jobs
because they assume that they will have a job to go back to shortly.

These people are also dealing with the clusterfuck surrounding schooling &
childcare. From what I've seen, it's close to impossible to get your younger
child back into childcare. The older ones taking remote classes in school
require a good deal of adult attention.

I don't think a lot of people would change jobs even for a big raise because
things are so hectic right now. Even people here on HN are struggling to
balance their lives, and these are people who earn good wages and have a lot
of flexibility with their schedule.

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AnotherGoodName
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-
joi...](https://www.marketwatch.com/story/apple-pulls-in-pricing-joins-record-
corporate-debt-borrowing-spree-2020-05-04)

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...](https://www.marketplace.org/2020/06/16/the-fed-starts-buying-
corporate-bonds/)

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
> 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
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-
own...](https://www.reuters.com/article/us-alphabet-bonds/google-owner-
alphabet-issues-record-10-billion-bond-at-lowest-ever-price-idUSKCN24Z2PC)

------
munificent
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
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.

~~~
cryptica
>> 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.

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hanoz
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.

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pfortuny
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).

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

~~~
oxymoran
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
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.

------
AtHeartEngineer
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.

~~~
oxymoran
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
> That supply and demand has nothing to do with how well a company is actually
> doing.

Companies that are more profitable have higher value stock - increasing the
demand for it, no?

~~~
andreilys
Profitability is one part of the calculation, but there are plenty of
unprofitable companies with higher stock valuations because of expected
growth/investor sentiment

~~~
ntsplnkv2
Future profitability is still profitability. That increases demand.

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riffic
Did no one just notice the worst collapse in March since the great depression?

This is stupid. nothing's real anymore.

~~~
boring_twenties
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?

~~~
jarym
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
That's a funny way to spell "months"

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baron816
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
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.

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m3kw9
I think with this pandemic it didn’t destroy economic value as whole but
rather shifted value from industries.

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blaser-waffle
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.

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

~~~
AnimalMuppet
Perhaps. But why should we consider that a reasonable measure?

~~~
mrfusion
I guess If you want to use the price of gold as a proxy for the increase in
the money supply.

~~~
AnimalMuppet
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.

