Question on stock prices.

rent-seeking
NOUN
the fact or practice of manipulating public policy or economic conditions as a strategy for increasing profits.

Copyright protection and enforcement enable profits (in certain situations; in most, they are not necessary and often stifle progress). They do not directly increase them. If your software is crap and nobody buys it, your copyright on it doesn't make you a dime extra.

I mean rent-seeking. Things with no other purpose or good than profit. Like, oh, buying enough politicians to push through a crippling corporate tax cut that nets you billions, or even tens of billions -- and let you spend it all on stock buybacks. Or when an administration puts a stop to your price gouging and insane fees, or works to threaten your carved-up monopolies by allowing for competition, just grease the next administration to put in your puppet to roll all of that back. On and on and on.

"If you'd shoot people in the back of the head for rent-seeking, it would stop tomorrow."

Rent-seeking is also what drives investment. I write software, which couldn't exist without copyright and the ability to charge usage (rent).

All r&d, all investment in creating works of art would not exist with being able to rent-seek off ownership rights.

"If you'd shoot people in the back of the head for rent-seeking, it would stop tomorrow."

Rent-seeking is also what drives investment. I write software, which couldn't exist without copyright and the ability to charge usage (rent).

All r&d, all investment in creating works of art would not exist with being able to rent-seek off ownership rights.

Make stock buy-backs illegal;
Reinstate Glass-Steagall;
Enforce monopoly laws (especially turfing and price fixing);
Mandate employee representation on corporate boards;
Actually lock up CEOs for willful malfeasance.

Won't quite STOP it, but it'll cut down on it one hell of a lot.

If you'd shoot people in the back of the head for rent-seeking, it would stop tomorrow.

melt-up.

Money doesn't go "into stocks". Except in public offerings where a company sells new shares, money goes through a stock market, from buyer to seller. The seller then needs to do something with the money.

As the fed buys up more and more bonds (creating money) to keep interest rates low across the board, the money is trying to go somewhere, but there is just nowhere for it to "go into" only "go through".... You think one of your stocks is getting overprices, so you sell it. Now you have to do something with that money. Banks, money markets, securities are either paying sub-inflation return, or high risk. So, the money turns around and goes right back through the stock market, classic melt-up.

I still don't see anything short-term that is going to reverse the trend.

Clearly, right now, stock price is detached from earnings and is purely supply and demand... how much money is chasing how few stocks. Forward looking P/E is clearly irrelevant.

I remain unconvinced that anything will force stock prices to reattach to economic reality.

Stock prices climb because....

Theory from Shark Tank's O'Leary says in his experience it is because he rich have no where else to put their money that makes any sense. The worse the economic output, the worse all other investments look.

Depression level unemployment makes deflation more likely than inflation, making commodities a bad bet.

Fed buying up debt means all down for interest rates for securities.

Real Estate is already bubble and more likely to go down than up.

Can't even just stick it in the bank like most people, because if a bank goes under there is a FDIC payout cap.

"This ‘new threat’ to the U.S. economy flies in the face of conventional wisdom"

Their new threat is... get this... people spending less to try to save more try to pay off debts is bad for the economy and could actually lower incomes by as much or more as spending is reduced....

Wait! What? You mean the thing that has caused every recession since WWII "flies in the face of conventional wisdom"? Fucking ignorance.

Next you're going to tell me money is borrowed into existence and not everyone can be spending less than they earn at the same time! NO FUCKING SHIT!!!

I hear you Erotic... and I do think eventually it will be a shit show. Will we stop throwing $1T a month at the economy? Then it gets ugly. OR, Just nationalize a huge portion of the private sector debt and have the Fed but it up? US Treasury pays the Fed interest, who then just hands it back to the US Treasury?

In a "normal" economy, the issue there is that by increasing the monetary base, you greatly increase the max the fractional reserve system can multiply it too... BUT, eventually it becomes pushing on a string because the limiting factor isn't banks' ability to lend, but rather qualified borrows walking in with current debt/income levels that make banks feel comfortable lending to them. I think we've seen we're pushing on a string here as we drastically increase the Fed balance sheet after 2008, without significant increase in private sector debt. In fact private sector has been doing such a bad job adding debt, government had to step up with $1T a year deficits BEFORE the virus hit.

Then what? Count on households, with lower debt levels after government took over much of if through stimulus checks, will re-start borrowing to resume spending more than they earn? Sounds like a fair bet, as that's what peeps do when given the ability and a little encouragement. A few "cash for clunkers" and "tax credits for replacing your appliances" to stoke the spending a touch.

We already see GOP saying no more stimulus because their Wall Street bankers that fund their campaigns are worried that the only way to handle the debt will be to raise taxes on the rich.

Eventually, something is going to have to give... I just don't know what the trigger will be.

I don't think the number of people earning more on UI than not on UI is as big as you think it is. Granted there are some, but there are not. I found out last week that I qualify for UI. I am self-employed. My income in March and April was 5% of what it was in December. This month it looks to be about 30%. Next month . . . fuck if I know :( Will I earn more? No. I bring that up because a lot of the UI claims are where? CA/NY/NJ/FL. Here in CA UI is based on income and caps at $450 a week. To get that amount, iirc, you have to already be earning something like 50ish thousand a year. So now do the 8 weeks of an additional $600 and you are close to the same on the bottom end. IIRC the UI benefit for someone making min wage was $160 a week. Now they will be earning more for a bit because they will be getting 760 a week whereas they were getting 400 a week. Ok, that's fine, it's temporary.

I have looked at things as a see saw. I learned so much from that thing in the 3rd grade. I weighed 80lbs in 3rd grade. I could make that thing sink compared to other kids. I then learned that as others climbed on the other side, I would go up. This is what we are seeing in the market. Their is some shit that is going down and some shit that is shooting up. For it to be a shitshow in the market we need shit to down in all sectors.

But like you, I see a shitshow coming. During the crisis in 06-08 I got fucked. I was the loan type that people bitched about. I had an interest-only note on a 1.3mm house that I had bought in 04. What people didn't think about was that I put 300k down. I capped it at the max amount so I could write the interest off. It mad doing taxes very simple, "Honey, what did we pay wells last year?" That was all interest. So when the market took a shit, and the guy next to me who had put 3% down lost it and the guy 8 houses away who did the same lost it . . . and so on I saw that the values were shit and it would take at least a decade to get back. The house was worth 1.6 at the time. I wound up selling it for 1.1ish. I took a 200k haircut. The person I sold it to? They lost it a year later, deeper into the downtown. It sat empty for 6 months and sold for 750k. I should have bought it back :) In December of last year, it was worth about 1.5. It took a little more than 13 years to get to where it was. This is what I see coming down the pipeline. That level of shitshow in the stock market.

Who is going to get hit hard?

Airlines, Cruises, Cars, Service Industries, Manufacturing.

Then it will cascade.

Eons ago, I used to partner with 3M in some software. They used to have meetings there and at the start of every meeting, they would have one of their lead economists give a 15-minute presentation. I'd love to hear one now. I know a Nobel laureate in econ but ain't gonna bother him. I will probably pick some info from a guy who runs the cal econ forecast. We are in the same building. He told me that he thinks that this may be a hard spike and then a moderate recovery. He said he expected CA's unemployment to hit close to 30% and then to start to draw down and get in the teens for a bit. He said that we are a long way from getting back to the 3-5% range.

Erotic, I thought that too. Earnings will bring the reality.

Here's the thing. The market sectors likely to have suck earnings have already crashed hard. Airlines are down 60-70%, restaurants 50%+, hotel chains about 50%. Brick and mortar retail is a wipeout.

Markets are recovering because companies like Amazon, Facebook, Netflix and other "new economy" stocks are up 25-35%. Staples like grocery stores are also up. Market swings now seem concentrated in the banking and energy sectors. When will oil demand return? Who is going to eat the loss of bankruptcies, private banks or the Fed? When will the bankruptcies actually happen, and why when almost anyone can borrow at near 0% and many are earning more on unemployment than they were earning while working?

@AZ

To answer the question . . . when will the market 'correct?'

When we have two-quarters of a locked-down economy.

Start looking at sectors and see where the layoffs have occurred. Then work backwards.

Restaurants hit hard.

Casinos hit hard.

Movie theaters hit hard.

Hospitals hit hard.

Airlines hit hard.

What was not hit hard?

Lawyers.

Technology companies (on the whole)

Most white-collar work.

Now you can figure out who is going to take a hit and who is going to win. That will tell you when the market will correct.

Now if we get an opened country and let's say . . . there is a baseball game with fans and there is an infection that happened there, then shit will be all over the news and people will freak the fuck out. When they get home, they ain't out spending money on unnecessary items.

You will also see the market shift if taxes and/or interest rates go up. The more I think about it, I think you are going to see a LOT of countries raise corporate tax rates. They NEED the income.

More whataboutism.

Barr has power to investigate them. Contact Barr or your local FBI with your evidence.

Currently, Burr is under investigation. Try to keep up

Now if they add Loeffler, Inhofe, and Feinstein to the investigation we might actually change things in DC.

I know, I know.

"NEW: Intel Chairman @SenatorBurr is giving up his role as Chairman effective end of day tomorrow.

The FBI seized Burr's phone Wednesday in relation to an investigation about his stock sales amidst the #COVID19 outbreak."

HAHAHAHAHA! From the guy who has to insult literally everyone he engages!

Pot, this is Kettle, I have bad news....

Insults speaks volumes of your personality.

Keep telling yourself that, if it makes your existence a little more bearable.

But whether they come from CA, New England, or whatever area....

Once they accept lower pay from occupation xyz job, being less than a LA or NY income for same job, nothing changes. Your savings and 401 accounts are your wealth, not affecting median income.

Albeit avg Charlotte, Jackson, MS or Memphis home and taxes are lower than Chicago. The occupation counterparts have higher median up north.

I actually enjoy the south more than the north. It's May, and I still can't paint outside. Bike riding season is very, very short here. When I left, I never had plans to ever live here again. I have 4 more Winters and I'm gone.

@8inch, you're right about the lower incomes down here. It's pretty obvious when you drive around here. But I wonder with the huge influx of northerners (myself included) coming to SC, how long till that number rises drastically. But it might be people retiring here too. I only made about 1/3 of my pay this year since I retired. Next year I'll be less. I'm sure I could look it up but I'm lazy lol

My comprehension and median income is higher than the avg Southerner. Stats to prove it.

No matter how snarky you get, the south will remain welfare states and low median income.

8*: reading comprehension is outside of your skill set, obviously.

NOW for the way too long answer!
Historically, over the long-run, stock prices tie into corporate profits, which is a percent of GDP, which is tied to population, inflation and productivity. historically, we had averaged about 6% rate of return over any 40 year period. That equated to 2% population growth, 2% inflation and 2% productivity.

Some will promise 10% ROI, but that has never been close to happening over a period that matches a worker's working years 40-50 years.

What we really care about is inflation adjusted purchasing power of our investments.

If we go back 40 years to 1980, we're talking an S&P of 110. Adjust for inflation puts that at 365 in today's dollars. Using money chimp interest calculator inflation adjusted-ROI of the S&P over the last 40 years is 5%. Much of that is multiple expansion (stock prices disconnecting from corporate earnings).

If the medial household income is $60K and they put away 10% of their income for 40 years, at 5% ROI... back to money chimp compound interest calculator... $761K. Not millionaire, but close...

HOWEVER, excluding out recent period of multiple expansion, historic inflation adjusted return from stock is closer to 4%, which is enough to drop it to $600K.

HOWEVER, we don't earn money equally over our lifetimes. When we're in our 20s, median income is closer to 40K, not hitting the median until well into our 30s, reducing years for our "average" savings from 40 years to closer to 35. That change drops our inflation adjusted total to $450K..

Now, here is where it really takes understanding macroeconomics....

EVEN IF everyone put 10% of their household income into stocks, for 40 years, and got 4% inflation adjusted ROI, not everyone could have $450K worth of stocks.

$450K * 150 million households = $67T Total of all USA publicly traded stocks is $25T.

Okay, but is bullshit number since not every household will have that $450K at the same time. True, you build up to that over your working career, then burn it back down over your retirement... meaning the average would be half that... okay... $200K * 150M = $30T. Closer to the $25T total stocks.

BUT!!!!

80% of stocks are owned by the richest 10%. So, that leaves $5T of stock to buy with the $30T total we would have to have in the market. Work backwards. Divide the $5T in stock not held by the top 10% by 150 million households = $33K each average. Double that by the time we're ready to retire. Most households would be lucky to hold $100K of stock by retirement time.

So... no. We can't all invest 10% of our income, consistently over our working lifetimes, and enter retirement as millionaires.

This leads me to my saying "I don't want an economy where someone can succeed. I want an economy where everyone can succeed."

"Do you think, or ever thought the NYSE was rigged? Or can ppl be extremely lucky and buy n sell and make millions without inside knowledge?"

Why can't both be true? Yes, it is largely rigged. There is enough money in few enough hands, that those few people can move markets in their favor. And yes, it is likely than some people will time it right and make millions of the movements. Just like it is a guarantee that someone will eventually win the lotto.

But can everyone do it? No. Can everyone put in 10% of their income, for 40 years, and come out millionaires? NOPE! Just as not everyone can win lotto.

AZ,

Without hitting me with a Stephen King sized answer...

Do you think, or ever thought the NYSE was rigged? Or can ppl be extremely lucky and buy n sell and make millions without inside knowledge?