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(Marketwatch)   Stock market looks like 'hapless Wile E. Coyote, running off the edge of a cliff,' says behavioral economist. Shares of Acme Co. up on the news   (marketwatch.com) divider line
    More: Obvious, Dow Jones Industrial Average, Stock market, Barrick Gold, Berkshire Hathaway, Gottfried Leibniz, Warren Buffett's Berkshire Hathaway, U.S. stock market, S&P  
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964 clicks; posted to Business » on 16 Aug 2020 at 9:05 AM (15 weeks ago)   |   Favorite    |   share:  Share on Twitter share via Email Share on Facebook



39 Comments     (+0 »)
 
View Voting Results: Smartest and Funniest
 
2020-08-16 6:22:02 AM  
'Never before have I seen a market so highly valued in the face of overwhelming uncertainty,' says GMO's Montier

Maybe Montier's never seen the Fed pump this much money into the markets, so he doesn't recognize the rise as a result of inflation rather than an increase in real value.

If this guy is your financial advisor, I'd recommend getting a different one post haste.
 
2020-08-16 7:56:13 AM  
BBBBRRRRRRRTTTTTTT
 
2020-08-16 9:12:55 AM  
But, brrrrrrrtttt would be fine if it was all spent on social programs.
 
2020-08-16 9:28:26 AM  

bfh0417: But, brrrrrrrtttt would be fine if it was all spent on social programs.


Repeal the ACA and enact block grants for Medicaid in a pandemic amirite?
 
2020-08-16 9:35:36 AM  
Are we still pretending that the stock market has a rational connection to the actual economy?
 
2020-08-16 9:40:14 AM  
Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.
 
2020-08-16 9:51:32 AM  
When do you all think this shiat will finally start to collapse?
 
2020-08-16 10:06:55 AM  
relative to gold, its still less expensive than it was in february. i know, if my aunt had balls she'd be my uncle, but all the liquidity injected into the system is going to cause inflation. so while it looks like all time highs are on the way, its still off of what it was in february, relatively speaking
 
2020-08-16 10:13:18 AM  
It's mostly due to the dollar being at epic lows, mainly because the Fed can't pour money out the door fast enough.  That's why gold is going nuts.  But all things come to an end, and someday soon the dollar is going back up.  The market is facing stronger headwinds than I've seen in years, priced for beyond-perfection.
 
2020-08-16 10:31:09 AM  
stock market is for rich winners

economy is for poor losers
 
2020-08-16 10:35:16 AM  
I certainly don't understand the rapid rebound, and I would not be surprised if another drop happens.  For now, all of our accounts are above where they were when the markets hit their peak before the covid crash.  I feel like we should back some cash.
 
2020-08-16 10:38:34 AM  

cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.


You don't get to pick your funds at any time?  I've had employee plans through Fidelity, and Principle.  Both allow you to pick funds with different biases toward different markets - not just stocks or bonds, but allow commodities or technology, small market cap or large, international or national, etc.
 
2020-08-16 10:41:33 AM  
I think another driver is that the indexed funds are gobbling up a lot of the revenue that used to go to small businesses.  This pandemic has brutalized Main Street business.
 
2020-08-16 10:58:12 AM  

MBZ321: When do you all think this shiat will finally start to collapse?


Already has for a great many people, just not for everyone yet.
 
2020-08-16 11:04:53 AM  
Everything I thought I knew about the market went in the bin when Trump was inaugurated. Irrational is hardly a beginning for describing the stock market these days.
 
2020-08-16 11:16:05 AM  

MBZ321: When do you all think this shiat will finally start to collapse?


And there is the problem, it is already collapsing.

Before details of the systemic collapse can be conveyed, first you need to clarify

1. Do you want details of the global economy collapsing (or do you desire a focus on a singular economy)?

2. Is your Focus on the Stock Markets (or a singular market)?

As usual those w/ greater wealth will be able to avoid any negative effects for a longer duration.

This is why homo sapiens are social herd creatures that believe in pecking orders. Cause the longer and better off you live, the further you can spew your genes. We rationalize this behavior by giving it neat names and enduring stories. The truth is we are using wealth to gain safety in the middle of the herd, and if the herd weakens and dies, it doesn't matter how much wealth and power you have.

/ Maybe the winners should start erecting massive statues of themselves w/ ego boosting statements at their base. So the future can know how great they were.
// Got a bit off topic and dark there. That's because the world is heading that way, guess I won't get invited to any parties now.
/// Oh wait we are in the middle of a pandemic, no parties.
 
2020-08-16 11:22:20 AM  

bfh0417: But, brrrrrrrtttt would be fine if it was all spent on social programs.


But that would cause inflation and we don't that!
 
2020-08-16 11:26:14 AM  
Invest in guillotine futures.
 
2020-08-16 11:28:29 AM  

We Ate the Necco Wafers: 'Never before have I seen a market so highly valued in the face of overwhelming uncertainty,' says GMO's Montier

Maybe Montier's never seen the Fed pump this much money into the markets, so he doesn't recognize the rise as a result of inflation rather than an increase in real value.

If this guy is your financial advisor, I'd recommend getting a different one post haste.


Guess you didn't read the associated article:

"It is very hard to see how maturity transformation should engender massive enthusiasm for equities. You might be sitting there reading this, screaming silently that I am a moron and that the missing link is interest rates. To wit, by performing QE the Fed lowers the bond yield and, because this serves as the discount rate for other assets, it drives up the stock market.

I have several issues with this viewpoint. First, as long-term readers will know, I am very skeptical of a clear link between bond yields and equity valuations.4 A little international perspective helps illustrate one of the reasons for my skepticism. Japan and Europe both have exceptionally low interest rates, mirroring the U.S., but they aren't witnessing stock market valuations at nosebleed-inducing levels. Second, even if I accepted the link, there is the problem still that if the interest rate is low because growth is low, then the valuation is unchanged in a simple DDM framework (see "Role of Interest Rates"). And third (and in my humble opinion the killer blow for this argument), QE hasn't actually managed to lower bond yields, which truly emasculates the argument. As Exhibit 7 shows, all three of the completed cycles of QE have actually ended with yields higher than they were when the QE began!"

/yeah I know, "welcome to Fark"
 
2020-08-16 11:32:30 AM  

Glorious Golden Ass: cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.

You don't get to pick your funds at any time?  I've had employee plans through Fidelity, and Principle.  Both allow you to pick funds with different biases toward different markets - not just stocks or bonds, but allow commodities or technology, small market cap or large, international or national, etc.


Exactly - maybe you can't change contributions, but I've always been able to completely shift between funds at any time, for both existing balances and future contributions. And I think I've always had a cash/money market equivalent fund option.

Not that I'd recommend trying to time the market. It seems most of us agree there's no reasoning to short term trends - so consistency is generally the best choice. That said, some will have special circumstances. And it's never a bad time to rebalance.
 
2020-08-16 11:43:51 AM  

cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.


I reallocated my 401k to the self directed brokerage option a few years ago (because I can buy index funds and outperform the target funds because our fund manager is apparently a braindead moron incapable of performing their fiduciary duty and lost money in the past couple years) and have been sitting in cash-equivalent since January. Got out before the crash, stayed out for this insane rise, not even going to consider reinvesting until covid has been under sustained control for 6mo and the slide towards fascism is either arrested or we fall off the cliff.
 
2020-08-16 12:07:42 PM  

Glorious Golden Ass: cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.

You don't get to pick your funds at any time?  I've had employee plans through Fidelity, and Principle.  Both allow you to pick funds with different biases toward different markets - not just stocks or bonds, but allow commodities or technology, small market cap or large, international or national, etc.


Play the Sectors; get your input into the big conundrum; or else be left off at the first stop.  PICK your own Match or else Match to the whole pile.
 
2020-08-16 12:32:39 PM  
If you dump a trillion dollars of any kind, even monopoly money, into the market, it's going to increase prices due to the sudden increase in demand. It should never have been done in the first place if the stock market is supposed to reflect reality, which we know now that it isn't/doesn't. Now it's worse than a casino.
 
2020-08-16 1:03:46 PM  

Nick Nostril: If you dump a trillion dollars of any kind, even monopoly money, into the market, it's going to increase prices due to the sudden increase in demand. It should never have been done in the first place if the stock market is supposed to reflect reality, which we know now that it isn't/doesn't. Now it's worse than a casino.


Even during the worst of the German hyperinflation of the 1920's, if you had your money in stocks you did very well.

Fark user imageView Full Size


And we know how that turned out.
 
2020-08-16 1:04:42 PM  

cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.


You can't adjust your contributions or holdings at any time? Weird. I just rebalanced mine to a much more conservative mix of investments, assuming this is about as good as things are going to get.
 
2020-08-16 1:44:58 PM  

Ishkur: Invest in guillotine futures.


Torch futures.  Once you have a guillotine, you don't need another.  Torches however need replaced regularly.

/that's revolutionary thinking!
 
2020-08-16 2:59:00 PM  

The Madd Mann: Are we still pretending that the stock market has a rational connection to the actual economy?


i never thought that.
 
2020-08-16 3:00:40 PM  

Glorious Golden Ass: cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.

You don't get to pick your funds at any time?  I've had employee plans through Fidelity, and Principle.  Both allow you to pick funds with different biases toward different markets - not just stocks or bonds, but allow commodities or technology, small market cap or large, international or national, etc.


Nope, tightly controlled due to the company being a part of a multinational lottery firm.  There's apparently sanctions on top of laws, covered in regulations, all designed to keep employees from profiting off either the stock market or any lottery anywhere.

Our fund is locked into Principal and we're damned lucky to get a quarterly report.  It's doing ok, but I'm glad we also have separate plans with vanguard.
 
2020-08-16 3:15:03 PM  

cherryl taggart: Glorious Golden Ass: cherryl taggart: Around here, 401K with the employer match is still chugging along, buying in.  I suspect that this is also some part of the equation. Left to ourselves, we would have stopped buying stocks and gone into a safer investment, but the employer says, no changes until open enrollment.  So, we're on this ride for at least another month.  Pretty sure we're not the only ones.

You don't get to pick your funds at any time?  I've had employee plans through Fidelity, and Principle.  Both allow you to pick funds with different biases toward different markets - not just stocks or bonds, but allow commodities or technology, small market cap or large, international or national, etc.

Nope, tightly controlled due to the company being a part of a multinational lottery firm.  There's apparently sanctions on top of laws, covered in regulations, all designed to keep employees from profiting off either the stock market or any lottery anywhere.

Our fund is locked into Principal and we're damned lucky to get a quarterly report.  It's doing ok, but I'm glad we also have separate plans with vanguard.


I'm curious, what is a multinational lottery firm?  What are some of the big names?
 
2020-08-16 3:36:05 PM  

MBZ321: When do you all think this shiat will finally start to collapse?


When the smart money pulls out and leaves the tagalongs, coat-pullers, and rubes holding the bag.

But not to worry. If the smart money screws up and hangs around too long, gets caught in the shiatstorm, the rules will change overnight, and the tagalongs, coat-pullers, and rubes will be left holding the bag.
 
2020-08-16 5:31:08 PM  

ShiftyPumpkin: We Ate the Necco Wafers: 'Never before have I seen a market so highly valued in the face of overwhelming uncertainty,' says GMO's Montier

Maybe Montier's never seen the Fed pump this much money into the markets, so he doesn't recognize the rise as a result of inflation rather than an increase in real value.

If this guy is your financial advisor, I'd recommend getting a different one post haste.

Guess you didn't read the associated article:

"It is very hard to see how maturity transformation should engender massive enthusiasm for equities. You might be sitting there reading this, screaming silently that I am a moron and that the missing link is interest rates. To wit, by performing QE the Fed lowers the bond yield and, because this serves as the discount rate for other assets, it drives up the stock market.

I have several issues with this viewpoint. First, as long-term readers will know, I am very skeptical of a clear link between bond yields and equity valuations.4 A little international perspective helps illustrate one of the reasons for my skepticism. Japan and Europe both have exceptionally low interest rates, mirroring the U.S., but they aren't witnessing stock market valuations at nosebleed-inducing levels. Second, even if I accepted the link, there is the problem still that if the interest rate is low because growth is low, then the valuation is unchanged in a simple DDM framework (see "Role of Interest Rates"). And third (and in my humble opinion the killer blow for this argument), QE hasn't actually managed to lower bond yields, which truly emasculates the argument. As Exhibit 7 shows, all three of the completed cycles of QE have actually ended with yields higher than they were when the QE began!"

/yeah I know, "welcome to Fark"


GMO's specialty is spotting bubbles. Jeremey Grantham, the fund's co-founder, made his name doing it. He spotted the 1989 Japanese bubble, the 2000 Dot-com bubble, the 2008 housing bubble, and now he is calling the current the US market. They are almost always right, but often recognize the bubble early enough that people mock them for being doomsayers.
 
2020-08-16 6:10:53 PM  

Barfmaker: MBZ321: When do you all think this shiat will finally start to collapse?

Already has for a great many people, just not for everyone yet.


"The future is here, it's just not evenly distributed."
 
2020-08-16 7:42:48 PM  

dsmith42: ShiftyPumpkin: We Ate the Necco Wafers: 'Never before have I seen a market so highly valued in the face of overwhelming uncertainty,' says GMO's Montier

Maybe Montier's never seen the Fed pump this much money into the markets, so he doesn't recognize the rise as a result of inflation rather than an increase in real value.

If this guy is your financial advisor, I'd recommend getting a different one post haste.

Guess you didn't read the associated article:

"It is very hard to see how maturity transformation should engender massive enthusiasm for equities. You might be sitting there reading this, screaming silently that I am a moron and that the missing link is interest rates. To wit, by performing QE the Fed lowers the bond yield and, because this serves as the discount rate for other assets, it drives up the stock market.

I have several issues with this viewpoint. First, as long-term readers will know, I am very skeptical of a clear link between bond yields and equity valuations.4 A little international perspective helps illustrate one of the reasons for my skepticism. Japan and Europe both have exceptionally low interest rates, mirroring the U.S., but they aren't witnessing stock market valuations at nosebleed-inducing levels. Second, even if I accepted the link, there is the problem still that if the interest rate is low because growth is low, then the valuation is unchanged in a simple DDM framework (see "Role of Interest Rates"). And third (and in my humble opinion the killer blow for this argument), QE hasn't actually managed to lower bond yields, which truly emasculates the argument. As Exhibit 7 shows, all three of the completed cycles of QE have actually ended with yields higher than they were when the QE began!"

/yeah I know, "welcome to Fark"

GMO's specialty is spotting bubbles. Jeremey Grantham, the fund's co-founder, made his name doing it. He spotted the 1989 Japanese bubble, the 2000 Dot-com bubble, the 2008 housing bubble, and now he is calling ...


Where else is there to put money?  Interest rates are low, bond yields are low, real estate is a crap shoot right now.
 
2020-08-16 8:04:06 PM  

TedCruz'sCrazyDad: dsmith42: ShiftyPumpkin: We Ate the Necco Wafers: 'Never before have I seen a market so highly valued in the face of overwhelming uncertainty,' says GMO's Montier

Maybe Montier's never seen the Fed pump this much money into the markets, so he doesn't recognize the rise as a result of inflation rather than an increase in real value.

If this guy is your financial advisor, I'd recommend getting a different one post haste.

Guess you didn't read the associated article:

"It is very hard to see how maturity transformation should engender massive enthusiasm for equities. You might be sitting there reading this, screaming silently that I am a moron and that the missing link is interest rates. To wit, by performing QE the Fed lowers the bond yield and, because this serves as the discount rate for other assets, it drives up the stock market.

I have several issues with this viewpoint. First, as long-term readers will know, I am very skeptical of a clear link between bond yields and equity valuations.4 A little international perspective helps illustrate one of the reasons for my skepticism. Japan and Europe both have exceptionally low interest rates, mirroring the U.S., but they aren't witnessing stock market valuations at nosebleed-inducing levels. Second, even if I accepted the link, there is the problem still that if the interest rate is low because growth is low, then the valuation is unchanged in a simple DDM framework (see "Role of Interest Rates"). And third (and in my humble opinion the killer blow for this argument), QE hasn't actually managed to lower bond yields, which truly emasculates the argument. As Exhibit 7 shows, all three of the completed cycles of QE have actually ended with yields higher than they were when the QE began!"

/yeah I know, "welcome to Fark"

GMO's specialty is spotting bubbles. Jeremey Grantham, the fund's co-founder, made his name doing it. He spotted the 1989 Japanese bubble, the 2000 Dot-com bubble, the 2008 housing bubble, and now he i ...


According to them,

Fark user imageView Full Size
 
2020-08-16 8:46:51 PM  
As I say in all of these threads:

-The stock market represents the health of publicly traded companies. All of the mom and pop restaurants, salons, etc. that are closed are not represented by the S&P 500.

-Apple, Microsoft, Alphabet, Amazon and Facebook account for ~17.5 percent of the S&P 500. Not only have they been relatively unaffected by the pandemic, it's helped Amazon's revenue soar to record levels.

-The people who the pandemic has put out of work - servers, bar tenders, stylists, etc. - weren't exactly spending lots of money on appliances, homes, new cars, etc. pre-pandemic. In other words, the pandemic wasn't a great equalizer - the people it hurt the most were the poorest.

-Passive investing has overtaken active investing - the market is actually driven by people who are just buying index funds rather than trying to short it. They're playing the long game and keep buying because they don't plan on cashing out for decades.

-Trump and Republican Governors have made it clear that they'll keep the economy open at the expense of human life.

So while the market is overvalued, I don't think think it's that overvalued.

The biggest unknown is what happens this winter with infection rates. Will they get so bad that Governors order a new round of sheltering ini place? Will President Biden issue some kind of one-month lockdown to try and get things under control? What happens if all of the vaccines are a bust?
 
2020-08-16 9:26:45 PM  

MBZ321: When do you all think this shiat will finally start to collapse?


Around election time.

30m still on gov assistance
Covid will be rampaging again
Schools will be forced to shut down or go online
Biden's tax plan and regs will spook wall street


I think there is 79 days until election. So 80 days from now.
 
2020-08-16 10:58:46 PM  

AsparagusFTW: MBZ321: When do you all think this shiat will finally start to collapse?

Around election time.

30m still on gov assistance
Covid will be rampaging again
Schools will be forced to shut down or go online
Biden's tax plan and regs will spook wall street


I think there is 79 days until election. So 80 days from now.


I think the Fed will not allow the market to collapse.
 
2020-08-16 11:39:50 PM  
TedCruz'sCrazyDad:

I think the Fed will not allow the market to collapse.

I mean, they've been propping it up until this point, but that can't continue forever.
 
2020-08-17 12:58:40 PM  

mcreadyblue: Nick Nostril: If you dump a trillion dollars of any kind, even monopoly money, into the market, it's going to increase prices due to the sudden increase in demand. It should never have been done in the first place if the stock market is supposed to reflect reality, which we know now that it isn't/doesn't. Now it's worse than a casino.

Even during the worst of the German hyperinflation of the 1920's, if you had your money in stocks you did very well.

[Fark user image image 551x313]

And we know how that turned out.


So much this.

Just in general, if you want to hedge against inflation, buy stocks, not gold.

There is no realistic way to hedge against TEOTWAWKI, no matter what some fly-by-night coin dealer says. If the clock gets turned back to a point where gold and silver coin are the only credible media of exchange, your portfolio will be the absolute least of your problems.
 
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