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Comment by justinzollars | Hacker News Reader

I just can't understand why the stock market keeps going up.

No clue about the stock market.

But here is some interesting real-time traffic congestion data plotted with 2019 averages for cities. Gives a sense of how many people are going back to work.

Scroll down and click "Last 7 days"

Notice SF & London are trending with 2019 averages:

SF: https://www.tomtom.com/en_gb/traffic-index/san-francisco-tra...

London: https://www.tomtom.com/en_gb/traffic-index/london-traffic

Then compare:

Wuhan: https://www.tomtom.com/en_gb/traffic-index/wuhan-traffic

Shanghai: https://www.tomtom.com/en_gb/traffic-index/shanghai-traffic

Beijing: https://www.tomtom.com/en_gb/traffic-index/beijing-traffic

Shenzen: https://www.tomtom.com/en_gb/traffic-index/shenzhen-traffic

Hong Kong: https://www.tomtom.com/en_gb/traffic-index/hong-kong-traffic

This is a great resource. Thanks

This is amazing data...I never knew this was available. Thanks for sharing. What a totally dramatic falloff in the Asian cities.

Interestingly, cities in India seem to be at a lower traffic level than 2019 too. Maybe it's related to other factors?

Interest rates are negative. This causes people to chase and a big factor in this bubble. Companies are borrowing billions for free to do stock buybacks and keep the price going straight up. Nothing lasts forever. When is the big question.

Are people trying to get in and out before the crash to make a quick buck, or are they long and hope to buy at a position cheaper than hypothetical post-recovery prices?

Time not in the market is more expensive than timing the market.

If r/wallstreetbets is any indicator, they have no plan whatsoever and are total idiots. Given Hanlon's Razor, 9/10 people on the market are similar.

/r/wallstreetbets is a joke...

It seems even the mods there aren't so sure everyone knows that:

https://old.reddit.com/r/wallstreetbets/comments/f4a5kp/how_...

I think it's both. This rally has made people think that the market will outperform in the long run, but even those who believe we're in a bubble have some confidence that we haven't gone entirely euphoric yet.

I personally believe we have gotten to the brink of chaos. Foxconn has major issues getting employees back to work, and Apple has shut down stores in China, but AAPL stock is up. AMD is taking market share from Intel, but INTC rallied almost 10% on earnings. Iran launched missiles at a couple of bases housing Americans, and the market rallied the next day. Boeing stock is trading more than double where it was when the 737 Max 8 took its maiden flight. Everyone mentions in passing that equity values are inflated but nobody seems to give a damn.

Maybe people have gotten burned so many times fading the rally during the past three years that they've just given up on trying to call the top.

My money says it's all going to come crashing down eventually. Markets can remain irrational longer than impatient traders can remain solvent, but they have a way of normalizing sooner or later.

I agree completely. The Fed also can't keep QE programs forever. I think if the Democrats win in the fall, it could be a major trigger. There is no reason to think they won't intend to roll back the tax cuts and push for anti-trust against most FAANG seems likely too. Given how FAANG dominates the S&P, it could spiral quickly. The only question is when and how bad will it be. I think we need a real down cycle because just turning down the burner temporarily means the pop will be even worse.

Buybacks don't inflate the market cap, in theory.

What does happen, however, is that many modern buyback deals include a bid that gets more aggressive as the stock trades down. So in a selloff, the buyback actually supports the stock more than in a rally. This reduces downside volatility and prevents panic.

The debt problem is a huge issue, but with interest rates as low as they are, it's not entirely crazy to say "we think we will return more in capital gains from buying our own stock than we will be charged in interest for the loan to do so."

Apparently zoom has been going up because more people will work remotely during this period.

Crazy.

okay. Zoom makes sense.

There's been a grand fiscal policy experiment over the last 12 years unlike anytime before. It has resulted in every asset class losing price discovery mechanisms and basically becoming untethered from fundamentals.

Nobody knows how this will end, or when. Could be months, could be decades.

Relax and enjoy the MMT, friend. Worked for the Romans!

https://static1.squarespace.com/static/5386693ce4b05d183bf2d...

Worked for hundreds of years, right?

Worked for half a century, then slow decline.

I agree with your comment about the fiscal policy experiment, but not with your stated timeline of 12 years. QE was a smart way out of the crisis, but we didn't tighten as we ought've when the economy got up to speed about five years ago. I think of QE as the choke on a carbureted engine; once you get things heated up, you should lean out the mixture. Meanwhile, Bernanke is still out here talking about QE as a forever tool for the Fed.

Fundamentals try to explain and predict valuations; they don't dictate them. Only supply and demand, within the constraints of the market, can control valuations. And to be pedantic, price discovery is faster and tighter today than ever before, and that's part of the reason we have so many lively derivatives markets.

The problem, as you aptly point out, is that this price does not fit any model that is blind to the rates component of equity demand. The word "untethered" is totally appropriate for what's happening in the market; there's a disconnect between price action and corporate earnings growth because there's demand for equities in general when everything else yields almost nothing.

They tried to tighten 5 years ago - the market tanked and they immediately reversed. This is for infinity, can only result in external/internal war.

where would you take your money when interest rates are negative?

(also how do you avoid a crash when interest rates stop being negative)

Bitcoin, Ethereum.

Given the short to long term treasury bond yield inversion in 2019, I'm preparing for a recession in 2021 by keeping 10% cash and clearing off all debt.

I also implemented a higher risk strategy when I rebalanced my portfolio at beginning of year: hedging a few healthcare stocks with predictions of around 6% returns, but could see a higher payoff if covid-19 hysteria sets in.

Skeptical of crypto performance during a recession, so rebalanced to 3%

Stock prices are (generally speaking) about the sentiment of the long term performance of a company. The coronavirus has caused a lot of setbacks but it's only a short term problem. As long as a company can survive this short term loss of productivity there is no need for the stock valuation to be lowered.

> The coronavirus has caused a lot of setbacks but it's only a short term problem

We hope it's only a short term problem. It's far to early to say if this outbreak will be contained somehow, if it will continue into the summer, or if it will go away for the summer and come back in the winter again like the flu.

Containment seems to be working pretty well, if you compare the dynamics of it in China (and on the quarantined cruise ship) to the dynamics of it everywhere else.

Containment in China is not going well. Other countries containment + quarantining China is going well.

That is exactly my point -- other countries are effectively containing the virus to China, and it appears to be working very well.

Only a minority of countries are doing that. It might work now because most cases are in China. If self-sustaining outbreaks run out of control in Thailand and Singapore, will travellers from there be blocked too? It quickly becomes a game of cat and mouse.

This is unlikely. What is more likely is that all of Chinas poor neighboring countries are simply not reporting cases.

North Korea, Mongolia, Nepal, Northern Thailand, North Vietnam, North India, Eastern Russia, will keep this infection going until the next major outbreak next winter.

We have no way of evaluating the truth of this claim. China has not been straightforward in its count of infections and fatalities [0]. The government has banned funerals for victims and ordered the cremation of their remains [1].

[0] https://www.usatoday.com/story/news/nation/2020/02/12/corona...

[1] https://www.aljazeera.com/news/2020/02/china-virus-funeral-o...

Unless you think China is overstating the seriousness of it, this supports my point.

Even if it takes longer, it's not permanent. Most components of the SP500 and other indices are not going to be bankrupted by this.

15-20% of people who get this illness require hospitalisation. In the worst case scenario where it infects a billion people... you can do the maths. There is a huge potential for disruption to production and supply chains, especially in developing countries with developing healthcare systems.

If this situation gets out of control, it could trigger a global recession. Nobody is buying much from Wuhan for the foreseeable future. Imagine what would happen if it spreads across Asia.

Because it's not materially affecting American business.

Until supply becomes so limited it effects sales.

It would affect prices first. The real question mark is if it gets bad enough to where people default on their debt payments (there's over $13 trillion out there today) because the price of basic goods gets too high.

yet. ... and stocks are forward expectations of company performance.

There's a theory out there that traders think the Sanders win(s) mean that Trump will end up winning in the fall, and that that will keep business conditions friendly.

That has a certain ring of plausibility, though I'm skeptical of all explanations of market behavior.

The Fed has been buying treasuries and doing repo market purchases recently, expanding their balance sheet and dumping billions into the financial economy. Those funds have to move somewhere.

1Y Treasuries are yielding around 1.5% right now, while the S&P has rallied 22% in the past year. If you were to park your money somewhere, you would at least consider equities.

The Fed ought to be smoothly unloading some of its balance sheet or otherwise increasing rates, but Mr. Trump doesn't seem too happy about that prospect. Most of the Americans who support him seem to think the Dow Jones is a report card for the economy. Mr. Trump has publicly badgered Powell regarding rate hikes in the recent past.

It definitely feels like people believe the market is going to get even more euphoric, in which case one is tempted to be long in order to ride the bubble all the way up.

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