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Comment by JKCalhoun | Hacker News Reader

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JKCalhoun

> 1. People keep saying about the market being up recently

So, down 10% from the previous bubble.

> 2. S&P is heavily weighted towards the strongest companies

Good point. Dow is also up almost as much though.

> 3. The market is always very forward looking.

I may be cynical, but I see perhaps 2 to 3 years to regain the jobs we are losing, to see the employment rate return to earlier levels. That's years of depressed spending, and all the other woes of society from high unemployment.

So the market is looking to, what, 2025 or something?

Sorry to pick on you, I still just don't get it.

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> So the market is looking to, what, 2025 or something?

Sure. People are basically betting that stock prices are cheap right now, and if they hold onto them for a few years they'll be back to where they were.

Look at the 2008 recession. If you bought then you'd be doing very well.

They're basically betting that the worst has already been priced-in. In a sense, they're probably betting that we won't get a totally calamitous re-opening of the shutdown, or a totally calamitous fall and winter next year. But, in any case, most people adhere to the idea that stock prices always go up eventually, and therefore they buy accordingly.

Partly because, for those who can, there's no where else to "save" money due to already depressed interest rates.

We're about to hit bedrock, I suspect.

I think the only thing the market has going for it, is that everything else is worse.

Interest rates are negative or near zero, so bonds have the risk of losing value as interest rates rise, as the Fed needs to fight inflation. They also have no real upside, since interest rates are so low.

The Fed has agreed to print unlimited money to prop up businesses that basically don't exist, so having a bunch of cash is not safe, since the Fed is printing so much more of it.

So grossly overvalued stocks may be the best thing now.

> So the market is looking to, what, 2025 or something?

Well, another point not mentioned is, where else are you going to park your money? Interest rates globally are basically <= 0, real estate may be a dicey proposition for many years to come, bond yields are garbage, so... stock market. And considering so many companies are selling at a discount (regardless of whether or not you think that’s the case), dumping money in the stock market is a pretty good bet right now.

You can't even just spend it on crack and hookers. I wonder how many people's net worth is actually going up during the lockdown just because of reduced expenditure.

You're getting downvoted, but I agree — I have at least stopped eating out as much as I had before.

Could you share your thoughts on why real estate may be dicey in the years to come?

Normal investors lack the ability to invest in real estate the same way that wealthy investors do. It's nearly impossible for you and I to invest in a new office complex or similar. So normal investors are stuck with the housing (usually in a single market), existing small commercial, or REITs. Houses are fickle and gains are mostly due to luck (or volume). In my experience, yields on affordable commercial RE are not that far off from broader market yields.

Well, think about what happened to housing after 2008, now consider that this is gonna be 2008 on steroids.

Also, in the near-term (~1 years), you may see dramatically falling home prices as people lose their jobs and the supply of buyers dries up, and you may have difficulty collecting on rent with all the rent strikes going on and tenants who do not have the ability to pay.

Long-term these problems should work themselves out and real estate (particularly in hot coastal metros) should start going up again, but 2020-21 is going to be rough.

Who cares if it takes 3 or 4 years to recover if retirement is 20+ years away? Everyone knows you should buy at the bottom of a recession and people are betting that we've already bottommed out. And even if we haven't, stocks have been so cheap that it doesn't matter that much if we miss the absolute rock bottom. I'm up 60% for this month.

It also helps that some of the worst hit sectors like restaurants aren't generally represented in the stock market.

And as always the stock market isn't anywhere near a holistic view of the economy, it just gets over used because it's a convenient constantly updating number that can get slapped beside any news cast or announcement.

> Good point. Dow is also up almost as much though.

The dow is a subset of large companies in the S&P.

Look at the Russell 2000.

I was responding specifically to this comment that says "look at the Dow Jones instead of the S&P" to make a point that it's the same issue. I agree with parent overall in that I'm surprised the market is holding up as well as it is.

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