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Comment by kingsuper20 | Hacker News Reader

The stock market is an odd duck.

What to make of it now? There's both colors of swans at work in terms of the plague, excessive money printing, per Peter Turchin (cliodynamics) a peaking cycle in civic unrest, a potential loss of reserve currency status, big changes in tech that still haven't been digested, low cost of transactions. Lotsa opportunities for froth.

I'm still uncomfortable with it as a store of value. Not many people even owned stocks in the past, which makes historical comparisons a little problematic. It took things like the government heavily encouraging parking money there (401k, IRA, tax law changes, corporate tax law) and greater ease of transaction to put us where we are. You could argue that the entire market is a mania.

edit: Just to indulge my logorrhea for a minute, I wonder to what extent we are seeing an organic change in stock markets, a form of evolution really, that takes advantage of human nature. In the last 40 years or so, it was bound to gather up all the accoutrements of video poker. Marketing and blinkenlights, random payoffs, a house percentage getting scraped off, the fiction of player skill. The payoff is greater than 100% due to it riding the back of GDP growth (and the growth of large companies at the expense of the small) but the science of the casino is built deeply in the human psyche. The stock market has to act the way it does simply to remain attractive to all the primates.

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> You could argue that the entire market is a mania.

Objectively, the big publicly listed companies are growing and have stellar financials. I can think of no better place for someone to invest, other than maybe diversifying into real estate with high demand, if they already have a significant amount invested in public equity markets.

Public equity market prices are also backed by the federal government, at least on a 5+ year (maybe even 3+ year) timeframe per events over the last few decades.

It's worth considering that what you are buying is a dividend stream and/or the possibility of a company being bought, which simply gives you more stock. When you essentially lend money to GOOGL or AMZN, what are you actually getting back besides a story?

Don't get me wrong, in the timespan of an individual's life it may well make sense to heavily buy into this system. I'm just making the point that it's current form is rather new and appears loosely connected to the real world and is subject to change.

To me, the current stock market seems like a fiat currency without the threat of physical force. Maybe the temptation will be to increasingly merge government with large companies in order to keep the plates spinning.

Just because a company isn't distributing dividends doesn't mean you're only buying a story. AMZN still has lots of room to grow. If I'm an investor in AMZN I would much rather them reinvest profits into a data center that will produce even more future profits than distribute the money to me. Once these growth companies top out in terms of their market share they'll pivot to distributing dividends, same as large established companies like Coca Cola

CocaCola currently has a P/E of 32

You own the stock in perpetuity, not just for a year. As long as you don't expect the company to go bust any time soon that's not a bad PE ratio.

As recently as 2011, KO had a P/E of 9.

https://www.macrotrends.net/stocks/charts/KO/cocacola/pe-rat...

There are two ways that a P/E can return to a quasi-normal value. Either the price can go down or the earnings can increase.

The mean and median values, since 1880, are about 15.

"This time, it's different" https://www.multpl.com/s-p-500-pe-ratio

So if earnings increase 3x the P/E goes back down to ~10.

KO has excellent margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x. Food prices have been inflating at 10-15% recently; 15% inflation over 11 years will get you there, and that doesn't include any growth in sales at all. These aren't unreasonable assumptions, given the macro environment: another 1970s inflationary episode would do it. (Indeed, Warren Buffett made a lot of his money investing in Coca-Cola and See's Candies during the 1970s.)

> margins - last time I looked they were around 60%. That means prices * sales only has to increase by 5x to bump earnings up 3x.

I am not sure about the logic (are you assuming marging expansion?) but probably you are trying to say something else than revenue has to increse "only" five-fold for earnings to triple.

> Food prices have been inflating at 10-15% recently;

Sure.

I'm not sure I follow all the arithmetic here (I'm pretty sure that, at fixed margin, revenue would only need to increase by 3x to increase earnings by 3x), but I did follow up to see what Berkshire had paid for Coca-Cola.

This thoughtful Quora post claims that Buffett made his first purchase of KO at a P/E of 29.

https://www.quora.com/What-was-the-P-E-Buffett-paid-for-Coca...

Stock prices are absolutely inflated, and as a small-scale investor I'm scared.

However, I'm not pulling out because realistically, there's no other asset that's safer in the long run. Interest rates are close to zero so returns in bonds are low, inflation will eat away money held in cash deposits and don't even get me started on cryptocurrency, rare sneakers or other "alternative investments". I started investing in stocks in 2017, even then people were warning that we were in a bubble that was bound to burst at some point. Not investing would have missed me several years of above-average returns.

But today, there seems to be a bubble on everything after all the money printing. So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.

>So I'll keep investing in good, underhyped and stable companies and try to weather whatever storm, good or bad, will come in the next years.

This is the obvious strategy, reduce your risk tolerance and go with proven companies. Put your money (fresh from your bank account, not from your portfolio) into moonshots when you can afford to lose them, after that put the moonshot money back into your boring but relatively safe investments. There are low volatility or stable dividends ETFs that specialize in this.

Personally, I'm not smart enough to pick individual stocks.

At some point (perhaps now) Amazon growth is predicated on cannibalizing other companies. After all, the broad market can't exceed the GDP generally for the long term.

My primary point here is not to argue about investment concepts, merely to state a concern about the artificiality of it all. Financialization is real and rather spooky.

The thing is there's a FRACTION of a percentage of people who are "good at picking stocks".

Most PROFESSIONAL stock pickers don't beat the market. And those that do, a tiny fraction can do it consistently over a 5-10 year time frame.

This is backed up by decades of data. But we still have millions of people who apparently think they are smarter than the thousands of professional stock-pickers who have MAs, PhDs and years of experience and do it full-time and still don't beat the market.

And sure, many average joes were wildly successful with GME or whatever the latest meme stock is. Just as many people made a ton of money in the last tech bubble. Check back in 5-10 years...

Exactly. Just like if you get 1000 people in a room, odds are one of them will get a coin toss right 10 times in a row. Doesn't mean that guy is good at predicting coin tosses.

It has nothing to do with me thinking I'm smarter than all those guys. The market is irrational.

I'm counting on being luckier than those guys more than anything.

That's a certainly more rational position than believing your are smarter than the thousands of people with PhDs in finance or CS who pick stocks full time.

Any yes, what people on WallStreetBets are doing is gambling. Which is perfectly fine, I just wish more would acknowledge it.

I agree with this, picking individual stocks is effectively a full time job. Most people looking for a moonshot only want to invest based on a "theme". E.g. you bet on the entire EV market.

Amazon growth has been predicated on cannibalizing other companies since 1995. Bezos was very specific about that in the business plan he presented to investors: he wanted to own all of retail, and has largely succeeded in that.

From a valuation perspective, what's so wrong about that? You want to be on the side taking over the world. Otherwise you're on the side that's getting taken over, and the value of your equity logically trends toward zero.

> he wanted to own all of retail, and has largely succeeded in that.

They have a decent position in online retail, but they are very far from owning all of retail.

> When you essentially lend money to GOOGL or AMZN, what are you actually getting back besides a story

Buying a stock is not lending money to a company. It's purchasing an ownership claim on future earnings realized by the company.

For AMZN, the expectation of its investors is that it should not realize substantial (relative to revenue) earnings now so that it can grow further and thereby increase the long-tail earnings to which shareholders are entitled.

GOOG, on the other hand, is returning money to shareholders now. In fact, they just authorized a program to return another $50B to shareholders. Our tax regime skews payout preferences, so that instead of paying dividends, some companies opt for share buybacks. But the net result is that cash is transferred from the company to its shareholders. You can see GOOGL's buybacks over time here, looks like they returned ~$31 billion to shareholders in 2020: https://ycharts.com/companies/GOOG/stock_buyback .

Where does Amazon get all of the stock for employee compensation? Do they just have a large pool of outstanding stock in reserve?

I'm not sure about Amazon in particular, but generally companies (especially tech companies) hold some percentage of stock in reserve for employee compensation. However, the company can also buy back stock on the open market either to take it out of circulation (and thus increase the value of outstanding shares) or use it for employee compensation. Finally, if the board (as a proxy for individual owners) permits it, a company can issue new shares for any purpose including selling to raise cash for operations, or giving to employees as compensation. This isn't free money, however. New shares tend to dilute the value of existing shares. So owners often prefer to raise money other ways, like debt that doesn't convert to an ownership claim in the way stock does.

I don't know Amazon's specifics, but I believe that's how it's typically done.

It doesn't have to be that large a pool as percentage of the company.

Essentially they create them as they go.

Total shares outstanding plus outstanding stock awards:

    Dec 2011 : 468 million
    Dec 2012 : 470 million
    Dec 2013 : 476 million
    Dec 2014 : 483 million
    Dec 2015 : 490 million
    Dec 2016 : 497 million
    Dec 2017 : 504 million
    Dec 2018 : 507 million
    Dec 2019 : 512 million
    Dec 2020 : 518 million

Existing shareholders lose 1% per year.

> It's purchasing an ownership claim on future earnings realized by the company.

Which, as I said, can be realized via dividends or the sale of the company.

I looked up their dividend returns. It ain't much.

Keep in mind that tax law highly incentivizes the avoidance of dividends.

We'll see (or maybe not). This business of involving the general public in stock ownership is a new thing, it really is new ground to cover.

> Keep in mind that tax law highly incentivizes the avoidance of dividends.

Combining Biden's capital gains tax, Federal estate tax, Biden's stepped up basis for estates, Washington state's estate tax, and Washington state's new capital gains tax, the top estate tax rate is now 70%.

This ensures that tax planning will dominate investment strategies, which usually results in suboptimal investing and subsequently a lower performing economy.

Whatever changes you think investors might react to need to be discounted by the likelihood of them being in a bill passed by Congress.

It’s not something I know a lot about, but it seems likely that Congress will make substantial changes to Biden’s proposals?

Changes depend on time. Biden is past the early magic 100 days and now members of the house (and 1/3rd the senate) are realizing that they need to prepare for their re-election campaign in less than a year. The longer things go on the more concerned they will be.

The democrats have the government today. The most democrat heavy handed set of bills will ensure that republicans take a veto-proof majority of both houses. Different levels of watered down will have different effects. There is a reasonable chance that no matter what they do they will lose the house next election (even passing bills that the republicans would like to author but wouldn't dare!), but the exact set of laws they pass will have a big effect on both who shows up, and how voters change their votes.

Or can be realized in a share buyback program, which are massive. Dividends and buybacks are just slightly differently structured ways to return profit to investors.

> can be realized via dividends or the sale of the company.

Keep reading my comment. Share buybacks are another way of returning cash to shareholders.

> involving the general public in stock ownership is a new thing, it really is new ground to cover.

There have been discount brokerages for 50 years now. I guess that's "new" as compared to how long there has been money, but I don't know that it's "new" in the sense that we can't determine whether buybacks do have the effect of returning cash to shareholders (they do). Share buybacks have been allowed since 1934.

I think a lot of newcomers to stock investing in the past year have been given the wrong ideas about the stock market.

When all of the headlines are about GameStop and Nokia and AMC and some kid who made it lost a lot of money on RobinHood, the stock market can feel like a place for gambling. Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on.

Several times a week there are conversations on HN where commenters can’t understand how crypto currencies are different than stocks or how stocks are any different than gambling or why stocks can have any value without paying dividends.

I suspect many of those newcomers will be shaken out of the market during the next protracted drawdown. It’s unfortunate, because they stand to lose a lot over the course of a lifetime of investing.

> the next protracted drawdown

We should have seen this drawdown last year.

The longer the bubble builds the bigger the bust. We’ve chosen growth over stability, fundamentals, and robustness. Once the U.S. struggles to stimulate its economy through deficit spending it’ll hit a wall. It’ll be fine for people but there will be a massive dislocation in the economy.

I understand this. I'd much rather deal with the bad decisions of yesterday today than tomorrow. I guess for people that won't be alive in twenty years this is immaterial..

Check out the ages of elected officials, most are in the "won't be alive in twenty years" camp so the lack of foresight is unsurprising.

That is part of my reasoning behind my statement. The other part is the desires and concerns of the largest demographics electing these same people.

As long as people are still unemployed there should be no reason for the US with its sovereign currency to struggle stimulating the economy.

Even if you guys would overshoot full employment your current president doesn't seem too frightened by the idea of taxing coins out of existence again.

This is an argument in favor of pushing up inflation as soon as possible. Ideally inflation should be 2% and interest rates should be between 3-4% and it should stay that way forever.

If there is a discrepancy from that ideal then it means that something is going wrong, and the longer that discrepancy lasts, the more things are going wrong. Those wrong things will be discovered as soon as interest rates are back to their normal level.

Why those magic numbers?

> Now that cryptocurrency prices are listed right next to stock prices, many people don’t even understand that stocks are ownership shares in real businesses instead of just another ticker symbol to gamble on.

This distinction is practically useless, unless you own enough shares to have even tiny sway at shareholder meetings. Owning 1/1000000000th of a company doesn't mean any extra value or power to you. The big difference between crypto coins and stock is that (some) stocks pay dividends. The ones that don't pay dividends are just speculative ticker symbols that go up and down in value--no difference from crypto names that go up and down.

There's a large difference, one of those is based on a pyramid scheme with no inherent value, and one is based on a company delivering value to customers.

With the state of the stock market companies can and do go under, but generally those doing something for people dont magically disappear overnight (like any crypto certainly can.)

That's it; that's the difference.

Sure, but this is already priced in. Most equity doesn't go completely down the toilet overnight, but it also doesn't give you spectacular overnight returns.

So it's still a game, only for lower stakes in both directions.

> There's a large difference, one of those is based on a pyramid scheme with no inherent value, and one is based on a company delivering value to customers.

Crypto is mostly a store of wealth, similar to a currency. It's inherit value is that it is fungible, transferrable and scarce. Unlike other currencies, the supply is not at the whims of fed officials and politicians. The difference is that you can't pay taxes directly in crypto. I like it as a hedge.

Do you believe all currencies are pyramid schemes with no inherent value as they're based on nothing?

Currency is transactional, not a store of wealth. I'd say it's a bad idea to store your wealth in currency, absolutely, and I'd cite it's lack of inherent value as the reason why.

Currencies are not based on nothing. They're based on taxation. As long as a huge group of people need a currency to stay out of jail, that currency has value. (And pretty much all currencies in history have had their value imbued in them by threat of violence.)

It's surprising to me how ignorant people commenting here know about cryptocurrencies. I would have thought this group would be immune to being so confidently incorrect but once in a while a topic comes up that I know a bit more about than average and I suddenly realize the Hacker News commenters are no different than any average bunch on a Facebook group but perhaps because they are experts in their narrow field they feel it makes them an expert in any field perhaps. All the better for those of us in the know though I guess: Keep calm and HODL on!

>Crypto is mostly a store of wealth, similar to a currency.

Currencies are not meant to store wealth. They are the exact opposite, a medium of exchange. From a macroeconomic perspective wealth can only exist in the real world. E.g. you own a house, a car or a factory. When you deposit money into a bank account, you are effectively delegating wealth and letting other people use your money to obtain wealth in your place. These people net a return because of their wealth and let you have a share of their returns.

When you hoard currencies like Scrooge McDuck then you are neither spending your money, nor delegating wealth management to other people. The money has been taken out of circulation.

Then there is the other side of money/currency, money is a claim to another person's labor, meaning if you fail to act on that claim the portion of labor that this claim represents has perished because of unemployment. The solution to this problem is inflation. If labor perishes, make the claim to that labor perish as well. If you do not want to lose purchasing power you will have to invest your money. Banks let you deposit and make your money available to those who are interested in investing on your behalf. You can also put your money into financial assets that directly represent physical wealth such as ownership of a company. If banks and financial assets fail, you can still invest your money yourself.

>Unlike other currencies, the supply is not at the whims of fed officials and politicians.

Considering the vast majority of cryptocurrencies meet their demise at the hands of their creators I'm not exactly sure where the difference is. A lot of cryptocurrency people talk about how the background of the team behind the cryptocurrency is very important.

it's funny you think crypto is a hedge when it is highly correlated with sp500. doesn't bitcoin have a beta of like 2 or something?

If anything I would view it as a leveraged bet on the broader market.

I think the stock market has to a large extent (but not entirely) divorced itself from having much to do with the underlying value of companies or companies' business fundamentals. I can't otherwise explain astronomical P/E ratios and meme stocks.

Cryptocurrencies are basically stocks in nothing.

Until you can use them for payments writ large, they aren't even currencies, just speculation bubbles.

Proof-of-work crypto prices are based on 1) mind-share 2) sentiment/momentum 3) institutional backing (hedge funds and companies legitimizing them) 4) price of electricity 5) cost per hash 6) hardware supply 7) legality/illegality/regulation. Proof-of-stake currencies only lack #5, cost per hash. What I'm trying to say is that there's components to the price that can drive purchase/sell decisions.

No, proof-of-work crypto prices are based on supply and demand. Simple as that.

Yes, but supply and demand can be further broken down into these and other factors.

Cryptocurrencies are currencies whose value lies in their technology and adoption. Neither the tech nor its users are 'nothing', they are in fact quite tangible.

Edit: (Some) Stocks that don’t pay dividends still pay you. Most stocks now don’t pay dividends. Either they reinvest in the business (growing the stock’s value) or buyback shares with extra cash, (alternative method to dividends as they’re returning value to you the shareholder.)

I'd preface that first sentence with "Some".

Some stocks that don't pay dividends (or buybacks, or reinvest) straight-up consume investor's capital.

Ethereum will effectively do share buybacks starting in July. They're switching to a system that burns the majority of transaction fees. If share buybacks are equivalent to dividends, then arguably this is equivalent to paying dividends to ETH holders, funded by the fee revenue paid by users.

Yes, this is fine because the person paying for it is aware where the money ends up and the people who receive it know exactly who is giving it to them.

With pump and dumps it is often not known who the beneficiaries are.

Cryptocurrency staking is effectively the same as dividends for investors, though staking rewards are often more predictable.

>why stocks can have any value without paying dividends.

Well, if a company was never going to issue dividends at any time in the future, or do dividend-alternatives like buybacks or a liquidation at the end of its life (not a normal option), or anything else, its shares would be worthless. I could actually imagine a tech company going out of business before its first dividend.

Many have gone bankrupt without any form of dividend. Many others have gone on for years reinvesting in the business before doing a dividend. (I'm counting as buy-back as a dividend - with modern tax code it is currently a better way to do them)

Yes, but everyone is aware of this. Nobody talks about cryptocurrencies "going out of business", even though this is a thing that happens all the time.

> It’s unfortunate, because they stand to lose a lot over the course of a lifetime of investing.

On the other hand, it's worth gambling in stocks because if you don't your going to lose your shirt in the upcoming inflation, so you might as well roll the dice and shot your shit at not winding up poor.

Especially since there are tax increases targeted at the rich coming down the pike that are going to absolutely destroy you if you are middle class or poor, when a mcdouble costs $20 instead of $2 and the minimum wage is $100/hr instead of $15

The problem is options/derivatives trading. That is straight up gambling. There’s a meta market where you bet on the behavior of the market...

While that is a large part of it, it also seems like an unfair simplification, for two reasons:

1. You can construct portfolios of derivatives that are almost equivalent to holding the underlying except at a smaller initial cost. This gives you nothing but flexibility in ownership.

2. Remember that fire insurance is also straight up gambling that your house will burn down. Gambling counter to your interests is what we call insurance, and the proper mix of underlying and derivative is a hedged, lower risk portfolio than just the underlying.

It is ALL gambling, options are just another instrument, they can make your gamble more risky or less risky depending on how you use them.

Except in very rare cases stocks are entirely based on what investors think someone else is willing to pay in the future.

When I buy TSLA stock I’m not gambling on the future of Tesla. I’m investing in electric vehicles. So it’s “value investing” insofar as that’s my motive for investing. Sure I could gamble with plain stocks in the market, but thats not my motive or goal. Others, sure.

Of course stocks are based on what investors think they’re worth. Thats the whole point. It’s not gambling. Tesla is worth a lot of money because people think it is. If you’re susceptible to fomo hype trains and looking for a quick buck, you’re looking at the market as a slot machine, no doubt.

Stocks pay owners other than their value in the market, too. Capitalists look to make money off the market. It doesn't mean it’s all gambling. That’s a little reductive.

When gambling, the house "always wins" over time. With options trading, that's not always the case. Anyone with a gambling addiction would be far better off doing options trading - their chances are much better.

I agree completely.

Downturns are events where many participants learn how the market really works.

It’s an ugly reality check, but thankfully we have them frequently. Otherwise you get really overbought and then events like the tulip mania/bubble happen.

Also, this isn't limited to stocks - back when whale oil was a thing, there were all sorts of booms and busts, depending mostly if a ship came in with or without a whale.

Instead of Wall Street analysts, there were people with telescopes to view the incoming ships as far from port as possible to gain an information advantage.

All of my research in this suggests this behavior is hardwired into human DNA and won’t ever change.

There’s a big difference between saying that a company is growing and has stellar financials, and saying that it is a great stock to invest in. Surely the current price is relevant.

Everyone can agree that Amazon is worth A Lot Of Money. The question is: is it worth $2T? or $3T? or $1T?

But what are you investing in? The probability to sell (dump) <something> to someone in the future for a better price?

> Objectively, the big publicly listed companies are growing and have stellar financials.

If you don't invest for dividends then it doesn't give intrinsic value to the stock you own, it's just a proxy to the odds of your bet to dump it for a profit in the future.

I remember the banking crisis and the money printing after that, it was absolutely assumed inflation would follow, how much was debatable, but there wasn't much debate about the impending inflation.

Didn't happen... for <insert reasons that are now thought to be obvious but nobody knew before hand>.

Who knows what to make of the rules these days.

>"Didn't happen... for <insert reasons that are now thought to be obvious but nobody knew before hand>."

That's not exactly true, MMT was right about that beforehand, this is from 2009:

"There are also those that claim that quantitative easing will expose the economy to uncontrollable inflation. This is just harking back to the old and flawed Monetarist doctrine based on the so-called Quantity Theory of Money. "

From: http://bilbo.economicoutlook.net/blog/?p=661

I feel like saying it won't be 'uncontrollable' isn't the same as calling that there won't be inflation and getting the reason right.

I think you feel that way because you can't appreciate the argument from only a small quote. They get it right.

The reason QE was (is) not inflationary is because that money it's not being spent in the economy, it's only adding bank reserves. Bank reserves make the interest rate go lower, but, it will not go lower than zero, after that you can create all the reserves you want.

Lower interest rates make credit more cheaper, but cheaper credit doesn't influence the economy if nobody is borrowing.

Also, bank lending is not constrained by reserves. Lowering the interest rate will make borrowing more attractive for borrowers, but that doesn't make easier for banks to lend, because they are not constrained by reserves. They are constrained by the number of borrowers to whom makes business sense to lend.

So, the quantity theory of money is wrong and the fractional reserves model is a fallacy. That should be obvious by now. The Modern Monetary Theory guys were saying that, way before 2008.

Only because housing cost usually isn’t included in the definition of inflation for some crazy reason. Housing costs are out of control.

Housing costs is included, I'm not sure where you got the impression it wasn't. And considering you thought its exclusion was "crazy," why didn't hearing that fact prompt you to investigate?

https://www.bls.gov/cpi/questions-and-answers.htm#Question_1...

https://www.bls.gov/opub/hom/cpi/calculation.htm#estimation-...

Some say that inflation did happen, but it ended up in real estate prices, which aren't counted in the formal inflation definition.

I'm not smart enough to tell how true that is.

Yeah, I don't know how someone can look at housing prices say, 1990-2020 and say there wasn't inflation after the housing crisis. House prices dropped, but not as much as they "should" have to eradicate the evident bubble of '00-'08, despite the very public beating housing & banking took. And 2-3 years on they were shooting up again!

Is it really inflation if the cost of a house doubles but the cost of servicing a mortgage halves because interest rates are so low?

This reads to me like "is it really inflation if money just got cheaper?" Which... I think the answer is "yes, that's exactly what it is"?

No, that's just a single overlevered market with, well, the banks laughing all the way to the bank? Because apparently they can get away with it.

Individual markets have crazy price increases all the time. It's happened to gold, oil, wheat, and virtually every tradeable thing ever, including housing. That it happens in one place is no reason to cry inflation.

Evil landlord owns an apartment, he jacks up prices to the maximum possible that people can afford. Fed happens and the value of the apartment goes up. The landlord jacks up prices to maintain a stable price to rent ratio. Yet nobody can afford to rent the apartment.

It's not really inflation, it's something different. The cost of financing has gone down. If financing dries up, real estate prices will go up again.

we have high inflation, CPI is just not a good measurement.

https://twitter.com/LynAldenContact/status/13875210431207587...

https://tradingeconomics.com/commodities

In the meltdown of 2008, about $4 trillion disappeared. The Feds pumped $4 trillion into the economy. Net result: close to zero. That was good, because the result of $4 trillion disappearing was going to be quite a deflationary crash.

The trick was going to be removing that $4 trillion that they injected at the right rate. And what actually happened is that they didn't remove it. Is it showing up now, years later, in asset inflation, because they failed to remove it all this time? I could see that.

Recurring ,reliable revenues especially in large cap tech and payment processing (such as Visa, PayPal, MasterCard) is the main driver of the stock market and is why the market has done so well even though the economy feels weak otherwise and there is unrest. If companies can keep generating profit margins of 10-30%/a year, that is $ that must go to shareholders in the form of buybacks, dividends, or share price appreciation. This is what a lot of people get wrong about the stock market. Big companies, in tech, especial, are more profitable and dominant than ever. Never before have such companies generated so much cash.

This is my sentiment too. People seems to give the market far more importance than what it is in reality: an exchange for second-hand stocks, with money just circling that can never touch the company and the economy. And they also forget that if they don't invest for dividends they are just betting that they'll be able to dump the bag for a higher price in the future.

Owning a stock is more than just dividends. You own part of the company, if it is liquidated you are paid based on the assets of the company.

My point is that market participants seems to not care about what a stock intrinsically is when they choose one to buy (like also voting and governance), they just care about the price of that stock.

>You could argue that the entire market is a mania.

You could also argue that the entire market is simply a reflection of society and humanity in general. As an American, I don't really see the market we've built as any more maniacal than the society we've built. They seem to go hand in hand to me.

What defines how logical/maniacal our society is if not our social institutions?

At the very least it reflects the movement in the US economy from manufacturing to financial services (FIRE) to surveillance-based advertising.

Perhaps the thing to do is to cut to the chase and declare leaves as money (h/t to Douglas Adams).

The market can be pretty irrational but the 401k system means it can't fail. That system ensures it'll always have new dumb money poured into it. We'll bail it out one way or another because the middle class is tied to it.

What an odd system, indeed.

Just be glad the US has a relatively strong saving scheme like the 401k, without it everybody puts their money into real-estate. It has been happening in my country and has been going on for decades, causing house costs vs income to be way out of whack compared to US.

The store of value is the infrastructure, edifices, and monuments of intellectual capital. Geez man, how much more parroting can you do? Would your comment history reveal talk of “NFTs wtf amirite!!!”

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