Stock markets are booming but the good times are unlikely to last | Hacker News Reader

Stock markets are booming but the good times are unlikely to last

economist.com

39 pointssaq769 comments

I'm heartened to see the comments here because they seem to support what I've slowly been realizing, which is that nobody knows what will happen next. There will always be a steady stream of people telling you both that the sky is falling and that we're on the upswing. As far as we can detect there's a near equal probability of either being true. Writers have their own biases and economic homeostasis is dependent on both extreme perspectives coexisting.

Markets try to be efficient, but can only represent’s today knowledge. If more than a few had a solid idea that it would go up or down, it would have already been there.

Since the situation cannot be described by a scalar, "the sky is falling" and "we're on the upswing" can be correct at the same time, just about different parts of the market.

Of course it can, the article is referring to the S&P 500.

I'm here to tell you the hard truth, that the stock market will remain absolutely static for the foreseeable future, stocks are going to the troposphere!

The performance of the stock market is more related to the money printing by the federal reserve than anything else. Modern economics seems to deny this, and thus will make articles like this.

Which money printing are you referring to?

I think the US printed a couple of TRILLION dollars during COVID. The money hasn’t gone anywhere so if you’re American and don’t have the $80000 per person someone else has your cash.

Edit: not sure why you’re downvoting! It was actually $3.3tn in 2020 alone which is wild.

Wild indeed. When the velocity of it picks up, we will see distortion and it will be hard to decide what a thing is worth. If everyone had a free 80K, i'm not selling my used car cheap anymore.

$3.3tn is $10k per US resident, not $80k.

I think that's more like $9k?

> someone else has your cash

It was never yours. The Fed doesn't give money away, it buys financial assets. What did you sell them?

Also, the Fed has been selling assets lately, which does remove some money from the system.

That was during Covid, but it is 2024 now. The Fed started quantitative tightening in June 2022 and has sold over $1.3 trillion in assets; it also raised interest rates to the highest level in two decades. These are traditionally considered contractionary monetary policies, the opposite of "printing money".

M1 and the Fed's balance sheet are down since 2022, though. What "money printing" do you mean?

The $4T that businesses got handed in march 2020, aka 20% of all USA currency ever printed. Don't think they aren't still playing with it.

But that money has already entered the stock market. It doesn't explain it now.

Interest rates are high now, so in theory investment in the stock market should be lower (and it was for a long time - see all the people investing in treasuries to get the great and safe returns)

You assume it entered the stock market and didn't go elsewhere. There's no way to know where that money went.

2020 is 4 years ago …

It's been living in the reverse repo market, it's slowly trickling out.

> It's been living in the reverse repo market, it's slowly trickling out.

While this is true, the "trickling out" timing doesn't appear to correlate very well stock market increases.

It's true that reverse repos have been decreasing and the stock market increasing. But the timing of movement seems too far out for there to be much of a causal link.

https://www.newyorkfed.org/markets/desk-operations/reverse-r...

https://finance.yahoo.com/quote/%5EIXIC/

Anticipation of forthcoming lowered rates.

Quite a few former crashes coincided with rate reductions.

Hard to tell which caused which.

that's an interesting time frame. It's still up quite a lot.

Say, 2022 is when the Russo-Ukrainian war began, with quite significant consequences for the EU and US economies at the very least.

Wouldn't printing money have an inverse effect on the stock market?

If you devalue a currency by 1/10 and everything else is equal, then everything will cost 10/9 more measured in that currency.

To a point. Who wants to own stocks in a country with hyperinflation. Of course this is a nitpick because it is unlikely to happen to the US anytime soon.

No, stimulus affects the market positively. It was a K-type recovery, the market went up and the real economy didn't. The market dislocated in the 80's and every decade or so we have a crash that makes the rich richer. Whatever comes along, they weasel more money from us and the government.

Another angle is the stock market is tech so how is centralised tech dominance doing? Is EEE going well?

This is exactly what the article is saying - low interest rates set by the fed and corporate tax rates in the last decade led to higher corporate profits, and higher multiples, which was also probably fueled by investors with more cash and corporate buybacks.

https://archive.is/YE5fJ

if technology continues to improve productivity, then the market will continue to rise accordingly.

Is that why it is rising?

Its mostly hype, if AI shows real improvements, chatgpt would need to cost a lot more than $30/mo, considering it takes thousands per user per month.

Sorry, that went over my head: do you estimate ChatGPT costs thousands of dollars to operate per user?

Technology is improving productivity? We're still down half of what overall productivity was 20 years ago.

https://www.thirdway.org/report/missing-the-juice-whats-happ...

That graph is productivity growth, and it's consistently positive.

Productivity can grow without workers reaping the benefits of that growth, unfortunately. And in that case, the stock market grows even more.

Improving productivity isn’t perfectly aligned with what is good for tech stocks. Does Netflix want you to be more productive? Meta?

Google and Amazon maybe.

> Does Netflix want you to be more productive? Meta?

Yes. If you can support yourself while only working 10 hours a week then you have another 30 hours you could be spending on watching Netflix or shit posting on Facebook.

Good point. More precisely I should say does Netflix help you become more productive! They definitely want you to have more free time.

Experts predict 'good times will not last', and yet with a few exceptions like 2008 or 2022, prices tend to go up anyway. There is little evidence to suggest market timing works. Stock prices seemed overextended in 1996 and yet would go up for another 4 years.

This method seems to work pretty well: https://www.philosophicaleconomics.com/2013/12/the-single-gr...

Unique in that it seems statistically verified. Here’s an up-to-date version of the projection: https://financial-charts.effingapp.com/

OK soooooo.... Prediction is there is going to be a correction as % holding stocks are currently close to an all-time high. So what asset am I buying right now?

Do not use the word "verified" here.

I don't know enough to be able to comment on the content, but am nonetheless extremely skeptical that this person managed to find something that

> predicts the market’s future long-term returns better than any other classic valuation metrics to date developed–price to earnings (P/E), price to book (P/B), price to sales (P/S), CAPE, q-ratio, Market Cap to GDP, Fed

Hey! Those were the last two times I invested in the market, saw my investment diminish and stopped paying attention. For what it's worth, I am putting money in again, so let's see.. lol.

Edit. Oh .. I also invested just before the dot com crash. I looked at the historical charts and can't believe my timing.

"Investing", assuming you are regularly employed, shouldn't be a thing you only do at certain rare times. You should put a part of every paycheck into whatever investments match with your risk tolerance. They way you eliminate the risk that you put a big lump sum into the market right before a crash.

I haven't been regularly investing for a few years as I've been saving up for a downpayment. Is that a sound plan?

You should be investing in a low risk, high-liquidity market (treasury, money market) when saving up.

But anyway it is a reasonably sound plan for what you are doing.

Like bonds? When we talk about liquidity, aren't something like questrade ETF's for bonds like VAB.TO for example pretty liquid? I can just sell them any day fairly easily. Then again, the interest rate of my bank is probably more than that right?

You can sell stock any day too, it's just not guaranteed you get out what you put in. What you needs is short-term bond so that you aren't stuck with the interest rate risk (when prevalent interest rate changes, your bond value changes too). Just to make a concrete example, if you buy VAB.TO in 2020, and you want your money now in 2024, you're currently down 20% from your purchase.

You need short-term bond (6-month, 1-month or even shorter) so that at worst you will get 100% of your money out by waiting for the maturity date. Money-market would be super short term: consider them as days-length bond.

But if we are talking about down payment money here, it's probably 100-200k something, which would translate to a few thousand dollars per year. Might not be worth your time, and definitely not worth it if you misunderstand and buy ETF bond or something like that. So yeah, keep it in a high-interest rate saving account is ok.

Cool thanks for the help!

Very few people have the luxury/privilege of investing at their risk tolerance.

>Experts predict 'good times will not last', and yet with a few exceptions like 2008 or 2022, prices tend to go up anyway. There is little evidence to suggest market timing works.

It took a long time for me to accept this. Go back and look at the S&P historically for any date you'd like, and it always looks like we're teetering on the edge of an abyss. That's just the nature of economic growth.

society is a never ending ponzi, as long as people keep having kids.

yeah... about that... https://www.macrotrends.net/countries/WLD/world/birth-rate#:....

I think the warnings in this article are reasonable if you don’t think there’s transformative tech around the corner that is going to lead to huge societal changes. And even if there is a big productivity boost from AI or anything else, the winners and losers will be scattered around in an unpredictable way, you could still lose a fortune on the index funds

Here's the playbook:

* Predict that the good times won't last * When the economy is stable, keep posting that the bad times are around the corner * Repeat until an economic situation occurs (it does not matter how long, just keep repeating) * When an economic situation finally occurs, then say: "See. I predicted this."

Congrats, you are now an economist.

Lol, I was getting bearish but this article makes me bullish

No government wants a recession on their watch so printing goes on and markets keep going up

No one appears to have told Japan that for over three decades.

Thank God. This ski trip is expensive enough already

The stock market in America just seems to have the same function as the property market in China, it's the primary thing everyone dumps their wealth in. If one looks at stock market capitalization versus real economic output the ratio keeps creeping up. So either there's some miracle returns in the future or it's just more and more divorced from the fundamentals.

Sooo, back to gold then?

Opposite, China needs to get off land and that will allow them fiat to make up as much money as they want. Their big problem is that the workers aren't making enough money to keep the system running because it is all grifted by the state. Look at South Africa for what can happen when wealth isn't shared and the people can't support the economy because they are all too poor.

Based on a quick Google search, looks like US stock market cap is about $50 trillion [1] and real estate is $120 trillion. [2]

(There's going to be overlap since businesses own real estate.)

[1] https://siblisresearch.com/data/us-stock-market-value/ [2] https://www.statista.com/outlook/fmo/real-estate/united-stat...

Okay but what's the argument in relationship to my post? As the article notes China's property market is larger despite a stock market cap of 10tn, similar in Japan real estate value is about 5x larger than Japan's stock market cap.

That was the point, in the US stock market capitalization is unusually high compared both to other sectors and the economy at large.

It's plausible to me that the US stock market plays a larger role than in other countries. But you said it's the "primary thing everyone dumps their wealth into," which is a stronger, more surprising claim, and I wanted to see if it was true. Houses still seem to be people's biggest assets?

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