More Evidence The Markets Are Irrational

[ProfessorGAC]

DJIA, S&P, NASDAQ & the Russell are all up again. Three straight days.
1500 or more people dying each day, the personal stimulus, which is only a pinch of $ for millions whose regular income has evaporated, and hardly anybody has seen yet, are realities.
But the markets go up 3 straight days.
The models projecting deaths go down, but it still means at least 60,000 CONSUMERS will die.
But the markets go up 3 straight days.
I get bargain hunting but there is no financial logic to this "rally".
Not that anybody should have expected logic.

[Claustrum]

1. You are right.

But moreover, they are supposed to look at the economic reports and they were all bad across the world yesterday, 6.6m new unemployment claim in US yesterday, same bad report in UK and Asia. But somehow, it was up yesterday because reasons......

[exboyfil]

2. Pumping money into the system

As my financial "advisor" says, you can't fight the Fed as he was trying to get me to come off my cash position.

It really is no better than a casino.

As usual savers are the ones that get hammered. Treasury Inflated Protection Securities are now trading at -0.5%. Expect inflation to go hog wild.

[Quemado]

6. My Econcomics 101 teacher told our class in 1975

that the stock market was essentially legalized gambling. And, he was right.

[treestar]

18. Which is why it is now best to have a 401k type

fund for retirement, so the company doesn't offer pensions, and the worker can gamble some on getting a retirement income instead.

[gab13by13]

3. It appears to me that Wall Street doesn't give a shit about GDP,

as long as 6-7 trillion dollars is being pumped into the economy. The Fed and Central banks are buying up bonds and debt.
Also Trump is going to pump billions into the airlines, cruise ships, fossil fuel industry. Who cares about consumer spending when corporations and banks are getting Easter baskets full of money.

[Quemado]

4. 17 million first-time filers for unemployment, and the stock market goes up.

People who work also consume. 70% of the U.S. economy is consumer spending. So, if workers are losing their jobs and cutting back on consumption, you would think the market would go down because of lower corporate profitability in the near future.

Possible reasons for the market to go up in spite of mounting job losses:

Short sellers taking advantage of lower stock prices to buy stock to cover their shorts.
Corporations taking advantage of lower stock prices to buy back shares, reducing the amount of outstanding shares, and therefore, boosting share price.
Retail investors and tourists taking advantage of lower stock prices to get into stocks that they perceive as cheap to buy.

[ck4829]

5. K&R

[shockey80]

7. Yell BOO and the market drops a thousand points.

Sing a happy tune and the market rises a thousand points.

[Hoyt]

8. Markets factored all that in days or weeks ago.

[Maeve]

9. One attempt at explanation

https://www.nytimes.com/2020/04/10/upshot/virus-stock-market-booming.html?action=click&module=Top%20Stories&pgtype=Homepage

Two powerful forces are pushing in opposite directions. Commerce is being disrupted to a degree that seemed impossible just weeks ago. But simultaneously, stock investors are betting that powerful interventions out of Washington — including an additional $2.3 trillion in lending programs from the Federal Reserve announced on Thursday — will be enough to enable major companies to emerge with little damage to their long-term profitability.

It’s a battle between collapsing economic activity and, to use a silly meme from finance Twitter, the federal government’s money printer going “brrr.” In the stock market, at least, the revving of the money printer is winning.

Paradoxically, said Gene Goldman, the chief investment officer of Cetera Investment Management, the shockingly high numbers of jobless claims can even be viewed as helpful to the market, as they increase political pressure on Congress to scale up rescue measures beyond the $2 trillion legislation already enacted.

HOWEVER:

But just because there are reasons for the stock market rally doesn’t mean those reasons are good ones.

Stock prices are always based on what the world will look like in the future, not the present. In the global financial crisis, stock prices bottomed out in March 2009. The economy did not begin expanding again until July, and the unemployment rate would not peak until October.

But current market pricing suggests that investors are counting on a speedy rebound.

“If this doesn’t go on much longer than expected, if it really is a three- to six-month event from the time we turned the switch on the economy off to when we turn it on, then markets have already accounted for that and are looking ahead,” said Jim Paulsen, chief investment strategist for the Leuthold Group. “It could be that the virus stays hot, and this situation stays in place for three or four quarters, and we’re not priced for that.”

[ProfessorGAC]

15. Figured As Much

But, guessing into the future in the middle of massive unemployment, in a consumer driven economy, is not rational.

[Igel]

10. And to think,

school systems are trying to make plans for the fall. The bastards. How dare they not experience crippling angst and terror and even despair. You don't understand, it's not what you would do, so they're insane. Or it's an opportunity think that maybe they are at least partly rational and know more (or think they do) or have other interests.

That's empathy and tolerance. These used to be liberal virtues. They were never ideological virtues.

Somebody needs to figure out how we're going to build thing and feed people in three months. We all can't gather on the hill and wait for Jesus.

As for income.

I worked numbers for Texas last night. I make $60k/year. With typical unemployment, I'd get $521 a week. That's something like 45% of my income. Add in the $600 a week until the end of July, I'd be making 96% of my gross income if I were laid off.

I'd get $521/week if I made $40,000 a year, however. I'd still get the $600/wk. And I'd be taking home 120% of my gross pay in unemployment benefits.

Now pitch in that meaningless $1200.

State unemployment takes a little while to arrive. Always has.

It's different if you're a small business, where ideology can easily get mixed in with how money's doled out, lest the wrong people get money or money fails to get to those unprivileged but with greater rights to the money.

[ProfessorGAC]

16. We Disagree

You're population of one anecdote changes nothing I wrote.

[forthemiddle]

20. Thank you for the rational response

Sometimes I come on DU and swear we are going to spend the next two years in lockdown.
That’s just not going to happen. Other parts of the world are slowly starting to improve and get back to business. It’s not at the same pace as before, but it is happening.

We will experience a few bumps along the way, but we won’t be locked down forever.

[Hortensis]

11. Right or wrong, uncertainty is less.

[Mc Mike]

12. Pyramid scheme, shell game. rec, nt.

[CaptainTruth]

13. Years ago an investor friend told me "The markets are not the economy...

...& the economy is not the markets."

The economy is driven by the production & consumption of goods & services. The markets are driven by investor speculation. They're related, but not the same.

Best investment advice I ever got.

[uponit7771]

14. Trump has been pumping opening at the end of the month that was the reason for the spike this week

[treestar]

17. The arguments the right makes about capitalism

By their arguments, the Treasury should be overflowing, due to the tax cuts.

There is a great demand for PPE, so the enterprising investors should be ramping up productions of those right now. It's been a month too, so you'd think the factories should be built and those applying for unemployment taken care of with jobs there.

They've been claiming this for years, that I should read Milton Friedman so I would understand.

[ProfessorGAC]

19. Read Friedmann

That's funny.
One doesn't need to read anything if tax cuts are supposed to increase government revenues and they didn't.
I don't need to read a theoretical treatise for which there is already contradictory data. And, that data goes back 36 years!
Neither do you.
It's just silly for someone to say that to you.