Black Swan Event Under Way

[The Atheist]

They're all on some very strong drugs, mate.

The maths doesn't lie, and there's only one way it can go, and that's down.

I suspect a lot of the action right now is maximising tax losses to take advantage of the US gov't funding $1.7M to everyone earning more than $1M/pa.

As one of the guys posted a few days ago, it's easy to spend when the cost of funds is zero.

US unemployment hits 22M and the market goes up?

[sir drinks-a-lot]

Originally Posted by The Atheist

They're all on some very strong drugs, mate.

The maths doesn't lie, and there's only one way it can go, and that's down.

What is the "it" that can only go down? The stock market? Because there is no math that shows that.

[The Atheist]

Originally Posted by sir drinks-a-lot

What is the "it" that can only go down? The stock market? Because there is no math that shows that.

Yes, I'm talking about the sharemarket, and with unemployment and contraction of GDP across the world, the maths is dead easy - the market can only go down.

What you're seeing is the result of a massive funds injection into Americans' pockets combined with blind optimism and a total lack of understanding of the maths.

Did the sharemarkets recover after the GFC the way they are now? Nope.

So why is it now? People are scared, and a way of trying to overcome that fear is to be optimistic. It's exactly the same as buying 500 rolls of toilet paper.

[sir drinks-a-lot]

Originally Posted by The Atheist

Yes, I'm talking about the sharemarket, and with unemployment and contraction of GDP across the world, the maths is dead easy - the market can only go down.

What you're seeing is the result of a massive funds injection into Americans' pockets combined with blind optimism and a total lack of understanding of the maths.

What "math" are you talking about? You haven't provided any.

And there is no math that says the market can only go down.

[blutoski]

Originally Posted by sir drinks-a-lot

What "math" are you talking about? You haven't provided any.

The Atheist is not big on showing his work. Perhaps his formulae are proprietary.

Originally Posted by sir drinks-a-lot

And there is no math that says the market can only go down.

Shhh. Don't interrupt the swami when he's prognosticatin'

[Minoosh]

My mom's portfolio manager called yesterday. My portfolio too. This bank has a lot of very wealthy clients; we're just middle-class investors. So we're not super-important clients. I decided at least a month ago, probably six weeks, to stay the course, not because I was particularly hopeful but because the alternative to equities didn't seem all that great either. I didn't want cash, real estate, gold, or guns, ammo and canned goods. (Except for maybe the canned goods).

She seemed relieved at my laidback attitude. I appreciated her call, which seemed almost totally social. I thought when Mom died (she's 95) her stuff all had to be liquidated, but it doesn't. I'm underemployed but still hope to avoid raiding my IRA. My "good" job disappeared in the last recession and I don't think I'll save a whole lot more money, but with no pressing need to sell things off in the next year or two I'm riding it out just because I'm not sure what else to do.

[sir drinks-a-lot]

Originally Posted by Minoosh

She seemed relieved at my laidback attitude.

Reminds me of John Bogle's Investment advice of "don't do something, just stand there!"

I'm taking a similar approach and being pretty passive with my investments.

[blutoski]

Originally Posted by Minoosh

My mom's portfolio manager called yesterday. My portfolio too. This bank has a lot of very wealthy clients; we're just middle-class investors. So we're not super-important clients. I decided at least a month ago, probably six weeks, to stay the course, not because I was particularly hopeful but because the alternative to equities didn't seem all that great either. I didn't want cash, real estate, gold, or guns, ammo and canned goods. (Except for maybe the canned goods).

She seemed relieved at my laidback attitude. I appreciated her call, which seemed almost totally social. I thought when Mom died (she's 95) her stuff all had to be liquidated, but it doesn't. I'm underemployed but still hope to avoid raiding my IRA. My "good" job disappeared in the last recession and I don't think I'll save a whole lot more money, but with no pressing need to sell things off in the next year or two I'm riding it out just because I'm not sure what else to do.

My wife's an MD, so her account manager / investment advisor is calling weekly. I'm guessing some of his clients are freaking out. Not us, we're like you.

Also: gold bugs have been knocking door to door here, trying to sell us their worthless mine stocks.

[blutoski]

Originally Posted by The Don

Hedge funds are indeed very profitable for those who run them, but not necessarily for those who invest in them.

Then again, they're not really designed to outperform the market on a regular basis. The clue is in the name, they're there to provide a hedge against failure in regular investments.

This article highlights that 2019 was the first year in which hedge funds on average beat the market for 5 years. Of course individual funds can beat the market, sometimes for long periods of time but they tend to revert to the mean in the long term.

https://www.barrons.com/articles/hed...rs-51553284144

One interesting exercise that was cancelled a couple of years ago was the Canadian newspaper called the Financial Post, they did a running experiment annually where they got a wind up santa toy, laid out their stock list pages from their paper on the floor, wound it up a bit, and bought the stock it finally settled on when the spring wound down.

The toy consistently outperformed managed funds, and on average, matched the TSX performance. However, the gag was shelved when funds organized and threatened to pull their advertising. Notably, they didn't threat to sue for libel. They probably knew the facts were true, just not helpful.

[Meadmaker]

Originally Posted by The Atheist

Yes, I'm talking about the sharemarket, and with unemployment and contraction of GDP across the world, the maths is dead easy - the market can only go down.

No in this case, you are wrong. There's no maths that determine short term market prices. It's psychology.


One of the things I took away from that book on corporate finance that I read was how to value securities, and there is indeed math, or maths, that dictate that. The fair value of a security is equal to the net present value of all future cash flows generated by that security. That's the math. The problem is that with stocks, it's impossible to know the future cash flows that the stock will generate, so you can't actually do any better than estimate the price based on what you think the future cash flows will be. However, one thing is fairly certain, those cash flows will be generated over 10, or 50, or 100 years, not over the next six months.

Profits will go down over the next six months. That much is clear. However, what they will do over the next five years is not so predictable.

[sir drinks-a-lot]

Originally Posted by The Don

Hedge funds are indeed very profitable for those who run them, but not necessarily for those who invest in them.

Then again, they're not really designed to outperform the market on a regular basis. The clue is in the name, they're there to provide a hedge against failure in regular investments.

This article highlights that 2019 was the first year in which hedge funds on average beat the market for 5 years. Of course individual funds can beat the market, sometimes for long periods of time but they tend to revert to the mean in the long term.

https://www.barrons.com/articles/hed...rs-51553284144

Hedge funds are mostly profitable for their managers due to the two and twenty fee structures. They started back in the 40s using market neutral techniques which is where they got the name, but most of them haven't been hedged or market neutral for a long time and they're really just best seen as alternative (and usually bad) investments. There may be some diversification benefit in some of them, but...

[blutoski]

Originally Posted by Meadmaker

No in this case, you are wrong. There's no maths that determine short term market prices. It's psychology.


One of the things I took away from that book on corporate finance that I read was how to value securities, and there is indeed math, or maths, that dictate that. The fair value of a security is equal to the net present value of all future cash flows generated by that security. That's the math. The problem is that with stocks, it's impossible to know the future cash flows that the stock will generate, so you can't actually do any better than estimate the price based on what you think the future cash flows will be. However, one thing is fairly certain, those cash flows will be generated over 10, or 50, or 100 years, not over the next six months.

Profits will go down over the next six months. That much is clear. However, what they will do over the next five years is not so predictable.

This is why - and I don't want to come across as singling you out on this, it's just that you were obliging enough to present a strategy and its rationale earlier - this is why I don't think this is the time to value search.

Specifically, I'm referring to the idea that this would be a time to sort out the companies that might bounce back earlier from those that might languish longer, or fail outright. The problems are psychological here too. You're not the only one thinking this, for one thing. The disproportionate demand will neutralize the discount, they will be fairly priced or overpriced.

Secondly, the market as a whole already has a baked in future discounting. This means that there's *already* a bias toward overvaluing nearer term earnings vs long recoveries, further overpricing those stocks that are going to recover earlier.

This doesn't mean I think you're making a mistake - just that stock valuations involve too many recursive game theory scenarios, and ultimately I think this just means performance is unpredictable and lean toward broad index funds as the best way to mitigate this.

[The Atheist]

Originally Posted by sir drinks-a-lot

What "math" are you talking about? You haven't provided any.

I most certainly did.

The IMF is predicting a decline in GDP, to the tune of nine trillion dollars: https://blogs.imf.org/2020/04/14/the...at-depression/

USA already has unemployment at never before seen levels, with 22 million already out of work, and that number will climb considerably.

That means far reduced earnings, and that means less value in shares.

Originally Posted by Meadmaker

No in this case, you are wrong. There's no maths that determine short term market prices. It's psychology.

Nope - the psychology is driving it up, reality says it goes down.

Originally Posted by Meadmaker

The fair value of a security is equal to the net present value of all future cash flows generated by that security.

If you think earnings will only be impacted for six months, I'd say you're well short. I think the IMF's prediction is overly optimistic as well. I've already stated the world economy's hit will be more like $20T and I'll stick with that.

This is only the very start - even if you allow for 100 times as many cases as currently showing, that is a mere 3% of the world's population, and I don't think the factor is anywhere close to 100 times. Based on current evidence, it's 5-10 times more, so probably as little as 0.3% of the population has been infected so far.

The idea that there's any value in shares in the Dow while America isn't even close to having the epidemic under control is laughable.

Give it time. I'll be happy to revisit these numbers in a year. Much like arguments over the number of people Covid's killing, I see no point arguing about it when we'll have the proof of what actually happened.

[blutoski]

Originally Posted by The Atheist

I most certainly did.

The IMF is predicting a decline in GDP, to the tune of nine trillion dollars: https://blogs.imf.org/2020/04/14/the...at-depression/

USA already has unemployment at never before seen levels, with 22 million already out of work, and that number will climb considerably.

That means far reduced earnings, and that means less value in shares.

Which we see already. Why would it go down further?

Originally Posted by The Atheist

Nope - the psychology is driving it up, reality says it goes down.

Why?

Originally Posted by The Atheist

If you think earnings will only be impacted for six months, I'd say you're well short. I think the IMF's prediction is overly optimistic as well. I've already stated the world economy's hit will be more like $20T and I'll stick with that.

OK, so it's not 'the' numbers - it's your gut feeling?

Originally Posted by The Atheist

...The idea that there's any value in shares in the Dow while America isn't even close to having the epidemic under control is laughable.

Do you mean, the valuation should be $0?

Originally Posted by The Atheist

Give it time. I'll be happy to revisit these numbers in a year. Much like arguments over the number of people Covid's killing, I see no point arguing about it when we'll have the proof of what actually happened.

Hm. That seems to contradict what you've been doing in the thread, which is forecasting.

[sir drinks-a-lot]

I was asking for the math being talked about here:

Originally Posted by The Atheist

Yes, I'm talking about the sharemarket, and with unemployment and contraction of GDP across the world, the maths is dead easy - the market can only go down.

I was expecting actual math, like equations and stuff showing that the market can only go down.

Also in the same comment above you said that the recent market gains were due to "blind optimism and a total lack of understanding of the maths." Do your math equations not account for blind optimism and other investors not understanding math? If so, they're probably not going to be very effective at predicting the movements of the markets, let alone showing that the market can only go down!

[Roger Ramjets]

Originally Posted by The Atheist

The IMF is predicting a decline in GDP, to the tune of nine trillion dollars: https://blogs.imf.org/2020/04/14/the...at-depression/

USA already has unemployment at never before seen levels, with 22 million already out of work, and that number will climb considerably.

That means far reduced earnings, and that means less value in shares.

It's pathetic that the health of a country's economy is defined by 'GDP' and 'the share market'.

Yes, there a 22 million people out of work, but this time it's different. People aren't out of work due to shenanigans in the finance industry, or lack of demand, or lazyness. They are staying at home to stop people dying. This 'unemployment' is quite different to normal, and will be a net positive in the long run. The alternative would be much worse.

The nearest equivalent I can think of is WW2. We took an enormous hit as resources were diverted to fighting off the axis powers, but afterwards achieved long periods of economic expansion, increased employment and improved living standards. The same thing will happen when this is all over (assuming we don't screw it up and lose the fight).

There's a big shakeup going on right now. When we get through it a lot of things will have changed. Some industries will be gutted, while others find new ways to expand. But in the end we still have everything we need for a solid economy - plenty of natural resources, advanced technology, a healthy population, and sufficient demand to bring it all together. As people are now having to live on less they may continue to do so, and that may also be a good thing. Money spent on over-consumption is wasted, and hurts us more than we know.

If GDP is a bit lower than it was or speculators don't make as much on the stock market it might even be for the best. The virus has shown that we can survive without these 'indicators', and we might even look towards a future where we aren't slaves to them. Governments around the World have stepped in to control the supply of goods and services because private enterprise could not, proving that the 'invisible hand' is a myth. Some countries are now trying out universal basic incomes, where the unemployed are no longer treated like they have some kind of moral failing.

These are changes that we will need to implement in the future anyway when robots take over our jobs etc., only the virus has made it acutely necessary. Just a pity so many people have to die to show us the way.

[blutoski]

Not my site, but people I've interacted with through a shared intersection of skepticism and personal finance.
(and they're also Canadian)... are the Rational Reminder podcasters.

Link: [Rational Reminder podcast]

Episode 90, "Bear markets: always different, always the same" seems on topic.

[The Atheist]

Originally Posted by blutoski

Which we see already. Why would it go down further?

Because the current dead cat bull is being driven by hope and is ignoring those fundamentals.

Originally Posted by blutoski

OK, so it's not 'the' numbers - it's your gut feeling?

Nothing to do with gut feeling - the numbers are obvious. Some people take longer to figure them out. The IMF forecast assumes a return to "normality" in Q2, and nothing I've seen indicates that is even remotely likely.

People are basing their buying on thinking we're at the peak, which ignores the example of Italy, where they're a month into extreme lockdowns and have barely managed to reduce infections & deaths.

Originally Posted by blutoski

Do you mean, the valuation should be $0?

Clearly not.

You really do seem to be being deliberately disingenuous here, but hey, it's free to type, so be my guest.

Originally Posted by blutoski

Hm. That seems to contradict what you've been doing in the thread, which is forecasting.

There's more confirmation of that idea, because it's a complete mis-representation.

I'm saying I've made my prediction and the time to worry about it being right or not is when things do return to the prior normal.

Originally Posted by sir drinks-a-lot

Also in the same comment above you said that the recent market gains were due to "blind optimism and a total lack of understanding of the maths."

Again, the proof of that will be where the market goes from here.

If it shrugs off any further effects of the downturn, I'll have been wrong and will gladly say so.

[sir drinks-a-lot]

Originally Posted by The Atheist

Again, the proof of that will be where the market goes from here.

If it shrugs off any further effects of the downturn, I'll have been wrong and will gladly say so.

No, where the market goes from here won't prove anything. We're not disagreeing about the direction the market is going to go, but on whether or not there is any math according to which it "can only go down". I maintain there isn't, and your mathless posts are starting so suggest I'm right.

ETA: In fact, it looks like the market has gone up since your statement. Using the Wilshire 5K as a proxy for "the market".

[Emily's Cat]

Originally Posted by sir drinks-a-lot

Reminds me of John Bogle's Investment advice of "don't do something, just stand there!"

I'm taking a similar approach and being pretty passive with my investments.

I'm going with the "bury my head in the sand" approach, and just pretending that I don't have any investments. I'll look at them in a couple of years I suppose.

[blutoski]

Originally Posted by The Atheist

Because the current dead cat bull is being driven by hope and is ignoring those fundamentals.

How do you know this? Is this a fact or are you just describing a personal hypothesis?

Originally Posted by The Atheist

Nothing to do with gut feeling - the numbers are obvious. Some people take longer to figure them out. The IMF forecast assumes a return to "normality" in Q2, and nothing I've seen indicates that is even remotely likely.

OK, so... what numbers? You're saying that the IMF's numbers are wrong. So, not *those* nubmers. How do you pick and choose numbers? This is where I was going with the 'is it your gut feeling' question.

Originally Posted by The Atheist

People are basing their buying on thinking we're at the peak, which ignores the example of Italy, where they're a month into extreme lockdowns and have barely managed to reduce infections & deaths.

Mm. Not necessarily. I don't buy based on anything, for example. Many investors analyze with a very long term amortization. As mentioned above, my investment timeline is 45 years at this point.

Originally Posted by The Atheist

Clearly not.

It's not clear, since you literally said the idea they had 'any value' was laughable - your text is confusing.

Originally Posted by The Atheist

You really do seem to be being deliberately disingenuous here, but hey, it's free to type, so be my guest.

I am not being deliberate. You said in that post that there's no point in forecasting... in a thread where you've been forecasting and defending the principle of forecasting as an investment strategy.

Originally Posted by The Atheist

There's more confirmation of that idea, because it's a complete mis-representation.

I'm saying I've made my prediction and the time to worry about it being right or not is when things do return to the prior normal.

I appreciate the explanation. It makes more sense now.

Originally Posted by The Atheist

Again, the proof of that will be where the market goes from here.

If it shrugs off any further effects of the downturn, I'll have been wrong and will gladly say so.

My position was not that the market will go up or down; but rather, that when predictions are fulfilled, it's chance rather than ability.

If the market performs as you expect, how would you distinguish between being correct through your analysis vs being correct by chance?


As I was saying earlier: my approach to investing was informed over the years through skepticism, and I have a lot of analogies with claims like water witching or remote viewing. The claimants are correct some of the time, just by chance. The challenge is to build an experiment to distinguish between when the hits are chance vs demonstration of ability.

How would you propose we test the hypothesis that you can guage market value?

[Meadmaker]

Originally Posted by Emily's Cat

I'm going with the "bury my head in the sand" approach, and just pretending that I don't have any investments. I'll look at them in a couple of years I suppose.

I have a tendency to watch my investments much more closely in bull markets than in bear markets.

[The Atheist]

Originally Posted by Roger Ramjets

It's pathetic that the health of a country's economy is defined by 'GDP' and 'the share market'.

How else do you want to define it?

Number of people living in relative poverty? Number of millionaires?

Originally Posted by Roger Ramjets

Yes, there a 22 million people out of work, but this time it's different. People aren't out of work due to shenanigans in the finance industry, or lack of demand, or lazyness. They are staying at home to stop people dying. This 'unemployment' is quite different to normal, and will be a net positive in the long run.

How long is the long run?

When will the hotels & restaurants re-open? When will international air travel resume?

In the medium term - 2 years, say - the unemployment numbers in America will be mind-boggling. If you think the end of the virus will mean a quick return to the previous normal, I think you're wrong.

Originally Posted by Roger Ramjets

The alternative would be much worse.

Which alternative do you mean?

Originally Posted by Roger Ramjets

The nearest equivalent I can think of is WW2.

A much better guide is the 1929 depression, which is why IMF use it as a guide rather than WWII. Once the war ended, demand responded immediately. If the virus died out tomorrow, I'd suggest air travel would still take months to return to normal, and it doesn't show any signs of miraculous disappearance so far.

Originally Posted by Roger Ramjets

Some countries are now trying out universal basic incomes, where the unemployed are no longer treated like they have some kind of moral failing.

Sure, some countries have provided much saner responses than others.

Whether it leads to lasting, positive change, I wouldn't be betting my life on it. I suspect the recovery will be the worst thing that ever happened, as CO2 and other climate-negative emissions will skyrocket due to infrastructure spending on oil- and coal-dependent projects.

[blutoski]

Originally Posted by Meadmaker

I have a tendency to watch my investments much more closely in bull markets than in bear markets.

I'm the opposite lately, because I participate in communities that talk about investing and early retirement, and I want to demonstrate that I practice what I preach. I provide weekly updates even though the information is all out there for people to confirm independently.

As of this morning, I'm down 5% from my absolute peak, and rolled back to January's valuation, so only a few months' growth lost. And this is with zero speculation or market timing or fancy options trading or leverage or anything like that. And I just have a boring middle class job at the phone company, no high earning IT stuff.

I'm about 2 years into the 3 year hours requirement for taking the CFP exam, which I am looking forward to doing as a side gig after taking pension at my current employer in about 2 years.

[blutoski]

Originally Posted by Roger Ramjets

It's pathetic that the health of a country's economy is defined by 'GDP' and 'the share market'.

This is a misunderstanding: market performance is not strongly linked to GDP.

In fact, most of the research shows that the weak linkage is slightly negative: your share performance is slightly negatively correlated with GDP growth.

[blutoski]

Originally Posted by The Atheist

A much better guide is the 1929 depression, which is why IMF use it as a guide rather than WWII. Once the war ended, demand responded immediately. If the virus died out tomorrow, I'd suggest air travel would still take months to return to normal, and it doesn't show any signs of miraculous disappearance so far.

That's not the reason they chose the depression vs WWII, and the IMF explained their rationale.

Specifically, WWII destroyed capital, which needed investment to replace it. And to correct your statement above, the economy didn't bounce back immediately after WWII. The global economy was in a depression until arguably well into the maybe 1952ish because of productivity constraints. This disanalogy is why IMF thought it was a poor comparison. The factories aren't bombed to ash, they're just idle, like in the depression.

Resuming productivity will not be quick or easy, but it's not going to require a Marshall Plan.

The influence on stock prices is: what's the impact to future earnings? There's an argument that the current stock prices reflect a calculation based on available information, and they aren't over or under valued. They will probably continue to fluctuate as novel information comes available.

The keyword there is 'novel'. Bad news announcements that are expected have already been priced in. They're just validations to investors who have already made estimates that match. And sometimes bad news is a little less bad than expected, so the novel information is net positive and prices might rise after a bad announcement to accommodate.

We experienced a period of speculation and confusion with conflicting and widely ranging forecasts for awhile, and we saw a 25% plunge in US equities. Uncertainty increases the risk premium, which affects prices, but it also flushes out the people who were at too high a risk level as they panic sell. It's possible that this was too pessimistic and emotional, and now we're seeing a partial and more rational recovery and stablization as more consistent economic forecasts are emerging. ie: maybe it's only a 15% hit to forward earnings instead of 25%.

I'm not saying any of these things are true, but hopefully demonstrating that whatever happens, we can spin a story about it, like the diviners when they succeed or fail.

[The Atheist]

Originally Posted by blutoski

And to correct your statement above, the economy didn't bounce back immediately after WWII.

You're correcting a statement I didn't make.

I specifically said demand returned immediately.

Originally Posted by blutoski

The factories aren't bombed to ash, they're just idle, like in the depression.

Really? American factories were bombed to ash?

What years were American factories bombed?

Originally Posted by blutoski

Resuming productivity will not be quick or easy, but it's not going to require a Marshall Plan.

Kind of is, though, because spending on infrastructure projects is exactly the same.

Originally Posted by blutoski

I'm not saying any of these things are true...

This is why I say let's wait & see. With all of 1% of the world's population infected so far - at the highest possible estimate - we're a long way from the end of the tunnel.

[blutoski]

Originally Posted by The Atheist

You're correcting a statement I didn't make.

I specifically said demand returned immediately.

But it didn't. Demand is measured in dollars, there was widespread unemployment, poverty and starvation, demand plummeted. Global GDP dropped considerably, IIRC 1947 was the low point in that decade. It definitely was for Canada and Australia. I used to collect coins as a kid, and 1947s are among the rarest. The mint almost shut down, there was so little commerce, so little need for new coins, the natural shrinkage of recovering damaged coins wasn't reducing the currency fast enough to accommodate the contracting economy.

Originally Posted by The Atheist

Really? American factories were bombed to ash?

What years were American factories bombed?

Of course not. The postwar recession was global, the capital investment requirements that were sponging up US resources were being spent in Europe and Asia instead of domestically.

The wealth drain was experienced without even one bombing here, but it was obviously worse outside NA. England didn't cease rationing until 1952, which is where I got my round numbers in the previous post. There is an argument that the British WWII economic slump from slow capital replacement continued into the 1970s.

Originally Posted by The Atheist

Kind of is, though, because spending on infrastructure projects is exactly the same.

I don't understand what you mean. Same as what? Military occupations of defeated rivals?



In any case, it's not me you're arguing with. I'm conveying the IMF's rationale for choosing the Great Depression as a better analogy for COVID19 than WWII. Capital is idle, but not destroyed. Employing strategies for maintaining liquidity make more sense than strategies of new capital investment, is their advice.

Originally Posted by The Atheist

This is why I say let's wait & see. With all of 1% of the world's population infected so far - at the highest possible estimate - we're a long way from the end of the tunnel.

For sure, there's going to be an impact felt for years, possibly forever, but I really feel we're having different conversations here.

[Roger Ramjets]

Originally Posted by blutoski

This is a misunderstanding: market performance is not strongly linked to GDP.

I didn't say it was. 'Market performance' and GDP are not the same, and neither of them measure real economic health.

Problem is, people think they do. Governments make decisions based on them, and voters decide who to put in power depending on them. But when the stock market is running up it is in a bubble that will soon crash, and when it isn't we are in a recession or worse (yes, shares not going up or down is the worst possible scenario - according to share market speculators).

GDP keeps going up mainly because the population keeps going up. This 'growth' does more harm than good. All it does is burn up finite resources faster and push us closer to destruction. But 'investors' don't care. The only thing they care about is seeing their bank balance go up. They would sacrifice anything to that. Then they convince us that this is what matters.

Quote:

In fact, most of the research shows that the weak linkage is slightly negative: your share performance is slightly negatively correlated with GDP growth.

Share performance should be related to business activity. But due to all the speculation it is essentially random, determined more by 'sentiment' than actual performance. This then affects business activity, creating an unstable feedback loop that causes the 'business cycle' of boom and bust - for no real reason. GDP is obviously related to this, but not directly due to delays in the feedback loop.

If GDP went down permanently it could be a good thing, because it indicates lower consumption and less destruction. Over-consumption is killing the environment and us. The lockdowns we have been forced to implement to avoid dying are doing more to improve the environment and our health than any of the pathetic plans we attempted to implement before, and yet it hasn't caused the economy to implode. I knew it wouldn't of course, because when something needs to be done it gets done.

But investors are beside themselves worrying about whether their nest eggs will go down in 'value'. Because you see, if you don't have an ever-increasing fortune tucked away (for a future you may never see) then you are ruined.

[Roger Ramjets]

Originally Posted by The Atheist

With all of 1% of the world's population infected so far - at the highest possible estimate - we're a long way from the end of the tunnel.

Yeah, let's wait until everybody is infected and 30% die. Then what would would we have? For the survivors, plenty of light at the end of the tunnel!

How did the Bubonic Plague make the Italian Renaissance possible?

Quote:

The Black Death marked an end of an era in Italy, its impact was profound, and it resulted in wide-ranging social, economic, cultural and religious changes. These changes, directly and indirectly, led to the emergence of the Renaissance, one of the greatest epochs for art, architecture, and literature in human history.

The social consequences of the plague on society came to be profound. The high mortality rate resulted in a drastic decline in the labor force. Wages rose for both agricultural and urban workers. The survivors of the Black Death generally had a higher standard of living than before the plague. This was a phenomenon that occurred in both urban and rural areas. The crisis caused by the Black Death led to many changes in the economy, in response to the fall in the population. Because of the labor shortages, there was a move from labor-intensive farming such as cereal to livestock and increase both in industry and agriculture more labor-saving devices employed.

But we don't have to wait until millions have died to achieve our own 'Renaissance' - just a realization that there could be a better way. Perhaps when this 'black swan' event is over some real positive change will have occurred - if we were open to it.

[blutoski]

Originally Posted by Roger Ramjets

GDP keeps going up mainly because the population keeps going up.

This depends on the country, which is where I was mainly going with the disengagement of GDP and stock markets. Countries with rapidly increasing standards of living see a corresponding GDP growth. In these developing regions, GDP growth does seem to genuinely represent improved quality of life.

But their stock markets don't do better than developed countries. This is the investment myth I was trying to correct.

The mechanisms are related to this covid19 situation... expanding economies have rising demand for goods. The economy responds in two ways: the companies producing goods in a sector needs to grow production, so they issue more shares to raise capital. Growth, yes, but no increase in share price. Second type of response is a new entrant into the sector that competes with the incumbants, and the overall profitability may even decline with a growing demand as competition increases, share price may even go down.

Originally Posted by Roger Ramjets

This 'growth' does more harm than good. All it does is burn up finite resources faster and push us closer to destruction. But 'investors' don't care. The only thing they care about is seeing their bank balance go up. They would sacrifice anything to that. Then they convince us that this is what matters.

Share performance should be related to business activity. But due to all the speculation it is essentially random, determined more by 'sentiment' than actual performance. This then affects business activity, creating an unstable feedback loop that causes the 'business cycle' of boom and bust - for no real reason. GDP is obviously related to this, but not directly due to delays in the feedback loop.

If GDP went down permanently it could be a good thing, because it indicates lower consumption and less destruction. Over-consumption is killing the environment and us. The lockdowns we have been forced to implement to avoid dying are doing more to improve the environment and our health than any of the pathetic plans we attempted to implement before, and yet it hasn't caused the economy to implode. I knew it wouldn't of course, because when something needs to be done it gets done.

It's hard to say re whether rising/falling GDP would be a long term plus here in 2020, given that such a significant portion of GDP in developed nations is service rather than physical goods. I'd be fine with an increase in GDP if we're all spending it on learning to play the violin &c.

I'm definitely an investor, and I don't even own a car, the hope being to reduce my ecological impact and leave a better world for my grandchildren.

It's not an us vs them situation.

Originally Posted by Roger Ramjets

But investors are beside themselves worrying about whether their nest eggs will go down in 'value'. Because you see, if you don't have an ever-increasing fortune tucked away (for a future you may never see) then you are ruined.

In their defense, most investors are pension funds or equivalent, and I think people who've laboured for half a century deserve a comfortable retirement.

[blutoski]

Originally Posted by Roger Ramjets

But we don't have to wait until millions have died to achieve our own 'Renaissance' - just a realization that there could be a better way. Perhaps when this 'black swan' event is over some real positive change will have occurred - if we were open to it.

I'm being guarded but hopeful about that. My day job is at a telco, and we're working double shifts to get people set up in work from home configurations. I think a lot of them will stay this way after they're able to return to the office. 90% of these people always wanted to work from home anyway.

Especially once kids are back in school, that's the main objection I'm hearing from WFH clients at the moment. Which I get. My cats drive me nuts, I can't imagine what toddlers are doing to productivity.

Not specifically about my work, but connected via my side gig (writing fiction), I was watching a Q&A in reddit hosted by an author I follow and he was trying to do the chat while watching his daughter. He had it on speech to text, which was his first mistake.

Link: [We are Crit Faced! Ask Us Anything!]

Excerpt:

Quote:

Considering my two-year-old daughter, the most useless word in the English language is the word No. A close second is the word please. And coming in third is the compound phrase oh my god oh no oh no oh no.
I usually right during Maddys naps, which she stops taking a while back, and in the late afternoon when my wife gets off of work. It’s crunchy because it’s a bug. This this is a butterfly.
No we can’t play on the table. It’s not safe. It’s not a safe place to play. As we play on the floor. Which is safe. I think my proudest moment as a writer, who is probably I don’t know Maddie we can’t play on the table. Let’s get down. Down the floor. That’s not safe. I think my proudest moment was probably I don’t know I can’t think of anything I’m proud of right now maybe I don’t know
I can’t ride without noise canceling headphones and a brown paper bag to scream into.
I would just like to finish this book

[The Atheist]

Originally Posted by Roger Ramjets

Yeah, let's wait until everybody is infected and 30% die. Then what would would we have? For the survivors, plenty of light at the end of the tunnel!

Best non sequitur I've seen in a while.

If you think that statement is relevant to anything in the thread, or that I've posted, do let me know.

Originally Posted by Roger Ramjets

But we don't have to wait until millions have died to achieve our own 'Renaissance' - just a realization that there could be a better way. Perhaps when this 'black swan' event is over some real positive change will have occurred - if we were open to it.

While I agree with your wish, I'm not holding my breath for it.

[lobosrul5]

So, crude oil is now trading at $1.50 a barrel. Thats what about 3.5 cents a gallon! Lowest price before today in inflation adjusted dollars, since WW2 was around $17 a barrel!!!

Too bad there doesn't seem to be a good way for an ordinary person to invest in crude. The ETF USO is just a money loser long term.

ETA: now 80 cents a barrel!

ETA2: lol negative $20 something a barrel now.

[Mid]

Originally Posted by lobosrul5

So, crude oil is now trading at $1.50 a barrel. Thats what about 3.5 cents a gallon! Lowest price before today in inflation adjusted dollars, since WW2 was around $17 a barrel!!!

Too bad there doesn't seem to be a good way for an ordinary person to invest in crude. The ETF USO is just a money loser long term.

ETA: now 80 cents a barrel!

ETA2: lol negative $20 something a barrel now.

oh -$20 a barrel that's so 15 minutes or so ago it's now hit -$40.32:

https://www.ft.com/content/a5292644-...8-ace55d766654

ETA although Brent crude is still at a heady +$25

[Meadmaker]

Originally Posted by Mid

oh -$20 a barrel that's so 15 minutes or so ago it's now hit -$40.32:

https://www.ft.com/content/a5292644-...8-ace55d766654

ETA although Brent crude is still at a heady +$25

I don't understand the commodities market.


(I have to wonder if somehow this is algorithm driven trading, and the programmers just didn't anticipate the possibility of this sort of event.)

[lobosrul5]

Originally Posted by Mid

oh -$20 a barrel that's so 15 minutes or so ago it's now hit -$40.32:

https://www.ft.com/content/a5292644-...8-ace55d766654

ETA although Brent crude is still at a heady +$25

Thats only if you compare "apples to oranges".

The June contract for both Brent and WTI is trading in the $20's. Its the May contract for WTI that is below zero.

https://www.barchart.com/futures/quotes/CLK20/overview (May)

https://www.barchart.com/futures/quo...futures-prices (June)
https://www.barchart.com/futures/quo...futures-prices (June)

Futures markets are very different from equities. Its more like options with contracts expiring periodically usually monthly. I can't find any pricing for Brent for May, I guess its already expired. They have different cutoff dates?

[lobosrul5]

Originally Posted by Meadmaker

I don't understand the commodities market.


(I have to wonder if somehow this is algorithm driven trading, and the programmers just didn't anticipate the possibility of this sort of event.)

Doesnt seem to be. Its that demand is so low that theres no place left to store crude oil. So its gone negative, IE we won't even take this stuff for free, but you can pay us to store it if you want.

[The Atheist]

Originally Posted by Meadmaker

I don't understand the commodities market.

(I have to wonder if somehow this is algorithm driven trading, and the programmers just didn't anticipate the possibility of this sort of event.)

No, it's consumption-driven added to over-production, courtesy one Mr V Putin. The appetite for oil right now is close to zero. No planes, infinitely fewer cars, shipping down...

I think MBS must have upset Vlad somewhere recently, because the high fives from last year seem to have been replaced by Vlad showing the finger to Saudi's pleas for production cuts, although he has joined them when it was too late to matter.

There must be an immense amount of oil stored around the world right now. Good business to be in for the next year or so - if you know anyone with a couple of million gallons of spare storage, let me know!

And the current price of oil is below zero for the first time in history - they are indeed paying you to take it off their hands:

https://www.ft.com/content/a5292644-...8-ace55d766654

And no, I am not sorry about that at all.

[Mid]

Originally Posted by lobosrul5

Thats only if you compare "apples to oranges".

The June contract for both Brent and WTI is trading in the $20's. Its the May contract for WTI that is below zero.

https://www.barchart.com/futures/quotes/CLK20/overview (May)

https://www.barchart.com/futures/quo...futures-prices (June)
https://www.barchart.com/futures/quo...futures-prices (June)

Futures markets are very different from equities. Its more like options with contracts expiring periodically usually monthly. I can't find any pricing for Brent for May, I guess its already expired. They have different cutoff dates?

I may be wrong but I think Brent is still well in the positive due to storage capacity at least according to the FT:

https://markets.ft.com/data/commodities

Although I'll admit my understanding of the various bits of the oil market is next to zero so I may well be reading the market data wrong