Screw the Stock Market...

[Moliere]

Stocks higher on the jobs report today. If you're scratching your head on the market's strength, it's a function of what lenders call 'dead capital'. Here's how it works:

The Fed tries to increase liquidity by buying securities and putting cash into the economy. In theory, this lowers interest rates, which increases borrowing demand and stimulates the economy. In practice, lending restrictions are so tight as a result of the financial crisis that lenders can make very few loans that survive examiners' scrutiny. Without consumer and business lending, the Fed's cash has no home other than equities and index funds, so investors buy stocks, pushing the market higher despite a struggling economy.

This also doesn't hurt:

https://www.wsj.com/articles/global-...d=hp_lead_pos2

The Dow Jones Industrial Average climbed 695 points, or 2.6%, to 26975 in morning trading. The S&P 500 advanced 2.2% and the Nasdaq Composite climbed 1.7%.

The Labor Department said the economy added 2.5 million jobs in May. Economists surveyed by The Wall Street Journal had expected a loss of 8.3 million jobs. The unemployment rate also unexpectedly fell, clocking in at 13%, compared with estimates of 20%.

All together, the report suggests the economy is recovering faster than many had expected from the fallout caused by the coronavirus pandemic. That added fuel to a stock rally that has put major indexes on course for big weekly gains.

[All-American]

Another major factor-- not taking away from cowboy's point even a little-- is what companies are recovering and what companies are still suffering.

If your company relies on people physically visiting your store's premises, then this event has been devastating. Companies that are able to shift to remote working can weather the storm more easily, while companies that facilitate remote working and distancing are in fact thriving. As a general rule, the companies in the latter two categories tend to be larger, which means they are more likely to be publicly traded. Companies like Zoom and Amazon, for example, have benefited enormously from the crisis. Your ma and pa stores, by contrast, are getting pounded.

The stock market's resurgence shows the comparative health of these larger, publicly traded companies. But there is little question that the stock market's recovery is vastly outpacing the recovery of the economy at large.

[Mormon Red Death]

Another major factor-- not taking away from cowboy's point even a little-- is what companies are recovering and what companies are still suffering.

If your company relies on people physically visiting your store's premises, then this event has been devastating. Companies that are able to shift to remote working can weather the storm more easily, while companies that facilitate remote working and distancing are in fact thriving. As a general rule, the companies in the latter two categories tend to be larger, which means they are more likely to be publicly traded. Companies like Zoom and Amazon, for example, have benefited enormously from the crisis. Your ma and pa stores, by contrast, are getting pounded.

The stock market's resurgence shows the comparative health of these larger, publicly traded companies. But there is little question that the stock market's recovery is vastly outpacing the recovery of the economy at large.

biggest winner of the pandemic: Health Insurance companies. Generally they run at a medical loss ration of 80-85% (85 cents of every premium dollar spent on claims). I've heard they are running at 40-45%. Lets say you are a 6 billion dollar health insurer (500 million a month in premium). That means you usually have 75 million a month for admin etc... from March - May you got 275 million a month. In general they will have to give a decent portion of that extra 600 million back but still they are flush with cash right now.

[wapiti]

Another major factor-- not taking away from cowboy's point even a little-- is what companies are recovering and what companies are still suffering.

If your company relies on people physically visiting your store's premises, then this event has been devastating. Companies that are able to shift to remote working can weather the storm more easily, while companies that facilitate remote working and distancing are in fact thriving. As a general rule, the companies in the latter two categories tend to be larger, which means they are more likely to be publicly traded. Companies like Zoom and Amazon, for example, have benefited enormously from the crisis. Your ma and pa stores, by contrast, are getting pounded.

The stock market's resurgence shows the comparative health of these larger, publicly traded companies. But there is little question that the stock market's recovery is vastly outpacing the recovery of the economy at large.

The stimulus has also worked. 40 million unemployed is a bad thing but if you made under $70K the federal unemployment benefit meant that you actually got a raise when you lost your job. I'm guessing that applied well over half of those who lost their jobs. They got both a raise and a bonus (with the stimulus check).

Additionally, the PPP money has helped small businesses continue to function. That money has had a wide ranging effect depending on the business. For some it was a bridge through the crisis. For others it has and will fuel growth. And for some, it won't have been enough. I think history will see it as one of the key programs that staved off a depression.

[myboynoah]

The stimulus has also worked. 40 million unemployed is a bad thing but if you made under $70K the federal unemployment benefit meant that you actually got a raise when you lost your job. I'm guessing that applied well over half of those who lost their jobs. They got both a raise and a bonus (with the stimulus check).

Additionally, the PPP money has helped small businesses continue to function. That money has had a wide ranging effect depending on the business. For some it was a bridge through the crisis. For others it has and will fuel growth. And for some, it won't have been enough. I think history will see it as one of the key programs that staved off a depression.

Agreed. It was and still is critical to seeing the country through this pandemic, especially as we ask people to social distance.

[myboynoah]

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[Flystripper]

Fox...


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[PaloAltoCougar]

Fox...

Just lending support for Trump's bizarre statement today about how Floyd must be looking down from above, thrilled about today's economic report.

[SeattleUte]

David Tepper agrees with me.

https://www.cnbc.com/2020/05/13/davi...d-only-99.html

Haha. You’re also a stock market expert?

[SeattleUte]

So glad I found this thread, with economic geniuses old Gregg, JL, and MBN sharing their pearls of wisdom about finance and the economy. And I all this time thought their field was modeling epidemics.

[SeattleUte]

Should have gone all in on American Airlines.

I have a ton of doctor friends who “got out of the market” way lower than it is now.

Trying to time the market is like a litmus test for egotism.

This is the real genius here.

[old_gregg]

So glad I found this thread, with economic geniuses old Gregg, JL, and MBN sharing their pearls of wisdom about finance and the economy. And I all this time thought their field was modeling epidemics.

su, what would you say you are an expert in?

[SeattleUte]

su, what would you say you are an expert in?

Next time I need advice on what shutting down the economies of the West for months and months will do for the welfare of humankind, I'm going to ask you! And JL.

[Jeff Lebowski]

Lol. SU mocking people for predicting that the pandemic would harm the economy. Zero self awareness.

[All-American]

Surprisingly, my stock market tracker app shows that the S&P is up on each date metric it tracks: day, week, month, 3 months, 6 months, year, and two years.