Orkey Dorkey Chart Pennies

[12yearplan]

Clear explanation of what's goin' on wit da stock markets

 “No matter how many times we keep on saying the stock market is not the economy, people won’t believe it, but it isn’t,” said Paul Krugman, a Nobel Prize-winning economist and New York Times columnist. “The stock market is about one piece of the economy — corporate profits — and it’s not even about the current or near-future level of corporate profits, it’s about corporate profits over a somewhat longish horizon.”

 “The stock market is not representative of the makeup of this country.”

 Not dissimilar to the global financial crisis, the Fed stepped in, and that was really a catalyst for a stock market recovery,” said Kristina Hooper, chief global market strategist at Invesco. “The Fed can be very, very powerful, almost omnipotent, when it comes to the stock market.”
Throughout the crisis, the Fed and Chair Jay Powell have made clear they will support markets and use every tool in their toolkit to do it. Powell has taken an extremely dovish tone and repeatedly said the Fed won’t raise interest rates — which would presumably slow down the economy and markets — preemptively. Basically, the markets let the Fed take the wheel. Even if it didn’t buy bonds itself, the knowledge that it would if necessary reinforced the markets — private investors swept in to take up corporate bond offerings from companies such as Boeing and Nike. Continued confidence in a dovish Fed has only reinforced market bullishness; while a bad jobs report may be bad for businesses and workers, to investors, it’s also more reassurance that low interest rates aren’t going anywhere.

“But the criticism I would weigh was that there were no real conditions that workers were protected or rehired, that all the gains just didn’t go to the top.”

Goldstein pointed to a September report from the House of Representatives’ Select Subcommittee on the Coronavirus Crisis that found the Fed bought corporate bonds from at least 95 companies that issued dividends to shareholders while also laying off workers. “Surely the Fed is also so powerful that it can say, look, we need you all to prioritize rehiring your workers or we’re not necessarily going to rescue you, we’re going to rescue other companies, and that should be impactful,” Goldstein said.

 “Shareholder primacy means the job of corporations is to increase their share prices for this very small elite, and that means downward pressure on costs, including workers, where possible,” said Lenore Palladino, an assistant professor of economics and public policy at the University of Massachusetts Amherst. “The fact that the stock market is booming is because of the financialization of our goods- and services-producing companies, not because the real economy is doing so well.”

Or, as Mark Carney says; "the price of something is the value of it"

 Some people in the industry point to a certain level of faith in America, like the type legendary investor Warren Buffett channeled during the financial crisis and Great Recession when he told people to “buy American.”
“You have to have an existential faith in America in order to be in stocks over the long term,” said Nick Colas, the co-founder of DataTrek Research.

“What has happened in the last 14 months or so is we’re believing in America again, we’re believing in our companies,” said Brian Belski, chief investment strategist at BMO Capital Markets. “From every bear market and every depression, we transition from despair to hope, and the hope was defined by American companies.”

It does look like the US is poised to emerge from the pandemic much before the rest of the world and spend its way to an economic recovery that many other countries could not. Now, it’s the investors who sold out of the market when it was falling last year who have been left out.

“You have to have an existential faith in America in order to be in stocks over the long term”
“There are two lessons to be learned over the past year. The first is that economic headlines are lagging and not leading indicators of the market; and second, market timing is a losers’ game,” said Saira Malik, chief investment officer of global equities at Nuveen, an asset manager.

 “We have an administration that clearly has ambitions and wants to pay for them by taxing capital, taxing corporate profits, now taxing capital gains. The resilience of the market in the face of all that is kind of interesting,” Krugman said. “There may be a little bit of determined resilience; there may be some element of when people are determined to be optimistic, facts don’t matter.”

Hooper, from Invesco, offered up the explanation of the Fed. “I do think on a short-term basis, we could see a sell-off if there is a risk that appears imminent, but we have to recognize that all current risks are being cushioned by this incredibly accommodative Fed, which does have an impact. It’s a powerful upward force on stocks that can counteract the downward forces.”

 If the US wants to create a fairer, less extractive economy where corporations and shareholders aren’t living a very different reality than people trying to pay their rent or find a job, there are ways to do it. The federal government could raise corporate taxes and tax income from investments in the same way it does income from labor and seek to rein in CEO pay.

  It could also clamp down on shareholder primacy and make sure companies base their decisions not only on making their investors rich but also on the well-being of their workers, customers, communities, and suppliers. In 2019, the Business Roundtable, a major business lobbying group, issued a statement that it would redefine the “purpose of a corporation” as one that fosters “an economy that serves all Americans.” The government and the public could find ways to hold them to it. Palladino, in her work, has outlined a number of proposals that would curb shareholder primacy, including requiring corporate boards to have worker representatives, banning stock buybacks, and boosting unions.
Beyond policy fixes, there’s also just the reality that the market measures very one specific thing — how investors think (rightly or wrongly) corporate profits are going to be in the future. And for many people, that measure is meaningless. “If you can assess that the economy is good when we’re in one of the worst economic moments of American history, then it’s a useless measure,” said Maurice BP-Weeks, co-executive director of the Action Center on Race and the Economy.

The past year has been a truly wild ride in America and for the stock market, though in different directions. Investors are reaching almost exuberant levels, from the GameStop saga to the crypto craze. Stocks are continuing their bull run, with no clear end in sight. There are plenty of warnings that investors are out over their skis, but then again, there always are.

It’s a far cry from a little over a year ago, when billionaire hedge funder Bill Ackman went on TV to warn that “hell is coming” because of Covid-19. Or maybe it did — just not for Wall Street.

 

 https://www.vox.com/business-and-finance/22421417/stock-market-pandemic-economy?utm_source=pocket-newtab