Althouse: "America is in turmoil and stocks are booming. Is the market broken?"

June 3, 2020

"America is in turmoil and stocks are booming. Is the market broken?"

Asks Matt Egan (at CNN Business).

77 comments:

Kai Akker said...: Is the stock market broken? No.

Is it in fantasy land? Yes.

Thank the Fed.; 6/3/20, 2:07 PM
Drago said...: "Is the market broken?"

No. The market currently views Trump as the more probable winner.; 6/3/20, 2:08 PM
eddie willers said...: A lot of money will have to be spent to rebuild.

Boom time!; 6/3/20, 2:10 PM
Lucien said...: “Media striving for ratings promote panic and chaos, yet those rationally assessing the economy seem optimistic.”; 6/3/20, 2:13 PM
RMc said...: Yes. Now go away.; 6/3/20, 2:15 PM
Quaestor said...: Wall Street isn't worried. It's just the subnormals doin' their thang -- happy to be on the bottom and striving mightily to stay in their comfort zone.; 6/3/20, 2:16 PM
n.n said...: The stock market is socially distanced from the planned and random acts of protests, riots, redistributive change, and assault-assault. The chaos ("evolution", life) perists.; 6/3/20, 2:18 PM
AZ Bob said...: Could it be that investors see that the Democrats are shooting themselves in the foot?; 6/3/20, 2:19 PM
Dave Begley said...: No. The guy is a total moron. The market discounts future events to the present. Mr. Market is very efficient. Mr. Market knows that the rioting and covid19 shutdown are over and, in any event, temporary events.; 6/3/20, 2:24 PM
PM said...: 1. Market's ahead of strong vaccine news.
2. Market senses Trump 2nd term.
3. Market's loading up so Feinstein's hubby can sell.; 6/3/20, 2:25 PM
Mary Beth said...: It can't be that people have confidence in the president to handle the problem. Something must be broken.; 6/3/20, 2:25 PM
Ignorance is Bliss said...: Maybe what is broken is Matt Egan's understanding of what the markets are measuring.; 6/3/20, 2:26 PM
bagoh20 said...: My positive experience in 2020:

At the beginning of 2020, after selling off all my assets in California, I invested most of my money in REIT type trusts called Delaware Statutory Trusts. Capital gains tax deferred on the sold assets, and all the money goes into rental real estate trusts. They pay distributions of the net profits monthly that work out to about a 5-6% annually with absolutely no work required on my part. During the Covid disaster the payments stayed about 90% of what they were before, and are now back up to normal. The worst investment I had ever made before was a REIT, but this has worked out wonderful. The stock market investments I have not looked at once since the shutdown started. I don't even know where the market is right now.; 6/3/20, 2:28 PM
YoungHegelian said...: No, because the market looks ahead & they see the silver lining on these storm clouds --- four more years of Trump.

They understand that Slo-Joe is just a placeholder & that the real center of power in a Biden administration may tilt easily into an anti-business lefty administration, worse even than the Obama admin. Whatever kind of Klown-kar the Trump admin may be, it's at least a business friendly klown-kar.; 6/3/20, 2:37 PM
cubanbob said...: The markets anticipate a Trump re-election. That is the only reasonable expectation of why the markets are rising. Like 1968, the prog arsonists and looters and vandals are angering the Silent Majority. Unlike 1968, there is no George Wallace to siphon off votes from the Republicans. Also the markets realize that the virus lockdown was a gross overreaction and that locks down have really done little and the Blue State Governors and Mayors were full of crap since they have no problem with crowds protesting, looting,vandalizing and committing arson.; 6/3/20, 2:38 PM
Paul said...: No. Market is fine. It's the MSM ginning up this BS riots. They sure ain't the Watts riots of the 60s.

Economy is going up... only a small minority of places where they do this looting are being shown and make you think the whole country is going ape-shit.

And it's a lie. USA is going fine.; 6/3/20, 2:40 PM
Achilles said...: They see the US turning on the Antifa fucks and their democrat allies.

They know this is the end of the democrat party as it exists today.; 6/3/20, 2:43 PM
rhhardin said...: There's not much profit in brick and mortar retail, so not much is lost by damaging it or not.; 6/3/20, 2:43 PM
Skeptical Voter said...: Nope--the market is not broken. Americans are optimistic people.; 6/3/20, 2:44 PM
rcocean said...: Stocks are based on estimated future earnings. Not what's going on, right this second. Its why the October 1929 stock market crash started months BEFORE the Depression. Also, the rioting isn't affecting the real economy - putting the lockdown aside - the farms are still producing, factories are up and running, and High-tech is doing their thing.

In 1968 we had a booming economy, the Vietnam war, and the worst riots ever.; 6/3/20, 2:46 PM
Paco Wové said...: Broken, adj. something lefties can't bend to their will.; 6/3/20, 2:50 PM
chuck said...: It seems that burning down the Hillary Archipelago was a good thing.; 6/3/20, 2:52 PM
Michael K said...: Gun stocks especially.; 6/3/20, 2:58 PM
JackWayne said...: He should be saying, “I am Matt Egan and I am broken.”.; 6/3/20, 2:59 PM
Francisco D said...: Democrat media politics are broken, not the market. Investors know that once the media induced temper tantrum is over, we will go back to business.

My investment firm called the COVID hysteria our "first social media pandemic". I think everyone will be surprised at how many people understand this and the other events during the Trump era.

Trump may not be a likable person, but he fights against the authoritarians. This people are far, far worse than the shit they project onto Trump. They are dangerous to democracy and capitalism.

When Trump fights, the markets respond.; 6/3/20, 3:04 PM
mikee said...: America isn't in turmoil. Select urban, Democrat-controlled enclaves are in turmoil, purposefully allowed by the local leadership in a coordinated nationwide effort to delegitimize Donald Trump as president. Guess what? DJT just won re-election in a landslide. Heck, I'm betting with a good speech or two he could win New York in November.; 6/3/20, 3:10 PM
TreeJoe said...: A properly functioning equities market is pricing a company's value by forecasting discounted future cash flows. In other words: How much MONEY is the company going to make over the next many years, discounted by time and forecasted rate of return. Then divide by the number of shares of the company to say "This share is 1% of a company valued at $10,000 therefore the share is worth $100."

Ok, so America is in turmoil by being forced into a panic-driven economic shutdown amid a pandemic forecasting up to millions of US deaths and overwhelmed hospitals for the remainder of 2020. Well we are now forecasting at the lowest projection of deaths, no overwhelmed hospitals, and are re-opening the country in broad swaths. We have had racial riots before, so those can be somewhat forecast as well.

In the meantime companies made major structural changes to protect their 2020 interests. And are now forecasting their earnings after adjusting for what's going on.

They can be wrong. And there's tons of global volatility. But what's the justification for saying the market is broken?; 6/3/20, 3:18 PM
Dave Begley said...: bagoh20:

Was that a 1031 exchange you did?

A friend sold all his rental houses and did a 1031 into a private REIT. The best part is that his kid get a step-up in basis and won't have to pay a fortune in capital gains taxes.; 6/3/20, 3:23 PM
daskol said...: Valuations are difficult to assess because all the projections for 2020 went out the window with the lockdown, but they have to be at least as high, if not higher than they were in January and February. And they were at historic levels then. My vote for the surging market is a little bit of Trump's improving outlook in November and a lot of increased confidence that the Fed and the US govt may not be good at much, but they are willing and able to inflate and, when necessary, re-inflate asset prices. We got that routine down pat.; 6/3/20, 3:30 PM
Gahrie said...: Translation: We've done everything we can to destroy the American economy so we can beat Trump, but it's not working!".

You can actually find Lefties saying this if you look hard enough.; 6/3/20, 3:31 PM
The Cracker Emcee Refulgent said...: Nonsensical. What do the producing classes have to do with the rioters? The two worlds don’t (indeed can’t, by definition) really intersect. The beauty of capitalism is that it knows everything is on sufferance.; 6/3/20, 3:32 PM
bagoh20 said...: No matter how you feel about things, if they are happening right now, you probably are wrong about them in direction, magnitude or both. Who thought a month ago that Covid would be unimportant by now, and that people would be voluntarily crowding together by the thousands? Actually, almost nothing is as I expected it would be back on New Years Day 2020.; 6/3/20, 3:40 PM
Kai Akker said...: Look at those great answers! Is the market broken? No, No, No, No. Darn near 27 straight No's.

A liberal or Democrat would say YES! Because he knows his wisdom is infinite and therefore he can't wait to take apart the market mechanism and do something to make it better. Like distribute dividends in inverse preference to income. Or let people sell at a loss and their broker must indemnify them for two-thirds. (It would be all, but he compromises to show his sagacity and tolerance of free-market lunatics.) Or require that all federal tax refunds be reinvested in this special fund he has created, see, to invest in distressed zones of cities run by Democratic mayors who need to make everyone equal.

Not one Althouse reader has said we should be making investments according to important social criteria with a double-count for Greenery.

Btw, the market is the most overvalued it has ever been in American financial history. A fact to keep in mind despite its healthy mechanisms. It is the healthy mechanisms that make me respect the first part of this observation.; 6/3/20, 3:44 PM
William said...: I left my money in the market. It's not so much that I was an optimist but rather because inertia is the guiding principle of my life. In times of chaos, it's best to just stand there and not participate in the chaos. The market was discounted for the Black Plague. Now it's expecting a speedy and and robust recovery. The market was wrong about the Black Plague and maybe it's wrong about a speedy and robust recovery. In any event, I will do nothing except watch the wheels spin. The market is irrational, but if you want hard core crazy observe the behavior of those that don't believe in the efficacy of markets.; 6/3/20, 3:46 PM
Ken B said...: “Doesn’t match my presumption” = broken.; 6/3/20, 3:48 PM
Big Mike said...: Or is it CNN that is broken? Time will tell!

(The cliches write themselves, which is how they came to be cliches.); 6/3/20, 3:51 PM
Leora said...: The smart money is betting Trump will be re-elected now.; 6/3/20, 3:53 PM
stutefish said...: Betteridge's Law of Headlines: If a headline asks a yes or no question, the answer is always no.; 6/3/20, 3:53 PM
Tommy Duncan said...: American businesses are constantly engaged in a survival of the fittest process. COVID-19 simply sped up that process for some businesses.

The riots impact a very small segment of enterprises.

The big news is that China has been badly injured economically by the COVID-19 debacle. The "buy-USA" trend is a big plus for America.; 6/3/20, 3:58 PM
wendybar said...: Trump is going to win in a landslide, and Wall street knows it. Who would vote for all of this hate and destruction?? We don't want to relieve the Divider in Chiefs administration....; 6/3/20, 4:10 PM
Bob Smith said...: The question that matters? Is there something in the water at CNN HQ that makes people crazy?; 6/3/20, 4:22 PM
tcrosse said...: So Egan is right and all those millions of investors and institutions are wrong. OK.; 6/3/20, 4:33 PM
JAORE said...: I stayed put in the market. Although I told my wife of several plays I'd think about during the sell off. Oil at $10 per barrel and DROPPING? Some of the oil giants have billions of barrels in proven reserves. Amazon and deliveries. Yeah it was expensive but a no brainer. Same with food deliveries.

But I just held my ground and my asset mix. Helped no doubt by the fact I'm 10 years into retirement and my (virtually) untouched nest egg has almost doubled.; 6/3/20, 4:54 PM
tim maguire said...: Companies are valued at the present value of all future earnings. Which means if two companies have the same profits today, but one company is expected to grow next year and the other isn't, the first company will be valued more highly today. (It's more complicated than that, but that is the gist.)

The British stock market rose during the battle of Britain.

The US stock market is doing well today for a lot of reasons, some good, some bad. But one big reason is that Trump is president.; 6/3/20, 4:58 PM
readering said...: I never got out of equities. Was ok never getting out for the Bush crash. DOW back where it was Labor Day. I think the main factor is that China doing ok. Stock market kind of like playing family feud. 100 people surveyed said . . . .; 6/3/20, 5:12 PM
Tomcc said...: Looking into my crystal ball, I see: volatility ahead. And behind. What do I win?
(remember those heady days when a vaccine "looked promising"...); 6/3/20, 5:18 PM
stevew said...: In answer to your question, no.; 6/3/20, 5:18 PM
Tomcc said...: As to the initial question: if investors see better days ahead, the market will go up. That seems to be where we are this week, current events are transitory.; 6/3/20, 5:22 PM
Bay Area Guy said...: It's hard for CNN to understand, Yes. But if you live outside NYC or LA or SF/Oakland (where I live), it's not hard to understand. Most of the country wants the lockdown to end, wants to reopen businesses, was disgusted by the death of George Floyd and is equally disgusted by the looting, arson, and murder caused by the rioters.

It's a big vast country. The NY/DC/LA college educated, dare I say, privileged white liberals live in a myopic state of delusion and neurosis.

Fuck ''em - they're stupid.; 6/3/20, 5:27 PM
Yancey Ward said...: I am frankly astonished at the recovery in the stockmarket since the lows in late March. My plan in mid March was to put in 5% of my retirement funds into a broad selection of individual stocks for every 2000 point decline in the Dow Jones Ind (not all Dow stocks, of course). I followed this plan at 23,000, 21,000, and 19,000- getting to 15% invested (rest in Vanguard bond ETFs). However, the market shot almost in a straight line back to 22,000- I said, "Thank you," and booked a nice profit by selling all those stocks. I thought I would get better entry point by May if I just sat out in cash the bear market rally.

In April, I changed the strategy by selling a lot (for me, it was the biggest option sales I had ever made- about $60,000 worth of sales) of out of the money puts on the same stocks I wanted to buy at strike prices that were not that far under their previous lows in March- I spread the expirations out from June to November. I closed the last of the November puts today for less than 5% of what I had sold them for just 2 months ago. I wish now I had sold 10 times as many.

Am starting to think about selling a lot of uncovered calls and buying some really, really cheap puts. However, I didn't think the S&P 500 would be back above 3100 before the end of 2021, and I don't know what will actually keep it from hitting 5000 by the end of 2020 at this rate of apparent insanity.

I guess I will probably just sit it out for now until I have more clarity. My main hope, at this point, is that the market is actually correct in discounting everything that worries me right now.; 6/3/20, 5:29 PM
David53 said...: It seems crazy. I hardly moved anything and my portfolio is within 1% of its all time high.; 6/3/20, 5:48 PM
Scott said...: I got into XOM at around 45.50 a couple weeks ago. It's 49.27 now and throws off a nice dividend. I'll be in it for at least a year. Expecting it to hit 70.

Stocks are booming because it's the best place to put money that you don't need right now. What are the alternatives? Cash? Try and spend it. Most savings accounts pay in basis points, not percent. Your house? Depends on where you live. Commercial real estate? Main Street is dead, and corporations are finding that people like to work from home.; 6/3/20, 6:13 PM
Leland said...: COVID didn't affect us other than the emergency laws imposed on us. The riots aren't affecting us. By us, I mean my family and neighbors. We live in a blue county but in a red state and a red neighborhood within the blue county. The blue areas of the country, county, city, can continue there self-destruction. It's not affecting me.

I used to care about others, but the news media, particularly CNN have taught me not to care by showing me they only care about themselves.; 6/3/20, 6:36 PM
Leland said...: I posted my previous comment here before scrolling down and reading the analysis by Nate Silver, but yeah, what he said.; 6/3/20, 6:38 PM
Charlie said...: I moved nothing, and as of close today, am down less than 1% from previous high.; 6/3/20, 6:40 PM
Leland said...: Ack... I didn't realize that as usual, Nate Silver reads the data correctly and then draws the wrong conclusion. Same idiot that names his website 538 for the electoral college votes, only to laughably wrongly predict the electoral college.; 6/3/20, 6:42 PM
hstad said...: "...America is in turmoil and stocks are booming. Is the market broken?"
Asks Matt Egan (at CNN Business).Posted by Ann Althouse at 2:03 PM

No, but we know that CNN and the MSM is throwing gasoline on the fire - it's broken.; 6/3/20, 7:22 PM
etbass said...: We left our portfolio untouched and haven't even checked it for since February. Checked tonight and we are back where we were then and it is just as if nothing happened.; 6/3/20, 7:26 PM
traditionalguy said...: The stock market discounts prices today based on probable future events. The prices go up when the government is a winner, in both both tactics and strategy. Ergo Trump makes the prices go up. The SOB is a proven winner.; 6/3/20, 7:32 PM
MD Greene said...: Egan should look on the bright side. Lots of capital gains means more money to be taxed at next year's much higher rates. Win-win!; 6/3/20, 8:16 PM
LA_Bob said...: I think the "FED put" is a factor (inflation of financial assets rather than consumer prices). I think FOMO is a factor (Fear of Missing Out). And then there's this:

"Donald Trump encourages a sort of self-confidence. You don't have to believe Trump -- you only have to believe that other people believe Trump," said Shiller.

A great deal of financial commentary is about what "investors" think, "investors" being some mysterious bunch of people somehow in the know. I think of lot of individual investors invest based on what the media says about what "investors" think. For individual non-investors, this media talk just fuels what they think about the economy in general.

A great deal of life involves guessing and believing / not believing what others think.; 6/3/20, 8:34 PM
Drago said...: readering: "Was ok never getting out for the Bush crash."

LOL

Yeah, the subprime mortgage thing was all Bush.

Nice try.; 6/3/20, 9:09 PM
320Busdriver said...: Well, we did overreact to covid. That is becoming more clear every day and we will get back on track.
As of today our retirement accts are showing up ~5% from the Feb 18 high. Up 9% ytd after subtracting contributions. 13% with. I did practice some timing by selling equities on Feb 27 & buying spy and qqq on really bad days. Spy is still down 3% ytd but finally crossed back above the 200 dma last week. I think the next 6 months are gonna be great. Airline stocks are on a tear, my comp is up 35% in a month.; 6/3/20, 9:21 PM
Michael K said...: readering is counting on China, like most Democrats.

Too bad you have no loyalty to the country that keeps you safe. You deserve China.; 6/3/20, 9:52 PM
buwaya said...: Trump is the markets happy buddha figure.

That is, the laughing, fat Budai (a famous monk) figure in Chinese shops.
Or the Japanese lucky cat.; 6/3/20, 11:29 PM
Char Char Binks, Esq. said...: Is it okay to hug the Chinese again? Do they want hugs?; 6/3/20, 11:30 PM
Bob Loblaw said...: Broken? No, of course not. We created six trillion dollars out of thin air this year. Where else is all this money going to go? Not into bonds - the fed is artificially holding down bond yields by buying them. It's going into stocks and real estate.; 6/4/20, 2:16 AM
Kai Akker said...: The focus on the Federal Reserve is correct and that is the one element that troubles me. The Fed's constant interventions into both bond and stock markets distorts them. I think it's fair to say the Fed rigged the markets over the past 10 years since the 2008-09 bear market. The "Bernanke Put" removed at least some of investors' sense of risk in financial assets. The perception is pretty widely held that the Fed will always find a way to save asset prices. I doubt that is true. And I think our markets WOULD be broken if it WERE true.; 6/4/20, 4:04 AM
stlcdr said...: You could Probably take any 10 year period on the stock market and it will have a gain (even spanning the most recent crash in 08). The stock market always goes up.

The position of the market at a given point is irelavant, and only used for feeding the media sharks or political purposes. This article - stock market being broken - is trying to tie two dissimilar and unrelated events in a cause/effect. Violent, nasty, people destroying their communities has nothing to do with the stock market.; 6/4/20, 5:59 AM
Kai Akker said...: "You could Probably take any 10 year period on the stock market and it will have a gain (even spanning the most recent crash in 08)." --stlcdr

Want a re-do? Think how extreme some of the peaks have been, and we better reconsider that proposition.

How about 1929-39? 1928-38? The DJIA did not recover its 1929 level until 1954 or so.

From 1966 to 1982 was a 16-year period when the DJIA went from 1000 to 777. There was even a stop in the 500s in 1974, but the overall point is not only that stocks lost value, but when you factor in inflation, American stocks lost 80% of their purchasing power over those 16 years.

How about 2000-2010?

Stocks gain but human psychology carries everything to extremes. History tells us that works in both directions. The gains can accumulate for long periods; the wipeouts may be more rare, but when they arrive, they can come fast and do serious damage. Our rebounds from the internet bubble of 2000 and the credit bubble of 2007 may be lulling many investors into unwarranted comfort just when things are getting dangerous again.; 6/4/20, 6:33 AM
stlcdr said...: Blogger Kai Akker said...

Your mattress must be stuffed full of cash, then.; 6/4/20, 9:20 AM
gerry said...: Trump may not be a likable person, but he fights against the authoritarians. This people are far, far worse than the shit they project onto Trump. They are dangerous to democracy and capitalism.

My favorite Trump observation: "I take Trump seriously, but never literally." I wish I could remember who originally said it.; 6/4/20, 9:32 AM
readering said...: "readering is counting on China, like most Democrats."

Trump was counting on China for trade concessions, a major reason he had his head in the sand on coronavirus.; 6/4/20, 1:31 PM
Nichevo said...: We live in a blue county but in a red state and a red neighborhood within the blue county. The blue areas of the country, county, city, can continue there self-destruction. It's not affecting me.

D00d, and I do mean dude, what don't you get? You are an outpost in hostile territory. You are the defenses of Orthanc, best not abandoned lightly or long neglected. You just said it yourself you're over there in the Blue Area. Your internet Enclave, but then we spend that gauge reading about Bosnia and enclaves and cleansing? Serb counties wiping out Bosnian towns, Croatian cities going block-to-block in some Serbian borough?

No, we wouldn't do that. And no, they can't, quite, do that YET, I think. But I could be mistaken, and there's plenty of time to come. We don't know where all those gun sales are going, do we? I
As you legally buy guns in relative anonymity, why shouldn't you think others are as well, without telling you?

And of course you have all the maker types who probably have stuff in their basement to crank out STENs or Ingrams all day if they wanted to. Probably buying 80% lowers too, and lots of knockoff Dremels & such from Harbor Freight. Barrels are the key, but unregistered at present (?).

Plus if you can get drugs surely you can get guns, and everybody can get drugs. I wonder if anybody knows some drug dealers on the left.

So, NO, YOU ARE NOT SAFE!

Of course, your odds sound good at present. But don't get cocky.; 6/4/20, 3:12 PM
Jim Gust said...: Here is a better explanation for the booming stock market:

https://www.zerohedge.com/markets/staggering-powell-bubble-just-one-amazing-chart; 6/4/20, 4:26 PM
Nichevo said...: Blogger readering said...
"readering is counting on China, like most Democrats."

Trump was counting on China for trade concessions, a major reason he had his head in the sand on coronavirus.

Do you make yourself laugh? Because then there would be one of you.; 6/4/20, 7:14 PM
ken in tx said...: Record breaking savings rate, equals enormous pent-up demand.Boom times for businesses.; 6/4/20, 8:16 PM