The Stock Market Myth: Good News...Stocks Plunge!

[georgephillip]

Why is a measure of future corporate profits taken as a measure of economic well-being?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an upward movement is good news and a downward movement is bad news,,,"

"This view that the stock market is a measure of economic well-being is bizarre, because it is so completely at odds with what the stock market is.

"The stock market is a measure of the expectations of future profits of companies that are listed in the exchange: full stop.

"That is not some left-wing radical analysis of stock prices, this is the textbook definition.

"The stock market is not going to rise because people are getting better health care and living longer lives. It won’t rally because workers are getting paid family leave and guaranteed vacation.

"And, it certainly won’t rise because workers find it easier to organize and union membership soars."

Investors in GE, Microsoft, and other corporations will only ask how each of the above mentioned benefits will affect future profit margins of the companies they hold stock in.

If they are likely to lead to lower future profits (rising union memberships or paid family leave), they would expect stock prices to fall.

"It is important that people be clear on this point as the 2020 elections draw closer.

"Many of the policies being proposed by the leading Democratic candidates would be expected to reduce after-tax corporate profits.

"This means that they should be expected to lead to lower stock prices.

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

"This will mean sharply lower profits for a major sector of the economy, which will surely depress the stock price of fossil fuel companies."

 

[Toddsterpatriot]

Why is a measure of future corporate profits taken as a measure of economic well-being?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an upward movement is good news and a downward movement is bad news,,,"

"This view that the stock market is a measure of economic well-being is bizarre, because it is so completely at odds with what the stock market is.

"The stock market is a measure of the expectations of future profits of companies that are listed in the exchange: full stop.

"That is not some left-wing radical analysis of stock prices, this is the textbook definition.

"The stock market is not going to rise because people are getting better health care and living longer lives. It won’t rally because workers are getting paid family leave and guaranteed vacation.

"And, it certainly won’t rise because workers find it easier to organize and union membership soars."

Investors in GE, Microsoft, and other corporations will only ask how each of the above mentioned benefits will affect future profit margins of the companies they hold stock in.

If they are likely to lead to lower future profits (rising union memberships or paid family leave), they would expect stock prices to fall.

"It is important that people be clear on this point as the 2020 elections draw closer.

"Many of the policies being proposed by the leading Democratic candidates would be expected to reduce after-tax corporate profits.

"This means that they should be expected to lead to lower stock prices.

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

"This will mean sharply lower profits for a major sector of the economy, which will surely depress the stock price of fossil fuel companies."

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

Less reliable, more expensive energy is good for the little people, eh comrade?

Obviously some people will be hurt by a falling stock market, but because of the incredible inequality of stock holdings, the vast majority of the losses will be incurred by the richest 10 percent of the public, with the top one percent seeing close to 40 percent of the losses.

Stick it to the man!!!

 

[Toro]

It's true that the stock market isn't necessarily indicative of the economy over the near term or even the intermediate term. For example, from 1966 to 1982, the Dow was flat while the economy went up by a third. However, rising stocks, like all rising asset prices, are a reflection of the accumulated wealth generated by the economy over time. Future profits are based upon past profits, and grow off the capitalized wealth accumulated in the retained earnings of the corporate sector.

 

[georgephillip]

Why is a measure of future corporate profits taken as a measure of economic well-being?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an upward movement is good news and a downward movement is bad news,,,"

"This view that the stock market is a measure of economic well-being is bizarre, because it is so completely at odds with what the stock market is.

"The stock market is a measure of the expectations of future profits of companies that are listed in the exchange: full stop.

"That is not some left-wing radical analysis of stock prices, this is the textbook definition.

"The stock market is not going to rise because people are getting better health care and living longer lives. It won’t rally because workers are getting paid family leave and guaranteed vacation.

"And, it certainly won’t rise because workers find it easier to organize and union membership soars."

Investors in GE, Microsoft, and other corporations will only ask how each of the above mentioned benefits will affect future profit margins of the companies they hold stock in.

If they are likely to lead to lower future profits (rising union memberships or paid family leave), they would expect stock prices to fall.

"It is important that people be clear on this point as the 2020 elections draw closer.

"Many of the policies being proposed by the leading Democratic candidates would be expected to reduce after-tax corporate profits.

"This means that they should be expected to lead to lower stock prices.

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

"This will mean sharply lower profits for a major sector of the economy, which will surely depress the stock price of fossil fuel companies."

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

Less reliable, more expensive energy is good for the little people, eh comrade?

Obviously some people will be hurt by a falling stock market, but because of the incredible inequality of stock holdings, the vast majority of the losses will be incurred by the richest 10 percent of the public, with the top one percent seeing close to 40 percent of the losses.

Stick it to the man!!!

These measures will almost by definition mean sharply lower demand for oil and natural gas.

Less reliable, more expensive energy is good for the little people, eh comrade?

Are you worried about having to work for a living, Kulak?

Energy subsidies - Wikipedia

"The degree and impact of fossil fuel subsidies is extensively studied. Because fossil fuels are a leading contributor to climate change through greenhouse gases, fossil fuel subsidies increase emissions and exacerbate climate change.

"The OECD created an inventory in 2015 of subsidies for the extraction, refining, or combustion of fossil fuels among the OECD and large emerging economies.

"This inventory identified an overall value of $160 to $200 billion per year between 2010 and 2014.[14][15] Meanwhile, the International Energy Agency has estimated global fossil fuel subsidies as ranging from $300 to $600 billion per year between 2008 and 2015.[1"

 

[kyzr]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

 

[Toddsterpatriot]

Why is a measure of future corporate profits taken as a measure of economic well-being?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"If there is one item about the economy that we can be sure will be repeated every day, it is the movement in the Dow or the S&P 500. And, needless to say, an upward movement is good news and a downward movement is bad news,,,"

"This view that the stock market is a measure of economic well-being is bizarre, because it is so completely at odds with what the stock market is.

"The stock market is a measure of the expectations of future profits of companies that are listed in the exchange: full stop.

"That is not some left-wing radical analysis of stock prices, this is the textbook definition.

"The stock market is not going to rise because people are getting better health care and living longer lives. It won’t rally because workers are getting paid family leave and guaranteed vacation.

"And, it certainly won’t rise because workers find it easier to organize and union membership soars."

Investors in GE, Microsoft, and other corporations will only ask how each of the above mentioned benefits will affect future profit margins of the companies they hold stock in.

If they are likely to lead to lower future profits (rising union memberships or paid family leave), they would expect stock prices to fall.

"It is important that people be clear on this point as the 2020 elections draw closer.

"Many of the policies being proposed by the leading Democratic candidates would be expected to reduce after-tax corporate profits.

"This means that they should be expected to lead to lower stock prices.

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

"This will mean sharply lower profits for a major sector of the economy, which will surely depress the stock price of fossil fuel companies."

"For example, most of the Democratic presidential candidates are advocating strong measures to address climate change.

"These measures will almost by definition mean sharply lower demand for oil and natural gas.

Less reliable, more expensive energy is good for the little people, eh comrade?

Obviously some people will be hurt by a falling stock market, but because of the incredible inequality of stock holdings, the vast majority of the losses will be incurred by the richest 10 percent of the public, with the top one percent seeing close to 40 percent of the losses.

Stick it to the man!!!

These measures will almost by definition mean sharply lower demand for oil and natural gas.

Less reliable, more expensive energy is good for the little people, eh comrade?

Are you worried about having to work for a living, Kulak?

Energy subsidies - Wikipedia

"The degree and impact of fossil fuel subsidies is extensively studied. Because fossil fuels are a leading contributor to climate change through greenhouse gases, fossil fuel subsidies increase emissions and exacerbate climate change.

"The OECD created an inventory in 2015 of subsidies for the extraction, refining, or combustion of fossil fuels among the OECD and large emerging economies.

"This inventory identified an overall value of $160 to $200 billion per year between 2010 and 2014.[14][15] Meanwhile, the International Energy Agency has estimated global fossil fuel subsidies as ranging from $300 to $600 billion per year between 2008 and 2015.[1"

Are you worried about having to work for a living, Kulak?

I'm worried that you morons are going to triple the cost of electricity for zero actual benefit to the environment.

Because you're clueless.

"The degree and impact of fossil fuel subsidies is extensively studied.

I love it when idiots who have zero accounting knowledge call writing off a business expense a subsidy.

global fossil fuel subsidies as ranging from $300 to $600 billion per year between 2008 and 2015.

Usually the only real subsidy in these idiotic "studies" is when fuel is given to the poor at reduced prices.

 

[georgephillip]

It's true that the stock market isn't necessarily indicative of the economy over the near term or even the intermediate term. For example, from 1966 to 1982, the Dow was flat while the economy went up by a third. However, rising stocks, like all rising asset prices, are a reflection of the accumulated wealth generated by the economy over time. Future profits are based upon past profits, and grow off the capitalized wealth accumulated in the retained earnings of the corporate sector.

What effects did Reagan's legalization of stock buy-backs have on the rising market?

Stock Buybacks Were Once Illegal. Why Are They Legal Now? - The Intellectualist

"The SEC changed policy during the Reagan administration in 1982.

"The notion of stock buybacks has gained increased attention in recent years, primarily in light of America's growing wealth and income inequality but also for the Republican tax plan that President Donald Trump signed last year."

 

[Rambunctious]

The economy is not failing or struggling...don't believe the media...believe your own bank account and your own eyes....

 

[georgephillip]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

How many rate cuts are you expecting before November 2020?
What happens if profits of tech, insurance, and phrama decline in anticipation of that election?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"In the same vein, most of the Democrats are proposing measures that will sharply reduce the profits of the insurance and prescription drug industries.

"These measures should be expected to lead to sharply lower stock prices for the companies in these sectors.

The same story applies to the tech sector, where at least some of the candidates, most notably Elizabeth Warren, have proposed measures to break up dominant firms like Facebook and Google. These measures would be a big hit to some of the most highly valued companies on the market."

 

[BuckToothMoron]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

The Fed isn’t using the “punch bowl” lately? What Fed are you referring to? They just lowered rates and stopped decreasing their balance sheet. According to the Republicans on this board the economy is humming along. Look how high the stock market is, they say. Yet Trump wants to cut the payroll tax, and called for a full 1% cut in rates from the Fed.

This market is a bubble (created in part by the Fed and Trump) and it will burst within 2-3 years.

 

[Toddsterpatriot]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

The Fed isn’t using the “punch bowl” lately? What Fed are you referring to? They just lowered rates and stopped decreasing their balance sheet. According to the Republicans on this board the economy is humming along. Look how high the stock market is, they say. Yet Trump wants to cut the payroll tax, and called for a full 1% cut in rates from the Fed.

This market is a bubble (created in part by the Fed and Trump) and it will burst within 2-3 years.

This market is a bubble

Based on what metric(s)?

Or just a feeling?

 

[georgephillip]

The economy is not failing or struggling...don't believe the media...believe your own bank account and your own eyes....

Three years ago Trump labelled Obama's economy a bubble; which fundamentals have changed since then?

Trump says U.S. economy in a 'bubble' he doesn't want to inherit - Reuters

 

[Rambunctious]

The economy is not failing or struggling...don't believe the media...believe your own bank account and your own eyes....

Three years ago Trump labelled Obama's economy a bubble; which fundamentals have changed since then?

Trump says U.S. economy in a 'bubble' he doesn't want to inherit - Reuters

Confidence.....

 

[georgephillip]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

The Fed isn’t using the “punch bowl” lately? What Fed are you referring to? They just lowered rates and stopped decreasing their balance sheet. According to the Republicans on this board the economy is humming along. Look how high the stock market is, they say. Yet Trump wants to cut the payroll tax, and called for a full 1% cut in rates from the Fed.

This market is a bubble (created in part by the Fed and Trump) and it will burst within 2-3 years.

This market is a bubble

Based on what metric(s)?

Or just a feeling?

This market is a bubble

Based on what metric(s)?

Or just a feeling?

Almost four hundred years of capitalism:

List of stock market crashes and bear markets - Wikipedia

In case you missed it, capitalism is an unstable system of successive bubbles.

 

[BuckToothMoron]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

The Fed isn’t using the “punch bowl” lately? What Fed are you referring to? They just lowered rates and stopped decreasing their balance sheet. According to the Republicans on this board the economy is humming along. Look how high the stock market is, they say. Yet Trump wants to cut the payroll tax, and called for a full 1% cut in rates from the Fed.

This market is a bubble (created in part by the Fed and Trump) and it will burst within 2-3 years.

This market is a bubble

Based on what metric(s)?

Or just a feeling?

Sure- first consider the smell test. We have had extremely slow growth over the last decade yet valuations are at or near all time highs. There just isn’t enough growth to justify these high P/E ratios.

The corporate tax cut was supposed to spur growth-
Who Benefits From The Tax Cut 10 Months Later
So where is all the money saved from corporate tax cuts going? First, to companies’ bottom lines and second to stock buybacks, which were recently at a record high. So far, in 2018, the 500 corporations in the S&P Index have received $30 billion from the corporate rate cut, which in turn accounts for over 40 percent of S&P equity earnings growth. When economies are strong, equity values rise because the issuing corporations are engaged in innovation and other fundamental strategies to raise the real performance of the company. However, innovation and fundamental performance do not seem to be the cause of the rise in equity values. The Shiller PE ratio, which compares share prices to earnings, is now over 30, the highest since the expansion began mid 2009.

It feels a lot like 1999 to me. Multiple IPOs with billions in valuations and no hope for profits in the foreseeable future. Buy at your own risk brother.

 

[Rambunctious]

Here come the economy wrecking crew trolls....LMAO....dunderheads....wonder how much the DNC is paying them....LOL...

 

[kyzr]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

How many rate cuts are you expecting before November 2020?
What happens if profits of tech, insurance, and phrama decline in anticipation of that election?

Good News: The Stock Market is Plunging | Beat the Press | CEPR

"In the same vein, most of the Democrats are proposing measures that will sharply reduce the profits of the insurance and prescription drug industries.

"These measures should be expected to lead to sharply lower stock prices for the companies in these sectors.

The same story applies to the tech sector, where at least some of the candidates, most notably Elizabeth Warren, have proposed measures to break up dominant firms like Facebook and Google. These measures would be a big hit to some of the most highly valued companies on the market."

1. I'm expecting the Fed to move SLOWLY, from 2.5% to about 1% prior to the 2020 election. The economy shouldn't go into a recession, two or more quarters of negative GDP. The economy might slow to minimal growth, but I'm not anticipating negative growth. There is simply too much money in the economy and consumers wallets for that. The US economy is 70% retail, so as long as buyers buy we're fine. RV sales took a hit and are slowing, global economies are also slowing, so there are concerns, but nothing like the "great recession" when:
"Major causes of the initial subprime mortgage crisis and following recession include: International trade imbalances and lax lending standards contributing to high levels of developed country household debt and real-estate bubbles that have since burst."

2. If profits slow for tech, insurance, and pharma, as well as other sectors, the Fed lowering interest rates should keep the stock market from crashing. A recession is a 6-month dip in the stock market. Some people get laid off. Its part of the normal economic cycle. A recession is better than a depression. The "recession" might depend upon if Trump and Xi can get a trade deal. I'm not seeing the old boom-bust-boom-bust economic cycle.

3. I'm optimistic that no socialist will win in 2020, so assuming Trump wins, the economy will be his ongoing focus.

 

[Rambunctious]

Unemployment is low....and the job increases we have seen are skilled well compensated employment...people have capitol to spend and a hunger for it too....they are confident that they will have their jobs for the foreseeable future...you can't show that in a chart and Obama never had that kind of consumer confidence.....

Anyone that is trying to talk the economy down should be laughed at....they are doing so for politics only...imagine that...they hate Trump so bad that they want to ruin your life to make you vote like they want you to....that is evil....

 

[kyzr]

Economists change their tune every decade or so. 20-30 years ago everyone was focused on the M1 money supply like it was the key to everything. I haven't heard an economist mention the M1 money supply in 2 decades. Then it was the Fed, and how thick Greenspan's folders were. Thick was bad, it meant a rise in interest rates. Volker was the opposite, he raised rates to 20% to fight inflation. The good news is that the Fed isn't using the "punch bowl" lately and artificially lowering rates to create a "bubble". That was the worst. boom-bust-boom-bust-boom-bust.
Since the great recession in 2008 the economy has been growing slowly, lets keep it that way, nice and slow, 2%-3% of GDP is plenty.

The Fed isn’t using the “punch bowl” lately? What Fed are you referring to? They just lowered rates and stopped decreasing their balance sheet. According to the Republicans on this board the economy is humming along. Look how high the stock market is, they say. Yet Trump wants to cut the payroll tax, and called for a full 1% cut in rates from the Fed.

This market is a bubble (created in part by the Fed and Trump) and it will burst within 2-3 years.

1. The punch bowl is defined by inflation. We don't see any inflation aside from their target 2%, which is fine.
2. If you believe Powell, the Fed lowered rates due to global risks. Most other economies are already in recession.
3. I'm not seeing a bubble, except for the Budget Deficit, with Medicare going bankrupt in 2026 and SS in 2034. That's when the shit really hits the fan.
4. WTF did Nancy and her dems do for the 2020 Budget? I was hoping for sanity, and got more of the same deficit.

 

[edward37]

It's true that the stock market isn't necessarily indicative of the economy over the near term or even the intermediate term. For example, from 1966 to 1982, the Dow was flat while the economy went up by a third. However, rising stocks, like all rising asset prices, are a reflection of the accumulated wealth generated by the economy over time. Future profits are based upon past profits, and grow off the capitalized wealth accumulated in the retained earnings of the corporate sector.

What effects did Reagan's legalization of stock buy-backs have on the rising market?

Stock Buybacks Were Once Illegal. Why Are They Legal Now? - The Intellectualist

"The SEC changed policy during the Reagan administration in 1982.

"The notion of stock buybacks has gained increased attention in recent years, primarily in light of America's growing wealth and income inequality but also for the Republican tax plan that President Donald Trump signed last year."

Stock buybacks raise the price of the stock and the CEO whose salary is based on stock price makes a killing