Dow Hits 20000 for First Time(blogs.wsj.com)
blogs.wsj.com
Dow Hits 20000 for First Time
http://blogs.wsj.com/moneybeat/2017/01/25/dow-hits-20000-for-first-time/
213 comments
Yes, the dow is a flawed index.
That said, the S&P 500 & Russell 1000 are also at all time highs.
https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7K...
https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIW...
None of these data points mean anything on their own. People that look at a chart a conclude anything at all are not doing enough analysis.
That said, the S&P 500 & Russell 1000 are also at all time highs.
https://www.google.com/finance?q=INDEXSP%3A.INX&ei=6-KIWNi7K...
https://www.google.com/finance?q=INDEXRUSSELL%3ARUI&ei=8eKIW...
None of these data points mean anything on their own. People that look at a chart a conclude anything at all are not doing enough analysis.
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I listened to that podcast when it got rebroadcasted. Even the people who are in charge of the Dow admit it's not a great tool for measuring the economy. They don't change it because the only thing it has going for it is the fact that the algorithm has been around for over a century. If they changed it, they wouldn't gain much and they would lose the only thing it has going for it, which is its standing as the oldest economic measurement used today.
Also, the stock market isn't the economy.
THANK YOU for pointing this out.
The stock market is not the economy. Stocks going up is not objectively good, and stocks going down is not objectively bad. Same for housing prices and cost of living.
When the pie grows, often the result is I have a shrinking portion of it.
The stock market is not the economy. Stocks going up is not objectively good, and stocks going down is not objectively bad. Same for housing prices and cost of living.
When the pie grows, often the result is I have a shrinking portion of it.
Yes, true, but unfortunately for all of us who don't have our billions yet, many of those making policy decisions have a thumb or three in that pie and much of their wealth tied to it. What I've learned is that you can either be part of the "tide which lifts all ships" or be drowned by it. TL;DR get some index funds :)
Don't forget too that 401(k)s force your hand to care about the stock market to get any sort of retirement in the modern era.
So what? The Dow is a terrible indicator of even how well the stock market or the economy as a whole is doing. It is price weighted instead of market cap weighted so smaller companies that released fewer shares at a higher price have more impact on the Dow than larger companies. http://www.npr.org/sections/money/2017/01/04/508261371/episo...
Alright how about NASDAQ and S&P 500 hit record highs at the same time.
That would be a much better headline.
Even better: RUA 3000 hits all time high. A broad spectrum index covering ALL publicly traded companies in the US.
non-inflation adjusted highs which drop out low performers.
This! So this!
I wish that we could just drop the Dow entirely and focus on the more modern indices like the S&P. I understand it has historic significance, but let the DOW lie.
I wish that we could just drop the Dow entirely and focus on the more modern indices like the S&P. I understand it has historic significance, but let the DOW lie.
>I wish that we could just drop the Dow entirely and focus on the more modern indices like the S&P.
I don't get it. Is someone forcing "us" to use the DOW in some manner? It is what it is, use the information how you choose.
This reminds me of people who complain about how the BLS calculates specific measures of inflation or unemployment. They list their methodology. Either you find the information important and useful, or you can choose to ignore it. We don't have to "drop" anything.
I don't get it. Is someone forcing "us" to use the DOW in some manner? It is what it is, use the information how you choose.
This reminds me of people who complain about how the BLS calculates specific measures of inflation or unemployment. They list their methodology. Either you find the information important and useful, or you can choose to ignore it. We don't have to "drop" anything.
It is a historic thing. Once (ie the 1950s) calculating the S&P500 took hours - newspapers did it after the market closed for the night and the number was one of the last things put into the paper before printing. The dow could be calculated in a few minutes so radio and TV could report on it. Thus if you were a trader focused mostly on one stock, updates on the dow gave you a picture of the market - if the dow was moving it was a clue that there might be larger economic forces in play that you need to look into so see how it affects your stock.
Today we can calculate all the indexes several times a second. Thus the value of the dow (something easy to calculate) is not important today and we shouldn't use it.
Today we can calculate all the indexes several times a second. Thus the value of the dow (something easy to calculate) is not important today and we shouldn't use it.
No one is forcing you, but when the cultural zeitgeist is behind it (reported every day in the pop news, especially when rising) it promotes mass financial illiteracy.
I think it's a lost cause, just like the metric system in the USA, but dropping the Dow and focusing on more accurate measures would, in a small way, focus people's attention on more important economic news.
I think it's a lost cause, just like the metric system in the USA, but dropping the Dow and focusing on more accurate measures would, in a small way, focus people's attention on more important economic news.
The Dow is supposed to be easy enough to do by hand. Around 12 to 15 stocks, all with just the price. Its an invention of the early 1900s. Its more of a historical measurement that we keep using because... well... it works. And people are familiar with it.
But yeah, as the other posters have said: S&P500 just hit a record high. So the underlying fact is "Stock Market reaches new highs" by any sane measurement.
But yeah, as the other posters have said: S&P500 just hit a record high. So the underlying fact is "Stock Market reaches new highs" by any sane measurement.
It matters because we make it matter. It's psychological anchoring and it's a very real thing.
It's still important for the Dow Theorists (if there are any left).
Many also fail to consider the large number of stock buybacks when looking at the market.
http://fortune.com/2016/04/25/buybacks-stock-market/
http://fortune.com/2016/04/25/buybacks-stock-market/
According to this analysis (and I must admit, I cannot speak for it's veracity)
"Significant comovements exist between the DJIA and US GDP."
https://www.diva-portal.org/smash/get/diva2:311767/FULLTEXT0...
"Significant comovements exist between the DJIA and US GDP."
https://www.diva-portal.org/smash/get/diva2:311767/FULLTEXT0...
Especially since people get voted out of office went the major indexes lose significant value. So there is significant political pressure to maintain increases just like there is in residential real estate. I have a hunch outside of extraordinary events we won't see many loses in any indexes going forward.
I understand that people believe Trump is good for business. And I also understand that people believe Trump is good for the rich. And I also understand that people believe Trump is good for the blue-collar worker.
But I don't understand how Trump could be a good influence, in the long term, on business and the stock market, when looking at his positions and policy changes.
Why Trump isn't good for poor working class America - Assuming there's a large tax on every good coming into the country, then the cost of groceries will increase dramatically. The cost of cars will increase. The cost of consumer electronics will increase. The cost of many goods that Americans buy will increase and that will most directly affect the poor.
Why Trump isn't good for business - Many American companies source their parts from other countries. Increased tariffs and taxes impact their bottom line. Trump wants American companies to hire American and is willing to enforce it. American workers have a higher minimum wage. This also affects the bottom line.
Why Trump isn't good for the rich - If businesses are impacted then investments should decline, but if you've seen The Big Short, then it's possible that we could just have a fraudulent, unpredictable market instead. The huge tax cut should also benefit the rich, so actually, Trump does seem great for the rich.
All in all, I'd like to hear what others think and why this sort of thought isn't widely circulated.
But I don't understand how Trump could be a good influence, in the long term, on business and the stock market, when looking at his positions and policy changes.
Why Trump isn't good for poor working class America - Assuming there's a large tax on every good coming into the country, then the cost of groceries will increase dramatically. The cost of cars will increase. The cost of consumer electronics will increase. The cost of many goods that Americans buy will increase and that will most directly affect the poor.
Why Trump isn't good for business - Many American companies source their parts from other countries. Increased tariffs and taxes impact their bottom line. Trump wants American companies to hire American and is willing to enforce it. American workers have a higher minimum wage. This also affects the bottom line.
Why Trump isn't good for the rich - If businesses are impacted then investments should decline, but if you've seen The Big Short, then it's possible that we could just have a fraudulent, unpredictable market instead. The huge tax cut should also benefit the rich, so actually, Trump does seem great for the rich.
All in all, I'd like to hear what others think and why this sort of thought isn't widely circulated.
I have this - admittedly very condescending - theory that a large part of the middle class is still "financially illiterate". Wages are hardly ever discounted for inflation and thus growing wages (in absolute terms) make most people happy. Even if their purchasing power is declining. As long as there is no sharp increase in prices most people won't complain.
Money illusion is well a known theory, first proposed in 1928, and backed by empirical evidence from behavioral economics:
https://en.wikipedia.org/wiki/Money_illusion
People read their pay stubs more often than their grocery bills. You can suck a lot of money out of the middle class by making the latter go up more quickly than the former.
I wonder what things would be like if employers were somehow required to adjust pay for inflation by default. I guess they'd just label it a "raise" and take credit.
Heck, I'd be happy if Congress would pass legislation to make the minimum-wage automatically adjusted too.
Heck, I'd be happy if Congress would pass legislation to make the minimum-wage automatically adjusted too.
How about the government stops printing money instead? It would have a similar effect on buying power as your suggestion.
That's a little reductive -- there's always going to be some inflation (or deflation) over time, because there's no instant accurate measure of "how much value exists."
So making mistakes in inevitable, and it's safer to err towards inflation than deflation.
So making mistakes in inevitable, and it's safer to err towards inflation than deflation.
> All in all, I'd like to hear what others think and why this sort of thought isn't widely circulated.
Except a lot of things I've seen predicted about Trump so far (for one a total market crash) haven't come true. I see that maybe it takes longer... But presumably investors can also go through the same analysis you are and we should see a failing trend already. I've heard of a complete market collapse, a disaster, people losing their retirements (heard it on NBC right on the election night).
I think a lot of what the market does is unpredictable and attributing this to Trump or other political moves is probably a good way to lose money. Well at least I am not going to and buy gold and bitcoin or reshuffle my investments just because Trump is here.
Except a lot of things I've seen predicted about Trump so far (for one a total market crash) haven't come true. I see that maybe it takes longer... But presumably investors can also go through the same analysis you are and we should see a failing trend already. I've heard of a complete market collapse, a disaster, people losing their retirements (heard it on NBC right on the election night).
I think a lot of what the market does is unpredictable and attributing this to Trump or other political moves is probably a good way to lose money. Well at least I am not going to and buy gold and bitcoin or reshuffle my investments just because Trump is here.
From what I understand via articles, a lot of the current rally presumes that the talk of trade wars and tariffs is bluster... and that the rise is due to anticipated decreases in regulation and taxes making it easier for businesses.
It is still very possible that serious talk about major tariffs and trade wars from Trump might cause a US stockmarket wobble, similar to how the FTSE wobbled after Theresa May confirmed her desires for a "hard Brexit". This IMHO is the main angle of Trump's campaign that is potentially very bad for the business climate.
(Of course, there are many factors in a stockmarket's price so who knows. In the long run of course it is best to ignore day-to-day speculation. :) )
It is still very possible that serious talk about major tariffs and trade wars from Trump might cause a US stockmarket wobble, similar to how the FTSE wobbled after Theresa May confirmed her desires for a "hard Brexit". This IMHO is the main angle of Trump's campaign that is potentially very bad for the business climate.
(Of course, there are many factors in a stockmarket's price so who knows. In the long run of course it is best to ignore day-to-day speculation. :) )
> Why Trump isn't good for poor working class America - Assuming there's a large tax on every good coming into the country, then the cost of groceries will increase dramatically. The cost of cars will increase. The cost of consumer electronics will increase. The cost of many goods that Americans buy will increase and that will most directly affect the poor.
You're confusing median-income consumers with median-income producers. The latter will benefit from increased prices if the product is made at home, by them.
> Why Trump isn't good for business - Many American companies source their parts from other countries. Increased tariffs and taxes impact their bottom line. Trump wants American companies to hire American and is willing to enforce it. American workers have a higher minimum wage. This also affects the bottom line.
On the other hand, there is now less red tape to get domestic projects done. It goes both ways.
> Why Trump isn't good for the rich - If businesses are impacted then investments should decline, but if you've seen The Big Short, then it's possible that we could just have a fraudulent, unpredictable market instead. The huge tax cut should also benefit the rich, so actually, Trump does seem great for the rich.
Apparently the stock market disagrees about the decline in investment. Fraudulent market is possible under any president.
You're confusing median-income consumers with median-income producers. The latter will benefit from increased prices if the product is made at home, by them.
> Why Trump isn't good for business - Many American companies source their parts from other countries. Increased tariffs and taxes impact their bottom line. Trump wants American companies to hire American and is willing to enforce it. American workers have a higher minimum wage. This also affects the bottom line.
On the other hand, there is now less red tape to get domestic projects done. It goes both ways.
> Why Trump isn't good for the rich - If businesses are impacted then investments should decline, but if you've seen The Big Short, then it's possible that we could just have a fraudulent, unpredictable market instead. The huge tax cut should also benefit the rich, so actually, Trump does seem great for the rich.
Apparently the stock market disagrees about the decline in investment. Fraudulent market is possible under any president.
For an indicator, look at what Silvio Berlusconi did for Italy: pretty much nothing. The country stagnated while he was in power, mostly looking after his own interests.
He accomplished little in a country that really does need some "market friendly" reforms.
Also, be wary of the difference between being pro-business and pro-market:
https://promarket.org/donald-trumps-economic-policy-pro-busi...
He accomplished little in a country that really does need some "market friendly" reforms.
Also, be wary of the difference between being pro-business and pro-market:
https://promarket.org/donald-trumps-economic-policy-pro-busi...
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>All in all, I'd like to hear what others think
I think that "command and control" and "free market" economies are the extremes of the spectrum, neither optimal, with lots of room in between.
Trump has talked a lot, but we don't know where he will actually fall, policy-wise. It's not out of the question he implements economically beneficial policies. We should judge what he does, not what he says.
I think that "command and control" and "free market" economies are the extremes of the spectrum, neither optimal, with lots of room in between.
Trump has talked a lot, but we don't know where he will actually fall, policy-wise. It's not out of the question he implements economically beneficial policies. We should judge what he does, not what he says.
He did pull the US out of the TPP. And I'm confused why they did not affect the market like I thought it would.
Did the US just not hand over all its influence in Asia to China by doing that ??
Did the US just not hand over all its influence in Asia to China by doing that ??
Because the market new it was coming? I don't think it was expected to boost trade that much anyway.
What makes you think "trump" is the stock market?
The graves of investors have been dug with political shovels.
The graves of investors have been dug with political shovels.
"The graves of investors have been dug with political shovels." awesome quote! hadn't heard that one before. reminds me of the old 'the market can stay irrational longer than you can stay solvent' line.
> But I don't understand how Trump could be a good influence, in the long term, on business and the stock market
By reducing the corporate tax rate, he is on a path to ending double taxation.
By reducing the corporate tax rate, he is on a path to ending double taxation.
people have trouble understanding something like, "everything I buy is 10 pct cheaper thanks to globalization" versus "thanks to trumps tarrif's I make 5 pct more". One is direct and noticeable while the other isn't.
Except the average price is fixed to rise by 2% a year (Or rather price of paper money relative to average purchase is fixed to fall 2% a year).
So using your numbers, globalization would have actually raised wages by 10% compared to what they would have been if we didn't have it and a lot of people's job here would consist of making t-shirts in sweat shops.
So using your numbers, globalization would have actually raised wages by 10% compared to what they would have been if we didn't have it and a lot of people's job here would consist of making t-shirts in sweat shops.
I think when this came up in the debates, Trump all but admitted this is just an initial negotiating position and he doesn't expect to have to actually follow through with it.
So will just have to see if other nations call his bluff, and whether or not he will then back down from implementing the tariffs.
So will just have to see if other nations call his bluff, and whether or not he will then back down from implementing the tariffs.
I'm sorry that I don't have the time to respond to all of your assertions, but I have done a reasonable amount of research on one of the points and figured I'd add my $0.02.
> Why Trump isn't good for poor working class America - Assuming there's a large tax on every good coming into the country, then the cost of groceries will increase dramatically.
The United States is a net exporter of agricultural goods[1], where a large portion of the expense and challenge is transportation without creating a high amount of spoilage (as many of the products require a maintained temperature range and are only considered fit for human consumption within a (compared to dry goods) tight time-tolerance). On a much smaller scale, if you've been to a farmer's market and you've noted that the goods may come from a number of smaller farms, this (along with normalizing product with slightly variadic crop-yield) is often the "why."
As is intuitive, the challenges of transporting (food) product become more complicated over greater distances and time. This very obviously translates to greater expense, which means that the economic choice to sell internationally is only made when less profit can be had if remaining in the domestic market. An exception to this pattern is if a product is unrealistic to turn a profit on if attempting to grow in a non-native climate (e.g. trying to grow bananas in Alaska or coffee).[2]
What this means is that the USA can handily supply its own food product, with its lands available for agriculture easily being enough for its population, opposed to high-density regions such as China, which are approaching the point of being dependent on globalization to feed its population or a foray into geopolitics to get more arable land.[3] Put another way, the USA is rich in food goods to the point that, unless Russia decides to make up for a major global deficit[4], the US can demand higher prices for its exports. Further, being the world's dominant market, the USA can demand more favorable prices on its imports, due to the fact that it is more than capable of domestic supply and, if the cost of international trade becomes unwieldy, will instead invest in domestic infrastructure and supply, which adds further challenges for international competition -- "the cost of groceries" will only increase to the point that it becomes logical to switch to domestic supply. Coffee and tropical foods may increase in price, but consumption rates are a marketing problem due to a wealth of substitute goods.
[0] https://www.ers.usda.gov/ [1] https://www.ers.usda.gov/data-products/chart-gallery/gallery... [2] https://www.ers.usda.gov/data-products/chart-gallery/gallery... [3] https://www.ncbi.nlm.nih.gov/pubmed/12285198 [4] https://www.ft.com/content/af66f51e-6515-11e6-8310-ecf0bddad...
> Why Trump isn't good for poor working class America - Assuming there's a large tax on every good coming into the country, then the cost of groceries will increase dramatically.
The United States is a net exporter of agricultural goods[1], where a large portion of the expense and challenge is transportation without creating a high amount of spoilage (as many of the products require a maintained temperature range and are only considered fit for human consumption within a (compared to dry goods) tight time-tolerance). On a much smaller scale, if you've been to a farmer's market and you've noted that the goods may come from a number of smaller farms, this (along with normalizing product with slightly variadic crop-yield) is often the "why."
As is intuitive, the challenges of transporting (food) product become more complicated over greater distances and time. This very obviously translates to greater expense, which means that the economic choice to sell internationally is only made when less profit can be had if remaining in the domestic market. An exception to this pattern is if a product is unrealistic to turn a profit on if attempting to grow in a non-native climate (e.g. trying to grow bananas in Alaska or coffee).[2]
What this means is that the USA can handily supply its own food product, with its lands available for agriculture easily being enough for its population, opposed to high-density regions such as China, which are approaching the point of being dependent on globalization to feed its population or a foray into geopolitics to get more arable land.[3] Put another way, the USA is rich in food goods to the point that, unless Russia decides to make up for a major global deficit[4], the US can demand higher prices for its exports. Further, being the world's dominant market, the USA can demand more favorable prices on its imports, due to the fact that it is more than capable of domestic supply and, if the cost of international trade becomes unwieldy, will instead invest in domestic infrastructure and supply, which adds further challenges for international competition -- "the cost of groceries" will only increase to the point that it becomes logical to switch to domestic supply. Coffee and tropical foods may increase in price, but consumption rates are a marketing problem due to a wealth of substitute goods.
[0] https://www.ers.usda.gov/ [1] https://www.ers.usda.gov/data-products/chart-gallery/gallery... [2] https://www.ers.usda.gov/data-products/chart-gallery/gallery... [3] https://www.ncbi.nlm.nih.gov/pubmed/12285198 [4] https://www.ft.com/content/af66f51e-6515-11e6-8310-ecf0bddad...
Just two minor points - be careful not to treat "agricultural goods" and "food" as the same. As one example, the US is a major (THE major) producer and exporter of corn...but a dizzying amount of that corn is NOT for direct human consumption. It's largely animal feed, and a few industrial uses.
This also serves as a reminder that there are relative advantages. The US is great (climate-wise) for producing corn, soybean, etc, but there are some OTHER foods that we are less good at producing than other countries, be it climate or infrastructure. Basic trade principles show that it's better all around if everyone focuses on their specialties and trades rather than each trying to be fully self-sufficient.
So it's a bit simplistic to say our grocery prices will rise only to the point where it makes sense to switch to domestic production...that switch implies a lot of inefficiencies, which means that there is an upper cap on how much prices can rise, but not that we want to get to that point.
This also serves as a reminder that there are relative advantages. The US is great (climate-wise) for producing corn, soybean, etc, but there are some OTHER foods that we are less good at producing than other countries, be it climate or infrastructure. Basic trade principles show that it's better all around if everyone focuses on their specialties and trades rather than each trying to be fully self-sufficient.
So it's a bit simplistic to say our grocery prices will rise only to the point where it makes sense to switch to domestic production...that switch implies a lot of inefficiencies, which means that there is an upper cap on how much prices can rise, but not that we want to get to that point.
> Just two minor points - be careful not to treat "agricultural goods" and "food" as the same. As one example, the US is a major (THE major) producer and exporter of corn...but a dizzying amount of that corn is NOT for direct human consumption. It's largely animal feed, and a few industrial uses.
Oh, totally. Corn, specifically, has a really interesting history in grading, purpose, and politics in America. A lot of corn growing is meant to keep supply of other good down, that is, if the farm is not just paid to _not grow_ at all.
> The US is great (climate-wise) for producing corn, soybean, etc, but there are some OTHER foods that we are less good at producing than other countries, be it climate or infrastructure.
That's somewhat true, but becomes more true in time with repeat yield of nitrogen-fed corn production. That's mostly infrastructure though (with some time to rotate and repair soil).
> Basic trade principles show that it's better all around if everyone focuses on their specialties and trades rather than each trying to be fully self-sufficient.
Better "all around" for market efficiency in international-driven trade. The market in New York State could be optimized for specialized production that would well-exceed its own demand (with a couple areas of Long Island converting from specialty/rare goods to more general production).
> So it's a bit simplistic to say our grocery prices will rise only to the point where it makes sense to switch to domestic production...that switch implies a lot of inefficiencies, which means that there is an upper cap on how much prices can rise, but not that we want to get to that point.
You said it -- there is a huge amount of waste and risk in going international with product, so producers will go domestic at the earliest point possible. Foodtech (why I've done research into this topic) is really fascinating because of the complexity and fuzzy political costs.
Oh, totally. Corn, specifically, has a really interesting history in grading, purpose, and politics in America. A lot of corn growing is meant to keep supply of other good down, that is, if the farm is not just paid to _not grow_ at all.
> The US is great (climate-wise) for producing corn, soybean, etc, but there are some OTHER foods that we are less good at producing than other countries, be it climate or infrastructure.
That's somewhat true, but becomes more true in time with repeat yield of nitrogen-fed corn production. That's mostly infrastructure though (with some time to rotate and repair soil).
> Basic trade principles show that it's better all around if everyone focuses on their specialties and trades rather than each trying to be fully self-sufficient.
Better "all around" for market efficiency in international-driven trade. The market in New York State could be optimized for specialized production that would well-exceed its own demand (with a couple areas of Long Island converting from specialty/rare goods to more general production).
> So it's a bit simplistic to say our grocery prices will rise only to the point where it makes sense to switch to domestic production...that switch implies a lot of inefficiencies, which means that there is an upper cap on how much prices can rise, but not that we want to get to that point.
You said it -- there is a huge amount of waste and risk in going international with product, so producers will go domestic at the earliest point possible. Foodtech (why I've done research into this topic) is really fascinating because of the complexity and fuzzy political costs.
[deleted]
Informative comment. I would add that government subsidies for industrial production from China and for agricultural production from the US both distort the global economy.
The simplistic textbook economics case for "free trade" simply doesn't exist in the real world because the underlying assumptions do not hold.
The simplistic textbook economics case for "free trade" simply doesn't exist in the real world because the underlying assumptions do not hold.
Of course, for what it's worth, I wrote my response with those factors (subsidies, no such thing as actual "free trade") in mind.
However, the USA's role in food security for countries that rely on globalist trade structures cannot be overstated -- for the example of China, in the absence of very significant new trade agreements, the US could demand higher prices for its food exports, as their alternative would be reverting to far less profitable industries.
However, the USA's role in food security for countries that rely on globalist trade structures cannot be overstated -- for the example of China, in the absence of very significant new trade agreements, the US could demand higher prices for its food exports, as their alternative would be reverting to far less profitable industries.
Remember when nearly the entire business media predicted that if Trump was elected the stock market would crash immediately?
Some of my smartest friends (at hedge funds) placed large bets mid to late 2016 that the market would decline. Now here we are.
The lesson isn't that Trump is awesome for the economy (maybe he is, maybe he isn't) or that the market won't crash tomorrow (maybe it will, maybe it won't) but rather that even the so-called experts are relatively clueless when it comes to financial timing. Remember Brexit? Same story. Good lessons for the rest of us trying to invest. If you want to learn more, read 'The Bogleheads Guide to Investing' [http://fave.co/2jpTKmf] which is an excellent place to start.
Some of my smartest friends (at hedge funds) placed large bets mid to late 2016 that the market would decline. Now here we are.
The lesson isn't that Trump is awesome for the economy (maybe he is, maybe he isn't) or that the market won't crash tomorrow (maybe it will, maybe it won't) but rather that even the so-called experts are relatively clueless when it comes to financial timing. Remember Brexit? Same story. Good lessons for the rest of us trying to invest. If you want to learn more, read 'The Bogleheads Guide to Investing' [http://fave.co/2jpTKmf] which is an excellent place to start.
Brexit is a bad example because the predictions were accurate. If you are a foreign investor (your main currency being something other than GBP) and invested in the FTSE then the loss on your GBP was higher than your profit on the index. Slightly different story for UK based investors: While you made a profit on your FTSE ETF, those gains will to some extent be offset by a rise in inflation. Stocks are in general a good protection against higher inflation - which is exactly what is happening in the UK.
To say nothing of the non-UK businesses who sold goods/services for GBP.
I was referring to the predictions about market impacts.
It takes a long time for economies to correct to a President's actions- on the order of years. It's better to judge a President's effect on the economy at the end of their tenure than at the beginning.
It's also been shown that the President has less affect on the economy than people's perception would have them to believe.
It's also been shown that the President has less affect on the economy than people's perception would have them to believe.
Exactly this! so sick of people using this as some kind of proof achievement. All it means is that financial companies (i.e. banks) are expecting deregulation and are bullish on ability to make money in the volatile environment to come. It has no connection to any macro economics that will be impacted by his decisions being made today.
>It's also been shown that the President has less affect on the economy than people's perception would have them to believe.
You're thinking pre-Trumponomics. The president causes billions of dollars to disappear into thin air with 140 characters. He has a real and measurable impact on the economy, for good or bad.
>It takes a long time for economies to correct to a President's actions- on the order of years. It's better to judge a President's effect on the economy at the end of their tenure than at the beginning.
I'm not certain you completed your statement... The OP was about "experts" being unable to time the market. If it takes years for the market to correct, even if the underlying assumption about a market crash is correct, you have to time it properly. Otherwise you'll take years of loses to make the same off the crash as someone who placed their bets moments before the crash.
You're thinking pre-Trumponomics. The president causes billions of dollars to disappear into thin air with 140 characters. He has a real and measurable impact on the economy, for good or bad.
>It takes a long time for economies to correct to a President's actions- on the order of years. It's better to judge a President's effect on the economy at the end of their tenure than at the beginning.
I'm not certain you completed your statement... The OP was about "experts" being unable to time the market. If it takes years for the market to correct, even if the underlying assumption about a market crash is correct, you have to time it properly. Otherwise you'll take years of loses to make the same off the crash as someone who placed their bets moments before the crash.
> It takes a long time for economies to correct to a President's actions- on the order of years.
Those predictions were for short term effects.
Those predictions were for short term effects.
If that last part is true then we're in for a correction.
[deleted]
With Brexit the pound also dropped significantly. Even if the markets truck along they've been devalued.
The pound dropping has a number of effects (good or bad, it depends on your perspective). It pushed up the market in some areas where the were bargains to be had. It hammered others. It also changed the trade balance of payments
Great in the short term if you're an exporter. Terrible if you're buying a supercomputer, or planning a trip. These sorts of things have a much longer term impact.
The pound dropping has a number of effects (good or bad, it depends on your perspective). It pushed up the market in some areas where the were bargains to be had. It hammered others. It also changed the trade balance of payments
Great in the short term if you're an exporter. Terrible if you're buying a supercomputer, or planning a trip. These sorts of things have a much longer term impact.
I'm just a little confused about this though. If everyone thinks the market will decline due to Trump, then doesn't the market actually decline? What I'm saying is that apparently there were even more people making the opposite guess.
My theory is if you have real tradeable info/models that is worth more than ads on a blog you keep your mouth shut until the trade is done.
The invisible hand supports Trump
Or a Trump victory was already priced into the market -- it doesn't necessarily mean people weren't bearish on Trump.
It is so so so much more nuanced than that.
In one way, the more people that bought put protection on their stock portfolio created the bullish pressure that took weeks to unwind.
(When you buy puts, the market maker is going long the stock as their own hedge. most akin to a bookie)
In one way, the more people that bought put protection on their stock portfolio created the bullish pressure that took weeks to unwind.
(When you buy puts, the market maker is going long the stock as their own hedge. most akin to a bookie)
If you buy puts, MM sold puts and will sell shares against since he is holding a deltaLong position from selling his puts (he makes money if the underlying goes up and lose money if the underlying goes down (which is why you bought the put). To hedge that risk he would sell shares against the sold put so that the risk of the underlying move would be covered.
you're right, but yes the concept I'm referring to was staying delta neutral. When people close their put options before expiration, the MM's create buying pressure.
I would differ with your use of the word "guess".
The underlying dynamics of the market have supported the people who have been long on it.
The underlying dynamics of the market have supported the people who have been long on it.
Irrational market.
Without trying to be snarky, this sounds like a post-hoc rationalization.
How do you differentiate between an irrational market and a bad prediction? I'm honestly at a loss
I don't have an answer to that but I bet no one does regardless of whether you are an expert, trader, president or man on the street.
We love to overestimate the short term impact and underestimate the long term impact of events.
Brexit probably will have large negative effects on the UK's economy... but it will take a long time to figure that out.
Some of Trump's policies are also likely to do long-term damage, but not in the short term.
Brexit probably will have large negative effects on the UK's economy... but it will take a long time to figure that out.
Some of Trump's policies are also likely to do long-term damage, but not in the short term.
And here we are, invested in index funds, outperforming the hedge funds again...
Bingo. So many macroeconomic prognostications in this thread, none of which will be correct. The fact that "smart hedge fund" guys are making stupid bets on a market crash is hilarious.
Put money in diverse holdings and let it compound. It's not hard.
Put money in diverse holdings and let it compound. It's not hard.
I wonder about an index fund bubble. I am mainly using them too but if everyone is and continues to you wonder if it gets too crowded?
> Remember when nearly the entire business media predicted that if Trump was elected the stock market would crash immediately?
It was rather amusing yes. I stayed up late during the election night watching NBC (it is my new comedy channel, alongside Fox and friends).
So after showing a blue map for months reporters were in disbelief and shock, almost in tears. That didn't last long. Because around midnight or so the mood lifted. It looked like after-hours trading and overseas markets were headed down. So just like that the sadness turned to optimism and they printed out a few graphs (because as we all know if it is printed on paper it becomes official) and were telling people how they were right, they predicted a massive crash. There were insinuation of people losing all their retirement money. Etc, etc.
The amusing (or tragic, of course) part is after failing to predict the outcome of the election, they turned right around and with the same confidence were talking about a total economic disaster.
Of course market shot up even higher next day than before.
It is interesting that they would rather want a total crash of the market justify their prediction of Trump.
It was rather amusing yes. I stayed up late during the election night watching NBC (it is my new comedy channel, alongside Fox and friends).
So after showing a blue map for months reporters were in disbelief and shock, almost in tears. That didn't last long. Because around midnight or so the mood lifted. It looked like after-hours trading and overseas markets were headed down. So just like that the sadness turned to optimism and they printed out a few graphs (because as we all know if it is printed on paper it becomes official) and were telling people how they were right, they predicted a massive crash. There were insinuation of people losing all their retirement money. Etc, etc.
The amusing (or tragic, of course) part is after failing to predict the outcome of the election, they turned right around and with the same confidence were talking about a total economic disaster.
Of course market shot up even higher next day than before.
It is interesting that they would rather want a total crash of the market justify their prediction of Trump.
We won't know what Trumps policies do until 6 months to year from now.
Even then, some policies take years to show an impact - often with amplification or diminution based upon other events that occur long after a President is gone.
Look at how long it took for the housing market bubble to grow before bursting - 15 to 30 years, depending upon which policies you view as being contributing factors.
Look at how long it took for the housing market bubble to grow before bursting - 15 to 30 years, depending upon which policies you view as being contributing factors.
To be fair, historically at all presidents changing, markets get volatile and usually dip a bit mainly based on the uncertainty. Change typically leads to volatility in the markets so it wasn't a bad move to bet on it.
The market has been in a steady climb for 8ish years and had been sideways for nearly a decade before due to the internet bubble and mortgage/housing/banking based Great Recession from 2008, so it was more robust on a bounce off that massive dip. Trump inherited a very low volatile market.
Flipside is Trump is coming in on record highs, other presidents come in on lower than highs usually due to the change/uncertainty, may lead to a lower total increase over 4/8 years. The last two presidents came in on huge dips/volatile markets, internet bubble busting and housing bubble/fraud in 2006-8 leading to Great Recession while wages stagnated the whole time. This market still has fuel in it as it is still bouncing from those.
I am sure we will see some dips coming from the interest rates going up. No policies or interest rate changes have happened just yet to stop the bull.
Side note, typically Republican presidents have a lower overall performance on the markets[1].
[1] http://www.forbes.com/sites/peterlazaroff/2016/07/26/democra...
The market has been in a steady climb for 8ish years and had been sideways for nearly a decade before due to the internet bubble and mortgage/housing/banking based Great Recession from 2008, so it was more robust on a bounce off that massive dip. Trump inherited a very low volatile market.
Flipside is Trump is coming in on record highs, other presidents come in on lower than highs usually due to the change/uncertainty, may lead to a lower total increase over 4/8 years. The last two presidents came in on huge dips/volatile markets, internet bubble busting and housing bubble/fraud in 2006-8 leading to Great Recession while wages stagnated the whole time. This market still has fuel in it as it is still bouncing from those.
I am sure we will see some dips coming from the interest rates going up. No policies or interest rate changes have happened just yet to stop the bull.
Side note, typically Republican presidents have a lower overall performance on the markets[1].
[1] http://www.forbes.com/sites/peterlazaroff/2016/07/26/democra...
Well, hang on.
Firstly, Brexit hasn't happened yet, and nobody knows the plan. Every time the PM asserts something about where we're headed plan-wise, the markets tank. Once Article 50 is invoked, you'll see GBP slide and FTSE will get... interesting. Because a lot of the FTSE is made up companies with a lot of different EU dependencies, it's hard to call where it's going to go. But it's not likely to be good for most investors.
As for Trump and the stock markets? Well, suggesting an "immediate crash", that was silly.
Right now though, the US is in the same place as the UK is with Brexit: nobody is quite sure what's about to happen. He's made a lot of promises that he might not actually be able to keep. If he does, it's likely to cause some serious mayhem in the markets. Not least: he's specifically said he wants to devalue the dollar.
Just let that sink in for a minute: the sitting President of the United States of America got into the Oval Office by promising to lessen the dollar's buying power and value.
The hope then is that this will make US shares more favourable to overseas investors, imports more expensive promoting internal trade (and therefore jobs), and therefore US business more worth overall.
Will it work? Who the hell knows? None of us. And that's why it's too early to call those predictions of decline, wrong.
Firstly, Brexit hasn't happened yet, and nobody knows the plan. Every time the PM asserts something about where we're headed plan-wise, the markets tank. Once Article 50 is invoked, you'll see GBP slide and FTSE will get... interesting. Because a lot of the FTSE is made up companies with a lot of different EU dependencies, it's hard to call where it's going to go. But it's not likely to be good for most investors.
As for Trump and the stock markets? Well, suggesting an "immediate crash", that was silly.
Right now though, the US is in the same place as the UK is with Brexit: nobody is quite sure what's about to happen. He's made a lot of promises that he might not actually be able to keep. If he does, it's likely to cause some serious mayhem in the markets. Not least: he's specifically said he wants to devalue the dollar.
Just let that sink in for a minute: the sitting President of the United States of America got into the Oval Office by promising to lessen the dollar's buying power and value.
The hope then is that this will make US shares more favourable to overseas investors, imports more expensive promoting internal trade (and therefore jobs), and therefore US business more worth overall.
Will it work? Who the hell knows? None of us. And that's why it's too early to call those predictions of decline, wrong.
I think we're really yet to see on both these things, markets usually recover from over-reactions quite quickly, so while we did see those immediate slumps, they did recover.
However, in the longer term, the market will adjust to Trump and Brexit accordingly as actual decisions get made and impacts are felt, it's difficult if not impossible to predict what these might be with any degree of accuracy, one could speculate but ultimately there's just too many moving parts.
I'm not sure I'd promote Bogleheads in specific, but the general theme of passive index fund investing is a good one to make. If you don't want to take big risks or pay big fees, that's the way to go - that's what I do at least.
However, in the longer term, the market will adjust to Trump and Brexit accordingly as actual decisions get made and impacts are felt, it's difficult if not impossible to predict what these might be with any degree of accuracy, one could speculate but ultimately there's just too many moving parts.
I'm not sure I'd promote Bogleheads in specific, but the general theme of passive index fund investing is a good one to make. If you don't want to take big risks or pay big fees, that's the way to go - that's what I do at least.
Markets don't crash from one independent event or even a few events. I think history has shown that.
However, any event may act as a catalyst for starting a chain reaction for a series of financial events each directly responsible for the following one.
Could not disagree more. You should actually read some history.
https://en.wikipedia.org/wiki/Black_Wednesday
https://en.wikipedia.org/wiki/Black_Wednesday
Just wait until he's able to pass his 35% tariff.
Mainstream financial analysis is junk.
If you knew what a market would do - you wouldn't share it with everyone for free.
You may, however, attempt to manipulate some market through these means.
If you knew what a market would do - you wouldn't share it with everyone for free.
You may, however, attempt to manipulate some market through these means.
Brexit hasn't happened yet. The vote happened, but the U.K. has not yet left the E.U.
This is sort of the same sentiment that people have towards things like Bird Flu. It didn't happen, so the experts were wrong, and it was all a load of hot air. But in actual fact a lot of people behind the scenes worked very hard to make sure it didn't become a problem.
I don't understand how the analogy stands? The warning was if [Brexit/Trump] then bad market outcome because those things are intrinsically bad. It's not a bug that can be fixed - it's a situation to be analysed.
Not only that but the bad impact was one of the given reasons to not do the thing in the first place. "A Brexit vote might cause some problems but they are fixable" is a pretty different message to "A Brexit vote will cause an instant recession".
Not only that but the bad impact was one of the given reasons to not do the thing in the first place. "A Brexit vote might cause some problems but they are fixable" is a pretty different message to "A Brexit vote will cause an instant recession".
Who worked behind the scene after the election to make sure that the economy doesn't crash?
[deleted]
>But in actual fact a lot of people behind the scenes worked very hard to make sure it didn't become a problem.
Even more worked harder to sell useless drugs for the epidemic.
Even more worked harder to sell useless drugs for the epidemic.
I agree that there was a bird flu effect that you describe. Likewise, I always point people at Y2K as being a case in point where a lot of hype created the work that deflated the danger - but lay people could only see the hype.
That said, who worked to make sure that the market didn't crash after Trump got in office?
That said, who worked to make sure that the market didn't crash after Trump got in office?
"The Dow is dumb! Calculating a price-weighted average of a small arbitrary group of stocks is no way to go through life, son, and no one should care if that average reaches 20,000." - Matt Levine from https://www.bloomberg.com/view/articles/2017-01-11/insider-t...
Exactly. This is the most pointless economic indicator ever.
Trump for all his craziness is vehemently pro business. I know the whole tech crowd wants him to crash and burn but the stock market rising is no surprise to me.
Whether it's worth the damage done to the poor and the environment is yet to be seen.
Whether it's worth the damage done to the poor and the environment is yet to be seen.
I think many people dont want him to crash and burn. I think he was a terrible choice for president same as I think brexit was a terrible idea, but that's what we have got so I hope I am wrong on both counts. Why? Because I have to live in a world with both, so I don't wish for me to be right and everything to be shit, I hope I was wrong and everything is sunshine and fucking roses.
He's already threatened businesses with penalties if they build plants outside the US. He's going after free trade agreements that help a lot of companies build products more cheaply and access overseas markets. Sure, protectionism may help some businesses avoid competition for a while, but it can't help them in the long run as they become obsolete. This kind of interference in the free market makes it hard to call him pro-business.
What he is doing is largely in reponse to increasing protectionism by other countries. Examples:
US "web" companies must now store EU data in Europe. Any foreign company that wants to compete in Europe needs a European office and datacentres now. Good luck getting European customers for a US startup now.
China is notoriously protectionist. They manipulate their currency exchange rate, engage in market dumping to hurt competitors in other countries, require foreign firms to have a Chinese "partner" which is more like a parasite that steals money and IP.
There's many more examples. To a certain degree the US government has a job of protecting US businesses just like it protects it's citizens.
For important resources like steel and rare earth elements, US businesses have been driven out not because it's so expensive but because foreign countries heavily subsidize the industry and create artificially low prices. "Bringing the jobs back" will work but only if the US govt retaliates with import tariffs or subsidies of its own
US "web" companies must now store EU data in Europe. Any foreign company that wants to compete in Europe needs a European office and datacentres now. Good luck getting European customers for a US startup now.
China is notoriously protectionist. They manipulate their currency exchange rate, engage in market dumping to hurt competitors in other countries, require foreign firms to have a Chinese "partner" which is more like a parasite that steals money and IP.
There's many more examples. To a certain degree the US government has a job of protecting US businesses just like it protects it's citizens.
For important resources like steel and rare earth elements, US businesses have been driven out not because it's so expensive but because foreign countries heavily subsidize the industry and create artificially low prices. "Bringing the jobs back" will work but only if the US govt retaliates with import tariffs or subsidies of its own
Trump for all his craziness is vehemently pro business.
I think this might generally be correct however he seems to be more vehemently "Pro American Worker" and so far when that collides with his "Pro Business" stance the worker is currently winning. Attempting to get businesses to repatriate jobs is not necessarily a "pro-business" stance.
I think this might generally be correct however he seems to be more vehemently "Pro American Worker" and so far when that collides with his "Pro Business" stance the worker is currently winning. Attempting to get businesses to repatriate jobs is not necessarily a "pro-business" stance.
What decisions has he made that are pro worker? I have heard that he has pushed to restart pipeline construction (pro business), freeze fedral hiring (anti worker), and kill ACA (anti worker, pro business).
The pipeline will create jobs and decrease fuel costs (pro business and worker). Freezing federal hiring will decrease the tax and regulatory load shouldered by everyone (pro business and worker). The ACA was shown to have been sold to the workers based upon lies regarding costs and access to their doctors. It's imploding under its own weight.
Further, if the ACA benefits anyone, it benefits people who don't work but receive subsidies. So getting rid of it is a decided plus for workers.
Further, if the ACA benefits anyone, it benefits people who don't work but receive subsidies. So getting rid of it is a decided plus for workers.
Freezing federal hiring literally will cost jobs, so is in no way pro worker. Employees of the government are workers too. The ACA benefits my wife who was able to quit her job to start a business without worrying about being denied healthcare for her pre-existing condition. The ACA benefits all workers in businesses who now are required to offer healthcare plans which meet a minimum standard. Workers will not benefit once businesses can go back to deciding that offering a group health insurance plan is an optional benefit.
"Freezing federal hiring literally will cost jobs"
Jobs in government, not in private industry. Would you rather we all go on the gov payroll?
Jobs in government, not in private industry. Would you rather we all go on the gov payroll?
Since we are speaking in ridiculous hyperbole -- if everyone worked for private industry and no one had the option to work for the government -- what do you expect would be the effect on the distribution of wage and labor benefits?
None? What does government jobs have to do with equality? Well over half of US works for private companies already, the impact of no government jobs would be minimal if you ignore the obvious problem that we wouldn't have a government.
Arguably companies would come in to replace the government. Private security, private trash pickup, private road maintenance. It would work, but I'm not sure how well
Arguably companies would come in to replace the government. Private security, private trash pickup, private road maintenance. It would work, but I'm not sure how well
All I was trying to say that the current round of executive actions are being taken for businesses and without regards to effects on workers, but you put it more succinctly.
Businesses would like to make their goods as cheap as possible (by using cheap labor outside the US). What he has proposed (tariffs) forces them to build here, hence the jobs are here.
Business would like to make their goods as profitable as possible, they have never shown any willingness to pass on savings to customers.
That's the point, they are supposed to make as much money as possible. That's why you need competition. If corp A's competitor is selling the same product at a lower price, then corp A loses out on the profit. It's a nice feedback loop.
Federal jobs are a net negative for the economy. Private jobs are funded by profit from selling products. Federal jobs are funded by taking money from everyone to pay for them. Freezing federal hiring should have no short term effect on the economy, long term it will mean less government services but lower taxes.
I heavily support the pre-existing condition clause in the ACA but the rest of it is a clusterfuck. The way it's designed inscentivizes only the riskiest people to join groups and everyone else to go without insurance.
The ACA's "profit model" is also greatly skewed towards overcharging the young and healthy. Our oldest generation is the most wealthy population group and our youngest are reletively one of the poorest in US history... As a young healthy male my insurance cost has gone from $55 to over $300 a month due to the ACA. I recently just ditched insurance because that's too much money to pay for a service I get hardly any benefit from.
It's yet another money siphon built by the boomers to fuck over the mellenials.
I heavily support the pre-existing condition clause in the ACA but the rest of it is a clusterfuck. The way it's designed inscentivizes only the riskiest people to join groups and everyone else to go without insurance.
The ACA's "profit model" is also greatly skewed towards overcharging the young and healthy. Our oldest generation is the most wealthy population group and our youngest are reletively one of the poorest in US history... As a young healthy male my insurance cost has gone from $55 to over $300 a month due to the ACA. I recently just ditched insurance because that's too much money to pay for a service I get hardly any benefit from.
It's yet another money siphon built by the boomers to fuck over the mellenials.
Government jobs are paid for through taxation. Taxation is a form of theft and at best should be considered a necessary evil for running the government that everyone agreed to - as outlined in the Constitution. The Constitution never allowed for the massive Federal work force we have. It's a bit of a leviathan that needs to be reduced.
Sure, the ACA has some short-term, especially anecdotal benefits. I'm glad your wife was able to use it productively while it was available to her... but the ACA is loaded up with give-aways paid for with other people's money - so it's unsurprising that there are some who think it's a good deal for them.
If I give you my neighbor's big-screen TV, I'm sure you'd have a great story about getting a big-screen TV. But you aren't the only party in that transaction.
Long term, the system set up by the ACA is collapsing. Insurers are fleeing from the markets because they don't make economic sense without ever increasing government subsidies to the industry.
Worse, the big promise of the ACA was that it would lower costs for everyone without changing their doctor-patient relationships. Those were lies. Not just mistakes, but pre-meditated and documented lies.
Sure, the ACA has some short-term, especially anecdotal benefits. I'm glad your wife was able to use it productively while it was available to her... but the ACA is loaded up with give-aways paid for with other people's money - so it's unsurprising that there are some who think it's a good deal for them.
If I give you my neighbor's big-screen TV, I'm sure you'd have a great story about getting a big-screen TV. But you aren't the only party in that transaction.
Long term, the system set up by the ACA is collapsing. Insurers are fleeing from the markets because they don't make economic sense without ever increasing government subsidies to the industry.
Worse, the big promise of the ACA was that it would lower costs for everyone without changing their doctor-patient relationships. Those were lies. Not just mistakes, but pre-meditated and documented lies.
The ACA just piled onto the clusterfuck we already have. At a federal level we've already got Medicare, Medicaid, Tricare, and now the ACA. Within medicare we have "parts" A through D that offer a bunch of intermingled benefits. Even when someone has medicare it's a huge fucking pain in the ass to figure out which "part" to bill and if you send it to the wrong one they won't pay.
Many states have their own programs as well.
It's a gaint fucking mess they need to cut the shit and just throw everyone on Medicaid
Many states have their own programs as well.
It's a gaint fucking mess they need to cut the shit and just throw everyone on Medicaid
I believe ACA mainly benefits people who work but don't make enough to pay for healthcare insurance. Medicaid would be for those who don't work at all (or make way too little).
I think looking at it as a zero sum thing is framing it the wrong way anyway though.
I think looking at it as a zero sum thing is framing it the wrong way anyway though.
I agree that the pipeline will decrease fuel costs, and provide temporary construction jobs, however the net will be that the oil businesses will increase their profits and need fewer workers to transport the oil to market. Until workers can share equally in the profits of a business, I think it is dishonest to equate removing regulatory "burden" as pro business. Trickle down economics effects simply do not happen.
"Until workers can share equally in the profits of a business"
Sharing equally in the productivity of the society is just communism. It fails every time because people have varying levels of productivity but when you compensate everyone equally no matter what effort they apply, you get a tragedy of the commons situation.
Communism has been tried many times and has never been shown to be good for workers.
Sharing equally in the productivity of the society is just communism. It fails every time because people have varying levels of productivity but when you compensate everyone equally no matter what effort they apply, you get a tragedy of the commons situation.
Communism has been tried many times and has never been shown to be good for workers.
All of the pro-manufacturing-in-the-US, anti-import stuff.
I have yet to hear about any movement on those campaign talking points.
Do threats not count as movement? What about threats that inspire (alleged) action? There has been quite a bit of both.
Does it have to be an executive action?
Traditionally, the President wasn't the one creating the laws to begin with. So if Congress passes a law and Trump signs it, is it his action then?
Does it have to be an executive action?
Traditionally, the President wasn't the one creating the laws to begin with. So if Congress passes a law and Trump signs it, is it his action then?
He had a big meeting with manufacturers two days ago and is incentivising US manufacturing through the threat of tariffs.
He's promoting _jobs_, but also promoting pollution and cuts to healthcare, wages, and job safety.
Is there anything more statist than wanting to pick and choose which businesses do well and which ones crash and burn? Taking out one's personal vendettas on businesses on a whim?
I take that back, the 2nd part is beyond even statism.
I take that back, the 2nd part is beyond even statism.
As a business owner, of a large multi-national company heavily invested in various non-physical IP-heavy "product", say, Disney, wouldn't Trump's move to pull the US out of the TPP not make me shit my pants with fear for the future?
One of the key provisions of the TPP was to force Asian countries to adhere to strict US copyright laws. And that makes sense, since IP companies' products are what the US really exports on makes money on - nobody is buying US fridges and ovens in large quantities. And if you can't get China to respect IP laws, then you have no future there.
Maybe I'm completely confused about the TPP, but I'm frankly pretty surprised the market's reaction so far has been one giant "meh".
One of the key provisions of the TPP was to force Asian countries to adhere to strict US copyright laws. And that makes sense, since IP companies' products are what the US really exports on makes money on - nobody is buying US fridges and ovens in large quantities. And if you can't get China to respect IP laws, then you have no future there.
Maybe I'm completely confused about the TPP, but I'm frankly pretty surprised the market's reaction so far has been one giant "meh".
This sounds great but the TPP didn't include China, by far the biggest IP violator on the planet. The TPP was more of a giant conglomeration of things that various large companies in different countries wanted.
The text of the agreement was drawn up as secretively as possible because everybody knew the only point was to help the fortune 500 and fuck over everyone else.
I'm glad it's dead.
The text of the agreement was drawn up as secretively as possible because everybody knew the only point was to help the fortune 500 and fuck over everyone else.
I'm glad it's dead.
> Whether it's worth the damage done to the poor
Like what? If anything, more jobs instead of more and more social programs would do a lot to actually get people to a decent livelihood...
Like what? If anything, more jobs instead of more and more social programs would do a lot to actually get people to a decent livelihood...
America today manufactures far more goods then the America of 1970 did. Yet, American manufacturing is dead as a source of jobs.
Even if the factories come back, the jobs won't.
Even if the factories come back, the jobs won't.
It's more that he's pro-business-he-likes. If you happen to be a company focused on renewable energy or nuclear fusion he's likely to side with old energy companies and try to throw as many regulatory hurdles in front of your ventures to ensure his friends win. All in the name of free market capitalism of course (/s).
Not strictly true, or he wouldn't be working with Elon Mask, for example. [1] However what's certain is that he wants to achieve US independence from Middle Eastern oil so as to stop enriching Saudi princes.
[1] http://www.independent.co.uk/life-style/gadgets-and-tech/new...
[1] http://www.independent.co.uk/life-style/gadgets-and-tech/new...
Trust me, when your Sec of State pick is an Exxon-Mobil executive, there's no energy independence in the cards. Those vultures want to ensure they get a monopoly on oil regardless of the country in question. That's just how they roll.
xname2(1)
[deleted]
> Trump for all his craziness is vehemently pro business.
No he is definitely not. Trump is anti-business and he makes that very clear. His campaign promises and actions since election are super clear that he is pro-his-wealth and not pro-business.
A pro-business politician would raise taxes on the wealthy, provide tax cuts for the middle class, increase the corporate tax rate, improve immigration so that more people could come in to the country, address massive business risks like climate change with a serious face, improve healthcare for everyone in nation, etc. A pro-business politician would want a healthy and wealthy middle class, a stable climate, and good tax structure to incentivize smart people to come here and build useful things. More businesses are more likely to succeed in a society that is healthy, resourceful with its environment, and with enough wealth shared that income inequality does not destabilize the structure.
Trump is the opposite of being pro-business. Trump is not fiscally conservative or pro-business at all - the very idea that he is would be considered an "alternative fact" - a lie.
No he is definitely not. Trump is anti-business and he makes that very clear. His campaign promises and actions since election are super clear that he is pro-his-wealth and not pro-business.
A pro-business politician would raise taxes on the wealthy, provide tax cuts for the middle class, increase the corporate tax rate, improve immigration so that more people could come in to the country, address massive business risks like climate change with a serious face, improve healthcare for everyone in nation, etc. A pro-business politician would want a healthy and wealthy middle class, a stable climate, and good tax structure to incentivize smart people to come here and build useful things. More businesses are more likely to succeed in a society that is healthy, resourceful with its environment, and with enough wealth shared that income inequality does not destabilize the structure.
Trump is the opposite of being pro-business. Trump is not fiscally conservative or pro-business at all - the very idea that he is would be considered an "alternative fact" - a lie.
Could you explain why any of what you say a 'pro-business' politician should do is pro-business? I think a lot of people would disagree with you on those points.
Okay, sure. The first place is to immediately dispel the idea that Republicans have ever been about being "pro-business" - and the second place will be that Trump specifically is not.
It's simple Tragedy of the Commons at first. Republicans / Republican Presidents are generally pro-greed and pro-riches, not pro-business, and those are different things. What you want in a good business environment is not achieved with Republican policies. This can be seen with the past few presidents - good economic times and growth with Democrat policies, and poor economic times and decline with Republicans.
Specifics.
> A pro-business politician would raise taxes on the wealthy, provide tax cuts for the middle class, increase the corporate tax rate
Henry Ford is the good example here of showing why this is pro-business. Give your country a stable, wealthy middle class (pay your auto-workers more, a lot more), and then they will be able to buy your products and your company will thrive. Roads will be built for your cars to drive on, with those taxes!
Wealthy people are important in a capitalistic society, but income inequality and extreme wealth present dangers, not useful things. Income inequality will catch up with the business as the middle class fades and doesn't buy their products.
Want a pro-business environment? Increase corporate taxes to fund schools and education and infrastructure so that more people will grow up healthy and wealthy and wanting to buy things.
> Improve immigration so that more people could come in to the country
Is this really a debate, especially here? Most of the smart people in the world who can create wealth and businesses do NOT live in the USA. If they wanted to live here, or did live here, that would be great.
> Address massive business risks like climate change with a serious face
The climate is changing, and it's going to kill a lot of people that could have been buying your products. It's going to displace hundreds of millions of families and settlements. Food production and distribution is going to be wildly affected. Basic things that should be stable in a business environment will not be stable. Climate change is the biggest RISK for corporate profits in the world (though right now you could also see it as an opportunity - if you recognize that it needs to be addressed).
> improve healthcare for everyone in nation
Again is this really a debate? Isn't it obvious that healthy people will be better for business? Do you want your customer base to be dying? Or your employees worried about disease? That's not useful for business.
It's simple Tragedy of the Commons at first. Republicans / Republican Presidents are generally pro-greed and pro-riches, not pro-business, and those are different things. What you want in a good business environment is not achieved with Republican policies. This can be seen with the past few presidents - good economic times and growth with Democrat policies, and poor economic times and decline with Republicans.
Specifics.
> A pro-business politician would raise taxes on the wealthy, provide tax cuts for the middle class, increase the corporate tax rate
Henry Ford is the good example here of showing why this is pro-business. Give your country a stable, wealthy middle class (pay your auto-workers more, a lot more), and then they will be able to buy your products and your company will thrive. Roads will be built for your cars to drive on, with those taxes!
Wealthy people are important in a capitalistic society, but income inequality and extreme wealth present dangers, not useful things. Income inequality will catch up with the business as the middle class fades and doesn't buy their products.
Want a pro-business environment? Increase corporate taxes to fund schools and education and infrastructure so that more people will grow up healthy and wealthy and wanting to buy things.
> Improve immigration so that more people could come in to the country
Is this really a debate, especially here? Most of the smart people in the world who can create wealth and businesses do NOT live in the USA. If they wanted to live here, or did live here, that would be great.
> Address massive business risks like climate change with a serious face
The climate is changing, and it's going to kill a lot of people that could have been buying your products. It's going to displace hundreds of millions of families and settlements. Food production and distribution is going to be wildly affected. Basic things that should be stable in a business environment will not be stable. Climate change is the biggest RISK for corporate profits in the world (though right now you could also see it as an opportunity - if you recognize that it needs to be addressed).
> improve healthcare for everyone in nation
Again is this really a debate? Isn't it obvious that healthy people will be better for business? Do you want your customer base to be dying? Or your employees worried about disease? That's not useful for business.
> increase the corporate tax rate,
A number of economists disagree with you.
* Opaque
* Consumer paid
* Subject to Perversion through Deductions / Inversions
https://www.nytimes.com/2014/01/06/opinion/abolish-the-corpo...
A number of economists disagree with you.
* Opaque
* Consumer paid
* Subject to Perversion through Deductions / Inversions
https://www.nytimes.com/2014/01/06/opinion/abolish-the-corpo...
Your list is largely comparable to what one would see as a list of goals from someone sympathetic to European style socialism.
And yet the USA is the dominant economy in the world. How do you square that reality with your claim of what a "pro-business politician" would do?
And yet the USA is the dominant economy in the world. How do you square that reality with your claim of what a "pro-business politician" would do?
Sure, I wrote out a big answer just above.
You wrote rationalizations for the policies you mentioned, but you didn't address my point that the real world example of the economic dominance of the USA would be evidence that you're incorrect.
You'd think that if your policies were good for business, countries that had adopted those policies would be the most economically successful.
You'd think that if your policies were good for business, countries that had adopted those policies would be the most economically successful.
Comparing countries with such distinct histories, geography, culture, etc., is futile.
We could very well owe the current dominance of the US due to the unfolding of events in World War 2. Aside from that, there are many countries that could never have the dominance the US has just due to the difference in population alone. An economy based on a domestic market of 300 million people is always going to have some advantages (and disadvantages) compared to one with 3 million people, even if those 3 million people are better off on average in every measurable way.
So many other variables...
We could very well owe the current dominance of the US due to the unfolding of events in World War 2. Aside from that, there are many countries that could never have the dominance the US has just due to the difference in population alone. An economy based on a domestic market of 300 million people is always going to have some advantages (and disadvantages) compared to one with 3 million people, even if those 3 million people are better off on average in every measurable way.
So many other variables...
Other people have covered how the Dow is a mediocre stock index. The other half is that 20k doesn't mean anything either. It's just a number calculated by the math-function of the index.
The psychology is mildly fun, just like a 50th birthday may be more celebrated than a 49th. Round numbers appeal to us. But 20k dow says nothing more about the state of the economy than the 19.9 dow did a few days ago.
The psychology is mildly fun, just like a 50th birthday may be more celebrated than a 49th. Round numbers appeal to us. But 20k dow says nothing more about the state of the economy than the 19.9 dow did a few days ago.
>But 20k dow says nothing more about the state of the economy than the 19.9 dow did a few days ago.
It's not the 20k vs 19.9 it's a) the record high, b) the upward trend.
It's not the 20k vs 19.9 it's a) the record high, b) the upward trend.
Mediocre? It's worse than that. It's worthless. Stock price means nothing.
It's ironic to see so many people posting about how the Dow and stock market mean nothing.
If so, why did such noted liberal economists (like Krugman) make such dire predictions about where the market was going after Trump won the election?
Are they to be disregarded because they obviously place a lot of importance on the stock market?
If so, why did such noted liberal economists (like Krugman) make such dire predictions about where the market was going after Trump won the election?
Are they to be disregarded because they obviously place a lot of importance on the stock market?
Would be great for Republicans if this boom persists through the 2018 midterm elections.
When Trump's trade policies take hold there should be a rush to form manufacturing startups to make stuff in the USA for the industrial supply chain, e.g. power cords, circuit boards, paints, etc. I expect these to form in the traditional centers of manufacturing excellence - urban areas where minorities will enjoy relative job prospect improvements.
When Trump's trade policies take hold there should be a rush to form manufacturing startups to make stuff in the USA for the industrial supply chain, e.g. power cords, circuit boards, paints, etc. I expect these to form in the traditional centers of manufacturing excellence - urban areas where minorities will enjoy relative job prospect improvements.
There are lots of articles about how the stock market is affected by elections, but few about how the stock market affects elections. The up market didn't make Al Gore win, for example, but maybe if it were down he wouldn't have pulled it so close. Who knows? Maybe people were feeling so high from the market that they wanted the low-taxes guy because they were feeling rich.
Can the US really make power cords cheaper than China or Vietnam? If they add tariffs to imports I'm sure they can but is manufacturing for the domestic market alone enough to create sustainable jobs?
Nope, unless it's all automated and paired with high tariffs. But then you might only create tens of jobs per factory instead of thousands.
They can't, it's a political statement. It will likely not happen but for a small range of high-value products.
[deleted]
Here's an interesting podcast claiming the Dow is meaningless: http://www.npr.org/sections/money/2017/01/04/508261371/episo...
The article might have already discussed this, but I can't tell because of the paywall.
The article might have already discussed this, but I can't tell because of the paywall.
Just a reminder that Dow Jones went up by over 140% over the last 8 years.
Right. It was basically already at 20k (19,963.8) on Jan 6, with two weeks left for Obama's Presidency.
That's correct, but the bull run started after the election results in November.
I'm not exactly shocked that an ego-driven, heavily pro-business Republican President with full congressional control and majority of states under Republican governorship could drive the market up.
I'm not exactly shocked that an ego-driven, heavily pro-business Republican President with full congressional control and majority of states under Republican governorship could drive the market up.
So nominal stocks valuations are up. The real question is are valuations high or low.
good indicators
- Stock Market Capitalization to GDP (This is Warren Buffets's favorite). https://fred.stlouisfed.org/series/DDDM01USA156NWDB?
- Q Ratio aka Tobin's Q Ratio (total price of the market divided by its replacement cost)
- S&P 500 CAPE (PE10) and Shiller PE (PE)
- S&P 500 Price to Book Value
None of them alone, but all of them together.
good indicators
- Stock Market Capitalization to GDP (This is Warren Buffets's favorite). https://fred.stlouisfed.org/series/DDDM01USA156NWDB?
- Q Ratio aka Tobin's Q Ratio (total price of the market divided by its replacement cost)
- S&P 500 CAPE (PE10) and Shiller PE (PE)
- S&P 500 Price to Book Value
None of them alone, but all of them together.
If you had a bunch of money to put in the stock market, would you:
- Put 1/3 of it in now and the other 2/3 in when the next crash hits - Wait until it all goes to shit and put it all in then, keeping it in a high-yield savings account until then (they make about as much as CDs these days)
Would love to hear opinions!
- Put 1/3 of it in now and the other 2/3 in when the next crash hits - Wait until it all goes to shit and put it all in then, keeping it in a high-yield savings account until then (they make about as much as CDs these days)
Would love to hear opinions!
Time in the market is better than trying to time the market.
How long until next crash? When is the crash over and things start to climb again? You cannot know before after the fact, so it ends up being a big gamble. I'd say invest now, possibly over a few months if you want to spread the risk.
How long until next crash? When is the crash over and things start to climb again? You cannot know before after the fact, so it ends up being a big gamble. I'd say invest now, possibly over a few months if you want to spread the risk.
What's your time horizon?
I typically just invest it all at once with no attempt to time the market.
If i'm really nervous, i might make 12 equal investments over a year. Again, no attempt to time the market.
The only time i've ever timed my investment based on the market is buying post crash. Getting a 3% return over a week was nice after the brexit slump.
I typically just invest it all at once with no attempt to time the market.
If i'm really nervous, i might make 12 equal investments over a year. Again, no attempt to time the market.
The only time i've ever timed my investment based on the market is buying post crash. Getting a 3% return over a week was nice after the brexit slump.
You have no idea that if "the crash" hits there won't be another one a week later. Timing the market is a fools game. Long term, low cost, investing is the only way to match the market
You Should Really Read This. "What If You Only Invested at Market Peaks"
https://news.ycombinator.com/item?id=8210923
wait for the next crash.
There's no real evidence that the President has much of an influence on the economy.
I agree 100%, but for as long as I can remember, presidents have received credit for the state of affairs on their watch, and used that as talking points while campaigning.
Yeah :( It started with Kennedy, if I recall correctly, but it apparently took off and became a standard part of the presidential playbook.
The Venezuela stock market has had quite a run over the past few years too, but..... https://www.bloomberg.com/quote/IBVC:IND
This is nothing more than a sugar high before the inevitable Trump crash. He likes to take credit or stuff other people did. Then when Trump actually does something and it doesn't go well he pushes the blame onto someone else.
The stock market indexes were already up significantly as a result of Obama's policies. I'm just not here for Trump or others assigning credit to Trump for something Trump had very little to do with.
This is what you call speculation. Under Obama people had to prove out their finances. Under Trump gut feeling is enough.
The stock market indexes were already up significantly as a result of Obama's policies. I'm just not here for Trump or others assigning credit to Trump for something Trump had very little to do with.
This is what you call speculation. Under Obama people had to prove out their finances. Under Trump gut feeling is enough.
I got down voted for this. However, I was right that it was a sugar high and not based on the numbers. It was some blanket assumption that Trump would automatically be "good for the market" because "deregulation". Deregulation isn't always good.
"Customers" will be a lot less likely to spend money if they aren't adequately protected when they do. Regulations also exist to protect the health and safety of the US citizens. It protects business from getting sued when they didn't follow the regulations.
So businesses and consumers benefit from regulation and that there is no gain to be had here. We are just trading the small gains in stock price for lots of additional risk legally and otherwise.
I didn't even bring up the fact that Trump may unwittingly get us into a trade wars with some of our biggest trading partners by threatening to go to war with them or threatening them with tariffs when they don't do what we say.
"Customers" will be a lot less likely to spend money if they aren't adequately protected when they do. Regulations also exist to protect the health and safety of the US citizens. It protects business from getting sued when they didn't follow the regulations.
So businesses and consumers benefit from regulation and that there is no gain to be had here. We are just trading the small gains in stock price for lots of additional risk legally and otherwise.
I didn't even bring up the fact that Trump may unwittingly get us into a trade wars with some of our biggest trading partners by threatening to go to war with them or threatening them with tariffs when they don't do what we say.
Can we not post articles behind a paywall?
What will happen to the Dow (and other indices) when the first serious geopolitical or financial crisis hits?
It will go down. After that, it will go up again. Then down again. Then up again. Ad nauseum. The market fluctuates. If you want to put money away for the long-term, it makes sense to have some in it. For the short-term, not so much. This is all pretty standard stuff.
This is driven by expectations of Trump's deregulatory agenda. He says he's going to cut 75% of regulations.
I can't believe this is happening. America is back people.
I can't believe this is happening. America is back people.
I never understood this line of reasoning, as if regulations were some extrinsic property.
"I'll take one quart of regulations, a three feet of rules"
It doesn't work that way. The practice of regulation is non-linear in terms of its formulation and result. Long, complicated regulations could be relatively meaningless, while short rules could be really important.
Saying we are going to cut 75% of regulations is useless. Point to specific rules and regulations.
"I'll take one quart of regulations, a three feet of rules"
It doesn't work that way. The practice of regulation is non-linear in terms of its formulation and result. Long, complicated regulations could be relatively meaningless, while short rules could be really important.
Saying we are going to cut 75% of regulations is useless. Point to specific rules and regulations.
Since ignorance of the law is no excuse, you still need to read and understand those "long, complicated regulations that are relatively meaningless" to determine if they apply to you, and if so how to comply with them. Removing those regulations would make doing business easier with minimal downside, especially for smaller companies that can't easily afford large armies of lawyers to understand the law.
Depends which 75% of regulations he cuts. If he cuts EPA regulations and there is more pollution as a result of the increase in manufacturing this could result in more deaths in the long run. How about safety regulations get cut so manufacturing gets cheaper but more workers die in manufacturing plants, is that ok?
Fine, but what if there is a chance that the huge heap of regulations supporting entrenched interests is broken up? I'm looking at you Comcast
Let's see which regulations get cut first. So far, it's not the government contracting regulations.
Bonus: when Trump "freezes the size of Federal employment" do you think that will be match by a freeze in contracting, or a boost in crony contracts?
Bonus: when Trump "freezes the size of Federal employment" do you think that will be match by a freeze in contracting, or a boost in crony contracts?
What I learned reading The Art of The Deal is his MO:
Trump: "I have a problem (e.g. Wollman Ice Rink) but know nothing about this topic. Who is the best company that makes ice rinks?"
Makes a few calls to hockey teams to find this information.
Learns the name of the company.
Calls CEO of the ice rink company.
After 15 mins of conversation, learns that freon-based ice rinks suck the monkey and that brine-based ones last forever.
Total elapsed time: Probably an hour.
Hires ice-rink company to help with Wollman Rink.
Project completed in four months and under budget.
No studies, no meetings, just results.
Government bureaucrats: REEEEEEEEEE!
Trump: "I have a problem (e.g. Wollman Ice Rink) but know nothing about this topic. Who is the best company that makes ice rinks?"
Makes a few calls to hockey teams to find this information.
Learns the name of the company.
Calls CEO of the ice rink company.
After 15 mins of conversation, learns that freon-based ice rinks suck the monkey and that brine-based ones last forever.
Total elapsed time: Probably an hour.
Hires ice-rink company to help with Wollman Rink.
Project completed in four months and under budget.
No studies, no meetings, just results.
Government bureaucrats: REEEEEEEEEE!
[deleted]
These critics don't understand what it means to get things done. It's becoming a meme at this point.
Media for the last year and a half: "Donald Trump will NOT be able to build the wall."
Just now, Donald Trump: "We will start IMMEDIATE CONSTRUCTION of a border wall."
Media for the last year and a half: "Donald Trump will NOT be able to build the wall."
Just now, Donald Trump: "We will start IMMEDIATE CONSTRUCTION of a border wall."
He did put in a provision to prohibit federal agencies from hiring contractors. From the order: "Contracting outside the Government to circumvent the intent of this memorandum shall not be permitted."
I haven't seen a single fake news site report that though, they are all pushing the alternative fact that contractors will be hired en mass.
I haven't seen a single fake news site report that though, they are all pushing the alternative fact that contractors will be hired en mass.
Stuff still needs to get done, so a hiring freeze means needing a workaround, they will find money for contractors because it is seen as a limited time expense, even though it is probably 3x or 4x more expensive over the long term. When they tell you they cut the size of government they won't tell you that government costs went up, or they will tell you government payroll is down and contractors get costed as something other than payroll.
"3x or 4x more expensive over the long term"
And that's where you're wrong. If done right, 3x to 4x more expensive up front and less TCO in the long run.
And that's where you're wrong. If done right, 3x to 4x more expensive up front and less TCO in the long run.
In software it never works like that. Costs more to build it with contractors and then because you get rid of the contractors support is done by people unfamiliar with the code so support costs more, upgrades cost more because new contractors need time to learn the codebase or the old contractors charge more because they know the codebase.
Fine, but a LOT of the current problems do not revolve around software whatsoever
Actually, axing the net-neutrality regulations, which he is sure to do, will help Comcast and AT&T.
Yup his choice for Head of the FCC is actually quite anti net-neutrality.
I only see him cutting regulations that hurt the large organizations. He'll keep the stuff in that helps our current monopolies. That's what he's wanted his whole life, why change now?
That's what he's wanted his whole life?
He will remove only the bad, useless ones. See A theory of regulation in https://www.bloomberg.com/view/articles/2017-01-24/metrics-f...
Okay, that was a good read.
Also the 2nd very solid Matt Levine article I've read in this thread, I think I detect a pattern.
Also the 2nd very solid Matt Levine article I've read in this thread, I think I detect a pattern.
This is why Hacker News needs a downvote button. This is a non-story. The DJIA is an average of 30 stocks. Even if it was possible to figure out causation of stock market movement, the DJIA would be a terrible indicator of stock market movement.
For more, see here: https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
For more, see here: https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average
And even if it does hit a real, inflation-adjusted high in the next few weeks, it won't mean much. The Dow is a seriously flawed stock index, and it's certainly not a good way to measure what's going on in the overall economy.
On today's show, we rain on the Dow's parade and explain why a lot of very smart people say we should ignore the Dow.
http://www.npr.org/sections/money/2013/03/12/174139347/episo...
The Dow Isn't Really At A Record High (And It Wouldn't Matter If It Were) http://www.npr.org/sections/money/2013/03/05/173515767/the-d...