[throwaway_jobs]

It seems the pandemic and unemployment is finally causing voodoo economics (trickle down economics) to reverse course and perhaps cause trickle up economics, where the multi-billion dollar corporations and rich alike will begin to feel the pinch of poverty on a massive scale trickle up.

Unfortunately while taxpayers got their $1,200 Checks they were robbed blind of over $4T to the FED which went directly to stabilize the publicly traded companies. If it weren’t for that, we would have already seen bankruptcies on a massive scale from publicly traded companies...instead the markets are back where the were pre-covid. But at some point they will have to admit there can’t be a recovery when there are no consumers left.

[camillomiller]

I'm frankly flabbergasted by what's going on with the markets. If anyone thought stocks were still somehow a projection of reality and an indicator of expectations on the future of a company's performance, well, that's clearly not the case anymore. I am really scared that a real devastating collapse is still looming, but I frankly have no clue of when that could happen and what could actually trigger it.

[jfengel]

It is baffling, and I've been expecting a crash for a decade... which is the problem. The market can remain irrational longer than you can remain solvent.

Right now it's kind of persistently slightly irrational. A quick-and-dirty measure of its sanity is the P/E ratio: how much money are the publicly listed companies actually making? Right now, the number is around 22[1], meaning a dollar invested in the market takes 22 years to pay itself back purely in terms of corporate profits.

That's a return of about 3%. Numbers over 20 are generally considered a sign that the market is overheated. They peaked at around 45 and 65 right before the 90s and 2000s crashes. So there is revenue there, and not entirely out of line with stock prices, but not entirely line with them either.

None of that takes coronavirus into account; that's current price with last quarter's earnings. But if you assume that coronavirus is only temporary (it may not be, but let's be optimistic for a second) it means that long term the numbers are calling for a crash... eventually. One of these days. Longer than you can remain solvent while shorting it.

Probably.

In other words, I've got no idea what's going on. The markets have been weirdly stable (in price-to-earnings terms) for the past decade, at a number that's too optimistic, before coronavirus. Surely the inevitable at-least-short-term loss of earnings should have corrected that, but it hasn't. So either people are thinking very long term, or they're just nuts.

[1] https://www.multpl.com/s-p-500-pe-ratio

[dehrmann]

I've started ignoring P/E because , among other reasons, it doesn't account for cash reserves. If you have two similar companies, but one is sitting on more cash, it should be worth more, but its P/E makes it look overpriced relative to the other.

[perl4ever]

People have been writing stuff about short-termism being the bane of the economy for a long time; maybe it's worth reconsidering the idea that prices reflect estimated total future profits and not the next quarter? Could short-termism be a myth?

[throwaway_jobs]

> I am really scared that a real devastating collapse is still looming,

Eventually it will because businesses will never recover without consumers recovering. That said I don’t think it’s looming...again congress gave over $4T to the FED to stabilize the market. To put that runway in perspective consider how in 2008 we were on the brink of a total financial collapse, yet with only $1.6T used to stabilize the banks the financial collapse was turned into the longest bull market in history (over a decade) and record high markets. We are talking 2.5x that bailout this time around.

[three_seagrass]

Fed has flooded the market with cash like never before. Buying up debt to the point that they're picking up junk bonds.

Once Q2 earnings hit next month you'll see a massive market correction.

[SuoDuanDao]

I was listening to a great American poet recently, the lines "The buying power of the proletariat's gone down/ Money's getting shallow and weak" really stuck with me.

What can that much money in the markets really buy when there's no economy being served by it any more? Eventually the winners will find they've been playing the wrong game.