But… the stock market is the economy, because it drives the economy (or can slow the economy if it collapses), ect. It’s infuriating, but it’s true. As long as we believe in money, and not in production, the markets are the economy. All the figures of production are just shaky props that give the BS of the market some degree of legitimacy, but nevertheless that tenuous connection is there and is real enough.
A) this is not necessarily true.
B) Even if I grant it’s true, you’ve got the causal link backwards. The stock market is an indicator, nothing more. It’s an indicator of the expected future earnings of public US corporations. It doesn’t actually cause those future earnings.
No. The stock market is just a betting market.
But the economy is liquidity. Catch 22.
No, it really isn’t. Insisting that the stock market is the economy does not make it so.
Picking everything doesn’t really count as a prediction Athryn :P
Athryn ruined everything already.
The Dow is not the economy. That is all.
I think a lot depends on when China starts stumbling. When it does, hello depression.
One of the things that I’m kinda feeling is that investors aren’t trusting the signals the stock market is sending anymore. Stocks now seem to be moving wildly based on mere rumor or on simple fear (like the run on Societe Generale [too lazy to check for proper spelling, sorry]). There seems to be less correlation between market movement and actually economic information.
Am I right in seeing this? Is this a temporary thing or is it possibly longer-term? With regards to this latter question, I’m wondering if the failure of ratings agencies to accurately evaluation the risk involved in mortgage-backed securities has perhaps caused investors to doubt the veracity of fundamental market information more than previously. But I have no clue if I’m right in this.
I think someone(US, Taiwan, S Korea, Russia) will accidentally hit China’s newly refurbished aircraft carrier, while it’s out tooling around, with a sub that was spying on it and the impact will sink the carrier. China will respond with a cyber attack, which will result in an ad hoc hacker attack on China. The collateral damage will be networks worldwide, especially financial.
Thus the next great depression begins.
Winter is coming.
Anyone who hopes to retire some day and not have to eat dog food or live on the streets.
With the baby boomer bulge all reaching retirement age soon, it’s going to be pretty problematic if all their savings goes down the tubes. Added bonus because if they can’t retire, they will continue to work, which will make it harder for younger people to find jobs.
So play the value investing game instead of trying to play the market. Put your money in a company that’s solid and stop giving a shit what the market does, because it’ll come back up eventually when people realize that the company has not, in fact, lost any of its real value.
Or if you don’t have that kind of time, find someone to invest your money for you who invests in value instead of trying to game market fluctuations.
The whole thing makes me unspeakably bitter and pissy.
I have almost all my non-retirement investment money in broad-based funds (IIRC I’ve got ~50% in S&P 500 index fund, plus 25% small caps mutual funds, and 25% foreign funds) that I contribute to month in and month out regardless of how the market does. My university switched over all our retirement money to age-based mutual funds that invest in the recommended proportions of large cap, small cap, bonds, etc. and automatically re-apportion as retirement gets closer.
The overall point still stands though. If the stock market does badly over the next 20 years, the fact that I’m in broad based mutual funds isn’t going to matter. I’m still likely to be bit short at retirement. And I’m not primarily concerned with me, I save a lot each month, I am investing “correctly.” I will be okay unless the market does very, very poorly. That’s not true of broad swaths of America. Most American’s don’t invest enough for retirement as it is. Lots of news about poor stock market performance is going to decrease the number who do invest. Without these investments they are going to be in big trouble when it comes to retirement. Many of those that do invest are still likely to come up short unless the stock market has reasonable performance. If we are in a situation similar to Japan, a lot of people are going to be in big retirement trouble.
I had friends that delayed their retirement because of the 2000 tech crash. Same thing for the 2008 stock crash. Sure you’re supposed to switch over more to bonds as you get closer to retirement. But realistically any major market crash is going to impact people’s savings even if they are in relatively “safe” investments and it increases people’s anxiety and makes them much less likely to want to retire. This means no job openings which means unemployment goes up.
All of that is fair. Every point you make is valid.
However, that doesn’t mean that a discussion of “call the economy” should have anything to do with the fucking stock market.
The stock market is a very imperfect, poorly-linked secondary indicator of the economy. If you’re talking about calling the economy, talk about jobs, or GDP, or unemployment/partial employment, or median incomes, or something worthwhile. Don’t talk about stocks.
No arguments from me. I agree with you on that.
The only thing that Aaron is wrong about is when he says the market is a secondary indicator. I think at best it’s a tertiary. More and more often I think it’s pretty fucking useless.
I’ve said it before and I’ll say it again: discussions about economics would be much clearer and more informative if everyone was prohibited from talking about the stock market.
As far as where the economy is going? Nowhere fast, unless you’re rich.
Stock market != economy? Hmmm …
Seems more likely that the stock market it is the best predictor of economic activity that we have since it has by far the most research put into it.
Here’s what confuses me. I remember the recession in 2000, and then that was called a double-dip recession. (Wags referred to it as the W recession, referring to the president at the time.) Then there was the housing market collapse, the subprime loan collapse, the bank bailouts.
Did the recession ever stop? Hasn’t it just been a decade of economic suck?