Is the stock market going to tank?

[MultiVerse]

^ MV = PQ or MV = Nominal GDP. Gold bug BTC homers never understand velocity (V).

[MultiVerse]

No, you're missing the point and instead resorting to demagoguery.

As a result of restrictive monetary policy the U.S. economy weakened steadily *before the financial turmoil* throughout 2008 with an annualized real GDP growth of −.5% creating expectations among the public that the fall in equity and housing wealth would be permanent.

In other words, the Fed messed up when it intervened in credit markets and instead the Fed should have adopted more accommodative monetary policy.

[MultiVerse]

Without context your chart means nothing and that's why you should never reason from a price change. Once again MV = NGDP.

In other other words, Nominal GDP tells you whether monetary policy is restrictive or accommodative.

For all the talk of money machine goes brrrrrr, where's the post '08 inflation?

[MultiVerse]

Once again you're reasoning from a price change. We know from the real estate thread that there's lots of affordable housing in middle America.

Restrictive zoning and high demand in hot markets cause housing prices to rise but as everyone points out you can always move someplace less expensive. If your narrative was true housing prices would have risen to bubble proportions everywhere.

Also, easy money and easy credit are not the same thing. Better to think of '08 as a Minsky moment.


P.S. If you take the long view yield curve prior the Great Depression it was inverted for most of the prior fifty years.

[Toadman]

Without context your chart means nothing and that's why you should never reason from a price change. Once again MV = NGDP.

In other other words, Nominal GDP tells you whether monetary policy is restrictive or accommodative.

For all the talk of money machine goes brrrrrr, where's the post '08 inflation?

It went into the housing and stock markets. And I guess that trickle down theory is now officially debunked.

[MultiVerse]

The question isn't whether housing and equity prices rose, that's reasoning from a price change, the question is what would real housing prices look like in a world without bubbles?

Prices would look like they do now, what the Efficient Market Hypothesis (EMH) predicts, as a series of random increases and decreases roughly tracking Nominal GDP.

Unaffordable housing is a real problem. People like Bro migrated to hot cities like SLC because they wanted to. Others did so because of jobs.

If uncool cities like Detroit suddenly created 10,000s of thousands of jobs and Detroit also restricted supply then prices would rise there too.

[LeeLau]

ACB is the 5s down approx 15% from the split so puts are in the money. Also shorted some in the TSE.

I was curious about what happens if I buy puts before a reverse split; ie what happens after the reverse split? ACB did a 1 for 12 reverse split. I owned puts. The puts became an untradeable derivative but I could exercise them. So I did and they converted to post split shares therefore whoever was my counterparty had to accept my offer price for the post split shares at the option price (presumably the counterparty had to buy ACB on the open market). The profits simply showed up in the account immediately which was nice as I thought it would take 3 days or so for clearings and settlement.

[MultiVerse]

Agreed, reliance on rising asset prices for prosperity is a bad thing.

My point is there's often a tautological aspect to these arguments. The causation arrow *always* points to the Fed → rising asset prices, when instead rising asset prices also results from other things like prosperity, productivity, migration, etc.

The most important point is demand for money is real and we should be looking at nominal growth forecasts (preferably decided by the market not the Fed) rather than worrying about hyperinflation.

[Deebased]

A-fucking-men ^^^

[GeezerSteve]

The new big tech corporatists are every bit as keen on amassing power and wealth. Indeed, they are better at it, and there's no enforcement of anti-trust laws to slow them down.

[billyk]

I was curious about what happens if I buy puts before a reverse split; ie what happens after the reverse split? ACB did a 1 for 12 reverse split. I owned puts. The puts became an untradeable derivative but I could exercise them. So I did and they converted to post split shares therefore whoever was my counterparty had to accept my offer price for the post split shares at the option price (presumably the counterparty had to buy ACB on the open market). The profits simply showed up in the account immediately which was nice as I thought it would take 3 days or so for clearings and settlement.

The money probably showed up in your account as “available for trade” but won’t actually “settle” until the second day after the trade.

If you buy another stock with that “available for trade” money, that’s OK. But if you then sell the second stock before the first trade settles, you can cause a “good faith violation”. If you sell it after the first trade settles, you are OK.

At least that’s how it works with Fidelity. Got bit by that recently.

[billyk]

Recently did a rollover from my 401k to an IRA that I already had. Sick of end of day trading & pricing for the mutual funds which was all that my 401k permitted, and wanted to move to ETFs mostly and some small portion of stocks.

So, I’m out of the market for about 5 days while that all settles out. Sitting on a pile of cash while the market, and especially, tech stocks go on a tear. So finally I pick Tuesday morning to get back in with some VTI & QQQ. Immediately afterwards stocks reverse and go into a nose dive. So I say to myself, why not buy the dips? So I do, and cost average down... for three days, and it looks like the slope is getting steeper. Who knows, this could be the big one, that Benny was predicting?

So I pull the plug this morning to limit the loss. And you know the rest of that story. Stocks reverse right afterwards. I have no balls.

[iceman]

A-fucking-men ^^^

I mean there's plenty of jobs if everybody only works half as much.

[MultiVerse]

The key point is the money supply is not a reliable measure of monetary policy. The evidence that the Fed was too tight is seen in the sharp drop in Nominal GDP (NGDP) leading to a sharp drop in Real GDP (GDP). Nominal GDP that is the combination of inflation and real growth, not inflation alone, not so called bubbles, not interest rates, is the leading indicator of money demand.


The mistake is thinking the housing bubble caused the crises. Most of the decline in new housing construction occurred during a two year period prior to 2008 when the unemployment rate only ticked up a small amount. Or in other words, construction workers were able to find new jobs when the bubble actually deflated.

It wasn't until late '08-09 when the financial crisis happened (which did have its origins in housing) that unemployment spiked but up until that point credit markets were capable of dealing with the problem.

In late '08, however, stocks, commodities, bond yields, all plunged indicating expectations among investors for a sharp drop in nominal spending. Instead of thinking about bubbles, bailouts, fiscal stimulus and easy/tight money by instead focusing on aggregate spending or Nominal GDP monetary policy can help the private economy allocate resources to other sectors if, housing for example, declines.


If you look at bubbles in terms of Nominal GDP growth then "bubbles" like '29, 2000, '06 occurred when NGDP growth was low and not when NGDP growth was stable. Instead of thinking of housing in terms of bubbles, you can assume EMH which means housing is a combination of durable goods and scarce resource. In that sense a “bubble” is really a sharp increase in the value of land.

In that sense the housing boom of the 2000's was not a bubble. The bust of 2007-2009 was a Fed-imposed liquidity crisis:

https://www.idiosyncraticwhisk.com/2...sing-boom.html

[4matic]

Consumer sentiment number much better than retail sales would indicate shows how much it is tied to asset prices.

[PB]

Duly impressed that all you E-nerds can have a rational disagreement without shitting all over each other.
Well done Sirs!

[Toadman]

It will be interesting to see how retail sales look this summer. Most of that product would have been on the water by March. And retailers basically stopped ordering retail goods in April. I can see some very thin margins as retailers are going to need to put stuff on sale to entice anyone to come into the stores and not just shop on-line.

[LeeLau]

ACB is the 5s down approx 15% from the split so puts are in the money. Also shorted some in the TSE.

I got bought in on my CHK short as I lost my borrows (borrowed via IB which clears through Warburg).

Then got this note:
""SEC rules require us to prevent your account from short selling a stock on any business day in which our affiliate had a short position in the same stock that was required to be bought in under SEC short sale regulations. You must wait one business day to enter this order."

That's a new one. Learning opportunity and will have to wait for perhaps one more pump and dump to re establish position.

Also in cruise ships news. RCL also looking to place asset backed debt. Terms still tbd

ACB put profits more than wiped out as I got cocky and shorted ACB into earnings. 40%spike against me. Ouch. Abandoned that ship

Got a chance to reestablish CHK short today as it spiked 35%

[Ted Striker]

It will be interesting to see how retail sales look this summer.

And their landlords.

[MultiVerse]

Yeah, we disagree at milepost 1 in terms of base principles, what an economy is, what value is, the role of agency, etc. You assume static traits apply to something whose complexity cannot be accurately modeled. Real incomes have gone up along with output during periods of contracting nominal GDP in the US. Rendering such an aggregate stat the signal introduces more externalities than you or I understand or could ever hope to model. Things which you assume away as constant or insensitive end up catalyzing important changes in outcomes.

FWIW, all macro models including Austrian, Keynesian, Marxist, monetarist, and RBC define rising prosperity as increasing real incomes, not increasing nominal wages and not increasing asset prices. Something to consider is stable NGDP growth means it's unlikely for there to be both high unemployment and policies focused on reducing sticky wages like the Austrian model, for example.

The case of real incomes and output going up even if NGDP is falling happens when there's high productivity growth. High productivity growth increases real wages and that can cause the labor market to get too hot so declining NGDP, according to some, can be beneficial. What we don't want is the opposite to happen, deflation caused by declining NGDP.

We're in agreement that increasing real incomes as a result of increasing productivity increases living standards. The thing is, changes in productivity represent a smaller problem (or a long term problem depending on how you think about it) compared with the short term cyclical business cycle. That's when aggregate stats are useful for mitigating things like the Great Depression, '70s inflation, or the Great Recession.

[Toadman]

Yeah, we disagree at milepost 1 in terms of base principles, what an economy is, what value is, the role of agency, etc. You assume static traits apply to something whose complexity cannot be accurately modeled. Real incomes have gone up along with output during periods of contracting nominal GDP in the US. Rendering such an aggregate stat the signal introduces more externalities than you or I understand or could ever hope to model. Things which you assume away as constant or insensitive end up catalyzing important changes in outcomes.

One of the outcomes from the '08/'09 recession was a clean up of the low hanging fruit in the labor pool. Mgmt used that downturn to lay off the low performers/unproductive types. At least that's my impression, based on what I saw going on within the company I worked for and conversations with friends and family who saw the same thing going on with their employers.

Not sure that's the case with what's going on now. It's simple math. Sales revenue is down, and most businesses have inventory that is now burning a hole in their pockets, and how do you unload it without losing your shorts?

[Benny Profane]

It will be interesting to see how retail sales look this summer. Most of that product would have been on the water by March. And retailers basically stopped ordering retail goods in April. I can see some very thin margins as retailers are going to need to put stuff on sale to entice anyone to come into the stores and not just shop on-line.

Nobody is shopping in stores. Well, some, but the traffic numbers will be way way down.

[BobMc]

Nobody is shopping in stores. Well, some, but the traffic numbers will be way way down.

Sure, but we all still have to eat. Eaters gonna eat.

[Piggity]

I see a lot go people flocking to safety off and on since January but I’m opposite. If you’re forward thinking and risky then it’s been easy to find large gains in the biotech, diagnostics, pharma and hospital grade disinfectant industries. I’ve had stocks pop from 200-300-500% in as little as 24 hours and typically retrace back down until popping again but even bigger.

INO at $4 and MRNA at $18 per share, learned a few lessons but now have better strategies and few potential 10X* stocks in the portfolio. Maybe I’ll strike out but fishing has been good past few months

[Piggity]

CODX at $6, GNMK at $4, MESO from $3.50 at lowest price point