The stock market and economy have parted ways | Hacker News Reader

The stock market and economy have parted ways

washingtonpost.com

282 pointscs702530 comments

> “I’m not sure what will trigger a sustained sell-off in stocks, but surging [virus] infections and another round of more business closures will be difficult for investors to ignore much longer.”

An alternative place to put investments will trigger it. When your options are savings accounts paying 0.25% interest, and treasury notes paying nothing, and CD's being garbage, what are your alternatives for investing? If interest rates were 5%+ on savings/CDS's/Treasury notes then you would see a bunch of money move from stocks to these other safer more stable investments. But the safety/stability doesn't mean shit if the return is near 0.

I think you are absolutely correct and the reason that the stock market is being so weird is quite simply "what else are we doing to do with that money?"

The solution for individuals: cash, gold, options, etc, aren't viable solutions for institutional investors.

Imagine that you're in charge of a $1 billion fund, what are you going to do? You can't put that into gold, cash or treasury notes. But all sectors are affected by this so you can't simply rebalance your portfolio. You can't go out and buy an obscene amount of call options because those would still way too risky at the institutional level.

For me this is why the stock market right now is deeply troubling. Not because "the elite's are out of touch", I know quite a few people in finance, people managing these billion dollar portfolios and they also have no clue what's going on. None of these people are delusional about what's going on, they just don't know what to do.

What's troubling is that this detachment from reality seems to be based on the fact that the entire financial system is effected and there's no way for it to react in a sane way anymore.

I don't claim to have any clue as to how this will play out, but when this reality bubble bursts it's going to be a very extreme event.

Is part of the issue that there is just too much money has been printed and hoarded and its creating some weird effects?

The government has been printing money for a long time, to stimulate the economy, provide spending money, etc. Due to 80/20 rule, rich get richer effects, etc, a large portion of money the government prints ends up in the hands of a relatively small group who doesn't spend it but rather tries to invest it to get more money. Government prints money again trying to stimulate the economy and again most of it ends up in a few hands. At some point don't you have what we have today? A 1% that owns lots of wealth and doesn't know where to put it while the majority of the economy is still relatively broke? How does it play out? Do the 1% just buy all the assets at some point?

I am not trying to make a statement about inequality but rather curious about the result of printing money for 70 years and having that money end up with relatively few parties each round. Perhaps someone with more knowledge can speak to this.

It's not just "rich get richer". It's also that everybody bought into the "just buy the market" idea hook line and sinker. Pension funds, individual investors, everybody.

How retirement works on paper: you save the money by buying the market and get 20% more when you retire in 40 years. How retirement works in reality: younger people work to supply the old with food and medical care. The real transfer is happening now, while the financial transfer is happening over decades. I don't think this creates a healthy, sustainable dynamic.

The Conservative Party in Great Britain has been trying to make home ownership a reliable method of saving for the last century. They pretty much succeeded: house prices have been going up almost constantly since the war, and owning a house all but guarantees you'll be able to built generational wealth.

This came at high costs: once a large enough part of the population buys houses at inflated prices with the expectation of their price further increasing, the government needs to protect them from housing crashes and depreciation to inflate the bubble further and further.

Now that pretty much everyone has their money invested in the stock market, I see the same thing happening in the US. The Fed needs to keep the interest rate artificially low and guarantee policies to keep the stock market up so that people don't lose money, but also making sociery overall worse.

> 20% more

Where did this number come from? At 4% compounding over 40 years, you will have at least 130% again over what you put in.

Is there any serious idea about how a fair pension scheme could/should work without just buying the market? (So in some countries the pension system is just mandated by law, managed by the government. And might be even "guaranteed by law" to track inflation. But in this case it's again exactly the same, your purchasing power of your pension income depends on the strength of the country's economy - which depends on the global market.)

Printing money has recently shown to have little impact on inflation. This is likely due in part to lack of consumer spending (can't inflate prices if nobody is buying it anyway) as well as spreading the USD across billions of people in dozens of interconnected economies that base off the dollar.

The recent $5 trillion injection from the Fed (buying bad debt/assets) and Treasury (stimulus/PPP) may simply show that we could afford universal healthcare and a bunch of other programs that cost $$$. Now is the time to spend that money and, at least it appears, avoid some long term costs. I'd argue the benefits of things like expanding education, investing in mental and physical health, and doing more to support our youth will have a much greater return than potential long term inflation or other issues from the $5 trillion.

I commented more on this last week here: https://news.ycombinator.com/item?id=23778819

Printing money has not had much impact on consumer prices. But it seems very plausible that it is causing inflation of asset prices, including equities, and that that is a distortion of the market that could have negative long-run repercussions.

Printing money to get through a recession vs printing money as the primary way of funding government programs are wildly different things. The mere suggestion that U.S. officials were serious about running a deficit of a large percentage of GDP could send people fleeing U.S. dollar denominated assets, and thanks to the exchange rate effects cause a spike in inflation before the programs even started.

The thing that makes a green piece of cloth valuable is the powerful government and the massive reserve bank behind it. If a dollar bill starts to look like an IOU from an entity that has no capacity to pay, it will be valued as such.

Have they been printing money? Has more USD been created, physically or virtually? This is something I don't understand, I'm hoping someone here can explain it.

I was under the impression the last 40 years of US deficit spending has been mostly financed by selling US bonds to China, Japan, etc., while counting on growth and inflation to take the edge off when they come due. And selling more bonds instead of defaulting, so the debt just keeps growing. Printing money causes inflation but not deficits or lingering debt.

I don't know though, I'm not an expert. I would appreciate any corrections or clarifications from anyone.

At a large scale, the question "what is money" actually gets pretty complicated. This may help:

https://www.khanacademy.org/economics-finance-domain/ap-macr...

Yes--see https://www.investopedia.com/ask/answers/082515/who-decides-... under "How the Fed Creates Money With QE":

"The Fed can indeed create money "out of thin air." To be more precise, it does so with keystrokes on a computer. This was illustrated with its QE program, also known as open market operations. That's when the Fed buys an asset from a financial institution and pays for it with money it simply creates."

Generally lowering the interest rate causes inflation only if the economy is already at capacity.

Printing money to keep up with economic growth is also an important function of central banks.

Deficit spending is ultimately simply financed by paying off the debt in the future via taxes. (And the growing economy and the stable but low inflation helps with this.)

Look up Quantitative Easing, since 2008

Today was one of the few times I saw "social unrest" mentioned in this context. I suspect that will happen a lot more over the next few years.

The markets are a wobbling shitpile of unpayable debt just waiting to collapse. That was already true before Covid, but Covid has nailed the coffin shut while the corpse is still alive.

I wouldn't be surprised if the Fed is knowingly goosing the twitching body because the alternative is one of the biggest financial explosions in history. More free speculation vouchers at least buy a little time before the music stops, the bomb goes off, and we all run out of metaphors.

An alternative to a meltdown is what's been happening since 2008- the poor start killing themselves and maybe they vote for the wrong guy, but the trend doesn't stop. Given that the market says 30% of the workers don't really matter (and remember, that's people participating in the labor market, which is at a historic low IIRC), maybe they just ignored. They can cause some level of social unrest, but the rich are mobile, and the factories are pretty automated. What we'll see soon is more private security and automated security.

> That was already true before Covid

I think there's a lot of people who don't remember or realize this. And it bothers me that having conversations now takes so much effort to address that particular part of the context: "they were having econ troubles before covid was on the radar"

Totally serious- this is one of my favorite comments on HN ever. I don't completely agree but I love the way you said what you said.

Some sectors are hard-hit by Covid but others are not. Furniture sales, Grocery, Tech, Entertainment are all doing quite well.

Debt is also not necessarily the time-bomb that everyone thinks it is. Debt is tied closely to the overall money supply, and world productivity has been increasing as has population. World debt is about 69 trillion with a population of 7.8 billion. That's under $9k USD per person.

Fed will continue printing until Boomers die off... there is a lot of wealth locked up in 401k that needs to be disbursed.

This block votes and they vote often and if their little pennies are threatened, they will vote people out.

Edit: If you think these market rises are anything other than a way for the rich to rinse their money before the market bombs, I have a bridge to sell you, it's very pretty.

Imagine referring to an entire generations' life savings as "their little pennies."

Don't forget that the FED works closely with the WH, so it's in everyone's interest in that administration to keep the music going until the election.

I think you are massively incorrect. Equities right now are at a pretty massive discount to future value. If anything I think the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter.

The implications of this seem mostly sociological to me. Is that a good state of affairs for the world? Could we use those people more productively?

The implications are not about the current stock market.

Amazon and Microsoft are pretty damn likely to keep growing in value for 10+ more years regardless of any coronavirus situation. That’s an amazing / dumbfounding situation. But it still would imply a rational longterm investors sees those stocks as being attractively priced right now.

> the coronavirus effect on the economy has just demonstrated that economic growth is fundamentally not impacted much by around 1/3 of all jobs. The labor product and consumption activity of that 33.3% just doesn’t matter.

If you're right about that we're into revolution territory. If COVID reveals that we've built an economy that not only doesn't care, but doesn't even register the existence of 1/3 of the population, the body politic may have had a poison dose.

> Equities right now are at a pretty massive discount to future value.

Using what metric?

Production is changing the state of the matter, by transforming, aggregating or displacing said matter.

I can tell you that if you shut down 1/3 of the machine, you will see a 1/3 drop GDP.

I've been saying this for a while. There is simply a surplus of "forced buyers" for investments, so the price and yield has gone down and down, and there's no real reason why it can't be negative. The only next point is warehousing physical cash, which itself isn't cheap or liquid.

Individuals presented with this crisis could realise the problem, the disastrous future it implies, and turn to philanthropy. Institutions largely can't, and foreign oligarchs won't.

The US model of funding retirements is subsidizing (via tax breaks/structures) the middle class to buy into inflation beating assets (only stocks meet this really) or underfunding pensions that need to also beat inflation by buying into equities. There truly is “no alternative” to stocks and, to a lesser extent, real estate. These are the only two major asset classes which can provide sufficient returns to support a middle class or above lifestyle for a very large class of people who do not work or intend to not work in the near future.

> "what else are we doing to do with that money?"

TINA

Care to define TINA?

"There is no alternative", as noted. Associated with Mad Mags:

https://en.wikipedia.org/wiki/There_is_no_alternative

There Is No Alternative

This trope gets repeated over and over but it just makes no sense. Volatility is risk. What rational investor says "interest rates are too low, I MUST deploy my capital into a market that is seeing wild 30% gyrations from month to month instead of parking it safely while this global crisis plays out."

You're thinking about your personal investments, not someone managing a large investment firm or hedge fund. This simple fixes for your personal investments would be seen as absolutely insane in the professional investment world. You can't just tell your clients "oh I put $100 Billion into some nearly 0% interest investments because I think the market is crazy", especially if the DJIA is having record months. Even the people managing your 401k are expected have a steady read of return and react slowly and calmly.

"As long as the music is playing, you’ve got to get up and dance."

--Charles Prince, Citigroup CEO, 2007

Isn't some form of this what the Taleb-advised Universa fund is doing?

https://www.bloomberg.com/news/articles/2020-04-08/taleb-adv...

Then way are institutions buying negative rate bonds?

A very large percentage of the market is required to achieve a certain return. Think insurance companies. Giant pension plans. Etc. They have all been forced further and further out the risk curve over the past decade due to low interest rates.

Everything is being forced further out on the risk curve. Everything.

This also explains wacky basketcase unicorns like WeWork, perpetually unprofitable companies raising round after round, the continued existence of the cryptocurrency world in spite of it being like 90%+ scams, real estate going up in cities where >25% of people are behind on their mortgages, etc. There's no "alpha" anywhere. Money is chasing its tail.

All this QE is just going to give us is more asset bubbles. The financial economy is completely detaching from the real economy and becoming a pure fantasy LARP for the rich and of course governments.

Pension funds aren't required to achieve a certain return. If returns over a long period are below the assumed rate, then the employer simply needs to increase contributions. This is less than ideal but not a requirement in any reasonable sense.

I wonder how long those pension plans may make their obligations if they start paying short term obligations with their long term principals. I could see something from them triggering a correction.

And the people making those decisions get paid on commission, so of course they want returns, not "safe parking".

> instead of parking it safely while this global crisis plays out.

parking isn't safe. Parking is guaranteed to lose 20-30% because of the newly printed money and the resulting asset prices rise across the board. Yes, some assets may experience the swings during that money tsunami, yet on average across the board the assets would still rise 20-30% - ie. the amount of the newly printed money.

Economy and market didn't part ways. The stock market is just like speedometer that got "upgraded" from mph to kmh - the number is higher while the car and the speed are still the same.

> instead of parking it safely while this global crisis plays out

Because interest rates will never go back up, or if they do, they will be counterbalanced by inflation. This is the view of Ray Dalio at Bridgewater and (presumably) many other very smart people. I'm not that smart, but I agree.

Thus, cash and cash obligations are no longer stores of wealth. Equities are, unfortunately. High volatility is just the price you pay. Equity prices are honestly not that high if this scenario plays out.

Forgive me if I say this sounds awfully like the "new paradigm" / "this time it's different!" phase of a bubble.

Month over month volatility is a poor reason to put money there. Long term average growth is a good reason. Over the 10-20 year periods in the last century, what widely available asset classes perform better?

If you invested into the German stock market in 1914, it would have taken over 100 years to get your money back.

The America of the past 100 years has been quite exceptional. Using its history to predict the future is not a good idea, IMO.

The problem is that cash is also quite risky right now. The money supply expanded by about 80% in the past few months. Stocks are more sensitive to economic conditions but less sensitive to inflation.

Have you talked to the people who use Robinhood? This is exactly how many of them think but in less sophisticated terms.

/r/wallstreetbets for anyone looking

If the expected NPV of the riskier investment is much larger than the non-risky one, a "rational investor" would of course take it. That's literally what the words mean.

In a high volatility market, the NPV might range from -10% to +20%.

It's a well established economic term: financial repression.

Understate inflation so real rates are negative, then your savings either dwindle or you give in to the pressure to take more risk.

An investor who fears missing out on 30% gains.

Then you concur that the market is being driven by FOMO and not low interest rates?

Kendall found that prices followed a random walk model, i.e., past stock prices have no bearing on future prices.

> But the safety/stability doesn't mean shit if the return is near 0.

Hmmm.... One of the things you mentioned though could drop in an instant.

A return of negative is worse than 0.

I suspect many are sitting on cash, waiting for the other shoe to drop (or, you know, the market).

> I suspect many are sitting on cash, waiting for the other shoe to drop (or, you know, the market).

Well, MOST people can't afford an unexpected $500 bill, so most people aren't sitting on cash. Nevertheless, I don't agree that most of the people who can afford an unexpected $500 bill are sitting on large cash sum either either. Personally I have 2/3 in the market, and 1/3 cash (for liquid assets, I also have equity in my home but I am not counting that).

I'm out of the stock market waiting for the other shoe to drop. I've been all-cash since early Feb just watching this FOMO rally from the sidelines.

I'm not average for an American (consumer or investor), but people like me exist.

Given the retail drive of this rally, bills coming due could have a similar effect.

This is the most sane thing anyone can say.

At some point there is going to be a critical mass of people not paying their mortgage, not paying rent, not paying loans, not paying credit cards...and simply no money and unemployment.

I think this week we will begin to see some acknowledgement of the realities because July 15 is the new tax return date, and I think there will be millions and millions of American's who just say F it, I am not filing/paying taxes.

Then again it also wouldn't surprise me if 10s of millions end up homeless before the end of the year while politicians keep parading around unemployment numbers and the stock market record highs, while these people get swept under the rug and never actually acknowledged.

$600 federal unemployment top up ends July 31st. PPP and other paycheck guarantee program layoff moratoriums end at the end of September. I expect carnage in October. United Airlines has already stated they are targeting ~36k job cuts in October when they're permitted to [1] [2], I presume other airlines and businesses will follow.

[1] https://www.usatoday.com/story/travel/airline-news/2020/07/0...

[2] https://www.flightglobal.com/strategy/layoffs-expected-when-...

What prevents government from paying their bills, rent and loans forever? Warren Buffett said that US gov can never go bankrupt because it owns the printing press.

Without a doubt, the coming wave of evictions and foreclosures is going to pop the bubble. Once the tent cities (maybe we should call them "Trump hotels") start springing up in every metro area around the US, I think the market will finally lose this steam. The US is headed for a dire economic situation. At that point, the only thing that can save us is an effective vaccine that confers long lasting immunity. Anything less means total economic annihilation.

> ... start springing up ...

What do you mean 'start'?

The homeless camp right next to the new Apple spaceship just got a bathroom installed:

https://www.mercurynews.com/2020/06/03/after-months-of-compl...

This stuff has been going on for a few years now.

So what, out of fear to earn too little interest (0.25%), risk to lose 50% of your investment? +0.25% looks better than -50% to me. Don't see a rational logic here. Though humans have been shown to be irrational, especially in a group.

But then why did the stock market perform so badly for so long during 2008?

For a while after 2008, people weren't sure there could ever be a full recovery. To pick one issue, Lehman Brothers went from healthy to dead in basically a few months, and nobody had a good reason why this couldn't happen to any large financial institution. Maybe the risk was unavoidable, and everyone will just have to make investment decisions knowing that the financial system is at constant risk of falling over.

Confidence in this area was restored when the Federal Reserve started doing what are called "stress tests" under the Dodd-Frank Act, where large financial institutions have to prove that even if things turn bad they won't collapse.

My guess: the economic problem had an uncertain path to resolution. A pandemic is different. We are waiting for a vaccine; once that is available, it’s game on. I’m not saying this is the truth; however, it is a plausible way to think that investors are viewing the future.

Herd immunity may not work either. Today there's this article about people getting it twice and other viruses have already been known to let you get infected twice. https://www.vox.com/2020/7/12/21321653/getting-covid-19-twic...

Wall Street is looking where everyone should - at the deaths. And deaths have been going down since mid-April. It's just that recently (about a month ago) we've massively ramped up testing throughput. We're on track to become the most tested large country in the world in a few weeks. And the "lagging deaths" have so far failed to materialize.

Death counts are important, but only part of the story.

Hospitalizations are still extremely problematic because there is permanent health harm. There is also a massive cost to being in the hospital for an American. COVID hospitalizations seem to take between 1-3+ weeks, which costs more than the net worth of the average American.

Also, the economic impact is severe and has yet to fully show itself. Lots of employees are still "employed" but indefinitely furloughed. They will show up as unemployed when their company finally falls into bankruptcy or takes decisive headcount steps. In September, the PPP strings for employment expire and there will be an employment rate cliff unless Congress acts. 20% of Americans are behind on their rent/mortgage and are worried about an eviction/foreclosure in the next 6 months. This is both bad for the obvious reason and because a consumer-driven economy shrinks quickly when consumers are more judicious about spending.

We still don't understand why deaths per case are dropping yet. Until we know the variables (perhaps the weakest already died off, perhaps the colder weather amplified the worst symptoms, etc) I don't think it's safe to assume the death rate will be monotonically decreasing.

The market is reacting to the fact that half of people in the country don't bother wearing masks in the grocery store anymore, and that disneyworld is open. The market thinks everything will turn out okay.

My bet is we see deaths and disabilities skyrocket through the end of the year.

Interesting - in the barrage of recent pessimism about the US's covid response, I was unaware of its high testing numbers. Nice to have a little good news.

https://coronavirus.jhu.edu/testing/international-comparison

The deaths coming back up in the last 2 weeks, so far consistent with 1 month lag.

If you are right and that’s what Wall Streets is looking up to, they are in for the big surprise in the next two weeks.

100%, this is also driving capital into the private equity markets (of which VC is a subset that is very relevant to Hacker News readers). Startup funding has remained exceptionally robust, especially for companies with traction at the later stages. All of that capital lost at sea, looking for a port in the storm.

For individual investors, bonds are looking good right now, though.

* US TIPS are up about 7.5% YTD

* Aggregate bond funds (BND, SCHZ, etc.) are up 6-7%

* Intermediate-term bond funds (IEF, etc.) up > 11%

Meanwhile, the S&P 500 is at 6% YTD.

Bonds are sensitive to interest rates, but it seems nobody is expecting those to change this year.

Noob here, but doesn't this comment assume stock markets and investments outside the US do not exist?

Surely large investment funds aren't entirely in on US stocks alone and are diversified. So isn't one option to just move some money elsewhere? i.e out of the US market - to a place(s) deemed more stable or with better upside.

You can, but that exposes you to currency risk because if you live in the US, you will almost certainly want your money converted back into USD when you want sell your investment to spend it but currency exchange rates changes over time.

Which place is that?

and when you take into account the enormous potential for inflation the "saftey" of bank accounts is completely undermined.

The market is acting rationally. You have no choice but to go all in on the market or inflation protected assets or risk loosing everything to inflation in the coming decade.

I'm no gold bug, but turn some of your cash into gold.

It is actually very hard to get real gold (especially in a form that you can convert back to cash in the future). Just try to get delivery of a gold bullion. And if you succeed, try selling it into the system again, without losing 30%.

Paper gold is a bet no different than a stock; it is a bet that the system and your counterparty will both be solvent when you need them.

I go back and forth on gold a lot. I keep a very small amount of my money in gold, but I’m literally thinking “if things really get down to it, I can trade this for food”

But that type of mental exercise does not work well for many people. Especially imagining a system where our fiat currency is effectively useless.

I doubt this will change though while governments are on their spending spree. AT this point you might even lose money putting money into government bonds.

With inflation, the return is not near 0, it's negative.

There are some very strange happenings goings on with a small number of stocks. AMZN, TSLA, AAPL and a few others have seen stratospheric gains in the past few months with especially Tesla with no clear reason why. Not trying to knock tesla but there is something that I have never seen happening and given store closures, spiking covid cases and virus antibodies that seem to last months and in some cases weeks these are all very gloomy predictors. The typical explanations seem to be as follows(ordered them in my opinion has the highest probability of reality and weight):

#1 Interest rates are as low as they have been in an extremely long time, people/institutions want higher returns so they are putting money into vehicles with higher returns(stocks).

#2 Given the Govt./Treasury has been printing money like crazy dealing with the pandemic, money in cash is not great, stocks offer better returns.

#3 Given sports are mostly shut down(primarily in the US) sports betters are putting money into stocks instead and betting there so to speak.

#4 People are using their stimulus checks extra unemployment money to invest in stocks.

All of these don't seem to jibe, and alot of these stocks seem similar to what as known as a 'melt-up' which precedes a meltdown, see 2000's tech and 2008 financial crisis. I hope that is not the case but Tesla jumping 10-14% a day doesn't seem healthy for the stock and the stock market in general and something very strange is going on.

One other note on Tesla in particular, that I think the other comments here have largely missed:

Tesla is--and has been for a while now--the largest market cap company that is not included in the S&P 500. To be considered for inclusion in the S&P, companies must show at least 4 consecutive quarters of profitability.

Tesla's next earnings release (which is in roughly two weeks) has the possibility of being that fourth consecutive quarter. S&P isn't then required to include them, but it seems likely they would. Once they did so, index funds and ETFs that benchmark to the S&P (which is the biggest single benchmark of such funds, by a lot) would then be forced to buy the stock (at whatever price it traded at the time) in proportion to its ranking in the index. At one point today, Tesla was top-10.

Clearly this is a bit of a conspiracy theory, but this type of behavior (bidding up shares in front of index inclusion) isn't that unusual. What is unusual is that Tesla has gotten so large prior to inclusion: stocks normally join in the 500s - 300s or so, and grow from there.

Thanks, this is an excellent observation. One of the other stocks I watch is docusign and it has also gone parabolic for quite the same reasons(getting included in nasdaq 100) although not as much as tesla. I feel like this is a way to game the system, grow somewhat big and you can then be included in a premier index where you then have multiple funds forced to buy your stock, your market cap increases, get added to more indexes etc.

> stocks normally join in the 500s - 300s or so, and grow from there.

Does 500 - 300 represent the share price? If so, do most companies issue a similar number of shares before getting included in the S&P?

Sorry, wrote that quickly and wasn't super clear. What I meant was ranking. The S&P 500 is what's called a "cap-weighted index", where companies are ranked 1 through 500 by market capitalization, which is share price times the number of shares outstanding. Share count isn't meaningful, because (generally) increasing share count on the same company will just decrease price, and vice versa.

In most cases a company lifecycle is like, we launched a company, it's private for a few years, then it goes public. Either shortly before going public, but maybe a few years after, it becomes profitable. It then grows and grows etc, and joins the S&P by virtue of its size getting larger than the 500th-ranked firm already in the S&P ("size" here is market cap).

Tesla is different, because Tesla went public and was unprofitable, then got ~big and was still unprofitable, and now for (largely unknown) reasons would be, if it were included, the 10th largest company in the S&P, but is still unprofitable. They may cross that threshold later this month, but this process--joining the S&P at rank 10--is highly unusual.

I would expect some activity like this, but it seems implausible that it could drive up the price >2x. Surely lots of these would-be arbitrageurs will end up losing a lot of money?

If an index contains a stock then corresponding index funds must buy it no matter the price.

  #1 Interest rates are as low as they have been in an extremely long time, people/institutions want higher returns so they are putting money into vehicles with higher returns(stocks).

This isn't wrong, but it's also worth noting that (regardless of return preference / risk tolerance), higher stock prices are also, partly, a consequence of low interest rates. Stock markets are many things, but one thing they are is a discounting tool, and the discount rate you use is informed by market rates elsewhere. If interest rates are zero, simplistically, equities are the sum of their related cashflows for the next indefinite period of time.

(I'm aware there are other premia I'm not including, but, simplistically)

> #4 People are using their stimulus checks extra unemployment money to invest in stocks

Really? I'd normally guess that people with high incomes are most likely to invest, and to qualify for a stimulus check you couldn't have a really high income, right? And if you're receiving unemployment, people at the higher end of the income range will be receiving less because of benefit caps and won't have "excess" income, right?

I've heard claims in the past that a large share of stock is held by the wealthiest minority (like the top 10% owning > 80% of stock or something, the top 1% owning ~50% etc). Can the people investing their stimulus or unemployment benefits really change prices that much?

I put this at the bottom as it seems the least likely in my opinion and makes the least sense. I've heard this with robinhood traders on many financial sites as explanations for stocks jumping as people are spending their stimulus checks day trading.

source - https://www.cnbc.com/2020/05/21/many-americans-used-part-of-...

Unless one spouse makes ~100k and another spouse makes very little. Then you'll get two checks.

Most people don't own any stock at all so it is not very surprising.

Your speculation doesn't appear unfounded to me, but I think you're painting the picture with too broad of a brush here. AMZN, TSLA, and AAPL (just to limit the discussion to the ones you explicitly mentioned) are tech stocks, but have fundamentally different business dynamics that I would expect to be affected quite differently by the effects of COVID.

* AMZN: huge swaths of new and existing are customers moving their shopping online. They stand to profit from this in the short and medium term at least, and I would wager that the change in shopping habits would result in a noticeable number of long term changes sticking.

* TSLA: a lot to unwind here, but it's a combination of their recent delivery numbers and large amounts of retail investor speculation. While I believe the stock was undervalued before, quarterly delivery numbers wouldn't fully explain such large jumps.

* AAPL: I'm at a loss on this one, but I also don't know a lot about it. With many folks not able to spend their discretionary income on bars/restaurants/travel/etc. I can see more of this money being channeled to iPhones.

>AMZN: huge swaths of new and existing are customers moving their shopping online. They stand to profit from this in the short and medium term at least, and I would wager that the change in shopping habits would result in a noticeable number of long term changes sticking.

Don't forget about AWS. With a lot of people being stuck inside due to covid lockdowns, people watch more Netflix and use more online services in general. With AWS powering a gigantic chunk of the modern web, it is no surprise that they are doing so well right now.

AAPL - I expect decent macbook sales this quarter due to the fact that many roles now need to go fully online that previously didn't have their own machines to take home. Yes, businesses could go with cheap PC laptops, but a lot of businesses standardize on manufacturers and probably went with what they standardize on for those employees that need to suddenly work from home.

> I can see more of this money being channeled to iPhones.

And maybe games and other online content, juicing Apple's "services" revenue?

AMZN is the most obvious one, considering the general view that Covid-19 isn't going anywhere any time soon.

Something I don't see a lot of people talking about with Tesla is that over the last couple years, the writing has appeared on the wall about internal-combustion. Most developed nations have set a hard end-date for it at this point. That makes an electric car company a really appealing long-term investment.

Agreed, but even though it could be elon being elon, even he thinks Tesla is trading too high.

But constantly rails against short traders.

Tesla can be explained a little easier I think. People are moving a lot of money out of oil and gas so a natural place to put it is what appears to be the successor to it.

I built a valuation model of TSLA and came up with a fair intrinsic price of less than $200.

Of course it is hard to value anything right now because coming up with a discount rate is fraught and you have government manipulation of the asset market as well.

I don't know if there are waaaay smarter and informed people than me that know something about TSLA's long-term growth prospects or it is just bing meme-ed into orbit.

Very strange times!

Here's one way to look at TSLA. I see zero chance of Toyota, BMW, Mercedes, Volkswagon, or GM making all of their direct competitors obsolete.

With Tesla's massive monopoly on driver data (likely a prerequisite for level 5 automation) and head start in driverless tech overal there is absolutely a chance that TSLA puts all the aforementioned companies out of business.

I don't know how likely that is, but it's a hell of a lottery ticket regardless.

It is hardly a lottery ticket, the TSLA market cap is already larger than Toyota, GM and Ford combined. It is unclear to me how much room for growth there is.

Found this: https://docs.google.com/spreadsheets/u/1/d/1HflVng6sYIb6Gs4p...

Not sure how accurate it is, but the rest of the industry is only worth 773 billion combined. Which means if you invest now at a market cap of 277b, you can only 3x your money on that lottery ticket.

I'm not sure it's the case that Tesla has a massive monopoly on driver data, and even if it does it won't for long. Toyota for example has their TSS system which collects a ton of driver data. Tesla has produced around ~1 million vehicles in its lifetime. Toyota produced 10x that last year alone. If more data is the key to unlocking level 5 then Toyota or one of the other big players will get there long before Tesla does.

What head start in driverless tech? Right now, Tesla isn't even among top companies developing self-driving car technology.

Also, it's would pretty naive to think that governments would allow a single company to have such sort of monopoly like you describe.

Tesla's driverless technology is years behind the current leaders.

What’s your story if self driving never works.

Question from someone who has no dog in this fight. If your model is right would it be in you best interest to short their stock or do you believe that the market can "remain irrational" forever?

Yes it would, but I am very, very nervous that the actions of the government and the capricious actions of retail investors would go against me, so I have no stomach to do it.

As an example, image that you shorted bitcoin half-way up its rise ... you would be broke! Possibly less than broke! On the other hand, you would have eventually been right, just the timing on a bubble stock (or possible meme stock, in this case) can make that sort of thing dangerous.

Tesla's stock price was irrational years ago. Shorting would have certainly lost you money.

Shorting can cause you to go broke in a time frame much faster than "forever".

> #3 Given sports are mostly shut down(primarily in the US) sports betters are putting money into stocks instead and betting there so to speak.

> #4 People are using their stimulus checks extra unemployment money to invest in stocks.

Retail investors aren't going to drive prices that much.

Just a few weeks ago we looked at oil futures going negative here on HN, and there were thousands of retail investors getting into that -- and the prices didn't budge.

Tesla has always been a popular stock with speculators, hype followers, and Robin Hood users. It had nutty valuations before the pandemic. On top of that, the Model Y is now available and crossovers are by far the best-selling type of vehicle in the United States right now.

(It was probably a mistake to come out with the Model 3, a sedan, before the Model Y, a crossover).

>(It was probably a mistake to come out with the Model 3, a sedan, before the Model Y, a crossover)

Maybe. But it seems Tesla has realized very significant production efficiencies on the Model Y contra the Model 3, and given the expected larger volume on the former, it's a big advantage that these design lessons were learned on a model that will carry less of their income.

Changing tooling and production processes for a product that already exists is a very painful strategic gambit. Remember that Tesla's pipeline is bigger than their current offerings; that kind of distraction wouldn't be healthy for their long-term growth.

Greater cash flow from Model Y due to design/manufacturing efficiencies might be a critical strategic advantage.

Anecdotal from conversations with my friends:

1. People are worried about their stock investments losing value due to the Covid economy.

2. Some people can't imagine putting their money in anything but stocks.

3. Ergo, there's a lot of demand for stocks that are familiar to casual investors and feel relatively safer from the effects of Covid.

It could be a reflection of all the money that's been printed.

I think the current TSLA situation is simply about betting on the future. The stock price of a company not only represents what it's doing right now (sales, profits, whatever) but also a prediction of what it might do into the future.

Tesla are doing OK now, (kind of) breaking even, and making a decent number of cars. I think most would agree they're more solid now than ever before, and it seems like they're probably here to stay. But much more importantly we have to look at what they could be doing in 5-10 or 20 years.

Often people say Tesla isn't anything near the behemoth that is Toyota (true), and their stock shouldn't be higher than Toyota's. Toyota now make just under 9 million cars per year worldwide [1], exactly the same as they made in 2007.

In 2007 their share price was ~$75USD and now it's roughly similar. While they make a ton of cars and are profitable, they're not growing or really doing anything drastically different to almost 15 years ago. It's very likely in 10 or 15 more years they'll still be trundling along, doing the same things, making a similar number of cars. That's solid and good, and their stock price reflects that.

Tesla, on the other hand, are going all out for expansion. With the new factory going up in Germany, and one about to be announced in the USA for Cybertruck, it seems like they have no intention of slowing down, and plan to continue to grow extremely rapidly. In 10 years they may be making as many cars as Toyota is now. In 20 years they might be twice the size of Toyota (in terms of units produced).

Whether you believe they can pull that off or not is a matter of speculation that isn't worth getting into. That "guess the future" is exactly what we're seeing in the stock price. Toyota's stock price is not skyrocking because they're not doing anything radical, and aren't growing exponentially. On the other hand Tesla's stock price is skyrocketing, which we can read to mean a huge number of investors think they can pull off massive growth.

Of course time will tell, and in the mean time we can all gamble on what we think will happen.

(Note - I haven't even touched on Tesla's plans for self-driving, their "revolutionary" new battery chemistry, home storage, large scale storage or whatever else they're (maybe) cooking up. Also important is the inevitable extinction of the internal combustion engine. Those are heated topics of disagreement, but again, the fact the stoke price is climbing so fast shows people think Tesla have a very bright future)

[1] https://www.statista.com/statistics/267272/worldwide-vehicle...

Or people don’t want to bet on volatility like consumer, and want to dump into high tech. Telsa sits at a weird overvalued intersection of having an influencer as CEO, a price point not available to majority of the US and a promise of something they won’t be able to deliver for 10 years.

Or what just park 20% of your portfolio in airlines and wait. Telsa is up 200% for no reason at all since crash. AAPL is up 27% YTD, because shutting down most of the planet somehow led to 27% growth.

Or we can look at it another way, since US printed ~25% of annual GDP in 'free money' and USD remains the primary method of exchange, we are all trading in dollars that are worth 25% less, so nothing has changed but a buffer to pad numbers on balance sheets until the wheels start turning. Something that was done too late in 2008.

And to disillusion people, its not that hard to pick stocks, and no the people at funds dont tend to be any better than you at their jobs. The industry is ran on finding and exploiting market inefficiencies, insider information, and hype. Watch MSNBC for a day and start guessing the days when DJI dips based on Covid coverage the day before.

> especially Tesla with no clear reason why

It's called a short squeeze.

Squeezes last 1 maybe 2 days. Not 4 months

I'm only talking about maybe the last week of trading at most.

VIX needs to hit 40+ before that happens.

Tesla is poised to become one of few greatest tech behemoths of the world, taking a position were Apple is the closest comparison. Comparisons to existing automakers ignore a host of strategic advantages that are very hard for them to replicate. The details would require a long wall of reasoning, but it's there.

Investors have only realized the credibility of the über Tesla bulls in the last year or so, taking the stock from 5 years of stagnation into a valuation that assigns a significant probability of this happening.

It could certainly run ahead of the ideal probability-weighted likelihood of success for a bit. Also, with the likely S&P500 inclusion triggering a float contraction due to $25 billion of index funds forcibly buying at any cost, a latent buying pressure from $20 billions of short interest and a ~$50 billion actively managed S&P-benchmarked active funds that might buy, a lot can happen in the next few months. The discount rate for "Tesla has a significant probability of being in the position of Apple in 10 years" is not obvious.

This is not some random bubble obviously fueled by braindead retail investors.

The amount of friends I have that are out of work and posting screenshots of robinhood on ig and snap right now is wild. This feels like crypto 2017 all over again.

I suppose the difference is there is a real market under it all and retail traders aren't entirely driving this, but they're the ones left holding the bag when the curtain drops.

Or real estate circa 2006. When your cab driver starts offering unsolicited stock tips, that's the time to get out.

Isn't it the same when people on Hacker News start telling you to exit the market.

Ah, the era of NINJA loans.

My haircut guy went from renting to "owning" 2 homes.

Those were amazing times.

Where are you getting out to? A 40% inflated money supply of US dollars?

That's where the FOMO comes in. I, and many, many of my friends, missed out on Bitcoin in college.

Many of my friends are posting the same things you state on their social media, and are making it clear they won't be left behind this time.

Not sure what all that means, but it's fascinating.

Bitcoin is, including its geographic scale, a once-in-a-century event. One may expect to find similar returns in small investments in one's life, but probably not in broader global markets. It was a fad that happened to have just-enough technological innovation baked in to yield (at least for now) spectacular success.

For me, the real value in Bitcoin wasn't the small-dollars money I made in trading it for lunch money, but rather the exposure to the psychology of day-trading in a volatile market.

Unless your friends are playing the game with leverage, a short-term speculative play will only yield spectacular financial success if the government decides to print a spectacular amount of money.

If you can impart one idea to friends buying into this, or any, market, it might be this: "Don't play for more than you can afford to lose."

It means a massive crash is coming.

Money printer go brrr is funny, but it's not capable of propping up the entire market forever. There's a flight to safety that happens when countries really start printing.

Saying you missed out on Bitcoin is like saying you missed out on a giant ponzi scheme.

>Many of my friends are posting the same things you state on their social media, and are making it clear they won't be left behind this time.

The problem is that these people are just gambling. Do you really think they have some insight into the market that thousands of Quants and Traders on Wall St. don't have? Go to Vegas, you will see plenty of people flashing cash around when they win on the Roulette table or hit a streak in Blackjack. Are these guys genius players or are they the inevitably of table odds?

Because options price in risk, assuming risk is accurately priced then there is never really a particularly great time to make money off of it. As a retail investor I highly doubt you would have enough information to beat the overall market at pricing in risk.

With regular stocks, sure they might well be in a bubble but if you knowingly invest money in a bubble, you have to time the pop. If you bought bitcoin at $14k you made almost 50% in a few days but if you didn’t sell then, you’d have been underwater for years

Well you should be like Kennedy then, when the shoe shine boys were giving stock advice it was time to get out in 1929, perhaps High School dropouts and convenience store workers "getting rich" gambling with options on Robinhood might be a useful signal of things breaking down now.

One of my unemployed friends just told me he's putting everything into bitcoin.

Has he heard of Tether? It might be worth telling him that the entire cryptocurrency market it being propped up by 10 billion “dollars” of what is essentially Monopoly money.

He might be right. There is a considerable work being done currently on Bitcoin to improve it's transaction throughput, speed, privacy and fees. Once it's done, in a year or two, Bitcoin will have great utility as a modern form of money.

good for him. hope he can hold out for a couple years...

might be a smart move. I'm not going all in, but I am dollar cost averaging my buys and accumulating bitcoin.

I spoke to my financial advisor a month ago and he told me he was not worried of a major and sustained drop as FED and Congressional intervention had helped curtail that before it spiraled out of hand.

But I cannot help but see current market prices and see current for lease and boarded up building. I wonder if he was correct. I wonder if the advice he has given me is wrong?

I believe we are about 9months away from the greatest financial disaster of our times. We should be and should have looked at COVID-19 as a war and not as a pandemic and we as a nation should have encouraged others to do the same (as they have). We should have legally declared war on the virus, shut down the economy for three months, passed a massive stimulus, and gone back to business when the “war” was over.

Unfortunately we have weak politicians at every level and extremely divisive leadership at the top. The good news is that we are just as informed and can find truth like never before. The hard part is that the truth is hard to find especially when we have something as large as the stock market lie to us on a day to day basis.

The advice your financial advisor gave you is no more insightful than the stuff you read in editorials and website forums.

Financial advisors exist for the people that are predisposed to appealing to authority, and also have no time for that trade.

They are nowhere near as specialized as like an oncologist who you would still want a second opinion from. Most programmers have the cognitive abilities to pass a financial advisor's licensing exam with one week of preparation.

Just for perspective.

Advisors are about behavioral control. The last thing you want to do is have your advisor trading up a storm in your portfolio. They are not incentivized to trade because they have to justify it. You're not incentivized to have them trade because passive management beats out active almost all the time.

I think what most people don't realize is that the pandemic is more of the pin that is popping the bubble. Remember the Fed was dropping rates all last year like a lead balloon and injecting liquidity in massive way last fall -- all before the virus.

If Covid-19 goes away overnight, I don't see the economy recovering and I think the Fed's actions have been catastrophic for the US dollar. They're literally hitching the country's solvency to the market to save it. Maybe it will work, sure, but were a bit in uncharted territory so I don't see where the confidence is coming from. And by doing this they have to be right; they're making it their hill to die on. If they're wrong, America will become a very different place.

Do not underestimate the distorting effects of the government. When we read about trillions of dollars we find it very hard to comprehend what that means in terms of actual market impact and price discovery. Right now I would not bet against the markets in the next year. If we cannot find a resolution to coronavirus by early 2021, I would start getting worried about market contagion.

That's amazing. Shortly after the Powell interview, in a speech a wall street insider insisted the whole reason for 60 minutes interview is so that financial advisors can have a leg to stand on in case they get sued for buying stocks into a severe recession with earnings dropping. They just needed the CYA.

>I believe we are about 9months away from the greatest financial disaster of our times

Why 9 months? What would precipitate that?

By nine months it will be a debt crisis which has become a liquidity crisis which then forces a fire-sale of assets.

But most of the debt has been around for years at this point. What in the next 9 months changes that?

Debt is fine if payments can be made. What's coming is an inability to make payments.

Further, credit is tightening, so that, say, companies that have been using credit to stay alive (zombie companies) won't be able to anymore. Up until around 2003, zombie companies were no more than 2 or 3% of total companies, as you would expect. This grew to 5-6% in the 2008 crisis. But that crisis wasn't allowed to resolve naturally, so it's been continuing to grow, and now it's almost at 20% -- of all companies.* https://www.axios.com/zombie-companies-us-e2c8be18-6786-484e...

The economic contraction that we're just starting is going to set off a wave of defaults, and those defaults will beget more defaults.

Why won't the fed just pump another $8T into the economy to prop up the assets further?

It could... But each dollar they add puts the country's solvency at risk. And it's already deeply at risk.

But you're not alone thinking this. I'm deeply concerned at how many people think that the Fed can just "manage" this. I feel like I'm watching generational wealth falter and the spoiled children are reacting to the news with, "My dad will just put it on his card."

my first (only) financial advisor was a manager at RadioShack for 10 years before he got the advisor job.

relatedly, i once applied as a network admin at Ed Jones. They didn't have their shit together when i showed up for the interview, and gave me the questions for the financial advisor interview instead. it was an automatic process, about 100 questions that were some variant of "how good or bad do you feel about asking your friends to buy financial products you don't understand well, and will you also please ask them to recommend you to their friends?"

i didn't get the job. and i fired the advisor.

Financial advisors study for months and are legally required to pass tests before giving financial advice. It’s not like one day you’re at radio shack and the next you’re a cfa/cfp.

Series 7, series 63, cfp, cfa, etc. when you get a job at fidelity you literally just go to class and study 8 hours a day for a few months.

Also you were asked sales rep questions, not actual advisor questions.

Financial advisor =/= certified financial planner (CFP or CFA).

It's like how there are people at HR Block who will do your tax returns, and know a lot about the process -- but they're not a CPA, which has a formal requirement.

Similar to paramedics vs. doctors/surgeons, etc.

There is nothing strange about the current valuations of the stock markets. Yields of just about every fixed-income security not exposed to stock-like risk is zero.

Global stock market indexes are at a P/E of ~20 - that means a yield/direct return on equity of 5%. This doesn't seem so unreasonable when there are no returns to be found anywhere else. The global economy is still making money, just not hand over fist. Assuming no further catastrophe and no permanent reduction in earnings, the stock market is still a good investment when looking at the returns you get from profitable companies every single day.

The risk premium is very low, yes. Rising returns in other places and an increase in the risk premium would cause a permanent loss when investing at these level, yes.

But you're getting a 5% return if you invest today, albeit exposed to a risk of this number falling. And what is the alternative? Let's say the P/E was at the historical average of 15. That's a yield of 6.5%. That seems unreasonably high to me when other investments yield zero, so of course market prices are going to be bid up until it falls to a more reasonable level. We should be happy that the global yield is still as high as 5%.

Either there will be a correction or a crash in the future, and things will return to normal, or this is just another indicator of a late post-industrial world where capital is very cheap. The third alternative is a global war and destruction of life and wealth on an absolutely tragic scale. That would put us back in known territory real fast.

I can easily imagine today's children hitting their twenties and complaining that the millennials pulled up the ladder, there is now nowhere to park their hard-earned money to make an investment income.

>complaining that the millennials pulled up the ladder

The millennials that currently invest a pittance compared to Boomers or even Gen-Xers?

In addition to everything he mentioned, there is still the possibility that immunity, acquired after infection, is only for a short period. Nothing makes sense. Everyone was already waiting for some kind of correction before Covid. And now, in addition to the covid, we have conflict tensions, unemployment and lack of income on a global scale.

Stock market became a casino.

https://www.theguardian.com/world/2020/jul/12/immunity-to-co...

If immunity acquired after infection is only for a short period, immunity acquired after a vaccine will also only be for a short period.

Very likely, yes. However, it is much less debilitating to get a shot every three months.

It's unlikely that would be sustainable for long for various reasons. You're talking about needing literally tens of BILLIONS of shots a year for the forseeable future?

If immunity is not long lasting, then the only path out is global eradication. We have done it before with smallpox.

I don't see us getting to the levels of vaccinations that would be necessary for eradication. A quarter of the people in the US think the whole thing is a ploy to implant everyone with microchips and nothing will ever convince them otherwise. Maybe some of those people will change their minds when they get it but I wouldn't count on enough to matter. We're all going to be sick and dying for decades.

Don’t need it forever

Could they really manage to make a new version of the vaccine four times a year? For influenza they only do it twice a year and the vaccines are often only 50% effective (or worse.)

I would assume this is because of how fast flu is evolving and how many strains there are, with different ones predominant in any given year. Covid is (relatively) stable, so you'd just use the same one.

The have parted ways because the Fed is buying lots more than just treasuries. There is so much money desperate for returns because interest rates are so low. That is why we have such inflated equities right now. It is a mental game: if people don't know the economy is awful, maybe they won't change their behavior and maybe it will actually get better before they realize it.

The Fed buying bonds isn't pushing Tesla to the 14th largest market cap. It's currently trading $200 per share higher than any analyst recommendation that the WSJ or Yahoo has. Not to mention Hertz, a bankrupt company, has a market cap of 200 million.

Something very unusual is going on.

They made it easy for the uneducated investor to invest in companies that see the spotlight on the news. You can invest in minutes and for free now, right from your phone. These people don't do any research on the company. They see news stories on the company all the time, and news stories that the stock went up XX% So when you have people casually buying stocks I feel like they get inflated past the point that makes any sense, and thus become incredibly overvalued. Seasoned investors would see this and stay far, far away from these businesses.

Is there recent data on how much investment originates from retail investors? Are there really enough retail investors on Robinhood and elsewhere to push valuations up this high?

That's a good question. My statement was opinion and speculation, but it would be interesting to see this backed up by data, maybe someone here can find data on percentage of a stock like TSLA for example is held by retail investors?

You can see the % of shares held by institutions

https://finance.yahoo.com/quote/TSLA/key-statistics?p=TSLA

Compare Tesla at 57.93% to Ford at 55.06%

I don't have the link but I think people linked Hertz' valuation pop after it's bankruptcy almost exclusively on Robinhood type traders.

9.5% of float shorted, up 13% mid-day. Short squeeze, methinks.

https://www.marketwatch.com/investing/stock/tsla

Here is the Volkswagen stock chart from October 2008:

https://www.ft.com/__origami/service/image/v2/images/raw/htt...

... and, two hours later, back down to +1%, still mid-day.

Of course it's a short squeeze

"But though we had plenty of money / There was nothing our money could buy..."

--- Rudyard Kipling, "The Gods Of The Copybook Headings"

In other words, fake it till you make it

Theres literally no where to put you money now.

The stock market would be down if you could put money in any government bonds that you thought would immediately start increasing spending or any stock or bond market that would do any better. Emerging markets are shaky with China destroying HK and corona running through cities everywhere in the world.

If you could even remotely tell me a safer place to get returns then I concede the point but I doubt you could

As was commonly heard in '08: The time has come to worry about return of investment more than return on investment.

can you explain the difference?

If people start expecting negative returns from the market, 0% returns from govt bonds sound pretty good.

Switzerland are now at -0.75% and still getting investors.

> Theres literally no where to put you money now.

Philanthropy always has room.

Try living off philanthropy in your old age.

What about real estate?

No one knows when people will be moving back into cities and rents in places like SF have dropped I think 16% in some areas. No one knows if ever they will get that back, or how much it will drop. Its a complete unknown

Maybe residential, but I think office & retail space is a very bad investment now. Covid accelerated a couple of trends: The work from home/remote trend and the moving of retail sales online. I don't see those turning around anytime soon even if we get a vaccine. Companies are finding that their employee productivity is at least on par with office-based employees and now they're eyeing all those savings on rents. A lot of leases not being renewed this year.

Invest in main street and labor saving gadgets for yourself (e.g. roomba).

That seems wrong too. If I don't have a job or I'm underemployed, why do I need a roomba? I'm not over-worked as a dev where this kind of aid helps me. Main street has closing store after closing store where I'm at in the PNW. There's no main street left.

What does that mean specifically and at what cost. Are the returns better?

concretely, how much does the sentiment of retail investors actually matter to prices -- in general for the whole market, and for specific stocks that dumb retail investors get excited about (Tesla, Hertz, or whatever)?

I have no idea what the answer to this question is or even how to formulate it in a clear, answerable way. But it seems very important!

It seems that stock prices move, newspapers publish a narrative to explain it, but in many cases there is no way to tell whether the narrative is correct or not. Right now there is a narrative about Robinhood and other no-fee brokers, but is it true?

You're asking a great question. I used to work as a professional trader and the answer is that probably nobody really knows. Like you said, any explanation you hear about prices moving is just a narrative fallacy.

People love hearing simple explanations to complex questions like "why did X price move" when in reality there is no such thing. The stock market is an incredibly complex interconnected system, with so many types of participants and algorithms optimizing for different outcomes over different time horizons.

Retail flow can certainly influence the market, but in my experience the influence is more indirect than direct, as algorithms may jump onto the retail order flow signals to profit from it, which may then create positive feedback loops. But who knows, the fact is that a lot of volume is being bought, and that's all you can conclude.

I'd go as far as saying that anyone who tries to connect the stock market with economic events doesn't understand a thing about trading. They're just not connected, except in a few special instruments. They're only connected in so far that people believe they are connected and invest based on that, just like Bitcoin is only worth what people believe it to be worth.

in some limited cases it seems like maybe we can be pretty confident that retail investors "caused" a price move. even if professionals magnify it, the core thing would not happen without retail investors. Like the Hertz thing, or "Long Blockchain Corp", or when people get confused over ticker symbols.

but I agree it does seem sort of unanswerable in general. very odd, then, to see people making these public assertions with total confidence.

I am curious: based on your experience, do you think that, in principle, an omniscient observer of all transactions on stock exchanges and who made them could answer questions like this in many cases? If so, what concrete things would they hypothetically want to look at to figure it out?

> I am curious: based on your experience, do you think that, in principle, an omniscient observer of all transactions on stock exchanges and who made them could answer questions like this in many cases? If so, what concrete things would they hypothetically want to look at to figure it out?

Not necessarily, because the order flow they see goes through brokers, is anonymized, and order execution is optimized algorithmically as to not reveal any patterns. You can't easily tell what is retail flow and what isn't, however you want to define that. What you would need is not just to exchange data, but also the internal user data from companies like robinhood, and an understanding of how exactly algorithms from hedge funds and HFT firms behave. In theory this would be possible if you had complete access to and a full understanding of all of this. In practice it's impossible.

I don't know how useful these are, but I found

428k+ Robinhood users hold some position in TSLA: https://robintrack.net/symbol/TSLA

50%+ is held by institutions: https://www.nasdaq.com/market-activity/stocks/tsla/instituti...

Probably a fake number. It seems Robin Hood is available in the US (330m population) and UK (66m population).

It's not a fake number, it comes directly from Robintrack's own public API (assuming you mean the number of people holding shares on Robinhood)

Robert Shiller's piece, which is linked to in the article, is worth reading:

https://www.project-syndicate.org/commentary/understanding-u...

    Historically, the PE for the entire
    U.S. stock market is about 15. But
    today’s market PE of roughly 23 is
    about 50 percent higher than the
    historic average

Every time I see statements about the PE of the market, I wonder which PE they mean?

The price of the companies divided by their past revenue? If so, which past? Last month, last quarter, last year?

The price of the company divided by future revenue? Then future revenue guessed by whom and for which time frame?

Normally this is 12 month trailing PE.

"The PE ratio of the S&P 500 divides the index (current market price) by the reported earnings of the trailing twelve months."

So it's current total market value (add the market cap of all 500 companies in the index),

And divide by the total past 12 months earnings of the same 500 companies.

If that doesn't answer your question, please let me know.

This site lists PE based on trailing 12 months earnings as 27.75: https://www.multpl.com/s-p-500-pe-ratio

So PE of 23 is probably based on projected "forward earnings" which isn't really that useful. The most common time period for both is 12 months and the projections are usually coming from a combination of guidance from each company and analysts at banks and investment companies. Obviously there's a large margin of error in these estimates.

It's a little complicated because all these metrics are like trying to compare apples, oranges, and bananas. So, it depends, and it's not necessarily the best metric to gauge the valuation of the markets.

It's price divided by earnings.

For price, I believe it's the sum of the market capitalization of all the companies in the S&P 500. If you divide by shares outstanding for all the companies, then you get price of the S&P 500 (price).

For earnings, is the sum of all the companies earnings (Net Income) in the S&P 500. If you divide earnings by shares outstanding, then you get earnings per share (earnings).

Historically, interest rates were not this low, so naturally PE ratios would inflate now given cheap money. Also, historically, the Fed didn't print money to purchase ETFs and distort/inflate the market.

If there is a "new normal" for the PE, the hard part is figuring out what it is. What is the new acceptable level? I have no idea.

In this context, one can probably use either trailing or forward PE. Companies do make forward earnings projections. Neither one is likely to bring P/E even close to 15.

A combination of FOMO and the never-ending flow of passive money into the market, which is 45%+ [1] and probably growing. Passive investors do not analyze their investments, they blindly buy market indices like the S&P 500.

With all of the stimulus into the economy, that flow of passive investment money is probably not too impaired, yet.

1. https://www.cnbc.com/2019/03/19/passive-investing-now-contro...

I have two explanations: one optimistic and one pessimistic.

The optimistic is that the Fed is prepared to unleash the runaway inflation (you can keep the stock market records if you want... it’s just the dollars that will buy much less) — and the markets are currently busy of pricing it in. That’s fine... more or less.

The pessimistic scenario is that the current administration is determined to keep the stock market alive and kicking at all costs, whatever means necessary, until this November — and then it wouldn’t matter this much anymore. They think they have the resources for buyouts before November... however, the UK and Japanese governments somewhat famously failed to uphold the market in very similar scenarios, which ultimately led to decades of stagnation.

I wonder what it will be this time.

> The pessimistic scenario is that the current administration is determined to keep the stock market alive and kicking at all costs, whatever means necessary, until this November

This is a given. Look at the push for schools to open in the fall. They're even talking about tax credits for attending sporting events and for traveling and staying in hotels. All kinds of craziness in the midst of a pandemic.

I'm a bit surprised nobody has called out the obvious.

The market did correct for these fears and in doing so, dramatically overcorrected. Initial estimates were quite worse than the current situation, and unemployment is terrible - but has been recovering at a rate significantly greater than anyone expected.

That doesn't mean we won't see declines or corrections in the near market, as it's possible the market is too optimistic now - but short of a crystal ball, nobody can actually predict that.

The stock market is a popularity contest. A simple mention on the news of a stock can create a buying or selling frenzy over it, and this has been the case for a long time.

Keynes wrote about it in 1936:

https://en.wikipedia.org/wiki/Keynesian_beauty_contest

yeah, look at the idiocy over wayfair -- down 5% on the open over a literally insane conspiracy theory.

In the short run, yes. But in the long run it's a weighing machine.

but then explain why the current prices aren't reflecting a weighing from a few decades ago?

when does "short term" become "long term"?

They can do both at the same time, it's just that a time series is not a very useful representation, you want something similar to an FFT.

One theory is that many small business owners are using their PPP loan money to invest in the market. This is local restaurants with millions of dollars in the bank that can't really invest in their own business due to slow business. If they are fearful of going out of business then taking a shot in the stock market doesn't seem all that risky.

PPP loans have go be used for employee retention.

https://www.sba.gov/funding-programs/loans/coronavirus-relie...

"Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease."

Interesting theory. Is there a way to quantify how evenly investing, say $200B, across the S&P would affect the index's price?

It wouldn't be evenly distributed. It would disproportionately be invested in well know consumer brand as these would be novice investors.

So they pay it back into the economy, because quarantine restrictions prevent them from producing their own economic activity. Now that's stimulus.

Related, "The Stock Market vs The Economy" by Ben Felix: https://www.youtube.com/watch?v=0ECqDaPjjV0

At least we can dispense with the idea that the stock market is driven by short-term thinking.

Prices are high because investors expect things to be better in the future, even though things are bad right now. Maybe the investors are wrong, but at least they are thinking about the long term, or at least the intermediate term.

I think prices are high b/c retail investors are being taken for a ride and have no other recourse. A ton of cash has been injected into the system. People are rightly concerned about inflation. What do they do? Bonds aren't a good investment. Real estate will be affected by unemployment, so that's not an option. No one gives a crap about gold any more. Plus retirement funds carry insane penalties. It's not like pulling that stuff out is an easy decision.

One thing - real estate going down while inflation rises gives you a pretty clear hedge. If real estate goes down a lot faster than inflation rises, its best to hold cash. If inflation rises a lot faster than real estate goes down, its a lot better to buy real estate.

Original thinking and therefore probably wrong, but perhaps interesting:

A more precise explanation than FOMO is that the stock market is simply a form of poker.

In poker, the cards themselves have zero value, they are simply a tool used to determine a winner.

While stocks may have some intrinsic value, it is commonly acknowledged that their value as assets is substantially lower than their stock market price. Moreover companies continue to buy their own stocks further reducing the value of stocks as assets.

Unlike the card game of poker, in stock market poker the players share the pot. This simple fact explains why there is a relentless pressure to increase the size of the pot.

In 2017 the richest 10% of Americans owned 84% of stocks. These are the major poker players. They have the resources to absorb major losses and then simply bid up the next hand.

Any small players (yes that means you and me) can easily lose their shirt in a down turn as we do not have reserve assets or other means (hedge funds) and are not able to participate in the next hand.

Many investment funds, pension funds and others fraudulently present stocks as assets and participation in the stock market as "investment".

It is the equivalent of asking that people invest in poker game by representing that the cards themselves have value. If participants in pension funds and retirement plans begin to recognize this fraud this may cause the stock market to collapse. However even this is unlikely. Poker games don't collapse, people just stop playing.

Just a thought.

> While stocks may have some intrinsic value, it is commonly acknowledged that their value as assets is substantially lower than their stock market price. Moreover companies continue to buy their own stocks further reducing the value of stocks as assets.

This is not really relevant. Companies have larger market caps than their intrinsic assets because people trade on discounted cash flow.

> Any small players (yes that means you and me) can easily lose their shirt in a down turn as we do not have reserve assets or other means (hedge funds) and are not able to participate in the next hand.

1. There's no mechanism that forces you to "call" a bet in investing. It's not winner takes all. 2. Why can't you allocate your bond/equity split such that you do have reserve assets?

For people like me who had no clue that

FOMO = Fear of Missing Out

Conspiracy theory time! I don't really believe either of these with any non-trivial degree of probability, but I figure at worst I'd get downvoted, and maybe I'd get some insightful takes.

There was an opinion expressed after '08 that the crisis was used by "elites" to conveniently get rid of (as in fire, mostly) a bunch of people that were, to them, superfluous. Like, that was long overdue and there was a good excuse to fire and not rehire a lot of people, decimating small towns, etc.

So, here comes COVID. Seems like a convenient excuse to get rid of the pesky "main street" businesses. Hence, the corner store is going out of business, but people still need stuff. Yes, the pie might get smaller, but more importantly it gets redistributed much more towards Amazons and Walmarts of the world (don't get me wrong, personally I am fine with Amazon and don't care about corner stores). Amazons and Walmarts are the ones being traded as stocks. Hence, stocks go up!

I have a bolt on to this conspiracy theory. How many business have reduced wages and implemented hiring freezes? It's difficult to manipulate a salary worker into shouldering more responsibility if they have choice and alternatives. Perhaps what we're watching isn't necessarily the 'winner take all' world playing out. Perhaps we're watching capital reorganize labor. The first nail in the technical revolution. The businesses that survive this crisis will be leaner and, in a likelihood, more profitable (higher margins). Also justifying higher stock prices. Hell, even a combination of both theories make sense.

The real tell will be 10/1/2020 an on-wards. That's when a lot of the governmental layoff-freezes disappear. We'll get a real sense of what industries have been seriously propped up.

Obviously the "elite conspiracy" angle is silly, but either way, I think framing it as a "convenient excuse" to fire and not rehire a lot of people is a little odd to me.

Individual businesses are full of inefficiencies that are easy to tolerate when times are good. In many cases, it's often a net waste of time to plug most of them, you usually have higher ROI activities to attend to.

But when a crisis hits and the economy slows down, the equation has changed, many higher ROI activities (eg. marketing or sales activities) are no longer higher ROI, and plugging your many inefficiencies remains one of the few lucrative activities you can choose from. So the organization focuses inwards and starts looking for cost inefficiencies.

Put another way, you wouldn't tell someone who just lost their job that they're just using their loss of income as a convenient excuse to cancel their Hulu subscription that they rarely use.

My issue with this (and largely with the arguments that the market is up because money is cycling into bigger businesses) is that the collapse of small businesses is going to create substantial economic pain that's going to really hurt the large businesses - maybe not in the very long run, but certainly in the medium term.

People are going to lose jobs, only some of which will be replaced by big companies (since they're inherently better at scaling people's work as well as automating jobs), so we're going to be stuck with a bunch of unemployment. Unemployment and the economic uncertainty that comes with it will cause a substantial drop in consumer discretionary spending, which I believe makes up like 70% of spending in the economy.

If you're Amazon, maybe that's fine because to your point, if the pie shrinks significantly but their share of it goes up enormously, they may still benefit even in the short term. But what about Apple, which is hitting new highs? People need to buy stuff, and since Amazon has everything, even if the type of stuff they're buying changes, they'll still go there. But they can (and I suspect very much will) put off buying new high end luxury devices like iPhones/iPads/Macs. Similarly, businesses that would be buying those devices will probably lengthen their upgrade cycles as well.

Same story with Facebook - stock is doing great, but small businesses represent a significant portion of their income. Plus a huge amount of the advertising is for consumer discretionary stuff, and it's a very easy kind of advertising to dial back quickly when marketing dollars go down.

The page is archived at http://archive.is/uDZCq

It's moral hazard in a nutshell, the backstop provided to the markets is so large that the risk/reward is completely out of whack. When the fed is buying junk bonds the signal to investors is loud and clear.

You'd be foolish not to participate until reserve banks start signaling otherwise.

What I would like to know is who the market is. I mean, I'm pretty sure that my investments don't decide if the market goes down or up and, I doubt very much the traditional narrative that the market movements are the result of the aggregate decisions of a lot of people like me.

I would not be surprised if one hundred (random number) people were the one that decide what the market does. The controllers of the investment banks and the big funds are the real players, I suppose.

So, if that theory is right, and we want to know why the market is doing what is doing, we should look to those people. I don't know, maybe even ask them directly what are they thinking.

My profs said it was whenever that last, most staunch hold out joins the market that the end of irrationality is near. Granted, that assumes exogenous demand is not ballooning the market. So I don’t know how or when this ends. What would trigger the fed to stop pouring liquid oxygen into the fire? A vaccine? A general election?

Edit-I also don’t think we’ve seen the full ramifications of the newly, long term unemployed begin to hit. Much of the current numbers assume people who were layed off for the shutdown are all coming back and paying their mortgages and other bills. Presumably there’s possibly a 3 month lag time due to earnings reports.

My theory is that this is a kind of latent inflation - it is still visible only in the financial assets sector - but eventually it will show up in consumer products too.

The phrase "the stock market" appears 7 times in this article, but is never discussed let alone defined.

It doesn't make sense to analyse "the market" as a monolith--not that there was much of that in the article anyhow. Yes, there are winners, which has led to a net-postive macro trend but there are losers which have crashed as well.

The interesting question is what causes some companies to generate revenues while others fail.

Central banks keep printing money forever. Now we are at the point where the real economy and stocks have diverged. Of course central authorities cannot always just buy all bad debt. There is somehow a distortion of risk. Ie buyers of financial papers are not exposed to their risk fully if central banks buy “bad debt”. This financial printing of limitless debt is putting many at debt.

I am worried if there is no caps in debt printing and freedom. You are not free if you are forever a life time in debt.

Somehow I feel there is a symbiosis between politicians winning elections on promises which central banks deliver by creating through new debt.

I am trying to say that we are at global warming and constantly creating more stuff is requiring more energy and we are already using too much of that.

Thus the economy and the environment are diverging. We probably cannot maintain status quo for too long.

Something better more sustainable will come after that.

Zero interest rates are not causing inflation through salaries increasing they flow to more automation and robotics. Automation lower cost of production and are thus deflational.

"stock market" has not parted from the economy.

SP500 Equal Weigh Index is -11.64% YTD, -6.02% for 1 year.

It's only the top 20-50 companies that are doing fine.

Here is what I believe it's the cause.

1) More than a half of assets are now passive [0] 2) People with some money are bored at home and with no sports, they moved their betting to stocks [1] 3) Most trading is now hugely amplified by HFT [2]

[0] https://qz.com/1623418/index-funds-now-account-for-half-the-... [1] https://www.bloomberg.com/news/articles/2020-02-26/reddit-s-... [2] https://www.bundesbank.de/en/tasks/topics/high-frequency-tra...

For the last week or so I’ve been buying ATM QQQ call spreads and rolling them up and out as they become ITM.

I’m up 100% in one week, this is silly.

Mind expanding the acronyms and explaining what exactly you've done? I'm still an investing novice.

Not OP, but anyway these are the terms you want to search:

- ATM: At The Money

- ITM: In The Money

- QQQ: Invesco QQQ Trust

He is doing leveraged bets that the QQQ stock fund will go up a certain amount. When it goes up to that certain amount, he makes another bet it will go up again.

At the same time he is using a call spread so the upside is limited to the difference between the contract he bought and sold. Also at the same time, losses are limited.

Suppose $TWTR is $49 a share, you buy a call for $50 and sell a call for $60. Suppose the $50 call is $3 that means you paid $3. Then you sell the $60 for suppose $1. So now you are out $2. That's your max loss.

Now tomorrow $TWTR goes to $35. Everything expires and you lose $2. Suppose it goes to $300. Then your profits are ($60-50)-$2=$8 Profits Suppose it went to $55. Suppose this is after expiry, then your contract is worth $5 but you paid $3 so you made $2 profit, but you also sold 1 contract, so now you have $3 profits.

So in essence, the spread limits your upside, further limits your downside while you are bullish.

Or the markets are just assuming the Florida strategy is the one that wins out. Let people die and carry on.

I feel like we have taken a turn for the worse in terms of income inequality in the US. The differences between the poor and the rest has been greatly exaggerated by the virus and there is a chasm now.

The lower rung of the economy has no bearing on the stock market as that section doesn't contribute to it. Sectors like tech are entirely created by middle/above middle class individuals for those that are wealthier than them. The stock market is doing well because it has realized this fully. Some sectors like Airlines, retail etc are not doing well because they depend on the lower rung of the economy. I am not sure how this will change.

I have no way to read the article, but I will nonetheless comment on the headline. You can't sensibly talk about the economy and the stock market at a time like this without also talking about current and expected future policy.

add a dot after washingtonpost.com

https://www.washingtonpost.com./opinions/the-stock-market-an...

how does that trick work?

This is the part of the cycle where all the printed money goes into financial assets (rather than poor people's hands) and we inflate our asset bubble as a way to feel bad about the fact the real economy is a shit show.

How to tell the market is not at a top: the Washington Post is calling a market top.

When a major publication like this starts _promoting_ retail stock buying, that's when it's time to head for the lifeboats.

Please, the stock market has been disconnected from the economy for decades.

It's all a big scam. I worked for a an extremely large financial institution, and I worked directly for a Chief Investment Officer.

I imagine that behind the scenes they're doing everything and anything to keep things in the green until the day after the US elections..

I think the simple explanation here is money parked in millennial 401k accounts. If a millennial gets laid off, they collect unemployment.....none I know would dare mess with their 401k.

Kind of crazy it's socially acceptable for the finance world to slice & dice & profit off the life savings of an entire generation while transferring any risk taken back to taxpayers.

"FOMO" makes an entirely natural market process sound problematic. If an investor is confident that the economy will fully recover in 2022, they should be willing to buy stock at a very slight discount from fully recovered today, even if current economic conditions aren't great. That's not a psychological trap, just an efficient market.

A very slight discount? As of writing, the Nasdaq is at all time high and the S&P only 5% below. All this with depression-level unemployment.

Unfortunately the people that are unemployed because of all this aren’t (in general) that important to the economy. This will only further push class disparity.

Again, this just seems like a confused perspective. Market indices measure the expected future performance of large companies, not current unemployment rates.

In a consumer-driven economy, current unemployment rates are inextricably linked to the expected future performance of large companies.

Something can be both rational and problematic.

Certainly, but I'd argue the problem is entirely with people's expectations. Stock market indexes were never an appropriate tool to measure current economic health. If we want a numeric tool to measure what things are like right now, we have to build one, because yelling at the S&P 500 to whip it into shape won't work.

Market in January == market today

World in January != World today

But that's an overly simplistic view of the world. There have been winners and losers, namely tech in the winning camp and retail in the losing camp.

Our world is forever changed and the innovations and ideas that come about in the coming years to deal with this change will mostly come from tech and will be fascinating to watch

https://archive.is/uDZCq

http://archive.is/uDZCq

Anyone with a theory about the current markets: Put your prediction here for what you think will be the state of the market or specific stocks/indices as of, say, Aug 13 2020(Q3 earnings reports will be generally issued by then).

The stock market isn't up, it's just being measured in devalued dollars.

yeah, well 2.5 trillion dollars tossed out to Americans will give you a lot of speculation and A LOT of fireworks. economists didn't predict the fireworks, but turns out we are a simple people.

My theory is that there is too much money seeking to be invested, because too much of current society revolves around time-shifting money (which is essentially what investing does).

Cynically, perhaps this is a sign of confidence that the US will continue to prioritize its economy over everything.

The title on this should be prefixed as '[OPINION]'

Interest is one of the main reasons the economic and financial system is in ruins. It is an exploitative, parasitic practice and we've known that for thousands of years. But some people only care about their pockets.

You broke the site guidelines by starting and then perpetuating this flamewar. Please read https://news.ycombinator.com/newsguidelines.html and stick to the rules when posting here. Note this one:

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Let me know when you figure out a better way to put a price on the risk of loaning money.

As evil as you may think interest rates are- without a price on the risk of loaning money- access to loans dry up and only the already wealthy will have access to capital.

> Let me know when you figure out a better way to put a price on the risk of loaning money.

Collateral.

So people with no collateral are SOL?

Loaning money should not be done to make money, it's parasitic. It should purely be a charitable contribution without expecting a return. If the loanee decides, out of his or her own goodness to return more money than they took, then that's up to them.

Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways.

> It should purely be a charitable contribution without expecting a return. > Now the obvious and direct effect of this is that people will generally not loan their money. This is a good thing. The follow up is that they will invest their money in hopefully legitimate and moral ways.

What kind of investor are you referring to that doesn't expect returns? Even "social impact" investors expect returns in reputation, or in buttressing the foundation on which their primary profit driven business is built.

But here we’re talking about equity (stocks), not bonds (loans). So the interest isn’t coming from loaning, it’s coming from investing.

So everything is sunshine and roses now that we have effectively 0% interest rates?

Not quite, because usury is deeply ingrained in the system, from bonds to CDs to buying debt for debt, etc. There are many usurious transactions that form the underpinning of the financial system that need to be abolished for things to be fair.

Even islamic banking expects some kind of ROI. Perhaps it isn't strict usury, but there is generally some kind of ownership or profit sharing happening.

Expecting is different from enforcing in the contract, as is the case with interest/usury. As long as the contract allows for a gain or loss (other caveats holding), then it should be fine in general. On a side note, there is no strict definition of what "Islamic banking" is, much of so called Islamic banking you hear about today, isn't.

More like YOLO, lets go market orders only boys DKNG rocket ship get on board.

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