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For those who feel our financial markets are a true indicator of economic health, I invite you to please read the following:
"If the day ever dawns when economics is taught rationally, the first item on the school or college curriculum will be the concept of ‘two economies’. One of these is the real (or ‘physical’) economy of material products and services. The other is the financial economy of money and credit." https://surplusenergyeconomics.wordp...two-economies/
markets are never an indicator of economic health .
in fact our best market returns are typically when we are at the end of a recession and nothing looks like it changed.
markets and growth and corporate profits have never been linked .
as much as we think higher profits lead to higher stock prices it really does not work like that .
markets are based on greed ,fear and perception not the here and now .
gains and corporate profits don't flow together more ofton than not.
in the book a random walk down wall street 548 nyse issues were tracked and analyed over 5 year periods and the results were the performance had no relationship between the technical and fundemental signals and the actual stock performance ..
ned davis research took another look at the relationship and going as far back as 1927 they found when profits rose more than:
20% the s&p returned a mere 1.3% in gains
10 to 20% saw 5.8% in gains
(-10% to + 10% in profits saw a 9.3% jump in gains
Those of us who are heavily invested in "paper assets" (mostly stocks and bonds), who don't primarily rely on W2 income, who don't own much (or any) real estate, and who live frugally, have one conclusion:
The S&P 500 IS the real economy. Nothing else matters.
For those who feel our financial markets are a true indicator of economic health, I invite you to please read the following:
"If the day ever dawns when economics is taught rationally, the first item on the school or college curriculum will be the concept of ‘two economies’. One of these is the real (or ‘physical’) economy of material products and services. The other is the financial economy of money and credit." https://surplusenergyeconomics.wordp...two-economies/
I know this, just wish I can put it as eloquently.
I don't think it's possible to have public equity markets without their performance being driven by mass psychology. At the same time, you need public markets to raise huge sums for certain ventures. Public markets also provide a way for the little guy to ride the waves of growth. Historically rules-based public markets are a sign of an advanced economy.
The only solution is bottom-up: investors of all stripes and sizes need to learn as best they can how the economy works and how investing works. If enough people think investing is like gambling at the races, then the stock market will be a casino.
Just look on the bright side: all that speculation means there's a practically bottomless reservoir of money to perform price discovery. You can just ride that wave with an index fund without risking any more than you have to.
And yet there are posters on here that tout everyone ought to rely on this financial economy; which is not based on anything real but more emotions as another poster stated, for our prosperity.
You have to be kidding me. There are even poster on here who criticize certain subjects of discussions in threads regarding economic hardship for "not speculating in these markets". That these subjects put themselves in their position by not risking their money on these financial markets.
The taxpayer even has to prop this up. The FED or taxpayers should only be propping up the real economy.
What difference does it make? Financial markets are what they are, why do the two have to connect?
They do connect via money. If the paper economy crashes and you rely on dividends you're eating cat food. If the physical economy crashes there's no more money to invest.
i have lived through more crashes and down turns then i care to count in my 35 years as an investor .
i have never eaten cat or dog food and simple fidelity funds have taken the little bits and pieces i have managed to save and grew them over time into 7 figures .
as well as we have been spending down six figures a year the last 8 years and we are still higher then the day we retired
that is despite wars , crashes , the great recession , covid and the lost decade for stocks as well as spending down to live.
so far 122 rolling 30 year cycles representing typical accumulation stages and retirement cycles say if you bet against it growing your money or supporting you , you would be betting against the house on a long shot
Last edited by mathjak107; 05-04-2023 at 03:08 AM..
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