Main Street vs. Wall Street (article)

[disneysteve]

https://www.nbcnews.com/business/business-news/why-main-street-suffering-while-wall-street-soaring-n1214611

This article talks about how what the stock market is doing can be very different than what most people, and even most businesses, are experiencing with the economy.

It doesn't mention it in this article, but I also read the stat recently that 85% of all stocks are owned by the top 10% of earners. As much as we hear about and talk about the stock market, the reality is that the vast majority of Americans have either a very small stake or none at all.

[Jluke]

Financial education
financial literacy
financial responsibility
financial priorities
financial obligations
financial burdens

all of the above, and other things, may explain why most are not in the stock market.

note: I didn’t read the article.

[disneysteve]

all of the above, and other things, may explain why most are not in the stock market.

Just to clarify, the article isn't about who owns stock. I just added that fact. The article is about the disconnect between what the market is doing and what's happening in people's daily lives.

[corn18]

That article made no sense. A bunch of gibberish. Would have been great had they actually discussed the economy. They spent all their words telling us that 5 companies make up most of the equity market. So what. And as with all articles, there is NEVER any suggestions on what to do about it.

This NPR podcast is better: https://www.npr.org/transcripts/861331371

[bjl584]

I was working in retail par time up until about a year ago, but the 9 or so years that I was there the economy was doing very well. And so were my investments.
But the people that I worked with, not so much.
They definitely weren't riding the economic wave so to speak.

DOW 28,000 doesn't mean anything if you have no savings, no investments, and are struggling paycheck to paycheck in a low end retail job.

[Singuy]

I was working in retail par time up until about a year ago, but the 9 or so years that I was there the economy was doing very well. And so were my investments.
But the people that I worked with, not so much.
They definitely weren't riding the economic wave so to speak.

DOW 28,000 doesn't mean anything if you have no savings, no investments, and are struggling paycheck to paycheck in a low end retail job.

You said the people you WORKED with. That is the economic wave, having people in jobs vs bleeding jobs during a recession. What people choose to do with all that income is their problem but it definitely beats living in a tent and going to the soup kitchen after all these people lost their jobs.

You can't force people to think beyond their next paycheck. You are doing well because you knew to save and invest. You understand wall street and your retirement plans. You know not to be overly exuberance every pay day. Others not so much..so what can you do? Give them triple pay over market value vs having them gain the skills(or work ethics) to earn that triple pay? It's like people just want money to fall out of the sky with zero effort. You can have 2 ounce of effort and invest into your retirement and money literally falls from the sky, and that's literally with 2 ounce of effort..a click of the button..sacrificing like a starbucks latte daily.

[bjl584]

You said the people you WORKED with. That is the economic wave, having people in jobs vs bleeding jobs during a recession. What people choose to do with all that income is their problem but it definitely beats living in a tent and going to the soup kitchen after all these people lost their jobs.

You can't force people to think beyond their next paycheck. You are doing well because you knew to save and invest. You understand wall street and your retirement plans. You know not to be overly exuberance every pay day. Others not so much..so what can you do? Give them triple pay over market value vs having them gain the skills(or work ethics) to earn that triple pay? It's like people just want money to fall out of the sky with zero effort. You can have 2 ounce of effort and invest into your retirement and money literally falls from the sky, and that's literally with 2 ounce of effort..a click of the button..sacrificing like a starbucks latte daily.

I get a lot of the folks I worked with were in the positions that they were in due to their own series of choices. I don't claim to have a solution, and I wasn't even trying to draw cause and effect.
I just observed that most of the people I was around in that environment weren't doing well or benefiting from the Wall Street run up. For whatever sets of reasons, that's just how it was for them.

[disneysteve]

I just observed that most of the people I was around in that environment weren't doing well or benefiting from the Wall Street run up. For whatever sets of reasons, that's just how it was for them.

This is pretty much true across the board. As I said, 85% of stock is owned by 10% of the people. Most people aren't involved in the market in any meaningful way, if at all.

The question often comes up, as it has here recently, of how can the market be doing so well when 40+ million are unemployed and businesses have been closed for months? This article addresses some of that. The stock market isn't the economy. The two don't necessarily move in lockstep.

[LivingAlmostLarge]

So my friend when we went away this weekend said she didn't believe the economy was doing bad. She lives in a bubble I told her. I told her there are tons of people unemployed. She said she didn't know anyone and are these people really unemployed? She said she knew people talking about her their identities stolen and filed for unemployment. She said that she doesn't believe that many people are unemployed or really doing badly.

I don't know what to say. With my jobs i do people's taxes and I literally see people with no income from self-employment, or laid off/furloughed. So I see people doing poorly. And I still don't get how the stock market does well when people lose money which I think = lower consumer spending = lower GDP. I mean how do you spend money like the "great recession" if people don't have income? And are in line for a food bank?

[disneysteve]

I still don't get how the stock market does well when people lose money

You have to look at the companies that are the ones profiting. Amazon, Netflix, Zoom, and lots of other tech companies are hitting all-time highs as a result of the shutdown. As the article says, 5 stocks make up 20-25% of the market's value. If those 5 are doing okay, the indices look good. Sure the airline stocks and cruise stocks are low but they represent a tiny sliver of the overall market. It's the big tech giants that fuel much of the market performance. Essential businesses like Walmart and Target are doing well too. It's just that looking at the stock market doesn't accurately reflect the big picture.

[corn18]

The market isn't exactly great. This could go south in a heartbeat. If 3Q/4Q GDP isn't getting back on track, we may be in a depression and the market will go back down.

[LivingAlmostLarge]

No I listened to that and I get the five big companies. But they are still dependent on other companies spending. FB and Alphabet need ads revenue. Whose going to keep advertising if people aren't spending? Amazon needs to spend more in infrastructure but bulk of their profit comes from AWS. But what if smaller companies start spending less on their cloud because they shut down? Or move to Azure?

And you see only 48k FB and 144k MSFT, and 118k at Google and 123k at apple and AWS is 25k. Yes Amzn has 1 million but the tech side which is less likely have to layoffs. But that's a tiny segment of the economy. Okay so maybe they keep their jobs, but what about the rest? Isn't the value of the company only in the value of people still spending and supporting them? Will people still be buying apple phones and spending $1k on tech stuff without a job?

I just wonder does it really not matter that there are millions looking for work and money? That the top 10% can support the economic spending on their own? I'll tell you if i were laid off I"d be cutting spending to the bone. Even "essential" amazon and target spending can be cut back. It's obviously cut back if you are going to the food bank. Then coupled with paying for rent, health care, etc. I don't know how we can expect with record unemployment people to keep spending at record GDP.

[corn18]

The market is assuming a recovery by 4Q20. If the market is wrong, it will correct. Then we get to hope for a recession vs. a depression.

[Singuy]

Best video that explains why the market is up while the economy is in the toilet.

[disneysteve]

Best video that explains why the market is up while the economy is in the toilet.

That was excellent. Thanks for sharing it.