Stock Market Prediction

[Saratoga_Mike]

Originally Posted by PaceAdvantage

As they say....WTF?

Total hindsight call, I admit, but the overwhelming monetary and fiscal stimulus worked/are working. RVs are selling. Boats are selling. $20k ATVs are selling. Furniture is selling. And the latest data points from public companies: sneakers/shoes are really selling. It doesn't feel like much of a recession if you listen to consumer-oriented conference calls of public companies, especially for those that target the lower end of the income spectrum.

Here's an interesting piece of information:

As a result of the special $600/week federal unemployment benefit, “the average (wage) replacement rate across states increases to roughly 116 percent.* That is, an average worker could earn 16 percentage points more by collecting unemployment than he would on the job. The expanded benefits exceed 90 percent of the average weekly wages in all states; they exceed 120 percent of average wages in 21 states and 130 percent in six states.”

Is it any wonder there are reports of employees refusing to come back to work? Why do that...and take a pay cut!

*this number was 45% in 2019 (no extra $600/week, of course)

Source: Noah Williams, Univ of Wisconsin (Madison)

[PaceAdvantage]

Originally Posted by Saratoga_Mike

Here's an interesting piece of information:

As a result of the special $600/week federal unemployment benefit, “the average (wage) replacement rate across states increases to roughly 116 percent.* That is, an average worker could earn 16 percentage points more by collecting unemployment than he would on the job. The expanded benefits exceed 90 percent of the average weekly wages in all states; they exceed 120 percent of average wages in 21 states and 130 percent in six states.”

Is it any wonder there are reports of employees refusing to come back to work? Why do that...and take a pay cut!

*this number was 45% in 2019 (no extra $600/week, of course)

Source: Noah Williams, Univ of Wisconsin (Madison)

How is any of that good for the economy?

[Saratoga_Mike]

Originally Posted by PaceAdvantage

How is any of that good for the economy?

You're probably like me saying, why the hell aren't people saving their money? That's the paradox of thrift, meaning during a recession people typically save more, which results in lower aggregate demand. When that happens, the recession deepens.

The stimulus is softening the blow, and the consumer is spending. I suspect savings is going up too, just not as much as you and I might expect given a 20%+ unemployment rate. The consumer is about two-thirds of the economy, so it's a very important driver. You (and I) may say but the $600/week will go away at the end of July and the stimulus money will all be spent in a few months. The hope is the stimulus serves as a bridge to a more self-sustaining recovery in the economy.

[Ocala Mike]

What happens in a few months when the $600 bump wears off, and then when unemployment benefits run out not long after that?

[lamboguy]

Originally Posted by Ocala Mike

What happens in a few months when the $600 bump wears off, and then when unemployment benefits run out not long after that?

what would happen if they continue giving $600 a week while someone is still working AND they improve the supply chain here to the point where we never will rely on any other country again? you will have an economy that produces more revenues than ever before and it will be on steroids without having to sell unbacked paper to anyone.

[highernote]

Originally Posted by lamboguy

what would happen if they continue giving $600 a week while someone is still working AND they improve the supply chain here to the point where we never will rely on any other country again? you will have an economy that produces more revenues than ever before and it will be on steroids without having to sell unbacked paper to anyone.

It is probably a good idea to own gold before it gets to that point.

[highernote]

Originally Posted by PaceAdvantage

How is any of that good for the economy?

If you're referring to people spending their stimulus checks then it is good because it keeps capital flowing. This creates demand for products and services. Creating products and services takes labor. Labor means jobs. Jobs means income. Income means increased spending. Interestingly, whether we're talking communism, socialism, fascism, or capitalism all four require the flow of capital. Depending on who you talk to in America they will tell you America falls in to one of those four economic categories.

The worst thing would be if everyone saves their stimulus checks rather than spends them. This would lead to a contraction of the economy and falling prices due to excess inventory. Falling prices is what the Fed wants to avoid. It makes it harder to pay off debts and leads to depression.

I assume some people are using their stimulus checks to pay state and local sales taxes, and property taxes. Without tax revenue state and local governments can't function. They cannot run deficits like the U.S. gov and print money. If state and local govs run out of money they have to cut services and that means massive layoffs, which would probably lead to more Federal stimulus checks, the Feds would do what FDR did and create a federal program like the New Deal to create public work projects -- build bridges and highways, revitalize national park infrastructure, build dams, hire artists to paint murals, etc.

[PaceAdvantage]

Originally Posted by highernote

If you're referring to people spending their stimulus checks then it is good because it keeps capital flowing.

Not what I was referring to at all. After 20 years, you'd think I'd be better at this.

I was clearly referring to people wanting to stay unemployed and collect more than what they made while working.

How is **THAT** a good thing?

[lamboguy]

Originally Posted by highernote

It is probably a good idea to own gold before it gets to that point.

its always a good idea to own precious metals.

the goods that come from China and India have no quality at all.
if we do it right, there will be other countries buying our manufactured goods. we did it in the 1950's and 1960's. a good 10 years of manufacturing can lead to a major expansion in the economy and do that along with keeping spending intact could lead to paying down the national debt and putting a good dent into it.

in theory this could all work, reality may be a different story though.

[Saratoga_Mike]

Originally Posted by PaceAdvantage

Not what I was referring to at all. After 20 years, you'd think I'd be better at this.

I was clearly referring to people wanting to stay unemployed and collect more than what they made while working.

How is **THAT** a good thing?

Sorry, I misread your question, too.

I'm surprised this issue - paid more to stay at home than work - hasn't gotten more press. As businesses open back up and call workers back, I suspect it will. I know of two dental offices and a restaurant where workers have "declined" the invitation to come back to work because of it, in the opinion of the employer. The employer can report this refusal to the state's DOL, and the "unemployed" person could theoretically lose their benefits, but there's wiggle room in the CARES Act (the worker can cite safety concerns--sometimes legit, of course), which makes the lose of benefits less clear cut.

What's the solution? If the unemployed are paid more to stay at home than work, then we need to pay the unemployed a supplemental $450/week when they go back to work (yes, they'd earn their normal wages from their employer plus $450/week from the government). You can't make this stuff up--see link below. Let's fix one market distortion with another, then call ourselves Republicans (the $450/week proposal is courtesy of Sen Rob Portman from Ohio). My understanding is the extra $450/week would expire in conjunction with the sunsetting of the $600/week in supplemental unemployment insurance at the end of July.

How has this played out/will this play out in the real world? I have a friend who works at a manufacturing plant. I've never asked him a precise number, but I think the plant has a few hundred employees. In early April, a large portion of the employees were laid off. My friend kept his job, as management appreciated his work ethic and productivity. So far, so good. But his hours were cut back to 32/hours/week and no overtime. As a result, he's making about $700/week pretax. Meanwhile, those who were laid off are receiving $850/week to $950/week in total unemployment benefits. Needless to say, this has left my friend bitter. Now if Senator Portman's bill passes and some of my friend's co-workers are called back to work, my friend will still make his normal hourly wage, but he'll work alongside those making an additional $11.25/hour ($450/40 hours). What a great reward for his hard work and productivity.

https://www.politico.com/news/2020/0...k-bonus-281884

[FakeNameChanged]

Originally Posted by lamboguy

its always a good idea to own precious metals.

This tired old cliche just isn't true today, or in the last 10 or 30 years. Not even over 100 years. At times gold has outperformed the market, but silver not very often. And both sell today for less than they both did 8-9 years ago.

https://www.longtermtrends.net/stock...ld-comparison/

Gold/Silver vs. S&P 500 & Dow 30

Descr.---------------------10 yrs.----------------------30 yrs.
Gold ----------------------+47%-----------------------+368%
Silver---------------------( -3%)-----------------------+211%
S&P 500-----------------+162%-----------------------+704%
Dow 30-------------------+122%----------------------+736%--(839% @ the high)

[Richie]

Originally Posted by Ocala Mike

What happens in a few months when the $600 bump wears off, and then when unemployment benefits run out not long after that?

What happens when everyone has to pay tax on all that?

[lamboguy]

Originally Posted by FakeNameChanged

This tired old cliche just isn't true today, or in the last 10 or 30 years. Not even over 100 years. At times gold has outperformed the market, but silver not very often. And both sell today for less than they both did 8-9 years ago.

https://www.longtermtrends.net/stock...ld-comparison/

Gold/Silver vs. S&P 500 & Dow 30

Descr.---------------------10 yrs.----------------------30 yrs.
Gold ----------------------+47%-----------------------+368%
Silver---------------------( -3%)-----------------------+211%
S&P 500-----------------+162%-----------------------+704%
Dow 30-------------------+122%----------------------+736%--(839% @ the high)

you are missing the most important point. gold and silver has out lived every civilization, country or any other form of currency known to man so far.

if you are trying to balance precious metals to other forms of wealth you are dealing with a cyclical product. it will at times out-perform everything else. it will always outperform governments that you can't trust. to me there are a lot of governments in the world today that are untrustworthy.

[FakeNameChanged]

Originally Posted by lamboguy

you are missing the most important point. gold and silver has out lived every civilization, country or any other form of currency known to man so far.

if you are trying to balance precious metals to other forms of wealth you are dealing with a cyclical product. it will at times out-perform everything else. it will always outperform governments that you can't trust. to me there are a lot of governments in the world today that are untrustworthy.

Civilizations? I thought we were talking about investments. Minerals, lumber, even soil will be around long after we're gone. They used to use salt as currency thousands of years ago. How does gold or silver out-perfom governments? Governments have no track record, as a means to investment. Not following your line of thinking. (edit) Unless you're talking about using gold and silver as a currency, I'll agree with you somewhat. My guess is my grandkids will probably using some form of bitcoin not too far in the future.

[highernote]

Originally Posted by PaceAdvantage

I was clearly referring to people wanting to stay unemployed and collect more than what they made while working.

How is **THAT** a good thing?

Economically speaking, in the short term it is better than working because they have more money to spend. But this is only an option because of the pandemic. Otherwise, this wouldn't even be an issue.

In the long term, it seems like it will be bad, but it depends on many factors.

Will they have a job to return to or will they be permanently unemployed and end up on welfare or some other government subsidy?

If they go back to work will it be at a lower pay? If so, that will be worse for them in the short term, but will work out in the long term because they will probably get a raise as time goes on. If they go back to work we will all benefit as the economy slowly recovers.

However, if there is massive inflation due to all the stimulus money and low interest rates that could be bad because wages won't be able to keep up with prices.

On the other hand, if their unemployment runs out and there is nothing to replace it we could go into a depression. That is bad because prices will drop because income has dropped. That means debt will be harder to pay off.

So some debt may have to written off or currency might even have to be devalued so that debts are lower. If there is a currency devaluation then it would pay to own precious metals.