Ask HN: Doom and Gloom but financial markets doing well?

King: We're winning!

Peasant: But we are so poor!

King: You're losing!

some ancient strip cartoon the name of which I cannot recall

but that would be impossible, right?

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

Also,

>financial markets are doing well

(presumably this means equity prices for shares of publicly listed businesses increasing at a sufficient rate)

and

>depression, people complaining, news

are unrelated things (assuming you mean emotional depression, not economic depression).

https://russellinvestments.com/us/blog/market-concentration-...

https://www.reuters.com/markets/us/peak-us-stock-concentrati...

Late stage bull markets tend to look like this: still going up, but mostly due to a shrinking number of stocks which benefit from mass reallocation out of everything else.

They say so themselves!

https://www.nasdaq.com/articles/the-stock-market-is-not-the-...

Unemployment is low and inflation is falling, but consumer sentiment remains depressed. This has confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which have grown at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, are at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three quarters of the gap in US consumer sentiment in 2023. Global evidence shows that consumer sentiment gaps across countries are also strongly correlated with changes in interest rates. Proposed U.S.-specific factors do not find much supportive evidence abroad.

https://www.nber.org/papers/w32163

USA printed basically 10 trillion (yes with a T). UK about 1 trillion. Germany, France, Spain, South Africa Japan and so on. Maybe 25 trillion? No one seems to have counted.

Under MMT (modern monetary theory) this is fine as long as government takes away the printed token (money) later on in form of tax

But they have not. The money has flowed from waitresses to landlords, to supermarket owners and their landlords and to share owners of supermarkets - basically it went from the poor to the middle class and then to the ultra wealthy.

The ultra wealthy now have an extra 25 trillion dollars. So they “invest”.

Real estate goes to stupid prices (see cost of a 4 bed house in London).

Stock market hits new highs.

But the rest of us have sold our nice middle class homes in suburbs for stupid amounts and moved … somewhere with less amenities.

Or are renting in cities at high rates and food prices going sky high.

The simplest answer is governments only did half the job - the next job is a uber wealth tax - holding of over say 20 million, 30 million, just get taxed, forcing sale of assets and return of assets to the flowing economy and then governments can afford things like welfare and investment again.

We should stop privileging the privileged.

> America is in a funk, and no one seems to know why. Unemployment rates are lower than they’ve been in half a century and the stock market is sky-high, but poll after poll shows that voters are disgruntled. President Joe Biden’s approval rating has been hovering in the high 30s. Americans’ satisfaction with their personal lives—a measure that usually dips in times of economic uncertainty—is at a near-record low, according to Gallup polling. And nearly half of Americans surveyed in January said they were worse off than three years prior.

> Experts have struggled to find a convincing explanation for this era of bad feelings. Maybe it’s the spate of inflation over the past couple of years, the immigration crisis at the border, or the brutal wars in Ukraine and Gaza. But even the people who claim to make sense of the political world acknowledge that these rational factors can’t fully account for America’s national malaise. We believe that’s because they’re overlooking a crucial factor.

> Four years ago, the country was brought to its knees by a world-historic disaster. COVID-19 hospitalized nearly 7 million Americans and killed more than a million; it’s still killing hundreds each week. It shut down schools and forced people into social isolation. Almost overnight, most of the country was thrown into a state of high anxiety—then, soon enough, grief and mourning. But the country has not come together to sufficiently acknowledge the tragedy it endured. As clinical psychiatrists, we see the effects of such emotional turmoil every day, and we know that when it’s not properly processed, it can result in a general sense of unhappiness and anger—exactly the negative emotional state that might lead a nation to misperceive its fortunes.

https://www.theatlantic.com/health/archive/2024/03/covid-gri...

Thing are slowing down but the economy is still flush with cash: starting wages are at an all time high, median household income is increasing the fastest it has in 80 years even adjusting for inflation, consumer spending is breaking records.

There are obviously people being left out of this but beware that you are not in a pessimistic information bubble.

Think about who stands to benefit from making you feel bad.

A lot of Americans are in the labor class and don't own financial assets, what do they have to be cheery about?

So 1. people around here tend to be in the speculative investment bubble and it is worse there than most other places right now and 2. any time there is change like this (esp. when it happens fast) - there are winners and losers and 3. Since 2007/2008 everyone has been trying to be the next Burry or Taleb and call the bubble.

If you're looking at the big brand shares like the FAANGs, or most recently Nvidia, then that is all meaningless nonsense. Never, ever, try to read something into the movement of those shares, its a fools game.

Second, but related to the first, don't forget that the NASDAQ is dragged up and down by the big tech brands, so take NASDAQ movements with a pinch of salt too.

There are also in general many sectors out there where valuations and expectations are unrealistically high. Its not all plain sailing.

Another commenter in this thread pointed out starting wages have been at an all time high. That might be true, but that doesn’t mean it’s enough to live comfortably. In my City you’d need to make a salary of about 165,000 in order to be able to theoretically afford the median home here. The two largest employers here have very few positions that pay in that range (mostly leadership roles or administrative) whereas most are 15-25/hr range.

So yes the economy is doing great if you’re rich. Never been better. It is in the best interests for news organizations right now to talk about how amazing it is doing in order to help suppress panic and keep afloat spending from the general populace. If the non-rich feel things are tightening (they are, just ask them) and they decide to stop spending that is bad.

Also keep in mind there is an election this year and a healthy economy as reported can equal votes.

1.

In most western countries, salaries of low-skilled workers have grown faster than inflation, but salaries of high-skilled workers have grown only as fast or slower than inflation.

We (HN) live in a high-skilled bubble, and our food delivery is becoming less affordable because our door dasher is making more money.

2.

Journalism is going through a structural crisis because ppl are addicted to TikTok and co.

So jounalists struggle a lot. From their point of view, the economy looks bad. That's what sets the tone in the news.

3.

If you want to get a different president elected, a good economy is not what you want. So Republicans, Russia and China all want Americans to think that the country is going to shit, because then, they will vote in their guy.

Incidentally, the TikTok algorithm is controlled by a company that is controlled by the Chinese party.

Which leads me to believe it is mostly the negative media hype which gets eyeballs. Also, given the election coming up it is good for the challenger to claim the incumbent messed up the economy and they’ll totally fix it if you vote for them.

Right now there does seem to be some interesting disconnects in some measures of the economy. I'm talking things like business revenues in financial results, compared to the various surveys that are done. One of doom and gloom measures is a survey that asks how people think the economy is doing. But where it get's interesting, is surveys that ask about personal finances appear to be showing fairly strong results. So there seems to be a broad sense that people as individuals are doing pretty good, but perceive the economy as bad for others or in general.

I think another angle and personal bias of mine, is Hacker News is a specific tech community with lots of exposure to only a portion of the economy. So we're seeing layoffs and difficulty in the labor market ourselves, and expect that to be happening across the broad economy, especially compared to 2 years ago. But I think there are a few factors that impact us differently. I think a primary one is going to be interest rates. For startups, which are going to light a pile of money on fire and hope they grow, there are other areas of the economy that are much safer to get those returns with current interest rates. Why fund a speculative startup when I can get 9% on a private loan to a business. Also you look at medium and big tech companies, those bonds (debt) are way more expensive competing for those same interest rates, so the investment into growth and expansion is way down compared to 1 or 2 years ago. And we get to perceive that through the big layoff announcements that seem to keep popping up, as interest rates have risen. So the B2B space, which eventually serves other non-tech companies and consumers, is soft on growth and expansion, which is often rooted back to funding through debt instruments.

But if you look at the broader economy, for the average worker in North America, wages are going up at or faster than the rate of inflation, the unemployment rate is low. We're probably sitting around full employment, which actually can be it's own problem. The inflation took a shock but is trending back towards norms. Consumer spending even with current inflation rates hasn't really stopped, purchases don't seem to be getting deferred all that much. So companies where there was an expectation of a pullback in spending haven't really seen it in their financial results, maintaining their value on the open markets.

Another angle for people to perceive doom and gloom is also affordability factors in some segments of the economy. Where I am housing is a disaster for many reasons, so I'm sure many people see being unable to buy the same quality of living as their parents as part of the doom and gloom. But the overall financial markets aren't reacting to this, because enough people still have those mortgages, and with the rise in interest rates, defaults don't appear to have meaningfully risen. Overall debts are getting paid, even if they're more expensive.

And another angle I want to tread carefully into, is the politics and policy angle. With an election going on, as I understand it one of the most correlated factors to a change in governance is the health of the economy. So there may be some motive to color financial data or results through a lens to try and produce a political outcome. I have no idea what overall impact this might have, but some of those surveys I talked about above when divided by political lines or where people receive their information get very interesting. I'm not trying to have the political discussion or take any side, I'm just saying watch out for motives in your sources of information.

And there are just overall expectations, inflation has been difficult, interest rates have risen, so we just expect things to be bad. Also keep in mind one of the disconnects in the financial ma...