Author Topic: The stock market is shrinking  (Read 3163 times)

effigy98

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The stock market is shrinking
« on: August 16, 2018, 01:11:10 PM »
The American stock market has been shrinking. It's been happening in slow motion - so slow you may not even have noticed. The market is half the size of its mid-1990s peak, and 25 percent smaller than it was in 1976. -NYTimes

If the majority of companies start going private, what this means for FIRE... Interested in others opinions.

FIRE@50

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Re: The stock market is shrinking
« Reply #1 on: August 16, 2018, 01:25:59 PM »
Are you talking about this?

https://www.nytimes.com/2018/08/04/business/shrinking-stock-market.html

No, I'm not worried about it.

Quote
“It’s not possible for the general public to invest in a diversified portfolio of really small, publicly traded companies in the way they could a few decades ago.”

I can't figure out why I would care about that. Is anyone really advising the general public to invest in really small companies? I'll stick with the 500 biggest ones.

DS

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Re: The stock market is shrinking
« Reply #2 on: August 16, 2018, 01:36:20 PM »
Top. Is. In.

jc4

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Re: The stock market is shrinking
« Reply #3 on: August 16, 2018, 01:43:23 PM »
If the majority of companies start going private,

I don't think this is the problem proposed. The proposal is there are fewer public companies, bc they're bigger, not bc they're private.

what this means for FIRE

That aside, it shouldn't make a difference for Index-ers. Whether I own 5 shares of big company or 1 share each of 5 small companies (in my Index fund), it shouldn't make a difference.

Granted that's assuming simple averages. If those companies, can have greater efficiencies together (that's the theory), you should be better off.




AccidentalMiser

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Re: The stock market is shrinking
« Reply #4 on: August 16, 2018, 01:48:03 PM »
The American stock market has been shrinking. It's been happening in slow motion - so slow you may not even have noticed. The market is half the size of its mid-1990s peak, and 25 percent smaller than it was in 1976. -NYTimes

If the majority of companies start going private, what this means for FIRE... Interested in others opinions.

That's like saying that a person's financial situation is degrading because they closed three bank accounts and now only have three left.  Their bank account count has fallen by 50%!!!  The sky is falling!!

I understand that the point of the article is that there are fewer publicly traded companies.  Mergers and consolidations occur more now than before, for certain.  Smaller companies with useful technologies are snapped up by larger companies more.  Many companies have gone private. 

The author is warning that the concentration of power is increasing among remaining megacorps.  This isn't something I worried about yesterday and it won't be something I worry about tomorrow.


AccidentalMiser

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Re: The stock market is shrinking
« Reply #5 on: August 16, 2018, 01:49:15 PM »
Top. Is. In.

An excellent, well-supported post if I've ever seen one. 

I expect an similarly well supported retraction when this turns out to be false.

DS

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Re: The stock market is shrinking
« Reply #6 on: August 16, 2018, 01:53:05 PM »
Top. Is. In.

An excellent, well-supported post if I've ever seen one. 

I expect an similarly well supported retraction when this turns out to be false.

y so srs

Mighty-Dollar

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Re: The stock market is shrinking
« Reply #7 on: August 17, 2018, 01:38:47 PM »
Top. Is. In.
Not until the Schiller PE gets up around 40. DOW is about to make another big run beyond the previous high of 26,600.
http://www.multpl.com/shiller-pe/

PE still has a long ways to go. http://www.multpl.com/

daverobev

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Re: The stock market is shrinking
« Reply #8 on: August 17, 2018, 06:40:10 PM »
Top. Is. In.

An excellent, well-supported post if I've ever seen one. 

I expect an similarly well supported retraction when this turns out to be false.

y so srs

Because there is a whole (pointless) thread of "top is in" already; absolutely no bloody need for it elsewhere.

Posting random junk is known as threadcrapping. OP was looking for discussion, not in jokes.

AccidentalMiser

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Re: The stock market is shrinking
« Reply #9 on: August 19, 2018, 06:32:34 AM »
Top. Is. In.

An excellent, well-supported post if I've ever seen one. 

I expect an similarly well supported retraction when this turns out to be false.

y so srs

Because there is a whole (pointless) thread of "top is in" already; absolutely no bloody need for it elsewhere.

Posting random junk is known as threadcrapping. OP was looking for discussion, not in jokes.

Thanks @daverobev

PizzaSteve

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Re: The stock market is shrinking
« Reply #10 on: August 19, 2018, 08:40:42 AM »
The broader issue to discuss (IMHO) out of this 'symptom of a larger economic change' is whether the American economy will continue to perform well if it continues down a path of ever larger companies and a market dominated by quasi monopolies.  Monopolies do produce profits, but tend to under perform.  Companies that use market ir political power to sustain profits cans be stable, but also grow more slowly than those that rely on innovaltion and efficiency/labor productivity gains to fuel profit. 

Efficiency and innovation have fueled most of the growth stocks that created gains for the 60+ year bull market we have enjoyed in the US(and which produced the data we all use to calculate retirment success probabilities).  If this is winding down we may expect different return distributions in the future for public stocks than the backtesting data many on this site use.  However, if innovation and public markets continue to thrive, we should do very well.
« Last Edit: August 20, 2018, 07:11:02 AM by PizzaSteve »

MustacheAndaHalf

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Re: The stock market is shrinking
« Reply #11 on: August 19, 2018, 11:09:40 AM »
To quote the article:
((When I say “shrinking,” I’m using a specific definition: the reduction in the number of publicly traded companies on exchanges in the United States.))

In the past 5 years, SCHB and VTI performed within 0.03% of each other, at 13.48% and 13.51% annually (according to morningstar.com).  SCHB currently holds ~2400 public companies (I believe it was closer to 2000 a year or so ago), while VTI holds ~3600 public companies.  Their performance is nearly identical despite SCHB missing over one thousand public companies.  The number of companies doesn't appear relevant for stock market returns.

sol

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Re: The stock market is shrinking
« Reply #12 on: August 19, 2018, 11:43:37 AM »
What's the projected end result?  Let's see, Disney buys Netflix, Amazon buys Walmart, and Google buys facebook.  In the future, all restaurants are Taco Bell.

There are a bunch of hard sci-fi universes where things are run by megacorps, instead of governments.  Remember House Arrakis from Dune?  The Weyland Corp in Alien?  Has anyone seen Dark Matter?  These aren't just large companies, they are more like nations unto themselves. 

Indio

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Re: The stock market is shrinking
« Reply #13 on: August 19, 2018, 12:12:08 PM »
Sorry didn't read article (reached free articles for the month) so not sure if author covered this.

Industry/market consolidation is cyclical. Look at airlines. As soon as a big one merges with another big one, a startup comes into the market promising something different, special, ie new routes, Norwegian Air. Same thing has happened in banking. then that startup gets acquired after a decade or so and it starts over again.
In tech there have been a few divestitures happening because the vertical integration wasn't working for whatever reason -- profitabiity, not synergistic. GE, HP, Symantec, IBM have been spinning of divisions.

MustacheAndaHalf

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Re: The stock market is shrinking
« Reply #14 on: August 20, 2018, 02:24:04 AM »
There are a bunch of hard sci-fi universes where things are run by megacorps, instead of governments.  Remember House Arrakis from Dune?
Maybe you meant the Spice Guild, with a monopoly over transport between worlds?  Arrakis held spice, but House Harkonnen had to leave when their contract was up, and turn it over to House Atreides.  But Dune seems more interesting for it's lack of computers (after an AI rebellion, computers are illegal), or maybe dealing with a scarcity of water.

But you're closer to the mark than this article.  The article doesn't delve into the dangers of monopolies directly (probably owing to conflicts of interest with the newspaper's advertisers!), but it should.  In the U.S., most people have only one choice of cable internet provider.  Which reminds me the opposite of socialism isn't capitalism, it's monopolies.  The article could have focused on how monopolies and companies with near monopolies hurt consumers.

Did the article even mention the Sherman Antitrust Act?  I don't think it did, even though that's a vital solution to monopolies.

sol

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Re: The stock market is shrinking
« Reply #15 on: August 20, 2018, 09:01:45 AM »
Maybe you meant the Spice Guild, with a monopoly over transport between worlds?  Arrakis held spice, but House Harkonnen had to leave when their contract was up, and turn it over to House Atreides. 

Lol, I've been out-nerded.  In my defense, I haven't read those books in approximately 26 years.

nereo

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Re: The stock market is shrinking
« Reply #16 on: August 20, 2018, 09:11:53 AM »
What's the projected end result?  Let's see, Disney buys Netflix, Amazon buys Walmart, and Google buys facebook.  In the future, all restaurants are Taco Bell.

There are a bunch of hard sci-fi universes where things are run by megacorps, instead of governments.  Remember House Arrakis from Dune?  The Weyland Corp in Alien?  Has anyone seen Dark Matter?  These aren't just large companies, they are more like nations unto themselves.
What about Wall-e?

SunshineAZ

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Re: The stock market is shrinking
« Reply #17 on: August 20, 2018, 10:42:11 AM »
What, no "Snow Crash" references?  I mean, come on, the mob running things is much more likely.  :)  And who doesn't love a good pizza.
 

daverobev

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Re: The stock market is shrinking
« Reply #18 on: August 20, 2018, 01:59:20 PM »
Maybe you meant the Spice Guild, with a monopoly over transport between worlds?  Arrakis held spice, but House Harkonnen had to leave when their contract was up, and turn it over to House Atreides. 

Lol, I've been out-nerded.  In my defense, I haven't read those books in approximately 26 years.

Shadowrun, perhaps - very cool originally pen and paper RPG with a load of novels, and the odd computer game (including some well received ones, recently). I loved the first books that were written. They haven't stood the test of time that well, but the scenario is pretty cool (I mean, megacorps + elves, trolls, etc).

Also Kim Stanley Robinson's Mars books.