Is this a clear sign of high inflation? - page 3.

stompix

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You can't really blame inflation for that.
When you think one thing is caused by that you should look at others to see if they match, let's check a country which experiened deflation, Japan:

Then something else must also be happening, DJI is 19,86 % while NDAQ is 60%, so the growth is triggered clearly by some industries, and not all of them.

Quote from: Wind_FURY on November 25, 2021, 07:08:45 AM

OP, that IS a very clear sign of high inflation. All that extra money going to stocks, commodities, real estate, AND cryptocurrencies. But it will come down crashing soon, and prepare for the next cycle, OR hyperinflation.

Hyperinflation in the US? I don't understand why you're happy about this, trust me even if your coins will be worth 1 billion and you could buy everything you wanted you wouldn't want to live in such a period. Unless you enjoy seeing people suffering.

Poker Player

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Quote from: Charles-Tim on November 25, 2021, 04:52:09 AM

Not all stocks are like that, also better than having fiat that comes down to loss.

Quote from: The Sceptical Chymist on November 25, 2021, 06:39:51 AM

Dude, be happy with a 30% return because annual inflation is nowhere near that as far as I know, at least not yet.

Yes, I think I've been a bit pessimistic before. Much better than having Fiat, of course, but in real terms the return is quite a bit less than that 30%. You have to think that the CPI index has been manipulated over the years to show what is convenient for governments, so inflation is much higher than what it shows.

Quote from: Wind_FURY on November 25, 2021, 07:08:45 AM

OP, that IS a very clear sign of high inflation. All that extra money going to stocks, commodities, real estate, AND cryptocurrencies. But it will come down crashing soon, and prepare for the next cycle, OR hyperinflation.

I doubt there will ever be hyperinflation in the US or the EU. Think of it as being defined as a 50% monthly rise in inflation.

Quote from: The Sceptical Chymist on November 25, 2021, 06:39:51 AM

If I were you, Poker Player, I'd be watching out for warning signs and getting prepared to sell some of your stocks before (or at least shortly after, before prices get really low) that crash comes, because it's coming. It's just a matter of when, not if.

I had some stocks that I have already sold. Now I only have the S&P 500 left, and I don't care if there is a crash because I do DCA, and Bitcoin, which I do the same.

Wind_FURY

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OP, that IS a very clear sign of high inflation. All that extra money going to stocks, commodities, real estate, AND cryptocurrencies. But it will come down crashing soon, and prepare for the next cycle, OR hyperinflation. The government is spreading a new narrative that “inflation is good”. Cool

The Sceptical Chymist

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Quote from: Poker Player on November 25, 2021, 03:38:06 AM

At the end of the day, anyone like me who has money invested in the S&P 500 can't be too happy about the 30% return because if we discount inflation it comes to almost nothing.

Dude, be happy with a 30% return because annual inflation is nowhere near that as far as I know, at least not yet.

And while stocks and other investments aren't included in the "basket of goods" that the government uses to measure inflation, you'd better believe the stock market's sky-high prices are indicative of too much money chasing too few investments, which is just another form of inflation. And man, I don't know when this party is going to come to an end, but I've had this feeling for at least a couple of years now that we're overdue for a crash or a major correction--it just never seems to come, and I find that ominous.

If I were you, Poker Player, I'd be watching out for warning signs and getting prepared to sell some of your stocks before (or at least shortly after, before prices get really low) that crash comes, because it's coming. It's just a matter of when, not if.

fiulpro

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I do not think that stock market can be a direct indicator of Inflation, here are certain reasons why :

1. They increase in price undoubtedly during Inflation but the increase is usually much more since people flock to some investments to get a backup when the government won't be able to regulate the economy.

Therefore the change would be much more drastic.

2. Not all stocks are going up, some of them are going down as well and the investors are not being able to earn from them.

3. Inflation does not always have a positive impact, the companies are striving hard to maintain their price thus sometimes they will sell their stocks at a beneficial rate but the companies itself are also being affected by the inflation causing probelms for them as well.

- it can be a indicator but it's not universal-

Charles-Tim

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Quote from: Poker Player on November 25, 2021, 03:38:06 AM

At the end of the day, anyone like me who has money invested in the S&P 500 can't be too happy about the 30% return because if we discount inflation it comes to almost nothing.

Not all stocks are like that, also better than having fiat that comes down to loss. If I will have to be open minded, there is nothing bad to diversify. But bitcoin and some other cryptocurrencies are most profitable since the last decade till now but there are some successful stocks too. Also the more the adoption, the less the volatility.

This is based on what I read. Have you read about gold also, that its price at $678 in 1980 have the buying power of its price of $2,142 in 2020. It's price per Ounce now is $1,795. While gold is seen as a store of value which is truly is.

Quote from: Charles-Tim on November 30, 2020, 04:49:42 PM

Gold reached a price of $678 U.S. dollars in 1980, according to a breakdown from Visual Capitalist. Accounting for inflation, based on calculations from Officialdata.org, $678 in 1980 held the same buying power as approximately $2,142 in 2020. The precious metal technically broke its U.S. dollar all-time high this year, hitting $2,075, according to TradingView data. Its 1980 record purchasing power level remains unbroken, however. Since its push to $2,075 in August, gold has retraced in price, sitting near $1,778 per ounce at the time of publication.

mk4

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Quote from: Poker Player on November 25, 2021, 03:38:06 AM

I believe it reflects more the effects of massive printing and inflation than how companies are doing.

I mean, that's pretty much it. The federal reserve has been pretty aggressive with the money printing that it might be crazy to hold a huge amount of your wealth accumulating like 0.001% APR or something on your local bank. It simply just makes sense to hold equities and assets in general; the downside of course being that equities are inflated.

magneto

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Not really?

The stock market does have some correlation with inflation, but it is not the best inflation proof asset.

Why not just look at the inflation rate instead of trying to proxy it through some other metric? It's not hard to see that inflation is high, way above what central banks are targeting.

Gyfts

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Inflation and the stock market are not exactly good metrics to compare because it depends on the stock. If you want to see where inflation is, look at prices over all consumer goods year over year, and then look at the general direction of the economy.

If you have a stock that is valuated high because of future projected growth, and that growth doesn't happen because inflation slows the economy and reduces growth of the company/sales, then the value of the stock will eventually come down. Other stocks

On the other hand, if you inject extra money into the economy in the form of stimulus when most people don't need it, a lot of that money ends up going into the stock market which will usually cause a bump in the market, but the effects of inflation are felt much later.

It's a bit difficult to compare.

Poker Player

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When we think of inflation we usually think of how much food, electricity or gasoline costs.

But there is another aspect as well: how much it costs us to buy financial assets.

The above chart at first glance may appear to be due to the strong performance of the 500 largest U.S. companies. But this is misleading: I believe it reflects more the effects of massive printing and inflation than how companies are doing.

The charts for the stock markets of countries with high inflation are similar: the more currency printing and inflation, the more the stock market rises.

That the S&P, which has an average return of about 10% on average has risen 30% in the last year is sobering. Let's think that in November 2020 we were already out of the stock market slump that was the COVID.

At the end of the day, anyone like me who has money invested in the S&P 500 can't be too happy about the 30% return because if we discount inflation it comes to almost nothing.

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