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Ask HN: Is the stock market's growth largely anything more than inflation?

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Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#101

Post by alaricus »

chii wrote: post #94
alaricus wrote: post #50

Earlier quoted context omitted.

When government prints money, people don't go and drive the price or bread and butter up. They go and invest in financial markets, driving the price of financial products like stocks up.

which then encourages investment (it is, after all, what financial products end up being used to finance). This investment would, if done smartly, will produce more goods and services to justify the higher prices of those financial instruments. Thus, the economy grows. The financial growth leads the goods/services growth. Unless, of course, the financial growth is spent poorly (which is of course, totally possible),…

Not necessarily. How did the economy benefit from retail investors driving up the price of memestocks? Financial activity can be extractive.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#102

Post by chii »

alaricus wrote: post #101
chii wrote: post #94

Earlier quoted context omitted.

which then encourages investment (it is, after all, what financial products end up being used to finance). This investment would, if done smartly, will produce more goods and services to justify the higher prices of those financial instruments. Thus, the economy grows. The financial growth leads the goods/services growth. Unless, of course, the financial growth is spent poorly (which is of course, totally possible),…

Not necessarily. How did the economy benefit from retail investors driving up the price of memestocks? Financial activity can be extractive.

> How did the economy benefit from retail investors driving up the price of memestocks?

GME did a secondary offering during the memestock rise in price. https://www.shacknews.com/article/125255/gamestop-gme-comple...

it created funding, which they could've used to pivot their business. Whether they use this money wisely to generate more profit is a different question, but you'd expect a business to generally try.

Just because some activities are extractive, doesn't mean all activity of that type is extractive.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#103

Post by ChrisLomont »

throw8383833jj wrote: post #47
ChrisLomont wrote: post #42

Earlier quoted context omitted.

>You can forget about seeing any return above inflation. That's not true. Here's a calculator you can play with that shows S&P 500 returns for any time period you like. Or you can go to FRED data and play around and get the same information. https://dqydj.com/sp-500-return-calculator/

i meant, going forward from here. in the past, we had great returns due to increasing population, plus productivity increases and in large part due to dividends. all three of those are severly decreased going forward for the next 100 years.

If you can predict future market behavior, then you can get rich by taking shorts/longs on your position. There's always some investors willing to take the opposite position.

Good luck.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#104

Post by slv77 »

throw8383833jj wrote: post #47
ChrisLomont wrote: post #42

Earlier quoted context omitted.

>You can forget about seeing any return above inflation. That's not true. Here's a calculator you can play with that shows S&P 500 returns for any time period you like. Or you can go to FRED data and play around and get the same information. https://dqydj.com/sp-500-return-calculator/

i meant, going forward from here. in the past, we had great returns due to increasing population, plus productivity increases and in large part due to dividends. all three of those are severly decreased going forward for the next 100 years.

Returns are more correlated with working population growth then total population. The US experienced a generational dividend in the 70’s with a higher percentage of the population going to work as smaller families became the norm and women entered the workforce in large numbers.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#105

Post by slv77 »

ChrisLomont wrote: post #103
throw8383833jj wrote: post #47

Earlier quoted context omitted.

i meant, going forward from here. in the past, we had great returns due to increasing population, plus productivity increases and in large part due to dividends. all three of those are severly decreased going forward for the next 100 years.

If you can predict future market behavior, then you can get rich by taking shorts/longs on your position. There's always some investors willing to take the opposite position. Good luck.

Some trends are hard to predict short term but easy to predict long term. The day weather forecasts are difficult to predict more then 10 days ahead but climate change forecasts have been very accurate. It is difficult to predict who will be diagnosed with cancer next year but relatively easy to predict cancer rates in the overall population in a given year.

In the long term however we’re all dead so being proven right in 80 years time is meaningless to any investor.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#106

Post by aynyc »

chii wrote: post #95
aynyc wrote: post #81

Earlier quoted context omitted.

The US dollar has lost 85-96% of it's value since the early 70's Can you explain that? I don't really understand that sentence.

The argument they're making is that because the original value of the dollar is worth X amount of gold, until the 70's (where we got off the gold standard), the "actual", gold backed value would've been a constant multiple of the price of gold today (since gold's value is stable under this assumption), and thus, the dollar lost a bunch of value. i don't buy it, because the amount of possible goods/services purchasabl…

Ah, makes sense. I'm not sure I agree, but it's an interesting take.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#108

Post by dragontamer »

chii wrote: post #93
dragontamer wrote: post #63

Earlier quoted context omitted.

I mean, that or TIPS / I-Bonds, if you really care about inflation. There's a lot of instruments out there.

The amount you can buy for I-bonds is too small for a retirement portfolio (which, i think needs to have a total asset of around $1million to make retirement self-sufficient).

So buy TIPS.

I-Bonds are super-safe since they have a minimum (currently a 0% minimum) rate. TIPS can go negative during periods of deflation. But if you actually want an inflation hedge, then TIPS exist for that reason.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#109

Post by imtringued »

> The more money the government prints the more the stock market goes up.

This printing nonsense forgets that accounting is a two sided relationship ...

Yeah sure the government does something but did it initiate or did it respond to something someone else initiated.

Instead of arguing the government did something, you can equally argue that the private sector did the opposite. Remember the earn more than you spend story that everyone is supposed to follow? It is obviously impossibly because where is the saved money coming from? Someone needs to obligate themselves to be liable for those savings and it turns out the government wants to be liable.

If the stock market is booming, expect it to be the result of people earning and therefore producing more than they spend and therefore consume. The excess has to be invested somehow and the most prominent investments are available on the stock market. That is the reason why the stock market is going up so high and interest rates are so low. Lots of people producing and investing the surplus. Not many consuming the surplus.

The moment people produce and save but don't invest, you get deflation which generally results in unemployment and debt defaults which is undesirable. So the government acts as the borrower or consumer of last resort.

What would the market look like if we corrected for the money supply? You would see negative or zero yields in the stock market.

Re: Ask HN: Is the stock market's growth largely anything more than inflation?

#110

Post by imtringued »

ChrisLomont wrote: post #103
throw8383833jj wrote: post #47

Earlier quoted context omitted.

i meant, going forward from here. in the past, we had great returns due to increasing population, plus productivity increases and in large part due to dividends. all three of those are severly decreased going forward for the next 100 years.

If you can predict future market behavior, then you can get rich by taking shorts/longs on your position. There's always some investors willing to take the opposite position. Good luck.

It is the same with money printing, when the commercial bank prints money, it also prints debt, or maybe it deprints money?
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