It's not inflation inflation. It's somewhat due asset class "inflation" (really overvaluation). There's tons of money looking for a productive place to park. With interest rates low and inflation high, stocks are one of the few place to put money that it actually makes something. You also have trillions of various assets being held by the Fed, which includes billions in ETFs. The market is overvalued by most measures right now.
Ask HN: Is the stock market's growth largely anything more than inflation?
121–126 of 126 posts
Re: Ask HN: Is the stock market's growth largely anything more than inflation?
#122Mostly not. About 90% of the US economy is engaged in non-productive value-destroying work. (Middlemen, govt, corporate nonsense.) The tech sector is the only exception broadly speaking and it powers the whole world. For the rest we have bombs to back it up.
Re: Ask HN: Is the stock market's growth largely anything more than inflation?
#123Earlier quoted context omitted.
> 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. Jus…
The concern is that with enough printing (aka 2020-21) there aren't enough wise investments to put the money into. If capital is already cheap, even cheaper capital doesn't help anyone.
> there aren't enough wise investments to put the money into
yes, that is a concern, but only for those who are investing. Not for society in general imho. The investment would lose money if it wasn't wise, and the investor who did it suffers the loss. unless, of course, this loss is subsidized by taxpayers (e.g., a bailout).
Cheaper capital allows for investments that otherwise would not have happened to happen. An example is the massive amounts of dark fiber left over from the dot-com boom. the losses from building out those fiber is suffered by the investors, but the benefit is now being reaped by whoever that purchased it on discount after the bust.
I wish the same could've been said for fracking shale oil - unfortunately, that didn't happen (and thus led to high prices of oil today). So it's not always the case that unwise investments turn out to be useful in the future, but you can't really know ahead of time.
Re: Ask HN: Is the stock market's growth largely anything more than inflation?
#124Earlier quoted context omitted.
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 rig…
>Some trends are hard to predict short term but easy to predict long term. The day weather forecasts Just because weather is a series with such prediction characteristics has no bearing on asset prices having such prediction characteristics. By this reasoning, I could claim since some series are completely predictable, thus stocks are too. Since this level of hand waviness is clearly wrong in the latter case, it is a…
Over some time period if corporate earnings growth continues to exceed GDP growth then they will eventually consume all of GDP leaving nothing for taxes or labor. This creates a hard upper bound on returns.
GDP growth is tied to working age populations growth and productivity growth which are very long term, predicable trends.
Long term returns on stocks will need to return to GDP (or less) but that could be tomorrow or 100 years from now. While I can be certain that it will happen if it happens and I’m right in 100 years is matters little as I’m dead and it does me no good.
Re: Ask HN: Is the stock market's growth largely anything more than inflation?
#125Earlier quoted context omitted.
>Some trends are hard to predict short term but easy to predict long term. The day weather forecasts Just because weather is a series with such prediction characteristics has no bearing on asset prices having such prediction characteristics. By this reasoning, I could claim since some series are completely predictable, thus stocks are too. Since this level of hand waviness is clearly wrong in the latter case, it is a…
Over some time period if corporate earnings growth continues to exceed GDP growth then they will eventually consume all of GDP leaving nothing for taxes or labor. This creates a hard upper bound on returns. GDP growth is tied to working age populations growth and productivity growth which are very long term, predicable trends. Long term returns on stocks will need to return to GDP (or less) but that could be tomorrow…
>then they will eventually consume all of GDP.
This makes zero sense. GDP is not some fixed cap on economic activity. As earnings increase, so does GDP, and there is ample room for all other categories.
Also, taxes and labor are not parts of GDP. I don't think you're using any of these terms correctly, which explains the confusion.
>GDP growth is tied to working age populations growth and productivity growth which are very long term, predicable trends
No, those are factors related GDP growth, but are not sufficient or necessary. GDP can grow without them, it can shrink while those grow, etc.
Inflation alone growths nominal GDP, for example. Other factors include lower interest rates, capital growth, govt spending, devaluation against other currencies, consumer confidence, predictability, and many more.
>While I can be certain
It seems you're basing this certainty on misunderstanding of macroeconomics and ignoring important empirical evidence.
Re: Ask HN: Is the stock market's growth largely anything more than inflation?
#126Growth? Didn't the markets go down a lot? Or were those just Russian ones?
I don't follow individual stocks a ton, since I have index funds, but I'm not sure I follow your question OP.