41–50 of 110 posts
All dollar-denominated graphs in the article use linear scales, which is misleading, because price inflation is compounded (exponential). Compare the difference in how steady inflation looks between linear (left) and logarithmic (right) here: https://www.graphpad.com/guides/prism/7/user-guide/images/em... This is not to dismiss the fact stock market valuations are outstripping growth of the economy, but the article i…
Earlier quoted context omitted.
An inverted yield curve has accurately predicted 9 out of the last 5 recessions ;) You can even see it on the chart in the linked article, in 2005/06 — that time, it was different.
This "9 out of the last 5" quote is the deadest of beaten horses on HN. It shows up at least once a week here, and it is written with such smugness and unoriginality that it makes even dad jokes funny by comparison. Let's cut to the chase and make a bot that posts "9 out of the last 5 recessions, hyuk!" on every post remotely related to finance and be done with it. It is the furthest thing from a substantive comment;…
(I’ve never heard of the expression before so I found it amusing)
* There has been massive asset inflation.
* The market is in a speculative bubble.
* The 500 largest American companies really are ~4 times more valuable than they were 10 years ago.
Even with #3, the best case scenario, that alone should be setting off major alarm bells, because their material contribution to society hasn't increased fourfold, so that increased valuation must be coming from somewhere, that is to say, control over society more generally.
Now divide by M1 money supply. Is it the stock market over valued or the dollar devaluing as they print trillions of them.
I wondered about this too, but both sides of the ratio are denominated in current dollars, so dollar valuation is already divided out: ratio of total US stock market value to US GDP
The problem with macro-economic composites is that at that level, everything is unfolding on different timescales. So around transitional moments, your end result is going to go wonky. GDP plummets -> interest rates are dropped -> GDP recovers -> interest rates are raised You're balancing between responsiveness, accuracy, and reliability: pick two. I'd have thought the last few crises would have taught us that we sho…
> You're balancing between responsiveness, accuracy, and reliability: pick two. Can you explain the difference between accuracy and reliability in this context?
Now divide by M1 money supply. Is it the stock market over valued or the dollar devaluing as they print trillions of them.
I wondered about this too, but both sides of the ratio are denominated in current dollars, so dollar valuation is already divided out: ratio of total US stock market value to US GDP
The money supply has been increasing for already some time, but only now we are seeing inflation catching up for example on consumer prices.
For money supply to show in consumer/business side of GDP, money created by central bank need to be distributed. When interest rates have been low, maybe banks were hesitant to start pushing money to individuals and businesses and it instead ended up in stock market.
Earlier quoted context omitted.
Fed Fund Rate vs 30YT since 1970(only cherry picking this year because the data on fred is poor before this period, and end of gold standard is significant) is a perfect 8/8[0]. [0]: https://fred.stlouisfed.org/graph/?g=ENDs
And how many degrees of freedom went into the choice of metrics to compare? Just because something went 8/8 doesn't mean it will predict the future crashes.
The problem with these indicators is that, although they may indicate over- or undervaluation, they tell you nothing about when a mean reversion will happen. As Keynes famously said: "The market can stay irrational longer than you can stay solvent." An indicator that does a pretty good job of signaling the "when" of a recession, and by extension the likely "when" of large market corrections, is yield curve inversion.…
All dollar-denominated graphs in the article use linear scales, which is misleading, because price inflation is compounded (exponential). Compare the difference in how steady inflation looks between linear (left) and logarithmic (right) here: https://www.graphpad.com/guides/prism/7/user-guide/images/em... This is not to dismiss the fact stock market valuations are outstripping growth of the economy, but the article i…
The chart here is a ratio. Both the numerator and denominator are the same unit, so it doesn't matter if the unit inflates.