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Show HN: Inflation-adjusted stock charts – Total Real Returns

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Show HN: Inflation-adjusted stock charts – Total Real Returns

#1

Post by compumike »

Here's a little side project I’ve been working on: https://totalrealreturns.com/ The Total Real Returns chart demonstrates the preservation or growth of real wealth more clearly than conventional (nominal-dollar, price-only) stock charts, because: (1) we include the effects of inflation-diminished purchasing power, and (2) we include the effects of reinvesting dividends from the initial investment.

I found it harder to explain the y-axis in words than it was to do the math, so please let me know if you think the "baguettes" explanation on the homepage helps.

I was up until 4am ET finishing some features on this, and then at 8:30am ET the BLS released the new CPI numbers through their API: https://download.bls.gov/pub/time.series/cu/ and I was able to manually re-run my daily cronjob with the new numbers, so it's up to date! If you catch any bugs, please let me know via the “Report a bug” link in the footer of every page.

Some FAANG examples: https://totalrealreturns.com/s/META

https://totalrealreturns.com/s/GOOGL

https://totalrealreturns.com/s/AMZN

https://totalrealreturns.com/s/AAPL

https://totalrealreturns.com/s/NFLX

Comparing three Vanguard treasury funds, showing vividly the impact of bond duration (short-term, intermediate-term, long-term) on both risk and reward: https://totalrealreturns.com/s/VFISX,VFITX,VUSTX

Show HN: Inflation-adjusted stock charts – Total Real Returns
totalrealreturns.com

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#4

Post by compumike »

Invictus0 wrote: post #3

Does this account for dilutive secondary offerings? Edit: I thought about it some more and now I realize this is a dumb question.

Only implicitly. (In that, via market behavior, the nominal price-per-share might drop when companies increase the number of shares outstanding.) But I believe that's all that's needed?

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#5

Post by whatshisface »

How can everything go down at once, doesn't the money have to go somewhere?

Best hypotheses so far along with how to test them:

1. Perhaps the parts of the CPI that companies in the stock market can produce are being outpaced by the components that are not produced, like real estate, and so can't contribute to an increase in share prices. (How to check: Look up changes in the CPI components, which are detailed in the reports.) (Edit: This does not hold up, almost all the increases are in energy, which is produced and held in reserve by public companies.)

2. Perhaps the consumer goods in the CPI are increasing in price far more rapidly than prices of goods and services overall, leading to an underestimate of the value of the dollar to anyone except a consumer. (How to check: Since capital goods are eventually used to make consumer goods, this should eventually correct itself. Also, is there a broader version of the CPI?) (Edit: This might be it, although energy is 8% of the CPI and GDP, it is only 4% of the S&P 500.)

3. Perhaps money is leaving the USD, US bonds, and US stocks and going somewhere else. (How to check: Make these same charts but with broader indices.)

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#6

Post by compumike »

whatshisface wrote: post #5

How can everything go down at once, doesn't the money have to go somewhere? Best hypotheses so far along with how to test them: 1. Perhaps the parts of the CPI that companies in the stock market can produce are being outpaced by the components that are not produced, like real estate, and so can't contribute to an increase in share prices. (How to check: Look up changes in the CPI components, which are detailed in the…

Money (cash) is not wealth. Wealth can be created, or destroyed. The clearest explanation I've read for this was a PG essay: http://www.paulgraham.com/wealth.html specifically the "Money Is Not Wealth", "The Pie Fallacy", and "Craftsmen" sections. Of course this essay has a positive/optimistic take on it, but certainly wealth can be destroyed as well.

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#7

Post by TekMol »

I tried to look at QQQ to see the performance of the Nasdaq 100 with dividends reinvested:

https://www.tradingview.com/chart/?symbol=NASDAQ%3AQQQ

But the difference is so small. Nasdaq 100 even performing better. Does QQQ pay out dividends or does the management fee eat up so much that the dividends get cancelled out?

Since the development is so similar to the index, I guess they pay dividends.

How can one see the Nasdaq 100 performance with dividends reinvested?

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#8

Post by simmons »

Very neat! It's easy to be discouraged seeing how much my investments have fallen in recent months. But this graph makes it seem like the stock market could still be on track, producing slow and steady gains in the long term, when we consider that the crazy bull market of the last couple of years was an aberration. (No guarantees about where the stock market goes from here, of course.)

Now, if only I had a crystal ball, or at least was more in tune with the world of finance so I could have ridden the ups and downs more effectively. ;)

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#9

Post by fundamental »

If the goal is to demonstrate relative performance over time, wouldn't it be useful to use a normalization such that all lines either start at the same point (e.g. simulating investing X amount) or ending at the same point (showing requirement to get to X final amount)?

Re: Show HN: Inflation-adjusted stock charts – Total Real Returns

#10

Post by jagtesh »

whatshisface wrote: post #5

How can everything go down at once, doesn't the money have to go somewhere? Best hypotheses so far along with how to test them: 1. Perhaps the parts of the CPI that companies in the stock market can produce are being outpaced by the components that are not produced, like real estate, and so can't contribute to an increase in share prices. (How to check: Look up changes in the CPI components, which are detailed in the…

Short unambiguous answer is yes. However, the destination doesn’t have to be limited to stock/bond markets. Think property, gold or toilet paper rolls. Last one is a joke.

It’s hard to accurately measure investments flowing into property (what part of the world?). There are many variables to consider and I don’t think there’s a single trend that will end up as a winner. My hypothesis is that we will see many (eg. very wealthy doing X in Y country/city, middle class doing A in B country/city, etc).

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