Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

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

totalrealreturns.com

Post reply on HN
Print view View original

11–20 of 279 posts

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

#11

Post by echelon »

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…

The stock prices capture sentiment. The price people are willing to pay given all the other places their money could go.

People are selling in anticipation of the market going lower, to cover debts, to take advantage of lower asset prices, opportunity costs, margin calls, etc.

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

#12

Post by whatshisface »

jagtesh wrote: post #10
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. ver…

>Think property, gold or toilet paper rolls. Last one is a joke.

Since corporations produce commodities, wouldn't gold and toilet paper be on the stock market?

I guess gold reserves (as opposed to production) and property would have a lot of ownership outside the S&P 500. I wonder if there are any super-broad indices that include them in a cap-weighted form.

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

#13

Post by whatshisface »

echelon wrote: post #11
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…

The stock prices capture sentiment. The price people are willing to pay given all the other places their money could go. People are selling in anticipation of the market going lower, to cover debts, to take advantage of lower asset prices, opportunity costs, margin calls, etc.

When they sell they're wanting money, an equal amount of money to the stock they're selling. That should make the dollar go up by the amount the stock went down.

(I don't really believe this, because it clearly does not describe the chart, but it makes sense and I want to understand why it doesn't work like that.)

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

#14

Post by Symmetry »

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…

Andrew and Barney are shipwrecked on an island with nothing but their clothes, the cash in their wallets, and a book Andrew has. Barney pays Andrew $100 for the book since he hasn't read it but Andrew already had. Later, after finishing it Andrew is able to buy it back for $80 because it's old to both of them but has a bit of sentimental value for Andrew. The dollar denominated wealth on the island has gone down by $20 but the same stuff and same number of dollars are there.

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

#15

Post by whatshisface »

Symmetry wrote: post #14
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…

Andrew and Barney are shipwrecked on an island with nothing but their clothes, the cash in their wallets, and a book Andrew has. Barney pays Andrew $100 for the book since he hasn't read it but Andrew already had. Later, after finishing it Andrew is able to buy it back for $80 because it's old to both of them but has a bit of sentimental value for Andrew. The dollar denominated wealth on the island has gone down by $…

The consumer price index on the island has gone from $100 for the basket of one book, to $80 for the same basket, causing an increase in the measured value of currency equal and opposite to the decline in the price of the good. If you made the CPI more realistic by including other goods on the island, this website would show the dollar go up as the stock market (of booksellers with an interest in book prices) went down.

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

#16

Post by whatshisface »

compumike wrote: post #6
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.

That's true, but I am not aware of any wealth indices, only price indices, and price indices can only increase and decrease relative to each other.

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

#17

Post by jonathan-adly »

The problem with these kind of charts is the implicit message that history is the future. America have been on the dominant financial and militaristic force in the world for the last century and its equities have reflected that strength.

Would it continue to be the same for the next century? Who knows! Ray Dalio and the Maxis think otherwise. Good work OP though!

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

#18

Post by compumike »

fundamental wrote: post #9

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)?

I think that's a reasonable idea and I may try including that option in the future. Right now, the start point is quite arbitrary: it's the first date where we have data for all the symbols requested. And date ranges dramatically affect any sort of relative performance comparison. So in the current code I decided to just normalize to today's nominal-dollar value so that the end values are relatable.

What would the ideal UX be on this?

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

#19

Post by roenxi »

Symmetry wrote: post #14
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…

Andrew and Barney are shipwrecked on an island with nothing but their clothes, the cash in their wallets, and a book Andrew has. Barney pays Andrew $100 for the book since he hasn't read it but Andrew already had. Later, after finishing it Andrew is able to buy it back for $80 because it's old to both of them but has a bit of sentimental value for Andrew. The dollar denominated wealth on the island has gone down by $…

I liked this explanation. Although to attach to it - in this example the price of the book is set by magic/intuition to illustrate the effect. In the real world, the prices are set by less flexible forces of supply, demand and people estimating valuation - usually in a way that means the price has to fall in some relatively narrow band. But after the dust settles on those inflexible forces, it ends up looking the same as this example.

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

#20

Post by hobo_mark »

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…

Recent noahpinion episode about this very topic:

https://noahpinion.substack.com/p/where-does-the-wealth-go-w...

Post reply on HN