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

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

#21

Post by roenxi »

whatshisface wrote: post #15
Symmetry wrote: post #14

Earlier quoted context omitted.

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 do…

The book is an asset in this example. CPI isn't relevant, because trading the book does not affect it.

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

#22

Post by whatshisface »

hobo_mark wrote: post #20
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...

According to that explanation, the index value of a dollar should still go up when the price of all assets goes down.

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

#23

Post by fundamental »

compumike wrote: post #18
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 id…

If you want to have ragged starting information displaying pricing information for the various symbols in the range they're defined, I'd assume it's much more common that there's different start dates, but they're all defined for today. So, you could have a single checkbox to normalize based upon equal value at today's value and I'd default to having that on. As your baguette argument about the absolute values not having huge significance still applies it seems like it would work with no other modifications (i.e. it doesn't matter that it could require fractional shares and the like).

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

#24

Post by whatshisface »

roenxi wrote: post #21
whatshisface wrote: post #15

Earlier quoted context omitted.

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 do…

The book is an asset in this example. CPI isn't relevant, because trading the book does not affect it.

The book doesn't represent any invested capital, so let's not say that it is an asset. Instead, let's say that there are shares in a book making company, tracked in the index, and also books, which will be in the CPI.

The value of being able to make one book per day is linked to the price of a book, which means that on the island, the CPI and the stock market have to rise and fall together. That causes the stock market and currency to move inversely.

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

#26

Post by compumike »

jonathan-adly wrote: post #17

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!

Thank you. :)

I agree with the "Who knows!" and that we've benefited from a lot of favorable tailwinds, which are quite uncertain for the future.

The implicit positivity partially comes from looking at indexes, rather than individual companies. If you look at any specific companies that may have been unstoppable corporate giants in decades past (maybe try https://totalrealreturns.com/s/GE https://totalrealreturns.com/s/X https://totalrealreturns.com/s/F for example?) the idea of limitless growth becomes much more uncertain.

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

#28

Post by peterisza »

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 doesn't go into the stock market. If you buy a stock from me today, I can use the exact same money to buy bread tomorrow. That money keeps circulating in the economy, it doesn't go into or out of the stock market.

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

#29

Post by Barrera »

The trick is the to get those inflation-adjusted returns you need 100% time exposure. No selling because circumstances force you to. No selling because you get spooked at a 50% drawdown. Not many people can tolerate even a 20% hit, which explains a lot about the situation the world economy finds itself in.

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

#30

Post by compumike »

londons_explore wrote: post #25

Total inflation-adjusted returns are what everyone should be looking at when considering investments. Yet it seems so awfully hard to find that data on stockbrokers sites/apps. Why?

I agree and that's why I decided to build it :)

I think part of the answer is that: (1) it's very hard to explain what that means to most people ("WTF, why are the historical prices on this chart changing?") beyond simple 2:1 splits, and (2) it's hard to get everyone to agree on what inflation metric to trust/use.

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