3 ms·
What do you mean “tells you very little”? You invest $1 in S&P at beginning of the year and now it’s $1.28.
by tempsy 7y ago
What do you mean “tells you very little”?
You invest $1 in S&P at beginning of the year and now it’s $1.28.
- Gibbon1 7y agoAlso means that a dollar invested stocks today buys you 22% less stock than a year ago. Basically this is inflation nothing more.
- tempsy 7y agoInflation..? What? We’re in a very low inflation environment right now. The Fed is actually trying to figure out how to get inflation to the target 2% annually. Unclear if they met it or not.
- Gibbon1 7y agoWe've been conditioned to think of inflation as the rising cost of toilet paper and gasoline. But not in other things like stocks, bonds, rents and real estate. In theory the last two are part of orthodox inflation but they are heavily gamed. We've also been conditioned to think in terms of rates but not integrated over time.
- perl4ever 7y agoSome things are more volatile than others. Since nothing can increase in price faster than inflation forever, there's no point in including the volatile things in your index. This is why inflation indexes commonly leave out energy. People say "but everything uses energy!" as if this was a problem - yes, everything uses energy, so the long-run increase in energy prices will be reflected in everything else, so it doesn't need to be explicitly included.
- jimthrow 7y agoWe have had over 2% for the last 3 years. That’s already pretty high
- perl4ever 7y agoAverage volatility (annualized) of the stock market has been about 14% historically, and sometimes goes up to 30%. So I don't think that a 28% return in a year is enough to say definitively that stocks are up. It can easily be random noise.
- tempsy 7y agoIt’s up.
- perl4ever 7y agoSomebody said that in an efficient market prices are within a factor of two of correct. People are so caught up in the fact that we have prices of everything to fractional pennies every microsecond, that they can't conceive of just how much is false precision. Can't you begin by admitting that there is some uncertainty, that every price implicitly has some +/- amount associated? And next, consider that when an entire company is purchased, it usually costs a lot more than the immediately prior trading price, showing that separately from uncertainty, there is a big range between different shareholders?