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It is all relative - stocks prices are in dollars, if USD goes down - then it is rational to buy stocks with it even if the business perspectives are not perfec
by zby 6y ago
It is all relative - stocks prices are in dollars, if USD goes down - then it is rational to buy stocks with it even if the business perspectives are not perfect. In other words there is so much USD being printed that high inflation seems probably (this time - the same thing was said in 2008 - but this time the printing is even bigger). Look at gold prices: https://goldprice.org/gold-price-chart.html https://goldprice.org/gold-price-chart.html. Also there is some non negligible danger of USD losing its reserve currency status: https://www.linkedin.com/pulse/chapter-1-big-picture-tiny-nutshell-ray-dalio/ https://www.linkedin.com/pulse/chapter-1-big-picture-tiny-nu... , https://www.linkedin.com/pulse/money-credit-debt-ray-dalio/ https://www.linkedin.com/pulse/money-credit-debt-ray-dalio/ , https://www.linkedin.com/pulse/changing-value-money-ray-dalio/ https://www.linkedin.com/pulse/changing-value-money-ray-dali...
Update: I think I need to add that I have no economic education - I wrote this after reading recent Ray Dalio posts to see what others think about it.
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- IkmoIkmo 6y agoWould be cool if someone built a simple S&P500 or All-world stock index, expressed in gold instead of USD, or expressed in a weighted basket of all currency index. This may give a better representation of the stock market value, corrected for some of the inflationary effects of quantitative easing. Anyone ever seen such indices?
- nycdatasci 6y agohttps://www.macrotrends.net/1437/sp500-to-gold-ratio-chart https://www.macrotrends.net/1437/sp500-to-gold-ratio-chart
- strawhatguy 6y agoNeat chart. So it’s been decreasing but still above 1. Maybe that means there’s room for the sp500 to go down more (or gold up)?
- rileymat2 6y agoI am not sure it is all that helpful because it will fluctuate with gold price/value changes unrelated to inflation.
- osrec 6y agoIsn't that sort of OPs point? I.e. we treat gold as the datum (or ultimate asset) to measure everything else against?
- abraxas 6y agoYou'll find them here: http://pricedingold.com/ http://pricedingold.com/
- alexpetralia 6y agoIf you look at TIPS bonds, consumer inflation (CPI) is not actually substantially higher over 5 or 10 years, if at all. The expected inflation rate is the same tenor Treasury yield minus the TIPS.
- konschubert 6y agoConsumer prices and asset prices have decoupled. Most consumers don’t have direct access to cheap FED money and the trickle-down effects (startup boom) have had limited impact on average wages.
- alexpetralia 6y agoYes personally I would look at the rising CAPE as an indicator of asset inflation (too much capital chasing too few earnings).
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- jonahbenton 6y agoThere is no excess of money "being printed." There is actually a reduction in supply, because of the way the system works. The quantity available depends on the flow, and the flow is greatly reduced. The source of the flow of dollars is changing, because businesses are shut down, so dollars are flowing more directly from the Fed, which is trying to make up for the loss of flow elsewhere in the economy. Gold prices are up because of the collective fiction around the idea of "assets" and "store of value." There is no risk of loss of "reserve currency" status. There is always jostling around relative currency valuations, but the Fed has only strengthened its position as world premiere source of liquidity. And for the west there is no viable alternative.
- malcolmxtucker 6y agoWhy do you say there is no risk to USD reserve currency status, especially with China blitzing a "hearts, minds, and infrastructure" foreign policy?