4 ms·

Asset prices are just one parameter in a complex system. Inflation is another. For example commodity prices could inflate so fast that earnings of companies gro

by lixtra 6y ago

Asset prices are just one parameter in a complex system. Inflation is another. For example commodity prices could inflate so fast that earnings of companies grow into their valuations. Another parameter is whether you’re free to spend your money. Currently in lockdown, all my money doesn’t buy me a dinner with friends in a restaurant (okay, I could pay a hefty fine, so restaurant dinners have inflated 1000%s in price!). It’s not clear to me how the future will unfold and therefore I spread my worth in various assets and consume what may be unavailable soon.

ethbr0 6y ago
Most of the stock market focused writing recently appear to be from one of two perspectives, with very little big picture that unifies both. 1) The monetary perspective, in which stock prices are what they are, but there's a broader game (the real economy) of primary concern 2) The stock market analyst perspective, in which stock prices ebb and flow within a given range according to somewhat understood patterns The issue is that (1) has been taking monetary actions never before seen (not even to support WWII), and (2) is crying from the rooftops that nothing makes sense when analyzed under historical pricing standards. Well, yes. Both of these are true.
dasudasu 6y ago
You have the democrats calling for "trillions" in stimulus: https://www.bloomberg.com/news/articles/2021-01-08/biden-calls-for-quick-pandemic-relief-minimum-wage-increase https://www.bloomberg.com/news/articles/2021-01-08/biden-cal... You have Jerome Powell telling you that "stocks are not that high" considering that the risk free rate just collapsed: https://www.cnbc.com/2020/12/16/powell-says-stock-prices-are-not-necessarily-high-considering-the-low-level-of-interest-rates.html https://www.cnbc.com/2020/12/16/powell-says-stock-prices-are... If they want to go by history, they just have to look back at the last decade to see what this does to a stock market. There is no alternative.
mxschumacher 6y ago
Much higher commodity prices would eat into the margins of any company using those resources, thereby decreasing their value
- lixtra 6y ago
  That depends on the pricing power of the company. But true, I rather meant broad inflation than commodities only.

by lixtra 6y ago

ethbr0 6y ago

Most of the stock market focused writing recently appear to be from one of two perspectives, with very little big picture that unifies both. 1) The monetary perspective, in which stock prices are what they are, but there's a broader game (the real economy) of primary concern 2) The stock market analyst perspective, in which stock prices ebb and flow within a given range according to somewhat understood patterns The issue is that (1) has been taking monetary actions never before seen (not even to support WWII), and (2) is crying from the rooftops that nothing makes sense when analyzed under historical pricing standards. Well, yes. Both of these are true.

dasudasu 6y ago

You have the democrats calling for "trillions" in stimulus: https://www.bloomberg.com/news/articles/2021-01-08/biden-calls-for-quick-pandemic-relief-minimum-wage-increase https://www.bloomberg.com/news/articles/2021-01-08/biden-cal... You have Jerome Powell telling you that "stocks are not that high" considering that the risk free rate just collapsed: https://www.cnbc.com/2020/12/16/powell-says-stock-prices-are-not-necessarily-high-considering-the-low-level-of-interest-rates.html https://www.cnbc.com/2020/12/16/powell-says-stock-prices-are... If they want to go by history, they just have to look back at the last decade to see what this does to a stock market. There is no alternative.

mxschumacher 6y ago

Much higher commodity prices would eat into the margins of any company using those resources, thereby decreasing their value

lixtra 6y ago
That depends on the pricing power of the company. But true, I rather meant broad inflation than commodities only.