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Financial assets going up is precisely a sign of inflation. Argentina has 40% inflation and the best performing stock market (if you denominate in Argentinian c

Financial assets going up is precisely a sign of inflation. Argentina has 40% inflation and the best performing stock market (if you denominate in Argentinian currency)

H8crilA 5y ago
How does it do priced in some basket of goods that people actually consume?
- omalleyt 5y ago
  Bad. That’s why you don’t hold equities during hyperinflation. You hold physical assets, like gold and real estate.
  - H8crilA 5y ago
    Yeah but this doesn't necessarily work. I actually investigated Argentinian real estate not long ago and it's declining (in real terms, let's say in USD which experiences very low inflation), quite obviously due to it being overvalued and the real GDP decline + deleveraging.
    - omalleyt 5y ago
      What about gold?
  - throw0101a 5y ago
    Holding gold is less useful that you may think: > Gold objects have existed for thousands of years but for many investors gold has only recently become a tradable investment opportunity. Gold has been described as an inflation hedge, a “golden constant”, with a long run real return of zero. Yet over 1, 5, 10, 15 and 20 year investment horizons the variation in the nominal and real returns of gold has not been driven by realized inflation. The real price of gold is currently high compared to history. In the past, when the real price of gold was above average, subsequent real gold returns have been below average. Given this situation is it time to explore “this time is different” rationalizations? We show that new mined supply is surprisingly unresponsive to prices. In addition, authoritative estimates suggest that about three quarters of the achievable world supply of gold has already been mined. On the demand side, we focus on the official gold holdings of many countries. If prominent emerging markets increase their gold holdings to average per capita or per GDP holdings of developed countries, the real price of gold may rise even further from today’s elevated levels. As a result investors in gold face a daunting dilemma: 1) embrace a view that “those who cannot remember the past are condemned to repeat it”, there is a “golden constant” and the purchasing power of gold is likely to fall or 2) embrace a view that “this time is different” and the “golden constant” is dead. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078535 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078535
throw0101a 5y ago
> Financial assets going up is precisely a sign of inflation. No, it is not. Inflation is the costs of goods and services that roughly correspond to cost of living. When you start talking about asset prices rising there is another term that we already have to cover that: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble
tarsinge 5y ago
Then why inflation in the 70’s hammered stocks? https://ritholtz.com/wp-content/uploads/1979/08/Death-of-Equities.jpg https://ritholtz.com/wp-content/uploads/1979/08/Death-of-Equ...

Financial assets going up is precisely a sign of inflation. Argentina has 40% inflation and the best performing stock market (if you denominate in Argentinian currency)

H8crilA 5y ago

How does it do priced in some basket of goods that people actually consume?

omalleyt 5y ago
Bad. That’s why you don’t hold equities during hyperinflation. You hold physical assets, like gold and real estate.
- H8crilA 5y ago
  Yeah but this doesn't necessarily work. I actually investigated Argentinian real estate not long ago and it's declining (in real terms, let's say in USD which experiences very low inflation), quite obviously due to it being overvalued and the real GDP decline + deleveraging.
  - omalleyt 5y ago
    What about gold?
- throw0101a 5y ago
  Holding gold is less useful that you may think: > Gold objects have existed for thousands of years but for many investors gold has only recently become a tradable investment opportunity. Gold has been described as an inflation hedge, a “golden constant”, with a long run real return of zero. Yet over 1, 5, 10, 15 and 20 year investment horizons the variation in the nominal and real returns of gold has not been driven by realized inflation. The real price of gold is currently high compared to history. In the past, when the real price of gold was above average, subsequent real gold returns have been below average. Given this situation is it time to explore “this time is different” rationalizations? We show that new mined supply is surprisingly unresponsive to prices. In addition, authoritative estimates suggest that about three quarters of the achievable world supply of gold has already been mined. On the demand side, we focus on the official gold holdings of many countries. If prominent emerging markets increase their gold holdings to average per capita or per GDP holdings of developed countries, the real price of gold may rise even further from today’s elevated levels. As a result investors in gold face a daunting dilemma: 1) embrace a view that “those who cannot remember the past are condemned to repeat it”, there is a “golden constant” and the purchasing power of gold is likely to fall or 2) embrace a view that “this time is different” and the “golden constant” is dead. * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078535 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2078535

throw0101a 5y ago

> Financial assets going up is precisely a sign of inflation. No, it is not. Inflation is the costs of goods and services that roughly correspond to cost of living. When you start talking about asset prices rising there is another term that we already have to cover that: * https://en.wikipedia.org/wiki/Economic_bubble https://en.wikipedia.org/wiki/Economic_bubble

tarsinge 5y ago

Then why inflation in the 70’s hammered stocks? https://ritholtz.com/wp-content/uploads/1979/08/Death-of-Equities.jpg https://ritholtz.com/wp-content/uploads/1979/08/Death-of-Equ...