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Not sure what the long comment is about. It's basic and correct math that you subtract inflation from yield of a bond or stock, just as you would cash in a bank

Not sure what the long comment is about. It's basic and correct math that you subtract inflation from yield of a bond or stock, just as you would cash in a bank. Equities are not immune to inflation as you say. Inflation affects different companies in different ways, and also leads to higher discount rates which hurts longer duration and higher multiple assets the most. The nature of the inflation matters too. Only wage inflation is generally good for earnings, unless you're a commodity provider. Consumer spending power declines with anything that's not wage inflation An overvalued stock is a worse inflation hedge than cash in a rising discount rate environment. Netflix could be a good investment, or it could be terrible if its earnings start to decline. A company with declining earnings is even worse than a bond of the same yield

reducesuffering 5y ago
What you’re entirely missing is that stocks track inflation (and exceed it with growth) long term. Yes, for past returns, nominal yield - inflation is all there is to calculate real yield. But using that to project future yield, without factoring in inflation’s future effect on the asset, is a mistake, as my math illustrates. If you have a bond paying 5%, and a stock paying 5% yield, but the government suddenly prints 10% of money to the money supply and helicopter moneys it, that bond won’t budge, it’s why it’s called fixed income, the future payments are already set nominally. But that stock would effectively be worth 10% more, because the currency was debased 10%. There’s the same amount of company ownership producing tangible goods now being chased by 110% of the money. Yes, fluctuations from CPI occur due to front loading expectations, velocity, potential from M2, interest rates, productivity growth, and macroeconomic environment. All those are different forces applying pressure at various times, but they’re orthogonal to limited company ownership chased by an inflating currency. It’s much more certain that company value be retained independent on inflation than the 10y will predict it.

reducesuffering 5y ago

What you’re entirely missing is that stocks track inflation (and exceed it with growth) long term. Yes, for past returns, nominal yield - inflation is all there is to calculate real yield. But using that to project future yield, without factoring in inflation’s future effect on the asset, is a mistake, as my math illustrates. If you have a bond paying 5%, and a stock paying 5% yield, but the government suddenly prints 10% of money to the money supply and helicopter moneys it, that bond won’t budge, it’s why it’s called fixed income, the future payments are already set nominally. But that stock would effectively be worth 10% more, because the currency was debased 10%. There’s the same amount of company ownership producing tangible goods now being chased by 110% of the money. Yes, fluctuations from CPI occur due to front loading expectations, velocity, potential from M2, interest rates, productivity growth, and macroeconomic environment. All those are different forces applying pressure at various times, but they’re orthogonal to limited company ownership chased by an inflating currency. It’s much more certain that company value be retained independent on inflation than the 10y will predict it.