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Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. Plus if you just look at liquid assets you miss how these people ac

Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. Plus if you just look at liquid assets you miss how these people actually made their money. Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?

voisin 4y ago
> Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. It is wrong only if someone is sitting in cash for long periods of time. A poor person needing to buy groceries every week is seriously affected by CPI inflation. A rich person holding onto significant cash because they view asset prices to decline is actually experiencing deflation in the thing they want to buy and CPI for that person is utterly irrelevant. The long term return of stocks is irrelevant to this discussion. > Plus if you just look at liquid assets you miss how these people actually made their money. Not sure what you are getting at here, but it is beside the point I am making that CPI is not relevant to the wealthy holding cash. > Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns? Again, this isn’t something that affects the wealthy. If a wealthy person wanted to buy META a year ago, the price has declined 70% since then, so the asset you wanted to buy has experienced deflation giving you a better entry point, regardless of CPI inflation. Replace META with almost any other asset and the same statement is true over the last year or so.
- benj111 4y ago
  >It is wrong only if someone is sitting in cash for long periods of time It's wrong because you don't know ahead of time when assets are going to fall. All we know in that the long term inflation will average out to X and stock price growth will average > X, and that inflation will erode the value of cash. Someone with a million dollars in 1900 was very wealthy. Do you think their family that kept all their wealth in cash is still wealthy? No.
  - voisin 4y ago
    I am not suggesting anyone can judge ahead of time when assets are going to fall (though there are certainly indicators). I am stating that CPI inflation is not a “tax” on the cash held by the wealthy. It isn’t relevant. Their “basket of goods” purchased differs dramatically from what CPI measures and largely includes financial assets which have seen deflation. This is objectively a “cash is king” situation despite inflation running hot.
    - benj111 4y ago
      What wealth do you think you needed to hold to be in the 1% 100 years ago? Can we agree that it is a lot less than today? The 1% back then didn't have to worry about the price of milk back then either. They still have to worry about inflation though, because if they dont.if their wealth doesn't keep up with inflation they are getting less wealthy. If you have 100 million today you can't just sit back and not worry about your family ever working again, because eventually a house will cost 100 million. Then the car will, then eventually the milk will too. If you have 100 million in the bank and a pint of milk costs 100 million you are no longer wealthy, it doesn't matter what basket of goods they buy.
hattmall 4y ago
Never if you are wealthy. That's the point. The things needed to survive are what inflation is based on, for a wealthy person that amount of spending is so much less than 1% it's negligible. You only lose the 3% of your money if you need your billion dollars to buy food and gas and general consumer goods. The cost of luxury items fluctuates wildly and isn't part of inflation.
- benj111 4y ago
  But you still need that money to keep up with inflation. If you have a billion dollars under the mattress and inflation is 3% you've lost 30 million dollars in spending power. That dwarfs anything you would spend on food yes. And the next year another 30 million, and the next year. So you need to invest to protect it from inflation, so inflation is relevant. The percentage they spend on food and stuff today is negligible. But you invest to keep it that way. Because once it becomes non negligible it's too late.
zarzavat 4y ago
Their point is that inflation measures consumer goods such as milk. How much milk do you need to buy in your lifetime? Wealthy people don’t use their money to buy milk, they use it to invest in businesses and to buy real estate, asset prices which don’t track the inflation rate at all (currently inflation is up and assets are down).
- benj111 4y ago
  The parent opened with "I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. " Which suggests that inflation will never hurt the rich. But it will yes they are spending much of that cash on milk today. But the price of milk is rising whereas money kept in cash isn't, or at least not at the same rate. If you have a job with good pay today, would you be happy if you were told it would never rise? Sure you may be happy today, but what about in 20 years when the price of everything has doubled.
  - voisin 4y ago
    The rich doesn’t care about the price of milk. They care about the price of stocks, bonds, real estate, etc. which make up the bulk of their purchases. These assets have experienced deflation over the period you are pointing to the price of milk inflating. CPI inflation isn’t a tax on the cash held by the wealthy.
    - benj111 4y ago
      What time period? My position is that you don't know ahead of time what assets will rise and fall, but in the long term stocks will beat inflation. And if you want to preserve your wealth so you don't have to worry about the cost of milk you will need to beat inflation. They care about stocks, bonds, and real estate precisely because of inflation. Because if they don't beat inflation they get poorer every year. If you don't invest you are guaranteed to lose to inflation, that's why people invest in riskier assets. They don't do it because it's fun.

voisin 4y ago

> Over time stocks tend to beat inflation. Looking at one small window of time is just wrong. It is wrong only if someone is sitting in cash for long periods of time. A poor person needing to buy groceries every week is seriously affected by CPI inflation. A rich person holding onto significant cash because they view asset prices to decline is actually experiencing deflation in the thing they want to buy and CPI for that person is utterly irrelevant. The long term return of stocks is irrelevant to this discussion. > Plus if you just look at liquid assets you miss how these people actually made their money. Not sure what you are getting at here, but it is beside the point I am making that CPI is not relevant to the wealthy holding cash. > Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns? Again, this isn’t something that affects the wealthy. If a wealthy person wanted to buy META a year ago, the price has declined 70% since then, so the asset you wanted to buy has experienced deflation giving you a better entry point, regardless of CPI inflation. Replace META with almost any other asset and the same statement is true over the last year or so.

benj111 4y ago
>It is wrong only if someone is sitting in cash for long periods of time It's wrong because you don't know ahead of time when assets are going to fall. All we know in that the long term inflation will average out to X and stock price growth will average > X, and that inflation will erode the value of cash. Someone with a million dollars in 1900 was very wealthy. Do you think their family that kept all their wealth in cash is still wealthy? No.
- voisin 4y ago
  I am not suggesting anyone can judge ahead of time when assets are going to fall (though there are certainly indicators). I am stating that CPI inflation is not a “tax” on the cash held by the wealthy. It isn’t relevant. Their “basket of goods” purchased differs dramatically from what CPI measures and largely includes financial assets which have seen deflation. This is objectively a “cash is king” situation despite inflation running hot.
  - benj111 4y ago
    What wealth do you think you needed to hold to be in the 1% 100 years ago? Can we agree that it is a lot less than today? The 1% back then didn't have to worry about the price of milk back then either. They still have to worry about inflation though, because if they dont.if their wealth doesn't keep up with inflation they are getting less wealthy. If you have 100 million today you can't just sit back and not worry about your family ever working again, because eventually a house will cost 100 million. Then the car will, then eventually the milk will too. If you have 100 million in the bank and a pint of milk costs 100 million you are no longer wealthy, it doesn't matter what basket of goods they buy.

hattmall 4y ago

Never if you are wealthy. That's the point. The things needed to survive are what inflation is based on, for a wealthy person that amount of spending is so much less than 1% it's negligible. You only lose the 3% of your money if you need your billion dollars to buy food and gas and general consumer goods. The cost of luxury items fluctuates wildly and isn't part of inflation.

benj111 4y ago
But you still need that money to keep up with inflation. If you have a billion dollars under the mattress and inflation is 3% you've lost 30 million dollars in spending power. That dwarfs anything you would spend on food yes. And the next year another 30 million, and the next year. So you need to invest to protect it from inflation, so inflation is relevant. The percentage they spend on food and stuff today is negligible. But you invest to keep it that way. Because once it becomes non negligible it's too late.

zarzavat 4y ago

Their point is that inflation measures consumer goods such as milk. How much milk do you need to buy in your lifetime? Wealthy people don’t use their money to buy milk, they use it to invest in businesses and to buy real estate, asset prices which don’t track the inflation rate at all (currently inflation is up and assets are down).

benj111 4y ago
The parent opened with "I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. " Which suggests that inflation will never hurt the rich. But it will yes they are spending much of that cash on milk today. But the price of milk is rising whereas money kept in cash isn't, or at least not at the same rate. If you have a job with good pay today, would you be happy if you were told it would never rise? Sure you may be happy today, but what about in 20 years when the price of everything has doubled.
- voisin 4y ago
  The rich doesn’t care about the price of milk. They care about the price of stocks, bonds, real estate, etc. which make up the bulk of their purchases. These assets have experienced deflation over the period you are pointing to the price of milk inflating. CPI inflation isn’t a tax on the cash held by the wealthy.
  - benj111 4y ago
    What time period? My position is that you don't know ahead of time what assets will rise and fall, but in the long term stocks will beat inflation. And if you want to preserve your wealth so you don't have to worry about the cost of milk you will need to beat inflation. They care about stocks, bonds, and real estate precisely because of inflation. Because if they don't beat inflation they get poorer every year. If you don't invest you are guaranteed to lose to inflation, that's why people invest in riskier assets. They don't do it because it's fun.