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> 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 o

by 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.

by voisin 4y ago

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.