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S&P500 Normalized with M2
- xattt 3y agoI’m trying to click the X to close the window but won’t do anything.
- the-dude 3y agoTry Alt-F4
- etskinner 3y agoIt would be more helpful to compare S&P 500 vs CPI rather than M2. It's purchasing power that matters to most investors, not the comparison to how much money exists. S&P 500 gained ~40% since January 2020, and CPI gained ~18%. Even better would be comparing to the total stock market rather than S&P 500. Using something like DWCF or VTSAX
- SantalBlush 3y agoRight, this chart is the epitome of misleading statistics. It was made by someone who doesn't understand what they're talking about, and its intended audience is people who don't understand what they're reading.
- pb7 3y agoRead the author's bio. Do you think it was made in good faith?
- throw9away6 3y agoThe cpi is a bad metric. It does not accurately capture all the cost increases we have seen since covid.
- VHRanger 3y agoFeel free to use PCE or whatever else instead. There's alternatives, and trust me, one of them addresses your gripes. Unless your complaint is very specific, assume you didn't just intuitively out-think a bunch of PhDs whose job is thinking about this
- qez2 3y agoThe post seems to be implying that increase in money supply is synonymous with inflation, but one of the main reasons we print more money is actually to keep up with growth.
- fxtentacle 3y ago"All the technological advantages humans made" I didn't notice them. Is there anyone who believes Google or Microsoft are now significantly more useful than in 2003? Does anyone feel like Facebook has gotten more useful in recent years? Apart from compensating for ever slower Electron apps, does the additional CPU power in modern Macs really improve my life? How come VS Code still feels so much slower than Visual Studio 6 on Windows 98 SE? Maybe it's time to accept the obvious conclusion that new != better when it comes to technology.
- swyx 3y agocareful with crypto guys and inflation truthers - they cant articulate the velocity theory of money, but are very confident that they know better than the fed (usually spelled FED as a shibboleth) on what money is
- arcticbull 3y agoWhy on earth would you divide the market cap of the 500 largest companies in the US by the money supply? It's a completely arbitrary and silly thing to do. Why not divide the number of cheese wheels by the diameter of the moon? This chart isn't mind-blowing, it's straight-up meaningless. [edit] Also note the S&P 500 isn't even a consistent numerator, it's an index whose constituent companies are replaced over time at the whim of a committee, lol. Remember when Tesla got added in 2020, and the Apartment Investment and Management Co. got removed? - and as a peer comment pointed out, this doesn't even include dividends and distributions.
- jy1 3y agoA common narrative lately is that a lot of stock prices are highly correlated with money supply. E.g. The only reason 2021 bubble happened is because the FED printed trillions of dollars. I wouldn't say its completely arbitrary given this has been a common discussion point. No opinions on whether it has meaning, but wanted to add the relevance.
- readthenotes1 3y agoJust because it's a common talking point doesn't make it arbitrary. Iirc, the fed also backstopped bonds and bought some stock
- deleted 3y ago[deleted]
- arcticbull 3y agoThe Fed isn't an acronym of initialism. It's short for the Federal Reserve so it's "Fed" not "FED" - I call this out for your benefit as the conspiracy theorists always capitalize it, and this reduces your credibility for the average reader. Just as writing BITCOIN would reduce my credibility in the eyes of the, er, renowned monetary theorist Tsartoshi.
- Waterluvian 3y ago
- jy1 3y agoIt's up substantially when calculating total return (including dividends) https://twitter.com/Tsartoshi/status/1680139560074764288?s=20 https://twitter.com/Tsartoshi/status/1680139560074764288?s=2...
- bryanlarsen 3y agoThis is good news. It means the Fed is doing its job. M2 is a measure of the amount of money in the economy, not a measure of inflation. If the economy grows, the amount of money needed to lubricate the economy also grows. If the money supply doesn't grow while the economy does then we'd see significant deflation. So we want these two measures to be relatively balanced, and they are. Yay!
- VHRanger 3y agoIt might surprise no one here that people who are professionals in the finance industry are capable of adjusting for inflation: https://www.multpl.com/inflation-adjusted-s-p-500 https://www.multpl.com/inflation-adjusted-s-p-500 You can also note that M2 is correlated basically with inflation in the long run (Rsquared ~0.92) The error on the part of the twitter user is that he's using nominal values instead of % growth (log-log) values. Something you learn in 101 econometrics. This is why you don't listen to crypto bros on matters of monetary economics.
- xnx 3y agoTalking about M2 without context or regard for other factors is such a reliable indicator that I don't need to read any further.
- deleted 3y ago[deleted]
- 5350-uiop-1130 3y agothe cost of everything has gone up bigly while my salary has remained stagnant dont need any financial astrology or jargon to know this
- deleted 3y ago[deleted]