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The correlation between inflation and rates is that raising rates is normally used to reduce inflation.
The danger with keeping rates low for too long is you could create the situation where we could experience hyper inflation. We haven't seen it yet, but that is the danger. By the time it occurs it would be very painful to reverse.
Actually we already have a pretty high inflation. We just don't see it. Because we normally look at the consumer price index. The inflation takes place at the stock markets. But there it's called an increase in value, A very misleading way to look at the numbers.
The net value assets of most of the largest corporations doesn't have increased in the last couple of years, but their market "value" have often doubled or tripled. Many of those corporations will never be able to achieve appropriate incomes in the next 20 years to justify their current market "value". And of course most investors demand that the stock prices will double, triple or even more in the next 20 years.
The whole situation is just completely absurd.
2014 saw the highest corporate profits in history on the s&p 500 . future profits are expected to be even higher so i don't accept that theory . i got raises at work because our company sold more and made more .
[quote=lukas1973;46545656]Actually we already have a pretty high inflation. We just don't see it. Because we normally look at the consumer price index. The inflation takes place at the stock markets. But there it's called an increase in value, A very misleading way to look at the numbers.
The net value assets of most of the largest corporations doesn't have increased in the last couple of years, but their market "value" have often doubled or tripled. Many of those corporations will never be able to achieve appropriate incomes in the next 20 years to justify their current market "value". And of course most investors demand that the stock prices will double, triple or even more in the next 20 years.
The whole situation is just completely absurd.[/quote
Reversion to the mean....unfortunately many will be crushed when this happens
Actually we already have a pretty high inflation. We just don't see it. Because we normally look at the consumer price index. The inflation takes place at the stock markets. But there it's called an increase in value, A very misleading way to look at the numbers.
The net value assets of most of the largest corporations doesn't have increased in the last couple of years, but their market "value" have often doubled or tripled. Many of those corporations will never be able to achieve appropriate incomes in the next 20 years to justify their current market "value". And of course most investors demand that the stock prices will double, triple or even more in the next 20 years.
The whole situation is just completely absurd.
Nonsense! The facts are not on your side. Nor are the principles of economics.
First stock prices do not just go up because that is what investors "demand". Prices go up based on what investors are willing to pay. A great many people spend their lives analyzing companies and trying to understand what company stocks are worth buying, worth holding, or should be sold.
Price to earning ratios or the Shiller PE ratios are used to look at stock valuations. They have not doubled or tripled. The ratios are a bit higher than the historical averages but huge swings in those ratios are typical. A great deal of research has gone into looking at these ratios and it is clear they are not very predictive of either short term or long term changes in the stock market.
Finally the notion that stock prices should be a measure of inflation is more than strange. To use your term it is completely absurd. Inflation reflects what we pay for goods and services. Stocks are investments and are not goods or services or expenses.
about a 9% average return before inflation adjusting in the past , over a typical 30 plus years of an accumulation stage . even the lost decade of 2,000 comes to that once you factor in the years leading up to it .
Actually we already have a pretty high inflation. We just don't see it. Because we normally look at the consumer price index. The inflation takes place at the stock markets. But there it's called an increase in value, A very misleading way to look at the numbers.
The net value assets of most of the largest corporations doesn't have increased in the last couple of years, but their market "value" have often doubled or tripled. Many of those corporations will never be able to achieve appropriate incomes in the next 20 years to justify their current market "value". And of course most investors demand that the stock prices will double, triple or even more in the next 20 years.
The whole situation is just completely absurd.
It shows up most in the luxury goods index and in the price of high-end homest.
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