Beating Inflation - Page 4

On January 05 2012 16:19 bellweather wrote:


CPI is published by the BLS and readily available to the public (CPI-U rose aprox 7.5% cumulative over the past 4 years) http://www.bls.gov/cpi/home.htm

If you need investment advice don't get it here unless you want to be very explicit about willingness to take risk, liquidity requirements, etc.

On January 04 2012 07:27 Glacierz wrote:


I think that's pretty much all you got if you invested in the S&P 500. The August drawdown was a bullet too hard to dodge.

If you bought long duration us gov't Treasury, you would have been up around 20% in 2011 despite the rating downgrade on U.S. gov't debt and rise in inflation. Funny how economics and the markets interact huh?

On January 05 2012 19:35 Sadistx wrote:


Really? The summer correction you could see from a mile away. Anyone who didn't have the basic foresight to sell their shit in June and wait until at least the end of September shouldn't be in the stock market anyway.

On January 05 2012 23:32 Glacierz wrote:


You sir, obviously do not work in the finance industry. If you think any money manager could see any kind of drawdown like this from a mile away it would not have been a drawdown in the first place. Please refrain from making statements like this to make people think you are immune to left tail scenarios.

On January 06 2012 01:54 EternaLLegacy wrote:


Or you can conveniently ignore the minority of investors who actually have an understanding of economics who have been saying get the hell out of stocks traded in US dollars for a long time now. I'm sorry dude, but just because most people screw up does not make it impossible to avoid screwing up.

On January 06 2012 03:49 BrTarolg wrote:
Oh the hilarity of this thread

Btw, i would avoid the bund for all sorts of reasons (eurobond, contagion, etc) too many external factors to make it a true safe haven (do you really think that in 10 years time, that yield is going to make sense?)

But i said it once and i'll say it again, put your money in some TIPS and on average you'll get the best performance for the risk (and effort) you are looking to take on.

And btw, there ARE a few hedge fund guys on TL
Theres also a couple of guys who work close enough to know some of the general themes of some of the better hedge funds around

On January 06 2012 02:00 Glacierz wrote:


You don't understand what I'm saying. I'm not disputing that there are people who avoid drawdowns, but not all of them had the right rationale for it, and certainly not all of them will do it consistently over time. A good money manager is not judged on avoiding something like the Lehman crisis of 2008, or the August correction of 2011, but rather on the consistency in their decisions and risk management. I seriously doubt anyone who posts on TL belongs to any top tier hedge funds who can actually forecast anything in the market with consistency.

When I see anyone posting stuff like "what happened can be seen from a mile away" it makes me cringe because someone out there might actually believe he has some sort of skill that makes him outperform investment professionals. Just because you managed to sell your positions before a big correction, it doesn't mean you have the skill to do it every single time it happens, and it certainly doesn't qualify you to teach others on what to buy/sell at the correct timing.

A word of advice to beginners in investment: don't listen to people who tell you how to time the market or when to buy/sell what. Market timing is a zero sum trade simply because for every 1% you win, someone else is on the losing side of that 1%. The market today is so efficient at pricing in public information, do you really think you can be correct over 50% of the time? A top fund manager is only correct 60% of the time in their trades, and that's only statistically significantly different than a coin toss when you execute hundreds of trades. I think there's nothing wrong with OP's thought process, if he invests something sensible and hold it without worrying about the intra-day/month movements, it will work out in the long term (commodities converges with inflation, and stocks generate revenue, pretty simple to understand).

If you don't get all of that, the very simple question you should ask is whether you've seen a lot of people consistently making large returns by shorting the market only. Why is it that almost all the fund managers have net long exposures in equity? It's because over time most of the stocks go up.

On January 06 2012 03:58 Glacierz wrote:


I could be wrong but if you are in a PM position in a hedge fund aren't you prohibited from posting your opinion on forums like this? Any specific investment recommendations you make could seriously jeopardize one's career.

On January 06 2012 04:01 EternaLLegacy wrote:


Yes, but why do stocks go up? One word bro, inflation.

On January 06 2012 04:04 BrTarolg wrote:


I don't work in a fund personally

I prop rates

On January 06 2012 04:52 Glacierz wrote:


I agree with your view on bonds, but I also remember people saying yields can't get lower a year ago, and look at what happened to the 10-year rates over 2011 (I'm talking about US Treasury). The fact of the matter is no one knows when or how fast yield will rise, 2012 can be another muted growth environment where rates just keep still, or even fall further (despite how unlikely) on the longer end of the curve.

On January 06 2012 05:13 BrTarolg wrote:


But on a 5-10 year perspective it's a lot easier to see why you wouldn't invest in german bonds right now

On January 06 2012 04:41 Glacierz wrote:


Nope, correlation between stock returns and inflation is practically 0 (it's actually slightly negative for the last 15-20 years). Profit drives stock prices up, more specifically, expected growth in profit drives P/E multiples.

Inflation only has strong negative correlation to bonds, because rates rises when inflation is accelrating.
Bonds have low correlation to equity, which is why the traditional 60/40 allocation is such a simple and popular way of diversifying a portfolio

On January 06 2012 05:33 Glacierz wrote:


Yea that's completely true. I don't think people know what to invest in anymore. Usually during turmoils like this bonds are the safe place to be.

On January 06 2012 14:35 BrTarolg wrote:


TIPS and cashhhh

srsly loads of the big funds are long cash right now, with (what i believe) the intent of buying up the incoming bottoms in the next year or so

edit: ok to make this more sense for those who understand, this is a liquidity play
Anything that is extremely liquid is king, because we are about to suffer one of the greatest liquidity (which is actually insolvency) crises of all time
Thus a big theme being run is to be short illiquid stuff, and long liquid stuff

Central banks etc. are holding up poorly performing assets (like peripheral bonds) with all their might. Every day i see the ECB secretly (not so secret to those watching the market) buying peripheral. LTRO? That was basically a form of TARP/QE
You think the ECB just needs to swoop in and save us? You have no idea how much they are already doing

This is forming one of the greatest mispricings of illiquid or poor assets of all time. Even though things like government bonds should be liquid, as the respective governments suffer a liquidity (or insolvency) crisis, this may not be the case (look at the exchange BTP market or greek bonds lol)
i.e the entire market is being falsely held up

Now to fight against this and go short these bonds is pretty much suicide, no matter how good your fundamental view is
Same as going long the bund, almost suicide despite germanys strong fundamentals for all sorts of external reasons

So whats left? No surprise that many funds are simply long treasuries and... cash

On January 06 2012 09:27 EternaLLegacy wrote:


Why do you think the correlation is slightly negative? I don't disagree with that, but that should tell everyone something very very disturbing, which is that the stock market has been LOSING value over the past 2 decades on average.

On January 06 2012 23:02 Glacierz wrote:


What? 2 series can be perfectly negatively correlated and still both have positive returns given positive mean. I'm not sure how you can infer anything about the magnitude of returns by correlation. All it tells you is that inflation movements and stock price movements are completely unrelated historically.

I will give you an example,
series 1: [1%, 2%, 1%, 2%]
series 2: [3%, 1%, 3%, 1%]

correlation between series 1 and 2 would be -1 and both series have positive returns. Also S&P total returns (not to be confused with price levels what excludes dividends) has more than tripled from 1991 to 2011 (my data goes from Q3 1991 to Q3 2011), which stock market were you looking at?

On January 07 2012 00:42 EternaLLegacy wrote:


My bad. I thought you were talking about something else. Simply a horrible misreading of what you were saying.

Regardless, the stock market is motivated by so many factors on the short term that it's hard to see any correlation through all the noise. I haven't looked at the numbers historically, but the logic should imply that since inflation = higher prices, that P/E ratios will fall (cause earnings will go up in nominal dollars), which will make stocks more desirable, which will cause people to buy said stocks and push the price up.

Inflation should not be limited simply to commodities and assets, but instead should seep into stocks as well.

I agree with the sentiment of the argument you were making though, which is to focus on long term investments and ignore the short term noise which is just gambling. I think we just have very different ideas of what good long term investments are, because I think all stocks traded in dollars are going to underperform, with a few exceptions. This is a reflection not on stocks themselves but the currency.