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Beating Inflation - Page 4

Blogs > micronesia
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EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 05 2012 10:22 GMT
#61
On January 05 2012 16:19 bellweather wrote:
Show nested quote +
On January 04 2012 03:33 EternaLLegacy wrote:
On January 04 2012 03:14 Glacierz wrote:
On January 04 2012 02:46 EternaLLegacy wrote:
On January 04 2012 02:39 BrTarolg wrote:
From my opinion (Trader opinion), any kind of inflation linked bond with a country unlikely to default (UK, US if you live there) is the absolute best choice if you want to buy something and close your eyes for 5-10 years


I wouldn't do that, because the inflation adjustment is not going to match real inflation. You can look at the numbers governments come up with versus numbers older metrics and private sources come up with, and they don't match. I don't know much about the UK, but in the US real CPI for the last 3-4 years has been over 9% (last I looked) whereas reported CPI is somewhere in the ballpark of 3-4%.

It's safe in terms of you pretty much know the yield and there's little to no risk of getting nothing back. I'll give you that. I would never buy them so long as we continue to keep interest rates too low and print money. The fundamentals are bad and the numbers are bad. It might've been good 10 years ago, but not anymore.


Where the hell did you get 9% CPI???? Credible source pls, don't post false information to people who are not well versed in the markets.


I've seen the numbers referenced all over the place, and there's a lot of bogus information out there, but that was the number Peter Schiff referenced.

I did a simple Google and came up with these links:
http://www.neuralnetwriter.cylo42.com/node/200 - no idea who this guy is but those charts are really good at showing exactly what I'm referring to, and I've seen similar reproduced in other places.

http://www.investopedia.com/articles/07/consumerpriceindex.asp#axzz1iQ8z3Kjj - has a good explanation as to why some people think CPI is stupid and why it's probably inaccurate or at least way too dynamic to be a good indicator.

In short, the weightings assigned to various categories seem to be a source of great dispute. Personally, I think real inflation is probably higher than reported, but maybe not as high as some of the claims of 9-10%. However, anything over 4% was considered an emergency 35 years ago. Lets just say, it's not looking too good.

And additionally, on another note, I think if you're going to hold currency take a look at the singapore dollar, australian dollar, or swiss franc, to name a couple. Hell, even canadian dollars aren't bad. USD only looks good cause Euros really suck, but they're not so hot and haven't been for some time.

Edit: http://www.schiffradio.com/blog?action=blogArchive&blogTag=CPI is one article talking about CPI from Peter Schiff


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.


Yes but the BLS has changed the way they calculate inflation over the years and some critics of CPI say the new methods are too conservative.
Statists gonna State.
Sadistx
Profile Blog Joined February 2009
Zimbabwe5568 Posts
Last Edited: 2012-01-05 10:44:32
January 05 2012 10:35 GMT
#62
On January 04 2012 07:27 Glacierz wrote:
Show nested quote +
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.

Ok, as far as investment goes - UK/France/German bonds, municipal state bonds, blue chip stocks currently on the down trend.

Put a little bit of money into each and do some research to see if you understand why your investment does the way it does after say, a year.

Glacierz
Profile Blog Joined May 2010
United States1245 Posts
January 05 2012 14:32 GMT
#63
On January 05 2012 19:35 Sadistx wrote:
Show nested quote +
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.
EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 05 2012 16:54 GMT
#64
On January 05 2012 23:32 Glacierz wrote:
Show nested quote +
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.
Statists gonna State.
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
Last Edited: 2012-01-05 18:55:53
January 05 2012 17:00 GMT
#65
On January 06 2012 01:54 EternaLLegacy wrote:
Show nested quote +
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.
BrTarolg
Profile Blog Joined June 2009
United Kingdom3574 Posts
January 05 2012 18:49 GMT
#66
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
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
Last Edited: 2012-01-05 18:59:00
January 05 2012 18:58 GMT
#67
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


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.
EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 05 2012 19:01 GMT
#68
On January 06 2012 02:00 Glacierz wrote:
Show nested quote +
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.


Yes, but why do stocks go up? One word bro, inflation.
Statists gonna State.
BrTarolg
Profile Blog Joined June 2009
United Kingdom3574 Posts
January 05 2012 19:04 GMT
#69
On January 06 2012 03:58 Glacierz wrote:
Show nested quote +
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


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.


I don't work in a fund personally

I prop rates
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
Last Edited: 2012-01-05 19:45:40
January 05 2012 19:41 GMT
#70
On January 06 2012 04:01 EternaLLegacy wrote:
Show nested quote +
On January 06 2012 02:00 Glacierz wrote:
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.


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


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
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
January 05 2012 19:52 GMT
#71
On January 06 2012 04:04 BrTarolg wrote:
Show nested quote +
On January 06 2012 03:58 Glacierz wrote:
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


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.


I don't work in a fund personally

I prop rates


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.
BrTarolg
Profile Blog Joined June 2009
United Kingdom3574 Posts
January 05 2012 20:13 GMT
#72
On January 06 2012 04:52 Glacierz wrote:
Show nested quote +
On January 06 2012 04:04 BrTarolg wrote:
On January 06 2012 03:58 Glacierz wrote:
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


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.


I don't work in a fund personally

I prop rates


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.


But on a 5-10 year perspective it's a lot easier to see why you wouldn't invest in german bonds right now
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
January 05 2012 20:33 GMT
#73
On January 06 2012 05:13 BrTarolg wrote:
Show nested quote +
On January 06 2012 04:52 Glacierz wrote:
On January 06 2012 04:04 BrTarolg wrote:
On January 06 2012 03:58 Glacierz wrote:
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


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.


I don't work in a fund personally

I prop rates


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.


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


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.
EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 06 2012 00:27 GMT
#74
On January 06 2012 04:41 Glacierz wrote:
Show nested quote +
On January 06 2012 04:01 EternaLLegacy wrote:
On January 06 2012 02:00 Glacierz wrote:
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.


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


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


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.
Statists gonna State.
BrTarolg
Profile Blog Joined June 2009
United Kingdom3574 Posts
Last Edited: 2012-01-06 05:40:56
January 06 2012 05:35 GMT
#75
On January 06 2012 05:33 Glacierz wrote:
Show nested quote +
On January 06 2012 05:13 BrTarolg wrote:
On January 06 2012 04:52 Glacierz wrote:
On January 06 2012 04:04 BrTarolg wrote:
On January 06 2012 03:58 Glacierz wrote:
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


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.


I don't work in a fund personally

I prop rates


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.


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


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.


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
EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 06 2012 06:50 GMT
#76
On January 06 2012 14:35 BrTarolg wrote:
Show nested quote +
On January 06 2012 05:33 Glacierz wrote:
On January 06 2012 05:13 BrTarolg wrote:
On January 06 2012 04:52 Glacierz wrote:
On January 06 2012 04:04 BrTarolg wrote:
On January 06 2012 03:58 Glacierz wrote:
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


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.


I don't work in a fund personally

I prop rates


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.


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


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.


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


I didn't even see you were UK. Generally in the wake of crisis you'd expect a flood to real assets like land, oil, and of course precious metals. Obviously not in the short run, but we're talking about what regular joes saving for retirement should care about, which is the super long run. I don't think the average person should care about anything else, because trading is not their day job and most people save for retirement, not for their 3rd beach house.
Statists gonna State.
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
January 06 2012 14:02 GMT
#77
On January 06 2012 09:27 EternaLLegacy wrote:
Show nested quote +
On January 06 2012 04:41 Glacierz wrote:
On January 06 2012 04:01 EternaLLegacy wrote:
On January 06 2012 02:00 Glacierz wrote:
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.


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


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


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.


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?
EternaLLegacy
Profile Blog Joined December 2011
United States410 Posts
January 06 2012 15:42 GMT
#78
On January 06 2012 23:02 Glacierz wrote:
Show nested quote +
On January 06 2012 09:27 EternaLLegacy wrote:
On January 06 2012 04:41 Glacierz wrote:
On January 06 2012 04:01 EternaLLegacy wrote:
On January 06 2012 02:00 Glacierz wrote:
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
On January 04 2012 05:21 Chill wrote:
In 2011 I made 0.19%. Inflation is destroying me -_- hahaha. The stock market is a cruel mistress and is crushing me.


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?


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.



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.


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.


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.


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


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


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.


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?


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.
Statists gonna State.
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
January 06 2012 17:55 GMT
#79
On January 07 2012 00:42 EternaLLegacy wrote:
Show nested quote +
On January 06 2012 23:02 Glacierz wrote:
On January 06 2012 09:27 EternaLLegacy wrote:
On January 06 2012 04:41 Glacierz wrote:
On January 06 2012 04:01 EternaLLegacy wrote:
On January 06 2012 02:00 Glacierz wrote:
On January 06 2012 01:54 EternaLLegacy wrote:
On January 05 2012 23:32 Glacierz wrote:
On January 05 2012 19:35 Sadistx wrote:
On January 04 2012 07:27 Glacierz wrote:
[quote]

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?


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.



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.


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.


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.


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


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


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.


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?


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.


You mixed up the steps. The reason you have P/E ratio around 12-14 is because expectations of earnings going up. How much a company's stock is worth is determined by a series of expected future casflows discounted by a pre-assumed discount rate. If there is no future growth prospect for a company, it will not trade at anything higher than its book value. Expected profitability is the main driver for stock returns. Note that I highlighted expected, the reason you see so much noise in the market is partially due to rapid changes in expectations due to changes in the environment.

Looking into the long term, inflation will flow into the pricing of goods/services, which ultimately gets captured by the firm's revenue. However, that's probably the most minor source of risk/return when it comes to stocks (unless you are in a hyper-inflationary environment, then it does matter a lot). BrTarolg makes a very relevant point. Bonds gets impacted by inflation and rising rates much more than stocks, avoiding bonds is much more sensible if you are worried about inflation/interest rates picking up rapidly. The reason you don't want to invest in stocks right now is the future uncertainty in growth and the high possibility of recession, which would have a huge impact on firms' profits.
Glacierz
Profile Blog Joined May 2010
United States1245 Posts
Last Edited: 2012-01-06 18:23:47
January 06 2012 18:10 GMT
#80
I don't know how many people here are trading portfolios with limited finance background, but I highly recommend those who haven't taken any courses in investment getting to know the basic Gordon Growth stock pricing model (dividend discount model):

http://en.wikipedia.org/wiki/Gordon_Growth_Model

It's super simple to understand and you can easily build this yourself in Excel by making some assumptions on growth rates and discount rates. The company financials are all available through google/yahoo finance.

Not long ago, azndsh also wrote a series of 5 blogs detailing an intro to investment which I think are helpful to read:

Part 1
Part 2
Part 3
Part 4
Part 5

I suggest part 2, 3, and 5.
Prev 1 2 3 4 5 Next All
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