Is this a clear sign of high inflation?

[Silberman]

When we think of inflation we usually think of how much food, electricity or gasoline costs.

But there is another aspect as well: how much it costs us to buy financial assets.

As someone who lives in a nation with clear high inflation and not even debatable, I can tell you that even stocks do not go up when things goes to shit. Why? Because the value of money becomes so worthless and people become so poor that people can't even buy stuff from those companies who are in the stock market, which results with those companies losing customers and losing profits and that ends up with losing value in stock market.

So, imagine an inflation so high that, even stock market doesn't go up when money becomes worthless. That is the true inflation, and god forbids any other nation to have something like that and I hope we will never have it again.

This is true, at the early stages stocks go up as people have too much money which was printed by the government and they need to choose a place to put it, and many choose stocks to do this as for a time it seems it can outpace inflation, however eventually things get so bad that assets like that begin to perform poorly, governments try to rescue them by printing more money but this only makes the problem worse, eventually crashing the stock market and the whole economy with it.

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[so98nn]

Idk, this looks like mis matched example of inflation or may be it does not connect the dots properly. The share chart which you have shown here is incremental over the year period which indicates the performance value of the 500 companies included in it. It's not inflation. The company share value will rise all the time if they are having good performance. If the value is rising then it means their products and services are being liked by everybody and they are using it for their good terms. Moreover as they keep growing they are actually hiring more an d more employees to lower the burden of company work force.

I see it completely different way. Its more or less companies growth. Inflation would make the companies dead, bankrupt, resignations of employees and what not. If their products get costlier then they should see lesser users of the same who would go and search alternatives. That way company share should ideally go down and not up.

[davis196]

I have studied finance at university and I can say and inflation affects all financial assets.
Especially the stock market.Only real estate(besides Bitcoin) can provide enough protection against inflation,which means that the real price growth minus the nominal price growth(caused by inflation) cannot become negative.Real estate assets cannot get devalued due to the inflation.Stocks can get devalued and government/treasury bonds can also get devalued by inflation.
It is pretty clear that the Federal Reserve money printing boosted the S&P 500 index a lot,during the last decades.Traditional financial markets are a giant bubble.Crypto markets are a giant bubble as well,thanks to the money printing made by the central banks.

[Wind_FURY]

I have studied finance at university and I can say and inflation affects all financial assets. Especially the stock market. Only real estate(besides Bitcoin) can provide enough protection against inflation,which means that the real price growth minus the nominal price growth(caused by inflation) cannot become negative. Real estate assets cannot get devalued due to the inflation. Stocks can get devalued and government/treasury bonds can also get devalued by inflation.

It is pretty clear that the Federal Reserve money printing boosted the S&P 500 index a lot,during the last decades. Traditional financial markets are a giant bubble. Crypto markets are a giant bubble as well,thanks to the money printing made by the central banks.

Yes, but it’s not stocks that get devalued, it’s the currency. Increasing inflation is a effect of the money printer. It increases the money supply, and therefore increases demand, and increases the prices of stocks, real estate, used cars, almost everything. Then because of it, it creates bottlenecks on the supply side, causing inflation to increase further/faster.

[paxmao]

You can't really blame inflation for that.
When you think one thing is caused by that you should look at others to see if they match, let's check a country which experiened deflation, Japan:



Then something else must also be happening, DJI is  19,86 %  while NDAQ is 60%, so the growth is triggered clearly by some industries, and not all of them.

OP, that IS a very clear sign of high inflation. All that extra money going to stocks, commodities, real estate, AND cryptocurrencies. But it will come down crashing soon, and prepare for the next cycle, OR hyperinflation.

Hyperinflation in the US? I don't understand why you're happy about this, trust me even if your coins will be worth 1 billion and you could buy everything you wanted you wouldn't want to live in such a period. Unless you enjoy seeing people suffering.

Japan is no longer on deflation, there are clear signs of economic recovery and even though the Japanes CEOs are extremely conservative when they set their expectations, the growth is more clear if you look at the small caps. Many of them with a high technological component. Also, Japan is a country that is particularly well suited to embrace several of the key technological drivers expected by the future: mid and high tech manufacturing, robotics, AI,... they do not make as much noise, but they are certainly embracing the change.

There is inflation and that is the cause of a general index growth - simply the FED giving money to every zombie company out there - NASDAQ increase has a concurrent factor: COVID advanced work from home and app based services by 10 years.

[LUCKMCFLY]

When we think of inflation we usually think of how much food, electricity or gasoline costs.

But there is another aspect as well: how much it costs us to buy financial assets.

Inflation is a pretty bad thing, you’re holding huge amount of money, but that money is totally useless, because things are costly in the market and before you know what’s happening you’re already done spending all the money on just a few things.

The covid-19 situation has really turned a lot of economies around the world upside down and causing them all to struggle. It has been the same way in most countries, and it’s worst in a case whereby the government is filled with leaders that doesn’t care to carry out their responsibilities to the citizens. Inflation keeps going up and the cost of things are high, and people are now looking for ways to save their value.

Inflation seems to be felt by many countries, especially during the pandemic which is getting worse and this is felt by the lower middle class whose impact is very significant because they are no longer maintaining values but looking for values to survive while the government does not seem to want to be burdened by them and hands off

The best weapon against inflation is buying solid fiat, or gold, or the best BTC, if it is BTC better because in a fully inflationary economy, it does not matter that the BTC falls in price, in the same way it will continue to be worth a lot with respect to the internal economy that the country owns.
Another way to protect against inflation is by buying material things that are later sought by people and at that time it is possible to sell more expensively, and resort to looking for extra income at all costs, starting a simple business that can give money is another way to attack the problem.

I think that running your business with products that are not prone to financial crises is most likely the best way to protect your wealth from inflation. When we come up with material things right now I guess one problem could be that markets are overheated already., wouldn't you agree? I am not necessarily talking about the housing market, but also about watches and other assets. Right now things are expensive.

Of course, in times of high inflation everything is possible, however the business with watches, or with any other asset is valid, in my country people passed food, medicines and anything to be able to change them to foreign currency, even today what is happening is gasoline, copper, some thieves chose to pass the copper from the electric power cables, they stole it and they passed it to earn more money, and only then to be able to find or buy food and any basic item.

[Wind_FURY]

You can't really blame inflation for that.
When you think one thing is caused by that you should look at others to see if they match, let's check a country which experiened deflation, Japan:



Then something else must also be happening, DJI is  19,86 %  while NDAQ is 60%, so the growth is triggered clearly by some industries, and not all of them.

OP, that IS a very clear sign of high inflation. All that extra money going to stocks, commodities, real estate, AND cryptocurrencies. But it will come down crashing soon, and prepare for the next cycle, OR hyperinflation.

Hyperinflation in the US? I don't understand why you're happy about this, trust me even if your coins will be worth 1 billion and you could buy everything you wanted you wouldn't want to live in such a period. Unless you enjoy seeing people suffering.

I didn’t notice stompix’s post. Happy about this? No, why would I be happy? Plus it isn’t a jeer on the people, it’s a jeer on the Federal Reserve, and government as the lying becomes more shameless. They are treating plebs like shit, manipulated, gaslighted and brainwashed. The majority believe their lies, believe it or not.

[tygeade]

it’s not stocks that get devalued, it’s the currency. Increasing inflation is a effect of the money printer. It increases the money supply, and therefore increases demand, and increases the prices of stocks, real estate, used cars, almost everything. Then because of it, it creates bottlenecks on the supply side, causing inflation to increase further/faster.

This is quite bad, and it is as if no one wants to fix this problem of inflation. It just got worse during this coronavirus pandemic. For the fact that people had to stay indoors, during the lockdowns and then things are also getting costly to the extent that most of them wouldn’t be able to achieve it, that’s very bad.  It’s really got a lot of things destabilized this year. I know how costly things got in my country and people are just finding it difficult.

There were even people who lost their job as a result of the pandemic as well. Those are the ones who I pity the most. Especially the ones who have families to take care of. Solving this issue of inflation should be a priority for the government. Printing too much money wasn’t really a way to go, because they knew this was going to affect the economy later.

[Silberman]

I have studied finance at university and I can say and inflation affects all financial assets.
Especially the stock market.Only real estate(besides Bitcoin) can provide enough protection against inflation,which means that the real price growth minus the nominal price growth(caused by inflation) cannot become negative.Real estate assets cannot get devalued due to the inflation.Stocks can get devalued and government/treasury bonds can also get devalued by inflation.
It is pretty clear that the Federal Reserve money printing boosted the S&P 500 index a lot,during the last decades.Traditional financial markets are a giant bubble.Crypto markets are a giant bubble as well,thanks to the money printing made by the central banks.

At the end the only thing we can do to protect ourselves is to invest in fundamentally strong assets, real estate maintains its value because we all need a place to live so there is always going to be demand for it, however since real estate can be so costly it is difficult to sell during a time of crisis, so it is important to have a significant amount on assets that can be traded more easily, and under a scenario of hyperinflation gold, silver and bitcoin seems like the best assets to have.

[LUCKMCFLY]

When we think of inflation we usually think of how much food, electricity or gasoline costs.

But there is another aspect as well: how much it costs us to buy financial assets.

The above chart at first glance may appear to be due to the strong performance of the 500 largest U.S. companies. But this is misleading: I believe it reflects more the effects of massive printing and inflation than how companies are doing.

The charts for the stock markets of countries with high inflation are similar: the more currency printing and inflation, the more the stock market rises.

That the S&P, which has an average return of about 10% on average has risen 30% in the last year is sobering. Let's think that in November 2020 we were already out of the stock market slump that was the COVID.

At the end of the day, anyone like me who has money invested in the S&P 500 can't be too happy about the 30% return because if we discount inflation it comes to almost nothing.

No this can't act as a barometer for Inflation, If we are going to value everything that rises in price as Inflation then even Bitcoin will expand due to Inflation one day.

It's true that the more the money is printed more the money reaches into the market and higher the stock prices rally, but this thing is generally temporary in nature because if the money printing isn't backed by enough economic development eventually it will fall one day because companies that would have promised these valuations won't be able to justify their valuation using their profits/ Revenues and eventually the market would fall like a house of cards when people would ultimately take their money out of overvalued stocks.

It is very interesting about overvalued stocks, but there is something that worries me, or perhaps it is just a small intuition, whenever problems arise regarding falls in the global economy, who applies as fundamental is some variant of covid-19, I do not know if they do it on purpose or as a strategy, but it happens that it is always the perfect excuse for entertainment, in several countries the way to close their borders is being evaluated, obviously all economic problems are skewed towards these fundamentals.