Re: Inflation
Posted: July 19th, 2021, 6:38 pm
Yeah, those HYPers, switching positions once a decade.
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GrahamPlatt wrote:Yeah, those HYPers, switching positions once a decade.
scrumpyjack wrote:If I thought inflation in the UK was to return in a very substantial and long lasting way, which has been the norm since WW2, I think I would move it to another currency, probably Swiss Francs. I think that is more secure than the dollar which has also had periods of high inflation.
I think it is quite probable that we will have a return to high inflation, much the same whichever government we have.
1nvest wrote:These are charts of a range of currencies relative to gold
Rebased to a 1980 start date ...
scrumpyjack wrote:GrahamPlatt wrote:scrumpyjack wrote:I'm not sure about 'all this selling going into cash' because on the stockmarket in principle there are 2 sides to each transaction - a buyer and a seller, so for every seller having more cash, there's a buyer with less cash. It is all cash neutral overall. Obviously there are complications to that but not enough to substantially change the notion that it is all cash neutral.
If the overall value of 'the market' falls, it's not because of buying and selling per se - it's because equities have been re-priced downwards; there is less overall value. Same with the housing market but in the opposite direction; it's on the rise despite there being fewer sellers around.
For equities that is of course quite true, and overall no cash has been taken out or put in.
For the housing market, as much of house price purchase is usually financed by mortgages, there can be a considerable amount of cash moving into or out of the market. For example most older people selling, or on death, will have paid off their mortgages whilst the younger buyers will usually have borrowed the money to buy with.
NotSure
What about when a leveraged equity investor/trader sells to an unleveraged one, or vice versa? Surely cash can get sucked in and out of equities via leverage? And as I understand it (i.e. not at all) the leveraged tend to trade more frequently that those that are not.
GrahamPlatt wrote:1nvest wrote:These are charts of a range of currencies relative to gold
Rebased to a 1980 start date ...
“1980 for instance and it took just a ounce of gold to buy into a Dow stock index fund, in 1999 it took 40 ounces of gold.”
odysseus2000 wrote:NotSure
What about when a leveraged equity investor/trader sells to an unleveraged one, or vice versa? Surely cash can get sucked in and out of equities via leverage? And as I understand it (i.e. not at all) the leveraged tend to trade more frequently that those that are not.
The concept that no net money changes hands is often stated for common stock.
E.g. X sells 1 share at 100, y buys 1 share at 100, no change in money.
X decides to do no more and has 100.
Y now decides he doesn't like the market and sells, but the best price available is 80 from Z
Y now has 100-20 = 80
Z now has 80
If more investors don't like the market, Z may find that U will only pay 60 but he sells.
Z now has 80-20 = 60
At every point the buyer and seller are matched but in a bear market the holders of equity can not recover the cash they paid because shares have fallen in price. In the above example x ends with 100, Y has 80, Z has 60, U has 60. If the share has a dividend this would also have to be accounted for.
NotSure wrote:What about when a leveraged equity investor/trader sells to an unleveraged one, or vice versa? Surely cash can get sucked in and out of equities via leverage? And as I understand it (i.e. not at all) the leveraged tend to trade more frequently that those that are not.
GoSeigen wrote:NotSure wrote:What about when a leveraged equity investor/trader sells to an unleveraged one, or vice versa? Surely cash can get sucked in and out of equities via leverage? And as I understand it (i.e. not at all) the leveraged tend to trade more frequently that those that are not.
I'm getting a sense of deja vu! Didn't we have this discussion just a week or two ago?
You're confusing what happens to an individual person with what happens in aggregate. A market is always at least TWO people, not one. So if the one person is buying the other is selling and the aggregate numbers tell a different story to the case of each individual. See:
https://en.wikipedia.org/wiki/Fallacy_of_composition
GS
...There two views of predicting future share price. Technical analysts believe that only demand and supply drive the stock price since all other factors (e.g. economic, political etc.) are discounted and reflected in market prices. Fundamental analyst determines the intrinsic values of the company and compares it with the current market price...
NotSure
Either way - apologies, not very relevant to inflation....
GrahamPlatt wrote:What I fail to “get” about inflationary relationships is why it is that equity prices tend to fall with rising inflation.
I’d class shares with all other tangible goods and expect them to rise alongside the rest.
Graham Platt
What I fail to “get” about inflationary relationships is why it is that equity prices tend to fall with rising inflation.
I’d class shares with all other tangible goods and expect them to rise alongside the rest.
NotSure wrote:GoSeigen wrote:NotSure wrote:What about when a leveraged equity investor/trader sells to an unleveraged one, or vice versa? Surely cash can get sucked in and out of equities via leverage? And as I understand it (i.e. not at all) the leveraged tend to trade more frequently that those that are not.
I'm getting a sense of deja vu! Didn't we have this discussion just a week or two ago?
You're confusing what happens to an individual person with what happens in aggregate. A market is always at least TWO people, not one. So if the one person is buying the other is selling and the aggregate numbers tell a different story to the case of each individual. See:
https://en.wikipedia.org/wiki/Fallacy_of_composition
GS
A related discussion - about how asset prices had nothing to do with supply and demand (as those words are commonly used when referring to equities - supply: sellers looking for a buyer, demand: a buyer looking for shares/bond to acquire).
Your statement made quite an impression on me, but when trying to research further, all I could find was endless websites and individuals explaining how price was influenced by a number of factors (fundamental, technical etc.), but ultimately down to supply and demand.
So no, I still haven't got it but I do continue to try!
Maybe not the best source, but this is TLF: https://www.fool.com/investing/how-to-invest/stocks/why-stocks-go-up-and-down/
If you could point me at a better source going into more detail about why supply and demand are irrelevant, I would genuinely be grateful.
This paper at least presents some arguments either way, but doesn't draw any compelling conclusions. Is not the usual complex mixture of both?...There two views of predicting future share price. Technical analysts believe that only demand and supply drive the stock price since all other factors (e.g. economic, political etc.) are discounted and reflected in market prices. Fundamental analyst determines the intrinsic values of the company and compares it with the current market price...
https://www.arabianjbmr.com/pdfs/OM_VOL_5_(3)/5.pdf
Either way - apologies, not very relevant to inflation....
GrahamPlatt wrote:What I fail to “get” about inflationary relationships is why it is that equity prices tend to fall with rising inflation.
GoSeigen wrote:GrahamPlatt wrote:What I fail to “get” about inflationary relationships is why it is that equity prices tend to fall with rising inflation.
Is this even true? How do you know?
GS