A Strange Asymmetry
More thinking, less talking
“I'm bad for business because I cause people to think.”
Very common nowadays to hear that inflation is “good for stocks.”
Stephanie Link even blocked me the other day because I dared challenge her on this.
Oh well, her loss.
Anyway, a reminder from this 1979 article, “The Death of Equities”:
“The one rule whose demise did the stock market in could be summed up thus: By buying stocks, investors could beat inflation. Stocks were a reasonable hedge when inflation was low. But they proved helpless against the awesome inflation of the past decade. “People no longer think of stocks as an inflation hedge, and based on experience, that’s a reasonable conclusion for them to have reached,” says Richard Cohn, an associate professor of finance at the University of Illinois. Indeed, since 1968, according to a study by Salomon of Salomon Bros., stocks have appreciated by a disappointing compound annual rate of 3.1%, while the consumer price index has surged by 6.5%. By contrast, gold grew by an incredible 19.4%, diamonds by 11.8%, and single-family housing by 9.6%…
There are at least four good reasons why inflation is killing equities:
• Stock prices reflect anticipated corporate profits. During periods of rapid inflation, however, profits fall because most businesses cannot raise prices quickly enough to keep up with costs.
• Even gains in profits are largely illusory because inflation makes them look rosier than they actually are. And because plant and equipment are depreciated at historic cost rather than replacement price, money that should go into capital investing and inventory purchasing instead goes to the government in taxes.
• Experience has taught investors that inflation will lead to an economic downturn that will wreck corporate profitability and stock prices. This happened in 1974, when the worst recession since the Depression followed the last burst of double-digit inflation.
• Investors jump from stocks to bonds to nail down high rates. Inflation also prompts corporations to sell debt because it is tax-deductible and can be paid off in cheaper dollars—thereby reducing the flow of new stocks to market.”
“I think about gold much differently than most people. I think there's a lot of people who own gold as a way to get rich. I own gold for insurance. I honestly don't even really care whether it goes up or down, I'm going to own it regardless of whether it does or not.”
Congressman: “We’re compromised.”
Nick Bryant: “We want to know why the government has covered up this child trafficking, and we want the perpetrators to be prosecuted, and you wrote this letter and I really resonated with it. Why do you think nothing has been done by the government with regards to that?
Rep. Tim Burchett: “Because we're compromised, pure and simple. You've got some of these dirtbags and and elected officials that have taken part in some of this awful behavior, and it's the honeypot, you know? They get them, and then you always wonder why good conservatives vote for horrible legislation occasionally, or or good liberals vote for something conservative. I think it's because they've been caught in some situation like that, and somebody's whispered in their ear - you know, man, we don't need this stuff out, you need to help - if you can help us on this bill, I can make that go away, but it never goes away. It's a temporary fix, because they're just going to keep hanging over them for the rest of their lives. They've done business with the devil, and now they're gonna face the consequences.”
“You want it to be one way, but it’s the other way.”
Jim Grant: "Apropos of demographics, what happened to the American population between 1880 and 1900?"
Evan Lorenz: "It went up about 50%"
Jim Grant: "Over the same period, what happened to consumer prices?"
Evan Lorenz: "They went down about 14%."
Tell me again how restrictive Fed policy is.
This is on ongoing pet peeve and serious problem - our financial media - particularly the small group allowed to question FOMC members - is full of shills, cheerleaders and publicists!
“After lunch, at Michelle’s request, I took calls from reporters. If we were going to hold our own in the court of public opinion, we needed to get our side of the story out. Generally, I spent the most time with the beat reporters who wrote regularly about the Fed, including Jon Hilsenrath of the Wall Street Journal, Greg Ip of the Economist, Krishna Guha of the Financial Times, Neil Irwin of the Washington Post, John Berry of Bloomberg, Steve Liesman of CNBC, and Ed Andrews of the New York Times. I knew that these more specialized reporters were best equipped to understand and then explain what we were doing and why. Other media would pick up on their reporting.”
- Ben Bernanke, The Courage To Act In My Own Best Interest
The gaslighting is offensive. This was today:
"They’ll be covering what Powell and the other influential Central Bankers basically tell them to cover, so the story is told by the storytellers, and the storytellers are the central bankers, and that's the problem. It's all basically propaganda."
Here’s Jeanna Smialek’s latest book:
"...telling the stories of the women and men who kept pushing the limits of what economic policy could accomplish." - from a Jason Furman blurb
Good grief - like all of them, she’s a publicist, not a reporter!
Below the fold: Thomas Hoenig, Kevin Warsh, Murray Stahl, Greg Weldon, Neely Tamminga, Melody Wright, High Yield, CRE, Private Credit, 25-Sigma Events, O.J., the Inflation, Mike Green, Insiders, Mike Meixler, The Wire, Wargames, Led Zeppelin, and much more!
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