Comment by everforward
20 hours ago
> The main thing holding people back is the housing crisis. This is orthogonal to the value creation of businesses.
This feels wholly at odds with saying most social mobility is upwards. So most of the social movement is into a class where a home and vacations are a given, but we also have a growing class of people who can't afford a home? Per BLS, average real wages are down 0.3% YoY https://www.bls.gov/news.release/realer.nr0.htm .
> Value creation is growth. If it didn’t exist the S&P would still be 42.55$.
This reductively assumes "value creation" is the only effect on the S&P pricing. You'll note a ton of graphs correlate with it, e.g. https://tradingeconomics.com/united-states/inflation-cpi is the US inflation rate, which also tracks the S&P pricing. Ie if a company is worth $100 a year ago and inflation was 4%, I'd expect to pay $104 for their stock with 0 value creation whatsoever.
Home ownership is not the definition of economic class.
The s&p has vastly outstripped inflation, this isn’t even an argument. It’s a very bizarre and uninformed opinion to say “inflation is correlated with s&p value”.
In economics, you deduct the inflation rate from growth to get the real rate of return.
I wonder why so many people with such little understanding of financial markets make comments like these.
https://www.multpl.com/inflation-adjusted-s-p-500
> Home ownership is not the definition of economic class.
It was at one point, so if you're saying it doesn't now then your "social movement" is really just goalpost moving. I'm sure the upper class does grow if you just declare that the boundaries of it are now lower. We're all millionaires if we just redefine millionaire to mean "not currently overdrafted".
> In economics, you deduct the inflation rate from growth to get the real rate of return.
Which neglects the impact of inflation on the principal. If I put $100k into the S&P in 2016 I'd have 303k now (303% value). Cumulative inflation during that period was 38.8%, so your metric says I'm at 164% rate of return. $303k today is only worth $218k in 2016 dollars though, so I'm really only up 118% in absolute value.
That's also only using the CPI, and neglecting asset inflation which impacts stock prices outside of actual value creation. More money floating around means more gets parked in index funds, regardless of whether the company is actually doing anything better.