Sure buit on the otehr hand it is such a product. In general if you're modeling this and you dont dont take into account the rates of new/dying customer and willingness to change supplier then your models are going to be very poor.

Also with costs of doing business. Many of these are are subject to a competitve free market but those which are imposed as a duty/etc have to be treated differently. Commonly this is a small proportion so you may be making a small (or no) mistake by ignorng it. However with certain products cusch as cigs, it's such the dominanant factor that any model will be ludicrously wrong if it's ignored.

Yes. It would be a very easy game to win if it didn't happen that way.

The model, as I believe it existed in the earlier post, was "zomg, look at all this massive inflation." The only problem with that model was that the inflation, while existing, was neither massive or even mildly noteworthy.

If you wish to talk about a completely different model (modeling the current value of future cash flows of a newspaper businesses, for instance), all of your points stand.

Also, how are you doing, old friend?

Thinking about inflation in terms of demand or the weather or Putin or the supply chain or whatever else is in the news is incorrect, because human demand for products is infinite.

When housing prices rise people say ohhh there's a shortage of homes, so that's why their prices are rising.

But, in reality you could always point to a shortage, because I would like to own 100 houses, so I can rent them out and never work again.

Prices in the economy rise, because the money supply expands and then all of the other money is worth less.

That's why I knew we would have inflation during Covid when Jerome Powell and Christine Legarde said we wouldn't have any.

They thought everyone will be inside, so there will be no demand, and so there will be no inflation, but I knew that that they were wrong, because I could see that they were expanding the money supply through QE4.

The CPI is also a a cumulative index. The only reason it is at 3.4 now is because last years comparisons were very high, which has been a tailwind this year, but those easy comparisons end in July and will become a headwind next year.

Any spike in commodity prices as the Fed juices the economy with rates cuts will cause the cpi to jump from 3.5 to 7, then stocks like Apple and Microsoft have to crash, because you can't own a stock that has a pe of 30, which is a 3 percent yield, if inflation is 7, which would give you a negative real yield adjusted for inflation.

Yep. And that is why we have had massive unprecedented deflation across the US over the past (almost) two years as we have drastically reduced money supply.

Those who think we are still experiencing inflation purely because prices have continued to rise are a bunch of silly buggers. It is purely illusory that things cost more than they did last year as money supply dropped

Given the above: Someone please graph the price of condoms from 1950 to the present. Adjusted for inflation and etc.

I think this will provide the basis for a lively discussion.

The money supply is barely down and is still way way above where it was in 2020.

What do you think is making the stock market go up. Those are all prices.

QE4 is lying in my bank account.

Not that I'm happy about that. QE aka money printing bails out the speculators.

If an airline fails the planes, the runways, the pilots, they don't disappear.

QE bails out the investors and the poor pick up the tab with an inflation tax.

consider myself a permabear in retrospect thinking most everything has been a bubble, but currently see the impact of AI as underpriced in markets. just because startups are riding its coattails doesn't mean it won't be transformative. AI isn't new but the potential for it to outperform humans on many/most general (esp white collar) tasks -- not just chess and fifa -- in the near future is. think a lot of people are mistakenly assessing the current state of AI (namely LLMs) correctly noting model weaknesses, but failing to extrapolate the historically exponential capability gains into the future.

agree QE is a strong hidden regressive tax

I have never understood the psychology of a permabear? Just never understood the thinking since the market has been in a perma longterm uptrend since its creation. Long painful dips mixed in for sure but its easier to ride those out than predict them and even if you do predict them then not to overstay your welcome at the relative bottom.

If you bought at the tip top of every "relative peak". 1987, 2000, 2007, 2020 etc. you are doing just fine. Tactical bearishness is fine but permabearishness has always struck me as a mental disorder. Bearishness should be a tool in every traders toolkit but investors should be much more concerned with dollar cost averaging and buying dips. All that said I almost always have some sort of hedge in place. Sometimes heavy and sometimes very light but I am emphatically a permabull.

Exponential growth in AI functionality will require exponential growth in compute and that will be the bottleneck. Moore's Law is already being tested.

It think a lot of people quite logically have been permabears, it's just that the Fed has always bailed the speculators out in the past.

In that 1987 crash they referred to the recovery as the Greenspan Put. He slashed rates to bail out the market and then that caused the dot com bubble. That popped and then the Fed started slashing rates again and that caused the housing bubble in 2007. That popped and then they launched QE and now we have an everything bauble.

If Apple falls and it's only generating 100 billion in net income and has only grown it's revenues at 1 percent the last 3 years there's not really anything there to bail you out apart from the Fed creating more inflation through another QE program.

So everyone just buys assuming the Fed will be there if something goes wrong.

Where I think they are mistaken is this time we will have inflation and the Fed won't be able to bail out the markets because if they launch QE 5 the dollar will crash.

The old "this time it's different defence" I don't disagree that there are lots of bad things that can cause an ugly crash. Just that in a few years it won't matter. Just like it has never mattered in the past from a long term perspective. Every dip, drop and crash feel "different" when in the heat of the battle but somehow when the dust settles they are all pretty much the same.

It's fine to be permabear on a certain stock if you have rightly concluded it will go busto. Lot of shortsellers on those stocks can make bank. But the market in general? Nah!

Well yes 20 years from now the markets will be up, because the value of money goes down over time and companies retain earnings.

2 years from now I think markets will be down sharply. I could be wrong.

We'll see what happens.

"zomg, look at all this massive inflation" is an interpretation. Can't blame the model for what people think/say . I disagree that it's not noteworthy but wouldn't call it zomg massive.

I'm doing ok thanks. How are you?

agree. to be more precise i was bogleheadish until 2013 when i incorrectly turned bearish with the thesis central banks were artificially propping up asset prices (without realizing they could in fact do this in perpetuity at the expense of non-asset-holders) ...i was using permabear disparagingly to highlight the fact that i have long (often incorrectly) had intense skepticism toward any new investment fads like FANG/TSLA/BTC but see AI in a different light. i may be just as wrong on this account, like a Julian Robertson moment where i finally capitulate and turn bullish at the top

i'm not technically savvy enough to fully grasp but my impression was that while moore's law (transistors per chip) could be approaching limits, there are other factors at play that have resulted in FLOPS/$ doubling every 2.5 years without any signs of slowing? also exponential investment increases could scale capabilities. besides moore's law i've also heard energy capacity cited as a potential bottleneck down the road.

Limits on computing power is a dubious argument because we know it can be done (see humans). It will be also blown out of the water as quantum computing develops

I think you were right just way way to early.

In 2013 the market hadn't done anything in13 years. Microsoft was 10 times earnings, clearly way undervalued.

I don't think they will be able to push asset prices much higher than this though.

For an Apple double it would have to go to 6 trillion market cap, which would be 20 percent of current US GDP. It's valuation would be so out of whack. It wouldn't make any sense.

All they need to do to make stock go higher is what they did the last couple years .
Buyback shares shrug .

Well they make a 100 billion a year and the market cap is 3 trillion, so mathematically you're only able to buy in 3 percent of your shares a year. That's not much. It's a tiny yield.

They also pay a 0.5 percent dividend, which means that not all of that income is being spent on buybacks.

The last 3 years the revenue at Apple has only grown 1 percent.

If your thinking rationally about how much the business can return to you in terms of it's earnings it's not a good spot.

When Buffett was buying Apple it was 10 times earnings, clearly undervalued.

It's possible that I'm missing something.

Maybe AI does become this huge thing where earnings explode.

I mean who am I to think that I can outwit the market.

But, I don't know everything I'm looking at, says it's overvalued.

Define sharply? And once it declines sharply, how long until it rebounds? Or doesn't it rebound ever again?

In the next 2 years a 20-30% drop is very probable because throughout history that stuff happens. But it will rebound to new highs like it it has every other time. These have always been great buying opportunities. Markets looking lofty however are generally poor shorting opportunities due to the fact that every short argument today coulda been made 3 months ago with the market much lower.

Even the great financial crisis, which was the nastiest market in my lifetime somehow looks like a blip on the radar from the long term view.

Banking on timing the drop, measuring the drop, and not staying too short at the end of the drop seems to me like a fools errand.

During the financial crises housing prices and stock prices and inflation were very depressed, so the Fed was able to launch QE and markets made a relatively quick rebound.

If I'm right about inflation and we get a market like the 70s, you are talking about a 50 percent correction in the S and P and a ten year bear market.

Could be completely wrong about that.

If the market was to keep on bulling for the next ten years you'd be talking about the average house in the United States costing a million if you apply a 3 percent yield to that rent would be 30k a year. Why would home owners even need a job. The math would be so ridiculous, that it is extremely unlikely to happen in my view.

It being down from two years ago is not the same as up from two years ago.

You obviously must agree with yourself that we have had not only no inflation in the past two years as the money supply has dropped.

We only had inflation while the money supply was increasing (it has been dropping for over two years), given your theory. Now we are in deflation.

This is all very simple.



Nah. Stock prices have dropped over the last two years because decreasing the money supply causes deflation. That the prices have gone up is not only an illusion, it borders on a full-fledge psychotic delusion, since money supply changes = inflation. Don't show me one of those s&p charts to try to prove this wrong (this would be a sign of the delusion). The stock market went up drastically from the beginning of 2020 until around April of 2022 and has been dropping ever since.


Or, maybe, perhaps, money supply increase = inflation is simply incorrect.