The Death of equities, how inflation is killing the stockmarket.

Discussion in 'Wall St. News' started by Debaser82, Dec 17, 2009.

  1. [​IMG]

    The cover is from 1978 I believe.

    What gives?

    I thought stocks offer protection against currency debasement.
  2. they do in a sense, but high interest rates depress valuations.

    And more inflation requires investors receive more return (higher interest rates), thus lower stock prices.
  3. too hard to look up the inflation rate to equities chart ?
  4. kaciara


    what kind of inflation?

    stock market appreciation in 2003 2008 can be considered financial inflation??...

    may be
  5. ammo


    tmarket, i dont know where you got that, can you put one up of the oex(top 100 stocks in the spx) it seems the pe was about 18 in 87 before the crash,that was the consensu of why we tumbled
  6. I think that cover was from Fall 1979. While it didn't exactly mark an epic bottom for stocks and bonds, and an epic top for commodities and inflation, it came pretty close.
  7. Everything old is new again.
  8. Stock prices are inflated, really ? :D
  9. With the exception of hyper-inflation, inflationary environment tends to be good for the stock market. This is because companies can raise the damn prices without any qualm. Higher prices, of course, translate into higher earnings.

    But the problem for you as an investor is that whatever profit you might have made in the stock market is eroded due to the rising inflation. That is, your profit is worth much less today than when the inflation was considered tame because everything you want to buy now would cost you a lot more than it did before.
  10. That's a much more interesting read :

    When Washington Shut Down Wall Street unfolds like a mystery story. It traces Treasury Secretary William Gibbs McAdoo's triumph over a monetary crisis at the outbreak of World War I that threatened the United States with financial disaster. The biggest gold outflow in a generation imperiled America's ability to repay its debts abroad. Fear that the United States would abandon the gold standard sent the dollar plummeting on world markets. Without a central bank in the summer of 1914, the United States resembled a headless financial giant.

    William McAdoo stepped in with courageous action, we read in Silber's gripping account. He shut the New York Stock Exchange for more than four months to prevent Europeans from selling their American securities and demanding gold in return. He smothered the country with emergency currency to prevent a replay of the bank runs that swept America in 1907. And he launched the United States as a world monetary power by honoring America's commitment to the gold standard. His actions provide a blueprint for crisis control that merits attention today. McAdoo's recipe emphasizes an exit strategy that allows policymakers to throttle a crisis while minimizing collateral damage.

    When Washington Shut Down Wall Street recreates the drama of America's battle for financial credibility. McAdoo's accomplishments place him alongside Paul Volcker and Alan Greenspan as great American financial leaders. McAdoo, in fact, nursed the Federal Reserve into existence as the 1914 crisis waned and served as the first chairman of the Federal Reserve Board.

    #10     Dec 20, 2009