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Will they make up their goldarn #*@^&$# minds! Is inflation good or bad for equities?
Old 06-13-2008, 08:12 PM   #1
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Will they make up their goldarn #*@^&$# minds! Is inflation good or bad for equities?

Could somebody help me on this? All the financial planners I have dealt with and most websites I have read say you must have a big dose of stocks to offset the effects of inflation. However, certain others say that inflation destroys value and eats away at real investment returns. I also personally note that a whiff of inflation and the stock market goes down and expectations of inflation makes interest rates rise, which is bad for stocks. Which is it for heavens sake? Or are we talking about very long term effects vs. short term reactions?
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Old 06-13-2008, 08:20 PM   #2
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http://www.nytimes.com/2008/06/08/bu...ey/08fund.html says the answer is "Not necessarily"
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Old 06-13-2008, 08:33 PM   #3
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High inflation is universally bad. The question is how do you cope. Stocks, which can theoretically raise prices in inflationary periods, should do better then normal bonds. So its not that stocks will necessarily benefit from high inflation, they are just one of your least bad alternatives.
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Old 06-14-2008, 03:41 AM   #4
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inflation causes values to rise naturally. you may not be ahead in real dollar terms but non the less stock prices will rise generally just from the dollar value falling.
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Old 06-14-2008, 04:54 AM   #5
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1981 New Yorker cartoon:

The Big Picture | What Do Higher Rates Mean?
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Old 06-14-2008, 06:16 AM   #6
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now that says it all!
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Old 06-14-2008, 12:17 PM   #7
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Originally Posted by cashflo2u2 View Post
I also personally note that a whiff of inflation and the stock market goes down and expectations of inflation makes interest rates rise, which is bad for stocks. Which is it for heavens sake?
First, try to keep in mind that the stock market is a whimsical creature, intent on making us look like idiots.

Given that, the best overall inflation resistant stock is what WEB calls a "toll booth". Some enterprise that has pricing flexibility, is either strongly desired or needed, for which level of demand is relatively insensitive to price, and which requires little ongoing maintenance capital spending.

Correctly identify a few of these and you troubles are over. In fact, inflation will be your best friend. Other than your faithful doggie, of course.
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Old 06-15-2008, 04:05 PM   #8
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I'm beginning to get the picture!
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Old 06-15-2008, 06:22 PM   #9
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Correctly identify a few of these and you troubles are over. In fact, inflation will be your best friend. Other than your faithful doggie, of course.
See how easy and foolproof it is. Just put your feet up, lean back and let the money roll in.
There are plenty of stockbrokers that'll show you how to do it too.
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Old 06-15-2008, 06:37 PM   #10
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See how easy and foolproof it is. Just put your feet up, lean back and let the money roll in.
There are plenty of stockbrokers that'll show you how to do it too.
You are welcome to your sarcasm and defeatism. I didn't say it was easy; it is however possible. For some people, that is.

Ha
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Old 06-16-2008, 12:47 PM   #11
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In his "Stocks for the Long Run", Jeremy Seigel has shown that stocks, in the past, have been a good long-term hedge against inflation, but react negatively in the short term.

Its a book worth reading.
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Old 06-16-2008, 12:58 PM   #12
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In his "Stocks for the Long Run", Jeremy Seigel has shown that stocks, in the past, have been a good long-term hedge against inflation, but react negatively in the short term.

Its a book worth reading.
great book......I have an AUTOGRAPHED copy............
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