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Comment by vincnetas | Hacker News Reader

And you know what happens with the money that you take, save and invest?

They go in to public companies, they hire MBA's, and they try to improve profitability of company by letting engineers go.

Your money have come a full cycle :)

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It’s okay, if they improve profitability enough at places like Boeing our investments will be the least of our worries!

TINA when CPI inflation (in the UK) is has been 18% in just 2 years.

> TINA when CPI inflation (in the UK) is has been 18% in just 2 years.

The UK inflation rate was 3.9 percent in November 2023, down from 4.6 percent in the previous month. Between September 2022 and March 2023, the UK experienced seven months of double-digit inflation which peaked at 11.1 percent in October 2022. https://www.statista.com/statistics/306648/inflation-rate-co...

I can't tell from the context of your comment whether you believe the monthly inflation figures are inflation that happened in that month (the "one month's worth of inflation was X%") or if those are annualized figures (the "one month's measure of an annualized rate of inflation").

If you are of the belief that the monthly inflation figures "stack", you are saying inflation is much higher than the 18% in 2 years that GP reported.

If you are not of that belief, then the figures you cite are fairly consistent with the 2 year rise in prices being in the +18% neighborhood.

UK CPIH index value (includes cost of housing)

Nov 2021 - 114.1

Nov 2023 (latest value) - 130.0

So, 14%. 18% slightly out of date figure.

Cash in the bank, even at 5% rates, hasn't kept up.

Cash in the bank normally doesn't keep up. If it does, the orthodox view is that you risk a deflationary spiral.

Central banks want to incentivize investments.

It's not what they want. It's the mechanics of their business.

They borrow short at base rates and lend long at a margin

Owning shares in the entities for which money for goods and services pass through is the way to keep up with inflation. If I buy things from Costco/Apple/Toyota/Novartis/etc, then they increase prices, then their share prices go up accordingly.

Anything else will fall short.

This is a phenomenon of the last two decades. Before the fed started cutting rates after 9/11 (to support the country, the financial markets, the housing markets, etc.) both money market and savings accounts (you had to choose a good bank) usually gave positive inflation adjusted return.

Barely.

In real terms US bills have returned 0.4%/yr over the last 120+ years

Seems to me Treasury bills meaningfully outpace inflation, on average: https://www.bauer.uh.edu/rsusmel/other/lrret1.htm. But I was talking about cash accounts, which typically pay lower interest rates than T-bills or CDs (as noted on the above link).

In the late 1990s my savings account at the EmigrantDirect was paying about 7% with inflation around 3%.

This was not a term deposit, but a regular account, either itself with check-writing privileges or linked to a checking account with 1-3 day transfers. I think MMFs with check-writing paid similar interest, although not 100% sure as I never put my money there. Those were cash accounts as I could withdraw any amount, up to 100% of the account any time without any penalties.

Probably a confusion of what that percentage is - whilst the monthly figure is as you have said, the accumulated/aggregate percentage of inflation over those two years is probably what GP refers to as 18%

> Probably a confusion of what that percentage is - whilst the monthly figure is as you have said, the accumulated/aggregate percentage of inflation over those two years is probably what GP refers to as 18%

“Montly” inflation rates are usually expressed in terms relative to the prior year, not prior month.

When we look at another data source, annual inflation rates for the UK don’t appear to be 18%: https://www.macrotrends.net/countries/GBR/united-kingdom/inf...

I said in two years, not one.

1L Arla Lactofree milk was £1 around 2013 in Tesco. Today, it's £1.85.

Bank of England inflation calculator at https://www.bankofengland.co.uk/monetary-policy/inflation/in... says it should be £1.34

So much for the inflation numbers.

Inflation measures are not across the board, they are aggregates. Similar to how pay at one company and profit is not ever the same even within the same industry or audience, different products have different prices.

The average male height is 176cm, but I'm 187. LIES I TELL YOU! PURE LIES!

aka, some folks on HN don't know about statistics.

Oh, I understand statistics, that's not what I'm saying: I'm plainly saying that so far, with anything I threw at it, the gov.uk inflation calculator is a plain lie.

In my experience--which is anecdotal, and thus shouldn't be trusted--nearly any discussion of inflation involves people waving around their untrustworthy anecdotal experience as evidence that the statistics are wrong.

Are you suggesting that while milk might have a price spike, carrots and beef would compensate?

But that's not what happens. What comes down in electronics. If you exclude food, shelter and medicine (things you need to live) the numbers are in line with govt estimates. But most people would bristle at this approach.

At least in the US, the government publishes overall inflation, inflation less food and energy, and inflation for each major category.

"This item looks different to me", "this category looks different to me", and "this basket looks different to me" are real feelings, but the government isn't straight up lying about inflation measurements.

> the government isn't straight up lying about inflation measurements

Agreed. The government publishes the methodology and the source data the final numbers are based on are generally publicly available. However, the methodology slowly changes with time. And whatever the rationale is (there is always one that sounds good) its effect is always lowering computed inflation numbers. And lower inflation numbers give government ability to keep printing and spending money -- a dream for most officials.

So while I do not think the government is straight up lying, it is slowly twisting the methodology due to seriously misaligned incentives. My 2c.

It's just a misdirection that hides details with extra steps so we can all just argue with zero concrete steps.

But either way, I've lately become convinced to ignore inflation. The real thing we should be reducing is printing of money, no if buts or maybes.

I work with farms. Some are having to cut the number of milkings from 3/day to 2/day since the workers they would normally use are not available.

That's why we now have the Vimes Boot Index - https://www.vimesbootsindex.co.uk/

And food prices feel like they're up 50% over the same period, especially when you start noticing the shrinkflation.

£6 for a pint of beer (outside of London) is 'the new normal'.

TINA stands for There Is No Alternative? That's a new one for me.

> Your money have come a full cycle :)

Until the huge bubble around tech companies explodes.

Tech (Meta, Apple, Amazon, Microsoft, and Alphabet) is pretty profitable with reasonable P/Es.

Reasonable by 2024 standards or by 1990 standards? I'm fairly sure that the P/Es of today would have been considered overvalued a few decades ago, when profits actually meant something, dividends were handed out, etc.

Amazon is priced for massive relentless growth.

Apple, Microsoft, Meta priced for modest growth.

> Apple [...] priced for modest growth.

Do we live in the same metaverse?

AAPL priced for modest growth? The $3tn company???

Apple's PE is 30. Seems like modest growth, is implied.

Share prices increase if the supply and demand curves for the shares move accordingly.

Share buybacks decrease supply of shares relative to demand, so share prices increase.

Share buybacks are likelier to happen the more profitable a business is.

A higher share price at time t+1 than time t means the shareholder can earn a profit if they buy a share and then sell later.

Ergo, profits mean something.

Edit: as a reply to the comment below this, please take a moment to look around and identify anything providing you utility that was the product of a publicly traded company.

A perfect example of how the only meaningful product of a publicly traded company is the stock itself.

I think they missed the idea that everything has a market. It is more of a macro econ class idea than the micro one most people take. Stock has is a market in itself. As well as the product they sell. But so is the money. The inputs for those different markets are different. You have very nicely described the market for stock dividends.

Stock buy backs are a tax efficient dividend. https://www.cnbc.com/2018/08/31/warren-buffett-explains-the-...

Google's PE is 25 today compared to the S&P of the 1990s 15 https://www.multpl.com/s-p-500-pe-ratio/table/by-year

That said in the 1990s the US had access to a huge new market (the USSR market), something that US companies don't have today.

Dividends are not handed out because they are a silly way to distribute profits. Buybacks are better. This way people who want money out can sell some stock and those who don't avoid a burden of reinvesting the money as well as taxes. Dividends mean a company managements thinks the stock is overvalued so it's not profitable to buy it back and it's better to pay cash out (there might be also some regulatory reasons like paying dividends to qualify for being an investment for various funds).

For those reasons avoiding companies that pay significant dividends is a superior investment strategy (because it means more competent management or management that doesn't consider the stock overvalued).

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