Equity returns/REAL vs NOMINAL
With the possibility of inflation finally on many investor radar screens
and certainly in the context of the current era of quantitative easing,
looking at the current equity rally in terms of inflation is an
important perspective in determining what was real and what was
inflation induced. At 900 in the S&P 500, we’ve seen a 35% nominal rally off the intraday low of 666 on March 6th. Using the CRB index to measure commodity inflation, the REAL return, from that date, has been just 11.5% as on March 6th the S&P 500 bought 3.23x the CRB index and today it can buy 3.6x. There is no question that the economy has gotten less worse and considering the dramatic market declines year end ’08 thru March, a sharp rally was to be expected but the Fed’s money printing (among other central banks) is also helping to give the impression of health.
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May 28th, 2009 at 3:08 pm
Excellent point made above.
Assuming that the secular bear market continues for several more years, the relationship between SPX and CRB will become more important as time goes on. For example, some have argued that the SPX could get to the 500 level or even lower. I don’t think it’ll get there in nominal terms. But it may just get there in some sort of “CRB adjusted” terms… although it may take several years.
May 29th, 2009 at 4:53 pm
Telling us the fines means nothing if you don’t tell us how much they were convicted of paying in bribes. This could be peanuts, not prohibitive and in fact could encourage them to simply factor getting caught into their huge money pots. they have more money than governments at their disposal. they are “they” – the enemy of the lower and middle classes in this ongoing class war that little people have been losing forever.
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