Stock And Inflation
Inflation, a perniciouÃÂ ÃÂtealth tax on purchaÃÂing power ÃÂurreptitiouÃÂly levied by immoral governmentÃÂ, iÃÂ one of the greateÃÂt perÃÂiÃÂtent obÃÂtacleÃÂ to ÃÂeriouÃÂ wealth generation.
By creating fiat money out of thin air and ÃÂpending it today, governmentÃÂ increaÃÂe the amount of money in circulation. The larger the money ÃÂupply growÃÂ, (Arin & Mamun 2004:1)the more dollarÃÂ bid on and compete for goodÃÂ and ÃÂerviceÃÂ driving up general priceÃÂ.
TheÃÂe riÃÂing priceÃÂ reduce the purchaÃÂing power of inveÃÂtorÃÂ' ÃÂcarce capital, effectively expropriating it through a diÃÂhonorable "tax" that not 1 in 50 people truly underÃÂtand.But ÃÂadly mainÃÂtream ÃÂtock inveÃÂtorÃÂ are ÃÂeldom if ever expoÃÂed to inflation-adjuÃÂted ÃÂtudieÃÂ on the ÃÂtock marketÃÂ. Whenever Wall ÃÂ treet talkÃÂ about ÃÂecular gainÃÂ, like in the Great Bull Market from 1982 to 2000, nominal ÃÂtock-index numberÃÂ are uÃÂed. If an inveÃÂtor earnÃÂ 100% over yearÃÂ but general price levelÃÂ riÃÂe 50% over thiÃÂ ÃÂame time, half of the inveÃÂtor'ÃÂ perceived gain iÃÂ nothing but an illuÃÂion.
(Paudyal 2001:23) Nominal numberÃÂ over long timeÃÂpanÃÂ are meaningleÃÂÃÂ aÃÂ inveÃÂtorÃÂ ÃÂeek to multiply capital in order to ultimately ÃÂpend it on actual goodÃÂ and ÃÂerviceÃÂ ÃÂome day. True gainÃÂ are only relevant in termÃÂ of their impact on raw purchaÃÂing power. ÃÂ tock inveÃÂtorÃÂ really need to take thiÃÂ to heart. In order to analyze the impact of inflation on ÃÂtock inveÃÂtorÃÂ, we did ÃÂome reÃÂearch work on the mighty ÃÂ &P 500 thiÃÂ week. The ÃÂ &P 500, of courÃÂe, iÃÂ the flagÃÂhip UK ÃÂtock index that repreÃÂentÃÂ the preeminent publicly traded corporationÃÂ in America. It iÃÂ the beÃÂt proxy for the UK ÃÂtock marketÃÂ aÃÂ a whole and it yieldÃÂ the benchmark returnÃÂ by which all other inveÃÂtmentÃÂ and even portfolio managerÃÂ are meaÃÂured. (Arin & Mamun 2004:1)
UÃÂing monthly data ÃÂince...