Spencer Jakab
speaker
981 appearances
14 recordings
1 series
first heard Jul 2017
last heard Jun 2021
Spencer Jakab’s voice in public audio — every appearance, attributed to the second.
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Appearances
People think back to the 1970s when stocks really did badly.
There was a famous 1979 Businessweek cover saying the death of equities, why inflation is killing stocks.
And
They did do badly and they do do somewhat badly during periods of high inflation, but not all of them.
You have to take a more nuanced look, which is what we've done as a team at Hurt on the Street.
Looking at the S&P 500 overall or its predecessors, when you've had low inflation between 0% and 1.5%, then the real return, so the inflation adjusted return of stocks has been really good, has been 10.6% a year.
If you look at periods when it's been between 2 and 2.5%, let's say, where you were just a few years ago, the return goes down to 6.5%.
If you look at when inflation is higher than 6%, the real return has just been 1.2%, which is a very low return for stocks.
Certain stocks actually can do pretty well.
Some stocks actually will make you money in real terms during periods of inflation, and there are reasons for that.
And some are terrible to own.
Yeah.
And some companies, there are some companies that have a lot more control over the prices that they can charge and some that don't.
There are some companies that are more indebted.
And basically, if you're a debtor, if you have an extremely high mortgage or if you're a company with lots of borrowings, you might welcome inflation because if you've been profligate or if you borrowed a lot of money.
then the real value of the money that you have borrowed is going down when there's inflation.
And if you can increase your prices along with general price increases, then you can keep pace with inflation.
And in some cases, you can actually do pretty decently.
So it depends.
There are some companies that aren't very flexible and tend to suffer when inflation picks up.
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