In our last post we reviewed the price increases for several commodities, stocks and bonds, covering most of the global investable universe. Let’s take a closer look at some of the implications touched on.
For convenience, here are the figures again:
Copper (CPER): 30.34%
Gold (IAU): 24.23%
Silver (SLV): 40.88%
Platinum (PPLT): 13.13%
Short Term UST (VGSH): 1.77%
Intermediate Term UST (VGIT): 5.32%
Long Term UST (VGLT): 12.87%
US Stocks (VTI): 19.72%
XUS Stocks (VXUS): 8.38%
Stocks (VT): 14.64%
Several possible takeaways here. One that struck me was the gains across such disparate assets as copper, gold, long term treasuries, and stocks around the world. This covering a period during which took place the worst economic collapse since the Great Depression.
What do these assets have in common that would make them all increase in value by double digits? Nothing intrinsic to the assets themselves presents itself. The one thing that they all unequivocally have in common isn’t in the assets themselves, but rather the fact I’ve quoted them in dollars. After all the price of something is just the value of that something divided by the value of the pricing unit.
Maybe they didn’t increase in value. Maybe the dollars deceased.
And by a heck of a lot more than 2%.
Had I quoted those prices in ounces of copper or ounces of gold, stocks and bonds would all be down. Pricing stocks in terms of gold instead of dollars, for example, we have:
US Stocks (VTI): -3.71%
XUS Stocks (VXUS): -12.83%
Stocks (VT): -7.79%
A little more consistent with economic reality? A change in your choice of units can be so clarifying.
Consider that the value of an asset is ultimately in what you can buy with it. So for the actual value of this group of assets to have increased by double digit percentages would mean that there would have to have been a double digit increase in the amount of goods and services produced.
That’s just not happening.
We’re staring down the barrel of double digit inflation. Either asset prices must fall or consumer prices rise in kind. Or some messy combination of both.