The Only Republican in San Francisco

Is the stock market one big inflation hedge?

I’ve mused out loud to friends that the recent run-up of the stock market was not based on confidence in the economy or the individual companies, but rather an expression of the value of a dollar. It’s fairly simple: investors see the currency losing value over time (due to gov’t spending), and so convert their currency into assets. It’s basically like buying gold, i.e., an inflation hedge.

By my theory, the fundamentals of the stock market haven’t changed – the companies’ prospects haven’t improved dramatically – but it now takes more dollars to buy the same amount of stock. The “rising” market is anticipating inflation, not recovery.

But since I hadn’t heard any smart people saying such a thing, I figured there wasn’t much to my theory. But, cue horn-tooting, the WSJ’s numbers seems to support it: “Adjusted for Inflation, Dow's Gains Are Puny”.

How much of the market’s recent 20% gain is simply a precursor of (real) inflation?

My cities

Can I pick them or what? I lived for many years in San Francisco, apparently the worst-run city in the US:

It's time to face facts: San Francisco is spectacularly mismanaged and arguably the worst-run big city in America. This year's city budget is an astonishing $6.6 billion — more than twice the budget for the entire state of Idaho — for roughly 800,000 residents. Yet despite that stratospheric amount, San Francisco can't point to progress on many of the social issues it spends liberally to tackle — and no one is made to answer when the city comes up short.

Funny thing about government – they get paid regardless of how good a job they do. Would you hire a housepainter on those terms? An administrative assistant? Yet we do it with government every day. (We can expect government-run medicine to perform similarly.)

Government spending is poverty. It is the destruction of wealth. Imagine a world of hungry people, where the proposed solution is to take food out back and burn it: governments, local and national, apply the same reasoning to money.

Being the social-climber that I am, however, I recently moved to the poorest place in America.