Of Dollars and Data

As usual, there's a few chart crimes in here.
Chart 1 shows CPI and inflation adjusted wages on the same graph? Why? Inflation adjusted wages already take into account CPI. There's no sensible reason to plot these two on the same graph.

The caption is "wages are up 80% but that didn't keep up with living costs" - you cannot draw that inference from this graph. This graph actually shows that in fact wages grew faster than inflation.

Housing is another red herring, of course, because the average new American home is 2x bigger now than it was in the 70s - and the average American family is like 10% smaller. Broadly, 1 square foot of the 'average' American home costs exactly the same as it used to in the 1970s. [1] So yes, housing is more expensive in big cities but that's because of zoning as Mr. Andreessen will tell you. Outside big cities it's still zoning, which requires minimum setback, garages, square footage, etc.

In fact if you look by cohort, inflation-adjusted, millennials are doing roughly as well as other generations did at their age. [2]

Their flagship claim that folks have 86% less purchasing power now holds zero water. The poverty rate remains basically unchanged since the 70s. [3] You'd think there'd be a lot more people in poverty if they only had 1/10th the buying power no?!

Some things are more expensive (college, healthcare, 1 sqft of house in a big city, new houses outside of town) and yes, productivity growth far outpaced wage growth - but wage growth…

I don't know. But I am still diligently putting part of my paycheck in the S&P 500 every single month. I don't believe you can accurately time the crash, and by cashing out, you are losing some significant returns [0].

In fact, I remember reading last year, a widely discussed article in HN about how we were in a "Late-Stage Major Bubble" [1], since then, then S&P 500 has gone up more than 20%. I'm glad I stayed invested.

Even if we are in a bubble, the maxim "The stock market can remain irrational longer than you can remain solvent." still applies.

Lastly, regardless of the FED balance sheet, I believe the US remains the best place on earth to start and run a business. America breeds a culture of risk-taking and entrepreneurship and most of the innovation in the world still comes from there.

When asked "What are America’s primary strengths?", Lee Kuan Yew, former Singapore's PM, had this to say:

Americans have a can-do approach to life: everything can be broken up, analyzed, and redefined. Whether it can or it cannot, Americans believe it can be solved, given enough money, research, and effort. Over the years, I have watched the Americans revise and restructure their economy, after they were going down in the 1980s, when Japan and Germany looked like they were eclipsing America, taking over all the manufacturing. Americans came roaring back. They have the superior system. It is more competitive.

What has made the U.S. economy preeminent is its entrepreneurial…

Take a look at the linked article https://ofdollarsanddata.com/why-private-school-isnt-worth-the-cost/

The author is pointing out that spending gobs of money on expensive educations is no better than the public education that is either free (high school) or cheaper (public colleges.)

I've lived this, too. My parents sent me to a private high school, and later when I found rankings in my state, my private high school was no better (or worse) than the free one in town. I was no better or worse off, I probably would have kept most of the same friends, and probably would have gotten into the same colleges.

Then, my Dad pushed me to a "fancy" private college. The professors were just so-so, and I should have transferred. (I didn't know better.) Later I found rankings and my "fancy" college ranked poorly, but the public college nearby was ranked significantly higher.

After graduating from college, I bumped into some people from high school, and we all agreed that our guidance counselor gave us horrible college advice. Had I gone to the public high school, would they have pushed me towards the better public college? I have no idea.

> 1900 had invested passively in the stockmarket, spent 2% of their wealth

How is that possible, though?

e.g. according to

https://ofdollarsanddata.com/sp500-calculator/

adjusted by inflation the stock market only grew by 34.10% between 1900 and 1982 when adjusted and even if dividends were reinvested. And that's total growth, annualized was barely 0.36%

Their wealth wouldn't have increase at all during that period, especially if they wanted to spend 2% each year.

Of course it accelerated massively in the 80s (1900-2024 was 2.48% annualized) but using the average would make no sense.

If you were still very rich in 1982 you would have made a massive amount of money since then. e.g. somebody like Trump invested all of his inherited wealth (and everything his dad gave him before) into the stock market instead of pretending that he was a very "successful" businessman he would have been much, much richer than he was in 2016 and wouldn't have had to be so ashamed about realising his tax returns.

> […] you can't justify the claim that it's entirely "underlying business activity that drives total returns".

The S&P 500 index tracks earnings per share (EPS) fairly closely over the decades:

* https://www.macrotrends.net/1324/s-p-500-earnings-history

A lot of folks think the top ten stocks in the S&P 500 making up ~40% of the capitalization is bonkers, but they also make up ~40% of the net income share:

* https://en.macromicro.me/collections/34/us-stock-relative/142686/us-sp-500-top-10-companies-market-cap-revenue-earnings-share

So from an earnings/income perspective, there appears to be a link between the two.

Perhaps worth noting that the US markets seem to (only?) outperform when tech is outperforming, with other US non-tech sectors basically performing the same as out countries' non-tech sectors:

* https://ofdollarsanddata.com/do-you-need-to-own-international-stocks/

This isn't only a problem with technology: https://ofdollarsanddata.com/why-winners-keep-winning-4e7f221f5b84

> Both King and Rowling’s foray into undercover writing reveals a harsh truth about success and social status — winners keep winning. This idea is formally known as cumulative advantage, or the Matthew effect, and explains how those who start with an advantage relative to others can retain that advantage over long periods of time. This effect has also been shown to describe how music gets popular, but applies to any domain that can result in fame or social status. I discovered this concept by reading Michael Mauboussin’s The Success Equation where he writes:

>> The Matthew effect explains how two people can start in nearly the same place and end up worlds apart. In these kinds of systems, initial conditions matter. And as time goes on, they matter more and more.