Subject: Re: Hopes, for Greg’s first letter?
Reading those sentences carefully, it seems 2025 is being compared with the five-year period 2021-2025, inclusive.
Perplexity: "By standard index-level measures, S&P 500 revenues had more than recovered from the pandemic shock by 2021 and were growing solidly by 2022"
Perplexity again: average CPI 2021-2025 was 4.9%/year bc this period includes the pandemic bump.
So presenting a nominal ten-ish percent increase in any revenue metric over a five year average as a positive finding seems...maybe not milking the data, but not entirely disingenuous, either.
In a rolling five-year period, isn't our IV supposed to increase after inflation?


That's a bit inappropriately harsh.

First, I think his comments were intended primarily along the line of "it was a reasonably good year, numbers were better than the recent average". Value is growing, though obviously not soaring.

But taken as data points for a rate of growth, note that he compared the most recent year to the five year average, NOT the level five years ago. The middle of a five year average is only two years before the middle of the most recent year. So, for example, the recent $46bn of net cash flows from operating earnings versus a five year average of $40bn would (to the extent it's meaningful) represent a compound annual growth rate of 7.24%/year, since you need to annualized for two years, not five.

Though it's rather an odd calculation to choose, US CPI inflation calculated the same way would be 3.58%, so you could (if squinting) think of the recent growth rate of net cash flow from operations as inflation + 3.66%/year. A slow patch, but not backsliding. US monetary inflation has actually been remarkably steady around 2.8% for the last 2.5 years, using MCT inflation figures. Think of that as "what is the change in the purchasing power of a buck, ignoring product category specific anomalous price changes". If the price of eggs soars but everything else is flat, that's an egg problem, not a problem with the value of a dollar.

Jim