jimmy46

How Stocks Are Like Bonds

While there are many interesting comments in that article, I don't believe it explains "How inflation swindles the equity investor".

In the lengthy article there was only one sentence that hinted of that problem:

"""Replacement cost accounting almost always shows that corporate earnings have declined significantly in the past decade."""

That is, depreciation based on historical cost hides the theft of inflation because when the next plant needs to be built, it will cost far more than the one it replaces. And the meager depreciation that had been allowed in the inflationary years will not have been enough to pay for it.

Ideally as inflation increases, depreciation allowances should also increase.
But try explaining that to Barney.