Today on CNBC I saw something very interesting. In light of high inflation rates implied by both the CPI and PPI (today), Steve Liesman noted (correctly) that publicly traded companies generally report earnings, etc. without taking inflation into account (translation: they report NOMINAL values not REAL values). I have been saying this for years in my MBA class. I guess when earnings growth is far above inflation, it isn't so bad to overlook real values.
Still, remember what we talked about in class: WHEN WORKING WITH DATA OVER LONG PERIODS, NEVER RELY ON NOMINAL VALUES. ONLY REAL VALUES ARE COMPARABLE OVER SUCH A TIME SPAN.
So, with inflation currently running around 2.5%, any company whose year-over-year (nominal) earnings growth (or revenue growth, etc.) is below 2.5% is experiencing a decline in its real earnings or revenue.
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