Sure, energy and food are volatile, but can I go to a gas station and offer to pay the BLS-adjusted price? I cannot. So, to me it makes more sense to use the unadjusted dollars.
Maybe if you ALWAYS add four quarters and never compare quarter figures, then using adjusted dollars may be OK.
Hmm, I would still prefer seasonally adjusted figures.
It’s not as if the true value of the company varies cyclically with the season, right?
The only time I’s see your reasoning applying is if you have a life expectancy of three months.
When valuing securities in a given currency, I’m interested in monetary inflation, not my cost of living.
How much general purpose buying power is a share worth?
Fun anecdote about currencies, and how some people don’t realize understand how arbitrary the unit of measurement is—
I had a bank recently that gave a certain margin value of my portfolio, based on certain rules.
They’d give me different rates if the “lending value” of my portfolio was over a certain threshold.
This is a European bank.
In general they gave 70% of market value as the lending value of equities quoted in euros,
and 63% (a 10% haircut) for “foreign” equities (those quoted in other currencies) for the additional currency risk.
I pointed out that Berkshire was listed in both the US and Europe, and one share has the same value no matter what units you use to measure it.
I asked if I could sell all my BRK/B in the US and buy it all back in Frankfurt, and get the extra 11% in lending value because it would then be quoted in euros?
The room was silent and they sort of looked away. But…yes.
It’s much the same as the nonsense of newspaper articles asserting that gold (or oil or whatever) has hedging power as its price tends to rise when the US dollar falls.
Not quite catching on to the obvious extension: the price of everything in the universe rises quoted in US dollars when the US dollar falls.
Currency movements do matter a lot to me, since my income and expenses and assets are all a bit scattered.
Since most of the most important big currency movements are either in the US dollar or in the euro,
when calculating my net worth or portfolio progress I do this:
I value all my assets and liabilities in US dollars, convert that net number to Euros, and take a simple average of the two numbers.
I measure based on somewhere in the mid Atlantic.
A brief spike or dip in one of the currencies doesn’t mislead me as much that way.
I could take it further with more currencies, but it’s a diminishing return.
Oddly enough, this would probably make sense for anyone.
Just because your assets and expenditures are all in one currency doesn’t mean that moves in that currency don’t affect your real wealth.
But a good quality inflation adjustment will accomplish the same thing in general, just with more time lag.
Jim