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U.S. economy shrank at a 1.4% annual rate in the first quarter

wsj.com

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Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#191

Post by CuriouslyC »

bitcurious wrote: post #78
taylodl wrote: post #55

The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. The inflation we're seeing isn't a result of a hot economy needing to be kept in check, it's the fact that 40% of China's production is on lockdown and just about every product made, regardless of where it's made, is relying on part(s) coming from China. Supply is constrained and therefore prices are rising. Likewise, supp…

In my neck of the woods, by far the largest and most impactful inflation has been in the housing sector - 50% price inflation over the past two years. This is entirely attributable to the Fed's pumping of soft assets like stocks, leading to a bunch of paper millionaires cashing out.

Housing inflation is also exacerbated by low interest rates. I think severe taxes for unoccupied homes is a better solution than bumping rates though, as houses are already completely unaffordable for most and a rate hike just makes that worse for many while not limiting firms that buy in cash.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#192

Post by JumpCrisscross »

radford-neal wrote: post #171
throwaway4good wrote: post #54

Given that the economy grew 6.9% previous quarter, over the past two quarters, the US economy is growing at an annual rate of 5.5% - which is very high.

If you average 6.9% and -1.4% (which is close to being a valid procedure, since the numbers are fairly small), you get 2.75%, not 5.5%.

For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#193

Post by lisper »

mensetmanusman wrote: post #140

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing…

It is also good to keep in mind that GDP is not a good measure of societal well-being. If GDP double but the population quadruples, most people living at the end of that process would not consider it to be a good outcome.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#194

Post by radford-neal »

JumpCrisscross wrote: post #192
radford-neal wrote: post #171

Earlier quoted context omitted.

If you average 6.9% and -1.4% (which is close to being a valid procedure, since the numbers are fairly small), you get 2.75%, not 5.5%.

For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)

No. These are annual rates. The actual change in the fourth quarter was approximately 6.9/4 = 1.725% and the actual change in the first quarter was approximately -1.4/4 = -0.35%, for a total change of approximately 1.725-0.35=1.375% in the two quarters. That's an annual rate of approximately 1.375*2 = 2.75%.

(All calculations approximate, but close given that the percentages are all fairly small.)

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#195

Post by gruez »

riku_iki wrote: post #157
gruez wrote: post #96

Earlier quoted context omitted.

It was already priced in. On jan 3 the markets were predicting a 57.12% chance of interest rate increase to 25-50bp, 3.6% chance of increasing to 50-75bp. https://www.cmegroup.com/trading/interest-rates/countdown-to...

But market is not economy.

It trickles down. If the banks knew the interest rates are going to rise at the next fed meeting, they're not going to wait until the announcement to raise their rates. That means the effect of a rate increase is felt way ahead of it being announced.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#196

Post by HFguy »

JumpCrisscross wrote: post #169
HFguy wrote: post #153

Earlier quoted context omitted.

It is a common mistake, but stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium. That is, to invest and take on risk, an investor will demand a return above and beyond the expected value of the cash flows the business generates. Whatever path of GDP and/or population is expected to be is already factored into the discount…

> stocks don't have a positive return because GDP increases over time. They have a positive expected return over time because they have a risk premium You’re both right. The equity risk premium [1] is real. But it’s a premium over something. That something is, approximately, production. (It’s precisely the risk-free rate of return. Which, in the long run, is base-rate production.) [1] https://www.investopedia.com/ter…

Yes, all assets are priced relative to the risk free rate. As the assets all compete with each other and they all compete with cash rates. So that rate can be thought of as being baked into other assets already (including equities).

Having said that, if you wanted a return strictly on base-rate production, then you'd invest then in risk free assets (vs equities).

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#197

Post by JumpCrisscross »

radford-neal wrote: post #194
JumpCrisscross wrote: post #192

Earlier quoted context omitted.

For those who are wondering, the correct calculation is (1 + 6.9% / 4) × (1 - 1.4% / 4), or ~1.37%. Economy started with 100. It grew at 6.9%, or 1.725% in the quarter, to 101.725. It then shrunk 1.4% annualised, or 0.35%, to 101.37. (Edited to account for annualisation.)

No. These are annual rates . The actual change in the fourth quarter was approximately 6.9/4 = 1.725% and the actual change in the first quarter was approximately -1.4/4 = -0.35%, for a total change of approximately 1.725-0.35=1.375% in the two quarters. That's an annual rate of approximately 1.375*2 = 2.75%. (All calculations approximate, but close given that the percentages are all fairly small.)

Yup, I realised my error after commenting and inadvertently ninja edited from under you.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#198

Post by gruez »

lisper wrote: post #193
mensetmanusman wrote: post #140

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing…

It is also good to keep in mind that GDP is not a good measure of societal well-being. If GDP double but the population quadruples, most people living at the end of that process would not consider it to be a good outcome.

That's why you use GDP per capita for that.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#199

Post by russdill »

mensetmanusman wrote: post #140

It’s always good to remind people that: GDP ~= Population * Productivity If your population growth flat-lines (which it did last year), productivity has to compensate. Can productivity compensate if the average age is getting older (people tend to be less productive after a certain median age)? One reason investing in index funds makes sense is the underlying assumption that global population growth keeps increasing…

I feel like you're using that equation in a bit backwards way. If suddenly, everyone between the ages of 0 and 5 vanished, it would have a huge effect on the population, but at first take, zero effect on the GDP since presumably that age group is not involved in production. With a second approximation, you might say that GDP would increase since parental childcare is not part of the GDP and those parents could instead be adding to the GDP.

Similarly, the current flatlining (ignoring the decrease due to excess deaths) of the population won't effect actual production until a couple of decades on, unless you count possibly increased production described above.

Re: U.S. economy shrank at a 1.4% annual rate in the first quarter

#200

Post by nemacol »

incomingpain wrote: post #126
alexk307 wrote: post #100

Earlier quoted context omitted.

What are you talking about? Biden is going to use nuclear weapons against US citizens? I assure you, there is no food shortage in the United States. The S&P500 went down 15%, calm down, it'll go back up.

Quoted post unavailable.

> Obviously Biden threatened to nuke insurrectionists.

That is an insane takeaway from the clip you shared. No reasonable person would listen to those words and take it as a direct threat to bomb insurrectionists. I think you are a troll.

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