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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

#311

Post by mrslave »

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…

If the only thing driving your GDP is new people (and mostly immigration) you don't have a very productive economy. I think this has been the case in a lot of places for a long time, but that statistic just has to go up by the tiniest of amounts and we technically don't have recession and our leaders are doing great, right? It's a huge and disastrous example of Goodhart's Law in action.

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

#312

Post by gumby »

onlyrealcuzzo wrote: post #60
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…

Durable goods make up ~20% of the US economy at best (~12.7% on average according to the Cleveland Fed [1]). Food, energy, & financing are >50% of the US economy. The rest of the economy is primarily services - which have very little impact from the supply of screws & toasters coming out of China going down. [1] https://www.clevelandfed.org/en/newsroom-and-events/publicat... .

> The rest of the economy is primarily services - which have very little impact from the supply of screws & toasters coming out of China going down.

That feels intuitively correct to me, but I’d like to see some data. For example the shampoos and ointments and such used in hair and nail salons all comes from China. OTOH essentially all restaurant food is domestic.

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

#313

Post by gumby »

dragonwriter wrote: post #185
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…

> The fact the Fed is even contemplating a rate hike tells me they're misreading what's going on. Irrespective of the source, the Fed rate hike (well, and QT, which it is expected to also deploy) is the only tool it has available to deal with inflation, which is still, for now, the bigger problem from the perspective of it's mandate. The fact that (possibly transitory if policy were neutral) slowdown is occurring whi…

> the Fed rate hike (well, and QT, which it is expected to also deploy) is the only tool it has available to deal with inflation

And the signalling of aggressive hiking, though not all at once, is very important. By saying they will do it and then following through they can change course in a few months depending on conditions.

One of the important lessons from the 1970s was but unfortunately positive feedback loop baked into inflation escalators all based on expectations plus the only way to break the cycle was Carter to recruit Voelker to basically shut things down to damn that curve. Since then the Fed has used an interesting combination of oracular opacity alternating with clarity to try to prevent a repeat of the 1970s situation.

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

#314

Post by ChrisLomont »

HFguy wrote: post #153
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 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…

Risk doesn't add value. Production does. Stocks rise as the company is perceived as more valuable, generally due to productive gain.

People don't want to risk investing without expected gain. But the risk is not causing growth.

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

#315

Post by onlyrealcuzzo »

gumby wrote: post #312
onlyrealcuzzo wrote: post #60

Earlier quoted context omitted.

Durable goods make up ~20% of the US economy at best (~12.7% on average according to the Cleveland Fed [1]). Food, energy, & financing are >50% of the US economy. The rest of the economy is primarily services - which have very little impact from the supply of screws & toasters coming out of China going down. [1] https://www.clevelandfed.org/en/newsroom-and-events/publicat... .

> The rest of the economy is primarily services - which have very little impact from the supply of screws & toasters coming out of China going down. That feels intuitively correct to me, but I’d like to see some data. For example the shampoos and ointments and such used in hair and nail salons all comes from China. OTOH essentially all restaurant food is domestic.

The shampoo used in a hair salon is maybe 10% of the price you pay. The rest is labor, rent (finance), debt (finance), utilities (energy).

The vast majority of traditional services have ~50% of revenue going directly to labor.

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

#316

Post by MuffinFlavored »

anamax wrote: post #306
MuffinFlavored wrote: post #302

Earlier quoted context omitted.

i’m just trying to understand why a good share price benefits the company financially? It benefits the shareholders, and all the executives who are paid in stock. But I don’t understand why financially accompany benefits from a high share price unless they are diluting and issuing shares

The question is not whether the executives are paid in stock, it's whether they're paid at all. Executives who don't worry about share price get to work somewhere else.

i’m not asking about the executives or the board. Why does a company benefit financially if it stock goes up other than being able to issue stock more easily?

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

#317

Post by alexanderdmitri »

snikeris wrote: post #175
ben_w wrote: post #158

Earlier quoted context omitted.

> I’m super interested in what investing looks like in 50-100 years as the population starts collapsing I don’t think it’s possible to forecast economics on those scales. If I was cryonically preserved and woken up in 2122, I would be equally willing to believe we were declining or stagnant for the reasons you give… or that we had solved AI and von Neumann replicators and that the planet Mercury had been fully disman…

Before being frozen, what would you do w/ your current wealth to ensure you have something of value in the future?

Invest in the entities that are managing your storage and unfreezing.

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

#318

Post by ensan »

pjc50 wrote: post #49

Always wondering exactly what people mean when they talk of "civil unrest", and who and how will it start. Do the various riots in 2020 America or the Jan 6 storming of the capitol count? On the other hand, Elon Musk Twitter purchase: $44bn. There's plenty of money out there still. I think it's unlikely that merely raising rates will do anything, for two reasons: firstly there's a real need to do some fiscal policy a…

Look at the luxury stores being regularly robbed in cities like LA. Not exactly “civil”, but it’s an inevitable consequence of inequality: rich people can’t easily enjoy their nice things.

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

#319

Post by ensan »

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.

So what? If you look at the average speed of a racing car shortly before it crashes, it will be very high.

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

#320

Post by qiskit »

adam_arthur wrote: post #251
qiskit wrote: post #167

Earlier quoted context omitted.

> pretty clear the primary driver was demand driven. Perhaps after the sharp downward in 2020. But it isn't clear what is the primary driver after the 1st qtr of 2020. That chart doesn't necessarily imply consumer consumption is driving the increase. It could be inflation that's driving the uptick in the chart. If last year it cost $1 to buy a dozen eggs. And now it costs $2 to buy a dozen eggs, it would cause a spik…

The chart is very obvious. We have a 10y trend of gradual increases YoY in consumption. Then the pandemic hits and we have a 30%+ increase in consumption in the span of a year. That doesn't happen by mistake, and if you look at the personal income charts it becomes even more obvious. Also the various spikes in consumption clearly aligns with when the respective spending packages were passed. The fact that it took a w…

> The chart is very obvious.

It is only obvious to people who have already drawn their conclusions and are looking for justifications to back up their conclusions.

> That doesn't happen by mistake, and if you look at the personal income charts it becomes even more obvious.

Once again, you already had your conclusion and went looking for "data". Personal income spiked briefly and fell back down back to its linear trajectory.

> The fact that it took a whole year for people to understand the root cause is quite amazing, given that we have this very obvious data. But there was a vested interest in it being a supply side issue, so I'm not surprised

Looks like there is vested interested everywhere.

In my experience, people who see the "obvious" in a very complicated issue are agenda driven people with vested interests. Also, my comment was in relation to consumption and inflation. My point was that you can't necessarily see inflation in consumption because you can't tell if the increase in consumption was due to inflation or more purchases. Something you completely ignored.

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