31–40 of 152 posts
I'm sure absurd parasitic government interference, lawfare, and shareholder activism in public corporations has nothing to do with all the good companies going private, ergo smart people telling the lawyers to go to hell, old people with pensions hardest hit.
Earlier quoted context omitted.
Semiconductors and software have created enormous amounts of value for the companies that own them , but the Fed usually thinks in macroeconomic terms. For the macro economy, the effect of technical development on overall corporate profits is much more muted. Creative destruction destroys old industries as much as it creates new ones. For example, there's a TV show "Mad Men" about the dominance of Madison Avenue adve…
Interest rates have been all over the map over the last 60 years, including double digits in the 80s, and yet low-cost index funds have been a reliable driver of wealth that entire time.
Then if you held from 1982 to 1987, the S&P 500 nearly tripled, despite low inflation and relatively few major technological changes. What was the difference? Interest rates went from 19% to 6%.
A useful lens with which to view this and other phenomena is "Which factors cancel out, and under what timeframes?" Technological development leads to large microeconomic winners and losers but little macroeconomic effect under short time frames, less than the business cycle, because the mechanism by which it increases overall welfare is to put workers out of work and firms into bankruptcy, freeing up those workers and that capital to be invested in new enterprises. Interest rates have a large effect over that timeframe, because they affect all firms in the economy equally. Over long time frames (multiple business cycles), the effect of interest rates washes out because they go up and then they go down and eventually they equilibrate near the long-term average. Technological development dominates then because you've given the economy a chance to adapt to new production methods and re-employ workers in obsolete jobs.
I'm sure absurd parasitic government interference, lawfare, and shareholder activism in public corporations has nothing to do with all the good companies going private, ergo smart people telling the lawyers to go to hell, old people with pensions hardest hit.
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Earlier quoted context omitted.
> efficiency gains from globalization have already passed their peak Is this true? Aren't there a ton of developing nations that have rapid debelopment that will increase efficiency of different industries as they grow?
There aren't a lot of Indonesias left.
Very interesting paper. > I show that the decline in interest rates and corporate tax rates over the past three decades accounts for the majority of the period’s exceptional stock market performance. It's interesting that they've shown this to the exclusion of other narratives, mainly frontier markets like semiconductors and software allowing "easy" creation of value. I think this is partially why investors are so ea…
I believe in almost no predictions that assert a change from the existing regime. Regime shifts of this scale (a stop to equity growth) are extremely rare. But nobody publishes papers on why the existing status quo will continue. The show will go on, technology will be deflationary, which will support interest rate drops. Inflation will get sucked out of the economy, and life will go on. Anyone that ever acted on adv…
Earlier quoted context omitted.
Semiconductors and software have created enormous amounts of value for the companies that own them , but the Fed usually thinks in macroeconomic terms. For the macro economy, the effect of technical development on overall corporate profits is much more muted. Creative destruction destroys old industries as much as it creates new ones. For example, there's a TV show "Mad Men" about the dominance of Madison Avenue adve…
Interest rates have been all over the map over the last 60 years, including double digits in the 80s, and yet low-cost index funds have been a reliable driver of wealth that entire time.
I'm sure absurd parasitic government interference, lawfare, and shareholder activism in public corporations has nothing to do with all the good companies going private, ergo smart people telling the lawyers to go to hell, old people with pensions hardest hit.
> I show that the decline in interest rates and corporate tax rates over the past three decades accounts for the majority of the period’s exceptional stock market performance. Lower interest expenses and corporate tax rates mechanically explain over 40 percent of the real growth in corporate profits from 1989 to 2019. In addition, the decline in risk-free rates alone accounts for all of the expansion in price-to-earnings multiples. I argue, however, that the boost to profits and valuations from ever- declining interest and corporate tax rates is unlikely to continue, indicating significantly lower profit growth and stock returns in the future.
Great paper, very though-provoking.
Thank you for sharing it on HN!