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The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

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Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#41

Post by paxys »

nemo44x wrote: post #4

I could be mistaken but using the S&P500 index might be slightly problematic in that the companies that compose this index change all the time. This almost guarantees that the index increases in value over time as high performers are added and low performers are removed. There is an upward bias. I don't doubt that overall, on average, much growth has come from a 40 year decline in interest rates and a consistent lowe…

The companies that compose the entire stock market also change all the time, and follow the same pattern (winners rise, losers go bankrupt). So the S&P 500 is still a good benchmark of overall stock market performance.

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#42

Post by pdxandi »

languagehacker wrote: post #36

Quite a few authors have pointed out that the "financialization" of American businesses, with a focus less on innovation or investing in their workforce and more on massaging their numbers to meet shareholder expectations, has created a lot of short-term enrichment for the super-wealthy while absolutely destroying the middle class as we know it. This seems like more fuel for that fire.

I’ve shared this opinion for a while, and would love to hear more informed opinions. Do you have any links to articles you’d recommend reading?

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#43

Post by criddell »

Stock returns grow because that's where people and institutions put their money.

If stock return growth slows (assuming they aren't talking only about dividends), that means either there's less money in general or it's being parked elsewhere. Which is it?

Or do I misunderstand what stock growth is?

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#45

Post by SoftTalker »

languagehacker wrote: post #36

Quite a few authors have pointed out that the "financialization" of American businesses, with a focus less on innovation or investing in their workforce and more on massaging their numbers to meet shareholder expectations, has created a lot of short-term enrichment for the super-wealthy while absolutely destroying the middle class as we know it. This seems like more fuel for that fire.

Really, anyone with a 401k or similar investments has benefited from this. That's a lot of middle class folks. Your parents, your grandparents, and very likely you. It's far from limited to the super-wealthy.

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#46

Post by crystalmeph »

psunavy03 wrote: post #25
nostrademons wrote: post #21

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.

https://fred.stlouisfed.org/series/DGS10/

Zoom out to "Max" to get the full 60 year history. You can clearly see a full four decades of declining interest rates running from 1981-2020. That very neatly corresponds with the amazing stock market growth most HN readers, myself included, have grown up with.

The stock market growth is neatly correlated with declining interest rates, not with the actual value of the interest rates currently. That is, until the interest rates can't go any lower. The 10-year yield got as close as I hope it will ever get to zero back in 2020. There's nowhere to go but up from there.

For myself, I'm dusting off the old magic - a 60/40 stock/bond portfolio, with the stocks focused on value funds, plus a relatively small amount in "breakout" funds that could multiply a few times if technology goes the way I think it will. Maybe if interest fall a little bit I'll dial it to a 70/30 mix, but bonds are definitely part of the equation now.

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#47

Post by TeaBrain »

nostrademons wrote: post #21
darby_nine wrote: post #2

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…

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…

Google, Facebook and other internet platforms destroyed the viability of the industry previously providing the advertising mediums, which were newspapers/magazines. They didn't completely destroy the ad agencies creating the advertising. Large advertising firms are still responsible for many ads seen on YouTube, tv, billboards or on static Google/Facebook ads.

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#48

Post by anotherhacker »

SoftTalker wrote: post #45
languagehacker wrote: post #36

Quite a few authors have pointed out that the "financialization" of American businesses, with a focus less on innovation or investing in their workforce and more on massaging their numbers to meet shareholder expectations, has created a lot of short-term enrichment for the super-wealthy while absolutely destroying the middle class as we know it. This seems like more fuel for that fire.

Really, anyone with a 401k or similar investments has benefited from this. That's a lot of middle class folks. Your parents, your grandparents, and very likely you. It's far from limited to the super-wealthy.

Not quite. This behavior leads to firing of middle-class workers. John Deere just laid off 300 workers, moved the factory to Mexico, engaged in buyback, and gave the CEO a huge pay.

So, yeah, it helps your 401k, but in the mean time you don't have a job. And if you do have a job, your salary is not increasing in line with inflation...

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#49

Post by TylerE »

anotherhacker wrote: post #48
SoftTalker wrote: post #45

Earlier quoted context omitted.

Really, anyone with a 401k or similar investments has benefited from this. That's a lot of middle class folks. Your parents, your grandparents, and very likely you. It's far from limited to the super-wealthy.

Not quite. This behavior leads to firing of middle-class workers. John Deere just laid off 300 workers, moved the factory to Mexico, engaged in buyback, and gave the CEO a huge pay. So, yeah, it helps your 401k, but in the mean time you don't have a job. And if you do have a job, your salary is not increasing in line with inflation...

Companies should be prohibited from doing buybacks for, say, 5 years, after any layoff.

Re: The coming long-run slowdown in corporate profit growth and stock returns [pdf] (2023)

#50

Post by spenrose »

pdxandi wrote: post #42
languagehacker wrote: post #36

Quite a few authors have pointed out that the "financialization" of American businesses, with a focus less on innovation or investing in their workforce and more on massaging their numbers to meet shareholder expectations, has created a lot of short-term enrichment for the super-wealthy while absolutely destroying the middle class as we know it. This seems like more fuel for that fire.

I’ve shared this opinion for a while, and would love to hear more informed opinions. Do you have any links to articles you’d recommend reading?

Trade Wars are Class Wars: https://www.amazon.com/Trade-Wars-Are-Class-International/dp...
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