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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)

#91

Post by vineyardlabs »

kbolino wrote: post #83
joejohnson wrote: post #51

Earlier quoted context omitted.

The 401k is an invention that is yet to prove its efficacy. The first 401ks were opened in 1978, so if you were entering the workforce then you’d be retiring this decade! So, we will see if this privatization of pensions really benefits us all or merely enriched a generation of asset managers while absolving the corporate and the government from providing pensions for workers.

Traditional pensions are fundamentally unsustainable endeavors under modern demographics. You cannot pay decent benefits to a growing retired population while collecting reasonable dues from a shrinking working population. As we've seen, all retirement funds, even the remaining pensions, have largely switched their investments to the stock and bond markets in the vain hope that this fundamental conundrum will be solv…

I agree with your general idea here but could it not be argued that pensions are just an abstraction on top of 401ks in the sense that if the demographics are shifting such that non-producers outweigh producers then you would expect the economy and business profits to suffer. These effects would cause broad slow growth or even reductions in business valuations, and therefore poor performance in investment accounts broadly.

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

#92

Post by layer8 »

frikk wrote: post #63
TylerE wrote: post #49

Earlier quoted context omitted.

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

I recently learned that buybacks and short selling historically have not been legal, its only in recent history that they've been standard practice en large (1982 is when buybacks were legalized, I think)

It’s part of Reaganomics. Buybacks weren’t explicitly illegal beforehand though, it just wasn’t clear when they would count as stock price manipulation.

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

#93

Post by tway_GdBRwW »

fnordpiglet wrote: post #35
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…

I call bullshit. Tax rates and interest rates certainly help spur investment and expansion of production but it’s hard to look at the world we live in today, with electric cars that can self drive and hand held devices connected to natural language comprehending oracles of knowledge, JIT industries end to end, starships to mars for colonization in mid to late stages, etc, and think “yep the only value is the value th…

> starships to mars for colonization in mid to late stages

?? Did I miss a news article?? I know we've successfully landed on the moon, but we don't have reliable ways of commuting there let alone setting up a colony.

I even hear about astronauts stuck in orbit for months at a time.

mars is just a little bit further away and has similar atmosphere problems as the moon.

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

#94

Post by kbolino »

vineyardlabs wrote: post #91
kbolino wrote: post #83

Earlier quoted context omitted.

Traditional pensions are fundamentally unsustainable endeavors under modern demographics. You cannot pay decent benefits to a growing retired population while collecting reasonable dues from a shrinking working population. As we've seen, all retirement funds, even the remaining pensions, have largely switched their investments to the stock and bond markets in the vain hope that this fundamental conundrum will be solv…

I agree with your general idea here but could it not be argued that pensions are just an abstraction on top of 401ks in the sense that if the demographics are shifting such that non-producers outweigh producers then you would expect the economy and business profits to suffer. These effects would cause broad slow growth or even reductions in business valuations, and therefore poor performance in investment accounts br…

Yes, and I think that describes the past few decades in Japan (among other factors).

Other options included pensioners taking a haircut and/or workers taking a paycut, neither of which is particularly palatable and still runs us into the ground eventually. Increasing corporate taxes could square the circle for a little while, but then corporations would slowly move more operations offshore, decreasing tax revenues eventually anyway. There's also the option of cutting other government expenditures, but eventually that stops working and at least some of the things that were cut can't stay un(der)funded forever.

The only other (distantly) feasible idea I can think of would be, again with an eye to Japan (of the past), near-total isolation from other countries economically, but that would have an even more substantial stagnating effect.

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

#95

Post by hnthrow289570 »

chrisco255 wrote: post #11

It's worth noting this is just one person's opinion, it's not an opinion of the Fed itself. The paper analyzes corporate profits on the basis of interest and tax rates alone, but ignores other monumental shifts in global markets over the past few decades like globalized supply chain networks. It's probably true that the efficiency gains from globalization have already passed their peak, but that would have as much of…

>Robotics and AI are rapidly advancing and it's going to have a substantial impact to supply chains and labor markets over the coming decades, regardless of what happens with interest rates.

It will be short-lived unless its applied to make necessities as cheaply as possible. Otherwise none of us will have enough money for many luxuries.

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

#96

Post by marcosdumay »

Ekaros wrote: post #59
TylerE wrote: post #49

Earlier quoted context omitted.

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

Just straight up ban them. Have to pay taxes on investment due to dividends? Well too bad for you.

Just tax them, they'll disappear.

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

#97

Post by nostrademons »

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.

Only if it's still high when you go to retire. It probably will not still be high when you go to retire, because the very act of many people drawing on their stock portfolios to fund retirement will put downward pressure on stock prices.

Ironically, if you happen to have made lots of money in the stock market over the last 10-15 years, your best strategy may be to retire now, mid-career, even if you don't have enough to last the rest of your life. Basically you're arbitraging the large labor force of today to fund your time off through high stock values. Then when the market crashes, the recovery will likely be in all-new firms in all-new industries, so you reinvent yourself to capitalize on the labor shortage then. Or even better, start one of those new firms and capitalize on all the workers who need to go back to work because they can't afford their retirements.

You can't do that with a 401k, though, it'd have to be a taxable investment account that you can withdraw at will.

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

#98

Post by fnordpiglet »

crystalmeph wrote: post #52
fnordpiglet wrote: post #35

Earlier quoted context omitted.

I call bullshit. Tax rates and interest rates certainly help spur investment and expansion of production but it’s hard to look at the world we live in today, with electric cars that can self drive and hand held devices connected to natural language comprehending oracles of knowledge, JIT industries end to end, starships to mars for colonization in mid to late stages, etc, and think “yep the only value is the value th…

https://en.wikipedia.org/wiki/Productivity_paradox . "You can see the computer age everywhere but in the productivity statistics." There are definitely companies that are winning from the tech you pointed out, sure. The companies that make robotaxis and the companies that sell AI subscriptions are going to make bank. But at an aggregate level, that robotaxi means a human tax driver is no longer working, and if every…

I’d argue productivity measured in economic activity is measuring the wrong thing. Looking at my personal life I have paid about the same amount for an iPhone since they came out, and probably less on computing hardware YoY over my life time. However it’s impossible to say my iPhone today is equivalent to the iPhone I bought 15 years ago, even though the nominal price is the same. What these nominal values fail to price is the “quality” of stuff improving while prices and demand for “more shit” doesn’t keep up. At some level we have enough shit, and we expect things to be about the same price year over year for something that has improved materially over that time. Where does this get valued?

I also think a goal of full employment naturally leads to a flattening of productivity. We hire a lot of people to do work that isn’t super productive because we consider employment more important than raw numerical superiority. We probably could let go many people and improve productivity at a great expense to social cohesion. This doesn’t seem like progress to most people if we had 30% unemployment. To the papers point low interest rates and reducing taxes creates a lot of space for inefficient employment. There even might, if you get particularly breathless, be a time post scarcity when employment itself is anachronistic. But as we have no method of social or communal distribution today in capitalists societies, we would need to find a way to keep people pecking for food pellets. Productivity would fall off a cliff at that point.

I thing what this paper illustrates more than anything is that productivity as a measure of value is pre-automation industrial thinking that we largely stick with because it’s really a lot harder to measure anything else. Valuations in the stock market IMO have decoupled from traditional economic measures because those measures are flawed and don’t explain how we value things in modernity.

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

#99

Post by jppope »

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.

thank you for this comment. this one needed to be said

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

#100

Post by ok_dad »

gizmo wrote: post #90
delfinom wrote: post #68

Earlier quoted context omitted.

Yep. But I'm so extremely skeptical the "your 401k will always go up by 10%" argument is going to continue to hold for more decades. Eventually the blood they are squeezing out from companies and consumers will run out...

If the US economy keeps growing then American businesses will do well and the stock market will reflect that. It’s hard to image scenarios where the American economy shrinks while other countries have growing prosperity.

Maybe if prices doubled over a few years, housing was out of reach, and salaries were stagnant it would be harder to buy stuff and the economy would suffer.

Whoops!

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