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

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

#101

Post by SoftTalker » Wed, Sep 04, 2024, 8:48 PM UTC

julienchastang wrote: post #88

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.

I don't have the references on my finger tips, but basically I recall 401ks to be a bad deal for most employees because of mismanagement by the account holder, high fees, ill timed trades, etc. A few 401k (or 403b) holders have done very well, however, if their plans offered low-cost index funds, contributed regularly and avoided moving money around at the wrong time or at all.

No doubt there is a history of shenanigans in 401ks, especially early on. But if you're dollar-cost averaging into low-cost index funds, you should avoid that.

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

#102

Post by crystalmeph » Wed, Sep 04, 2024, 8:52 PM UTC

GenerWork wrote: post #76

delfinom wrote: post #71

Earlier quoted context omitted.

Heh, we (a manufacturing facility of specialized devices), just got acquired by a public company. Due to the utter hell it's already been for meeting accounting standards they need for their financial disclosures like inventory count of fucking 1 cent screws in the warehouse needing to be perfect. Even the engineering staff had to be on hand to take part in warehouse recounts for the auditors. The heads are already t…

>Due to the utter hell it's already been for meeting accounting standards they need for their financial disclosures like inventory count of fucking screws in the warehouse needing to be perfect. Surely this is done on a monthly or quarterly basis instead of a daily basis, right? As in, on day X at XX:XX time you count the screws, and call it good? Or is it more detailed than that?

Does it matter? It's a wasteful process, and not the only one that has been introduced into the parent commenter's workflow.

In a private company, you can just say "I don't care if we lose 1-cent screws, just order more when we open the last big box of them." You don't ever have to count them, unless you notice that you're spending an awful lot of money on replacing them.

In a public company that is legally required to keep track of its assets, you have to keep track of stuff that is really not worth keeping track of. Even if that's only on a periodic basis, there are literally dozens, probably hundreds of new "just one more things" you have to spend time on in a public company.

Yes, all those "one more things" keep you honest and accountable, but it has real, and rising, costs that can distort rational economic decision-making.

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

#103

Post by crystalmeph » Wed, Sep 04, 2024, 8:58 PM UTC

paxys wrote: post #56

It'll be interesting to see what this analysis looks like today, considering there have been 2+ years of substantially higher interest rates since this paper was published.

In five years you might be able to start teasing out the effects of the sudden rise in interest rates. Right now, we're still feeling echoes of the pandemic and subsequent "snap-back" in economic activity.

Look at https://fred.stlouisfed.org/series/CCSA, set the units to "percent change from year ago," and zoom out to "Max". The pandemic effect dwarfs anything else in the entire history of the unemployment program. I think future economic research may well have to discard the years 2020-2024 because the circumstances were so unique and the distortions were so severe.

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

#104

Post by oezi » Wed, Sep 04, 2024, 9:04 PM UTC

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.

If the US economy grows 5% and stocks grow more, then there must be a reckoning coming at some point.

If it is 5 years or 10, nobody knows.

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

#105

Post by marcosdumay » Wed, Sep 04, 2024, 9:07 PM UTC

GenerWork wrote: post #76

delfinom wrote: post #71

Earlier quoted context omitted.

Heh, we (a manufacturing facility of specialized devices), just got acquired by a public company. Due to the utter hell it's already been for meeting accounting standards they need for their financial disclosures like inventory count of fucking 1 cent screws in the warehouse needing to be perfect. Even the engineering staff had to be on hand to take part in warehouse recounts for the auditors. The heads are already t…

>Due to the utter hell it's already been for meeting accounting standards they need for their financial disclosures like inventory count of fucking screws in the warehouse needing to be perfect. Surely this is done on a monthly or quarterly basis instead of a daily basis, right? As in, on day X at XX:XX time you count the screws, and call it good? Or is it more detailed than that?

It's inventory balance. The best practice used to be that you did it yearly, but nowadays it is that you do it once, and then only when you have some reason to suspect you lost track of it.

I don't know if the US tax code is modern enough to require the new practice.

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

#106

Post by oezi » Wed, Sep 04, 2024, 9:08 PM UTC

gizmo wrote: post #75

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.

Businesses are primarily valued based on their discounted future cashflows. American businesses are worth much more than their European counterparts because investors (correctly) expect that American businesses will more aggressively seek profit. By contrast, businesses that don’t make money and that are not expected to make (much) money in the future are worth nothing. In most countries the stock market doesn’t go u…

European companies can be very profitable but they aren't growing.

Tesla vs all other car manufacturers is a great example. Most car manufacturers have higher profits than Tesla, still the market cap of all car companies combined is challenged by Tesla alone.

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

#107

Post by sangnoir » Wed, Sep 04, 2024, 9:10 PM UTC

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.

401k's are a lot like a bunch of ranchers granting their herds 0.01% of their Cattle futures portfolios.

Less hyperbolic - the existence of large pools of capital without a voice on the boards is partly responsible for the management-led short-termism mess we're in.

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

#108

Post by marcosdumay » Wed, Sep 04, 2024, 9:12 PM UTC

criddell wrote: post #43

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?

The money doesn't get "parked" in stocks. It's sent to a company, that will use it.

Anyway, the idea is approximately right. When there's more money on the economy than stuff to buy, you get inflation, and the extra money gets places to go. Alternatively, yes, the amount of money and the number of time it transacts both change all the time.

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

#109

Post by sangnoir » Wed, Sep 04, 2024, 9:16 PM UTC

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…

> You cannot pay decent benefits to a growing retired population while collecting reasonable dues from a shrinking working population

How does this jibe with ever-increasing profits?

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

#110

Post by carapace » Wed, Sep 04, 2024, 9:25 PM UTC

AndrewKemendo wrote: post #66

wiz21c wrote: post #58

Earlier quoted context omitted.

> decline in interest rates and corporate tax rates mechanically explain over 40 percent of the real growth I interpret that as : "capitalists have taken over the control of our governments"... Is that right ?

That is correct. Well documented and the Princeton oligarchy study [0] cemented what left wing authors have pointed out for decades. [0] https://www.bbc.com/news/blogs-echochambers-27074746.amp

From the abstract of the paper:

> Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.

https://www.cambridge.org/core/journals/perspectives-on-poli...

However, it's not correct that "capitalists have taken over the control of our governments" (unless you're speaking as British royalty of the American Revolution, eh?) rather they set up the governments in the first place.