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)

#121

Post by julienchastang » Thu, Sep 05, 2024, 12:31 AM UTC

pdonis wrote: post #115

julienchastang wrote: post #88

Earlier quoted context omitted.

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.

> A few 401k (or 403b) holders have done very well, however, if their plans offered low-cost index funds I think it's more than "a few". For one thing, many 401k-equivalent funds that government employees can make contributions to are low cost index funds, and there are lots of government employees. For another thing, most 401ks offered by large corporations also offer low cost index funds, which many employees contr…

Low-cost index funds don't protect you from ill timed trades. I remember reading during the 2008 financial crisis that many account holders basically bailed into much more conservatively allocated funds as they watched there net worth plummet and were not able to benefit when the markets rebounded. They bought high and sold low. Most people do not have the stomach to watch their retirement savings quickly evaporate, unfortunately.

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

#122

Post by jppope » Thu, Sep 05, 2024, 12:54 AM UTC

jeffreyrogers wrote: post #61

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.

The problem with this theory is that by most metrics the middle class in America is doing very well. Homeownership rates are high (significantly higher than Europe), incomes are higher (again, median income in the US significantly higher than even wealthy European countries like Germany), and consumption of things like cars and other manufactured goods is higher than ever.

The financialization theory doesn't exclude those outcomes, quite the opposite in fact. The basic concept is that Corporate managers have taken primarily stock based compensation for themselves and gutted large companies in an effort to increase stock value at all costs. They then issue large buybacks (and to a lesser extend dividends), but they leave before the the repercussions hit the company.

Example article: https://www.marketwatch.com/story/heres-how-share-buybacks-g...

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

#123

Post by marcosdumay » Thu, Sep 05, 2024, 2:26 AM UTC

mulmen wrote: post #111

marcosdumay wrote: post #96

Earlier quoted context omitted.

Just tax them, they'll disappear.

Tax what? The buy back? How does that work? The seller is already paying capital gains tax.

That doesn't require that the government don't tax the profit that allowed the buyback.

The US taxing almost no kind of corporate profit is an oddity, and they can carve more exceptions to any kind of reinvestment they decide.

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

#124

Post by pdonis » Thu, Sep 05, 2024, 2:45 AM UTC

julienchastang wrote: post #121

pdonis wrote: post #115

Earlier quoted context omitted.

> A few 401k (or 403b) holders have done very well, however, if their plans offered low-cost index funds I think it's more than "a few". For one thing, many 401k-equivalent funds that government employees can make contributions to are low cost index funds, and there are lots of government employees. For another thing, most 401ks offered by large corporations also offer low cost index funds, which many employees contr…

Low-cost index funds don't protect you from ill timed trades. I remember reading during the 2008 financial crisis that many account holders basically bailed into much more conservatively allocated funds as they watched there net worth plummet and were not able to benefit when the markets rebounded. They bought high and sold low. Most people do not have the stomach to watch their retirement savings quickly evaporate,…

> Low-cost index funds don't protect you from ill timed trades.

Nothing can protect you from ill timed trades.

However, trades can only be ill timed if they are made. If you just pick an index fund with an appropriate time horizon for your planned retirement and then leave it alone, you don't have to worry about ill timed trades because you aren't making any trades at all.

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

#125

Post by GordonAShumway » Thu, Sep 05, 2024, 2:47 AM UTC

wiz21c wrote: post #58

cs702 wrote: post #40

The abstract does a great job of summarizing the OP's findings: > 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-fre…

> 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 ?

No, not really --it means financial engineering became more important than actual engineering for stock valuations.

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

#126

Post by AndrewKemendo » Thu, Sep 05, 2024, 4:28 AM UTC

carapace wrote: post #119

AndrewKemendo wrote: post #112

Earlier quoted context omitted.

I’m totally on board with the idea that we were never a valid democracy - and effectively a defacto oligarchy - to begin with

Depends on what you mean by "valid". King George probably thought we weren't but not in the way you mean, eh? We could draw a line from the Magna Carta to the Equal Rights Amendment. Democracy is a work-in-progress.

Moreso the 3/5ths compromise means the republic didn’t actually represent a significant portion of their claimed collective territories inhabitants. The articles of confederation was a business arrangement primarily to consolidate a market with similar laws for the ability to monopolize the cotton market. Of which Britain was largest purchaser btw.

So yes, from the beginning the Americas were a free “wilderness” that economic colonialism torched through. The Holocaust of first nations is just not even recognized as anything worth mentioning it seems.

So yeah - as KRS One would say: “you can’t have justice on stolen land.”

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

#127

Post by n4r9 » Thu, Sep 05, 2024, 8:08 AM UTC

moffkalast wrote: post #89

n4r9 wrote: post #80

Earlier quoted context omitted.

This dataset suggests that it's around 65.7%, higher than the 62.9% in 1965 but lower than the 2004 peak of 69.2%: https://fred.stlouisfed.org/series/RHORUSQ156N . Not sure that "consumption of manufactured goods" is a particularly good metric for measuring wellbeing, though.

That covid spike in 2020 is pretty interesting. Probably the percentage of people that rent something close to their workplace and could move home when WFH became a thing. > The homeownership rate is the proportion of households that is owner-occupied. I suppose there probably aren't better metrics available, but someone who lives in a rented out penthouse that's being financed by owning 20 rented out apartments woul…

Yes, I'm not surprised that OP's comparison fails to hold up especially against the central/eastern European countries. The website you link is using a slightly different definition of homeownership but at 90% it must carry over to be more than the US. Which I guess just means it's a poor metric for anythig really.

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

#128

Post by samus » Thu, Sep 05, 2024, 8:14 AM UTC

nostrademons wrote: post #32

psunavy03 wrote: post #25

Earlier quoted context omitted.

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.

"That entire time" only holds if you're looking at 20+ year time horizons, and zooming in shows the effect of interest rates. If you bought the S&P 500 in November 1968 and sold it in July 1982, you lost money in nominal terms, despite the CPI nearly tripling during that time period (so in real terms, you lost 2/3 of your investment). During that time period, interest rates went from 6% to 19%, also roughly tripling.…

Broad index funds are indeed recommended to be held for a very long time for maximum yield. Continuous investment over at least 15 years is better precisely because it spans multiple business cycles and allows taking advantage of the lower prices during dips and recessions. But that's completely fine for those that want to save up for retirement.

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

#129

Post by SebFender » Thu, Sep 05, 2024, 11:37 AM UTC

I know nothing - but my girlfriend worked for more than a decade with financial groups essentially betting on economic downturns. Started ok around 2000 but most were eventually sold at rebate to a larger firm's lately - and these aren't really in a comeback.

Let's just say most outlook on the past 25 years has been generally positive and should get better in the next 25. These "negative" aren't really popular currently, but I'd be surprised if they ever are.

I know nothing - just sharing from people who actually played billions into these downturns articles for multiple decades...

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

#130

Post by languagehacker » Thu, Sep 05, 2024, 1:17 PM UTC

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?

I'm currently reading "When McKinsey Comes to Town" and just finished "The Man Who Broke Capitalism" about Jack Welch and GE.