Monday, May 22, 2017
After centuries of attempts at socialism beginning with the Spartans, Plato’s Republic and Christian monasteries, atheists and deists (sentimental atheists) introduced the latest iteration of socialism in early 19th century France. Henri de Saint-Simon convinced his followers that the problems of the world were so large than only powerful states could solve them. He considered the chief problems to be poverty and inequality. Socialists were shocked and awed by the meager advances in the natural sciences so Saint-Simon proposed that a junta of scientists, led by a mathematician, should work together to solve France’s problems and dictate the solutions to compliant citizens. That has been the model for socialism since.
Monday, May 15, 2017
As the reader can see from the chart below, the variance in profits isn’t as great as that in stock prices. The two begin to diverge about halfway through the expansion. All that means is that the PE ratio begins to inflate because credit expansion by the Fed is pumping new dollars into the economy.
If stock prices remained tethered to earnings, stock prices would level off. To prevent that, the media send in the clowns. In a rodeo, clowns distract the bulls to prevent them from stomping the cowboy into the arena dirt, but in the market the clowns distract the investor. The clowns pull from their shirt sleeves old tricks to make the fundamentals look better. They use performance measures that rely on creative accounting, alternative profit measures, pro forma statements, and complicated valuation techniques. The clowns break the connection to earnings so that prices continue their ascent unrestrained by fundamentals. If the market was an actual rodeo, the clowns would be lynched for letting the bulls pulverize the cowboys.
Thursday, May 4, 2017
Legutko is a professor of philosophy at Jagellonian University in Krakow and a writer on politics and philosophy. He co-founded the Centre for Political Thought after the collapse of communism. He has been elected to parliament, held cabinet positions and is currently a member of the European Parliament.
Sunday, April 30, 2017
This is the book readers should give to any poor soul considering a degree in mainstream economics. Hopefully it will discourage them. It’s easy to read. Rodrik is a much better writer than most economists. And it’s not too long, about 200 pages.
Sunday, April 23, 2017
Here’s an example:
American retailers are closing stores at the fastest pace ever.
Roughly 10% of mall retail space - or 1 billion square feet - is on the verge of being closed, having rents slashed or transformed into something else. And in March, retailers cut 30,000 jobs, the same as in February.
It was the worst two-month span of job cuts for the sector since 2009 - during the depths of the Great Recession!
This year, as many as 8,640 total stores may close - which would outpace the 6,200 closed in 2008.
And as I've pointed out for years, it's because the companies failed to adapt. They were slow to recognize the changing tides and are now being destroyed by a single company... Amazon .”
Monday, April 17, 2017
Morgan Stanley’s analysts suggest running with the bulls this week. They recently announced that they expect the S&P 500 to rise 15% in the next twelve months and possibly to reach 3,000, a gain of 27.4%. They wrote,
Although optimism is a late cycle phenomenon, history tells us the best returns often come at the end."Essentially, they are shouting “the end is near!” but “party while you can!” They credited President Trump for their optimism:
While acknowledging that the pro-business agenda of President Trump has awakened "animal spirits" in the economy, the Morgan Stanley strategists feel that Trump has simply "turbocharged" a global business recovery that already has been underway since the first quarter of 2016. They note that one of the worst economic contractions in 30 years, as measured by U.S. GDP, bottomed out a year ago. Since then, their favorite economic indicators have been accelerating, including those capturing business conditions, business outlook and global trade.
Sunday, April 9, 2017
Productivity growth has been falling since about 1970 for many companies according to Andrew Haldane, Bank of England Chief Economist, in his speech “Productivity puzzles” at the London School of Economics last month in which he reported what’s happening to productivity in the UK and globally.
Haldane said the future is already here — it’s just not very evenly distributed. Some companies are highly innovative with rapidly growing productivity, but most lag far behind. There are broad differences in productivity growth between advanced economies and emerging market economies, between the US and other advanced economies, across industries and within industries. After providing the fruits of excellent research, however, Haldane offered an anticlimactic solution:
The Mayfield Commission aims to create an app which enables companies to measure their productivity and benchmark themselves against other companies operating in similar sectors and regions. By shining a light on companies’ relative performance, the aim is that this would serve as a catalyst for remedial action by company management.”