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GDP, M&A, EBITDA, P/E, NASDAQ, Econo-thread Part 15

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  • #91
    Originally posted by Sir Og
    Yesterdday I was looking at the EUR LIBOR rates for march. They were between 2.03-2.05% which looks perfectly normal but then I decided to look at the rates for some other currencies and I couldn't beleve the LIBOR rate for the YEN. The YEN rates were between 0.03-0.09%.

    So I am asking the apolyton economists if this is correct, meaning that there is virtually no interest if you borrow YEN or am I missing something.
    As Dan said, there is some real interest but it's quite popular to borrow in yen to lend in dollars. (by purchasing treasuries for instance)
    DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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    • #92
      India at it again

      http://news.bbc.co.uk/2/hi/business/3819001.stm
      DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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      • #93
        Originally posted by DanS
        Regarding the Economist article, they are being too cute by half (how many times are you going to exclude Germany from the analysis? ), but I agree with the overall thrust of the article that differences in growth between the US and the Euro area are overplayed. This won't change the fact that we'll be hearing a lot more about these differences over the next couple of years.
        Yes, they do exclude Germany - but they also make no adjustments for the differing ways that the US and EU calculate growth.

        I have (as usual ) tried to make adjustments to correct for the differences in measurement across economies - unfortunately I had to try to convert the newer methods that the US (and France) use to the older methods, this was simply because the data exists to do this whilst it does not to reliably convert data compiled using the older methods to the newer ones employed in the US.

        I take 0.33% a year off the growth rate for the US and France (which is the amount that US growth rates were boosted by when they changed to hedonic deflators) and I also subtract business purchases of software from the US figure as no other nation includes this fast-growing sector in their GDP figures.

        During 1983-93 the US grew at 3.35% a year compared to 1.96% for the EU25 (this includes IMF and GDDC estimates for the 10 new member states and the eastern Lander of Germany)
        During 1993-03 US growth dropped to 3.29% whilst EU growth picked up to 2.39%.
        Population growth was 1.06% in US and 0.32% in the EU during 1983-93 and the figures were not changed much during 1993-03 (1.14% for the US and 0.30% for the EU)
        The effects of the US and France using Hedonic Deflators and of the US including business software in GDP for the US were +0.45% during 1983-93 and +0.48% during 1993-03, the effect on the EU's growth rate was +0.05% in both decades.

        This would make the growth rates of GDP per head 1.84% for the US and 1.59% for the EU during 1983-93.
        During 1993-03 US GDP per head growth slowed to 1.67% whilst the EU's accelerated to 2.04%

        This, however, overstates the improvement of the EU as the US was recovering from a very steep recession in 1983.
        Using IMF estimates of the output gap then the underlying growth in GDP per head was 1.41% for the US and 1.56% for the EU during 1983-93.
        During 1993-03 both the US and EU saw an acceleration in this figure to 1.65% for the US and 2.03% for the EU.

        So, when you compare like with like, the gap in the growth of total trend-adjusted GDP between the US and EU has narrowed a bit during the last decade (to 0.46% a year from 0.59% in the previous decade) whilst the gap between the EU's and US's growth in trend-adjusted GDP per head has widened (with the EU's being 0.38% faster during 1993-03 compared to only 0.15% faster in 1983-93)


        Originally posted by DanS
        As for the UN workforce numbers, as I recall they assume that immigration as a percentage of the total population will decline in the U.S. I don't think that's a very good assumption.
        I agree, I wonder why they decided to assume that? Any ideas?

        Originally posted by DanS
        Also, I believe that they don't adjust the retirement age, because those adjustments haven't been announced yet by the authorities. While they need to make this assumption, I believe the retirement age will be marched northward about 3 months each year (i.e., keeping pace with longevity).
        This has less to do with it as:
        a) Retirement ages are likely to rise across the west anyways, and
        b) What matters is not the official retirement age but the actual age that people retire at (which is usually a few years below the official level)
        19th Century Liberal, 21st Century European

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        • #94
          I take 0.33% a year off the growth rate for the US and France (which is the amount that US growth rates were boosted by when they changed to hedonic deflators) and I also subtract business purchases of software from the US figure as no other nation includes this fast-growing sector in their GDP figures.
          Yes, you've done this consistently, and I've never liked it. These changes don't have as much impact in most other countries as they do in the US. For instance, at least one study has shown that using a hedonic deflator would have about half the impact in the UK versus the US. Presumably, the US changed its methods in an attempt to measure economic activity better. To "correct" the better measurements to be more in line with inferior measurements (at least for the US) doesn't make sense to me. Same goes for software purchases. We have a vibrant software industry. What's the rationale for excluding these purchases in the tally for economic activity?

          I agree, I wonder why they decided to assume that? Any ideas?
          The only idea I have is that during the recession there was a temporary sharp decrease in the number of work visas authorized by the congress. Since the UN did their numbers under this regime (roughly), they may have had to assume that this regime would continue and be effective. Of course, I'm skeptical that the regime will continue or be effective in the first instance, let alone continue to be effective.

          This has less to do with it as:
          a) Retirement ages are likely to rise across the west anyways, and
          b) What matters is not the official retirement age but the actual age that people retire at (which is usually a few years below the official level)
          Both true. The actual retirement age in the US may actually decrease due to political factors, since the 401(k) and IRA retirement ages may not increase in unison with the Social Security retirement age. If I'm sitting on a huge nest egg in my 401(k) by 60, I will be tempted to retire.

          I'm much more skeptical that Europe will increase its Social Security/public pensions retirement ages as the US has, since the entrenched interests have more pull in Europe. I'm set to get Social Security at age ~ 68 and they could raise the age for me without too much backlash. Aren't the French set to get pensions at age ~ 55, for instance?
          Last edited by DanS; June 18, 2004, 19:19.
          I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

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          • #95
            Or, as el freako would like to say but does'nt dare becaue he may loose his job, "we got some neat fiures but we don't have a clue hat they mean, if they mean anything at all."

            Comment

            • #96
              Worst. Troll. Ever.

              Are you drunk?
              I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

              Comment

              • #97
                Originally posted by DanS

                Yes, you've done this consistently, and I've never liked it. These changes don't have as much impact in most other countries as they do in the US. For instance, at least one study has shown that using a hedonic deflator would have about half the impact in the UK versus the US.
                I don't suppose you could point me in the direction of that study could you?
                I do find it surprising, however, as the share of high-tech spending (which would be most affected by hedonic deflators) is pretty similar in most developed countries.


                Originally posted by DanS
                Presumably, the US changed its methods in an attempt to measure economic activity better. To "correct" the better measurements to be more in line with inferior measurements (at least for the US) doesn't make sense to me.
                Well, as the data for correcting the other nation's up to the US's standard just doesn't exist then I was forced to adjust the US figures backwards - I don't like it any more than you do but the plain fact is that this is the only way that the figures can be made equivalent.

                Originally posted by DanS
                Same goes for software purchases. We have a vibrant software industry. What's the rationale for excluding these purchases in the tally for economic activity?
                Again, the rationale is to compare like with like - no other nation includes software purchases in it's GDP figures (and they amount to nearly 2% of US GDP and have added up to 0.3% a year to GDP growth over the last 20 years).

                Originally posted by Kropotkin
                Or, as el freako would like to say but does'nt dare becaue he may loose his job
                I'm a programmer, Economics is just my hobby


                Originally posted by Kropotkin
                "we got some neat fiures but we don't have a clue hat they mean, if they mean anything at all."
                As I have stated before the discrepancy shows up in long-term estimates of PPPs as well.
                The IMF have just changed their baseline estimates of PPP's to 2000 compared to 1995 - using their old figures (which took the GDP at PPP's in 1995 and applied the respective reported growth rates to them) the EU's GDP was 93% of the US level in 2000, however using PPPs for the actual year 2000 it came in at 96%.
                Again there is that 0.5% a year difference cropping up.
                The same discrepancy shows up in the OECD's estimates of PPPs (or used to until the OECD changed to new estimates of PPPs that are based on one year and use the GDP deflator to impute data forwards and backwards).
                If you have the same discrepancy of around 0.5% a year showing up in several differently compiled datasets (which previously agreed with one another) then surely you should suspect that the data that has recently been changed is less relevant for comparison.

                Just to be clear though, I do think that the US's current method of calculating GDP is superior - it's just that when you compare it with other countries using older methods you need to be aware that the changes that improved the US's data have also raised it's reported growth rate
                19th Century Liberal, 21st Century European

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                • #98
                  I'll google it some more. It wasn't low-hanging fruit just now. It was a study written by a Brit, IIRC.

                  In any event, I'm rather suspicious of the precision of GDP figures anyway, so I'm hesitant to look at the ingredients listed on the box (I don't know enough to judge them either). There could be a .5% difference each year that isn't real, for instance. It falls within the margin of error.

                  I'm much more confident in the overall magnitude of the figures, since they seem to be corroborated by other factors. For instance, it does seem that Americans work a lot more than those in the Euro area, for instance.
                  I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                  Comment

                  • #99
                    Originally posted by DanS
                    I never said that they are a swing producer now, but what makes you think that they couldn't become one if they chose to make the necessary investments?

                    Don't count out Russia. There is only a 2.5 million bpd difference between the amount exported by Russia and the amount exported by Saudi Arabia (about 4.5 million bpd difference in export capacity). Russia is the only exporter for which Saudi Arabia could not compensate, if it withheld its product from the market. In this sense, Saudi Arabia's power as a swing producer is already diminished. Russia already has significant power to seek a price according to its interests.

                    Also, don't put much stock in Russia's reserve numbers. Russia's a big country, only a small portion of which has been explored heavily.
                    I can agree that the Saudis have nothing to fear from Russia as a swing producer for another 5 years. However, the investment decisions on projects that Russia is starting is influenced by the current price of oil. This high price gives Russia an incentive to add large amounts of capacity.

                    I'm not proposing anything revolutionary here, guys!
                    Necessary investments: as you were already implying in the second quote, investments are influenced by the price of oil, and you will probably realise that the oil prices are at their current levels because SA hasn't pumping out as much as it could. IMO Russia has been able to challenge SA because OPEC allowed it to do so by propping up prices, not because of any inherent geological advantage of Russia.

                    Future oil reserves: I believe that those territories which haven't been explored well are those that are 1.remote 2.otherwise difficult to reach 3.have extreme climates, each of which driving up the costs of extraction.
                    Moreover, it takes a lot of wishful thinking to assume future discoveries in Russia could challenge SA's share. We're talking about at least a doubling, if not a tripling, of current reserves.
                    DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                    • #100
                      Necessary investments: as you were already implying in the second quote, investments are influenced by the price of oil, and you will probably realise that the oil prices are at their current levels because SA hasn't pumping out as much as it could. IMO Russia has been able to challenge SA because OPEC allowed it to do so by propping up prices, not because of any inherent geological advantage of Russia.
                      I would agree with this, although it seems apparent that Russia has an advantage over some OPEC members. It has enough so that it can profitably pump oil when OPEC sticks to its normal price band of $22-$28 (modified, as appropriate, by the value of the US Dollar). If Russia didn't have an advantage over some OPEC producers, then OPEC probably would have set the price band lower to discourage Russian investment versus OPEC investment.

                      Moreover, it takes a lot of wishful thinking to assume future discoveries in Russia could challenge SA's share. We're talking about at least a doubling, if not a tripling, of current reserves.
                      I don't have any way of judging this, other than to note that Russia is a huge country which hasn't been well explored, and hardly explored at all using the latest technology. It seems unlikely, but that's just a hunch.
                      I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                      Comment

                      • #101
                        Of course, you have to contend with militant Chechens trying to blow up/kidnap/kill any exploration and development teams......
                        “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                        ― C.S. Lewis, The Abolition of Man​

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                        • #102
                          Originally posted by DanS
                          I would agree with this, although it seems apparent that Russia has an advantage over some OPEC members. It has enough so that it can profitably pump oil when OPEC sticks to its normal price band of $22-$28 (modified, as appropriate, by the value of the US Dollar). If Russia didn't have an advantage over some OPEC producers, then OPEC probably would have set the price band lower to discourage Russian investment versus OPEC investment.
                          Yep, and OPEC has the option of doing so while still making a profit, Russia doesn't.

                          I don't have any way of judging this, other than to note that Russia is a huge country which hasn't been well explored, and hardly explored at all using the latest technology. It seems unlikely, but that's just a hunch.
                          Well, China and Brazil are also huge countries...
                          DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                          • #103
                            Yep, and OPEC has the option of doing so while still making a profit, Russia doesn't.
                            Huh? I just got done saying that Russia has an advantage over some OPEC countries. If OPEC lowers the price enough, then some of its own members will lose out versus Russia.

                            Well, China and Brazil are also huge countries...
                            Not quite so huge.
                            I came upon a barroom full of bad Salon pictures in which men with hats on the backs of their heads were wolfing food from a counter. It was the institution of the "free lunch" I had struck. You paid for a drink and got as much as you wanted to eat. For something less than a rupee a day a man can feed himself sumptuously in San Francisco, even though he be a bankrupt. Remember this if ever you are stranded in these parts. ~ Rudyard Kipling, 1891

                            Comment

                            • #104
                              Originally posted by DanS
                              Huh? I just got done saying that Russia has an advantage over some OPEC countries. If OPEC lowers the price enough, then some of its own members will lose out versus Russia.
                              Sorry, I meant to say SA. (though you could include its neighbours)

                              Not quite so huge.
                              Huge enough.
                              DISCLAIMER: the author of the above written texts does not warrant or assume any legal liability or responsibility for any offence and insult; disrespect, arrogance and related forms of demeaning behaviour; discrimination based on race, gender, age, income class, body mass, living area, political voting-record, football fan-ship and musical preference; insensitivity towards material, emotional or spiritual distress; and attempted emotional or financial black-mailing, skirt-chasing or death-threats perceived by the reader of the said written texts.

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                              • #105
                                Originally posted by Colon
                                Huge enough.
                                That's only because your reference point is Belgium
                                “It is no use trying to 'see through' first principles. If you see through everything, then everything is transparent. But a wholly transparent world is an invisible world. To 'see through' all things is the same as not to see.”

                                ― C.S. Lewis, The Abolition of Man​

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