GDP, M&A, EBITDA, P/E, NASDAQ, Econo-thread Part 13

[Ted Striker]

Originally posted by GP
Well

Well what?

...anyway

Anyway you can steal that is.

it's settled now.

Maybe for you, but I value freedom.

No need

Source?

for you two to go

Two of us going is the same as both of us going. You couldn't refute my statement so you resorted to lying.

Berzerker.

You name dropping hypocrite.

[Ted Striker]

Originally posted by GP
Totally agree. Let's try to understand this stuff more fundamentally.

Problem with that though is it turns into another pissing match about who has the right measures and who doesn't.

[TCO]

Originally posted by Ted Striker


Problem with that though is it turns into another pissing match about who has the right measures and who doesn't.

Yeah maybe. And at some point, it becomes silly to spend too much time worrying about definitions. And insepcting each assertion. But I've learned with business terms and accounting and such that it is usually pretty important to understand definitions and can swing the answer quite a bit.

[HershOstropoler]

Ad US investment: well, how is US performance better ?

Ad deficits: Bush's tax cuts and the spendingtrousers congress. If you remember, in 2000 I said the usual post-bubble budget deficit swing is about 8-10 % of GDP. We're at 5 % at the fed level now, add the states. I can't see any turnaround in US public finances.

GP:

"YOU were the one claiming a larger proof (that there is little superior in the US)."

Negativa non sunt probanda. So what is superior ? Explain, Mr superiorbusinesscommunication. "freer labor and capitol mobility" sounds nice, and more sunshine. Specifics, please.

Ted: "You want us buying stuff and spending money because if we don't, where are you going to sell all that stuff?"

How 'bout domestic demand ?

Sten: "Perhaps it would be useful to look at the income and savings definitions to see what is included in those before we get too excited about how americans all have negative personal balance sheets..."

National gross savings or household savings rate ? Amd who said anything about negative balance sheets ?

[TCO]

Originally posted by HershOstropoler
Ad US investment: well, how is US performance better ?

Given free movement of capitol, most economists and finance professors and such would say that after movement, performance will be the same. In other words, the dollars will go to the best investments. If there are more dollars and less good investments in Europe, some dollars will flow over to the US. Of course, this is at the most simplistic. If you want to discuss differences, feel free. For instance, there is the example of Japan. Lots of crappy investment. Racial pride, perhaps?

Ad deficits: Bush's tax cuts and the spendingtrousers congress. If you remember, in 2000 I said the usual post-bubble budget deficit swing is about 8-10 % of GDP. We're at 5 % at the fed level now, add the states. I can't see any turnaround in US public finances.

How much of the defecit is from tax cuts. How much from spending increases? How much from revenue shrotfalls that are a result of a hurting economy? How much from greater outflows (unemployment compensation, welfare at same rate but to more people)? I suspect the latter two are the bigger drivers.

GP:

"YOU were the one claiming a larger proof (that there is little superior in the US)."

Negativa non sunt probanda. So what is superior ? Explain, Mr superiorbusinesscommunication. "freer labor and capitol mobility" sounds nice, and more sunshine. Specifics, please.

Roland,

1. I have no proof of the contrary to Colon's statement. I just want to jump on him for assuming that disproving a few poor claims of others (or in this case me "not proving" something) is the same as him PROVING it. I'm not a Latin-quoting rhetoritician (don't understand your comment for instance), but I sense a flaw here. It reminds me of an argument that Ramo and I had about nature versus nurture. Ramo was claiming that he had PROOF that nature was not the cause of the difference. But his proof boiled down to nobody has proved to me the contrary. To me that means that the question is very much open, not that we have proved that a factor is not important in the regression.

2. I think that the subject of "who is better" is an interesting one. Unofrtunately, there are a lot of differences between the different countries, not just labor laws. Things like geography, natural resources, education levels, culture, etc.

Do you think that labor laws in the US are less rigid than in Germany? And that this is part of the reason for the 10% unemployment in Germany?

I guess we have to look at several things if we consider a statement like, "America has a stronger economy because of freer labor and capital laws." First, we have to say what a "stronger economy" is and see which country has that. And I guess we have to look over a decent time range. Then, we need to examine which country has freer labor/capital laws. So, "does America really have freer labor laws for instance." Finally we need to see how much of an effect is caused BY just these facotors (versus other confounding factors).

The whole thing is actually a very cool problem/situation. Unfortunately, sometimes I get the impression you all are more interested in defending Euro honor and pricking the American bubble of self-praise, than in really thinking through the problem.

Sten: "Perhaps it would be useful to look at the income and savings definitions to see what is included in those before we get too excited about how americans all have negative personal balance sheets..."

National gross savings or household savings rate ? Amd who said anything about negative balance sheets ?

I guess we could start with the definition of the terms in ef and Sten's statistics. The two headers for the tables: "household savings rate" and "Gross National Savings rate". Yeah, I guess those are the two you mentioned also...(I think that Sten was using the term "negative balance sheet" in a colloquial way...but I'll let him clarify.)

[HershOstropoler]

GP:

"If there are more dollars and less good investments in Europe, some dollars will flow over to the US. Of course, this is at the most simplistic."

Well, there could just be a higher demand in the US for borrowing for consumption and bad investments.

"How much from revenue shrotfalls that are a result of a hurting economy? How much from greater outflows (unemployment compensation, welfare at same rate but to more people)? I suspect the latter two are the bigger drivers."

They are. Result of reverse bubble.

"I'm not a Latin-quoting rhetoritician (don't understand your comment for instance), but I sense a flaw here."

It's difficult to prove a negative. If someone makes the claim "X is better", the onus of proof is on him.

"Do you think that labor laws in the US are less rigid than in Germany? And that this is part of the reason for the 10% unemployment in Germany?"

I'm not sure. One thing is, measured by ILO standards, Germany's unemployment is about 8.5 %, the US 6 %. A specific "rigidity" ****s up the labour market in the east; in the west it is about 6.5 %. Also, the rigidities identified by economists barely correlate with unemployment rates.

"Then, we need to examine which country has freer labor/capital laws."

I'm still waiting for an economist to come up with a meaningful quantification of "freedom". Esp in labour law, the conceptual differences are so big that you can only compare some specifics.

"Unfortunately, sometimes I get the impression you all are more interested in defending Euro honor and pricking the American bubble of self-praise, than in really thinking through the problem."

Funny. I get the impression you all are more interested in selling your american self-praise than thinking about a problem. Without pricking the bubble, how can there be a starting point for thinking anything beyond "USA! USA! USA!" ?

[TCO]

Originally posted by HershOstropoler
GP:

"If there are more dollars and less good investments in Europe, some dollars will flow over to the US. Of course, this is at the most simplistic."

Well, there could just be a higher demand in the US for borrowing for consumption and bad investments.

Than the interest rate will reflect likelihood of default. From the attitude of a faceless dollar/Euro crossing the ocean, it's a "good investment." But I guess, you are making the point that this is indicative of lack of strength in the economy. Maybe so. Maybe we are like a big Argentina. Drinking a lot of wine....that we will pay for in the morning.

As long as the borrowing is by individuals and such and not guaranteed by the government, though, I'm cool with it. Don't want to get into the moral purity argument that we should be more like hard-saving Japanese. People can do what they want. If Americans are chronic over-borrowers, it will be corrected like wine-drinking is. And the lenders take their chances and should demand higher interest rates.

[TCO]

Originally posted by HershOstropoler

"How much from revenue shrotfalls that are a result of a hurting economy? How much from greater outflows (unemployment compensation, welfare at same rate but to more people)? I suspect the latter two are the bigger drivers."

They are. Result of reverse bubble.

Clinton set him up the bomb!!

But seriously, I would also say that this is the standard result of a recession. Or are the terms synonymous, "recession" and "reverse bubble"?

[HershOstropoler]

"Than the interest rate will reflect likelihood of default."

It will, but the effect can be delayed.

"As long as the borrowing is by individuals and such and not guaranteed by the government, though, I'm cool with it."

Foriegners are holding about 30 % of treasuries, 20 % of corp etc bonds and 10 % of equity (nrs should be a bit higher in the meantime). Somewhere in the corp etc bonds, we have the GSE debt - and that is de facto government guaranteed.

How the big dollar recycling works exactly is an interesting question....

"Clinton set him up the bomb!!"

He and more importantly, Greenspan and Rubin. The difference to standard recessions is one of degree only.

[TCO]

Originally posted by HershOstropoler

It's difficult to prove a negative. If someone makes the claim "X is better", the onus of proof is on him.

Right on--agreed. I just jump when I see this type of flaw: A and B have not proven X>Y. Therofore I (C) have proven X not > Y. This is a bit too much of a jump for me. If he wants to say, X has not been proven greater than Y, I'm cool with that. (And in this case, I think it would be useful for Colon to look at some of the older claims...not getting too exercised about New Economy stuff. The older claims might have a little more substance. No point in killing a strawman.)

Let's think about it in terms of statistics. A lack of effective proof of X being a factor causing Y does not prove that X is irrelevant in the equation. (In the extreme, it could be a case of noone even trying to prove this. In a less extreme, it could be that only a few people have tried to prove it and have used very bad methods. If we point out flaws in their methods, that does not prove the counter.)

Now, if we want to say that we HAVE PROVED that X is an irrelevant factor in the regression producing Y, we need to do a little more. For instance, show that after controlling for Z, G and R, that X produces no statistically relevant effect at the 95% confidence interval or something to that effect. Of course, you could always have a confounding factor that is unidentified so it is hard to prove the negative. (The same is true about difficutly in proving the positive!) But this type of "proof" is much more compelling than just trying to destroy the arguments of X advocates--if you want to make the positive statement that X is proven irrelevant.

[TCO]

Let me finish your first post. Otherwise we get confused. DO some work or something.

[TCO]

Originally posted by HershOstropoler


"Do you think that labor laws in the US are less rigid than in Germany? And that this is part of the reason for the 10% unemployment in Germany?"

I'm not sure. One thing is, measured by ILO standards, Germany's unemployment is about 8.5 %, the US 6 %. A specific "rigidity" ****s up the labour market in the east; in the west it is about 6.5 %. Also, the rigidities identified by economists barely correlate with unemployment rates.

"Then, we need to examine which country has freer labor/capital laws."

I'm still waiting for an economist to come up with a meaningful quantification of "freedom". Esp in labour law, the conceptual differences are so big that you can only compare some specifics.

1. I guess there are often important effects of policy which defy an easy label/metric. But they can still have important effects. Certainly I've seen that be the case with business problems affecting individual companies--morale or research competetiveness is hard to document in a 10K. Would think the same applies on a macro level too. That's what makes it a cool problem. Have to figure out how to make the intangible, tangible.

2. What is the ILO standard and how is it different from whereever I got that 10% figure. (Or am I just wrong. Could swear I heard that on the news or something.) Do you prefer the ILO definition for some technical reasons or just cause it makes the gap smaller?

3. Regarding lack of correlation, we would need to look at a lot fo confounding factors and over a time range as well. It's obviously not one that will come out with a .98 rsq regression value. Still may be able to learn something interesting. Would think that there is also a way to analyse the problem in terms of theory.

[TCO]

Originally posted by HershOstropoler
"Unfortunately, sometimes I get the impression you all are more interested in defending Euro honor and pricking the American bubble of self-praise, than in really thinking through the problem."

Funny. I get the impression you all are more interested in selling your american self-praise than thinking about a problem. Without pricking the bubble, how can there be a starting point for thinking anything beyond "USA! USA! USA!" ?

I love the US, no doubt. I've been all over the world. And it is a really special place. But I'm a scientist at heart and a free-marketeer in terms of my econ mindset. If shown compelling arguments, I have no problem accepting them. I still think there is too mich emphasis on fighting with strawmen. And with looking at problems more as an advocate rather than an analyst.

[TCO]

Done with first Roland post.

[TCO]

Originally posted by HershOstropoler
"Than the interest rate will reflect likelihood of default."

It will, but the effect can be delayed.

Sure. It can bounce around a lot. It could be too much of a penalty also. That's just life in the volatile world of uncertainty. I don't see a good arguemnt for "delay" though.

Foriegners are holding about 30 % of treasuries, 20 % of corp etc bonds and 10 % of equity (nrs should be a bit higher in the meantime). Somewhere in the corp etc bonds, we have the GSE debt - and that is de facto government guaranteed.

How the big dollar recycling works exactly is an interesting question....

1. I would assume that the treasuries turn over pretty quickly. If default becomes a greater risk, they will charge a higher premium to buy those bonds. Or if future inflation is a bigger risk, they will charge a higher rate on the long-terms. But I think the US has shifted to alot of short term borrowing and TIPS. We'll se what happens. Obviously the market is making a judgement right now and changing it all the time.

2. "de facto garuanteed" will need to be nailed down if there is a default. (What is "GSE"?) Brealey and Myers have a very nice comment to the effect that "there is a reason for all those pages of legalese on debt agreements". (It affects the interest rate.)

3. Yes, the recycling is an interesting question. Do you have any feel for this? In other words, do temporary imbalences exist only for short amounts of time? Or is it possible for these to stay around for a long time?

"Clinton set him up the bomb!!"

He and more importantly, Greenspan and Rubin.

Rubin's pals at GS did well the last few years, no?

And why is it that C gets credit for the good stuff but has a fall guy for the failures (Magadishu, etc.) Anyway, it's not Bush's tax cuts that are driving the deficit, its the bomb that Cats left.