U.S. Economy Shrinks in 4th Qtr

[giblets]

That 2 is twice as strong as one? Would you prefer me to choose 1965? I can do that.

I would prefer you use enough data points to get something statistically significant. More than two. Maybe you should take a data point from each year from 1913 to 2013, giving you 100 data points. You might find that 2000 was above trend and 2013 is below trend- perhaps the stock market fluctuates in unpredictable ways.

[Ben Kenobi]

I would prefer you use enough data points to get something statistically significant.

Define what you consider statistically significant.

Maybe you should take a data point from each year from 1913 to 2013, giving you 100 data points.

Maybe you should.

You might find that 2000 was above trend and 2013 is below trend- perhaps the stock market fluctuates in unpredictable ways.

Sounds like an excellent thesis. Hop to it!

[giblets]

Why would I waste any time or effort in an attempt to convince you the Dow index fluctuates unpredictably? Or that by picking just two points, depending on which points you pick you could show pretty much whatever trend you want without providing anything useful? Your opinions are nothing more than a source of amusement.

[MichaeltheGreat]

So your argument is that because one sector of the economy is doing well, it compensates for every other sector of the economy? Economics!= what's going on in the computer industry.

Economics is a field of pseudo-intellectual masturbation for failed mathematicians who can't do applied physics, but found another way to make money, by a "pick your method of choice" approach to justifying the worldview of their employers.

I'm not talking about the computer industry, you dolt, computation, bandwidth, etc. is used in virtually EVERY industry, finance, commerce, etc., resulting in vastly increased efficiencies which drive productivity, which in turn drive growth, in ways that the 19th century mentality of Austrian school economic can't even comprehend. Those dumb ****s want to go back to a gold or silver standard because, in their view, the only real economic activity is exchange of one durable good for another.

Inflation is useful in discussing things like whether a farmer in Zimbabwe can get by petrol to get back to the farm after selling his truckload of carrots in the open air market, but it's completely useless to apply to something like momentary value of equity indices at two different points in time, which is how you're using it.

The other thing, fumb duck, is that you're playing the bait and switch putting words in people's mouths game. Referring to deflation coupled with increased value in a bundle of technologically related industries (telecomms != computers) which are universally applied throughout the economy has nothing to do with wether that sector, or any other sector, is going well.

Once again, you make an irrelevant assertion (current DJIA value being the same as 1942 based on your assumption that you just apply some inflationary discout), get called on it, so you try to shift the argument to a strawman claim that I cited the computer industry as "doing well" as if it's the entire economy. No, I addressed the irrelevance of applying "inflation" to value of equities.

You ought to move to New York and become the next Wall St. guru, because apparently all those professionals who make investment decisions for a living have got it all wrong.

[Ben Kenobi]

Why would I waste any time or effort in an attempt to convince you the Dow index fluctuates unpredictably?

Then you concede the argument. Glad to hear it Gribbler.

[giblets]

BK, you've already conceded that you're wrong by not writing a dissertation.

[Ben Kenobi]

Economics is a field of pseudo-intellectual masturbation for failed mathematicians who can't do applied physics, but found another way to make money, by a "pick your method of choice" approach to justifying the worldview of their employers.

Then it's no surprise that you don't understand it.

I'm not talking about the computer industry, you dolt, computation, bandwidth, etc. is used in virtually EVERY industry, finance, commerce, etc., resulting in vastly increased efficiencies which drive productivity, which in turn drive growth, in ways that the 19th century mentality of Austrian school economic can't even comprehend. Those dumb ****s want to go back to a gold or silver standard because, in their view, the only real economic activity is exchange of one durable good for another.

It's not difficult at all. What drives innovation? What drives production? What drives increases in efficiency? What drives an economy? How does economic growth emerge? These are all questions that this 'pseudo science' provides answers. To an individual, the question is very different from an industry. It all comes down to supply and demand. The reason we aren't seeing much economic growth in the past 12, 13 years is because the bulk of this change has already occurred.

The bulk of the efficiency and innovation increases from computerization occurred in the 90s. Now? We are seeing tiny, small increases that don't really have that much to do with the overall economy.

Inflation is useful in discussing things like whether a farmer in Zimbabwe can get by petrol to get back to the farm after selling his truckload of carrots in the open air market, but it's completely useless to apply to something like momentary value of equity indices at two different points in time, which is how you're using it.

It is absolutely crucial to understanding real growth in the economy. It's like trying to perform ballistics computations sans wind resistance. You will miss the target every time.

The other thing, fumb duck, is that you're playing the bait and switch putting words in people's mouths game. Referring to deflation coupled with increased value in a bundle of technologically related industries (telecomms != computers) which are universally applied throughout the economy has nothing to do with wether that sector, or any other sector, is going well.

It would be bait and switch if I were arguing that technological force is the primary force driving deflation. It's not. The long term deflationary forces have to do with demographics. People, as a bulk, have spending habits that are not difficult to track over time. If we assume that the overall population continues to exhibit these trends, then we can roughly predict what is going to occur.

No, I addressed the irrelevance of applying "inflation" to value of equities.

And again, it is *very* relevant to the performance of investments, etc. You think people don't take it into account looking at the actual inflation rates vs their returns?

You ought to move to New York and become the next Wall St. guru, because apparently all those professionals who make investment decisions for a living have got it all wrong.

I should move to Vienna.

[Ben Kenobi]

BK, you've already conceded that you're wrong by not writing a dissertation

I have provided a thesis, and defended it in this thread. You have provided a thesis and then admitted you don't want to defend it. Which is fine.

[giblets]

If you call "stocks fluctuate unpredictably" a thesis...

Or if you call "a linear regression based on two data points is meaningless" a thesis...

[MichaeltheGreat]

Why would I waste any time or effort in an attempt to convince you the Dow index fluctuates unpredictably? Or that by picking just two points, depending on which points you pick you could show pretty much whatever trend you want without providing anything useful? Your opinions are nothing more than a source of amusement.

More to the point, if someone actually wants to talk value, you need to address total capitalization of the underlying equities, not index price. DJIA addresses splits and dividends, but does not adequately address capitalization differentials at the time one component is replaced by another. Compare the total capitalization of the DJIA components in 1942 and currently, then it becomes absolutely laughable how far Ben's ideas are from reality.

But, without even going there, methinks Ben needs to read new sources or go back to sixth grade math.

Taking annual historical inflation tables, cumulative inflation in the US from Jan 2 1942 to Dec. 2012 is 1561,04%

On Jan 2, 1942, the DJIA was 112.77. This last friday, it closed at 14,009.79, which is 12,422.23% of the initial closing price in 1942. So the DJIA has increased 795.8% of the increase in inflation over the same time period, without even getting into the issue that the index does not truly address value.

[Ben Kenobi]

On Jan 2, 1942, the DJIA was 112.77. This last friday, it closed at 14,009.79, which is 12,422.23% of the initial closing price in 1942. So the DJIA has increased 795.8% of the increase in inflation over the same time period, without even getting into the issue that the index does not truly address value.

Umm, your numbers are very bad. I already provided a source that prices the dow in constant dollars.

[MichaeltheGreat]

Then it's no surprise that you don't understand it.

Nope, I just work with financing large scale capital projects and spend half my day dealing with investment bankers, large back project finance groups and private equity firms. It's not that I don't understand it. I reject it as being on a par with palm reading, but for a much higher hourly rate.

It's not difficult at all. What drives innovation? What drives production? What drives increases in efficiency? What drives an economy? How does economic growth emerge? These are all questions that this 'pseudo science' provides answers. To an individual, the question is very different from an industry. It all comes down to supply and demand. The reason we aren't seeing much economic growth in the past 12, 13 years is because the bulk of this change has already occurred.

Of course it provides answers. Take a set of data, give it to 100 accountants or lawyers or other consultants, you'll get 100 answers. Give it to 100 economists, you'll a couple dozen answers, because 99.9% of economists lack the individual creativity needed to come up with their own answer, so they're dogmatic adherents to their version of the one true faith. If you don't like the answer you get, you hire another consultant or an economist from a different school. They're just a different form of hooker, the difference is they take your money and **** you without anybody taking any clothes off.

The bulk of the efficiency and innovation increases from computerization occurred in the 90s. Now? We are seeing tiny, small increases that don't really have that much to do with the overall economy.

And we're not talking about economic growth. We're talking about how such factors are not reflected in your Austrian views of inflation. And we're seeing massive innovations - they're just obvious in the consumer market yet, and many won't be.

It is absolutely crucial to understanding real growth in the economy. It's like trying to perform ballistics computations sans wind resistance. You will miss the target every time.

Using your analogy, you'd factor wind resistance into swinging an axe to chop firewood or designing a frozen food container.

It would be bait and switch if I were arguing that technological force is the primary force driving deflation. It's not. The long term deflationary forces have to do with demographics. People, as a bulk, have spending habits that are not difficult to track over time. If we assume that the overall population continues to exhibit these trends, then we can roughly predict what is going to occur.

Such an assumption would be flawed in too many respects to even get into. Spending habits at the consumer level and at the business level are nothing like they were 50 years ago. One size does not fit all.

And again, it is *very* relevant to the performance of investments, etc. You think people don't take it into account looking at the actual inflation rates vs their returns?

I deal with people making investment decisions from ~50 million up. The only interest they have in inflation is the whether it's clearly understated or overstated in financial models to spin lifetime NPV. Hurdle rates are completely unrelated to inflation at this time - they are based on risk, marketability of the asset at the exit point, and competitive opportunity. Hurdle rates are so far above the rate of inflation it's not even an issue.

I should move to Vienna.

You'd end up driving a taxi in New York with your econonic views.

[Ben Kenobi]

You know, I'm amazed.

Everyone argues that I'm the dumbass here. Yet we've seen the following.

1,2,3 attempts to actually rebut the argument, none of which use the actual time period (but they do manage to mysteriously come up with other ones, presumably because it makes for better numbers).

Then a restating.

Then an actually relevant argument, for which no source is provided and remains just a thesis. Then, yet another irrelevant argument that does nothing to actually address the point at hand.

Is this really the best you've got?

[MichaeltheGreat]

Umm, your numbers are very bad. I already provided a source that prices the dow in constant dollars.

Well, sorry to burst your bubble, but there is no dispute on the 112 and 14,009 prices, and I got inflationary data off of Bureau of Labor Statistics, which tracks and publishes that data, so no dispute there.

[Ben Kenobi]

Nope, I just work with financing large scale capital projects and spend half my day dealing with investment bankers, large back project finance groups and private equity firms. It's not that I don't understand it. I reject it as being on a par with palm reading, but for a much higher hourly rate.

That doesn't exactly make me feel more confident, fwiw.

Of course it provides answers. Take a set of data, give it to 100 accountants or lawyers or other consultants, you'll get 100 answers.

You should show this to your clients.

Give it to 100 economists, you'll a couple dozen answers, because 99.9% of economists lack the individual creativity needed to come up with their own answer, so they're dogmatic adherents to their version of the one true faith. If you don't like the answer you get, you hire another consultant or an economist from a different school. They're just a different form of hooker, the difference is they take your money and **** you without anybody taking any clothes off.

So, what actual value are you providing to your clients? If you don't believe that there's any way to successfully grow the economy then what exactly are you doing?

And we're not talking about economic growth.

Really? I am. That's the whole point of this thread.

We're talking about how such factors are not reflected in your Austrian views of inflation.

Your oppositional thesis is "no one knows how the economy works." Straight out of margaritaville.

And we're seeing massive innovations - they're just obvious in the consumer market yet, and many won't be.

Then economics doesn't care.

Using your analogy, you'd factor wind resistance into swinging an axe to chop firewood or designing a frozen food container.

Again, inflation is very relevant to investment. Very relevant.

Such an assumption would be flawed in too many respects to even get into. Spending habits at the consumer level and at the business level are nothing like they were 50 years ago. One size does not fit all.

So, tell me, what's the age that people spend the most?

I deal with people making investment decisions from ~50 million up. The only interest they have in inflation is the whether it's clearly understated or overstated in financial models to spin lifetime NPV. Hurdle rates are completely unrelated to inflation at this time - they are based on risk, marketability of the asset at the exit point, and competitive opportunity. Hurdle rates are so far above the rate of inflation it's not even an issue.

So, what's your rate of return? Does it compensate for your take?

You'd end up driving a taxi in New York with your econonic views.

You're the only one working at a job that he's said provides exactly zero value.