270 replies to this topic

[Practical Girl]

DCoronata, on 08 May 2018 - 12:31 PM, said:

1) It isn't a "D'uh" if you read a lot of economics news forums. Traveller and I met on Bloomberg, and to be fair they're slightly better than most. If you read Marketwatch or WSJ you never hear them discuss the demographics! I sometimes post at the NY Times website and quite frequently you see posts on this issue and demographics are almost never part of the mix... It might be a "D'uh" if you have a functional memory- one reason why I want to do these discussions is the lack of serious economic discussion on most American websites that deal with economics!

2) You know you hear that "90%" figure bandied about but the reality is, it isn't that bad.
https://www.scienced...50401132856.htm
""It doesn't matter if you're selling bananas, airplanes, or whatever," Hamilton says -- the mortality rate is the same. Though the number, of course, varies from firm to firm, the team estimated that the typical company lasts about ten years before it's bought out, merges, or gets liquidated."

That's for public businesses. For privately owned businesses, most actually do pretty well.
https://www.bls.gov/...preneurship.htm
Chart three is fascinating- it's almost like they cut a parabola in half and the average MTBF (that's engineer for the time it takes for half to die) is about 5-6 years depending upon which year it started.

Now I want you to please note that being "the numbers guy" I try really hard to get them right before posting. If you want to know who "props up the economy" its the 70% of GDP that goes into consumer spending (minus the difference between exports and imports...) and most of that money, roughly 60% is services, which includes health care, rents, personal services, eating out, etc... About 35% are non-durable and durable goods, mostly expendables. We spend a lot of money on food, fuel, and clothing, etc.

I get it. My numbers were a bit "2010". But please don't treat me as if I am ignorant. Of course, I understand how our economy is powered. A link for you, from Business Insider. Why Small Business Fail. Good stats, but the one that sticks out is that "*82% experience cash flow problems".

So- you think it a good idea for a 65 year old who's already been skewered by the Great Recession to invest capital in a business? Many of these also involved in the economy of "sandwich" folks. Had both their parents and their children to support.

Would that everybody 65+ had the skill set- and cash- to take on the couple of industries that really pay. Really make money. That takes a very, very broad view of not just business but markets and how to capture. Employment and how to hire. HR issues. All that costs $$$. The sleeper in this is that some fail because of their inability to compete. That's simply going to get bigger, as the years go by.

As to the 70% consumer industry? Boomers spend more money on food, eating out, traveling, cars and real estate. Housing gets a bit tough to nail. Millenials are buying, now. Thanks be to god, the credit markets have loosened, for them. But not the only story. Millenials are getting priced out, in many instances.

Much of this is a consideration, yes?

The real question, for me: Why in the heck would a 65 year old person put a big portion of his capital to start a business, when he can just be comfy- and spend. US depends on that, right now. The rest sounds a bit "Mitt Romney-esque". Hey, just start a business...

[DCoronata]

Practical Girl, on 09 May 2018 - 09:08 AM, said:

I get it. My numbers were a bit "2010". But please don't treat me as if I am ignorant. Of course, I understand how our economy is powered. A link for you, from Business Insider. Why Small Business Fail. Good stats, but the one that sticks out is that "*82% experience cash flow problems".

So- you think it a good idea for a 65 year old who's already been skewered by the Great Recession to invest capital in a business? Many of these also involved in the economy of "sandwich" folks. Had both their parents and their children to support.

Would that everybody 65+ had the skill set- and cash- to take on the couple of industries that really pay. Really make money. That takes a very, very broad view of not just business but markets and how to capture. Employment and how to hire. HR issues. All that costs $$$. The sleeper in this is that some fail because of their inability to compete. That's simply going to get bigger, as the years go by.

As to the 70% consumer industry? Boomers spend more money on food, eating out, traveling, cars and real estate. Housing gets a bit tough to nail. Millenials are buying, now. Thanks be to god, the credit markets have loosened, for them. But not the only story. Millenials are getting priced out, in many instances.

Much of this is a consideration, yes?

The real question, for me: Why in the heck would a 65 year old person put a big portion of his capital to start a business, when he can just be comfy- and spend. US depends on that, right now. The rest sounds a bit "Mitt Romney-esque". Hey, just start a business...

I think you're misidentifying an observation for an opinion...
I don't think 65 year olds should start businesses, I'm stating that they in general, don't start businesses! This has an effect on reducing entrepreneurialism per capita and of course spending on non-health care issues per capita and therefore expecting things to stay the way they've done for the last 50 years is not a good idea.

It almost doesn't matter who won in 2016, we'd be seeing a slowdown for at least a decade unless Clinton would have opened the gates for new immigrants, and their families would have increased spending and business formation. So we did the polar opposite of what should be done in a demographically based slow growth period, we cut taxes on businesses who will not increase capacity to meet a stable if not shrinking consumer market.

Instead we are cutting our tax base, reducing the ability to build infrastructure and take care of social needs. And yeah, more than doubling the national debt.

But that might not be so bad, because it will drive interest rates higher so when the markets start to tank, we can all switch to bonds for a higher yield.

[Traveler]

But how well will bonds keep up with inflation?

[DCoronata]

Traveler, on 09 May 2018 - 10:47 AM, said:

But how well will bonds keep up with inflation?

Well the answer to that is, poorly at the start, but very, very well at the end. My brother in law bought long-term treasuries in 1983 when the ten year was about 14%- a few years later when yields returned to normal the sell price of those bonds were way, way higher than the original bid. Of course, how on earth do you know when's the high? And isn't that the critical question for every single investment (which is why trying to hit it is nearly impossible) I've hit lows twice in my life, hit one near-high this year when I bought a VIX ETF fund at around 22 and sold it for 45 about two weeks later and the precise sell timing was within minutes of the all-time high.

BTW I'm embroiled in a conversation on BB with a dyed in the wool holocaust denier. I'm keeping it relatively clean, but it is getting really hard to continue.

https://disqus.com/h...ment-3892853635

He's saying the German murderers were treated unfairly at Nuremberg. I'm guessing a Trump supporter...

[DCoronata]

Getting to my earlier discussion on bad media sources...
https://www.bloomber...-up-to-a-crisis

They are referencing average hours worked for "working age people" but the author Noah Smith who is usually pretty good, doesn't even come close to describing if he means 16-64, 20-55, or the entire civilian population survey data set. If you're not familiar with what that means, our government considers you of working age if you're not attached to a ventilator or having your meals served in liquid form.

[D. C. Sessions]

Practical Girl, on 09 May 2018 - 09:08 AM, said:

The real question, for me: Why in the heck would a 65 year old person put a big portion of his capital to start a business, when he can just be comfy- and spend. US depends on that, right now. The rest sounds a bit "Mitt Romney-esque". Hey, just start a business...

Lots of reasons. Ego, of course. Also, frankly, it's fun. I tell people that the reason I'm back in school (besides that learning is a hoot) is that I don't play golf, or cards, or watch TV -- gotta keep busy and tuition is cheaper than greens fees.

And from a slightly less personal side: if you work it right and genuinely know what you're doing, leaving a business to you heirs is one way to leave them one that's past its infant mortality phase. Also a potential tax break for them as well.

[JackD]

Try playing muni courses.

[DCoronata]

https://www.bea.gov/...dp1q18_2nd.xlsx
As threatened, sorry, I mean as promised, here's a look at today's GDP revision.

Gotta interrupt myself- sorry if it screws with flow but just a reminder, I'm not a professional economist, I'm an engineer who has studied economics as well as a zillion other things and I use a more statistical way of examining data rather than trying to parse political meanings. Often this means a very cut and dried analysis, but that's often the best way past the stench. I'm not just giving analysis, I'm also trying to educate; so many people do not know the facts behind economic data, metrics, and definitions and I think the best defense against idiocy on the web is knowledge.

Q1 revised down from 2.3% to 2.2%. (2.17% but who's counting?)
Price deflators fell (inflation indexes are lower) so dollar value GDP took a slightly higher drop.
There area four parts of GDP- (there will not be a test later):

Consumer expenditures (subheadings, goods and services) contributing 0.71%

Private investment (investment and inventory) contributing 1.19%, not often this is higher than CPE

Net Exports (difference between imports and exports, both goods and services) a relatively flat 0.08%

Government spending, Fed, state and local, added 0.20% to GDP.

Looking at the #s allows closer understanding of how things are really operating.
Consumer expenditures are generally ~70% of all GDP. Consumer spending increased by a relatively low 1.0%, and goods declined by 0.6%. I've been saying this for months, the MARTS (consumer merchandise sales) reports have been nearly recessionary. Durable goods down sharply after a big increase in Q4, and services, 1.8%, middling.
Investment spending is up- not that you'd notice it in jobs data or payrolls...
Personal health care spending as a fraction of GDP, stands at 11.71%. For reference, when they first released this data in 1999 it was 9.84%. Looking at how it has increased over time, it was 11.24% in Q1 2009 (+1.40%) and has since risen by 0.67% so the fraction spent is still increasing, but declining. Considering how we're aging (and many of those costs get shifted from individuals and the private sector to Medicare) this isn't that bad. Housing and utilities expenditures have declined slightly, but with increasing energy costs, this might change in Q2. (This is almost the same as health care!)
Imports continue to become a larger and larger part of GDP, and why doesn't this surprise me? Right now, we import 16.7% of our economy and we export 12.96%. Both are growing, but guess which is growing faster...
Defense spending is flat at 3.93% of our economy.
Right now, our national debt is growing at 6.12% of GDP- think about this, the increase in GDP is roughly 35% of the increase in the national debt, we are not even close to spending half our way towards growth.

[DCoronata]

This is another aspect of GDP and the economy, corporate profits.
https://fred.stlouisfed.org/series/CP
You'll note that even after a massive tax cut, corporate profits for Q1 2018 are (and this doesn't even include inflation) almost exactly the same as Q1 2017. Essentially no gains (1811.8 from 1810.5 billion) which is for all practical purposes, a few iPhones.I thought that business was supposed to see this amazing boom and growth under Trump!
BTW, post-tax corporate profits are essentially unchanged since late 2014. So why is the stock market so much higher?

[pnwguy]

DCoronata, on 30 May 2018 - 08:49 AM, said:

So why is the stock market so much higher?

"Because our Dear Leader is Making America Great Again!"

Securities, like anything else, are valued at whatever people THINK they are worth. If 2016 showed us nothing else, it's that a large part of the nation is delusional enough to need mental health attention. And our corporate leaders are masters at selling snake oil.

[LFC]

DCoronata, on 30 May 2018 - 08:34 AM, said:

As threatened, sorry, I mean as promised, here's a look at today's GDP revision.

You don't actually trust government figures, do you? I mean unless they make Republicans look good and/or make Democrats look bad. Then they're completely reliable.

[DCoronata]

pnwguy, on 30 May 2018 - 09:47 AM, said:

Securities, like anything else, are valued at whatever people THINK they are worth. If 2016 showed us nothing else, it's that a large part of the nation is delusional enough to need mental health attention. And our corporate leaders are masters at selling snake oil.

Yup, and I think using appreciable metrics that they're about 25% too high.
Absolute best case scenario, the tax cut gives companies paying the marginal rate (not many...) a 21.5% increase in after tax profits.
We're in the longest bull market in history, in one of the longest expansions on record, with relatively low unemployment and a totally tapped out consumer. The only way for most companies to grow profits is to increase their overseas sales, and Japan, Germany, Italy, Spain, France, Canada and the UK all have an older population (median) than the US. So if you're selling Viagra and gravestones, this is precisely your market demographic.

[golden_valley]

Is there a tombstone futures market? If so, I'm in.

[DCoronata]

LFC, on 30 May 2018 - 10:39 AM, said:

You don't actually trust government figures, do you? I mean unless they make Republicans look good and/or make Democrats look bad. Then they're completely reliable.

All kidding aside, they work really hard to get the best data money can buy and the news ain't always rosy. I'd mentioned MARTS- it's really been sad lately.
https://www.census.g...rts_current.pdf
The last five months, consumer spending (ex-gasoline) is 2.245 trillion and the five months before that was 2.221 trillion. Now that first number includes December, the biggest month of the year. And that's current dollars, not inflation adjusted.

We're not quite in a consumer recession. And yeah, that's after the tax cut.

[LFC]

DCoronata, on 30 May 2018 - 11:08 AM, said:

The last five months, consumer spending (ex-gasoline) is 2.245 trillion and the five months before that was 2.221 trillion. Now that first number includes December, the biggest month of the year. And that's current dollars, not inflation adjusted.

See! That's 3%! Hey, you have your facts and I have alternative facts. You have your maths and I have alternative maths.

[DCoronata]

LFC, on 30 May 2018 - 11:29 AM, said:

See! That's 3%! Hey, you have your facts and I have alternative facts. You have your maths and I have alternative maths.

Annualized, that's more like 2.7%, but if we use inflated dollars (we've had a spot of inflation the last five months) it gets more complicated... Inflation rate for the last five months (not including May) is running at an annualized 3.22%.

If we factor in the rate of inflation.
And we factor in the # of days, 151 vs 153. (And note, we're not factoring in # of hours because most stores are open far more hours in December) we get an increase in consumer spending of... about a percent. And yeah, GDP data shows 0.8% so that works but that's really, really weak especially after a nice tax cut.


I'd given this stat yesterday IIRC...
Last year, total GDP (current dollar) went from $19,057.1 to $19,956.8 billion. (+$899 billion)
In the last year, national debt went up by $1,243 billion.

Now it gets worse... By quarter, Q2 GDP gain $250.6B, debt up $503.3B. Q3, GDP up by $253.5B, debt up by $242.6B. Q1, GDP up by $202.7B, debt up by an astonishing $499.3B.

So in two out of the last three quarters, gains in GDP were less than half of gains in the national debt. How much longer can a nation take this sort of debt expansion with so little to show for it?

[andydp]

DCoronata, on 30 May 2018 - 12:09 PM, said:

Annualized, that's more like 2.7%, but if we use inflated dollars (we've had a spot of inflation the last five months) it gets more complicated... Inflation rate for the last five months (not including May) is running at an annualized 3.22%.

If we factor in the rate of inflation.
And we factor in the # of days, 151 vs 153. (And note, we're not factoring in # of hours because most stores are open far more hours in December) we get an increase in consumer spending of... about a percent. And yeah, GDP data shows 0.8% so that works but that's really, really weak especially after a nice tax cut.


I'd given this stat yesterday IIRC...
Last year, total GDP (current dollar) went from $19,057.1 to $19,956.8 billion. (+$899 billion)
In the last year, national debt went up by $1,243 billion.

Now it gets worse... By quarter, Q2 GDP gain $250.6B, debt up $503.3B. Q3, GDP up by $253.5B, debt up by $242.6B. Q1, GDP up by $202.7B, debt up by an astonishing $499.3B.

So in two out of the last three quarters, gains in GDP were less than half of gains in the national debt. How much longer can a nation take this sort of debt expansion with so little to show for it?

Do you have a link for this data ? The one above (bea.gov) only gets me some excel pages. Is there a page for mortals to understand ?

[DCoronata]

andydp, on 30 May 2018 - 02:16 PM, said:

Do you have a link for this data ? The one above (bea.gov) only gets me some excel pages. Is there a page for mortals to understand ?

https://www.census.g...c_releases.html
Historical MARTS reports
https://www.census.g...rts_current.pdf
Current report. Once you've got the data, you need Excel.

Edit: Oh, treasury direct

https://www.treasury...NP/debt/current

[D. C. Sessions]

DCoronata, on 30 May 2018 - 12:09 PM, said:

How much longer can a nation take this sort of debt expansion with so little to show for it?

Until there's a Democrat to blame for it.

[DCoronata]

https://www.bea.gov/...newsrelease.htm
https://fred.stlouis...g/series/PAYEMS

A little more data. Personal income data has some little notes that I'm trying to wrap my brain around and it gets into some interesting weeds and some appreciation of how things are working. Bigger picture items later, but some interesting notes first.

Social security spending went up strongly in January, and this is probably caused by a combination of COLA and more people retiring at the end of the year. Indexed to September, December's payment was 0.4% higher, January's 2.9% higher. April's data is showing that we're receiving 3.7% more social security payments now, than Sept, and in raw #s, that gone up from $923.3 to $967.0B. At the same time, unemployment benefits have fallen sharply, from $28.2B to $26.4B which is a sign of people finding work (or losing benefits...).
Personal savings is all over the place, going from $357.3B in Dec and $369.8B in Nov, to a high of $486.6B in Feb back down to $419.6 B in April. Xmas, of course, but to put things in perspective, the current 2.8% personal savings rate is HORRIBLE!!!

As a percentage of total income, wages and salaries went from 50.95% to 50.88%. The biggest changes to personal income came from personal interest payments, I guess there's a lot of people lending to other people and that actually amounts to (non-mortgage) nearly 2% of all personal income and I had no idea it was that much... Otherwise, there isn't that much to show in salary growth.
The per-capita inflation adjusted income went from $39,163 to $39,596 and that's not terrible but for most people a 1% increase isn't going to look like a heck of a lot.