And Lusty Lad and WTF are arguing over whether GDP growth of 3% per annum is high

[Chung Tran]

I disagree with your value definition. ''Unreasonably compressed''? According to who?

There are lots of stocks that live their entire existence as ''value'' stocks. Clorox, Pepsi, lots of utilities. If they were ''value'', everyone would buy them. They are ''value'' because they have little growth in earnings. Doesn't make them valuable or unreasonably compressed. Many of them grow less than inflation for many years.

To summarize, ''value'' is mostly a bullshit Wall Street term, to try and categorize non-growth stocks. I'm surprised you didn't simplify even more, by saying value = a P/E less than 10 times one year trailing earnings.

[Tiny]

Originally Posted by lustylad

Hey Tiny, I think comparing each quarter's GDP output with the immediately preceding quarter (as the Bureau of Economic Analysis does) is far more useful than comparing it with the same year-earlier quarter.

Our GDP performance in 2020 illustrates why. Because of the pandemic, much of the economy was effectively shut down in Q2 of that year, before immediately reopening in Q3. So you had a steep falloff in production, followed by a dramatic bounce-back. The BEA reported that our real GDP shrank at an annualized rate of 31.2% in Q2. Then in Q3 it soared by 33.8% per annum. (See table in WYID's post #36.)

In other words, it was a dramatic V-shaped recovery, as one would expect given how the initial recession was artificially induced by the covid pandemic. Both quarterly numbers were record changes in our GDP - one down and one up.

As you no doubt understand (but math dunces like WTF and chungy don't grasp), in Q3 2020 we didn't get all the way back to our pre-pandemic level of output, despite the fact that the PERCENTAGE growth was higher than the PERCENTAGE loss experienced in Q2. There's a math asymmetry at work here. If a number goes down by 33%, from that level it would take a 50% increase to get all the way back up to the starting number.

Anyway, the BEA reports each quarterly GDP result compared with the immediately prior quarter. If they looked instead at the year-earlier quarter, they would have reported "negative" growth in Q3 2020 - which makes no sense since actual output was rapidly expanding.

P.S. If you do a deep dive into the BEA data, you can also find GDP prior to seasonal adjustment.

LustyLad, This reminds me of Captain Midnight taking me to the woodshed once upon a time for claiming that employers bore their share of payroll taxes. Therefore it was fair to add those to income taxes, ad valorem taxes, and sales taxes to look at the total tax burden on businesses. I'm sure he would have taken me to the woodshed about the sales taxes too, but that must have slipped by him. Anyway, it didn't entirely make sense to me, but I figure he's right because he knows about 10,000X more about macroeconomics than I do. And he at one time or another had studied up on that point.

This is the same, except that in addition to your comments, I know that it's more common for economists to look at annualized QoQ rates. I had a little trouble digging up that graph for Why_Yes_I_Do -- it didn't just pop up by Googling.

What I don't understand is why you guys (economists) annualize the numbers. Take your example of 2Q2020. Based on the annualized QoQ GDP decline of 31.2%, the unannualized QoQ decline in GDP was about 9%. Why not just quote that number? How much sense does it make to assume you're going to compound a 9%/quarter GDP decline for 12 months? You're not. GDP never declined 31.2% from its peak in 1Q2020. It only declined 9% before it started to rise again.

I suspect the concept though makes more sense when you don't have extreme quarterly changes in GDP, like in 2020. But again I don't understand exactly why. But then since I was a little tike I always was within a few steps of a calculator with "y to the x" and natural logarithm keys. They called me "TI Tiny" in high school. So when I say the annualized numbers are misleading, to me they're really not. To the general public probably they are.

Notes:

1. TI = Texas Instruments

2. I have and will continue to forget my trip to the woodshed, about employment taxes, when arguing with WTF.

[Chung Tran]

I would respond, except the answer is so simple and obvious I think I misunderstood the question.

I'm sure Lusty will give you a good answer with 4 paragraphs when one would be plenty

[Tiny]

Originally Posted by Chung Tran

I disagree with your value definition. ''Unreasonably compressed''? According to who?

There are lots of stocks that live their entire existence as ''value'' stocks. Clorox, Pepsi, lots of utilities. If they were ''value'', everyone would buy them. They are ''value'' because they have little growth in earnings. Doesn't make them valuable or unreasonably compressed. Many of them grow less than inflation for many years.

To summarize, ''value'' is mostly a bullshit Wall Street term, to try and categorize non-growth stocks. I'm surprised you didn't simplify even more, by saying value = a P/E less than 10 times one year trailing earnings.

You're nitpicking Chung Tran. Lusty Lad's explanation of growth vs. value was excellent.

If what you're getting at is that "value" stocks are not necessarily cheap, yeah, that's right, 100%. There are a lot of value traps out there. More so than P/E's, future free cash flows and what management does with them determine whether a company is indeed cheap. If a company ends up paying, say, dividends equivalent to 20% of what you paid for the stock, you'll probably do pretty well. WTF I think has a couple like that he bought in 2020.

Also, based on what Lusty Lad was saying about Trump back in 2016, he's not his biggest fan. I believe he had a better handle on the man back then than you did.

[Tiny]

Originally Posted by Chung Tran

I would respond, except the answer is so simple and obvious I think I misunderstood the question.

I'm sure Lusty will give you a good answer with 4 paragraphs when one would be plenty

As I've said several times before, you know more about macroeconomics than I do. Any response that helps me understand this better would be appreciated.

[lustylad]

Originally Posted by Chung Tran

I would respond, except the answer is so simple and obvious I think I misunderstood the question.

Be my guest. Except I think Tiny pretty much already answered his own question.

[Chung Tran]

You had two questions, but rightfully dismissed the second as rhetorical. So let's go with ''why quote that number''?

Both the 31% and 9% figures are helpful. For understanding a fixed time period (one year) and the rapid change from one quarter to the next. Why quote one?

In this particular case, the 9% is a better measurement to understand the trend. The 31% simply records the sudden jolt, just as the 38% Q3 figure that Lusty cited did. And why I chided him for posting that with no context.

Sort of like a PE ratio. You say Tesla trades at 14 times earnings, for example. Is that last year's known earnings, or the next year's expected earnings? Makes a big difference, obviously. You should probably use both, along with much more data, before deciding to buy Tesla.

The 9% figure year over year smooths out the outlier 31% number, but as you said it is not a forecast tool.

[Tiny]

Originally Posted by Chung Tran

You had two questions, but rightfully dismissed the second as rhetorical. So let's go with ''why quote that number''?

Both the 31% and 9% figures are helpful. For understanding a fixed time period (one year) and the rapid change from one quarter to the next. Why quote one?

In this particular case, the 9% is a better measurement to understand the trend. The 31% simply records the sudden jolt, just as the 38% Q3 figure that Lusty cited did. And why I chided him for posting that with no context.

Sort of like a PE ratio. You say Tesla trades at 14 times earnings, for example. Is that last year's known earnings, or the next year's expected earnings? Makes a big difference, obviously. You should probably use both, along with much more data, before deciding to buy Tesla.

The 9% figure year over year smooths out the outlier 31% number, but as you said it is not a forecast tool.

Yes, I believe you're right. Both the YoY and QoQ numbers are useful.

To be honest, when I'm looking at info from financial statements for companies, I do usually focus a lot more on quarter to quarter trends than on the YoY changes for the quarters. That's not always the case though -- if I were looking at a retailer that sells a lot before Christmas I'd focus more on YoY changes. Anyway maybe it's the same for economists -- the QoQ numbers are more insightful for them, especially if they're not looking at a single instant in time, but rather looking at trends over years.

[WTF]

Originally Posted by Tiny

You're nitllll

Also, based on what Lusty Lad was saying about Trump back in 2016, he's not his biggest fan. I believe he had a better handle on the man back then than you did.

Based on his 2017 posts, lustylad has changed his tune and was stationed under the podium anytime Trump spoke to clean then juggling Trump's balls.

[The_Waco_Kid]

Originally Posted by WTF

Was Ken Lay your mentor?

No, Ronnie Jr.

[Texas Contrarian]

In reply to the obviously erroneous statement that Tesla is "not a growth stock," I mentioned that the author of this Barron's piece:

https://www.barrons.com/articles/tes...es-51632777811

... seemed a bit confused.

That's because the author, in the title of the piece, says that Tesla "isn't acting like a growth stock" -- and then in the last three sentences contradicts himself!

Consider:

He wrote that Tesla shares popped quickly in anticipation of better-than-expected Q3 sales last year.

And in a company with a market cap roughly 100X 2022 earnings estimates. (That's EXACTLY how growth stocks typically "act!")

Yet someone spends multiple posts forlornly attempting to argue that TSLA should somehow not have been classifiable as a growth stock? Seriously?

.

[Texas Contrarian]

Originally Posted by Tiny

Well Cap'n, I spent about another 30 seconds scanning that paper, and came across this jewel of a paragraph,

To see how different the growth rates are, consider some conservative parameter values.Let the product shares be α = .25, β = .5, and γ = .02, let annual growth rates be 1.5% for
the human population H and 1% for general technology A, and let computer prices P halve every two years. Without machine intelligence, world product grows at a familiar rate of 4.3% per year, doubling every 16 years, with about 40% of technological progress coming from ordinary computers. With machine intelligence, the (instantaneous) annual growth rate would be 45%, ten times higher, making world product double every 18 months! If the product shares are raised by 20%, and general technology growth is lowered to preserve the 4.4% figure, the new doubling time falls to less than 6 months. Such rapid growth may seem so far from historical experience that it should be rejected out of hand. However, an empirical projection of historical trends in world economic growth makes a median prediction that the economy will transition to a doubling time of one to two years around 2025 (Hanson, 1998).

Robin Hanson, who wrote the paper we're talking about, predicted world GDP would double every one to two years by 2025 way back in 1998. Cathie Wood is late to the party!

I don't think we can afford Cathie Wood, but we need to hire Robin Hanson and start a public company and sell something, like stock. Robin can supply the hype.

Yep! That notion is really something else. I've seen comically wild conclusions drawn from mathematical models with what look like a veneer of rigorousness, yet someone somehow comes to an otherworldly conclusion that defies all reason ... but these people ought to get a lifetime achievement award!

Bad enough was the model cited by an "economist-for-hire" quoted by Nancy Pelosi about a decade ago, when she said that "reputable economists" calculated that boosting food stamp dispensation was a "jobs program." The argument was that social spending of that nature produces a fiscal multiplier of about 1.75 (it does not!), and that this somehow means that as a result, a bunch of new jobs would be created as a direct result of the spending.

Even worse was the nonsense propounded at about that time by an infamous duo of Berkeley professors. Their brilliant model indicated that the optimal and revenue-maximizing marginal income tax rate was about 84%.

Following their example, as well as the urgings of Professor Piketty, France raised the top-bracket income tax rate to 75% ten years ago. That backfired in spectacularly embarrassing fashion and the French soon reduced the rate to 45%.

Episodes such as this led me to conclude that the following is an apropos response to anyone who proposes such ridiculousness and purports to undergird his argument with an arcane-looking "model," but unaccompanied by narrative that seems to comport with logic and reason.

Hello, pretty little mathematical model. Nice, fashionable look you've got going on there!

Please meet Mr. Real World. (Caution: Mr. World is a serious badass. In fact, he's the undefeated heavyweight champion!)

.

[Chung Tran]

Originally Posted by CaptainMidnight

Yet someone spends multiple posts forlornly attempting to argue that TSLA should somehow not have been classifiable as a growth stock? Seriously?

.

Would that be me?

I don't know what is ''forlornly'' about my posts. Have you been reading Robert Frost?

Tesla is not a growth stock anymore. It is a mature stock that is losing share to other companies. Read this and tell me with a straight face that Tesla is a growth stock.

https://www.macrotrends.net/stocks/c...-price-history

[Texas Contrarian]

Originally Posted by Chung Tran

Would that be me?

I don't know what is ''forlornly'' about my posts. Have you been reading Robert Frost?

Tesla is not a growth stock anymore. It is a mature stock that is losing share to other companies. Read this and tell me with a straight face that Tesla is a growth stock.

https://www.macrotrends.net/stocks/c...-price-history

Huh?? Are you just trying to be intentionally obtuse?

Obviously you didn't think through the Barron's article you linked, since it's painfully clear that you didn't understand it. Wanna try again?

.

[Chung Tran]

Originally Posted by CaptainMidnight

Huh?? Are you just trying to be intentionally obtuse?

Obviously, you didn't think through the Barron's article you linked, since you obviously did not understand it. Wanna try again?

.

.

No, I want you to tell me why you think Tesla is a growth stock. Without using ''forlornly'' in a sentence. I told you why it's not. You rely on links to answer for you?