jc, here are the facts i see. none of this is opinion.
Fact 1. in 1996 the calculations used to generate gdp and productivity growth were changed to include noneconomic factors. hedonic pricing is the term. it has artificially boosted productivity growth by 100%. productivity between 1996 and present is just slightly better than in the 1970s, the 1980s and the early 90s when using economic figures (the way the entire world measures their gdp).
why did they make the change? b/c they didn't like the economic numbers. that's like saying, i don't like the b-ball score b/c you won. i'll change the numbers b/c i s/h won, therefore, i beat you. that is the intellectual level that spurred this change of economic growth to economic / noneconomic fluff factor growth.
boom? try nothing extraordinary.
Fact 2: Open standards TCP/IP servers running ubiquitous devices, etc are a world apart from tulips. yes. and so was radio. that didn't stop some rca investors from jumping out of windows when rca's stock collapsed. everything is different, so what? the bottom line is that tcp/ip generated so LITTLE economic growth that uncle bill and crew had to fudge the numbers and the vast majority of folks are kept ignorant of this FACT.
Fact 3: We saw dissavings for the first time in recorded history.
Fact 4: Money supply growth is raging at a historically very fast pace (ask yourself why when the "revolution" says we should be able to do more w/ less - seems the powers that be say one thing and do another! Hint - watch actions, not words).
Fact 5: Credit growth is massive by historical standards.
Fact 6: Housing equity is dropping while massive asset inflation pushes values up 25%+ / year in some places.
Opinion: Money supply can't continue to grow at a double digit pace w/o damaging the economy and spurring inflation. Housing prices won't continue to grow at 15-30% / year so folks can refi and take on more debt. credit can't keep expanding at an unnatural pace. Statistical manipulation doesn't change the reality of miniscule productivity gains.
the faked statistics give folks the confidence to take on debt (125% mortgage, anyone?) and spend more than they take home to fuel market demand. this cycle can't last forever.
Fact 7: the growth rate of many tech leaders have been imploding while stock multiples have been expanding. didn't msft grow eps by less than 10% not so long ago? check oracle's growth rate in the early 90s and its pe. check it now. much higher pe for much lower growth rate. i thought revolutions were supposed to increase growth rates, not hack them up? the market has brought us closer to reasonable levels of late.
I would appreciate your view on why people should pay much higher multiples for companies with much slower growth rates than in the past and how this is related to a tech revolution as opposed to faked statistics / negative savings / credit exploding revolution. i'd also like to hear an explanation why growth rates are slowing in this "revolution?" as an investor, i don't care what you call it, i want a good bottom line getting better, not worse.
tell me the sky is green, but if i see blue, i don't believe you. again, i'm talking generalities. there is some value in the market - but not much.
good luck. |
