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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: porcupine --''''> who wrote (346)5/22/1998 12:58:00 AM
From: porcupine --''''>  Read Replies (1) of 1722
 
Wayne on Productivity:

From: WCrimi <WCrimi@aol.com>
Date: Thu, 21 May 1998 23:04:42 EDT
To: gadr@nyct.net
Subject: Productivity

Reynolds,

This is a question. In my view what the productivity number
really is, is basically irrelevant to the values because whatever
it is, it is already reflected in the current income steams and
their growth. That is what I am concerned with and what
investment bankers use to value businesses etc...

I did see an interesting comment about it though. The annualized
GDP growth rate has been about 3% or a little less for this
business cycle. Let us assume that economic growth essentially
equals productivity gains plus new workers. (give or take) This
cycle has seen one of the most dramatic increases in workers in
history with the unemployment rate falling to decade lows. Yet
GDP growth is way below years past and corporate profit growth is
only slightly above nominal GDP growth despite falling borrowing
costs, overstated earnings, and more rapid growth overseas in
aggregate. How can productivity be really high then? It must be
relatively close to govt. stats indicate. If the true
productivity levels were really high, then GDP growth would be
atronomical. Yet even if somewhat mismeasured it is nowhere near
past decades.

Again, this has nothing to do with the values. Only the income
streams etc., matter. But it is an interesting observation.

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