Markets 9-2-2020

[lustylad]

Originally Posted by adav8s28

The federal budget deficit was 585 billion in 2016. The lowest it has been since B. Clinton left office. The data is the data. I never said Obama was an economist...

https://www.thebalance.com/us-deficit-by-year-3306306

You're not only NOT an economist, you can't even comprehend your own fucking link!

G.W. Bush was in office for 8 years after Clinton. Every single one of his budget deficits from 2001-2008, according to your link, was less than the $585 billion you attribute to obama's last year (2016).

Yeah, the data is the data... if you know how to READ data!

[The_Waco_Kid]

Originally Posted by lustylad

You're not only NOT an economist, you can't even comprehend your own fucking link!

G.W. Bush was in office for 8 years after Clinton. Every single one of his budget deficits from 2001-2008, according to your link, was less than the $585 billion you attribute to obama's last year (2016).

Yeah, the data is the data... if you know how to READ data!

interesting isn't it that he fixates on only one year. ignoring the previous 7 years. yeah like i said he cherry picks his numbers while ignoring the pits in those cherries

[lustylad]

Originally Posted by Grace Preston

One of the great ways to send your stock prices soaring is with profitability -- and the shareholders don't care if that comes from increased sales... or from laying off hundreds of employees and shifting margins around.

Only the first part of your statement is true. Yes, as Larry Kudlow (head of the National Economics Council) likes to say, "Profits are the mother's milk of stocks".

However, the markets care a GREAT DEAL whether those profits are generated by revenue growth or cost cutting. Think about it. If revenues are stagnant or shrinking, it means your underlying business ain't healthy. Cost cutting may prop up earnings temporarily, but it's a one-trick pony if revenues don't pick up.

On the other hand, the market likes to reward companies with steady and strong top-line revenue growth, even if they aren't profitable. Amazon is a prime example. Prior to 2016 it experienced decades of brisk sales growth without showing any significant profit, because Jeff Bezos kept ploughing all of the firm's cashflow back into financing the rapid expansion of the business. The stock price kept advancing over this period, because investors knew there was a big pot of earnings at the end of the tunnel.

[lustylad]

Originally Posted by Lucas McCain

Just look at yesterday in the market. When investors sell off that quickly and take their short term profits, they are usually day traders...

Golly gee! I'm just soooo impressed with your astute market analysis, Luke! How would you like to manage my retirement portfolio?

Originally Posted by Lucas McCain

It is easy to manipulate net profits for a company. I do it for a living. All you have to do is eliminate the biggest cost for that company - employees.

Actually Luke, in your case the surest way to drive up the stock price would be to eliminate YOURSELF!

Originally Posted by Lucas McCain

I don't like Trump. Am I liberal now? I don't like Biden. Am I a conservative now?

I hope you can figure it out, Luke. In the meantime, one thing that never changes is - you are a PHONY and a FRAUD. Please tell us more about your 3 Ivy League degrees!

[friendly fred]

Originally Posted by Tiny

Thank goodness. Daily cases in Texas are falling and hopefully deaths will be too before long, thanks in no small part to Governor Abbott's executive orders for masks and bars issued this summer.

Amen - we are lucky to have Governor Abbott.

The one criticism of him I would offer is he should have provided rapid COVID-19 testing machines at the strip clubs and given them a special dispensation to get rid of masks as long as everyone who went in tested negative.

I'm on the fence about whether it should have been on the honor system...

[Tiny]

Originally Posted by friendly fred

Amen - we are lucky to have Governor Abbott.

The one criticism of him I would offer is he should have provided rapid COVID-19 testing machines at the strip clubs and given them a special dispensation to get rid of masks as long as everyone who went in tested negative.

I'm on the fence about whether it should have been on the honor system...

That would be fantastic, rapid tests at strip clubs.

I see a stripper about once a week socially. She recently came down with Covid. Before she was showing symptoms she flew to Miami with a couple of friends to get hair extensions. She infected both of them, and also a woman in Miami she was staying with. When it came time to get the hair work done she felt like shit, body aches, chills, etc. But nothing's going to get between a stripper and her hair extensions. (There must be a market out there for women with long, well tended hair beyond just you.) So she gave it to her stylist too. A couple of days later she got a rapid test and was positive.

So, tallying it up, she gave the Covid to at least 4 people she knows about. Maybe it was good she was traveling because otherwise she might have been spreading in the club, or heaven forbid, in my house.

Changing topic a little, I bought 4 or 5 HIV rapid tests back in the day, thinking that would be great to have with hookers, for the same reason you're thinking about Covid tests in a strip bar. I never used them as I figured out around that time that BBFS just isn't worth it. It's pretty unlikely you'd get AIDS, but there are lots of other things out there. So I just decided to always wear condoms. Maybe there's an analogy here, rubbers for AIDS and masks for Covid, although it's pretty weak.

[Tiny]

Originally Posted by lustylad

On the other hand, the market likes to reward companies with steady and strong top-line revenue growth, even if they aren't profitable. Amazon is a prime example. Prior to 2016 it experienced decades of brisk sales growth without showing any significant profit, because Jeff Bezos kept ploughing all of the firm's cashflow back into financing the rapid expansion of the business. The stock price kept advancing over this period, because investors knew there was a big pot of earnings at the end of the tunnel.

You may already know this, but for a number of years the reason Amazon was able to grow rapidly without significant profits was because it operated with little or negative working capital. Their customers paid them quickly, so they on average collected receivables in 10 or 15 days. But they'd draw out paying their suppliers to around 80 or 90 days. They were limping along making 1% or 2% net profit margins, so didn't have much free cash flow from profits to reinvest. But they generated gobs of cash flow from drawing out their payables. Their suppliers were loaning them the money to grow their business.

This works great as long as you're growing, because your vendors keep loaning you more and more money. Once the music stops, or if things go into reverse and sales fall, you're fucked. When this unwinds it's not a pretty picture. Amazon was fortunate in that they kept growing and it never unwound. While I don't think they have negative working capital any longer, and they're spending a lot more on capex (property, plant and equipment) than they used to, their net profit margins the last couple of years have jumped from the 1% to 2% range to 4% or 4.5%. So this worked out like you described. They're making lots of money now, although still selling at a steep price. I'd argue the investors didn't actually KNOW there was a big pot of earnings at the end of the tunnel, but that appears to be the way this is working out.

For every "growth stock" company like Amazon that works out extremely well there must be a lot more that don't. Bezos must have been struggling for a long while. Amazon used to (and maybe still is) window dress its balance sheet at the ends of the quarters, by drawing out the payables even longer and accelerating receipt of payments from customers even more than usual. This gave investors a rosier picture than actually existed, because the net cash at the ends of the quarters when reporting occurred looked a lot better than at other times.

What's a little disconcerting, Biden wants to put a minimum tax on companies like Amazon, and some of his Democratic colleagues, like Sanders, would go even farther, by boosting the corporate federal rate all the way back to 35% and levying an annual wealth tax on extremely successful entrepreneurs like Bezos. This would result in very little skin off of Bezos' back, but it would be a real obstacle for smaller companies on the road to success, the next Amazons. Our companies in the USA are among the most innovative and successful in the world. We shouldn't be frothing at the bit to handicap them. We should leave the capital with the capitalists, to invest in growth and jobs, not hand it all over to government to be squandered.

[adav8s28]

Originally Posted by lustylad

You're not only NOT an economist, you can't even comprehend your own fucking link!

G.W. Bush was in office for 8 years after Clinton. Every single one of his budget deficits from 2001-2008, according to your link, was less than the $585 billion you attribute to obama's last year (2016).

Yeah, the data is the data... if you know how to READ data!

You quietly left out the fact that your other hero Bush43 was the first President to introduce the concept of a Trillion (1.4) budget deficit in 2009. The first four months of that Budget belonged to Bush43. You're the ECCIE.net monetary policy expert right? You know the accounting period for the Federal Gov is Oct to Sept. I can read the data. It seems that you have selective reading skills. After Obama bailed out Wall Street by giving 1,000 "Troubled Assets" 625+ Billion dollars, Obama's deficits continued to decrease. He got it down to 418 billion in 2015, his last full year 2016 it was 585. Just about 1/2 of what Bush43 left him with in 2009 budget. Obama handed to Trump in 2017 a budget number that was lot less that what Bush43 gave to Obama.

https://www.thebalance.com/us-deficit-by-year-3306306

[adav8s28]

Originally Posted by Tiny

You may already know this, but for a number of years the reason Amazon was able to grow rapidly without significant profits was because it operated with little or negative working capital. Their customers paid them quickly, so they on average collected receivables in 10 or 15 days. But they'd draw out paying their suppliers to around 80 or 90 days. They were limping along making 1% or 2% net profit margins, so didn't have much free cash flow from profits to reinvest. But they generated gobs of cash flow from drawing out their payables. Their suppliers were loaning them the money to grow their business.

This works great as long as you're growing, because your vendors keep loaning you more and more money. Once the music stops, or if things go into reverse and sales fall, you're fucked. When this unwinds it's not a pretty picture. Amazon was fortunate in that they kept growing and it never unwound. While I don't think they have negative working capital any longer, and they're spending a lot more on capex (property, plant and equipment) than they used to, their net profit margins the last couple of years have jumped from the 1% to 2% range to 4% or 4.5%. So this worked out like you described. They're making lots of money now, although still selling at a steep price. I'd argue the investors didn't actually KNOW there was a big pot of earnings at the end of the tunnel, but that appears to be the way this is working out.

For every "growth stock" company like Amazon that works out extremely well there must be a lot more that don't. Bezos must have been struggling for a long while. Amazon used to (and maybe still is) window dress its balance sheet at the ends of the quarters, by drawing out the payables even longer and accelerating receipt of payments from customers even more than usual. This gave investors a rosier picture than actually existed, because the net cash at the ends of the quarters when reporting occurred looked a lot better than at other times.

What's a little disconcerting, Biden wants to put a minimum tax on companies like Amazon, and some of his Democratic colleagues, like Sanders, would go even farther, by boosting the corporate federal rate all the way back to 35% and levying an annual wealth tax on extremely successful entrepreneurs like Bezos. This would result in very little skin off of Bezos' back, but it would be a real obstacle for smaller companies on the road to success, the next Amazons. Our companies in the USA are among the most innovative and successful in the world. We shouldn't be frothing at the bit to handicap them. We should leave the capital with the capitalists, to invest in growth and jobs, not hand it all over to government to be squandered.

+1

Excellant post Tiny. I don't think the Corporate Federal Tax rate needs to go all the way back to 35%. In needs to be increased to somewhere around 25%, 26%, 27%. Trump is going to spend 4 Trillion dollars this year. Someone has to pay taxes. The rolling debt has to eventually start coming down. The only way for that happen is have budget surpluses.The Trump corporate tax cut is not paying for itself. The 432 billion deficit in 2015 is the closest we have been to a surplus since Bush43 left office in Jan 2009.

https://www.thebalance.com/us-deficit-by-year-3306306