tag:blogger.com,1999:blog-8537995.post110730936803182262..comments2023-10-29T10:54:58.681-04:00Comments on Vox Baby: Krugman's Unhappy ReturnsAndrewhttp://www.blogger.com/profile/13514024573333057559noreply@blogger.comBlogger29125tag:blogger.com,1999:blog-8537995.post-1107993061376892962005-02-09T18:51:00.000-05:002005-02-09T18:51:00.000-05:00On the other hand, where does he get a 3% dividend...On the other hand, where does he get a 3% dividend yield? I believe the actual yield on the S&P500 is more like 1.6%. Yes, one also needs to consider the impact of buybacks...but these are partly negated by various dilution factors.<br /><br />photoncourier.blogspot.comDavid Fosterhttps://www.blogger.com/profile/15464681514800720063noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107992514288907432005-02-09T18:41:00.000-05:002005-02-09T18:41:00.000-05:00I've been mulling on some similar thoughts. Seems ...I've been mulling on some similar thoughts. Seems to me that, if the growth rate goes down, the dividend payout ratio will go up. Earnings are retained (as opposed to paid out in dividends) to the extent that management expects funds for capital investment to be required. Less growth, less capex need.<br /><br />The other factor that must be considered here is the fact that US corporations do David Fosterhttps://www.blogger.com/profile/15464681514800720063noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107992091930651192005-02-09T18:34:00.000-05:002005-02-09T18:34:00.000-05:00I would say that it is clear that sufficiently hig...I would say that it is clear that sufficiently higher growth to restore long-run solvency is *not* realistic. It would help, significantly, but it would be more likely than not that a significant long-run financing problem would remain--especially since I think Andrew is correct in his assessment that the SSA is currently lowballing likely life expectancy.bradhttps://www.blogger.com/profile/04548019979157668776noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107710014032338422005-02-06T12:13:00.000-05:002005-02-06T12:13:00.000-05:00I do not share the confidence in the industry of o...I do not share the confidence in the industry of our intrepid correspondent who recommended we stop talking to Paul Krugman and start with Warren Buffet, but he's absolutely right. Only an armchair economist could possibly ask why we couldn't just crank up the dividend payout ratio. An investor, at least an old-style kick-the-tires-and-read-the-10K guy, wouldn't even be able to answer you. Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107673151754777362005-02-06T01:59:00.000-05:002005-02-06T01:59:00.000-05:00Sam begins by saying:
"In his New York Times edito...Sam begins by saying:<br />"In his New York Times editorial today, Paul Krugman picks up on Dean Baker's theme of insisting that using historical rates of return on stocks alongside the lower-than-historical projections of economic growth in the Social Security Trustees Report is inconsistent."<br /><br />I say:<br />Maybe I'm being thick here but how does anything else Sam says apply to this Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107629720529992642005-02-05T13:55:00.000-05:002005-02-05T13:55:00.000-05:00I am hoping to re-engage Andrew's attention on thi...I am hoping to re-engage Andrew's attention on this - I have a <A HREF="http://www.blogger.com/r?http%3A%2F%2Fjustoneminute.typepad.com%2Fmain%2F2005%2F02%2Fthird_time_luck.html">longish post</A> with even longer comments, but the gist is this:<br /><br />**Growth is not the issue**<br /><br />As noted, a stable, no growth economy can have a positive return on capital. In the context of the Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107612531524114942005-02-05T09:08:00.000-05:002005-02-05T09:08:00.000-05:00For some reason, Blogger doesn't remember me. So ...For some reason, Blogger doesn't remember me. So I'll post this via "anonymous" and sign my name below.<br /><br />There are significant pressures to increase dividends that go beyond the demographics of baby boomer retirement. Two come to mind immediately: first, a more favorable tax regime for dividend income and second, pressures on corporate governance.<br /><br />There has been a slow Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107489755122935032005-02-03T23:02:00.000-05:002005-02-03T23:02:00.000-05:00Maybe I'm missing something, but...
Isn't the bot...<I>Maybe I'm missing something, but...<br /><br />Isn't the bottom line very simple: TOTAL returns to stocks CANNOT grow faster than profits in the long run, regardless of the form the returns take?</I>Hmm - that is very close to "missing something".<br /><br />Look, we could posit a pure steady state economy where births = deaths, new job entrants = new retirees, the capital stock is constant, Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107450464747103572005-02-03T12:07:00.000-05:002005-02-03T12:07:00.000-05:00Maybe I'm missing something, but at first glance I...Maybe I'm missing something, but at first glance I don't see how "shifting" the assumed returns from capital gains to dividends changes the picture AT ALL. Sure, you can increase dividend growth and keep PE ratios from going to infinity...but now you've got dividends growing faster than profits, forever, and dividend-yields going to infinity.<br /><br />Isn't the bottom line very simple: TOTAL Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107404217667085832005-02-02T23:16:00.000-05:002005-02-02T23:16:00.000-05:00Andrew: I'm sort of saddened by the normally reaso...Andrew: I'm sort of saddened by the normally reasonable and smart liberal commentators over at Angrybear. They are frustrated at your blog even if I've been saying you have a solid point. I'm as liberal as it gets but when a conservative has a point - especially one as nonpartisan and honest as yourself - I say either accept it or challenge it on principle. But maybe I'm not be as clear as canPGLhttps://www.blogger.com/profile/18248302122192095044noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107403790231373692005-02-02T23:09:00.000-05:002005-02-02T23:09:00.000-05:00"Baker has made his own calculations of likely sto..."Baker has made his own calculations of likely stock gains in the future, he has factored in increased profits earned overseas. Just not crazy levels. See http://www.cepr.net/Social_Security/letter_to_feldstein2.htm"<br /><br />From which...<br /><br />"this assumption implies that 20 percent of the profits of U.S. corporations will be coming from developing nations by 2050"<br /><br />Which JGhttps://www.blogger.com/profile/11164150812219689611noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107390942810326672005-02-02T19:35:00.000-05:002005-02-02T19:35:00.000-05:00"Somebody I was talking with on another board keep..."Somebody I was talking with on another board keeps saying that since stocks returned at 7%, and the economy at 3-4%, the stocks must be outpacing the rest of the economy by 3-4%.<br /><br />"Is the error simply that he's failed to account for dividends, and only the capital gains return should be counted for considering the actual increase in valuation of the index?"<br /><br />It's the JGhttps://www.blogger.com/profile/11164150812219689611noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107389266652564122005-02-02T19:07:00.000-05:002005-02-02T19:07:00.000-05:00Thanks to Tom Maguire, I now see that I've got Bro...Thanks to Tom Maguire, I now see that I've got Brookings on my side too:<br /><br />http://www.csis.org/gai/Graying/speeches/bosworth.htmlPatrick Sullivanhttps://www.blogger.com/profile/14948365865741313524noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107386235405224212005-02-02T18:17:00.000-05:002005-02-02T18:17:00.000-05:00"in a nation with a great and growing current acco..."in a nation with a great and growing current account deficit"<br /><br />Today. But that can change pretty quickly. <br /><br />I fail to see why that has anything relevant to say to individuals searching for places to invest over 40 or 50 years.<br /><br />Certainly we can't tax the labor forces of those foreign countries to provide for Americans' retirement.Patrick Sullivanhttps://www.blogger.com/profile/14948365865741313524noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107379791408222672005-02-02T16:29:00.000-05:002005-02-02T16:29:00.000-05:00Jim,
Do you have a source for the figure "the S&P...Jim,<br /><br />Do you have a source for the figure "the S&P 500 over the past 55 years to 1/1/05 has appreciated 0.9% a year on average faster than GDP"? Somebody I was talking with on another board keeps saying that since stocks returned at 7%, and the economy at 3-4%, the stocks must be outpacing the rest of the economy by 3-4%. Is the error simply that he's failed to account for dividends, Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107378079216606882005-02-02T16:01:00.000-05:002005-02-02T16:01:00.000-05:00If you need to get 6.5% real returns on invested c...If you need to get 6.5% real returns on invested capital, ask an investor how to do it - don't ask a bunch of economists. You can find many different long term investments that yield 6.5% - just ask a few of the old guys at Sutter Trust or John Hancock how to put the money to work. You're all wound up trying to read the tea leaves in the share markets. Ask Warren Buffet if it is possible to Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107376918180171712005-02-02T15:41:00.000-05:002005-02-02T15:41:00.000-05:00[Max Sawicky; I really should register, I come her...[Max Sawicky; I really should register, I come here enough.] I provoked a response to this from Dean:<br /><br />http://maxspeak.org/mt/archives/001111.htmlAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107374348779206082005-02-02T14:59:00.000-05:002005-02-02T14:59:00.000-05:00My agreement and simple modeling of your point is ...My agreement and simple modeling of your point is up over at Angrybear. Enjoy - PGLPGLhttps://www.blogger.com/profile/18248302122192095044noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107368265562049922005-02-02T13:17:00.001-05:002005-02-02T13:17:00.001-05:00Jim writes:
"With more than 4 billion mostly youn...Jim writes:<br /><br />"With more than 4 billion mostly young people in economies in Asia, South America and Eastern Europe (and dare we hope Africa?) that expect to be growing *a lot* faster than 2% year -- and we'd better hope they do, for the world's sake -- is it unreasonable to imagine profits earned abroad will grow in proportion to total profits over the next 50 years, as US economic Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107368241236866332005-02-02T13:17:00.000-05:002005-02-02T13:17:00.000-05:00"A number of commenters have mentioned the possibi..."A number of commenters have mentioned the possibility of investing abroad to get out of the box imposed by GDP growth and reasonable P/E ratios. That is certainly a theoretical possibiliity, but in a nation with a great and growing current account deficit, relying on net foreign investment seems to be practically unwise. If we were (or plan to) invest abroad to fund our retirements, we would JGhttps://www.blogger.com/profile/11164150812219689611noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107368015369025402005-02-02T13:13:00.000-05:002005-02-02T13:13:00.000-05:00I have to agree with anonymous about the current a...I have to agree with anonymous about the current account deficit and foreign earnings. If we continue<br />the trend of continuing to finance our federal deficit by borrowing from foreigners before too many years a lot more of us will be working for foreign firms then foreigners will be working for US firms. Remember how the Japqanese were buying everthing in the late 1980s.<br /><br />Unless wespencerhttps://www.blogger.com/profile/09040914017546442297noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107365560174848652005-02-02T12:32:00.000-05:002005-02-02T12:32:00.000-05:00A number of commenters have mentioned the possibil...A number of commenters have mentioned the possibility of investing abroad to get out of the box imposed by GDP growth and reasonable P/E ratios. That is certainly a theoretical possibiliity, but in a nation with a great and growing current account deficit, relying on net foreign investment seems to be practically unwise. If we were (or plan to) invest abroad to fund our retirements, we would needAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107364445491137902005-02-02T12:14:00.000-05:002005-02-02T12:14:00.000-05:00Getting empirical, I note that the S&P 500 over th...Getting empirical, I note that the S&P 500 over the past 55 years to 1/1/05 has appreciated 0.9% a year on average faster than GDP, for a total increase of 64% relative to GDP.<br /><br />About half that is due to the increase in P/E ratio from 15 to 20, which as Siegel has noted is reasonable in light of reduced risk to corporate investors (better management, much easier diversification for JGhttps://www.blogger.com/profile/11164150812219689611noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107363363203763932005-02-02T11:56:00.000-05:002005-02-02T11:56:00.000-05:00Yes, there seems to be quite a bit of confusion ab...Yes, there seems to be quite a bit of confusion about the difference between capital's share of product, and the growth of capital's share of product. Suppose Congress passed a law confiscating 100% of capital gains; wouldn't that raise dividend payouts?<br /><br />Other points that Krugman isn't seeing, is that returns on investment (stocks, bonds, money market instruments) are going to be Patrick Sullivanhttps://www.blogger.com/profile/14948365865741313524noreply@blogger.comtag:blogger.com,1999:blog-8537995.post-1107359098885351672005-02-02T10:44:00.000-05:002005-02-02T10:44:00.000-05:00There are other alternative scenario to a high pe,...There are other alternative scenario to a high pe,<br />but in a low growth scenario to get historic returns they are also unbelievable. <br /><br />One alternative you brought up is to go back to a stock market like we had before WW II when almost all of the return came from the dividend rather then capital gains.<br />But if you assume 4% nominal growth -- close to the ss projections--with a spencerhttps://www.blogger.com/profile/09040914017546442297noreply@blogger.com