Some longer form readings to start your weekend:

• The Bloomberg Way (The Atlantic)
• After the Boom in Natural Gas (NYT)
• Which Fortune 500 Companies Are Sheltering Income in Overseas Tax Havens? (Citizens for Tax Justice)
• Thomas Edison’s Quixotic Plan for a New Monetary Policy (Bloomberg)
• Billions in Hidden Riches for Family of Chinese Leader (NYTsee also Dirty money cost China $3.8 trillion 2000-2011: report (Reuters)
• The Story of Grand Central Station and the Taming of the Crowd (Scientific American)
• The Theory Generation (N+1)
• George Lucas’s Force (The Chronicle)
• Feet of clay, heart of iron: Horseshoe champion Brian Simmons might be the toughest athlete in the world (SB Nation)
• How Barack Obama Vindicated ‘The Cult of the Presidency’ (The Atlantic)

What are you reading?

 

Price to Earnings Ratio (PE ratio), 1900 to present

Source: Chart of the Day

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

13 Responses to “10 Weekend Reads”

  1. farmera1 says:

    Glad a major pub is picking up what I’ve thought for a long time: Automation and Globalization have worsened the whole economic picture particularly for the Middle Class.

    http://www.nytimes.com/2012/10/24/us/politics/race-for-president-leaves-income-slump-in-shadows.html?_r=1

    “For the first time since the Great Depression, median family income has fallen substantially over an entire decade. Income grew slowly through most of the last decade, except at the top of the distribution, before falling sharply when the financial crisis began.”

    “At the top of the list are the digital revolution, which has allowed machines to replace many forms of human labor, and the modern wave of globalization, which has allowed millions of low-wage workers around the world to begin competing with Americans.

    “One of the more striking recent developments in economics has been economists’ growing acceptance of the idea that globalization has held down pay for a large swath of workers. The public has long accepted the idea, but economists resisted it, pointing to the long-term benefits of trade. “That is starting to change only in the face of very strong evidence over the past decade,” said Edward Alden of the Council on Foreign Relations.”

    Based on personal observations, automation has replaced many skilled (and highly paid) workers. I think productivity increases resulting in lower labor needed also go beyond the digital. Improved materials handling (often unrelated to computers/digital) has drastically cut the need for physical labor. Globalization has expedited companies moving to where the wages are the lowest. Loss of the US education advantage is another cause brought up in the article.

    It was traditionally thought that productivity increases was always a good thing, resulting in increased standard of living for society as a whole. The last decade has disproved this assumption. The increased economic well being has moved to the top say 1%, with the middle class being left behind with decreasing standards of living.

    No easy solutions; I wonder if this trend of workers being shoved down the standard of living yard stick will ever be reversed. Certainly Automation is happening at a seemingly increased rate, and Globalization seems unstoppable.

  2. gkm says:

    Interesting when you think about it that the easy money of the 1921 recession lead to the 1929 bubble and the easy money of 2001 lead to the bubble of 2007/2008. Both banker orchestrated about eight years apart. The cyclicality of the whole thing is awe inspiring.

    I can’t really perceive that Edison’s plan at best would be anything but very pro cyclical. As well, that commodity which was in the greatest supply net of real demand as a necessity would be the defacto dollar value determinant. I would guess that would once again be gold and silver. That or sharks teeth.

  3. RW says:

    In a reactionary world, everything old is new again and, fortunately for me, other people read Robert Samuelson so I don’t have to.

    Robert Samuelson Takes on NYT Editorial Board: Government Does Not Create Jobs!

    It keeps getting harder and harder to figure out what is supposed to be a real job in Robert Samuelson’s world. If the government requires drivers to buy auto insurance, do the people at the auto insurance companies have real jobs? …How about when the government finances an industry by granting it a state sanctioned monopoly as when it grants patent monopolies on prescription drugs. Do the researchers at Pfizer have real jobs even though their income is dependent on a government granted monopoly?

    Robert Samuelson on government jobs: They exist, but people who recognize them are like flat-earthers

    Samuelson notes that government spending during times of economic slumps can boost net job creation, but then notes that the idea of fiscal stimulus is ‘fiercely debated’ and says he doesn’t ‘intend to settle this debate either.’ That’s too bad, and I wonder why not? After all, that particular debate (i.e., is contractionary fiscal policy really contractionary?) really isn’t particularly hard. But then again, I didn’t think that it was so hard to recognize what a ‘job’ is, either.

    The New Physiocrats

    [The notion that government jobs don't really add to the economy, that they somehow aren't as 'real' as private sector jobs] “…is a modern version of the 18th century physiocratic notion that only agriculture is real, that everything else is fluff on top. And we really shouldn’t be seeing a rebirth of that sort of nonsense in the 21st century. If you believe that we should have fewer schoolteachers and firefighters — or that education should be privatized — make that case. Don’t try to hide your prejudices under a mystical doctrine in which important, productive jobs somehow don’t count if they come from a place with a .gov email address.

  4. RW says:

    Speaking of everything old being new again, I was browsing Will Rogers — lord that was a funny and true fellow — and came across the following:

    “The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed trough the poor fellow’s hands.” -Will Rogers (in the St. Petersburg Times; Nov 26, 1932)

    “There’s no trick to being a humorist when you have the whole government working for you.” -Will Rogers (audio file)

  5. VennData says:

    “…It is interesting how some banks say the new regulations will be too burdensome, but then spend hundreds of millions of dollars lobbying to kill it…”

    http://www.imf.org/external/np/speeches/2012/102512.htm

  6. VennData says:

    The clown adding his “voice” to the corporate media bumwad sweeping, Petterfy states, as his only presumption for the problem with 1) American 2) Democrats 3) business 4) “success” – as he defines it:

    “…Take away their incentive with [ed] badmouthing success…” Taken write off the screen which shows a black and white still of a dozen “Occupy” protesters.

    So what’s holding back America is people “badmouthing” success? ROFL! What a tough guy he must be!

    What an earth does he do – as an intermediary between individual investors and their unbalanced, ill-designed, over-priced portfolios – when someone says that they don’t like the stock market anymore? Does he cry and give up? What a pussy.

    Look, if Obama raises uber-rich people’s taxes 3.8%, how is that going to stop you from running your business? That is AFTER TAX PROFITS. He won’t stop you from hiring anybody. He won’t stop you from buying anything. All he is doing is trying to make Medicare fiscally sound, you blithering twit.

  7. guru says:

    The chart of P/E for S&P 500 Index going back to 1900 is interesting but is compromised …. slightly …. by the fact that the Standard and Poor’s actually launched the Index in 1923. According to Wikipedia (http://en.wikipedia.org/wiki/S%26P_500),

    “Standard & Poor’s introduced its first stock index in 1923. Before 1957 its primary daily stock market index was the “S&P 90″, a value-weighted index based on 90 stocks. Standard & Poor’s also published a weekly index of 423 companies. The S&P 500 index in its present form began on March 4, 1957. Technology has allowed the index to be calculated and disseminated in real time. The S&P 500 is widely employed as a measure of the general level of stock prices, as it includes both growth stocks and the generally less volatile value stocks.”

    So is the data since 1957 to be trusted?

  8. Born Again says:

    Guru,

    I am a fan of Robert Shiller’s PE Ratio. For his computation, stock market data from 1926 to present data is calculated on the four-quarters basis with interpolated monthly data; data before 1926 are from a 1939 publication by Crowles and associates. He also has data for historical housing prices and of course the Case-Shiller index. I would imagine it is similar to S&P’s PE Ratio as they publish the Case-Shiller index.

    http://www.econ.yale.edu/~shiller/data.htm

  9. maxborg says:

    great chart on earnings but although it appears stocks are cheap but only if earnings aren’t headed lower which may be the case.

  10. willid3 says:

    free market…or chaos or anarchy???

    http://pandodaily.com/2012/10/24/travis-shrugged/

    hard to tell the difference

  11. rd says:

    The bizaarre thing about the markets in the past 12 years is that we have had two 50%+ drops in the market during that period but the amount of time that either the annual PE or 10-yr CAPE is below the average values for the past 75-100 years is just a handful of months.

    Are we about to enter into a era of growth that will justify perpetually high PEs?