QE nightmare

It is a perfectly reasonable question. Traditionally beancounters seek to put a single scalar numerical value on a business or shares in one.

However, the business is actually best represented as a vector of quantities that are unfortunately not in an orthogonal basis set. This makes it tricky to boil it down to a single "representative" number.

Agilent have made effort to communicate their net worth as in

Whilst you can haggle about the mutability of EBITDA, operating margin and growth rate are both good predictors of organic growth businesses.

To illustrate my point consider two otherwise identical companies in terms of turnover, salary bill, profitability, growth and ROI but where one employs ten people and the other ten thousand. The latter will result in far greater benefit to the overall economy than the former.

Basically everyone needs to eat and somewhere to live. The first company directly provides ten of those and the second ten thousand.

I understand your view, but still have problems with it. First is that if it is not measurable, you really have no way of knowing if is really true.

And second if the company ceased to exist, the economy would adjust and al l those good things attributed to the company would exist in other forms.

The U.S. Federal Government kept General Motors and Chrysler from going out of business and thereby kept the economy from losing value. But is that r eally a true statement. If GM and Chrysler had gone out of business, exac tly what value would the economy loose. Other car companies would certainl y step up and provide enough cars to sell. The other car companies must be better run as they did not need government rescue. There is no way to measure whether the gove rnments action really helped the economy. Numerous car companies have gone out of business before. Nash, Studebaker, Packard. Did the economy reall y lose value because they went out of business? Or did the economy gain va lue because the weaker companies failed, and the remaining companies genera ted more value?

Dan

The Unions gained power, therefore the Democratic party gained power. The economy lost, not only because the weak genes weren't eliminated but because the government stole money out of the economy to flush down the sewer that GM and Chrysler are floating in. That money is gone forever.

I believe one of the considerations is that the cost of not bailing out would also be considerable. The real issue is why shares are still in the public domain, and not owned/held by the biggest creditor.

Not so. Those cars that GM and Chrysler now make would be made by someone else. ...right down the food chain.

No, the biggest issue is why were the unions in line before the secured creditors?

You mean export car manufacture to China? If you prefer the Chinese to be employed and for a million US to become unemployed then fair doos.

Were the unions creditors? You've lost me here!

e:

erything that it does including making and selling widgets, paying taxes an d keeping people in gainful employment.

u were considering buying it--is approximately equal to [the (depreciated) value of its assets + future profits], plus risk, less financing costs.

ys a business because it pays more taxes.

s value to the economy as a whole. In other words you've failed to perceive the distinction that Martin Brown was making and have done so in a way tha t suggests that you are incapable of perceiving that kind of distinction.

oint so explicitly.

The topic was manipulating the share price of a business, driving investors to flee.

The choice of an investor to flee has nothing to do with a business' social value, but with the investor's valuation of the business.

When your ideology suggests the share price of a business should reflect its social value, you're assuming people's share-buying is / should be motivated by self-sacrifice rather than viability, investment potential, etc.

That's irrational for the investor and bad for the common welfare. We want people to create and reward things based on society's judgement of their value, not tax rates.

I'm fully aware of the social value of a business' providing work and jobs. BTDT.

Naturally some rub their hands eagerly over-imagining how much they can squeeze from that, then kill it and the jobs. Or scare them off before they even get started. That's a different topic.

Cheers, James Arthur

Don't be so stupid. We exported jobs to China by floating GM.

NO! But they got a piece of the companies, anyway.

Bill's valuation is what we'd call "gross annual sales," which shows he doesn't understand it. He also confuses churning the money pot with "social good."

The rational value for an investor is the current value of its assets, plus the profits you project over the time, less the costs, reduced by a safety factor proportional to the anticipated risk.

The calculation, to a first order, comes to "How much would you rationally pay for something that has five dollars in durable assets, and promises to pay you exactly one inflation-adjusted dollar per year, forever?"

Add in the 2nd-order factors (the projected variation of all the above factors over time), and congratulations, you're an investor.

Cheers, James Arthur

But those doing the bailing had no clue about what the cost was for not bai ling those auto companies. They did not have any idea of the value to the economy of those companies before the bail out or after the bail out. The concept of the value of companies to the economy is nice, but there are no numbers.

Dan

ote:

everything that it does including making and selling widgets, paying taxes and keeping people in gainful employment.

you were considering buying it--is approximately equal to [the (depreciated ) value of its assets + future profits], plus risk, less financing costs.

buys a business because it pays more taxes.

t's value to the economy as a whole. In other words you've failed to percei ve the distinction that Martin Brown was making and have done so in a way t hat suggests that you are incapable of perceiving that kind of distinction.

point so explicitly.

rs to flee.

That was a topic.

al value, but with the investor's valuation of the business.

its social value, you're assuming people's share-buying is / should be moti vated by self-sacrifice rather than viability, investment potential, etc.

Nobody suggests that. When a government intervenes to save a business, it's not doing so as an investor, but rather as a participant in the economy th at is going to get stuck with the expenses consequent on the failure of the business, which an investor doesn't have to worry about, because bankrupt is bankrupt.

It would certainly be irrational for the investor. The "common welfare" is a more complicated subject, and one that you refuse to contemplate, on the basis that the free market is perfect, and thus not to be improved on.

f their value, not tax rates.

Unless, of course, they create monopolies and over-reward themselves. That' s what anti-trust legislation was designed to stop. It hasn't managed to st op the banks over-rewarding themselves.

s. BTDT.

But you think that preserving the purity of the free market is the only way to keep them doing that. Sadly, the free market isn't perfect, and it take s government intervention to keep the economy running at a close to optimal level of activity. Not all that much intervention, if it is done properly, but more than you want to stomach.

can squeeze from that, then kill it and the jobs. Or scare them off before they even get started. That's a different topic.

"How Mitt Romney got rich"? Or "how California exported businesses to Texas "?

ver which the two sums are calculated - is the true value of the business t o the economy in dollars per second or dollars per year.

y the value of Agilent on Nov 30 2013 or maybe on Dec 31 1999 ( 8 Billion dollars per Wiki ). Value has units of dollars. It does not have units of dollars per second.

imes.

he doesn't understand it.

It's not a valuation of the company, but an estimate of it's value to the e conomy as a whole, which is rather a rather different think, which shows th at the failure of understanding is all yours.

"Churning" is creating the appearance of movement without doing anything. B uying goods and services, creating product, and selling that product is not "churning". I didn't identify "economic activity" with "social good". That 's one more of your straw men.

lus the profits you project over the time, less the costs, reduced by a sa fety factor proportional to the anticipated risk.

y pay for something that has five dollars in durable assets, and promises t o pay you exactly one inflation-adjusted dollar per year, forever?"

ctors over time), and congratulations, you're an investor.

If you are an investor. If you are the government, faced with losing tax re venue from the firm and it's trading partners, and paying social security t o keep the former employees fed until they can find a new jobs, you are mak ing a different calculation.

Not one that you will make, because you will believe that the perfect free market will immediately find new jobs for the former employees and new supp liers and markets for the former trading partners, so that there won't be a ny hit on the tax revenue or social security - after all, the free market c an react faster than the speed of light.

would also be considerable.

ailing those auto companies. They did not have any idea of the value to th e economy of those companies before the bail out or after the bail out. Th e concept of the value of companies to the economy is nice, but there are n o numbers.

None that you seem to have the imagination to work out. Others may be less restricted.

The way I heard it the pension funds were invested in the company, it seems like an unusual arrangemnt to me, but apparently it's fairly common.

It is measurable, but expressed as a vector and not as a single number. However there is no easy way to order them uniquely without making some sort of value judgement on the weighting for each measured parameter.

In the case of US domestic car makers then Japanese, German and Korean manufacturers would take the market by storm. It is only by wrapping their cars in American flags that the US makers sell in their home market. US cars are a cruel joke perpetrated on a captive audience.

You can easily export all your manufacturing jobs and the spending power that goes with them if you take a hard line free market approach. Thatcher did that to the UK coal mining industry making a very large number of manual workers redundant in the process. The areas where mining was the main employer have still not recovered three decades on.

I am not convinced either were worth saving. I was in Japan when Bush senior negotiated the bilateral trade deal of US cars for Japan. The cars that arrived from the US were fit only for landfill even when brand new. Only gangsters could afford to keep them in fuel in Japan. (and obviously they were left hand drive in a right hand drive country)

It's not common at all. There is a well defined hierarchy of debt, with bond holders at the top (after tax and salary). They clearly bumped the bond holders off the pole, which is *not* how bankruptcy works, except in Obamaland.

Unless there is a universal method of measurement, I do not consider it mea surable.

Not really true. In the U.S. you can buy pretty much whatever you want to buy. A few exceptions occur. You can not buy Peugeot because the company decided it was too expensive to do the crash testing since they had a very limited share of the market. My son has a Korean car, my wife has a Japane se car, I drive a truck made by Ford but badged as a Mazda. It was cheaper for Mazda to buy Ford trucks than to make compact trucks. My nephew has a Cadillac. But he is in New Zealand.

Times change. The Amercan cars are a lot better than they were twenty year s ago. We shall see if the saved companies survive. I am not sure that th ey will.

Dan

In other words, you don't want to consider it measurable. On that basis, you wouldn't accept distance as measurable - laser interferometers are accurate, but not universally applicable, any more than are tape-measures.

NWRT.

Dan