<html><body><div style="color:#000; background-color:#fff; font-family:times new roman, new york, times, serif;font-size:12pt"><div>+1</div><div><br></div><div><br></div><div style="font-family: times new roman,new york,times,serif; font-size: 12pt;"><div style="font-family: times new roman,new york,times,serif; font-size: 12pt;"><font face="Arial" size="2"><hr size="1"><b><span style="font-weight: bold;">From:</span></b> Luke S. Crawford <lsc@prgmr.com><br><b><span style="font-weight: bold;">To:</span></b> conspire@linuxmafia.com<br><b><span style="font-weight: bold;">Sent:</span></b> Saturday, August 27, 2011 2:36 AM<br><b><span style="font-weight: bold;">Subject:</span></b> Re: [conspire] HP Melt Down<br></font><br>On Fri, Aug 26, 2011 at 12:59:24AM -0400, Edward Cherlin wrote:<br>> On Thu, Aug 25, 2011 at 21:26, Ruben Safir <<a ymailto="mailto:ruben@mrbrklyn.com" href="mailto:ruben@mrbrklyn.com">ruben@mrbrklyn.com</a>> wrote:<br>>
>> One of the most important definitions of competition given by<br>> >> economists includes as an essential component getting out of<br>> >> unprofitable markets, and leaving them or selling that part of the<br>> >> business to those who develop a comparative advantage. As in<br>> >> IBM/Lenovo, and presumably HP and its so-far-nonexistent buyer (oops).<br>> >> No zombie corporations, as in Japan, no other forms of<br>> >> anti-competitive subsidy, etc.<br>> ><br>> > The unit made a 7% profit over the last year which in most businesses is<br>> > a very considerable profit.<br>> <br>> This turns out not to be the case.<br>> <br>> In fact, the Dow Jones Industrial Average shows a long-term 11%<br>> growth. Similarly, the Vanguard S&P 500 Index Fund shows average<br>> returns of 10.55% since 1976. No "rational" investor will hold on to<br>> any stock or
any line of business with long-term prospects<br>> substantially below that.<br><br>Well, yes. But last year was brutal. While I agree that we all want<br>more than 7% a year out of a stock during normal times with normal<br>inflation, but over the last year? I think most of us would settle for <br>any positive number, and if the yields on T bills have anything to do <br>with it, many of us are okay even if that positive number dips below the <br>official estimates of inflation. Current yields on T-bills would indicate <br>that many people with money feel that this situation will continue for <br>some time and that they'd rather lock in extremely low yields on safe <br>government debt rather than take the risk of owning stock in a public <br>company. (this also means that many people with money think that<br>we are in something like a Japanese-style liquidity trap and won't<br>be getting out for some time yet.)
<br><br>I mean, I agree if 7% was the profit margin you'd expect selling<br>computers in a reasonable economy, when you have reasonable inflation,<br>by public company standards, that's kinda a dud; you can probably<br>find more profitable places to put your money and leave computer<br>building to guys like me who are okay working for next to nothing<br>to build up a business. I'm just saying; the last year? not a <br>reasonable economy. Not a reasonable amount of inflation. Making 7% <br>in a brutal downturn like we're seeing right now in the middle<br>of a liquidity trap? not bad at all.<br><br>the 10% gain since 1976 number is not telling the whole story;<br>There were some years where inflation was above 10%; Really, I think<br>that stocks should be measured as 'gains over and above T-bill yield'<br>or something like that. At the very least, gains should be adjusted<br>for inflation. A good yield on
a stock today would have not been keeping <br>up with T-bills in the 80s. <br><br><br><br><br><br>_______________________________________________<br>conspire mailing list<br><a ymailto="mailto:conspire@linuxmafia.com" href="mailto:conspire@linuxmafia.com">conspire@linuxmafia.com</a><br><a href="http://linuxmafia.com/mailman/listinfo/conspire" target="_blank">http://linuxmafia.com/mailman/listinfo/conspire</a><br><br><br></div></div></div></body></html>