How do we fix the economy???

What rubbish. You'll find companies with a heavy reliance on research get pummeled by the stock market when their R&D expenses fall. Those expenses are directly related to the likelihood of future revenues materializing.

The E wrote:

DDHv wrote: Could an accounting practice be designed to show long term effectiveness of good infrastructure early without rewarding poor infrastructure? What changes would be needed for this? Where would infrastructure maintenance be put instead of "operating costs"

We already have those. Problem is that modern public businesses run on quarterly or yearly results. As soon as shareholders and investors enter the picture, sustainability and long-term thinking go out the window.

PeterZ wrote:What rubbish. You'll find companies with a heavy reliance on research get pummeled by the stock market when their R&D expenses fall. Those expenses are directly related to the likelihood of future revenues materializing.

I'll disagree with that a bit. I'm in the pharmaceutical industry and the effect of short term quarterly thinking has been absolutely devastating. As a rule investors only care about phase III trials and somewhat about late stage phase II. They don't like to see cuts to those but for the rest of R&D, they couldn't care less. Cut away and reduce expenses, effects of cuts in earlier R&D programs are so many years away that investors simply don't care.

In most cases the CEOs don't own the company. Their financial incentives even the "long term" ones are short term by pharma R&D standards. So they focus on the near term R&D: phase III and the like. By the time their policies on drug discovery reach the point where investors care, they are long gone.

Pricing discounted cashflows requires something that generates revenue. Assets depreciate and requires continued investment or their ability to generate income disappears. Any investor recognizes that.

Now there are traders that look for bad news which sparks some adjustment in revenue projections that were initially too optimistic. Those adjustments cause some people to sell and others who were too pesdimistic to buy. The volatility is more from cash glow models being adjusted than from a disregard to long term investments. Traders make short term bets based on how many investors were too optimistic or pessimistic. In order to do that they too have to model the cash flows and estimate an intrinsic price.

So every serious player models long term cash flows even if their investment horizon is short. Dilettantes may throw money at stocks without have some way to value the stock price. Those that do are beggared relatively quickly or learn how to estimate a stock's worth.

biochem wrote:

PeterZ wrote:What rubbish. You'll find companies with a heavy reliance on research get pummeled by the stock market when their R&D expenses fall. Those expenses are directly related to the likelihood of future revenues materializing.

I'll disagree with that a bit. I'm in the pharmaceutical industry and the effect of short term quarterly thinking has been absolutely devastating. As a rule investors only care about phase III trials and somewhat about late stage phase II. They don't like to see cuts to those but for the rest of R&D, they couldn't care less. Cut away and reduce expenses, effects of cuts in earlier R&D programs are so many years away that investors simply don't care.

In most cases the CEOs don't own the company. Their financial incentives even the "long term" ones are short term by pharma R&D standards. So they focus on the near term R&D: phase III and the like. By the time their policies on drug discovery reach the point where investors care, they are long gone.

PeterZ wrote:What rubbish. You'll find companies with a heavy reliance on research get pummeled by the stock market when their R&D expenses fall. Those expenses are directly related to the likelihood of future revenues materializing.

No, pure reality. Those research companies have R&D as their primary asset, therefore, it is considered an investment to put money there.

But paying for transportation is considered purely a negative by by far the majority of investors. There it does not matter if an increase in costs is because of poor management, or because of improvements made that will keep costs down years down the line, either is bad because it eats away at godly profits.

And as Biochem says(something i also have seen through relatives), even "good" R&D is getting hit seriously in the last decade or two. Quarterly results is the new god of capitalism.

And it sucks.

Which of course is why the exceptions, even partial exceptions, are having so much more success than their "equals".

US car makers is a prime example, they´re only still alive thanks to subsidies, even if they have shaped up a little bit since the worst crisis essentially killed them off.

At that time, their idea of planning for the future was effectively down to thinking in months(because that was the only way to satisfy the quarterly reports). While their more successful competitors were making plans for years or even decades ahead, and still are.

biochem wrote:Yet more polling/exit polling data.

- Only two of 10 voters trust government to do what's right most of the time

- Half expect the lives of the next generation to be worse

- Eight in 10 voters worry about the direction of the economy in the next year.

- Seven in 10 voters say the economy is either "not so good" or "poor."

- Two thirds of voters say the U.S economic system is unfair to most Americans

- Almost two-thirds of voters said the nation was off on the wrong track

As usual the polls are published as basically - do something about the problem. Nothing but the usual from the politicians (The Republicans want to cut taxes. The Democrats want to spend money we don't have.)

Considering all that you post is true, history is loaded with proof that the government spending money is the best way to stabilize and grow the economy.
You are right that we don't have the money to spend and that is for two very obvious reasons...
Top Corporations and wealthy individuals have been given the GOP tax cuts since Regan at least... I don't think Nixon/Ford got as much as they might have wanted because they did not control the congress of their day... and the biggest reason of all...GOVERNMENT IS NOT FOR PROFIT the same way as a business might be... The federal and state governments should be running at a break even or a slightly behind to the benefit of the local areas.

Major segments of the economy including transportation and defense should be drawing on local industry and returning to the local economies.

We have watch our high paying, high tech jobs move overseas, we have watched the wealthy move their accounts off shore and to Panama all with the blessing of the federal government and the people working at fast food and big box stores are proving Regan's prophecy that we are moving to a "service economy"

The next person who says the government should have less cost, like some accountant trying to make a profitable quarterly report should have his tongue pierced with the hard ware needed to secure a sign to it "GOVERNMENT IS NOT FOR PROFIT BUSINESS... IT IS THE COMMONWEALTH"

but hey... I have been wrong before

C. O. Thompson wrote:

biochem wrote:Yet more polling/exit polling data.

- Only two of 10 voters trust government to do what's right most of the time

- Half expect the lives of the next generation to be worse

- Eight in 10 voters worry about the direction of the economy in the next year.

- Seven in 10 voters say the economy is either "not so good" or "poor."

- Two thirds of voters say the U.S economic system is unfair to most Americans

- Almost two-thirds of voters said the nation was off on the wrong track

As usual the polls are published as basically - do something about the problem. Nothing but the usual from the politicians (The Republicans want to cut taxes. The Democrats want to spend money we don't have.)

Considering all that you post is true, history is loaded with proof that the government spending money is the best way to stabilize and grow the economy.
You are right that we don't have the money to spend and that is for two very obvious reasons...
Top Corporations and wealthy individuals have been given the GOP tax cuts since Regan at least... I don't think Nixon/Ford got as much as they might have wanted because they did not control the congress of their day... and the biggest reason of all...GOVERNMENT IS NOT FOR PROFIT the same way as a business might be... The federal and state governments should be running at a break even or a slightly behind to the benefit of the local areas.

Major segments of the economy including transportation and defense should be drawing on local industry and returning to the local economies.

We have watch our high paying, high tech jobs move overseas, we have watched the wealthy move their accounts off shore and to Panama all with the blessing of the federal government and the people working at fast food and big box stores are proving Regan's prophecy that we are moving to a "service economy"

The next person who says the government should have less cost, like some accountant trying to make a profitable quarterly report should have his tongue pierced with the hard ware needed to secure a sign to it "GOVERNMENT IS NOT FOR PROFIT BUSINESS... IT IS THE COMMONWEALTH"

but hey... I have been wrong before

With one caveat - that it is run honestly. The economist, Pareto (of the Pareto rule) pointed out that no matter what kind of a government we think we have, there are always "foxes," insiders who run things the way they want. This leads to both crony capitalism and crony socialism, neither of which works. If the insiders are sociopaths . . ..

This means your college freshman daughter could be assigned a biologically male roommate in her women's dorm, and the college would be legally forbidden to notify her (or confirm, if asked) that her masculine-looking roommate is biologically male.

From:

https://www.frcaction.org/get.cfm?i=WA16F24&f=WU16F02

A lesser known aspect of the US administration's recent (and illegal) guidance to US schools

A classic example here is where a new bank CEO is appointed, who has a significant share of their income tied into their annual bonus which is tied to the annual net profit. First thing on the agenda is to close small country branches and sell off the real estate, which boosts the annual bottom line.
Unfortunately these branches were the feeders of customers for the long term, so eventually the bank loses.

Daryl wrote:A classic example here is where a new bank CEO is appointed, who has a significant share of their income tied into their annual bonus which is tied to the annual net profit. First thing on the agenda is to close small country branches and sell off the real estate, which boosts the annual bottom line.
Unfortunately these branches were the feeders of customers for the long term, so eventually the bank loses.

Yeah but by the time the long term comes around, the CEO probably will have earned $50+ million in bonuses and is retired enjoying the good life.

C. O. Thompson wrote:Top Corporations and wealthy individuals have been given the GOP tax cuts since Regan at least...

Even if you tax them @100% there aren't enough of them to pay for all of the spending.

we have watched the wealthy move their accounts off shore and to Panama

Actually they usually don't bother. It's much easier just to use Delaware.

["PeterZ"]What rubbish. You'll find companies with a heavy reliance on research get pummeled by the stock market when their R&D expenses fall. Those expenses are directly related to the likelihood of future revenues materializing.

["The E"]["DDHv"]
Could an accounting practice be designed to show long term effectiveness of good infrastructure early without rewarding poor infrastructure? What changes would be needed for this? Where would infrastructure maintenance be put instead of "operating costs"

[]

We already have those. Problem is that modern public businesses run on quarterly or yearly results. As soon as shareholders and investors enter the picture, sustainability and long-term thinking go out the window.[][]

That is why there is a risk factor assigned to each investment opportunity and why they call it "speculation"
Companies that would "get pummeled by the stock market when their R&D expenses fall" should sell only preferred stocks/bonds and investors who understand the risk/benefit of investing in this kind of company with this kind of option will be an advantage.

This whole quarter or yearly results driven economic model is fairly new... less than 40 years. It has done more harm than good for the US and world economy. Logically it stems from the instant gratification and short attention span this society has fallen into.

I still think that the argument about Main Street vs Wall Street needs to factor Madison Ave influence... the new car... McMansion... name brand passion that drives much of the decisions made in board rooms.