Friday, April 4, 2014

Liz Ann Sonders on whether Rosenberg has a clue

Liz Ann Sonders - is a capital spending cycle imminent? She tackles the Rosenberg problem. Some problems I have with the analysis:

1. You may be getting old Liz, but you're still a sexy babe. Quit being a whiner.

2. I have a problem with this chart:

I do not think this chart means what you think it means, Liz. Fixed investment as % of GDP can't go up forever; at best it's a 1-e-(t/x) relationship. There's an upper limit, you can't go over 100% of GDP. And the increase from one threshold to the next is not a function of how great RNFI is; maybe it's a function of the relative level of industrialization, or a function of the relative dominance of industrial capital over personal capital. In any case, I'm pretty sure you should look at this in absolutes, not in % of GDP.

3. With that in mind, okay fine: this next chart does maybe support the SWAG that we'll see a capex surge:

But it's still only a SWAG til data comes in that proves we're not in a new secular fixation on cash.

4. Most of those corporate "liquid assets" are still being stored in numbered accounts in Luxembourg or the British Virgin Islands, aren't they? How does that factor into your analysis? Does the US first have to end tax havens for corporations, and force repatriation of corporate cash, before they will begin capex spending in the US again? Is it possible for that cash to ever come back into the US?

And hey, doesn't that suggest that US corporate tax policy causes secular bear markets? After all, if Bushes & Clinton have given the corporations a place to hide their cash outside the US economy, they effectively sabotaged the US economy by ensuring those corporations would never reinvest their cash in the US economy, right?

5. Sure US capital stock is getting old. But it got old in the corrupt Soviet Union as well. Maybe US corpolitical corruption is just as economically stagnating as Soviet corruption?

Maybe what's needed, again, is for corporations to see cash reinvestment as a better solution than a numbered account in Singapore.


  1. Thanks for all that analysis. You're right, and I've come to the same conclusion - Liz Ann is hot!