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More Economic Facts That Aren't

Recs

4

August 20, 2012 – Comments (1)

This is Part 2 - you can find Part 1 here. This time, I have included the relevant links: the stories are quite interesting.

OUTSOURCING = OFFSHORING

Some, especially political-types, will use the former when they mean the latter. They are very different

OUR POLICY IS A STRONG DOLLAR

Every SecTreas since I was a kid has said this, but I am still waiting for one who actually means it

CHINA GDP WILL OVERTAKE THE US

I remember when the same thing was said of Japan Inc. in the 70's & 80's: Mitsubishi Real Estate bought Rockefeller Center in 1989. However, I have been hearing odd stories recently about Red China: building ghost cities that no one lives in, and mountains of unused copper ingots accumulating in warehouses and parking lots. There are even whispers of negative GDP growth.

EARNINGS GUIDANCE

Whenever a company or analyst changes this, it affects the stock's price. These, however, are rarely correct or even close, because you are prognosticating

 

PEG RATIO

This is suppose to be a more useful tool than just P/E ration. Maybe, but it relies on predicted earnings (see above). 

COMPUTERS ARE EATING RETAIL INVESTORS' LUNCH

Well, no; actually, they are eating each others' lunch. 

BEING FAT INCREASES US HEALTHCARE COSTS

The usual media harangue: recitation of the average American's overweight, then charts and graphs on healthcare costs, then implication that one causes the other. The average person can be moderately overweight (fat) and healthy at the same time. Morbid obesity is a different matter.  

COMMODITY ETFs TRACK THE DAILY SPOT PRICE

Depends. GLD does, because it owns physical bullion. USO does not, because it owns futures, which act differently and are technically a derivative. 

BLACK-SCHOLES IS ONLY FOR PROFESSIONALS

Anyone can use it to invest: calculators are easily available on the internet. This was suppose to be the Holy Grail for pricing options; its spectacular failure was responsible for the Long-Term Capital Management fiasco.  

HEED THE INVESTMENT PUNDITS

Not

ELECTRIC CAR -THE LATEST AUTOMOTIVE INNOVATION

Not even close: the first car ever was electric; electric, fuel cell cars date back to 60's; we have been using lithium-ion batteries for years in laptops; and both GM (EV1) and Toyota (RAV4) had production, electric cars 20 years ago.  

GREECE WILL PAY BACK ITS DEBTS

A couple of centuries ago, in his Wealth of Nations, Adam Smity opined:"When national debts have once been accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid. The liberation of the public revenue, if it has ever been brought about at all, has always been brought about by a bankruptcy ; sometimes by an avowed one, though frequently by a pretended payment."

To quote another, more contemporary but equally brilliant man: "it's deja vu all over again". 

1 Comments – Post Your Own

#1) On August 20, 2012 at 7:47 PM, Melaschasm (55.92) wrote:

BEING FAT INCREASES US HEALTHCARE COSTS

The usual media harangue: recitation of the average American's overweight, then charts and graphs on healthcare costs, then implication that one causes the other. The average person can be moderately overweight (fat) and healthy at the same time. Morbid obesity is a different matter.

In aggregate, which is the way this statement is usually made, this is true.  While such stats have some serious flaws, and there are many individual exceptions to the rule, it is a fair and accurate statement in the context in which it is normally used. 

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