No to: “the stock market which doubled under Trump”

There are many people whose brains are “data-free zones”, and this comment is one example of the resulting exposition.

For completeness, here is a plot of the S&P500 (expressed relative to 2017M01).

Figure 1: S&P 500 index as ratio to 2017M01 (blue, left scale), and 10 year constant maturity Treasury yield, % (brown, right scale). Orange shading denotes Trump administration. Source: FRED, author’s calculations.

As of January 2021, the index is only 67% higher. At the same time, the 10 year Treasury is 1.3 percentage points lower, so one should’ve expected ceteris paribus stock prices to be lower higher (recalling that the stock price is the present discounted value of dividends).

Folks, we live in an era where almost every macro/finance series — plus more — is available via FRED. Those that aren’t, are available elsewhere (see this list, for gosh sake!). Unless you are deliberately aiming to confuse/mislead people, please look to the data.

PS: Great historical financial data, including CAPE, on Robert Shiller‘s website.





90 thoughts on “No to: “the stock market which doubled under Trump”

  1. ltr

    February 4, 2021

    Getting Lazy in Discussing Winning in the Stock Market

    Neil Irwin had an interesting piece * reporting on returns to investors who just held stock index funds over long periods of time. The point of the piece is that people who just held an index, rather than trying to speculate on individual stocks, have seen very healthy returns over the last three decades.

    While the basic point is well-taken (most people will lose money by trading, both because they tend not to make the right calls on average and because of the fees associated with trading), there is an important qualification that should be made. Future returns over any long period will depend on the market’s current valuation relative to corporate earnings. This means that in periods where price-to-earnings ratios are high, we can anticipate lower future returns.

    Irwin sort of notes this point when he comments that the real (inflation-adjusted) returns for someone who bought in at the peak of the 1990s stock bubble would have averaged just 5.0 percent. This point was not widely recognized at the time. Many of the great minds of the economics profession (e.g. Larry Summers and Martin Feldstein) wanted to put Social Security money in the stock market with an expectation of getting 7.0 percent real returns. (Some of us at the time tried to show why this was not possible given the stock valuations at the time.)

    Even the 5.0 percent real return was only possible because of a shift in income from labor to capital during the weak labor market of the Great Recession and a large cut in corporate taxes. The Trump tax cut in 2017 effectively increased after-tax profits by 12 percent. This means, at the same price-to-earnings ratio, stock prices are 12 percent higher than would otherwise be the case, which translates into an increase in stock returns over a 20-year period of roughly 0.5 percentage points annually.

    This story is relevant today since price-to-earnings ratios are again extraordinarily high. Robert Shiller’s cyclically adjusted price-to-earnings ratio is now at 33.7. This is below the peak of 45.5 hit in 2000, but still close to twice the long-term average. It is also worth noting that his cyclical adjustment, which compares current market capitalization to the prior ten years’ profits, will understate the PE in a period of slow growth relative to a period of rapid growth. From 1990 to 2000 the economy grew at an average nominal rate of  5.6 percent. By contrast, it has grown at just a 3.5 percent average nominal rate over the last decade. (Nominal GDP is the appropriate measure here, since Shiller’s ratio is calculated using nominal numbers.) Adjusting for this difference in growth, the PE today would be very comparable to what it was at the peak of the 1990s stock bubble (in 2000).

    This means that investors in stock indexes can expect relatively low returns going forward, especially if some or all of the corporate tax cut put in place under Donald Trump is repealed. That doesn’t mean it is necessarily bad to invest in a stock index, but the returns may not be quite what some people would expect.


    1. Barkley Rosser


      Thank you for making a post relevant to the thread topic. Reposting Dean Baker on a relevant topic is usually useful, Dean being a pretty smart guy and insightful observer.

    2. dilbert dogbert

      Most all commenters here have bookmarked Dean for decades. We have easy access. Just post the link. If we are interested we can use it or ignore it. A long post just takes up space.

  2. David

    possible typo – should say “ceteris paribus stock prices to be higher” (not lower)? Agree with what I think you are saying – a dividend discount model would probably attribute a substantial amount of the rise in the stock market to the fall in r (which has roughly halved)

  3. Joseph

    Best stock market ever.

    Donald Trump on January 4, 2018: “DOW just crashed through 25,000. Congrats! ”
    Donald Trump on July 14, 2018: “The Stock Market hit 25,000 yesterday. It is all happening!”
    Donald Trump on January 30, 2019: “DOW just broke 25,000. Tremendous news!”
    Donald Trump on May 26, 2020: “Stock Market up BIG, DOW crosses 25,000.”

    1. pgl

      His CEA chair – Kevin Hassett – told us that the DOW would hit 36000 very soon in his book with James Glassman – published 22 years ago. How did that forecast turn out?

      1. Barkley Rosser


        Well, it is finally getting close, although if it gets there in the near future it will be with a Dem prez in place whose election was supposedly going to lead to a major stock market collapse according to some folks. That could of course still happen, but it certainly did not do so as of November 4.

        1. pgl

          Yes but nominal earnings today are several multiples of nominal earnings in 2002. Glassman-Hassett’s incompetent model suggest a price earnings ratio = 100!

    2. joseph

      Hassett didn’t just assume low equity risk and high PE ratios. He also committed an elementary Finance 101 math error. He double counted earnings growth and dividend growth in his formula. An all around embarrassing affair, right before one of the biggest market busts in history.

      And I wonder if Hasset has updated his Trumpian cubic fit to the pandemic data that showed the pandemic ending in May 2020? In this case, he is not just responsible for people losing their money with his optimist investment book, he’s contributed to people losing their lives by providing cover for Trump’s belief that the pandemic would end on its own.

      How many blown chances do you give to a distinguished member of the academy before you expel them from polite company?

      1. pgl

        “He also committed an elementary Finance 101 math error. He double counted earnings growth and dividend growth in his formula.”

        There was a math error but let’s posit this more precisely. He confused earnings (profits) with dividends (which over the long-run mirrors free cash flows).

        Free cash flows = earnings minus the investment in new tangible assets required for growth. Anyone who cannot get this straight deserves to flunk Finance 101. Then again I see a lot of appraisers doing the same thing. Village idiots can make money from stupid clients. Just ask Princeton Steve.

      2. joseph

        “There was a math error but let’s posit this more precisely. He confused earnings (profits) with dividends (which over the long-run mirrors free cash flows).”

        The standard Gordon equation uses discounted dividends plus dividend growth. When you use earnings instead of dividends as your base, you are effectively double counting growth. You can’t count 100% of your earnings as dividends and then assume dividend growth on top of that. A Finance 101 error.

        1. pgl

          Earnings is never the right measure so maybe I was not clear. Dividends over the long-run are limited to free cash flows = earnings MINUS the investment in new assets required for growth. So I think we are leveling the same basic criticism of the sheer stupidity of DOW 36000.

          Keep in mind my day job is critiquing appraisals for people that are as dumb as the authors of DOW 36000 if not dumber. And my audience needs a lot of assistance understanding the gibberish I’m critiquing as well as my hopefully clearly laid rebuttal. Then again I have had to explain to some of these people why 2 plus 2 = 4. Just imagine having Bruce Hall as a client.

          1. Barkley Rosser

            The funny thing about dividends as the fundamental (or the rationally expected future flow of them) is that there are a lot of stock out there that pay no dividends at all but somehow still have positive values. Of course we see the same thing with gold and cryrptocurrencies, and the latter have been really rip-roaring recently.

  4. pgl

    Data free zone! How did I know this was Bruce Hall? But let’s be fair – he is just peddling Kelly Anne Conway’s Alternative Facts.

  5. pgl

    Bruce “no relationship to Robert” Hall writes so much word salad gibberish it is hard to keep track but this line had me falling on the floor laughing

    ‘The “multiplier” is just a free lunch from the free money, right?’

    Menzie gave Bruce a few words to learn included this one. And this is his ‘understanding’ of a basic macroeconomic concept. Yes Bruce Hall is THAT STUPID!

  6. Moses Herzog

    It appears that every day that goes by Andrew Cuomo mirrors the orange creature who recently migrated to Florida.

    The great governor of “sophisticated” and “tough” New York state can try to blame donald trump for not enough Federal assistance. That is a viable argument. But Andrew Cuomo cannot blame lying about the number of deaths on donald trump. Other states’ Governors did not get federal help~~did they shove patients back into nursing homes and then lie about the deaths?? Many (most??) lied about the deaths but to the extent Andrew Cuomo did?? Answer: NO

    Now we have another litmus test for Andrew Cuomo. Will he “pull a Chris Christie” and try to blame his aides/staff (a la George Washington bridge lane closure) for attempting to lower the death count number?? If he fails this test, Cuomo becomes no better than donald trump~~the behavior borders on sociopathic.

    1. dilbert dogbert

      The Cuomo kerfluffle is just typical New York politics. He pissed the media and they have their knives out. He also pissed some democrats and they have their knives out. Same old Same Old. It is a blood sport.

      1. Moses Herzog

        @ dilbert dogbert
        There may be significant element of reality in what you’re saying, but If Andrew baby had been truthful about the death/cadaver numbers there’d be no blood in the water for the sharks. Just tell the truth: “NY’s population density and proportion of international travelers is higher than other states, and our hospital infrastructure was not suited to the demands of patient intake, so we shoved the overflow of SOON-TO-BE-DEAD to the nursing homes.” Not “I am the anti-Trump Messiah, here to rock your world in 2024”

  7. pgl

    Your graph of the S&P 500 shows that it almost tripled during the 1990’s (Clinton years) and almost doubled during the Obama years. I’m sure that is what Bruce Hall meant to say but then Kelly Anne Conway edited his comment before he hit the send button.

      1. pgl

        You are ignoring my reply to this comment. But yea 58% is so much closer to 100% than it is to 55% when you are a village idiot.

      1. pgl

        Menzie has a new post devoted to your strange definition of “broad”. BTW – if you keep hitting on your neighbor she is going to have you arrested.

      2. pgl

        “Now which is closer, your 58% increase or my ~ doubling?”

        Lord you cannot even follow your own gibberish. It was YOU that introduced the S&P 500 as a market that doubled. The rest of us did the arithmetic for little Brucie boy. Take ownership for your mistakes. There are so many.

  8. ltr

    February 17, 2021



    Cases   ( 28,453,480)
    Deaths   ( 502,542)


    Cases   ( 10,949,546)
    Deaths   ( 156,038)


    Cases   ( 4,071,185)
    Deaths   ( 118,933)


    Cases   ( 3,514,147)
    Deaths   ( 83,122)


    Cases   ( 2,362,352)
    Deaths   ( 67,074)


    Cases   ( 2,004,575)
    Deaths   ( 175,986)


    Cases   ( 834,182)
    Deaths   ( 21,435)


    Cases   ( 89,795)
    Deaths   ( 4,636)

  9. ltr

    February 17, 2021

    Coronavirus   (Deaths per million)

    UK   ( 1,746)
    US   ( 1,513)
    Mexico   ( 1,356)
    France   ( 1,272)

    Germany   ( 799)
    Canada   ( 565)
    India   ( 112)
    China   ( 3)

    Notice the ratios of deaths to coronavirus cases are 8.8%, 2.9% and 2.4% for Mexico, the United Kingdom and France respectively.

  10. ltr

    February 18, 2021

    Chinese mainland reports 11 new COVID-19 cases

    The Chinese mainland recorded 11 new COVID-19 cases on Wednesday, all from overseas, data from the National Health Commission (NHC) showed on Thursday.

    No deaths related to COVID-19 were newly reported, the NHC said.

    Twenty new asymptomatic cases were also recorded on Wednesday, and a total of 357 asymptomatic patients remain under medical observation.

    The total number of confirmed COVID-19 cases on the Chinese mainland has reached 89,806, and the death toll stands at 4,636.

    Chinese mainland new locally transmitted cases

    Chinese mainland new imported cases

    Chinese mainland new asymptomatic cases

    1. Barkley Rosser

      Oh well, back to same old, sigh. And yet again, no mention of Taiwan having had only 7 people die of Covid-19, an order of magnitude less than in the PRC. And no mention of how Taiwan outperforms PRC on every social, political, and economic indicator there is, including even ones that for ideological reasons one would expect the PRC to do better, such as the status of women.

  11. Moses Herzog

    Look, another Republican governor has his hand out begging for “big government” money for…….. snow.

    This Republican governor must be almost as “New York tough” as Andrew Cuomo. Probably nearly as corrupt with state awarded contracts as well. I feel so “confused” now, a Republican governor asking for federal aid…… but I thought free markets were here to solve everything, and “big government” is an “oppressive evil”?? Why can’t anyone explain this contradiction/hypocrisy to poor simpleton me?? Oh my. I wonder if he wants the federal government to reimburse him for the $2million in HCQ he threw down the toilet as experts told him HCQ was useless along with nonfunctional/malfunctioning face masks and defective PPE from fly-by-night suppliers that opened 2 days prior to Governor Kevin Stitt becoming their best customer. Well as very “sophisticated” and college educated Republicans like to say “caveat emptor”. [ Caveat emptor, the literal translation being, if you can quote Latin you can do tons of incredibly dumb things throughout your entire life and it doesn’t count against your score card, because you’re like……sophisticated….. and stuff ]

  12. ltr

    When Paul Krugman began to write for the New York Times, there was a number of power shortages in much of California and Krugman analyzed the set of problems in several essays using work done by Frank Wolak of Stanford. The California problems are directly related to the current Texas power problems and a similar analysis will be revealing. Krugman and Wolak were much criticized but the analysis fit perfectly.

    Look to Krugman – Wolak – California – and :

    I have all the Krugman essays and will put them together.

    1. ltr

      May 27, 2002

      Frank (Wolak) Thoughts On the California Crisis
      By Paul Krugman

      December 10, 2000

      California Screaming
      By Paul Krugman

      April 29, 2001

      The Real Wolf
      By Paul Krugman

      February 26, 2002

      The Power Perplex

    2. Menzie Chinn Post author

      ltr: I thought the main problem of the rolling blackouts in California was the market structure of the electricity generation/transmission system, which allowed exertion of monopoly power. In Texas, that is part of the problem, but the main part seems to be under-investment in power transmission infrastructure, due to lack of FERC regulation.

      1. ltr

        “I thought the main problem of the rolling blackouts in California was the market structure of the electricity generation/transmission system, which allowed exertion of monopoly power….”

        I am going to model this, and I may well be wrong, but my initial sense is both the California and Texas problems are monopoly problems. Also I remember reading, likely in notes from Frank Wolak, that Los Angeles Power (municipal rather than private) was not part of the recurring problems in 2000-2001.

        I am shaky about this, but will think carefully.

      2. baffling

        texas has a very deregulated electric power market. consumers can buy a variety of plans. producers compete to produce energy at lowest cost. one problem is that the producers sell into a single marketplace run by ercot. this model is actually very good at driving down cost. but the model is hideous at improving maintenance and disaster planning for the producers. essentially, there is nobody to oversee that proper backup planning exists in the event of a producer outage. the wind turbines and solar panels were expected to go offline in the winter time-this was no secret. the fact that nat gas, coal and nuclear had twice the power outage that renewables had was the problem, since this was an unforeseen loss in power for the state. nat gas in particular slammed the state, going offline when it was supposed to be running full steam ahead. it simply amazes me that that nat gas and coal plants were unable to cope with temperatures below freezing. this is what happens when you deregulate the energy market. the blackout in texas had no business occurring in a modern economy.

        1. ltr

          Likely then I was wrong in my analogy of Texas to California, where production was limited as too many plants were taken off-line for maintenance. The loss of such varied production in Texas struck me as artificial. Still, there was such limited backup and no reason or incentive to have provided for more. Less backup, relatively higher prices…

          1. Baffling

            Ercot is a monopoly in the sense they control the distribution of power in the grid. Producers bid to provide that power at lowest price. If they do not provide power, they get no pay. So there is not much incentive to develop backup capabilities that are never used and thus never get paid. Ercot failed to adequately address backup plans and producers had no incentive to create backup plans. In Texas some nat gas plants had planned downtime. But most of the nat gas plants went down because nat gas distribution systems (pipelines) failed to work. No nat gas, no electricity. It was a deregulated and free market system with no ability to develop contingency plans. An unmitigated disaster. Texas demonstrated why we regulate utilities in the rest of the nation.

          2. ltr


            All my hope and wishes to you.

            I do appreciate the careful explanations, and think I can now outline the self-contradictions in the Texas power system. Please notice:


            February 18, 2021

            Cold Truth: The Texas Freeze is a Catastrophe of the Free Market
            By James K. Galbraith
            Texas’s electricity market “reforms” made the current crisis inevitable

          3. Baffling

            ltr, the galbraith link is a pretty good summary of texas energy landscape. Deregulation of the energy sector was an unmitigated disaster. Unfortunately abbott and lawmakers wont acknowledge this and look to scapegoat renewables, so the problem can reoccur in another few years.

          4. CoRev

            Menzie, thank you for reading the article and finally understanding the issues. TX and ERCOT are behind this, the 3rd such failure in the past decade.

          5. CoRev

            And this is how a liberal thinks: “So there is not much incentive to develop backup capabilities that are never used and thus never get paid.” right after the 3rd example of ERCOT’s backup need AND USE in the past decade.

            Next time someone touts the low prices for INTERMITTENT renewables as base load options remember the current Texas example, or you could just remember the similar 2011 incident.

          6. baffling

            “So there is not much incentive to develop backup capabilities that are never used and thus never get paid.”
            hey idiot, this is not my belief, it is my description of the system in texas. you know, that republican stronghold. maybe free market conservatives should change their energy policy?
            by the way, you should really work on your reading comprehension. it seems to read without comprehending.

        2. CoRev

          Baffled, it looks like you have/had power. That’s good. I remember our discussion of last year where I cited the need for adequate back up for renewable wind/solar energy. Now you admit: ” essentially, there is nobody to oversee that proper backup planning exists in the event of a producer outage. the wind turbines and solar panels were expected to go offline in the winter time-this was no secret. the fact that nat gas, coal and nuclear had twice the power outage that renewables had was the problem, since this was an unforeseen loss in power for the state. ” Low energy prices are useless when no energy is available.

          What has changed? The ERCOT model disincentivized the backup market while incentivizing the renewable. This article does a great job at explaining why:

          I stand by my earlier claim that intermittency is a huge problem with renewable energy. This is true in every location where its use is a prime consideration: Germany. California and now Texas are examples.

          1. Menzie Chinn Post author

            CoRev: Is Judith Curry the only PhD you can cite? Well, from UtilityDive:

            But data from the state’s grid operator makes it clear that the majority of outages were caused by gas supply constraints corresponding to a major spike in demand. Though no power resource performed perfectly, power sector experts dismissed the idea that renewables alone were to blame for the outages.

            But, if you want to keep on engaging in disinformation, and make a fool of yourself, please go ahead.

          2. pgl

            What did Michael Mann about your guru? Oh yea – something like climate science would be stronger without her because of her “confusionism and denialism”. Now I grew up near Georgia Tech where she once taught. But she sort of had to leave as the rest of the faculty grew tired of her nonsense.

          3. Baffling

            Corev, nat gas and coal shutdowns far exceeded those of renewables. Far exceeded. I figured an ignorant fool like you would be a sucker for this situation. You really have no idea what happened in texas but comment like you are in the know. Grifter. Renewables going offline was expected and acceptable. Nat gas shutting down should not have occurred.

            And ercot deserves blame for not incentivizing backups and redundancy. I believe in belts and suspenders for engineered public utility systems. Maybe you should tell that to the free market conservative republicans that run ercot? They apparently aren’t interested in listening to a liberal explain how they screwed up.

          4. pgl

            President Biden had the US rejoin the Paris Climate Accord. I get that you think this will be the end of the world as we know it. So why on earth are you on your computer and not leading a bunch of your fellow Proud Boys to storm the White House?

          5. Baffling

            Corev, your link makes some incorrect arguments. Texas did not deregulate to help renewables. Texas deregulated because the conservative free market proponents argued it would provide cheaper energy. Renewables simply responded to this new wild west free for all in texas. I will reiterate, ercot was a conservative republican boondongle.

            Also, renewables purpose is to provide cheap extra energy during the high energy demand of the summer. Winter peak demand is much lower than summer peak, and thermal sources are sufficient in texas to handle the load if they dont break down. They were unreliable this time.

          6. Baffling

            I will also point out texas has its own grid because it did not want other states or the feds telling it how to run the power system. In plain speak, texas did not want the feds to mandate backup power. Most texans would have been better off if the feds had a say in how the grid was run.

          7. baffling

            “I stand by my earlier claim that intermittency is a huge problem with renewable energy. ”
            corev, apparently it is an even BIGGER problem for natural gas. 30 gigawatts of thermal energy went offline. the thermal source capacity for the state is 67 gigawatts. that is a pretty big failure. your best bet is to stay silent on these issues lest you continue to put foot in mouth.

            and as for intermittency with wind turbines, they can work in the conditions that shut them down in texas. they work just fine in the upper plains. all you need is to get off this deregulation horse, and mandate performance.

            corev, i am still fascinated how you have turned on the conservative republican love child called ercot. why are you so against free markets and deregulation, corev? you seem to prefer government regulated utilities. interesting.

          8. CoRev

            Menzie, instead of bias confirmation of wind energy, why did you not cite this: “By Sunday, ERCOT was urging ratepayers to reduce power usage due to record demand and “higher-than-normal generation outages,” due to frozen wind turbines and limited gas supplies</

            I stand by the oft repeated claim: "I stand by my earlier claim that intermittency is a huge problem with renewable energy. This is true in every location where its use is a prime consideration: Germany. California and now Texas are examples."

            Yes, Dr Curry and the specific writer: By Planning Engineer. You evidently didn't even read the source and just assumed another PHD with which you must disagree wrote it and attacked her.

            Says more about you than Dr Curry.

            Read the article in Dr Curry's blog and then read the WSJ article. Then come back with some actual knowledge instead of emotion. Talk to us about the differences.

          9. Menzie Chinn Post author

            CoRev: Sure, you stand by your previous comments. Please remember whose decisions rendered ERCOT unable to manage this crisis; and you are referring to their explanations for why production is down? Excuse me if their credibility is less than full here.

          10. Baffling

            Corev, your quote has been walked back by ercot. Even they have acknowledged the problem was a shutdown in gas, not wind. But you have already been told that numerous times. And yet you still promote a falsehood. That is the definition of a hack.

            I just find it fascinating how you continue to promote the failure of a strictly conservative republican power grid.

          11. Barkley Rosser


            I read your linked article, and if does not say what you say it does. It most definitely does not blame the ?Texas situation on overuse of renewables. It in effect blames it on the decision made by the Texas legislators to have ERCOT get paid for energy rather than capacity as is done in other states. Upshot is that they did not provide backup generators for any of their power systems, whether renewable or fossil fuel or nuclear, with even that one having some problems. The big problem was failure of the natural gas systems, which provide a much higher percentage of the power than do renewables in Texas.’

            You are completely out of it here, and your sneering at Menzie for supposedly not reading the article singularly inappropriate given that you lied about its content, furthermore, you did so in bolded letters favored by Moses Herzog when he wants to make a singularly inappropriate remark.

          12. Anonymous

            Baffled, you need to better read the article: ” Texas did not deregulate to help renewables.” Instead the article says:
            ” Rewarding resources for offering capacity advantages effectively penalizes renewables. As noted by the head of the PUC in Texas, an energy only market can fuel diversification towards intermittent resources. It does this because it rewards only energy that is fed into the grid, not backup power.

            In our earlier discussion I claimed that price alone wrong when considering intermittent sources . Intermittent sources must include the cost of backup sources. Texas and CA are prime examples of erroneous implementations. Dems Green New Deal is based upon this erroneous thinking.

            TX has had 3 similar episodes in the past decade. When will ERCOT and Texans learn?

          13. Barkley Rosser

            Wow, “Anonymous,” am I ever glad you finally showed up, our leading expert on energy issues, citing your own previous remarks on such things from our previous discussions. I know never to make up my mind about such discussions until you, “Anonymous,” weigh in with your special expertise.

            Of course carefully parsing your comment here it seems to fit in well with the confused mess of other comments made here in this thread by good old CoRev. So maybe you are just bungled-up CoRev bungling up even more by failing to identify himself and mysteriously coming in here as the super expert “Anonymous.”

          14. Baffling

            “ TX has had 3 similar episodes in the past decade. When will ERCOT and Texans learn?”

            Actually corev, 3 episodes in 3 decades. But who’s counting?

            And it would be nice if texas winterized their nat gas power plants. Interesting enough, much of the nat has that went off line was due to a loss of electricity to run the gas wells and pipelines. Maybe texas should not be reliant on an intermittent energy source such as nat gas?

            At any rate, please continue to blame ercot. Its run by a bunch of republicans, you know.

          15. CoRev

            Baffled, “i am still fascinated how you have turned on the conservative republican love child called ercot. why are you so against free markets and deregulation,…? you seem to prefer government regulated utilities. interesting.”

            This statement followed this: “all you need is to get off this deregulation horse, and mandate performance.

            The liberal mind does amaze. What is the cure for the ERCOT backup problem? How about including the TRUE price of backup for intermittent sources. Then the market can solve the pricing incentivization issues. Living in a colder area of the country we have a different kind of guaranteed contract for fuel suppliers to power plants.

            Anyone who continues to believe in unicorn piss of using intermittent sources for nonbacked up base load is not a rational thinker.

            I’ve been saying that for years and yet, strangely, you make silly political arguments and then support the need for “mandated performance”. (Still a political solution to a marketing issue.)

          16. baffling

            “Anyone who continues to believe in unicorn piss of using intermittent sources for nonbacked up base load is not a rational thinker.”
            and what about the fools who think the 30GW of nat gas and coal power production that froze last week needs no backup? talk about an intermittent and unreliable energy source. you seem to be overlooking this significant issue.

            “What is the cure for the ERCOT backup problem? How about including the TRUE price of backup for intermittent sources. ”
            i do not disagree. try telling that to the free market conservatives who run the energy market in texas. last i checked, it was dominated by the republican party. you could also make the wind turbines and nat gas powerhouses winterized. i would not object in the least. if they can do that in the dakotas and be profitable and still cheap, then they can certainly do that in texas? in fact, after the 2011 winter this was exactly what was proposed. and ten years of republican leadership did what? exactly. because republican leadership listened to the energy providers, and let them keep costs low.

            corev, you are a liberal and don’t even realize it!

      3. Willie

        My son lives in Dallas now. He and his girlfriend have so far escaped outages and calamity. What has me concerned is reports of price gouging by private electric utilities. I do not know whether that is actually happening or is an unreliable internet rumor. It has me a bit concerned, because they are not exactly well established yet, and a massive and unexpected utility bill will foul them up thoroughly.

        But free markets and all. There is no such thing as abuse of monopoly pricing power in Texas. Same with perverse incentives.

        1. Baffling

          I don’t think your son will have billing problems if he operates with a regular energy plan. There is a company, griddy, that would create a problem. They let you buy wholesale energy prices which skyrocketed this week when supply disappeared. But very few people run this kind of plan. I run an electric plan linked to the price of nat gas futures. Each kilowatt is more expensive in the winter, but I use 5 times the power in the summer when the nat gas is typically much cheaper. My heat comes from nat gas on a yearly contract price and does not fluctuate in price. All in all I can choose from about 100 different plans, but I bet 95% of them have the same yearly cost. Life was just as cheap and simpler when I had just one electric and gas utility choice back in the Midwest.

          1. CoRev

            Earlier you claimed you were buying WIND electrons. What happened with that story? ” Life was just as cheap and simpler when I had just one electric and gas utility choice back in the Midwest.”, and supply was nearly constant.

          2. pgl

            February 19, 2021 at 8:06 am”

            Our favorite troll is stalking you. Ignore the pest and hopefully he will run away.

          3. Baffling

            Corev i never said i bought wind. There is a plan available to purchase it if you would like. I simply pointed out the option is available. That option can only occur in a deregulated energy market. For the record, i am NOT a fan of a deregulated energy market. A free market energy sector does NOT ensure an adequate supply of energy when needed.

          4. CoRev

            Baffled now admits after living through the effects: “i am NOT a fan of a deregulated energy market. A free market energy sector does NOT ensure an adequate supply of energy when needed.”

            Still boiling your water?

          5. Baffling

            Corev not sure what tour point is. You support a deregulated and free market energy system? Or do you support a regulated utility monopoly? You cant seem to agree with yourself.

  13. pgl

    Just how stupid is Bruce Hall. Check his defense for the doubling remark:

    “Bruce Hall
    February 17, 2021 at 9:47 pm
    NASDAQ went from ~6,000 (Jan 2017) to ~14,000 (Dec 2020)
    S&P 500 went from ~ 2,400 (jan 2017) to ~ 3,800 (Dec 2020) ”
    DJIA went from ~20,000 (Jan 2017) to ~31,000 (Dec 2020) ”

    The Dow is not exactly the broader market so I just went with the first two and roughly approximated a doubling.”

    Wait the only truly broad market (S&P) goes up per Bruce’s source by 58% which he calls doubling but that narrow DOW went up by 55%. If you are dumb enough to round 58% up to 100%, then 55% rounds up to 100% too. Pathetic.

    Now I bet Bruce Hall has no clue what NASDAQ even is. This index is dominated by high tech and biotech companies. Well yea a pandemic is going to help these stocks a lot more than it is going to help a broad measure of the stock market. But of course Bruce Hall is too stupid to get this.

  14. pgl

    Folks – help me out here as this sounds like junk science designed to advocate for international tax evasion. I have only read the summary so far and intend to read the actual paper later but here goes:

    Thin capitalization rules (TCRs) aim to mitigate profit shifting by multinational corporations (MNCs) but, by raising the cost of capital for affected affiliates, can also negatively affect real investment. Exploiting unique panel data on multinational companies in 34 countries during 2006-2014, we estimate that the size of this adverse investment effect can be large, and dependent on the statutory corporate tax rate and the tightness of the safe-haven ratio. Negative investment effects are more pronounced for highly-levered firms for which TCRs are more likely to be binding.
    I guess I’m old school Modigliani-Miller so debt v. equity does not affect the cost of capital in terms of expected returns to equity. And thin cap in the tax world isn’t really about borrowing more from 3rd parties but is about the operating affiliate in a high tax jurisdiction paying interest payments to a tax haven to lower worldwide income. So what the heck is the analysis trying to say? Oh yea – make rich people pay their fair share of taxes will destroy investment. Got it.

    1. ltr

      China introduced capitalization standards in the wake of the international recession of 2008-2009, and attracting and keeping developmentally important foreign investment has as far as I know never been considered a resulting problem since then. Also, China limits the nature of Chinese direct foreign investment and this appears to have significantly improved the quality of the investment.

    2. ltr

      The point of foreign investment is what is important for development. China has no hesitation in limiting gaming investment in Macao and working to make the island economy more diverse. I remember a prominent American investor talking of leaving Macao, since beach-tourism was less profitable than gaming, but there was no leaving and Macao diversifying.

  15. SecondLook

    Pardon, given the extremely asymmetrical distribution of equity ownership – globally, not just nationally – why is the performance of stocks meaningful in any truly macro-economic sense?
    Now, if there is a direct correlation between say, a major market correction and a subsequent, if brief, decline in GDP and/or employment – or even some attributable shift in tangible capital resources that might affect 90% of the country, that would be worth discussing; n’cest pas?

      1. SecondLook

        Ah. I thought nowadays that rate of profit was considered more accurate.
        Then, my knowledge of Tobin’s q is limited to the last century’s dark age of investment banking.

        1. Menzie Chinn Post author

          SecondLook: Measured profit rates are based on accounting. Tobin’s q (as opposed to Summers’ q) has an “animal spirits” interpretation. Question is what’s a better empirical determinant of investment.

      1. Moses Herzog

        Maybe Rick Stryker is masquerading as Bruce Hall and posing as satirically dumb just to yank our chain??

        Admit it Menzie, if you didn’t have the IP addresses to cross-check, this would be a viable theory.

      2. pgl

        He is touting his comment where he claims 58% (S&P500) is nearly 100% but 55% (DOW) is not. Yes Bruce Hall is bragging about failing 1st grade arithmetic!

    1. noneconomist

      Bruce, with spring baseball on the horizon– and with no small thanks to your math– I now fondly remember the year George Brett hit .400 (.390 is ALMOST .400) and the year Sandy Koufax doubled his strikeout total from 216 to 306.

        1. Moses Herzog

          @ pgl
          I’m severely disappointed in you. I thought you were going to tell us about the 10 times [ 5 X 2 ] Steinbrenner fired Billy Martin (my favorite baseball manager of all time). You have disgraced yourself, and you will never be allowed to wear the pinstripes again.

          [ Joking, not joking ]

          1. pgl

            Sorry but I truly despise that team that hides how fat their players are in pin stripes. Besides Citifield is a real ball park as opposed to monstrousity in the Bronx.

          2. Moses Herzog

            Haha, funny. I wouldn’t put Rojas in Billy Martin’s class, but he looks like a good one. Doesn’t look like much base running speed though, you need to get some base stealers. You’re gonna bore the opposing team’s 1st Baseman.

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