Rebirth in 1998 is also a kind of life

There used to be such a hot topic in later generations: Even in 2020, the Boeing aircraft, Ford aircraft carrier, aero engine, medical technology, robotics, etc. of the beautiful country are still the best in the world, but why do some people think that the manufacturing industry of the beautiful country has declined?

A generally accepted view is that the decline of the manufacturing industry in the beautiful country comes from a sharp reduction in effective investment in real enterprises, and capital flows out of real companies to the capital market.

The reason for this situation must be mentioned a concept - 18% internal investment threshold rate of return (irr).

To put it simply, when investing, you must ensure that the expected return on investment is not lower than a certain threshold rate of return, so as to ensure the continuous expansion of capital. For example, the threshold rate of return of 100 million is 15%, and then you take out 100 million Investment, the expected return on investment should be greater than 15%.In other words, this 15% is the minimum rate of return for an investment of 100 million yuan. If it is lower than this rate of return, this investment project is a failed investment project;

Because irr can make the net present value of the project equal to the discount rate when it is zero, it can also directly reflect the actual income level of the investment project from a dynamic perspective, and is not affected by the industry benchmark rate of return. It is more objective. Therefore, European and American capital When investing, I really like to use IRR as a measurement indicator - although the calculation process of this thing is complicated, and when a large amount of additional investment is made during the operation period, it may lead to multiple IRRs, which lack practical significance in operational guidance, but most Capital who cares about this?

Unfortunately, however, according to **** statistics, since the mid-90s, the weighted average cost of capital (wacc) of the S&P 500 index companies in the beautiful country has basically fluctuated in the range of 8.3%-9.5%, while in 1999 In 6.7, WACC was as low as 20%, the lowest point in history in the past [-] years!

In fact, strictly speaking, even a wacc of 6.7% is not bad, at least it outperforms inflation—but just like the guests in a casino always win and lose, top capital stalls such as Morgan and GS have a lot of money. , There are many investment projects, and there are many successful projects, but there are also many failures. Therefore, if the expected irr of new projects is lower than 18%, they have no way to guarantee that they can effectively hedge the risks of all projects under their command.

In this case, if a listed company needs to invest in a batch of robots worth 100 million yuan to improve the production efficiency of the workshop and reduce defectives, if the investment cannot bring at least 20 yuan in cost savings per year (calculated based on the 15-year project life) , such as a 5-year project, which requires 40 per year), then this investment project will be rejected.

With such a target set, basically 90% of the endogenous projects are difficult to pass the approval of the company's management and board of directors. In the end, the entity enterprises in the beautiful country would rather pay dividends and repurchase shares, and hand over the company's cash to its Shareholders are not willing to invest in the development and growth of their own industries when they want to redistribute. <For every dollar of capex (capital expenditures) the company spends, an additional $4 is spent on returning shareholders through dividends or share repurchases.Cisco, on the other hand, spent a total of $2005 billion on stock repurchases from 2020 to 1100—while only spending $150 billion to replenish the company's productive assets during this period. (Last year, the TV series "Win or Lose" led by Chen Kun and Xin Zhilei was adapted from the business war novel of the same name written by IBM and Hewlett-Packard in 2006 when they competed fiercely for the domestic banking data center market. Although the TV series was nonsense, But there is a more in-depth description of the content of this part in the book, if you are interested, you may wish to read it.)

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As we all know, there is no business model in this world that can expand infinitely, and there is no win-win project that can always make a profit without losing money. Since the major capitals in the beautiful country have set such a high internal investment threshold rate of return, they want to obtain a satisfactory investment. In many cases, the benefits are inevitably at the expense of the long-term interests of the partners - the most serious consequence is to accelerate the internal decay of the beautiful country's entity enterprises.

In later generations, a scholar named Oren Cass conducted a follow-up study on all listed companies in the United States from 1971 to 2017, and published a report called "The Erosion of Capital on Enterprises - The Decline of Enterprise Investment from 1971 to 2017" "Enterprise-Level Analysis" report - This report pointed out that in the past half century, the business strategy of typical American companies has shifted from the traditional strategy of investing to supplement their capital base to providing cash to shareholders.

=0;

capital expenditure (capex) > earnings before interest, taxes, depreciation and amortization (ebitda),

Net sales of equity + net issuance of long-term debt > 0

Type [-]: Sustaining companies

Definition: Capital expenditure (capex) is greater than the sum of fixed capital consumption and cash returned to shareholders, and ebitda is sufficient to be self-sustaining and achieve the above two goals.

Has the following three elements:

&nent)>=0;

Earnings before interest, taxes, depreciation and amortization (ebitda) ≥ capital expenditure (capex);

Share repurchase + branch dividend > 0

The third category:: erosive companies

Definition: Consuming fixed capital at a rate greater than new capital expenditures (capex), while still returning cash to shareholders, but whose ebitda will be sufficient to replenish its base capital.

They have the following two elements:

&nent) < 0;

Share repurchase + branch dividend > 0

Research shows that from 1971 to 2017, the Pretty Country economy has shifted from an economy almost exclusively characterized by sustaining firms to one dominated by eroding firms.Sustaining companies’ share of total market capitalization fell from 1978% in 90 to 2009% in 37; conversely, eroding companies’ share of total market capitalization increased from 1980% in 1 to 2010 49 percent.

These trends had a particular inflection point in 1999, a year after the Asian financial turmoil, particularly for manufacturing firms, as the market capitalization share of eroding firms climbed rapidly from 1% in 1998 to 16% during 2005. 45% - The most representative example is that for every $1 invested in capex (capital expenditure), only 30 cents of cash are distributed to investors.Yet that number has risen steadily since then, and spiked in 2004, transforming the company from a perennial sustainer to a permanent erosion.

In short, the emergence of a large number of eroding companies has completely changed the relationship between the real economy and the financial market, so that the beautiful country of later generations always seems to be transfusing blood from the real economy to the financial market—think about it, when most When physical enterprises are cutting their own flesh and blood to serve those capital institutions and investors, how can the manufacturing industry of the beautiful country not decline even if they have cutting-edge technology and talent reserves?

And Yang Zhu's idea is - the market value share of the eroding companies in the beautiful country is best to continue to grow rapidly at the current level forever, until it reaches 100%.

This is not to say that he has really become so angry and selfless, but that the more corrosive companies in the beautiful country, and the larger the proportion, the easier it is for him to fish in troubled waters—if it is not because beautiful companies and capital are all due to certain sources Natural mechanism, forced to pursue ultra-high irr, causing major consortiums to passively suffer from the reverse binding of their mouthpieces. Do you think it is so easy for Yang Zhu to get so many forces by relying on so few super projects, and then in Swaggering and running amok under the nose of others?

Ok……

That's right, as the main rule-makers, the operating mechanism of financial capital in Europe and the United States has been gradually perfected by the "smartest group in the world" for hundreds of years-from the source of this set of rules, which is like a cancer cell. If you are born with defects, you can know what this group of people value most.

Yang Zhu even dared to bet that as long as he can exchange enough benefits, even if he detonates a few nuclear bombs in the beautiful country, that group of people will all become blind, pretending that they didn't see anything, maybe they will all hold hands Pointing to Peter the Great on the other side of the world, claiming that the other party is the murderer.

As we all know, the more chaotic the beautiful country is, the more powerful Yang Zhu's calculations can be. Therefore, the officials in Europe and the United States always show a kind of fierceness of "if you dare to look at me, I will smash your cheeks" His attitude, and some behaviors may seem really willful to outsiders, but it must be admitted that when this guy is sharing the cake with Europe and America, he is also generous and makes people smile.

However, at the moment, Yang Zhu is facing a huge stumbling block—or in other words, the group of Judahs are facing a huge challenge.

That is……

In 2003, the Federal Reserve started using the "forward guidance" policy this year!

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The so-called "forward-looking guidance" refers to the modern monetary policy tools used by central banks to guide the market's expectations of future interest rates and bring market expectations closer to the central bank's target expectations—that is, to release information about the direction of the central bank's monetary policy to the market in advance, so as to Guide market expectations so that market expectations are consistent with the central bank's guidance expectations.

Ok……

If we only talk about academic definitions, most people may have a vague understanding, so it is better to change the way—before discussing forward-looking guidance, let’s talk about expectation management.

The so-called anticipation is the prediction of the future.

If I only have 2000 yuan in my hand, then I will probably save money; if I expect to get 2000 yuan every month in the next month, then I will increase consumption with a high probability—it can be said that as an economic entity, I will When making decisions, the uncertainty of the future will be taken into account, and the future will be evaluated based on information. This subjective prediction is anticipation.

The “Liquidity Trap Theory” of the famous economist John Maynard Keynes who never sets the sun believes that when the nominal interest rate is close to zero, people will choose to hold wealth in cash instead of Investment will be made; at this time, the demand for money is nearly infinitely elastic, and no matter how much money is added, it will be stored by people.No matter how loose the monetary policy is, it cannot change the market interest rate. It can be said that the monetary policy at this time is completely ineffective.

But Pretty Country economist Paul Krugman sees things differently. In 1998, when analyzing the deflation crisis in island countries, Krugman pointed out that even though the interest rate has been reduced to zero, the Japanese economy still faces the plight of insufficient demand, and the only way to overcome deflation is to greatly increase the money supply and create inflation expectations, so that The market realizes that monetary expansion is permanent, which stimulates consumption and aggregate output.Michael Woodford has the same insight - he believes that monetary policy can also work at zero interest rates if it can change people's expectations about policy, and formally proposed the term "expectation management" in 2001.

In 2003, Michael Woodford and Gotti Ekstersson formally proposed the term "forward guidance" and stated that the forward guidance of the central bank can affect the expectations of future short-term market interest rates and extend to the long-term The market interest rate will ultimately affect the current consumer spending behavior.

So, how does forward guidance work?

For example, if the interest on borrowing money from the bank is zero this year, then I will probably not borrow money because I am not sure how the interest rate will change next year.If the bank tells me that the interest rate will be zero for the next ten years, then I will most likely borrow some money to invest in building a factory, because I don't have to worry about high interest costs in the future.The reason why forward-looking guidance can work under the zero interest rate constraint can also be understood as the central bank has released a signal to lower "long-term interest rates."

In a 2008 study titled "Central Bank Communication and Monetary Policy: A Review of Theory and Evidence", Alan Blinder, former vice chairman of the Federal Reserve and an economist at Princeton University, discussed the mechanism of forward guidance. A systematic description - In Blinder's research framework, the policy signals released by forward-looking guidance include the central bank's interpretation of current policies, policy commitments for a period in the future, future inflation, employment, output, etc. The most important information is the future direction of policy interest rates.New Keynesianism holds that it is long-term interest rates, not short-term interest rates, that stimulate aggregate demand.

But how are long-term interest rates determined?Alan Blinder made a formula:

rt=an+1/n(rt+ret+1+ret+2+...+ret+n-1)+et.

To briefly explain, rt represents the long-term interest rate, rt represents the short-term interest rate, ret+1 represents the market's expectation of the future short-term interest rate, and an is the term premium of funds, and et is the error term.It can be seen that long-term interest rates are determined by short-term interest rates and expectations of future interest rates.

Typically, the short-term interest rate is the current policy rate.

But how are expectations about future interest rates determined?Alan Blinder made another formula:

ret+j=hj(yt, rt, rt, u, πt..., θt)+et.

In this formula, hj is the learning process of the market, yt is the actual output, rt is the long-term interest rate, rt is the short-term interest rate, u is the unemployment rate, πt is the inflation level... and θt is the policy signal released by the forward-looking guidance.

Generally speaking, there are four main ways in which forward-looking guidance works:

1. Forward-looking guidance - future interest rate expectations - total output.

The central bank uses policy signals to influence expectations of short-term interest rates, which in turn affect long-term interest rates. If long-term interest rates remain low, it will stimulate long-term increases in consumption and investment, thereby achieving the effect of stimulating the economy.

2. Forward-looking guidance—prices of financial assets such as stocks—total output.

When the central bank releases a signal of loose monetary policy in the future through forward-looking guidance, it will cause market investors to lower their expectations of short-term interest rates, which will lead to an increase in the prices of financial assets such as stocks.

According to Tobin's q theory and Modigliani's constant income effect, rising financial asset prices will promote consumption and investment, thus achieving the effect of stimulating the economy.

Note: [Tobin's q theory] is also called Tobin's q ratio. This coefficient is the ratio of the market value of a company's stock to the replacement cost of assets represented by the stock. In Western countries, the q ratio fluctuates between 0.5 and 0.6.

[Modiliani's constant income effect]: Modigliani believes that under certain budget constraints, the country's past, present, and future income can be weighted average: when the credit system is developed, people's demand for money It will become smaller, because there is no need for so much currency; but after the interest rate drops to a certain level, the demand for currency will be infinite, because everyone will recognize that the interest rate has reached the lowest point, and it is not worth borrowing; the future trend of currency interest rates will only rise , so the demand for currency use should be increased (to put it bluntly, it is the intertemporal allocation of funds).

3. Forward-looking guidance - market interest rate - total output.

Generally speaking, the short-term interest rate is the benchmark interest rate, which is the basis of the market interest rate.

Theoretically speaking, all interest rates should change in the same direction as the benchmark interest rate; after the central bank makes a policy commitment, it can keep the benchmark interest rate at a low level for a long time, so that other short-term interest rates can also be kept at a certain level low, thereby stimulating aggregate demand and real output.

4. Forward guidance - inflation level - total output.

If the central bank sets an inflation target, and the market trusts the central bank's commitment very much.

The continuity of policy is expected to continuously correct the deviation between the public's expected inflation level and the policy target, so that the public's expected inflation rate matches the policy target level set by the central bank.

As long as inflation remains low, central banks will generally refrain from raising policy rates rashly.As long as the low interest rate level continues, it will play a positive role in the expansion of demand and output growth.

Ok……

Seeing this, do you feel a vaguely familiar feeling?There is even a dislocation of time and space, as if returning to China decades ago? (If I remember correctly, I have already written relevant views in the chapters that facilitated the cross-border e-commerce business between China and Europe, so there is no taboo here.)

In short, if the trajectory of the previous life is followed, in terms of the use of forward-looking guidance policies, the island countries that first applied this policy in the early 90s due to the bursting of the stock market and property market bubbles were the first to fail, while the beautiful countries were the winners.

Since the beginning of the millennium, due to the weak economic recovery and high unemployment rate in the beautiful country after the burst of the Internet bubble, the Federal Reserve lowered the federal interest rate to 1%, and then announced that "the committee believes that the loose monetary policy will be maintained for a long time"-this is The prototype of the forward-looking guidance of the beautiful country.

But in fact, due to the failure cases of island countries, although the beautiful country adopted some policies similar to forward-looking guidance, it actually has no intention of normalizing this policy.

The real normalization of the forward-looking guidance policy was actually something after 2008-after the outbreak of the financial crisis in 08, the Federal Reserve lowered the federal funds to 0-0.25%, and announced that it would remain extremely low for a long time level, the wording is still vague.

2011年8月-2012年9月，美联储连续三次使用时间指引，确切地给出了维持低利率政策的最短时间。于是2012年9月，美联储宣布联邦利率将至少在2015年年中之前维持在极低水平。

In December 2012, the Federal Reserve further clarified the content of forward-looking guidance, declaring that at least three conditions are met to maintain a low interest rate policy: a: the unemployment rate is higher than 12%; b: the inflation expectation in the next one to two years will not exceed 6.5% %; c: Long-term inflation expectations remain stable.

In fact, after the subprime mortgage crisis that swept the world in 08, the messy domestic environment in the beautiful country was still able to maintain a GDP growth rate of more than 2% per year. Outside of Huaxia, the normalized forward-looking guidance policy definitely contributed a lot!

………………

Of course, it's still the same sentence, although Yang Zhu is an angry youth, he is not so reckless as to be brainless.

The reason why Qin Xin invited a group of people, including the New York State Senator, paid a considerable price to let them use "ideology" as the entry point and call on the beautiful country to abandon the forward-looking guidance policy. The real reason is... With the normalization of forward-looking guidance policies after 08, not only the economy, but even a group of enterprises in the beautiful country seem to have found their backbone after decades of confusion. Under the chain reaction, the development of the beautiful country The growth rate of the market value share of eroding companies slowed down suddenly, and even the attitude of the government of the beautiful country gradually became tougher, and even the gang on Wall Street were beaten once or twice from time to time (after 2008, Wall Street was gradually beaten and Containment is not a secret in the industry, but domestic people usually don’t pay attention to this, so their impression of them is still in the ancient film and television works and urban legends.)

If it continues to develop according to the original historical track, it will obviously be extremely detrimental to Yang Zhu's plan-although his obsessions are only two or three, as a cynical youth, he obviously wants more things, but there are some Although it is not an obsession, it is also very important. According to the original historical trajectory, the time is not ripe until after 2012. Therefore, the forward-looking guidance policy of the beautiful country is indeed a big trouble for him.

In fact, this time Qin Xin was secretly operating, intending to use the name of "ideology" to kill the embryonic forward-looking guidance policy in the cradle. Although it was actually for himself, on the surface, it was indeed Give the gang of Judas a not-so-small favor—this favor will be enough to quench the anger of some people who suffered a big loss in soybean futures in the future.

Here someone might ask:

Isn't the forward-looking guidance policy of the beautiful country centered on the Federal Reserve as the core executive unit?

And there are rumors in the world that the Federal Reserve is not only a private company, but also controlled by those Judahs?

Why does this sound a little inconsistent?

Ok……

Let's put it this way, the Huaxia of later generations, not to mention the five major industries, even have foreign shares in two barrels of oil. To say that they are a joint venture, at first glance, it makes sense-but anyone on Earth knows who these companies listen to.

In the same way, although the Federal Reserve is a private company in name, the reason why it turned private is to increase operational efficiency and reduce financial burdens. Do you really think that a country will be so stupid as to give the lifeblood of its life to private individuals?

It is true that about one-third of the Fed's governors and chairs are Judas, and they wield considerable influence over Fed policy, but they are far from controlling the Fed, even without legal and other institutional restraints—and, besides, These people do not necessarily serve the interests of their own groups, but serve the interests of the beautiful country; otherwise, why have they been entangled in the Middle East for more than half a century?

In fact, as long as anyone who has studied Judah knows that it is really difficult to tell whether this group is a bloodline nation or a religious nation-this complex and special group relationship hub makes these people actually not so Most people are as united as they think; at least, there are more than a dozen factions with different demands and opinions.

However, some of the deep-seated instincts of this group are well known in the world, and the group of people involved in finance is particularly prominent in this respect-to a certain extent, this group of people is actually Yang Zhu's real "powerful helper" !

………………

It took half an hour for Qin Xin to selectively tell Lu Sisi some of Yang Zhu's thoughts and ideas—of course, Yang Zhu's ultimate purpose and core implementation details would naturally not be revealed, in fact there are many things Qin Xin I still don't know, and I can't say one, two, three even if I want to say it.

But even so, Comrade Lu Sisi was still in a cold sweat from shock—she knew that her boss always liked to play with big hands, but she never expected that this guy's hands were so big.

Reminiscent of letting Zhutou International Trade get involved in the cds business before, and then using the tens of billions of dollars in subsidies for the e-commerce business of Gongzhu.com, the joint operation of copper futures with Morgan Stanley, the intensified zero-yuan purchases in the beautiful country, the second outbreak of the anti-genetic movement, and the Enron Corporation Unusual cooperation with Alpha Group, soybean futures...

All these things appeared in her mind, and it seemed that there was some connection between them, but she couldn't grasp the thread that connected these things together.

After a full 5 minutes, the mixed-race beauty rubbed her temples in frustration;

Boss, what on earth do you want to do!

Also, should this matter be reported?

Lu Sisi suddenly struggled in her heart...