Random Economic Posts

[LFC]

Corporate earnings guidance sucks. (archived link)

The pandemic may have upended businesses, but surprisingly it did little to dent managers’ misplaced confidence in their earnings forecasts, new research shows.

More than three out of four financial professionals said there was a strong likelihood that their companies’ earnings would fall within the guidance they give to investors — but this only happens rarely, according to the researchers. The study surveyed 357 CFOs, investor-relations professionals and other executives at public companies in 2021.

The paper finds that companies offer accurate guidance about 30% of the time. Their inaccurate forecasts, in turn, influence the earnings estimates given by Wall Street stock analysts. That helps explain why only a very low percentage of companies deliver results within analysts’ estimates, according to data compiled by Bloomberg for the S&P 500 over the past 60 quarters. In the first fiscal quarter of 2023, companies in the bellwether index reported earnings in line with estimates just over 3% of the time.

“Managers actually do a relatively poor job of predicting earnings outcomes. When we asked them for their honest assessment of whether earnings would fall in their forecast, they way overestimated,” said Paul Hribar, an accounting professor at the Tippie College of Business at the University of Iowa and one of the authors of the study. “The overconfidence can be due to hubris, but there’s also miscalibration.”

[Bact PhD]

May 31, 2023 16:17:32 GMT pnwguy said:

May 31, 2023 15:21:40 GMT Bact PhD said:

Flori-DUH has dealt with this sort of stuff off-and-on for decades. Corporate pulls out after a series of major underwriting losses, corporate tiptoes back in, corporate writes policies for beachfront and flood-prone areas, a series of storms precipitates a series of major underwriting losses, rinse and repeat. The state is in deep shit right now because so many insurers have bailed, thrusting homeowners onto the state-backed “insurer of last resort.”

So Flori-DUH is where un-woke insurance companies go to die?  Can't DeSatanist provide fascist control of hurricanes?  I thought he was God's Fighter.  Surely that gives him unique powers over the weather...

Maybe Supreme Emperor can borrow The Sharpie?

[pnwguy]

May 31, 2023 23:14:59 GMT Bact PhD said:

May 31, 2023 16:17:32 GMT pnwguy said:

So Flori-DUH is where un-woke insurance companies go to die?  Can't DeSatanist provide fascist control of hurricanes?  I thought he was God's Fighter.  Surely that gives him unique powers over the weather...

Maybe Supreme Emperor can borrow The Sharpie?

But if The Sharpie is like a wizard's wand, he'd have to go to Hogwarts-a-Lago for training.  And the dress code there won't let him in with white vinyl boots (unless he has a warrant).

[Bact PhD]

May 31, 2023 15:21:40 GMT Bact PhD said:

Flori-DUH has dealt with this sort of stuff off-and-on for decades. Corporate pulls out after a series of major underwriting losses, corporate tiptoes back in, corporate writes policies for beachfront and flood-prone areas, a series of storms precipitates a series of major underwriting losses, rinse and repeat. The state is in deep shit right now because so many insurers have bailed, thrusting homeowners onto the state-backed “insurer of last resort.”

And right on cue, this article appears in the Palm Beach Post:

www.palmbeachpost.com/story/news/state/2023/06/02/state-farm-florida-homeowners-insurance-coverage-hurricane-season/70278487007/

State Farm is no longer providing home insurance in California because of wildfire risks and increases in construction costs. In Florida, an ongoing insurance crisis rages on and the 2023 hurricane season is here. Could State Farm pull out of the Sunshine State too?

Homeowners in Florida pay more for their insurance than most of the nation, paying over $4,000 each year on average, almost three times the national average for home insurance rates. With each year and each hurricane season, the cost for homeowners insurance in Florida increases much faster than the national rate.

[snip]

Florida's home insurance market was a wreck after the National Flood Insurance Program (NFIP) paid out almost $4 billion in flood insurance payouts after Hurricane Ian last September. Florida's struggle with spiking home insurance prices didn't start there, though.

At the start of the 2022 hurricane season, many insurers started to scale back their policy options in the sunshine state, sparking a hike in the already-high cost for Floridians to insure their homes against damage from the state's frequent thunderstorms and hurricanes. Some insurers left the state altogether, others went out of business. Amidst the insurer exodus, State Farm stayed put. But now that the industry giant has left California, it's more likely that State Farm would decide to leave Florida as well.

Again, I think it’s merely a matter of time before the economics of retiring to Flori-DUH no longer makes sense. Out-migration may well pick up, too.

[jackd]

Apparently taxes aren't so great either. There's no income tax but real estate, sales, and tourist taxes are significant.

[Bact PhD]

Jun 3, 2023 16:33:43 GMT jackd said:

Apparently taxes aren't so great either. There's no income tax but real estate, sales, and tourist taxes are significant.

The lack of an income tax has been much ballyhooed for, well, ever; it’s been a huge selling point for the retirees. As far as real estate, the millage rates may be higher than in other Southeastern states, but I’m not sure how they would compare with those in, say, the Northeast. Bear in mind, too, that there’s a pretty hefty exemption for the “homestead,” and there’s this quirk known as “Save Our Homes,” which caps the amount that a property assessment can increase in a given year, *regardless* of what the real estate market does. Sales taxes are in the 7% range in much of the Southeast. People here bitch and moan about taxes A LOT….but are rarely annoyed enough to pack up and move back North. “Soak the Tourists” through bed taxes at state, county, and city levels…hey, we LOVE that (unless we’re the ones doing the traveling).

[pnwguy]

Jun 3, 2023 21:07:10 GMT Bact PhD said:

Jun 3, 2023 16:33:43 GMT jackd said:

Apparently taxes aren't so great either. There's no income tax but real estate, sales, and tourist taxes are significant.

The lack of an income tax has been much ballyhooed for, well, ever; it’s been a huge selling point for the retirees. As far as real estate, the millage rates may be higher than in other Southeastern states, but I’m not sure how they would compare with those in, say, the Northeast. Bear in mind, too, that there’s a pretty hefty exemption for the “homestead,” and there’s this quirk known as “Save Our Homes,” which caps the amount that a property assessment can increase in a given year, *regardless* of what the real estate market does. Sales taxes are in the 7% range in much of the Southeast. People here bitch and moan about taxes A LOT….but are rarely annoyed enough to pack up and move back North. “Soak the Tourists” through bed taxes at state, county, and city levels…hey, we LOVE that (unless we’re the ones doing the traveling).

Taxing people who don't live (and can't vote) in a jurisdiction is especially rampant in Republican states, as part of their Spend But Don't Tax charade on fiscal responsibility.  I've seen crazy taxes on car rentals and hotels for things like "stadium taxes", to build new football cathedrals (football being the True Religion of the southern GOP).

Many states with income taxes exempt SS benefits, so if you aren't getting lots of retirement income from investments, it's better to be someplace where you aren't paying all the sales taxes for your living expenses.  

[AnBr]

Turns out auditing the wealthy brings huge ROI:

[andydp]

Found this article in the May 29 Washinton Post.  Looks like a good copy of the original.  


Nearly everything Americans believe about the economy is wrong 


thesouthern.com/eedition/page-a4/page_45faf64a-c663-5040-8937-e144363e240f.html

[goldenvalley]

The Southern Illinoisan?  Where did you run across that?  It's paywalled by the way.

[andydp]

May 30, 2024 22:23:37 GMT goldenvalley said:

The Southern Illinoisan?  Where did you run across that?  It's paywalled by the way.

. I googled the article title and got that.
If anyone can dig up a free article please pist

[andydp]

May 30, 2024 23:34:38 GMT andydp said:

May 30, 2024 22:23:37 GMT goldenvalley said:

The Southern Illinoisan?  Where did you run across that?  It's paywalled by the way.

I googled the article title and got that.  If anyone can dig up a free article please pist

Another try:


thesouthern.com/opinion/nearly-everything-americans-believe-about-the-economy-is-wrong/article_cba888a2-9b17-510b-85e1-72d70d221c18.html

[goldenvalley]

May 31, 2024 12:59:59 GMT andydp said:

May 30, 2024 23:34:38 GMT andydp said:

I googled the article title and got that.  If anyone can dig up a free article please pist

Another try:


thesouthern.com/opinion/nearly-everything-americans-believe-about-the-economy-is-wrong/article_cba888a2-9b17-510b-85e1-72d70d221c18.html

Still paywalled but thanks for trying.  I was curious because Southern Illinois (the geographic region) has always been conservative.  I wanted to see if it is full out MAGA now.  

[goldenvalley]

I've been reading The Bulwark over the last year. It's a Substack written by several former Republicans who left the party in 2016 because of the election results.  They haven't all left their attitudes behind but tend to be of the sort that is thoughtful and reasonable enough to politely disagree with.  One of them is Jonathan V. Last, I think some of TRSers are familiar with him.  He wrote an excellent piece on venture capitalism, zero interest rates and the now defunct MoviePass that is so clear that I thought I'd share it.  Here's a teaser:

Back in 2017, MoviePass offered consumers an amazing product. You paid $9.95 a month and in return MoviePass would buy you a ticket to see one movie a day, every day, with no exclusions.

At the time the average price of a movie ticket was $8.97.

So if you subscribed to MoviePass and saw two movies a month, the company lost roughly 200 percent of the gross revenue they extracted from you. Many subscribers saw more than two movies per month.

In a rational world, MoviePass should have been trying desperately to prevent people from subscribing—because every new subscriber increased their losses.

But in the real world of 2017, MoviePass tried desperately to get more people to subscribe. They succeeded. The service went from 20,000 subscribers in 2017 to 3 million subscribers within a year of instituting the $9.95 plan.

By 2018, the company’s net losses were $400 million. By 2019, the company had ceased operations. In between, the executives at MoviePass (allegedly) engaged in some light fraud.