The Republican Thread

[Y2HH]

Study after study of CFOs and CEOs have shown that the next quarterly report trumps any potential investment that pays off in huge dividends in the mid to long term.

 

That's not blanket to all capitalism. A lot of stupid CEO's and CFO's were probably interviewed there, because others do have future vision to keeping their company viable for a long time, rather than just the next quarter.

[Balta1701]

You need to go learn about oil production, because you obviously don't know much about it.

[Y2HH]

 

If you did, you'd realize what I said about OPEC was true.

 

Obviously you do not.

[BigSqwert]

That's not blanket to all capitalism. A lot of stupid CEO's and CFO's were probably interviewed there, because others do have future vision to keeping their company viable for a long time, rather than just the next quarter.

The U.S. Chamber of Commerce recently called short-termism one of the biggest threats to America's competitiveness. "This focus on the short term is a huge problem," agrees William Donaldson, former chairman of the Securities and Exchange Commission. "With all the attention paid to quarterly performance, managers are taking their eyes off of long-term strategic goals."

 

LINK

 

And that's just one example. I've been going to business seminars for 10 years now and have been provided with many similar results from studies. But what do I know.

[Y2HH]

http://www.mees.com/Energy_Tables/crude-oil.htm

 

Wow look at that, artificial supply control...

 

In 2008, some of the numbers are over 1000+ higher than they are right now. Gee...who'd have thunk it...OPEC can actually lower supplies when they want...or increase them, too.

[southsider2k5]

And that's another reason why I hate capitalism. It's all about the short term.

 

That's the same reason I hate our federal government. They are the kings of the short term.

[Y2HH]

LINK

 

And that's just one example. I've been going to business seminars for 10 years now and have been provided with many similar results from studies. But what do I know.

 

Like I said, that's not blanket to all capitalism. Some may do it, but its not smart, and it's not viable for long term growth or health of a company.

 

There are a lot of companies born and raised in this capitalist society that have been and remain viable after decades and decades of slow growth.

[BigSqwert]

That's the same reason I hate our federal government. They are the kings of the short term.

I can't disagree.

[BigSqwert]

Like I said, that's not blanket to all capitalism. Some may do it, but its not smart, and it's not viable for long term growth or health of a company.

 

There are a lot of companies born and raised in this capitalist society that have been and remain viable after decades and decades of slow growth.

You're referring to outliers and not the norm.

[NorthSideSox72]

That's the same reason I hate our federal government. They are the kings of the short term.

That's because short-termism (I hadn't realized it was a word, but it works) isn't special to capitalism, or to democracy - its an American cultural trait that bleeds into everything we do.

 

[southsider2k5]

You're referring to outliers and not the norm.

 

Which is why the majority of most start ups fail within two years. Companies that last, plan. Think of it as corporate Darwinism.

[BigSqwert]

Which is why the majority of most start ups fail within two years. Companies that last, plan. Think of it as corporate Darwinism.

Every company I've worked for relied primarily on "short-termism". And I've worked for several Fortune 500 companies. And I'm not just making educated guesses. I work in Internal Audit and look at corporate plans and strategies and often attend board meetings.

[Y2HH]

Every company I've worked for relied primarily on "short-termism". And I've worked for several Fortune 500 companies. And I'm not just making educated guesses. I work in Internal Audit and look at corporate plans and strategies and often attend board meetings.

 

So have I, and the ones that did failed, and the ones that did not, are still here.

 

So again, it doesn't apply to all capitalism, just stupid capitalism.

 

Name the several Fortune 500's you've worked for, because I find it hard to believe they are on the 500 list with nothing but short term thinking. As a matter of fact, they aren't. I could possibly see ONE slipping through the cracks and getting onto that list, but not several.

Edited March 26, 2010 by Y2HH

[Balta1701]

http://www.mees.com/Energy_Tables/crude-oil.htm

 

Wow look at that, artificial supply control...

 

In 2008, some of the numbers are over 1000+ higher than they are right now. Gee...who'd have thunk it...OPEC can actually lower supplies when they want...or increase them, too.

What would be really surprising if you knew the oil markets is how little of a change 1 million barrels per day actually is for the global market overall, in terms of where things will go over the next 10 years.

[Y2HH]

What would be really surprising if you knew the oil markets is how little of a change 1 million barrels per day actually is for the global market overall, in terms of where things will go over the next 10 years.

 

I understand that completely, but I also understand that they can do way more than 1 million per day. Way...way more. If they felt like flooding the market with oil and driving the price through the floor, they could...but where is the incentive in that?

[Balta1701]

I understand that completely, but I also understand that they can do way more than 1 million per day. Way...way more. If they felt like flooding the market with oil and driving the price through the floor, they could...but where is the incentive in that?

There's an obvious test case that's happened in the past 2 years. There was a gigantic price spike in 2007 and 2008 that was large enough to do severe damage to the global economy. This price spike has been a terrible thing for oil markets; oil demand went down and it took the price down with it for many months. Increasing capacity to avoid that 2008 price spike would have been incredibly sound business. They actually tried to do so, but the oil that was released was of poor quality, after which point, everything was pumping as much as possible, and there wasn't any capacity left. The 2008 price shock was a direct result of OPEC and the rest of the world being at capacity.

[NorthSideSox72]

I understand that completely, but I also understand that they can do way more than 1 million per day. Way...way more. If they felt like flooding the market with oil and driving the price through the floor, they could...but where is the incentive in that?

I get what you are saying here, but I think you are exaggerating a bit. Their margin for output change on the high side is significant, but its not as if they could make it $10bbl or something. Also important to note, that as demand continues to rise, and as mature fields peak and dimish (as they are just beginning to do in a lot of OPEC countries), that high side flexibility will decrease over time, giving them less power to do that.

 

[Balta1701]

I get what you are saying here, but I think you are exaggerating a bit. Their margin for output change on the high side is significant, but its not as if they could make it $10bbl or something. Also important to note, that as demand continues to rise, and as mature fields peak and dimish (as they are just beginning to do in a lot of OPEC countries), that high side flexibility will decrease over time, giving them less power to do that.

It's really quite remarkable how long oil production globally has stayed essentially flat. The world first produced 73 million bpd in mid 2004. In January, we produced...73 million bpd. Every bit of new oil development capacity over the past 6 years has done nothing but basically offset the losses in capacity as global fields degrade.

[Y2HH]

I get what you are saying here, but I think you are exaggerating a bit. Their margin for output change on the high side is significant, but its not as if they could make it $10bbl or something. Also important to note, that as demand continues to rise, and as mature fields peak and dimish (as they are just beginning to do in a lot of OPEC countries), that high side flexibility will decrease over time, giving them less power to do that.

 

Over time, I agree...but right now they do have some degree of supply control and will for the near term future.

[Rex Kickass]

There's an obvious test case that's happened in the past 2 years. There was a gigantic price spike in 2007 and 2008 that was large enough to do severe damage to the global economy. This price spike has been a terrible thing for oil markets; oil demand went down and it took the price down with it for many months. Increasing capacity to avoid that 2008 price spike would have been incredibly sound business. They actually tried to do so, but the oil that was released was of poor quality, after which point, everything was pumping as much as possible, and there wasn't any capacity left. The 2008 price shock was a direct result of OPEC and the rest of the world being at capacity.

 

It's my understanding that the fundamentals didn't support oil at the price spikes that oil acheived in 2008. I always got the impression that there were a number of reasons why the price of oil skyrocketed, and the vast majority of it had little to do with capacity.

[Balta1701]

It's my understanding that the fundamentals didn't support oil at the price spikes that oil acheived in 2008. I always got the impression that there were a number of reasons why the price of oil skyrocketed, and the vast majority of it had little to do with capacity.

But...capacity really was key. If there was additional capacity, the price spike would have been less intense or not there at all, even with all the other bubble-driving forces. In the housing market for example...an unsupported price spike that lasted a period of 10 years produced a massive over-production of housing. An oil price spike should have produced a similar spike in production, if that was possible, even if people were just buying up oil contracts on speculation. The only thing that knocked oil prices back down was a drop in demand as the economies crashed, not an upwards kick in production.

[Y2HH]

Oil prices spiked in 08 because of speculation and how they were buying contracts and making inventories look short, despite them not being short. They used the method in which inventory counts worked against itself. Well, that's not the ONLY reason, it was one of many reasons, but it was a bigger reason than people tend to believe.

Edited March 26, 2010 by Y2HH

[Rex Kickass]

But...capacity really was key. If there was additional capacity, the price spike would have been less intense or not there at all, even with all the other bubble-driving forces. In the housing market for example...an unsupported price spike that lasted a period of 10 years produced a massive over-production of housing. An oil price spike should have produced a similar spike in production, if that was possible, even if people were just buying up oil contracts on speculation. The only thing that knocked oil prices back down was a drop in demand as the economies crashed, not an upwards kick in production.

 

Was the housing bubble as big as oil futures?

 

Pricing more than doubled within 12 months on crude oil futures, which at one point seemed to be pegged to the dollar. Everytime the dollar dropped in value, oil seemed to increase in value (at least to my uneducated eye.) Rather than being tied to fundamentals (because IIRC, when the bubble burst, there wasn't really a huge change in oil inventory levels), oil seemed to be used as an investment hedge against the dollar.

 

At least that's what I remember.

[southsider2k5]

Oil prices spiked in 08 because of speculation and how they were buying contracts and making inventories look short, despite them not being short. They used the method in which inventory counts worked against itself. Well, that's not the ONLY reason, it was one of many reasons, but it was a bigger reason than people tend to believe.

 

Actually for once, Balta is right. Much of the oil spike was due to the fact that there is no excess capacity to be had. The only capacity that can be added requires long term capital improvements, which take high prices to make worthwhile.

 

The other big reason that crude oil goes up so far is that demand is super-inelastic, meaning that buying habits don't change very much relative to price changes. It take a large price spike to move demand down to any real amount. Usually in a market that is so hard to change production in, demand drops to take care of the capacity, or supply, axis, but in this case it doesn't work. Crude has always been prone to large price swings because of these factors.

[southsider2k5]

Was the housing bubble as big as oil futures?

 

Pricing more than doubled within 12 months on crude oil futures, which at one point seemed to be pegged to the dollar. Everytime the dollar dropped in value, oil seemed to increase in value (at least to my uneducated eye.) Rather than being tied to fundamentals (because IIRC, when the bubble burst, there wasn't really a huge change in oil inventory levels), oil seemed to be used as an investment hedge against the dollar.

 

At least that's what I remember.

 

Depends on what you mean by "as big". Crude oil went up by a factor of about four from its lows to its highs. Housing hasn't done anything near that in a short term. You'd have to go back generations to see something like that. The difference is that the banks weren't leveraged on the value of the crude market either.