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Why There Will Never Be A CapEx Recovery
Over three years ago, Zero Hedge first predicted that not only is there not going to be a capex boom - a boom which every year one after another weatherman, pardon, economist "forecast" is just around the corner (because there can be no true recovery without companies spending confidently for the long-term) but at that any moment corporations would unleash a massive dividend and stock buyback spree to boost their share prices and to shower management with record equity-linked compensation.
They did just that and we were right. The weathermen were wrong.
And unfortunately, until three things change dramatically, there will never be a capex boom, corporate revenues will keep declining, and companies will continue artificially inflating their stock prices by diverting every last profitable dollar into instant gratification for "activist" shareholders (and option-compensated management) instead of investing into long-term growth.
The three things are:
- the disconnect of equity value from employment, and thus a market which no longer reward investment
- the global demographic change
- the all time high debt overhang which looms like a time bomb in every corner office, just waiting for rates to spike higher to be set off
But don't take our word for it. Here is Citigroup's:
Citi's tragic conclusion:
- These are not things you fix with liquidity
Unfortunately, liquidity is all the system has left. Which is also why, in the current system, there will never be a capex recovery, and instead all dollars will ultimately go to purchase every last share of stock until the market spontaneously combusts in a thought experiment supernova in which companies with zero employees have an infinite market cap, thus breaching the monetarist event horizon, and crossing the Keynesian streams.
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Never say never.
Especially when a nuclear war is looking more possible now.
Cause that will make capex surge!
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/e4mV9C
the way things are going soon a company worth nothing will be valued at infinity
That last line was interesting. "thought experiment Supernova." Makes me feel more inferior than normal. :)
Except that the thought experiment ends when there is no one left to adopt unrestrained financialization, and the both the stock and flow of potential adopters seems to be declining. The gravitational collapse of a black hole might be a better analogy, but it doesn't roll of the tongue as smoothly. Regardless of the arrival of Godot with that CapEx boom, we could use an IPO BOOM if the farce is to be maintained.
Do you want a 1929 style crash .... or, an orderly retreat .... buy backs favor stockholders .... they are the owners .... you want them to be good socialists .... and turn over their companies .... to the NSWO (New Socialist World Order) .... it's also destructive .... when retreating armies .... blow every thing up .... get over it !
The stock market crash and Depression were just over a decade after the Bolshevik revolution. This gave a lot of credibility to the progressives, who could point to those events as a reason to lessen inequality, split up the banks, etc.
Now there is nothing but corporatism, with the federal government as its enforcement arm. Wal-Mart is the rope capitalism will hang itself with, but the tree will be owned by JPM and the tree will be grown on Federal land.
We of us who am Q99X2 like all article wording except "But don't take our word, here is Citigroup's" We prefer your word and do not trust corporate words. Thanks from out of another super event horizon.
Individual countries have faced this same scenario many times - you default, you create a new currency, and you go on. Entire countries have been devastated by war, and yet recovered. Some countries actually reform and recover - while others continue liberal policies, overspending, and taking on more debt until the cycle repeats.
The only difference this time IS the global economy - we have become so interlinked that the entire planet is likely to go under at the same time. Some countries. The other big problem for the US is that the countries that recover have to reform. Given that the one party is in charge, I cannot ever see the US recover -- after any re-set it will continue (or even expand) the policies and social decay that got us here.
The greatest lie of all time is that advertisements through social media works for the companies that pay for it.
This lie has allowed people with no skills of value to become billionaires because of what Wall Street thinks will have value at some point in the future.
A company like WhatsApp that really has no idea what they are doing, which has never generated a single cent of profit and never will because the business model was to give away a free app that took almost no capital or work to produce and gain a massive valuation through venture capital funds. It doesn't seem possible to run a business where your goal is not to make money amd if you try and charge for your product it means you are toast because there is no shortage of products in the marketplace that do the exact same thing as you.
This creates a massive missalocation of funds, talent, and development towards a sector of no real value. Exactly like every single person looking for a retarded cat so they can sell $100 million in books and merchandise like grumpy cat.
Everyone in college is trying to figure out how to make a phone app that will be worth billions instead of figuring out how to engineer better products, fix bridges, or create the next technological breakthrough. The reason why they are doing this is Wall Street and our new normal society doesn't value anything real. Wall Street wants what can be made with no effort. Corporations are afraid to miss out on something even if they don't understand what theyn are actually buying. So values have gone full tulip. Case in point, Under Armour paying $500 million for two fitness apps that never made a singe dime and one of them didn't even have a single cent in revenue.
If the stock market collapses, imagine what happens to the thousands of twenty somethings whose only skill and job experience is creating a social media app that made no money and never would have without Wall Street.
Yeah, having an engineering degree and working on an idea that say has snow melt on contact with the road surface has no interest but an app that let's you know the location of your hamster in a cage worth billions
Not much of a choice when the 'engineering' alternative is to work for Monsanto.
Very well said, ADR.
Much like the dot.bomb era, the Social Media era has brought with it a false reality, in that a viable economy is based on one's ability to 'instantly' text/video/stream/etc., from a handheld device, loaded with 'apps'. We don't have a mental picture of large-scale factories, producing tangible goods (somebody/s with a factory still has to manufacture stuff that we use every day), anymore, with workers steadily climbing a ladder of success over a period of years. Rather, it's a foggy mental picture of a goat-tee wearing, black-T-shirted metrosexual, busily tapping his 'device', and out the other end comes $$Billions...
Who would have thought that the Dot Com Bubble 2.0 would be brought down by Ad Blocker Plus and Ghosty in your browser?
I was involved in a transaction and media based site with high traffic - the advertising model really gets down to the click thru conversion rate and then the purchase
The truth is the value isnt there for advertisers on a per click basis especially as people get use to the clutter on a page from column ads
ask your children 16-38 - on Facebook only - which most of them have an account - how many times in their - entire sign up from day one to the site - have they clicked an ad? almost nothing especially the youngest - with little or no money
it is a big scam
as to Google that is a service that has value but is very expensive compared to facebook et al - key words in high traffic areas - say Las Vegas for golf - the words are very expensive and you have to be concerned about - click bots running the tab
i dont see the ad model working for all those trying to get traction
Well my plan b is to grow a garden and sell eggs. Seriously if this tech shit doesnt pay off, i'm just gonna go on disability.
Neo-Keynesian, not Keynesian
There never will be a REcovery as long as the FED, Wall Street, Banksters and CONgress keep REpeating their mistakes....
Well then. Stick to the Weimar or Old Mutual portfolio. 100% equity, preferably in countries whose economic golden age is ahead of them, not behind them.
Russian stocks would be good. P/E around 10? A bargain in the ZIRP world.
Chinese stocks are comparable. Don't laugh too loud at Banana Stall Guy---P/E on Chinese stock indexes are well below western ones.
the problem is the believeability of the chinese numbers/
"There Will Never Be A CapEx Recovery"
It is not hard to figure out. Capital expenditure is an investment in the future. Current corporate and government policy is nothing but theft from the future. That is why, from the principles of classical capitalist economics, there is no hope for a recovery.
We may be able to predict the catastrophe that is coming, but we will not be able to prevent it.
We are all short time managers...if you dont make the numbers this month..you are a loser....but everyone has learned how to manage the numbers so they look good...a few accounting magical tricks and you are good again....but that is our new generation.....its fast money or bancrupt...let someone else pay your bill....none of this work over a lifetime to build a company....that is to hard....hell we dont even make shovels in this country anymore....
ROBOTS
http://globaleconomicanalysis.blogspot.de/2015/05/miracle-twinkies-comeb...
Don't cross the streams