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cover of episode Dissecting Stock Returns: Financial Engineering or Genuine Growth?

Dissecting Stock Returns: Financial Engineering or Genuine Growth?

2023/12/6
logo of podcast Money For the Rest of Us

Money For the Rest of Us
AI Chapters Transcript
Chapters
This episode explores the factors behind the impressive growth observed in both public and private markets. It examines whether this growth is primarily driven by financial engineering techniques or reflects genuine economic expansion. The discussion includes the influence of interest rates, tax rates, and stock buybacks on corporate profits and stock returns.
  • Corporate profits have grown faster than the U.S. economy, which is unusual.
  • Lower tax rates and interest rates have boosted stock returns.
  • Stock market appreciation has been driven more by valuation changes than earnings growth.
  • Analysts expect global earnings to grow significantly in the coming year.

Shownotes Transcript

Do the impressive returns in public and private markets stem from strategic financial engineering or reflect actual economic growth?

  • How corporate profit growth is linked to economic growth, even though corporate profits are more volatile
  • How interest rates, tax rates, and stock buybacks influence corporate profits and stock returns
  • Why there are fewer publicly traded stocks
  • How the increase in leveraged buyouts has impacted the economy
  • How private equity funds use financial engineering to boost returns

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Show Notes

US CEOs start to contemplate Trump, round 2 by Rana Foroohar—The Financial Times)

End of an Era: The Coming Long-Run Slowdown in Corporate Profit Growth and Stock Returns by Michael Smolyansky—The Federal Reserve)

10-Year Stock Market Returns—Crestmont Research)

Stock Average—Crestmont Research)

Stock EPS Reality—Crestmont Research)

What Matters More for Emerging Markets Investors: Economic Growth or EPS Growth? by Jason Hsu Jay Ritter Phillip Wool Yanxiang Zhao—Portfolio Management Research)

Nominal Gross Domestic Product for United States—FRED Economic Data)

The Secretive Industry Devouring the U.S. Economy by Rogé Karma—The Atlantic)

Key Drivers Behind Widespread Adoption Of NAV Financing by Matthew K Kerfoot—Proskauer)

The Inevitable Rise of NAV Financing by Patricia Teixeira and Anastasia Kaup—Ropes & Gray)

HAVE EXCHANGE-LISTED FIRMS BECOME LESS IMPORTANT FOR THE ECONOMY? by Frederik P. Schlingemann and René M. Stulz—NBER)

LBOs Make (More) Companies Go Bankrupt, Research Shows by Alicia McElhaney—Institutional Investor)

Leveraged buyouts and financial distress by Brian Ayash and Mahdi Rastad—ScienceDirect)

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