Statistics are like lawyers. You can find one to support your position no matter how ridiculous.
As the final part of an ongoing series on “affordability,” this article looks into the biggest elephant in the room: statistics that have been abused by every federal and state administration for the past 40 years, about the cost of living.
What the heck is going on?
Trying to apply the rules of finance to the world, today, is like trying to apply the rule of law to Bill Barr’s Justice Department. It makes your head hurt because it’s disconnected from reality.
Tesla, a company that has annual earnings of about $24.8 billion is “valued” by the market as a $145 billion company, even though it does not make a profit. Meanwhile, General Motors has annual revenues of about $137 billion and made $8.1 billion net profit and is valued by the market as a $49.6 billion company. Granted, Tesla’s growth rate is currently projected to be three times that of GM’s, but when Tesla gets as big as GM, it’s not going to be growing that fast, anymore. Tesla is presently valued at more than Honda, Ford, and General Motors, combined.
This defies common sense. What ever happened to the efficient market theory?
Now consider that the U.S. Federal Reserve is incessantly talking about easing interest rates and being ready to flood the markets with cash (quantitative easing) at the slightest sign of economic “weakness,” at a time when all the major stock market averages are making all-time highs, almost dialy.
This has never happened before in the history of modern finance. And, it is enabling bad actors in the markets, propping up insolvent, “zombie” companies that have no business continuing to exist, and encouraging wild speculation in stock and bond markets around the world.
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