Greg Ip

Articles by The Economist’s U.S. Economics Editor

Archive for the ‘Stock market’ Category

Technology and productivity: The hollow promise of the iEconomy

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Feb 28th 2013, 21:44 by G.I. | WASHINGTON, D.C.

IN THE battle between David Einhorn and Apple over the latter’s $137 billion cash hoard lies a deeper lesson about the outlook for the economy. Mr Einhorn, an activist investor, says Apple clings to its money out of a “Depression mentality”. Perhaps. But the more mundane explanation is that Apple, like many of the world’s big companies today, is generating more cash from its existing product line than it can usefully plough back into new projects.

And that’s a problem. Apple is the most creative, innovative and envied technology company of our time, yet investors clearly doubt its ability to keep churning out hits at current margins, valuing it at just 10 times this year’s earnings, a ratio more appropriate for a mature value company.

To some, this might be comforting. After all, while the Dow may be flirting with an all-time high, Apple’s valuation suggests there isn’t much irrational exuberance going around.

But in another way it’s rather distressing. Let’s go back to the spring of 2000, at the peak of the Nasdaq bubble, when Cisco Systems embodied the hype and hope of technology. Cisco was, briefly, the world’s most valued company, with a market cap of $555 billion. Unlike many dotcoms, Cisco was nicely profitable, but not nearly as profitable as investors thought it would be one day: it traded at 135 times that year’s earnings. (Click on the nearby table for a comparison.) Compared with Apple, Cisco was a veritable spendthrift. Despite sales that were barely one-sixth of Apple’s today, its R&D budget was almost as large. Its cash pile, at $20 billion, was big enough (evidence that the phenomenon of cash-rich tech giants is not new), but then, there was no widespread clamour that Cisco hand it back it to shareholders; no one doubted Cisco would find a higher returning use for it. Read the rest of this entry »


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March 1, 2013 at 12:07 pm

Government bonds: A bull market in pessimism

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[Greg Ip] WHEN Japan slid into deflation in the mid-1990s bond investors were caught unawares. As late as 1995 yields on government bonds, a haven in times of deflation, were still approaching 5%. Investors today are not about to repeat that mistake. Inflation may be positive in America, Britain and Germany, but in all three countries government-bond yields have plunged to lows exceeded in recent times only by levels during the 2008 panic. Read the rest of this entry »

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August 20, 2010 at 4:00 pm

The economy: Pursued by Obamabears

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Mar 12th 2009 | WASHINGTON, DC
From The Economist print edition

Investors fret that President Obama’s crisis response is not up to the task

The original story is linked here.

Illustration by David Simonds


BARACK OBAMA has modelled his early days on those of Franklin Roosevelt, the last president to take office during a serious economic crisis. But by one benchmark he is failing. At market close on March 11th, despite a rally this week, the Dow Jones Industrial Average was 16% below its level on the Friday before Mr Obama took office. At this point in Roosevelt’s presidency, 54 days in, it was up 35%.

The “Obama bear market,” as conservative commentators have gleefully labelled it, has been blamed on two things: on the new president trying to do too much, and on his failure to do more. There is, paradoxically, truth to both assertions. Read the rest of this entry »

Written by gregip

March 12, 2009 at 4:12 pm