This should be regarded as a small “opinion piece” of mine.? My big gripe with economic predictions over the past five years, is that forecasters use the old closed economy simplifications that worked when the US was a unique capitalist economy, and international trade flows did not affect the total picture much.
Today, I don’t try to analyze the US economy as a whole.? I look at its sectors and try to analyze them in a global context.? Even if the domestic US economy is in a funk, it is possible for sectors that serve other countries that are growing to do well.
So, I don’t make much of those who assume a recession will restrain inflation.? Perhaps a global recession will do so, but a US recession will not.? We need to look more closely at how the US is devaluing its currency versus other countries, and that might give us better clues regarding future inflation.
It is much richer to look at the sectors of the US economy, and look at them separately.? They have varying exposure to the US and Global economies.? That difference is critical now for investment decisions.
Similar data errors are made by those who use the TRADING index of the U.S. dollar rather than a broad-based trade-weighted index, or those who use the 10-City Case-Schiller home price index, rather than a broad-based index like the OFHEO one, in making their economic projections.
🙂
unrelated but looking forward to your analysis of the NAHC proxy.
I am not an expert on the insurance industry but I really have a hard time believing this section ….
Run-off Analysis. Banc of America Securities also performed a run-off
analysis of National Atlantic to calculate the net present value of dividends
that would be paid to shareholders over the remaining life of the company
assuming that it serviced its existing policies without writing any additional
policies or renewing any existing policies. Based on the assessment of National
Atlantic management that the company would not be permitted to pay annual
dividends by the New Jersey regulators, this analysis calculated the net present
value of the final dividend available for distribution to shareholders after all
payouts on loss reserves and losses on unearned premium reserves, estimated to
be approximately $88.0 million payable in 2016. Banc of America Securities
applied a sensitivity analysis to assess a range of values if the loss reserves
were inadequate by up to 10% or were overstated, showing a redundancy of up to
10%. The range of final dividend distributions were then discounted to present
value as of March 7, 2008 using discount rates ranging from 13% to 17%. This
analysis indicated the following implied per share equity value reference ranges
for National Atlantic as compared to the Consideration:
Implied Per Share Equity Value
Reference Range for National Atlantic Consideration
———————————————– ————————–
$1.36 – $3.60 $6.25