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I don't think you can say his whole essay is wrong based on that. However you define it, there's going to be zombies that should have died, and there's going to

I don't think you can say his whole essay is wrong based on that. However you define it, there's going to be zombies that should have died, and there's going to be more of them after the bailouts and easy money than before. Whether one company or another should be in the list is moot, the zombies are hoping for a turn in fortunes and it sometimes happens for them. The problem is keeping them all alive, there's a cost to that. It's been a long time since it last happened, but there have been periods where the opposite happened too, where many firms with apparently good businesses couldn't find finance and had to fold.

tptacek 6y ago
OK. Do you believe that 30% of all American corporations are "phony-baloney" "zombies" that are "functionally dead"? Or do you think Taibbi isn't really saying that?
- lordnacho 6y ago
  I think he's trying to say there's a lot of crappy firms out there that should have died. How many people do you know that work at a place with no prospects? Nothing much new going on, nobody would miss them if the firm were gone? Jobs that even the person would not miss if they found another? Could well be 30%, but of course there's no definition for zombie. Functionally dead is a bit harsh as they're doing something to get paid, but they're not doing it efficiently and they're not being challenged, eg thanks to network effects or reg capture.
  - tptacek 6y ago
    There is a technical definition for a "zombie", which is apparently a term of art. As his own link points out, a "zombie" is defined as a company that can cover its operating costs and debt service, but not debt principal. Those companies include many that nobody believes are "functionally dead" or "phony-baloney". I keep making fun of him for linking to an article about zombies that counts Moderna --- Moderna, for Christ's sake --- among their numbers, but nobody thinks that Exxon is about to go under, either. I'm not really here to debate the definition. It's his link that enumerates the companies I'm pointing out. Which is why I'm making the case that he hasn't really read the stories he's linking to. We could go further into the analysis: a whole bunch of companies, like Delta, which Taibbi implies will never be worth anything again, are distressed because of the pandemic, which will clear up this year. Demand for the products of these kinds of companies will return and the list of "zombie companies" will change, as it has in the past (per Bloomberg, take Sprint as an example). But this is really dignifying Taibbi's polemic, isn't it?
    - lordnacho 6y ago
      I guess that definition of zombie makes sense, but of course any definition based on numbers will give you some false positives. Well I'm not normally a massive fan of his either. But he does have something here. I don't doubt that airlines will exist in the future, but why exactly must it be the same ones that exist now? The planes and the pilots will still be around, but why should they be run by the same companies? You could ask the same about many crisis era firms, they do something that should survive, but why should they survive? Why shouldn't there be some replacement, and why should the public prevent it? Doesn't this reduce opportunitie for newcomers?
      - tptacek 6y ago
        Please don't let me come across as snippy or cross-examining here; I just spent a lot of energy on 'btilly upthread is all (I'm still gearing up to respond to his thing about Taibbi's LBO coverage, which has its own sort of funny history). So, just, real quick: has it in the medium-to-recent past been a good idea to bet on the idea that the airline business will be dominated by some new entrant, rather than the major carriers we have now? Since Southwest entered the market, has there been a shakeup in the top tier of airlines that brought a newcomer in? Like, I know Alaska and Jetblue are a big deal, but if airlines were smart phones Delta would be Samsung and Alaska would be, like, LG. I'm happy to noodle about Delta's prospects, but you can look at his piece and see what he's actually saying about Delta, as an example of how the stock market is fake and props up companies with no prospects. But you know why Delta's 2020 revenues are where they are, and it's not because some permanent shift away from Delta.
        lordnacho 6y ago
        But the expectation that the existing players will continue dominating is what makes them continue doing so. If firms were a bit more precarious there'd be more entrants. I guess he didn't word it very well, because he does seem to suggest that some real businesses aren't doing much. I guess it's like his vampire-squid article, it's hyperbole. The thing about low rates is we no longer discount the future. If rates were 10% and 2020 happened, Delta would be worth a whole lot less. This would allow new shareholders to buy into it. At the moment things are being valued like they're going to be great forever. Why should we all be tied to a really long and optimistic time horizon? It seems wrong, because there are things that you should expect to happen over 5-15 years.

tptacek 6y ago

OK. Do you believe that 30% of all American corporations are "phony-baloney" "zombies" that are "functionally dead"? Or do you think Taibbi isn't really saying that?

lordnacho 6y ago
I think he's trying to say there's a lot of crappy firms out there that should have died. How many people do you know that work at a place with no prospects? Nothing much new going on, nobody would miss them if the firm were gone? Jobs that even the person would not miss if they found another? Could well be 30%, but of course there's no definition for zombie. Functionally dead is a bit harsh as they're doing something to get paid, but they're not doing it efficiently and they're not being challenged, eg thanks to network effects or reg capture.
- tptacek 6y ago
  There is a technical definition for a "zombie", which is apparently a term of art. As his own link points out, a "zombie" is defined as a company that can cover its operating costs and debt service, but not debt principal. Those companies include many that nobody believes are "functionally dead" or "phony-baloney". I keep making fun of him for linking to an article about zombies that counts Moderna --- Moderna, for Christ's sake --- among their numbers, but nobody thinks that Exxon is about to go under, either. I'm not really here to debate the definition. It's his link that enumerates the companies I'm pointing out. Which is why I'm making the case that he hasn't really read the stories he's linking to. We could go further into the analysis: a whole bunch of companies, like Delta, which Taibbi implies will never be worth anything again, are distressed because of the pandemic, which will clear up this year. Demand for the products of these kinds of companies will return and the list of "zombie companies" will change, as it has in the past (per Bloomberg, take Sprint as an example). But this is really dignifying Taibbi's polemic, isn't it?
  - lordnacho 6y ago
    I guess that definition of zombie makes sense, but of course any definition based on numbers will give you some false positives. Well I'm not normally a massive fan of his either. But he does have something here. I don't doubt that airlines will exist in the future, but why exactly must it be the same ones that exist now? The planes and the pilots will still be around, but why should they be run by the same companies? You could ask the same about many crisis era firms, they do something that should survive, but why should they survive? Why shouldn't there be some replacement, and why should the public prevent it? Doesn't this reduce opportunitie for newcomers?
    - tptacek 6y ago
      Please don't let me come across as snippy or cross-examining here; I just spent a lot of energy on 'btilly upthread is all (I'm still gearing up to respond to his thing about Taibbi's LBO coverage, which has its own sort of funny history). So, just, real quick: has it in the medium-to-recent past been a good idea to bet on the idea that the airline business will be dominated by some new entrant, rather than the major carriers we have now? Since Southwest entered the market, has there been a shakeup in the top tier of airlines that brought a newcomer in? Like, I know Alaska and Jetblue are a big deal, but if airlines were smart phones Delta would be Samsung and Alaska would be, like, LG. I'm happy to noodle about Delta's prospects, but you can look at his piece and see what he's actually saying about Delta, as an example of how the stock market is fake and props up companies with no prospects. But you know why Delta's 2020 revenues are where they are, and it's not because some permanent shift away from Delta.
      - lordnacho 6y ago
        But the expectation that the existing players will continue dominating is what makes them continue doing so. If firms were a bit more precarious there'd be more entrants. I guess he didn't word it very well, because he does seem to suggest that some real businesses aren't doing much. I guess it's like his vampire-squid article, it's hyperbole. The thing about low rates is we no longer discount the future. If rates were 10% and 2020 happened, Delta would be worth a whole lot less. This would allow new shareholders to buy into it. At the moment things are being valued like they're going to be great forever. Why should we all be tied to a really long and optimistic time horizon? It seems wrong, because there are things that you should expect to happen over 5-15 years.