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?

Let's talk about Exxon for a second.

The estimate from https://www.macroaxis.com/invest/ratio/XOM--Probability-Of-B.... is that it has a 36% probability of bankruptcy in the next 2 years.

In a longer time horizon, Exxon's finances are strongly dependent on petroleum revenue, but petroleum demand could easily fall.

The petroleum industry is projecting that when COVID ends, demand will come back. And they are projecting that as far out as 2050, gas will remain the dominant source of energy for transportation.

However neither seems likely to me. I believe that we will see a permanent shift towards more remote work. That cuts out both a lot of commuting. It also cuts out a lot of motivation for business travel. (Bill Gates estimates a 50% drop in business travel.) Both suggest a permanent drop in demand in the short-term. And in the long-term, the transition to electric vehicles seems likely to go much faster than the gas industry wants to believe. We are already seeing places like Washington State pass laws that all new cars must be electric by 2030. This suggests that the transition to electric will be eating into gas revenues fairly quickly. This is not a small issue - use of oil for personal transportation is somewhere near half of all oil usage in the world.

So you say that "nobody thinks that Exxon is about to go under". But I'm looking at it and I think that they are a company that structurally has financial trouble, in an industry that has market trends against it. No matter how big a household name they are, I would be very happy to take a bet that they go bankrupt in my lifetime.

People have been predicting Exxon's demise for at least 4 years now.

But look: it's not my claim that Exxon is a good investment. In fact: Exxon's stock seems to have tracked the prevailing grim sentiment about the oil business. Rather, what I'm pointing out is that it doesn't seem reasonable to suggest that Exxon is "functionally dead", a "phony-baloney" company propped up by paymasters in the rigged financial services industry. Exxon is, as a company... kind of important? Like, it does a bunch of stuff?

Another example: Boeing. We're all aware of a big reason for Boeing's predicament. But Boeing didn't get there by being a "zombie" that wasn't doing real business; in fact, we can probably ruefully say Boeing did too much business on the 737 Max product. So there's another reason you can be on the "zombie" list: your company made a huge mistake that will take years to climb out from.

Moderna was also on the list Taibbi linked to. Because it was an R&D company that wasn't meaningfully shipping product. I don't know that we even need to talk about Moderna's financial prospects (I genuinely have no idea what they are) to dispose of the idea that it's a "functionally dead" "phony-baloney" company; it's a key, effective component of a strategy to rescue the world from a global pandemic. So there's yet another way to get bucketed as a zombie: you can be a startup.

My point --- I was too lazy to type it last night and am too lazy to come up with a way to say it succinctly now, sorry --- is that Taibbi is either taken in by or preying on a layman's understanding of the word "zombie" to drive a column about how 1/3rd of the market is kayfabe. There is probably a way to make that point, maybe without even having to argue that Ford Motors is a fake company. But Taibbi tried to make it by linking to an article that calls out Tesla and Moderna as examples of the "zombie" phenomenon; he either hasn't read his link, which basically refutes his argument, or he's assuming you won't. Because after he writes that link, he goes on to imply that "zombie" means here what a normal person thinks it means. And it does not.

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?

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.

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.