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The Almighty Buck Businesses

Stock Market Valuation Exceeds Its Components' Actual Value 335

An anonymous reader writes: James Tobin, a Nobel Prize-winning economist, developed a concept called "Q-value" — it's the ratio between two numbers: 1) the sum of all publicly-traded companies' stock valuations and 2) the value of all these companies' actual assets, if they were sold. Bloomberg reports that the continued strength of the stock market has now caused that ratio to go over 1 — in other words, the market values companies about 10% higher than the sum of their actual assets. The Q value is now at its highest point since the Dot-com bubble. Similar peaks in the past hundred years have all been quickly followed by crashes.

Now, that's not to say a crash is imminent — experts disagree on the Q-value's reliability. One said, "the ratio's doubling since 2009 to 1.10 is a symptom of companies diverting money from their businesses to the stock market, choosing buybacks over capital spending. Six years of zero-percent interest rates have similarly driven investors into riskier things like equities, elevating the paper value of assets over their tangible worth." Others point out that as the digital economy grows, a greater portion of publicly traded companies lack the tangible assets that were the hallmark of the manufacturing boom.
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Stock Market Valuation Exceeds Its Components' Actual Value

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  • by Anonymous Coward on Monday May 18, 2015 @10:09AM (#49718379)
    Stock valuations are based not only on actual assets, but future growth and earnings potential. If I buy company X, it's because I think company X has a good product, business plan, and management and is going to be able to grow faster than inflation and faster than their competitors. I certainly don't want them to liquidate their current assets and give me my money back.
    • by Enry ( 630 )

      Yeah, we're done with this article.

    • Price to book? (Score:5, Insightful)

      by goombah99 ( 560566 ) on Monday May 18, 2015 @10:21AM (#49718511)

      How is Q different than the usual Price-to-Book ratio, which formally has the same english definition of the share price to the per-share Asset value of the company? The price-to-book value doesn't go below 1 usually because a leveraged buyout of the company could fund it self by selling off the pieces. The Q-value seems to define assets as replacement value which is unclear. Is replacement value to be taken as what the assets would trade for in their used shape, or what they would cost to buy new.

    • by ScentCone ( 795499 ) on Monday May 18, 2015 @10:22AM (#49718527)

      Stock valuations are based not only on actual assets, but future growth and earnings potential. If I buy company X, it's because I think company X has a good product, business plan, and management and is going to be able to grow faster than inflation and faster than their competitors. I certainly don't want them to liquidate their current assets and give me my money back.

      You've missed an important detail. They're not comparing the stock valuation to the assets alone. They're comparing the stock valuation to what the company would sell for if purchased. When you sell a company, you're also selling the "good will" and other value inertia things like brand familiarity, the value that will come from having the company in the future, etc.

      • Tobin's q uses book value. That can indeed include "good will" and other intangibles. Of course, those numbers are just guesses and there are many motivations for companies to guess high or low. Furthermore, different industries account for these differently. Furthermore, "good will" and other intangible assets often can't be sold. For example, the "good will" towards Nokia changed entirely when they company was acquired by Microsoft. Altogether, the q value seems pretty useless, since its denominator is pr

      • I only scanned the article, but what I think may be missing is the shift to outsourced manufacturing. Apple has few manufacturing assets, compared to the old days when IBM was building all of its own PCs. If that manufacturing asset is private, it won't show up in the totals. If it is public it will show up in the totals, but may be valued lower due to location or other factors. And finally, the efficiency of the asset to deliver more for less is not factored in. We should expect the trend to continue as lo
      • by DrLang21 ( 900992 ) on Monday May 18, 2015 @01:38PM (#49720425)

        When you sell a company, you're also selling the "good will" and other value inertia things like brand familiarity, the value that will come from having the company in the future, etc.

        These days it is often far dumber than that. Unless a company is paying a dividend, the only value you have is what someone else is willing to pay for it. In the age of worshiping the Almighty Growth, dividend payouts are more scarce than they once were and you can't expect a fledgling company will ever pay out. Stocks like that are little more than trading cards. It's just a popularity contest slightly regulated by supply. Actual earnings reports in these cases are only meaningful in the sense that people make buying decisions based on them, but with them having no direct impact on actual value.

    • Stock valuations are based not only on actual assets, but future growth and earnings potential.

      That's the theory. In practice, it looks and smells like Mr. Market [wikipedia.org] more often than not.

    • by Anonymous Coward on Monday May 18, 2015 @10:23AM (#49718547)

      amazing how often that phrased is used after a crash by the same people who said anyone questioning market valuations on way up "does not understand the market"...

    • , but future growth and earnings potential

      But most of that future growth and earnings potential is going to come from some other company on the market. If you make a smartphone, you are taking money from other smartphone companies, as well as to some degree companies that make computers. Once you get successful enough, you may also be in a position to reduce margins to the companies who provide components for your smartphone, so you're taking their money too.

      A little bit of money comes from "new" sources,

      • You're referring to the law of threes. That isn't due to collusion, rather it's due to how consumers tend to develop brand loyalty. It manifests particularly hard in the tech sector where independent developers tend to pick two platforms to support and ignore the rest. Microsoft has been fighting this tooth and nail with their windows phone platform, which can't seem to catch a break, because the other two players have everybody's attention.

    • by Marginal Coward ( 3557951 ) on Monday May 18, 2015 @10:40AM (#49718719)

      Right. It's been rare in recent decades for even individual companies to sell for less than their asset value, for precisely the reason you mention: that nearly any functioning business is worth more than the sum of its assets. The canonical example is Coca-Cola (KO), which Yahoo Finance indicates is currently selling for a price-to-book ratio of 6.28 [yahoo.com]. Should we expect something like the Coca-Cola company, which has had a strong business for over a hundred years consisting of a brand name known worldwide, a worldwide distribution system, and of course its famous "secret formuler" to sell for just the price of its property, plant, and equipment? Of course, Coke is an extreme example, but it illustrates a point that could be made less emphatically for nearly any successful business.

      Although I don't disagree that the market is fully valued or even over-valued at the moment, this single q statistic isn't any reason to panic. As indicated in TFS, it's attributable in large part to near-zero interest rates. With nowhere else to go to earn money, investors flock to the stock market. That certainly has some potential for inducing a bubble, but I don't think we're there yet. These extremely low interest rates can't last forever, but since they're controlled by policymakers who are keenly aware of the implication of raising them, no interest-hike-induced stock market panic is likely to ensue. So, move along Citizens.

      • Should we expect something like the Coca-Cola company, which has had a strong business for over a hundred years consisting of a brand name known worldwide, a worldwide distribution system, and of course its famous "secret formuler" to sell for just the price of its property, plant, and equipment?

        Well, that's a pretty bad example. Coca-Cola famously sold off all it's bottling plants, etc. The fact that it has a monopoly on supplying syrup to a second company makes it harder to do this kind of comparison.

        B

      • Right. It's been rare in recent decades for even individual companies to sell for less than their asset value, for precisely the reason you mention: that nearly any functioning business is worth more than the sum of its assets.

        Part of the deal with this, I believe, is that if a company has a Q-value of less than one it's a prime indication that it would be worth more broken up, and is thus a prime target for corporate sharks to come in and liquidate it, dissolving the company or selling the remnants to suckers after having sucked the worth out of the company.

        A q-value of less than 1 is an indication of a company that's NOT efficient with it's assets.

  • by Anonymous Coward on Monday May 18, 2015 @10:12AM (#49718407)

    a sandwich is more valuable than two slices of bread.. and it's ingredients: it's component assets.
    Surely* this is not a surprise? Am I missing something here?

    *Don't call me Shirley

  • by Anonymous Coward

    Intellectual property, trademarks, goodwill and copyrights are propping up stock prices like you wouldn't believe.

  • I wonder how they value assets? Clearly, sharing a few songs is theft of several million dollars - which makes my MP3 player a treasure trove. Also, patents and other intellectual property cannot be cheap at any price.

    I'm curious as to the exact valuation methodology. The links take me to the federal reserve site, which links to balance sheets. While it does list intellectual property, how do you accurately value something that isn't sold/bought on a market? If a company holds a patent that they never try

    • And it's not only about intellectual properties. I find that the value of a company lies in large part in the capabilities of its employees, in their productivity, in the ability to adapt to new conditions, in the efficiency of management and the expediency of making decisions and so on. None of these can be readily evaluated. But the stock market still looks for these values to a degree.

      For instance, Apple's stock value fell when Steve Jobs died as the shareholders probably fellt that an important manager/

      • by jandrese ( 485 )
        Employees don't really seem to be assets as far as the stock market is concerned. They are an expense that you suffer so the business will still operate. Assets are things that you can sell, like buildings and equipment.
    • by bondsbw ( 888959 )

      "Value" and "cost" are separate things that we try so hard to conflate. They look similar but are quite different.

      Say you have 50 wheelbarrows and I have none. If I need a wheelbarrow, and you don't need 50 wheelbarrows, then a wheelbarrow has higher value to me than it does to you. I might trade you $50 cash in exchange for the wheelbarrow. You value the $50 more than each wheelbarrow, while I value the wheelbarrow more than the $50.

      This is the problem with placing monetary valuation on any object or s

      • This is the problem with placing monetary valuation on any object or service; value is in the eye of the beholder, and that includes the value of money itself.

        That's why everything ends up being estimates, but with something like a wheelbarrow there's a number of stores you can get a wheelbarrow in, so you end up with a standard price for wheelbarrows, which is the general range where the person who needs a wheelbarrow can count on being able to buy one, and where a person with a wheelbarrow can count on selling it.

        So you might 'value' your wheelbarrow at $100, but if the price of wheelbarrows actually traded is around $50, that indicates that you're not looking

  • Why are people paying different amounts for different crypto-currencies? Why is a Dogecoin worth more than a Reddcoin? Etc.

  • by creimer ( 824291 ) on Monday May 18, 2015 @10:14AM (#49718427) Homepage
    The small investors are sitting on the sidelines, keeping their cash from inflating and popping a bubble. Stock buybacks are keeping the market afloat, as many corporations want to keep Wall Street happy than reinvest the money back into the economy to keep Main Street happy.
    • Inflation is too low. The best economies have historically had an inflation rate around 2.5% annual. US inflation has been hovering around 1.7% for a good while. More money in the economy juices things up and would flow to consumers, who have been reluctant to spend because their job doesn't pay well or is uncertain.

      Thus, companies are waiting for consumers to come, and consumers are waiting for raises and job stability before they spend more.

      Such a catch-22 stand-off is usually a sign to print more money (

      • Re:Print some bucks (Score:5, Interesting)

        by jfengel ( 409917 ) on Monday May 18, 2015 @11:23AM (#49719071) Homepage Journal

        Effectively, they have been. The Federal Reserve has been keeping interest rates at levels that should be causing significant inflation. The goal is to prevent a deflationary spiral by pumping up the money supply: when you can borrow lower than inflation, people should borrow and pay it back with tomorrow's less-valuable dollars.

        They've been doing that for nearly a decade now, and it has successfully prevented the deflation, but it's a little baffling that it hasn't touched off more inflation than it has. The consumer confidence is hovering around 100, which should be a decent level for a stable economy. Unemployment is still higher than we'd like but it's well off the bust years.

        My hypothesis is that people have gotten too used to boom economies. If people aren't getting triple-digit returns they don't want to invest. What we've got is a very stable economy, exactly the kind that people should be able to take risks in, but without a real estate boom or dotcom boom or other scheme to get people to dump their whole life savings and then borrow on margin, they just don't bother.

        Stability means that those who have been left behind continue to be left behind. That's the worst thing that can be said about the economy. There just isn't an engine of growth.

        There are a lot of other factors, I'm sure. Europe went mostly for less aggressive measures, and their economies haven't come out as well, meaning fewer markets there. China's growth has ceased to be ridiculous. Oil prices should have sparked some kind of boom, and I've got a nasty cynical feeling that Wall Street is ideologically predisposed not to invest in the emerging energies as much as they should.

        But a lot of it is the catch-22 you mentioned. Consumers and investors each seem to be waiting for the other to go first. We've been technically out of recession for more than five years, and it's gotten past the point where the recovery could be called mere accounting. It's real. But America just hasn't gotten its feet back under it in the way that it usually does.

        • The federal government is continuing to make more and more regulations to inhibit business activity. Two obvious examples are Obama's threat to destroy the coal industry and opposition to the pipeline from Canada. When a business can't be sure it won't be regulated out of business or have its profits stolen, it tends not to invest in new production, no matter how easy it is to borrow money to finance growth. There will be no recovery until Obama is out of office and it is known that his replacement is much
      • by creimer ( 824291 )

        Thus, companies are waiting for consumers to come, and consumers are waiting for raises and job stability before they spend more.

        That haven't stopped Apple from designing new products, creating demand and selling like crazy.

      • Obama has been printing almost a Trillion dollars per year for the past several years; that's what Quantitative Easing is - adding to the quantity of dollars in the economy.

        The reason it hasn't pushed up inflation is because there's still no demand, and there's no demand because so many employable people are either on Unemployment or out of the labor market. Changes to SSI Disability that were made a few years ago took over a million people who would otherwise have to work for a living off of the welfare a

  • by pubwvj ( 1045960 ) on Monday May 18, 2015 @10:15AM (#49718445)

    The excess above the ratio is the percent of Hope called Ph not to be be confused with PhD or pH. This value of Ph represents optimism for the future and is directly correlated with the height of skirts above women's knees based on historical data related to how well the economy is performing.

  • by nimbius ( 983462 ) on Monday May 18, 2015 @10:17AM (#49718469) Homepage

    Similar peaks in the past hundred years have all been quickly followed by crashes.

    statistical historical trends, the bedrock of science rears its ugly head oncemore...

    Now, that's not to say a crash is imminent experts disagree on the Q-value's reliability.

    s/experts/investors/. Laszlo Birinyi is an investor, but for all intents and purposes economics shouldn't be misconstrued as a science. most of it is, at best, premised on laughably distorted statistics designed to reduce uncertainty among investors and promote open trading on stock exchanges. The employment of utterly bullshit mathematics in the art of economics is the reason high speed trading systems have the ability to "undo" sales or purchases with impunity. Large firms also have this ability because without such a control feature markets could be plunged into a dark age from which no amount of bailout would save the cloistered elite. Economics is the sack of magic chicken bones that investors wave over the market and quickly dismiss once wrack and ruin occur as "events that could not have been foreseen."

    • by Livius ( 318358 ) on Monday May 18, 2015 @10:27AM (#49718591)

      The problem with 'economics' is that the word is used to identify two mutually-exclusive concepts:

      The scientific investigation into human responses to scarcity, and

      Mathematical techno-babble designed to disguise the wishful thinking of politicians and the wealthy who own politicians.

      By random chance, the two are occasionally the same thing.

    • ... but for all intents and purposes economics shouldn't be misconstrued as a science. >

      Sorry, game theory has demonstrated it's predictive ability for some time now.

      But whether economics is science or not is beside the point. The discipline has proved it's utility over and over, and the marketplace recognizes this.

      BTW, your comment about economics as the reason that "high speed trading systems have the ability to undo sales or purchases with impunity" is complete and "utter bullshit". Perhaps you should go back to whatever "science" you feel is valid and stay out of finance.

  • Stock- or commodity market values are speculative, Netherlands(?) tulip frenzy comes to mind.
    That this system fails does not seem to enter peoples mind since the greed of getting rich or more rich overrides everything else.

    What one my think about is who will have to work and pay for all those "profits" taken and why the "bubble up" to the top - what is it - 1 % works to groom the cream of the crop even more and the propaganda of "trickle down" is a fairy tale.

    • Oh come on...

      The difference here is NOT being rich or not. The difference is in managing your investments and your risks. You can make a LOT of money in stocks, but you have to take huge risks if you want to get rich quick. Huge risks mean failure is likely, so if you don't want to be poor you have to manage your risks.

      Rich people generally know how to manage their risks, or they don't stay rich very long. The trick to making money is not being lucky, but being smart.

      Stop approaching wall street like

      • by no-body ( 127863 )

        Yawn.... look at the history, the holy cow of "investing", stock market, mutual funds, compound interest, and what else have you on the current favorite fairy tales resulting in periodic crashes and always the larger part of a population is at a disadvantage and suffering.

        There is no doubt that the wealth of the larger part of general population along with effective income is shrinking and may have never been different - the so-called American Dream may have been working for a short period after WW II and b

        • And the alternative is?

          Nobody out there claims capitalism is perfect, surely there are problems with it. However, I dare you to look though history and find any better examples of an economic system that works long term.

          All the "solutions" to the above problems (perceived or real) don't work out so well. They kill economies, kill governments, and kill lots of people in the process. Give me capitalism, even with the wide gap between the rich and poor, because in that system the poor are better off and t

  • by Okian Warrior ( 537106 ) on Monday May 18, 2015 @10:21AM (#49718515) Homepage Journal

    Now, that's not to say a crash is imminent — experts disagree on the Q-value's reliability.

    Economics is a weird and wonderful science.

    Always looking backwards, always telling us *why* something happened, never making future predictions.

    In the days since Adam Smith penned his first thoughts on economics, engineers have taken us to the moon, physicists have split the atom, doctors invented antibiotics, philosophers invented human rights, chemists invented plastics, farmers quadrupled the per-acre food yield, programmers invented the internet, and much *much* more.

    And economists, always backwards looking, now think that the Q-value might explain past crashes.

    What a world we live in!

    • by Okian Warrior ( 537106 ) on Monday May 18, 2015 @10:35AM (#49718679) Homepage Journal

      Also, looking at this graph of Q-ratio [advisorperspectives.com], I notice that Q-ratio does not predict the 1992 crash or the 2009 crash (reputed to be a bigger crash than the great depression).

      For this hypothesis, what observations would invalidate the predictions made by this theory?

      But maybe I'm not spending enough time looking at the numbers, maybe I'm not reading deeply enough.

      Perhaps we should look at the "percent from its arithmetic mean", or maybe the "change from its geometric mean", or the "real S&P composite and the Q-ratio adjusted to its arithmetic mean", or the "net worth over market values outstanding"...

      All of which can be found on this fine article [advisorperspectives.com].

      If we look at the numbers in enough ways, I'm sure we'll find something that has a P < 0.05, then we can publish!

    • by khr ( 708262 )

      never making future predictions

      Economists make never-ending future predictions. Maybe not accurate, but they do make lots and lots of future predictions.

    • by MobyDisk ( 75490 )

      In their defense, it is because eEconomics perfectly follows t his Douglas Adams quote:

      There is a theory which states that if ever anyone discovers exactly what the Universe is for and why it is here, it will instantly disappear and be replaced by something even more bizarre and inexplicable.
      There is another theory which states that this has already happened.

      As soon as an algorithm is created that can accurately predict the market, investors will start using it, thus altering the market so the algorithm no longer works.

      This kind of economic theory is really attaching a name and a measurement system to a phenomena that is already understood. To say the Q-value predicts bubbles is a bit backwards since the Q-value is defined in terms of bubbles. So it really isn't a predictor

    • Always looking backwards, always telling us *why* something happened, never making future predictions.

      Economics makes plenty of predictions, and gets them right. MV=PQ is well-tested as a theory, and you can predict things based on that.

      The problem is predicting what we want to know......how can we end the recession?, for example. This is like asking how can we make a warp drive? and then proclaiming physics is a failure when it can't answer.

    • Economics is a science with predictive capabilities. The problem is knowing when this science leaves the world of economics and into the unpredictable world of human choice.

      Economics similar to physics can tell you what will happen if some action is chosen.

      If you let go of this bowling ball it will fall due to gravity. It doesn't say whether you will let go.

      Similarly Economics will tell you that creating money out of nothing and giving it to people will cause distortions in the economy . What is can't tell

      • Economics is a science with predictive capabilities. The problem is knowing when this science leaves the world of economics and into the unpredictable world of human choice.

        You're obviously more familiar with economics than I am - I've got a question, help me out.

        What's the best value for inflation?

        Meaning, what's the numerical value that we should be shooting for, for best results?

        If it's complicated, then what's the formula for the complicated value? If you have time, how "flat" is that calculation? (Meaning: is it a spike or a gently rising/falling mesa? How important is it to hit the best value exactly?)

        The calculation of inflation doesn't depend on human behaviour, does i

        • by Alomex ( 148003 )

          Currently believed to be about 4%, but it does heavily depend on human behavior. To wit, when we need deflation humans do not like to explicitly reduce wages, they would much rather simply not give you a pay increase and let inflation erode your wages away.

          Because of this we need 4% inflation rather than the 2% inflation target proposed nearly two decades ago, which had ignored this all too human variable.

    • by Livius ( 318358 )

      Adam Smith got so much right that in order for new economists to say anything new, they have to knowingly and wilfully say something they know not to be true.

    • by Tablizer ( 95088 )

      The problem is that economics is tied to human behavior, and human behavior is part of the science of psychology and social science, which are still in an infant stage because we don't really understand how the human brain works; and measuring the impact of changing fads and culture and opinions of the masses is tricky.

      In short, it's doing science with too many variables to isolate and tame in a systematic way. Intuition and guesswork thus have to be the substitute in many cases.

      For example, let's take the

    • All science does is look backward (gather data points of past experience) then construct a model which enables us to look forward. And that is the problem. If there is no predictability power , then you are not making science, you are reading entrail of fish.
    • by Idou ( 572394 )

      In the days since Adam Smith penned his first thoughts on economics, engineers have taken us to the moon, physicists have split the atom, doctors invented antibiotics, philosophers invented human rights, chemists invented plastics, farmers quadrupled the per-acre food yield, programmers invented the internet, and much *much* more.

      Impressive, but let's see smart engineers do all of that without capitalism (like in a country like North Korea).

      Seriously, though, all those things you list are easy compared to trying to predict human behavior. I think most people fail at predicting human behavior (whether they are an engineer or economist seems irrelevant. . . ) and those that succeed become crazy rich and never reveal their secret (or, if they do reveal it, it no longer applies since human behavior constantly adopts new knowledge).

    • Always looking backwards, always telling us *why* something happened, never making future predictions.

      That's just false. Stagflation in the 70's was predicted by some theories but not others. The theories that did not predict stagflation were scrapped or modified. The fact that it takes 10+ years of watching to decide between two competing models is annoying, but does not mean that predictions are not made. You just cannot show it in a classroom, like with fruit flies that breed once a day to show genet

  • by Dunbal ( 464142 ) * on Monday May 18, 2015 @10:37AM (#49718695)
    I have never met a rich stock analyst. Just like I've never met a psychic who won the lottery. All these little theories and formulas are swell, but let's see them put their money where their mouth is.
    • I have never met a rich stock analyst.

      I'd be happy to introduce you to a few. They're not particularly hard to find. They also don't have to be particularly good at analyzing stocks to do very well financially for themselves. They just have to be able to get people to listen to what they say.

      All these little theories and formulas are swell, but let's see them put their money where their mouth is.

      Companies like Goldman Sachs do exactly that and do it very successfully. What you have to remember is that stock analysts are really salesmen, not advisers. Their interests may not actually align with yours and often that is where the profit for them

      • by Dunbal ( 464142 ) * on Monday May 18, 2015 @11:21AM (#49719057)
        You're right. Let me rephrase that. I've never met a rich stock analyst who made his money by doing exactly what he told everyone else to do.
        • by dj245 ( 732906 )

          You're right. Let me rephrase that. I've never met a rich stock analyst who made his money by doing exactly what he told everyone else to do.

          I've only ever found 1 who seems to do that. This guy [investorsfriend.com]. One of his rules is that he discloses what he is currently investing in. He also revisits his predictions later, identifies how he was wrong , and offers some commentary, as in the last table of this article. [investorsfriend.com]

          I have not actually subscribed to his services, but have read his (Free!) newsletters for many years.

    • Just like I've never met a psychic who won the lottery.

      That's why Randi's contest always seemed like BS. I could make way more than a million dollars if I was psychic... but probably not if everyone knew I was. Maybe, if my descendants were non-psychic, I would admit it on my deathbed.

  • It's different this time.

  • I doubt it takes into account complete BS assets like "customer good will" and "estimated patent value" and monetary estimations of "brand recognition." They're sort of maybe almost worth something. If a company was only worth its building, computers, inventory, and furniture then the company is probably about to go bankrupt so at least SOME intangible assets are worth something.
  • "it is probably the best single measure of where valuations stand at any given moment." - Warren Buffett

    http://www.advisorperspectives... [advisorperspectives.com]

    Both Buffett Indicator And Shiller P/E Continue To Imply Long Term Negative Market Returns; 2015 Market Valuation
    http://www.forbes.com/sites/gu... [forbes.com]

    Yes, the market is looking a bit frothy. Locally here in NYC, assets such as real estate are looking pretty high...

  • Take a pimped out car. Let's say it's worth $50,000 on the open market. But if you break it apart and sell the pieces, you can probably get $80,000 or more - even admitting they are used. People don't like to do that, inpart beause it's a lot of labor - sometimes more than $30,000 to do dismantle the car and sell the pieces, even online.

    With corporations, it often works the other way around - the whole is worth a lot more than the parts. Sum of it's parts is not a reliable way to price something. A p

  • "The economy depends about as much on economists as the weather does on weather forecasters."

    ~ Calvin Coolidge

  • Investors and directors think the assets are more valuable combined than separated. Of course they think that, or else they would just sell the assets.

  • ...than just the sale value of their assets. If they weren't, there would be no reason to bother with running the company; you could just buy a pile of assets and store them somewhere.

  • by PPH ( 736903 ) on Monday May 18, 2015 @12:22PM (#49719527)

    ... is based (among other things) on the supply of assets available to trade. So when the market is high, that means many investors value their held assets and don't make them available to trade. This reduces the supply and increases the value/price of the remaining assets still 'in the market'. There may be some other mechanisms at work that are artificially sopping up liquidity, like HFT [wikipedia.org].

    If everyone put their portfolios up for sale, prices would drop fast and far.

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