4 ms·
American companies sell products & services outside of the United States. Comparing American GDP with the aggregate value of the US stock-market is deeply misle
by mxschumacher 9y ago
American companies sell products & services outside of the United States. Comparing American GDP with the aggregate value of the US stock-market is deeply misleading, especially given a historical comparison: foreign markets such as China have gained in relative importance over timeframe under consideration.
When looking at debt, one should not just observe the nominal amount, but also the interest rates, which have never been lower. Large companies can tap public debt markets and borrow billions at 1.5% over a timeframe of ten years. Risk is thus lower than the website suggests (at lower interest rates, a company can carry more debt). Additionally, returns to equity will be higher (the I in EBIT is smaller, so profits are bigger).
- module0000 9y agoGDP is a correlated measurement. Trying to use correlated measurements as a leading or primary measurement is one of the many steps on the stairwell down to bankruptcy for a trader.
- georgeecollins 9y agoThe American GDP includes net exports, ie: goods that are bought in other countries. So its not a crazy comparison. But it is not great ratio for long historical comparisons because of the changing nature of economies and markets.