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Some expect a correction to happen soon. Isn't the fact that people focus on that trillion achievement an indication that (some) investors currently don't focus

Some expect a correction to happen soon. Isn't the fact that people focus on that trillion achievement an indication that (some) investors currently don't focus on the fundamentals? We've seen some very high volatility of Facebook and Twitter stocks last week, even when fundamentally the news triggering these drops in value was not dramatic. Is that another indication? If there's a big correction, these stocks might get back to a point where the trillion goal is again very far. Anyone knowledgeable willing to share further insights and opinion?

wahern 8y ago
Personal wealth, globally, is nearing USD $300 trillion. See https://www.credit-suisse.com/corporate/en/research/research-institute/global-wealth-report.html https://www.credit-suisse.com/corporate/en/research/research... That's personal wealth, not including assets held by corporations. The fundamentals are that there's a surfeit of cash to invest globally. The predominate driver of growing wealth is the emergence of the developing world, not QE and other monetary policies. A correction will come, but it won't be so dramatic as to take the bottom completely out from underneath existing assets prices (not unless there's some global financial calamity), especially strong ones like Facebook or Amazon (Twitter is a different story). There's just too much money and not alot of places to park it with stable markets and/or high rates of return. The U.S. offers both. I wouldn't be surprised if in the next downturn stocks like Facebook remain buoyant and its everybody else that suffers.
- TheSpiceIsLife 8y ago
  > That's personal wealth, not including assets held by corporations. Are not all assets held by corporations also personal wealth in the form of shares? I'm not well versed in corporate finance, so correct me if I'm wrong, thanks.
  - whack 8y ago
    You're right. The $100B cash held by Apple is already priced into its market cap, which is turn included in the personal wealth of all its investors. If someone were to sum up both personal wealth and corporate assets, they would be double counting. That said, I think wahern's general point is still sound.
    - wahern 8y ago
      I'm no financial expert, but AFAIU the mechanics of securitization mean that we can assume some multiplier greater than 1x. You can borrow against your shares at the same time Apple can borrow against its cash holdings and, ceteris paribus, the end result will be more debt than Apple's cash reserves even after considering a reduction in Apple's stock value. And this debt can be used to buy more assets. (Basically, fractional reserve isn't just a banking thing. It's inherent to the mechanics of capitalist finance.) In addition, the ability to do this enhances capital allocation efficiency, which adds independent value to the entire system. So there's not a simple function mapping corporate wealth to personal wealth, though you certainly can't simply sum corporate-held assets to personal wealth. I'm happy to be corrected for the implication.
- 3pt14159 8y ago
  It depends on how China reacts when its debt bubble pops. Personally, I'd err on the side of letting the recession play out with some intervention, but only where really needed. If they over-inflate the Renminbi the knock on effects are going to be pretty dramatic globally. I sold almost everything. I don't try to call the very tops of markets, it's too hard. Having things ready when the pullback happens is good enough for me.
- berns 8y ago
  > There's just too much money and not alot of places to park it That's correct. But is all that money a representation of real wealth or is it a bubble?

wahern 8y ago

Personal wealth, globally, is nearing USD $300 trillion. See https://www.credit-suisse.com/corporate/en/research/research-institute/global-wealth-report.html https://www.credit-suisse.com/corporate/en/research/research... That's personal wealth, not including assets held by corporations. The fundamentals are that there's a surfeit of cash to invest globally. The predominate driver of growing wealth is the emergence of the developing world, not QE and other monetary policies. A correction will come, but it won't be so dramatic as to take the bottom completely out from underneath existing assets prices (not unless there's some global financial calamity), especially strong ones like Facebook or Amazon (Twitter is a different story). There's just too much money and not alot of places to park it with stable markets and/or high rates of return. The U.S. offers both. I wouldn't be surprised if in the next downturn stocks like Facebook remain buoyant and its everybody else that suffers.

TheSpiceIsLife 8y ago
> That's personal wealth, not including assets held by corporations. Are not all assets held by corporations also personal wealth in the form of shares? I'm not well versed in corporate finance, so correct me if I'm wrong, thanks.
- whack 8y ago
  You're right. The $100B cash held by Apple is already priced into its market cap, which is turn included in the personal wealth of all its investors. If someone were to sum up both personal wealth and corporate assets, they would be double counting. That said, I think wahern's general point is still sound.
  - wahern 8y ago
    I'm no financial expert, but AFAIU the mechanics of securitization mean that we can assume some multiplier greater than 1x. You can borrow against your shares at the same time Apple can borrow against its cash holdings and, ceteris paribus, the end result will be more debt than Apple's cash reserves even after considering a reduction in Apple's stock value. And this debt can be used to buy more assets. (Basically, fractional reserve isn't just a banking thing. It's inherent to the mechanics of capitalist finance.) In addition, the ability to do this enhances capital allocation efficiency, which adds independent value to the entire system. So there's not a simple function mapping corporate wealth to personal wealth, though you certainly can't simply sum corporate-held assets to personal wealth. I'm happy to be corrected for the implication.
3pt14159 8y ago
It depends on how China reacts when its debt bubble pops. Personally, I'd err on the side of letting the recession play out with some intervention, but only where really needed. If they over-inflate the Renminbi the knock on effects are going to be pretty dramatic globally. I sold almost everything. I don't try to call the very tops of markets, it's too hard. Having things ready when the pullback happens is good enough for me.
berns 8y ago
> There's just too much money and not alot of places to park it That's correct. But is all that money a representation of real wealth or is it a bubble?