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Are they? Do you have some magical economic clairvoyance about asset valuation? See, the thing about a market economy is that the value of assets is difficult

Are they? Do you have some magical economic clairvoyance about asset valuation? See, the thing about a market economy is that the value of assets is difficult to ascertain but can be "discovered" through the actions of market participants. Sometimes, a whole bunch of assets are tied up in a company that seems to be using them well enough, and might even be generating a profit (on paper), but in fact those assets could be used even more profitably in some other productive capacity. Note that this doesn't restrict assets to PPE (property, plant and equipment). I'm pretty sure anyone who has ever been an employee can attest that human capital can be just as unproductively employed as physical capital, but still show a profit on paper. So no, you can't make some blanket statement that all companies are worth more than the sum of their parts. Some might be, but I believe the main reason we are a capitalist society is because allowing markets to freely discover the prices of assets results in a much more productive allocation of capital than the alternatives.

charliemil4 7y ago
Damn that was absolutely beautiful
chii 7y ago
In fewer words, let the invisible hand of the market conduct economic darwinism and let the chips fall where they may. I would agree with that - except that would also cause collateral damage to people's livelihoods. if the gov't bailout is more a societal bailout - good unemployment benefits, good socialized healthcare, and effective tax collection of income - then they won't need to do any corporate bail outs, or inject liquidity. The fact that loans can easily be had, means that a company's investment hurdle rate is artificially lowered. And companies take more risks. I believe japan's lost decade is a prime example, and the bank of japan has held all the assets as their purchase program failed to bring any real economic prosperity (https://www.reuters.com/article/us-japan-economy-boj/bank-of-japans-balance-sheet-now-larger-than-countrys-gdp-idUSKCN1NI07Z https://www.reuters.com/article/us-japan-economy-boj/bank-of...). I sincerely hope the USA isn't gonna fall to that.

charliemil4 7y ago

Damn that was absolutely beautiful

chii 7y ago

In fewer words, let the invisible hand of the market conduct economic darwinism and let the chips fall where they may. I would agree with that - except that would also cause collateral damage to people's livelihoods. if the gov't bailout is more a societal bailout - good unemployment benefits, good socialized healthcare, and effective tax collection of income - then they won't need to do any corporate bail outs, or inject liquidity. The fact that loans can easily be had, means that a company's investment hurdle rate is artificially lowered. And companies take more risks. I believe japan's lost decade is a prime example, and the bank of japan has held all the assets as their purchase program failed to bring any real economic prosperity (https://www.reuters.com/article/us-japan-economy-boj/bank-of-japans-balance-sheet-now-larger-than-countrys-gdp-idUSKCN1NI07Z https://www.reuters.com/article/us-japan-economy-boj/bank-of...). I sincerely hope the USA isn't gonna fall to that.