Re:Is the world economy entering a wage-price spiral?
by Godel_unicode on Wednesday October 20, 2021 @10:45AM
(#28931254)
It's not market inefficiency causing that, but rather expected value. If a company has $1bn in the bank and you expect them to squander it, then you'd be foolish to value them based off of it.
This same logic explains the value of Amazon; they plow profits back into the business, making the future business bigger and more valuable. Their shareholders clearly agree with that type of longer-term thinking and have rewarded Amazon's growth with giant valuations repeatedly over the years.
Re:Is the world economy entering a wage-price spiral?
by diordiderot on Wednesday October 20, 2021 @04:38AM
(#28928259)
With a high enough net worth you don't need liquid assets, large banks provide <1% interest rate loans that get paid off by your estate. Saves on taxes as well
However, no money is transferred to shareholders unless Amazon do a buy back or issue a dividend, it's just a revaluation. If those shareholders starting selling, only market forces (belief in Amazon) keep the price up. Shareholders can't demand their share of that $1bn in most cases, short of suing the company.
Stocks can and do trade below book value. Companies with net $1bn in the bank can have a market cap below $1bn in inefficient markets.