My favorite myth of a quote is, “you can have your own opinions, but not your own facts.” In fact, you can have your own of both. A “fact” is a truth, or a quality of being actual. But just because you are given a measure that is actual doesn’t mean it supports the thesis or is a describing the quality that it purports.
I saw this chart floating around today. It’s attribued to Bianco Research, but I saw it on another blog.
It purports to show that the market capitalization of the stock market is not a rich as it once was, but is still high by historical standards. However, the market capitalization of the stock market as a percent of GDP is highly dependent upon the number of private companies, and the percent of business private companies are contributing to the economy.
For instance, Bloodhound is located in Minnetonka, MN, a city we share with Cargill, Incorporated. Cargill is slightly larger than Bloodhound. In fact, Cargill is the largest privately held company in the United States. If it were a public company, it would rank the size of AT&T and J.P. Morgan. The company supplies about 22% of the US domestic meat market. All of the eggs used in McDonald’s restaurants in the U.S. pass through Cargill’s plants. Cargill’s portion of spun-off Mosiac (MOS) alone is estimated to be worth $55 billion of capitalization.
In short periods of time, stock market cap as a % of GDP can be a reasonable comparison. But to compare the capitalization of 2011 to 1941 is not apples to apples.