Would you rather own the US and pay $70 or have the rest for $30?

by liberal japonicus

Been watching Kara Swisher, who has spent time with Elon Musk and has a number of insights. So I caught this episode of her podcast with Scott Galloway (here, teed up to the quote) Don't I agree with every point they make, but this point by Galloway made me sit up. 

I said that the US Equity market now was 50% of the total value of all equities globally and he said now it's actually if you [include] corporate debt America represents 70% of of all value globally so if you think about it ... would you rather own America for $70 or if you could own everything but America for 30 which would you pick [and] what that says to me is that America is overvalued and not only is America overvalued it's really the whole world is vulnerable..

A thread to discuss what you would pay for the US. For me, probably not a plug nickle. Have at it.

 

Comments

[wj]

Well, if by buying it I got to run it....

I probably wouldn't be all that good at running it. But compared to Trump/Musk (or, before we are thru, Vance/Theil)? That's one low bar!

[Pro Bono]

Why would you include debt? If I borrow $100 it doesn't make me worth more.

I'd rather own the USA - I think more could be achieved by changing its governance. But the rest of the world is better value.

[liberal japonicus]

I'm not an econ person, but I assume that he includes debt because that tells us how much money is at play and if you paid 50$, you would also have to assume 20 dollars of debt? Just a guess.

But yes, it would definitely be a fixer-upper!

[hairshirthedonist]

...if you paid 50$, you would also have to assume 20 dollars of debt?

Or maybe to own it free and clear you'd have to pay $70 to buy all US equities AND pay off all the associated corporate debt. It's a little weird the way it's worded. He says "all value" before saying "overvalued." So "value" doesn't mean "worth," because the US is worth less than it would cost to buy all of its equities outright (i.e. without owing anything afterward).

But does the rest of the world have no corporate debt at all?

[hairshirthedonist]

Oh, I think he's including corporate debt on both sides, US and rest of the world. I guess we just have that much more.

[wj]

When you buy the country, are you buying everything in it? Or are you just (which I assumed) buying the right to run it? That is, the government. With its debts, but not the debts of of businesses, and individuals, within it.

[hairshirthedonist]

In the video, they're talking specifically about equities, so you're buying the all shares of all the companies that issue them, be it US companies or companies everywhere else (plus their debt if you're doing the 70/30 thing).

(But you can propose whatever other meaning you like to "buying the US" if you want to talk about that meaning instead.)

[bobbyp]

If you own a debt instrument, it is an asset to the holder......something, something.

[Pro Bono]

I am an econ person, in a financial mathematics sense.

The equity value is the limited-liability, risk-adjusted, expected present-value of net future income.

future income: money the company takes in in the future, including if it is sold or wound up.

net: subtracting all costs, including debt repayments

present value: discounted by prevailing interest rates

limited liability: it can never be negative

expected: averaged over all scenarios

risk-adjusted: uncertain payoffs are usually worth less than their average value.

[hairshirthedonist]

Well that clears it up! ;^)

(Pass the aspirin.)

[russell]

Too bad we can't all play the "it can never be negative" game!

[Snarki, child of Loki]

Even better than the "it can never be negative" game, is the game played by the techbros, which includes imaginary numbers.

[wj]

the game played by the techbros, which includes imaginary numbers.

Well, imaginary numbers are done with "i". And the techbros are all about I. :-)

[Hartmut]

But it's a little i, which does not fit.
On the other hand they spy with their little i.
And their worldview is also 2-dimensional.
They are part of the imaginary axis (the one that did not lose the war) while they try to axe reality.
A rather dim engine too.