How The Mighty Are Fallen
Just for fun on a late Friday afternoon, here are some share prices to ponder:
Citi: $1.01; market capitalization of $5.64 billion
Wells Fargo: $8.61; Market cap. of $36.49 billion
Bank of America: $3.17; market cap. of $20.1 billion
JP Morgan Chase: $15.93; market cap of $59.86 billion
Ford; $1.70; market cap. of $3.95 billion
GM: $1.48; market cap. of $885.23 million
Microsoft: $15.31; market cap. of $135.85 billion
And the purpose of this is?
Merely to point out the derisory level that Citi’s stock has now reached. With a market capitalization of a paltry $5.64 billion it has total assets of about $2.1 trillion. That’s an absurd valuation relative to the bank’s size. Clearly the market is not anticipating a recovery any time soon!
Plus the combined market capitalization of the big four banks is less than that of Microsoft, yet they control total assets equivalent to around half of the entire country’s GDP. That is a precarious by any standard.
Finally: even it its current parlous ‘zombie’ state Citi has a greater market capitalization than GM and Ford combined. And GM’s price is after a late day recovery that meant it crept back above the dreaded $1:00 mark! Even so GM’s stock is now worth what it was in 1933. So much for 75 years of assiduous management of shareholder value.
Comparing one iconic near bankrupt company with another is probably another is perhaps ghoulish, but it gives us an idea of the devastation in the core of the economy. Step back and imagine the world of business without such household names as GM, Citibank and Merrill Lynch. These are not trivial companies yet by the time we emerge from this recession none of them may be in business, at least not the way we are used to them. Add in such famous financial names as Lehman, Bear Stearns, Wachovia, or AIG and the list of major brand names to be swept away in this downturn is staggering.
The age of dinosaurs was ended by a meteorite impact of epic proportions. The two asset bubbles of the past twenty years have had the same effect on our big companies. Were they simply too big and ponderous to survive? The dinosaurs died out because they couldn’t adapt quickly enough to a drastic climate change. But at least they weren’t responsible for the catastrophe that sealed their fate. They just had bad luck. The cohort of dead and dying companies littering our economic landscape fell foul due to their own actions, or inactions. Their demise is a testimony to the hubris of corporate America, not to the sudden impact of some unforeseeable event. They did this to themselves. Tough. But what a spectacular implosion. A buck buys you Citi or GM stock. Wow!
Something to think about as we limp into another weekend.
