The Global Equity Market's 20 Trillion Dollar Mistake Exposed

Tyler Durden's picture

Authored by Kevin Muir via The Macro Tourist blog,

Last week there were all sorts of articles hitting the newswires about the fact the world’s stock market total capitalization was pushing $100 trillion.

This article and chart from Business Insider sums up the reaction:

We first saw the chart in a note from CLSA analyst Damian Kestel: “I almost fell off my chair when I saw this and went to check that Bloomberg hadn’t reclassified some data… but no. I included this chart of total equity market cap in [a previous note to clients] in early June this year. At that point total world market cap was US$74 trillion, it’s now US$93 trillion,” he wrote. (The chart excludes ETFs and the like, so there is no double-counting of single stocks in different indexes.)

 

What is worrying about the chart is that final, fast peak in 2017. Until then, world market cap looked like any other stock index: A series of incremental gains building on each other over time, with a pronounced dip around the Great Financial Crisis in 2008, followed by a healthy recovery.

 

This year, the chart just looks insane.

Yes, Business Insider, this year, the chart does indeed look insane.

But maybe we should have all listened to Damian Kestel’s gut reaction that something might have been wrong with the data.

Lucky for us, sharp-eyed economist, Bernard Tamler, realized there was a problem with the calculations.

What do you think is the best returning stock market in 2017? The US? Japan? Nah, it’s Venezuela.

Yup, you read that right. Venezuela’s stock market is up over 4,000% year-to-date.

Of course this appreciation is not “real” by any means. The Venezuelan currency has been obliterated to zero in the meantime. But the problem was that Bloomberg was still using the “official” currency exchange rate, which was many thousands of times higher than the black market rate.

In doing so, they added almost $20 trillion of stock market capitalization to the world’s total.

We all make mistakes, so I am not faulting Bloomberg by any means. And when I dial the chart this morning, it appears as though they have fixed it, so good on them for quickly rectifying the inconsistency.

But I wanted to point out that in a hyper-inflationary environment, stocks can scream higher. Yet, more importantly, I wanted to highlight that the rise of total world stock market capitalization over the past few months has not been quite as dramatic as many have been touting. Let’s hope this hyper-inflationary mistake isn’t the way we hit new highs in stock market cap in the years and decades to come…

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Deathrips's picture

National security has governments backing the 100 trillion in losses.

 

Now Serf! Get back to work to pay for it

 

RIPS

NoDebt's picture

"Lucky for us, sharp-eyed economist, Bernard Tamler, realized there was a problem with the calculations."

An economist actually did something useful?  Huh.  Never thought I'd live to see that day.

- NoDebt (economist)

 

Government needs you to pay taxes's picture

Dont forget to thank your nearest bankster as he drives by in his new Ferrari.

lasvegaspersona's picture

So for every dollar of equity (or capitalization) companies must get $10,000 PER PERSON ON THE PLANET....more like $100,000 per person able to buy....in profits!!!

I'm thinking maybe hyperinflation really is the only way these numbers make sense.

Sanity_is_Dead's picture

How do I buy property in Venezuela?

Utopia Planitia's picture

1. Convert all your assets to BTC.

2. Surf to biteme.ve

3. Trade BTC for shares of Venezuela property.

(Venezuela property is doing so well we know you don't have enough BTC to purchase a single parcel outright. Hence our "special deal" to sell you shares)

4. Light up your favorite Cohiba and tweet out your financial prowess to the world!

ParkAveFlasher's picture

Sounds awesome, and totally transparent and legit, good thing I can interpret blockchain to track someone down and throttle them when I show up at the airport in Caracas with a thumb drive in one hand and my dick in the other, and nothing to show for either.

Thanks for the advertisement, but I thought ghostery took care of stuff like this?

PlayMoney's picture

5. Hire private security as foreigners have a tendancy to be kidnapped/robbed these days.

Chi Juan's picture

This is part of the reason Shepwave got Monday's highs and bearish swing right.  Markets about to get ugly. 

A1 T's picture

Whatever Shep keeps getting markets right because they are in in the rigged. Just like Tyler.

lasvegaspersona's picture

its schlep wave...get it right...these guys (or maybe it is just one guy in one of those Japanese sleeping tubes) are on fire!!!! (or maybe it is just that they are smoking in those Japanese sleeping tube)...dunno.....

buzzsaw99's picture

add in bitcoin and then look at it.

JibjeResearch's picture

Tezos Cryptocurrency's price hits record.  This is incredible

Get some Tezos, Don't miss this ship, ladies and gentlemen...

https://tezoschain.io/

Osmium's picture

The permanently high plateau just got higher?

AlphaSeraph's picture

Hyperinflation 2018. Pretty soon no one will give a fuck what the DOW is at.

lasvegaspersona's picture

People with debt will care.

People with assets will weep.

moonmac's picture

Meet CryptoKitties, the $100,000 digital beanie babies epitomizing the cryptocurrency mania 

https://www.cnbc.com/2017/12/06/meet-cryptokitties-the-new-digital-beanie-babies-selling-for-100k.html

 

 Mankind needs an asteroid to the face!

Iconoclast421's picture

That is exactly what happens when stupid people, who think they're smart, and didnt earn their money, decide to spend the money that they earned.

Iconoclast421's picture

That is exactly what happens when stupid people, who think they're smart, and didnt earn their money, decide to spend the money that they earned.

Iconoclast421's picture

They fix venezuela but they dont fix the $22 trillion that the other banks have printed. Wtf kind of consistency is that?

LawsofPhysics's picture

Bullshit.  The biggest mistake is allowing the bankers and financiers to gift themselves as much currency as they want for free (ZIRP) or even PAY them to take more currency (NIRP) without performing any real work, facing real risk, or putting up any new real collateral!!!!!

No matter, such "let the majority eat cake" monetary experiments never turn out well...

in the meantime...

"Full Faith and Credit"

lasvegaspersona's picture

I know this crowd does not want to hear it but money is created when a credible individual (OK this is the idealized situation) borrows money and promises to repay. When Zimbabwe prints a stack of Zim dollars that is a different story. When politicians get involved the usual timid banker can become rather animated.

Stormtrooper's picture

So what does $100 trillion mean in terms of a currency that has no inherent value?

Does not compute.

Solio's picture

Ah! The wonders of the diminished value of the fiats. The more they print the smaller it gets, so prices go up.

Anteater's picture

The chart should also be weighted by number of unique trades.

Obviously NYC trades curve is weighted heavier than Bolivias.