Capitalists Without Capital Are Ruling Capitalism
What does it mean that some of the decade’s big market winners were companies with no real net worth?
A market rally built on intangibles? Sounds shaky and yet ...
Photographer: Ulrich Baumgarten/Ulrich Baumgarten via Getty Images
As a rule in life, as soon as someone starts talking about “intangibles,” it’s time to be suspicious. A mediocre athlete who is worth his place on the team because of his intangible qualities should arouse skepticism. So should any company selling the intangible quality of their assets.
This is a serious problem because the stock market is increasingly populated by intangible companies. Some 40% of public stocks quoted in the U.S. have negative tangible book value, meaning that their tangible assets aren’t worth enough to repay all their debt. Two decades ago, this was only true of 15% of companies, according to Vincent Deluard of INTL FCStone Inc., who has carried out intensive research on the subject.