On Friday, the S&P 500 was up a very hefty 1.0&% but Toronto was down 0.2% as oil prices were lower.
Shopify was up 8.7%.
The BIG story of the day was Meta (facebook) being up 20.3% and also Amazon being up 7.9%.
I will admit to being a little bummed at not owning these two. At least I do own some Shopify.
I calculated that the market cap gain for Meta was about $215 billion and for Amazon the gain was $130 billion.
That’s a $345 billion dollar gain in wealth in just two stocks that appeared out of thin air on Friday.
It gets me thinking about the implications of how wealth is measured. There was no real change in the amount of actual goods and services in this world overnight Thursday. It’s not like a massive new and useful nickel or oil or natural gas deposit was suddenly discovered. We just had a sharp upward revision to the estimated value of the future earnings on these two companies based on their strong results in the past three months and comments on their outlook.
The stock market creates and destroys wealth every day. Stock valuations go up most days . And in sense this is wealth from thin air, especially when it happens very suddenly. Over time companies do created actual products and services and that’s very real. But when we have an increased opinion of value that create hundreds of billions in new wealth overnight, it’s maybe not quite so real. (And I am not opining on the true value of those shares).
I just think it’s newsworthy and thought provoking when the market value of their shares increases and just two companies can create $345 billion in brand new wealth overnight.
The owners of these two companies could sell and lay claim to an extra $345 billion in actual goods and services or other assets if they wanted. Luckily, they mostly won’t do that. You might think that someone else had to lose $345 billion for these share owners to gain it and yet that’s not the case at all. No one had to lose anything. But if wealth goes up materially for a few people and GDP and the real goods and services and real and even intangible assets have not increased is there a some collective loss for the rest of us? Is this a sort of indirect currency devaluation? I don’t know but these are just things I wonder about.
Meanwhile though if we too can own shares destined to rise we will get our share of this action over time.