±: 1.1.4 The Equity

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Show me the money!

MoneyHave you heard? There is not enough money around. We need more to get the market up and running again. Governments think so. Companies think so too. Governments can print new bills, companies can issue new shares. But have you really thought of what they are doing in a wider sense? Ok, they add money, but the consequence is that the market gets calmer, gets a relief, feels secure.

The added capital suddenly takes the form of nothing else than just another antidepressant killing anxiety for one more day, one more week – or as most issuers wish for: killing all future anxiety.

The most valuable antidepressant in history was presented at the G20 meeting in London April 2nd 2009. The leaders of the biggest economies in the world agreed that the market needed USD 1,100,000,000,000 – 1,100 billion US dollars. Could be placing in Guinness Book of Records. The question is whether it would be placed in the chapter dealing with Finance or the one dealing with Painkillers.

 

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Equity.
Equity is probably the single most anxiety trigger/driver today. We say that there is not money going around, so we need to issue more. ‘
Money makes the world go around. Kander and Ebb (the writer and the composer) have created a concept of money that may form a two edged sword. Whenever I meet companies, I ask them: is money a mean or a goal. Some says mean, some says goal, some says both and they add “depends on which leg you are standing on”.
In a materialistic world, yes, money is a goal. Ask any trader who uses his or her money to buy a new Porsche. But as I told my father many years ago, you need to spend something to earn something. Equity is spending money in the sense of putting money to work.
Today there are n trillions going around the world.
Equity is more like the oil making it possible to ease the way of earning money. It is very seldom the moneymaker itself. Which is the reason that I prefer to see equity as a reinforcer instead of a true value.
Equity is the perception of “enough oil to keep going”, it is not a goal in itself. The goal is the return of investment.

Have you heard this issue being raised the last couple of months? There is not enough money on the market. Let’s issue some more.
Equity is a two-edged sword. The stock exchanges have rules for how much capital a company  need to continue its listings.
,But the amount is not decreasing. How is that?


Have you heard about a company that started with cash only? Feel free to comment.
Equity has become a complex issue. It is no longer a cash issue alone, although economists often wants it to be like that. It is easier that way, but it a company is short of cash and needs to upgrade its equity in order to avoid a chapter 11 or bankruptcy it sometimes uses goodwill as an active factor in their balance sheets.

All companies start out with a positive equity, it is in the nature of the company structure all companies obey under. You need to put something in to get something out.
And if you don’t get something out, you probably haven’t put enough in. So equity is often not only a positive force, if you don’t earn enough money, equity beomces an anxiety trigger. And if that is consistent over time, it is an anxiety driver.

 

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