I have previously posted about the coming economic collapse.
This grilled cheese sandwich may not be a chart, but it is another sign of what is wrong with our current economic situation.
Let me explain.
The trillions and trillions of money printing have not created a recovery or improved economic circumstances for the vast majority of people. All that has been created is easy money for Wall Street, and a massively over-inflated stock market that only benefits the 1% who trade in shares. This over-inflation is now a bubble that is going to do what bubbles always do: burst.
Traditionally, a company's stock price is a reflection of the combined value of the company's underlying assets, plus perhaps a realistic margin for future growth potential and return on investment (cash flow through dividends). In the current bubble, many companies have a share price that vastly exceeds - and I mean VASTLY exceeds - the combined value of their assets and any objectively reasonable allowance for future growth or dividend cash flow.
A good example is The Grilled Cheese Truck Inc. which trades on the OTCQX marketplace under the ticker GRLD. This publicly listed company has 18 million shares and a recent stock price of $6 giving the company a market value of about $108 million.
But what are the underlying assets? According to the company’s financial statements, it has about $1 million of assets which include four (yes, only four!) grilled cheese trucks and almost $3 million in liabilities. In the third quarter of 2014, the company had sales of almost $1 million, on which it had a net loss of more than $900,000. In short, and notwithstanding that the grilled cheese sandwiches may be excellent, the company is trading at in excess of $100 million over valuation. For those who bought shares low and sold high, great money. For those who bought more recently, disaster when the crash comes.
[This paragraph will make Python happy] The economic recession of 1973-1975, which John Michael Young lived through, was nothing compared to what we will have to endure when the crash comes.
When people tell you that the high stock market equals a recovery, just think of the grilled cheese sandwich.
Did you mean John Watts Young, commander of Apollo 16?
Posted by: PythonMagus | Sunday, 15 February 2015 at 02:52 PM