Terry McCrann: Big tech will rule our future
One single American company is now worth 50 per cent more than the entire value of all the shares of all the companies listed on our market, proving our future belongs to tech, writes Terry McCrann.
Terry McCrann
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One single American company is now worth 50 per cent more than the entire value of all the shares of all the companies listed on our market — the ASX or Australian Securities Exchange.
Just to make that crystal clear: add up the value of all four big banks, BHP, Telstra, CSL, Macquarie Bank, Transurban the three big retailers, Woolworths, Wesfarmers and Coles — and the value of all the shares of the other 2000-plus companies — and this one company is worth 50 per cent more than all that.
The one company is Apple. It’s now worth $3 trillion ($US2.1 trillion in their dollars); our entire market is worth $2 trillion.
Further, there are actually three US companies listed on Wall Street that are each worth more than our entire market. The other two are Amazon ($2.3 trillion) and Microsoft ($2.2 trillion).
Add on the fourth US giant Google ($1.5 trillion) and the two relative tiddlers among the famed FAANG stocks, Facebook ($1.1 trillion) and Netflix (just $300bn, but still way bigger than our biggest company BHP), and these six stocks are worth a staggering five times the entire Australian market.
It’s important to understand that our market is not exactly small in the global scheme of things, although we are no longer in the top 10 by size. And we never will be again, as we slip and others ascend — such as what used to be called the Bombay but is now the BSE and not the Mumbai stock exchange.
This sober reality also captures the utter fantasy of turning Sydney into some sort of global or even regional financial capital post the coronavirus crisis.
The relative decline of our market captures the relative decline of Australia — despite the phony growth of the population-construction Ponzi we’ve been riding since the turn of the century.
But even the three biggest stock exchanges outside the US — the Tokyo, Shanghai and Hong Kong markets, each with total values in the $6-8 trillion range — are also dwarfed by America’s Big Six.
The primary and most obvious thing these values capture is the spectacular recovery in Wall Street from its virus-sparked plunge in March.
In barely a month, Wall Street plunged 34 per cent. It’s now made all that back, with the S&P 500 index hitting a record high last week, just topping the February peak.
With Wall Street, also — not exactly incidentally — dragging every other market in the entire world down with it; and then dragging every market up, to varying extent, with it. Any suggestion that the big drivers were not all about Wall Street is just utterly fatuous.
Our market went down — almost point-for-point with Wall Street — 37 per cent; but has now climbed back too, but only back to 85 per cent of its February peak.
Again, this captures everything — rather dismal — about Australia. It also captures the spectacular reality of those 21st century US tech giants.
There are actually three ‘markets’ — as in three key measures — on Wall Street.
The S&P 500 is the broadest measure as it includes the top 500 companies, including all those tech giants. It’s back to its February peak.
The most iconic Dow Jones index is only 30 stocks and not necessarily the biggest. Only Apple and Microsoft of the Big Six are in it. The Dow Jones has not returned to its February peak; it’s still 5 per cent shy.
The third is the NASDAQ, which does capture the Big Six and all the other tech stocks. It hasn’t just got back to its February peak, but gone 15 per cent higher than it.
Now, there are two layers to this story: the factors that have driven all shares higher around the world; and those that have added a further supercharge to the Big Six and especially Amazon, Apple and Microsoft.
The first has been the massive pump-priming, the printing of money by central banks and the zero interest rates that have joined to create tens of trillions of dollars of excess liquidity around the world searching desperately for some sort of return.
Very, very importantly, all this has been also added on to exactly the same drivers that were unleashed after the GFC and never unwound subsequently.
Further, central bank governors — led by the Fed’s Jerome Powell for the world, and our Philip Lowe for Australia — have promised not to undo any of this for years that will stretch deep into the 2020s.
They’ve promised not to snatch away the ‘punch bowl’. Indeed, they’ve — especially Powell — promised to pour in yet more 100-proof hooch if ‘necessary’.
The tech story is both obviously — Amazon and Apple — about who’s boomed through the global virus lockdowns, but also about, perhaps less obviously, that the future belongs to tech and the US owns that creative software space.
Originally published as Terry McCrann: Big tech will rule our future