Jim Boswell Blog | The Electronic Global Stock Market Board (EGSB) | TalkMarkets
Executive Director, Quanta Analytics
Contributor's Links: Globanomics
Author of Globanomics. Jim has nearly fifty years of professional experience in the development of management information and analytical business decision support systems. Broadly disciplined with exceptional experience. Education includes an MBA from the Wharton School-University of Pennsylvania, ...more

The Electronic Global Stock Market Board (EGSB)

Date: Wednesday, May 15, 2024 5:09 AM EDT

Since we are winding down i thought it might be worthwhile to go back and explain the Electronic Global Stock Market Board (EGSB) because of the major role it will play in monitoring not only how funds are being invested but with whom funds are invested.  Both perspectives will tell you much about your world.

The following comes from my book called Globanomics which can be purchased through Amazon.com (in fact, other than myself, that is the only place you can purchase the book).

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Electronic Global Stock Market Board (EGSB)

 

The Electronic Global Stock Market Board (EGSB) is something I conceived while creating a game called Golopoly (see my Mobius article, called The Economics of Love in Appendix A).  The EGSB could at “any given time” show how each nation in the world was doing business-wise in relation to all the other countries.  If you think in terms of the National Hierarchy of Needs, the EGSB would be what is used to evaluate a nation’s contribution to the world’s business growth.

Theoretically, the EGSB could exist today, but it does not currently exist.  What the EGSB provides is two very important new and instantaneous views of where “investors money is being placed”.  In Finance one learns that global stock market prices reflect investors decisions based upon “all current knowledge” available to them.  It’s been a well-tested theory and it has held up well under those tests.

So, if that is the case, globanomics believes it is worth asking two very important questions: (1) with what nations are investors placing their monies? and (2) in what industries are investors placing their monies?  The answers to these two questions alone will provide more global insight as to how the world is turning than can be derived using any other method.

Oh, and by the way, another Finance theory is this: the last dollar invested, and the next dollar invested, both reflect the current state of things in their respective times.

 

Knowing that globanomics needed the EGSB to optimism business decisions, I created my own EGSB using data from Forbes Global 2000 list, which comes out annually.  My EGSB is not as instantaneous as what I am proposing in globanomics, nor is my EGSB as comprehensive because I am only including the largest 2000 business companies in the world.  Regardless, my EGSB, is still worth looking at because it covers a ten-year period from which we can begin to recognize certain trends in global investors decisions.

The first graph that I would like to present comes from my EGSB and shows the “total global market value” of the companies of each nation or “group of nations” between 2011 and 2021.  It speaks for itself, and follows:

Let the truth of the graph sink in a minute.  The above graph tells you that the United States completely dominates the world regarding where investors want to spend their monies.  It is not even close.  I should not have to present any other information than that above to defend the important rationale for the EGSB.  From my own little-EGSB, I can recognize trends, and if I was an investor, I would be betting on the United States based upon the above.  The trend for the United States looks to be more positive than any other nation or group of nations.

If we look at the same information, but plot it differently, showing each nation or group of nation’s percent of the global net worth market, then we would see the following:

 

 

Now what does the above graph tell you?  It tells me that investors see the United States on the climb, while they see the rest of the world somewhat stagnating or on decline.  The EGSB does not lie.  The EGSB tells us where all “investor” monies are flowing.  The above graph is so important that the information it parlays must be “refuted” to refute globanomics’ interpretation of the data.

What makes the above graph so important? 

The fact that the United States is right at the brink of capturing more than 50% of the world’s investment monies by itself.  Globanomics says that we have a global watershed moment to take advantage of because of the above graph. 

Why is this a global watershed moment? 

Because the United States, without some constraints, can continue to gobble up more and more market share.  The person most in the know, can make better decisions than the person not so much in the know.  And from the above graph, it looks like the United States is the person most in the know. 

Mathematically, however, the optimal decision regarding business growth does not propose leaving the world’s business activities to operate in a “laissez-faire” manner.  Mathematically, in globanomics one must consider two options regarding optimal business operations.  One, is it better to put some constraints on a leader?  Or, two, is it better to let the leader operate without constraints?

The mathematical answer would always be the former.  The latter argument leaves open the possibility of either of two extremes: (1) the leader continues to grow until the leader has the whole pie; or (2) some how the non-leaders form together to demolish the leader and take control without any of the ex-leader’s input.  Neither one of those two options would result in an optimal solution.  One option would make the United States totally dominant, requiring little input from the rest of the world.  The other option would mean the world is operating without any input from the United States, which would seem somewhat like a negative considering the United States’ contribution to the concept of freedom.

 So, what do we do?

Globanomics would propose that you freeze the United States’ “share of the total business market value” to 49.99%--make the United States the minority owner with the rest of the world controlling 50.01%!

As crazy as that might sound, it remains the most mathematically optimal decision to make. 

 

But would not such a constraint discourage investments?  No, no, no.  It would not.  Globanomics is not trying to discourage growth, but to promote growth.  Globanomics wants to make a bigger pie.  Globanomics is only saying that we want to keep the leader’s share of the bigger pie to 49.9% so that we maintain a vibrant competitive business environment “world-wide”.   Without constraints, goes unnecessary risk.

Now here is also a well-kept secret in mathematics.  If you are a leader with 49.99% control of something, it is easy to always get more.  As a leader, your decisions impact future decisions more than any other player in the game.  Since your decisions are more important than all the other players, you have an advantage of knowing where you want things to move.  That knowledge gives you an advantage as to where to shift your own investment effort.  And that is where the next EGSB viewpoint comes in again—how investments are spread across business categories.

The following graph shows you the ten-year trend of global investments by business category.

 

 

A picture is worth a thousand words, so I do not intend to explain the above graph to you in full.  However, I will provide a few takeaways that are noteworthy.  Financials seem to dominate business sector investments, even more so than the growing “information technology” category.  Globanomics considers this a joke because globanomics looks on financials as pretty much of a bookkeeping and accounting function—not a “business growth” function like the other categories.  Globanomics recognizes the need for Finance; however, in the future globanomics would expect the percentage of investments in this sector to decline over time, as new and better investment alternatives roll out, including possibly even new business sectors like “space exploration”.

With globanomics new investment “index” products (e.g., Global 2000 fund; Global 1000 fund; etc.) would be made available that would be the safest, yet still valuable growth funds that a novice investor could make.  You don’t have to pay large investment fees for index funds, and the global index funds will offer safety like no other products currently being offered.

The growth in “information technology” investments as a percent of the pie shown in the above graph are noteworthy and sensible.  The world’s investment in the business discretionary category (i.e., autos, trucks, apparel, consumer electronics, furniture, discount stores, restaurants, etc.) seems to be growing—reflecting more goods for more people.  The decline in certain areas like in “energy”, “materials”, “utilities” can be attributed to shifts in investor thinking when compared to alternative options.  There is a lot to information parlayed in the above graph and that is even before one drops down a level and starts breaking down the investment trends for the business categories that make up each business sector.

Now let us take a look at this same business sector information from a national perspective.  The graph below does that.

 

 

What does the above graph tell us?

Well, let us just start out with the big one.  The United States dominates.  Period.

Maybe the United States does not dominate every category, but it sure does for the big categories.  And even in the small categories like Telecommunications and Utilities, the United States does very well.

So, what does that tell you?

It tells you that the United States is the big boy in town and should reserve the right to lead the global community forward from this day forward.  And it really means China is a “paper tiger” from a business view standpoint.

One of China’s most competitive business areas is in Finance, by all means.  We all know why they are high in that category.  It is because of the balance in trade and because of ill-founded Fed actions in the 1990s and early 2000s.  That is going to change now with a smarter U.S. Federal Reserve and with President Biden’s new initiatives to increase the focus on new chip development, new batteries, and new materials developed in the United States. 

Not shown in the above business figures, the United States with its touted national laboratories and school systems has the best talent in the world there, too.

It is just a matter of time before the world discovers the truth.  

 

Why did I specifically pick on China in my above statements?  Because it is China who thinks they might just be able to overthrow the current leader of the world, the United States, thus stopping globanomics altogether.  No other country in the world has the intent or mindset to replace the United States as the current world’s leader.

This China misconception must be acknowledged.

The singular globanomic graph above, by itself, shows how far China is from playing a leadership role in the global community.  Global investors are not flocking to China with their monies—they are flocking to the United States.  Not only that, the United States has “freedom-loving allies”, which also diminish China’s leadership capabilities.  A good question to ask is this:  Who would China really lead if they were the leader of the world?

 

In the National Hierarchy of Needs category regarding Business/Economic Development within the Primary Growth Factor level, the United States dominates the world.  The United States with its companies like Apple, Microsoft, Google, Amazon, etc. lead the world with regards to “global primary growth factors”.  It is the United States that is offering up the products of the future, not China.  Right now, the world cannot even count on China to help much during a pandemic.  It is the United States that has taken up that burden for the world through its pharmaceutical companies.  If the truth were told, the only hope China has to rule the world is through “offensive weapons of mass destruction”.  But we have been down that road before with the Cold War and we know how that war turned out.  There is no reason to believe that a new Cold War would turn out differently than the first Cold War.

Freedom in the business world will win over authoritarianism every day of the week.  Freedom offers “collective input” to help decision making, authoritarianism depends solely on the knowledge level of the authoritarian.  The collective mind is wiser than the singular mind.

 

Another way one may want to look at the global business community is through the eyes of the price-earnings ratio.  Price means “market value” and earnings means “profits” on that market value.  The price-earnings ratio is something that is used to identify “growth” funds versus “steady” funds.  A high price-earnings ratio means that investors are willing to invest more than one would expect based upon earnings alone.  The table below should serve as an example as to how to evaluate the price-earnings ratio.  It shows the sum of the 2020 market value (price) and the 2020 profits for each nation’s share of the Global 2000.

 

 

Association

2020 Market Value ($Billions)

2020 Profits (Earnings $Billions)

Price/Earnings Ratio

Africa

144

14

10.0

Americas

1,894

173

11.0

China

5,970

543

11.0

Europe

10,246

665

15.4

Hong Kong

1,061

100

10.6

India

848

35

24.5

Middle East

2,294

135

17.0

Other Asia

5,953

436

13.6

United States

25,914

1,215

21.3

Total

54,324

3,315

16.4

 

  The above table shows that investors on the whole are willing to pay more for the average stock sold by a United States company than they are for the average stock of a Chinese company when compared to earnings.  The price-earnings ratio for the United States is 21.3 whereas the price-earnings ratio for Chinese companies is 11.0—one of the lowest price-earnings ratios of all the country associations.  Although India’s price-earnings ratio for its Global 2000 companies is even higher than the United States that may be a reflection of the smaller volume of companies evaluated.  There is no inherent reason to believe that investors think India companies have greater potential than companies from the United States, even though that is implied in the above table

The 2020 price earnings ratios for the various business sectors also show how investors seem to evaluate opportunities differently by business sector, too.  The following table shows this:

 

Business Sector

2020 Market Value ($Billions)

2020 Profits (Earnings $Billions)

Price/Earnings Ratio

Consumer Discretionary

7,862

350

22.4

Consumer Staples

4,275

171

24.9

Energy

4,015

256

15.7

Financials

11,181

1,211

9.2

Health Care

5,721

216

26.5

Industrials

4,490

295

15.2

Information Technology

10,678

426

25.1

Materials

2,415

173

14.0

Telecommunications

1,969

106

18.6

Utilities

1.717

111

15.5

Total

54,324

3,315

16.4

 

 

One must be careful interpreting price-earnings ratios, but there is nothing in the above table that seems to be all that shocking.  The two highest price-earnings ratios are in the “health care” and “information technology” business sectors.  The lowest price-earnings ratios are in the “finance” and “materials-industrials-utilities” sectors.  This would seem consistent with current investor thinking that the future is greater for “health care” and “information technology” stocks than for stocks in other alternative business sectors.  I might personally disagree with investors regarding the future of health care stocks, but I do understand how one could continue to expect high growth in this area.  I do very much agree with a low price/earnings ratio for the “finance” sector.  Investors seem to already know what is ahead for the finance business sector and that is why they want more earnings from that sector before they purchase more financials stock.

 

* * * * *

 

All the above information is so important that I think one should take a moment to stop and think again what the “real business world” data above is telling us.  Here are the obvious takes on the “real world” information:

 

    • The United States dominates the world of business with an approximate 50% share.
    • The “free nations” of the world account for nearly 85% of all global business operations.
    • China is a paper tiger in terms of global business operations.
    • Investors still see more opportunities with the United States and its allies than they do with China.

 

Ignoring the above facts is ignoring the data.  What kind of world do we want to live in if we cannot even believe the information available to us?  Try to refute the United States dominate position in business with alternative data and you will lose.  What alternative data is better than looking at the summation of independently made decisions by the global community of investors?  It’s the global community of investors that choose where they want to invest their funds—no one is twisting anyone’s arm here.  And the global community is consistently putting more of their investment funds with the United States, so much so that the United States has gained a near 50% share of the entire business global stock market.

Personally, I have nothing against China or any other nation in the world.  Globanomics is not a nation-bashing philosophy.  In fact, globanomics looks upon every nation the same--as one of many global contributors advancing global peace and global business growth for the good of all humankind.  The fact, however, is this: globanomics needs a leader to lead the global community.  And globanomics tells us that that leader should be the United States of America.

 

The United States did not capture 50% of the global business market overnight.  This is something that only started to shape itself out when the world began to embrace globalization towards the end of the Cold War in 1989.  Since that time investors around the world started picking the “winners” and “losers” in globalization.  And by looking at the decisions that investors have made over time shows that the biggest winner has been the United States.  Just in the last thirty-years, several companies like Apple, Microsoft, Google, Amazon, Tesla, and even Facebook have grown to be more than $1 Trillion market-value companies.  No other country in the world has offered anything like those companies.  And those companies are just the tip of the iceberg of quality U.S. companies.

How was the United States able to accomplish this dominant position in the world?  How was a country with less than 5% of the world’s population able to capture 50% of the entire global business world?  There is one and one answer only—Individual Freedom--individual freedom for anyone and everyone to use their brain in whatever manner they wish.  No other country in the world has engrained the sense of freedom in its soul than the United States of America.  Combined with constant “new frontier” mentality that most Americans have been taught, the individual freedom concept engrained in America will always give its citizens an advantage over those under some form of authoritarian regime.  And that advantage shows up in the global business numbers.

Communal decisions in the long run are better than authoritarian decisions.  We will get into this subject more in a later chapter, but it explains why the United States was able to dominate the world of business.  The forefathers of the United States (e.g., Thomas Jefferson, James Madison, George Washington) can be credited as much for the U.S. dominance in business as can be the likes of Bill Gates, Jeff Bezos, Zuckerberg, and Elon Musk.  It was the forefathers of the United States that set the stage for the “free global world” of globanomics.

Although not a primary purpose of this book, this last fact raises a question as to why business does not contribute more to fund government operations in the United States.  In between 2020 and 2021 the net market value of the United States’ share of the Global 2000 rose from $25.9 Trillion to $39.1 Trillion—an increase of $13.2 Trillion in one-year!  How much of that “net market value” increase was taxed?  Zero.  Not a single dividend was paid the government for that net worth gain.  Instead all that increased net worth went only into the hands of stockholders.  That is ridiculous!  I consider my time in the military service as being government service, and I always felt that I was making that effort as much for American business as I was for every individual American citizen.  Business needs a good and strong United States government, and it should do its fair share to fund and support it.  (Opinion).

Based upon the information in this chapter, globanomics could in fact be implemented without certain authoritarian-like countries involvement.  The free world could implement globanomics and simply operate in a globanomic manner without working with authoritarian regimes.  Something like this would create a new, invisible “Great Wall of China” around the entire perimeter of China.  This would not be good for China, nor would it be good for the world.  Globanomics wants China’s involvement and input.  Globanomics simply wants China to recognize the benefits of freedom over authoritarianism.  There will be more discussion on this later.

Disclaimer: This and other personal blog posts are not reviewed, monitored or endorsed by TalkMarkets. The content is solely the view of the author and TalkMarkets is not responsible for the content of this post in any way. Our curated content which is handpicked by our editorial team may be viewed here.

Comments

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Dick Kaplan 4 weeks ago Member's comment

Nice.  A proper article and very thorough.

Jim Boswell 4 weeks ago Author's comment

It is within a book called Globanomics, which Talkmarkets chose "not" to support.

Danny Straus 4 weeks ago Member's comment

I take it tact and social interactions are not your strong suit?

Angry Old Lady 4 weeks ago Member's comment

With that attitude, why would anyone?  

Dick Kaplan 4 weeks ago Member's comment

How so?  Seems to me that they've been very supportive - giving you a free platform to share your views, helping you amass a large group of followers.  And I understand they are the only site to actually treat contributors like partners and give them equity in their company  You don't seem very appreciative.