A new milestone, albeit a depressing one for Russia, has been reached in the U.S. stock market. Apple Inc. is now worth more than the entire Russian stock market combined.
According to Forbes, the data doesn’t lie. Though it might seem a little odd that one single company is now worth more than the entire publicly traded market of a major economy, it is true. But as Forbes points out, this isn’t so much a story about how wonderfully Apple is doing, but more indicative of how appallingly bad Russian public policy is.
Bloomberg points out that not only is the company worth more than Russia’s entire stock market, it is worth about $121 billion MORE than their entire stock market. What could Apple do with the extra $126 billion after it bought out the Russian stock market? Why not buy every single person in Russia a contract-free iPhone 6 Plus?
“If you owned Apple Inc. (AAPL), and sold it, you could purchase the entire stock market of Russia, and still have enough change to buy every Russian an iPhone 6 Plus.
The CHART OF THE DAY shows the total market capitalization of all public companies in the world’s largest country slipped below that of the world’s most-valued company for the first time on record. The gap, at $121 billion on Nov. 12, is about the price of 143 million contract-free 64-gigabyte iPhones, based on Apple Store prices.”
It is also important to note that Apple is worth more than the Russian stock market despite the fact it is considered highly undervalued. Reuters notes that Billionaire activist investor Carl Icahn has urged Apple’s board to use its $133 billion cash stockpile to buy back more shares of the company.
“We believe Apple is dramatically undervalued in today’s market, and the more shares repurchased now, the more each remaining shareholder will benefit.”
Therefore, if Apple’s stock rose to meet these expectations, Apple would be worth more than the entire Russian stock market two times over. Let that sink in for a moment. One single U.S.-based company is currently worth more than the entire Russian stock market, and many investors say it is undervalued by almost half. What does this all say about Russia?
Forbes points out that a major issue for the Russian stock market is the country’s leadership itself. The economic effect of Putin’s policy, particularly regarding property rights, is called Putinism.
“Property rights, especially in those oil and gas firms, don’t seem all that secure. Who owns what is not something that seems all that fixed in law: Yukos and more recently Bashneft, and of course the various tribulations of BP over TNK, all lead to no one being quite certain that they do own what pieces of paper say they should own.
Meaning, of course, that share prices, the valuations put on those pieces of paper that allocate at least nominal ownership, aren’t very high. Add in what the Streetwise Professor calls “tunneling,” whereby insiders profit at the expense of the nominal owners of the business, those shareholders again, and we can understand why a $1 of profits in Russia is valued at a rather lower capital value than a $1 of profits in the US.”
[Image courtesy of Businessinsider.com.au]