Some Statistical curves give the advantage to the billionaires whose fortunes are rising much faster than the economy.
We are also discovering that the world’s biggest companies are sitting on mountains of cash – USD 3,000 billion – and that they carry no debt.
An additional conundrum for the modern theory of finance.
Are the followers of the “leverage effect” in their role when they fight against the followers of Modigliani Miller?
The former believe in the virtues of corporate debt as a way to maximize the shareholder return on their investments.
The latter refuse to believe in it and they insist on the fact that companies do not change value by transferring debt to the shareholders.
And what do we see ultimately?
We see many big wealthy companies that are not indebted owned by wealthy shareholders that owe nothing to the bank!
The Finance theorists should do better and change their mind to discuss together about the plight of the poor and indebted companies owned by the poor and indebted shareholders.
That would only be fair!
Dominique F. Pasquier