MAPping the Future: Financial markets–how large are they?

The author is an entrepreneur who wrote the books “The Peso Exchange Rate: Why Are We So Poor?” and “The Philippine Economy: Do Our Leaders Have A Clue?” This article was published in the Philippine Daily Inquirer.

WE MEASURE the size of a company by its assets, net worth or sales.

We measure how big an economy is by its gross domestic product, exports or foreign reserves.

How does one measure the size of the financial markets?

Fortune’s top 500

Here is an interesting series of statistics from Fortune’s Top 500 corporations in the United States. (Source: http://money.cnn.com/magazines/fortune/fortune500/2007/ full_list/.)

In 1955 Fortune’s top 50 included only companies, which produced goods and services in the real economy.

In this list, not a single bank or financial intermediary appears. Neither in the top 500.
Here is a sampling of the top 50 companies in 1955: General Motors, Exxon, US Steel, DuPont, Bethlehem Steel, AT&T, Kraft, Goodyear, RCA, Firestone, Uniroyal, Alcoa, Wilson, United Technologies, American Can, Rockwell Automation, Eastman Kodak, Armco.

Many of these names no longer register in front page news.

The first time a financial markets operator appears in the Fortune top 50 corporations was in 1995 when Citigroup ranked number 37. That is 13 years ago.

Let us consider 2007 records. In this year the list of the Fortune top 50 corporations includes the following 13 financial operators: Citigroup (ranked No. 8), Bank of America (9), AIG (10), JP Morgan Chase (11), Berkshire Hathaway (12), Morgan Stanley (20), Merrill Lynch (22), Goldman Sachs (24), MetLife (37), Wells Fargo (41), Wachovia (46), Lehman Brothers (47) and Freddie Mac (50).

That is 13 out of 50!

Give another 10 years and we will see the figure reversed. Grant another 20 years and the top 50 corporations may likely all be financial operators.

History is truly more fascinating than fiction.

Read on (in .pdf, 5pp.).

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