Sublime

Over- allocation of capital into the financial economy slows real economy growth rates andmisprices financial economy assets (artificially depressing savings yields). This mismatch, in turn, leads to financial crises as markets force adjustments between asset prices and the real economy cashflows that support them.

M&A is by far the largest source of redistribution of corporate resources among the capital allocation alternatives. M&A deals in 2021 totaled nearly $2.6 trillion, or 13.5 percent of sales. The chart shows that M&A tends to be cyclical. Early movers tend to do better than companies that buy later in the cycle.

separation between the real and financial economies results in protracted capital misallocation, as flows of funds and created credit are focused into purchasing existing assets in the pursuit of stable savings returns from known predictable cashflows and anticipated capital gains in asset values.

the social sectors do not have rational capital markets that channel resources to those who deliver the best results.

In an ideal world, corporate executives would allocate capital to maximize long-term value per share. But, for reasons that are mostly understandable, there’s a lot of evidence that they fall short of this objective