Cringely notes that Wall Street Can’t Count and shares this graphic as evidence:
My first thought, before studying it, was that market cap might not be the right metric for comparing enterprises that have just rejiggered their capital structures. Market cap takes into account equity, but an enterprise is also financed through debt — which can become substantial after, say, receiving a bailout.
But I was thinking far too deeply.
The real problem is that the graphic, produced by J. P. Morgan and distributed by Bloomberg, represents market caps as circles with diameters proportional to the dollar value, when your eye naturally assumes that the two-dimensional circle’s area should be proportional to the dollar value.
So they’ve squared all the values, vastly magnifying the already levered-up changes in market cap. Smooth.