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"the U.S. stock market is capitalized at $18.5 trillion. So what really has happened is that the global financial markets have just taken a $42.6 trillion dollar loss of assets."
that statement is a little messed up. Most companies (except banks and a few others) are traded based on P/E not book values. Book values of many companies did go very high over the past 5 years but the market cap of those stock did not follow. They followed the P/E. In many cases bank stocks followed the P/E and not the inflate book value.
So yes $42 trillion was lost in book assets (if that is actually the correct number). But that just brings the P/B more in line to where they should be. The market cap of the stock market will still trade more in line with P/E. The P/E of the markets were not too crazy but because of the recession we are going through the earnings of companies will come down.
To sum this up... All companies are NOT going to 0 because $42 trillion was lost on the books compared to a market cap of $18 trillion.
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