I use Twitter every day. But not to tweet. Configured to follow the right news sources (BBC, NYT, Reuters, The Economist, RT and others) it makes a truly excellent news feed to keep up with what was going on.

Today my news feed lit up with the story of the Twitter IPO on Wall Street. Bloomberg has the closing share price at $44.90, a 73% jump on the IPO price. That “values” the company at $24,990,000,000. Apparently Twitter has about 1000 employees and has never made a profit.

So what does that mean? Let’s get some context with a random comparison.

Everyone knows what Ford does and how long it’s been around. There’s probably a Ford truck, tractor or car in every country in the world, rich or poor, wired or not. Ford employs about 166,000 people and has about 70 plants around the world. Despite everything going against it in the last 5 years, it makes a profit: around $6,500,000,000 a year. So what does the market value Ford at? $65,340,000,000 according to Bloomberg today.

So, according to the “efficient” Wall Street stock market, Ford is only worth 2.6 times the value of Twitter. Give me a break – that has to be nonsense. Think about all the Ford vehicles around the world that do, and will, contribute to what goes on in the real productive economy – transporting goods and people, plowing fields. Oh, and how will Twitter contribute to that real economy? Hmmm.

What is going on?

Given current economic circumstances around the world, all the theory of business values, and Ford’s history, prospects, industry and financial performance, it would be hard to argue that Ford is not at a value that is about right.

Applying the same tested rules, Twitter is overvalued by an impossibly large multiple. It’s IPO has been caught up in the Wall Street casino.

In the casino, value is determined only by the greater fool game. Prices are bid up on the bet that some greater fool will come along and pay you more than you paid. It’s a game played by bankers and money men in a “market” awash with dollars “printed” out of thin air by the Federal Reserve. It’s a game mostly played out in the huge and opaque $600+ trillion derivatives “market”. But the Twitter IPO just gave Wall Street the opportunity to create a “product” that had a veneer of respectibility (because it is actually a handy tool for your smart phone).

It’s this mentality that blew things up in 2008. It will happen again … probably soon.