Little guys have always been going under. It's just happening at a faster clip now.
Its part of the market. Companies that become unprofitable now have assets that are of more value than the total value of the firm.
In an economic downturn, this occurs more often. As a result, other companies that are more profitable can buy up these assets:
Tobin's 'q' theory
Economics theory of investment behavior where 'q' represents the ratio of the market value of a firm's existing shares (share capital) to the replacement cost of the firm's physical assets (thus, replacement cost of the share capital). It states that if q (representing equilibrium) is greater than one (q > 1), additional investment in the firm would make sense because the profits generated would exceed the cost of firm's assets. If q is less than one (q < 1), the firm would be better off selling its assets instead of trying to put them to use. The ideal state is where q is approximately equal to one denoting that the firm is in equilibrium. Also called general equilibrium theory or 'q' theory, it was proposed by the US Nobel laureate economist James Tobin (1918-).
http://www.businessdictionary.com/definition/Tobin-s-q-theory.htmlThe explanation is that as companies have a q that is less than one, they have more assets than the value of the company. In an economic downturn, more companies now have a q of less than 1.
There's your economic lesson for the day.
IF THE ECONOMY IS ALLOWED TO WORK NORMALLY, we will have creative destruction: current assets will be sold off and picked up by other firms. Employees and owners will find something else where they are more highly valued.
It sucks for those in that position, but without it, we'd still be driving horses and buggies. (or steam cars, or model T's, or....)
However, what will happen right now, I cannot say because the rules keep changing. (Which is why Wall Street is rather skittish)
