How far can the bull go?

Discussion in 'Economics' started by ISLM, May 6, 2007.

  1. ISLM


    Whenever the stock markets in the world keep breaking their record high, M&A activities are actively progressing in the markets and blue chips prices are in their high prices, history told us that investors should be alerted to all these signals because it seems to be the time of the crash of the stock markets.

    Apart from the new record high of Dow Jones, the current hot topics are the M&A activities like the Dow Jones & Company Buyout proposed by Rupert Murdoch, the Reuters buyout offered by Thomson and the merger of ABN AMRO and Barclays. Will the next deal presented by Goldman Sachs since they have just created a historical huge private equity fund ($20 billion actual amount but can translate into $100 billion buying power) which is enough to purchase its competitor like Bear Steans or Morgan Stanley. The buying power of private equity is enormous. The global mergers and acquisitions in 2006 increased to US$3.9 trillion which exceeded the peak in 2000. The M&A activities are getting more frequently, the bidding prices are getting higher. This is one of the reasons that Orica, the Australian-based world’s largest explosives maker, has rejected the bid by a private equity. Meanwhile, Australia was the busiest M&A market in Asia Pacific (exclusion of Japan) year 2006. Steven Harker, the chief executive Australia for Morgan Stanley, stays positive on such activities (Reuters). The markets’ situations are similar to what happen in year 2000, aren’t they? The issue of AOL and Time Warner could be one of the representatives of the merger at that time. Certainly we can not directly compare the stories of AOL and Time Warner to those M&A activities today because the backgrounds are a bit different. But it somehow gives us an insight of what the stage of markets is heading to. While the merger of MSN and Yahoo is no longer active, what would be the next remarkable M&A deal this time? People are expecting some surprise news and let's keep an eye on it. Attached with the record high Dow Jones index, people now seem have forgotten about the problem of subprime mortgage, some of them even said the proportion of such mortgage is small compare to the total mortgage size. But the fact is that default rate keeps jumping. sooner or later such issue will be arisen in the market again, speculators are everywhere. Thus different levels of the bubbles are in the markets.

    Whilst many investors and noise traders are still enjoying the zero-sum game at the moment, some of the professional traders should have been working hard on their strategies to cope with the changes in the coming future. Who will be the last lucky person to leave the market before the bear comes? Would that be you?

    - Chin H Mak
  2. Give it 12-18 months after the squeal to Wall St. comes out. The excitement for the markets and "big money" that that film will generate will suck in the dumbest money.
  3. tef8


    leave the market? and miss the shorting opportunities? Naw.
    Just gotta keep yer peepers open and be alert.
  4. trad3r


    yeah, i second u. go short by then.. winning or not depends on what position u take. any other thought out there?