Sunday, March 9, 2008

What Hurt The Market Can Now Save It

One of the big contributors to he market failing this year, other than the housing and financial implosion has been the screeching halt of M&A activity. Not only did it grind to a stop but the deals that were in play, flat out failed and buyers walked away. I believe private equity has been quiet not because they believe the world is coming to an end, just the opposite,they are keeping their powder dry to pounce on companies that in some cases have been unjustly oversold. One of the big criticisms of private equity in the summer months was that they were really not acting like smart money but stupid money. They were clearly overpaying for some deals. They had liquidity bursting from the seams and felt they would be left out if they didn't buy something. One of the major reasons the market exploded in early 2007 was because of private equity buying, it was viewed as a signal to the market that things were cheap. I think a real deal,a substantial deal, will dramatically help change sentiment and the crowd mentality that "things are cheap" will then kick in once again. Still a little early, but it will happen. I am slowly starting to get a healthier view of things in here. I still want the VIX a little higher and want to see fear. Honestly, I am amazed they didn't take us down 350 on Friday. They had every opportunity.


Jack said...

We all want to see the 350 to 600 wash out day,dont we? But that would be way too easy. I read of so many who are waiting for this moment, it makes me wonder if we will get so clear a signal.
If we go into the recession so many are predicting,doesnt energy have to implode? Both my wife and 22 year old daughter chose activities this weekend that did not involve driving specifically because of gas price. I had never seen this before in my family, yes anecdotal but with so much energy in the hands of speculators,banks,and wall street even a small decrease in demand might set off a short term collapse in prices. Energy looks a lot like homes a few years back and tech before that.

upsidetrader said...

hey jack

i agree,nothing goes strait up or down,look at ag. and metals,they take breathers on their way to the final destinations.i posted a poll about oil this week on the blog and it looks like $110 gets hit first, at least so far. On another funny note,i got a late start this morning-why you ask? i went to my driveway and was out of gas,must be some kind of subconcious aversion to filling her up
have a great day

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I am a former hedge fund manager, broker and capital markets dude who now trades for his own account. I love what I do. I will try to post some stocks and an occasional chart that looks attractive for entry.I will also try to point out the idiocy of conventional wisdom and the lack of value added by the mainstream financial media. These postings should not be viewed as recommendations.