6 ms·

Inflated and leveraged equity assets seem to be driving a M&A spree. This isn't limited to domestic affairs in scope, as Chinese companies with high earning mul

Inflated and leveraged equity assets seem to be driving a M&A spree. This isn't limited to domestic affairs in scope, as Chinese companies with high earning multiples are leveraging their equity to buy out assets abroad (ex: one such company bough a GE business unit for ~$2b). Ee should expect more such events to come. I wonder how much of the Yahoo! Workforce will be laid off once they spin off their core assets.

chdhchchf 11y ago
Found a post on another website today that sums up the developing economic landscape quite well (edited to be more appropriate for HN): >The [austerity/ free market advocates] need to quit [complain]ing and just accept that we need to stimulate the demand side of the economy. The US and Europe are currently headed down the same course that Japan went down, and they're stuck in an inescapable stagnation. We've implemented the same QE and austerity policies that they did years before us, and now we're beginning to experience the same stagnation and gradual decline they did. Just like Japan we're propping up large, [poorly managed], decaying businesses at the expense of everything else in our economy, all while starving our economy's consumers of money. >We've printed tons of money to fund big business, and cut back on social services so businesses won't have to pay as many taxes, and yet we only have a worsening economy to show for it. Unless you want the stock market to be the only segment of the economy that doesn't collapse, quit [explative] complaining and just hand people money.
- Altay- 11y ago
  Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. Maybe we need to allow the free market to function. Who cares if house prices drom from $250,000 -> $50,000 and the Dow from 16,000 -> 3,000? They will eventually be snapped up by someone at some price, thus fulfilling 'demand.' So much debt will be wiped out through defaults in this process as well, it will be great for the average person who will finally be able to afford to meaningfully participate in the investment world. Dividends yields of 2-6% mean nothing to a small time investor, but 20% is something that we could very well see in a liquidation market.
  - Bromlife 11y ago
    > Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. That is not what his comment says. It says we're not doing the stimulus needed.
    - protomyth 11y ago
      At this point, I wish folks would look back at the USA from the conclusion of WWII to 1948 and after the 1920 crash. I don't think stimulus is the real answer.
  - dredmorbius 11y ago
    Businesses aren't demand-side. If money is printed, it should go to consumers. Or better, find a way to raise wage levels, while dropping equities, especially real estate. I'm a fan of government as employer of last resort.
  - bitL 11y ago
    You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of wealth (money) increases in time. This is nowadays done basically with inflation only (the profits in trading are more-less inflation these days). Now somebody said that the humanity's greatest shortcoming is the inability to understand exponential function...
    - jsprogrammer 11y ago
      >wealth (money) In most existing monetary regimes, money is not wealth, but debt. >You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of debt (money) increases in time.
    - Relys 11y ago
- LoSboccacc 11y ago
  The problem with EU is neither austerity nor stimulus. The problem is that there are very few local products sold globally and locally and employment is both scarce and ill paid for the populace at large, since local industries moved to cheaper pastures in the 90's or died from competition. There is no crisis to fight in Europe, this is the "new normal" - unless they can get over their collective asses and move forward what schengen has started and become one grand federal state, otherwise everyone will proudly sit on their ruins in a couple decades.
  - bitL 11y ago
    Why do you think federal state with the same fiscal characteristics across EU would help anything? That would bring only deeper centralization, out of touch decision making and inability to capitalize on locality advantages. We already see how Germany utterly dominates EU while giving scraps to the rest, even to France. Now imagine the whole EU would have the same taxes etc. as Germany, but individual states will have 10x less capital. How would that help EU?
    - LoSboccacc 11y ago
      well I was more daydreaming than anything, I don't think more superstructure are needed, especially not under the grip of germany. but the barrier of entry to the market makes it a very uncompetitive are to start a business. just think about the new bullshit vat collection mechanism for online companies, think about southern countries being forced to keep their immigrants while stronger countries can sidestep the Dublin III regulation at their convenience, etc etc. there is a great deal of unfairness, uncertainty, instability and risk in investing in Europe right now. Sure individual countries are fine by themselves, but if you consider them alone then china, usa, india and russia are all bigger markets with more prospect for growth than any single EU nation, while tapping the whole EU as a market means you need to comply with umptheen different codes, customer laws, taxes, exchange rates etc. yes, everyone use the euro except those who don't, and amongst those who do the purchasing power varies by countries so much it's common to have price tiers between different countries.
arca_vorago 11y ago
I've been saying this for a couple of years now. When wealth/wage inequality gaps widen and more and more money is funneled into the top .5%, those people and orgs simply do what they do best: financial, industry, and market manipulation in order to strengthen their positions. Its very dangerous because it makes the already wealthy and powerful even more so, and reduces choices for the consumer, while actually driving up costs because less competition. While its a very simplistic point, the oil industry is a good example of this. Ignoring the greater geopolitical/strategic game around the petrodollar as a reserve currency, what is happening right now is all the strappy young startup oil companies are being gobbled up by the big guys. I'm pretty sure as soon as all the m&a's are done oil ppb will rocket back up.
jngreenlee 11y ago
The challenge with this statement is that Dell is privately owned, so "private equity" as opposed to "public equity"...harder to be overvalued. If what you say is consistent, then EMC/VMware is overvalued in the M&A activity here (and honestly it might be). The best correction I can make is that "leveraged private equity is aquiring inflated public assets"
tomjen3 11y ago
Wait, how does too high prices for stocks mean cause companies to buy stocks? In the hope that the price goes up further, ie a classic bubble?

chdhchchf 11y ago

Found a post on another website today that sums up the developing economic landscape quite well (edited to be more appropriate for HN): >The [austerity/ free market advocates] need to quit [complain]ing and just accept that we need to stimulate the demand side of the economy. The US and Europe are currently headed down the same course that Japan went down, and they're stuck in an inescapable stagnation. We've implemented the same QE and austerity policies that they did years before us, and now we're beginning to experience the same stagnation and gradual decline they did. Just like Japan we're propping up large, [poorly managed], decaying businesses at the expense of everything else in our economy, all while starving our economy's consumers of money. >We've printed tons of money to fund big business, and cut back on social services so businesses won't have to pay as many taxes, and yet we only have a worsening economy to show for it. Unless you want the stock market to be the only segment of the economy that doesn't collapse, quit [explative] complaining and just hand people money.

Altay- 11y ago
Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. Maybe we need to allow the free market to function. Who cares if house prices drom from $250,000 -> $50,000 and the Dow from 16,000 -> 3,000? They will eventually be snapped up by someone at some price, thus fulfilling 'demand.' So much debt will be wiped out through defaults in this process as well, it will be great for the average person who will finally be able to afford to meaningfully participate in the investment world. Dividends yields of 2-6% mean nothing to a small time investor, but 20% is something that we could very well see in a liquidation market.
- Bromlife 11y ago
  > Your blurb seems to contradict it self. It claims we need stimulus then it says the West & Japan tried this already and it hasn't worked. That is not what his comment says. It says we're not doing the stimulus needed.
  - protomyth 11y ago
    At this point, I wish folks would look back at the USA from the conclusion of WWII to 1948 and after the 1920 crash. I don't think stimulus is the real answer.
- dredmorbius 11y ago
  Businesses aren't demand-side. If money is printed, it should go to consumers. Or better, find a way to raise wage levels, while dropping equities, especially real estate. I'm a fan of government as employer of last resort.
- bitL 11y ago
  You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of wealth (money) increases in time. This is nowadays done basically with inflation only (the profits in trading are more-less inflation these days). Now somebody said that the humanity's greatest shortcoming is the inability to understand exponential function...
  - jsprogrammer 11y ago
    >wealth (money) In most existing monetary regimes, money is not wealth, but debt. >You need perpetual growth because all math models used in financial industry are based on perpetual exponential growth - imagine insurance companies, profitability, attractiveness of financial services, hedging etc. is based on the assumption the amount of debt (money) increases in time.
  - Relys 11y ago
LoSboccacc 11y ago
The problem with EU is neither austerity nor stimulus. The problem is that there are very few local products sold globally and locally and employment is both scarce and ill paid for the populace at large, since local industries moved to cheaper pastures in the 90's or died from competition. There is no crisis to fight in Europe, this is the "new normal" - unless they can get over their collective asses and move forward what schengen has started and become one grand federal state, otherwise everyone will proudly sit on their ruins in a couple decades.
- bitL 11y ago
  Why do you think federal state with the same fiscal characteristics across EU would help anything? That would bring only deeper centralization, out of touch decision making and inability to capitalize on locality advantages. We already see how Germany utterly dominates EU while giving scraps to the rest, even to France. Now imagine the whole EU would have the same taxes etc. as Germany, but individual states will have 10x less capital. How would that help EU?
  - LoSboccacc 11y ago
    well I was more daydreaming than anything, I don't think more superstructure are needed, especially not under the grip of germany. but the barrier of entry to the market makes it a very uncompetitive are to start a business. just think about the new bullshit vat collection mechanism for online companies, think about southern countries being forced to keep their immigrants while stronger countries can sidestep the Dublin III regulation at their convenience, etc etc. there is a great deal of unfairness, uncertainty, instability and risk in investing in Europe right now. Sure individual countries are fine by themselves, but if you consider them alone then china, usa, india and russia are all bigger markets with more prospect for growth than any single EU nation, while tapping the whole EU as a market means you need to comply with umptheen different codes, customer laws, taxes, exchange rates etc. yes, everyone use the euro except those who don't, and amongst those who do the purchasing power varies by countries so much it's common to have price tiers between different countries.

arca_vorago 11y ago

I've been saying this for a couple of years now. When wealth/wage inequality gaps widen and more and more money is funneled into the top .5%, those people and orgs simply do what they do best: financial, industry, and market manipulation in order to strengthen their positions. Its very dangerous because it makes the already wealthy and powerful even more so, and reduces choices for the consumer, while actually driving up costs because less competition. While its a very simplistic point, the oil industry is a good example of this. Ignoring the greater geopolitical/strategic game around the petrodollar as a reserve currency, what is happening right now is all the strappy young startup oil companies are being gobbled up by the big guys. I'm pretty sure as soon as all the m&a's are done oil ppb will rocket back up.

jngreenlee 11y ago

The challenge with this statement is that Dell is privately owned, so "private equity" as opposed to "public equity"...harder to be overvalued. If what you say is consistent, then EMC/VMware is overvalued in the M&A activity here (and honestly it might be). The best correction I can make is that "leveraged private equity is aquiring inflated public assets"

tomjen3 11y ago

Wait, how does too high prices for stocks mean cause companies to buy stocks? In the hope that the price goes up further, ie a classic bubble?