Monday, June 30, 2014

M&A and Buybacks: Two fuels to the market fire that may be drying up....

Something to think about as we’re counting down to the upcoming fireworks:  Buybacks and M&A. 

In truth, “dry up” is a bit strong, especially for the M&A driver of markets, since large deals continue apace and until the ‘inversion’ motivation is mitigated, one would expect more and more companies to find ways to seize the tax advantage (US labor/economy disadvantage) of acquiring and domiciling overseas.  The slowing is more likely to come from valuations that are making deals less compelling.

But the Buyback craze is seemingly slowing, certainly as judged by rhetoric from CEOs.

Both articles below are a worthy reads on the respective subjects, and ought to raise a caution flag at a time when markets are still at/close to all-time highs!  (See chart below…a little reminder of where S&P has been over the past 20 years!)

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(Please note: This article is solely meant to be thought provoking and is not in any way meant to be personal investment advice. Each investor is obligated to opine and decide for themselves as to the appropriateness of anything said in this article to their unique financial profile, risk tolerances and portfolio goals).
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