When the markets and the economy are perceived as vibrant, we see a lot of mergers and acquisitions.
This type of activity can be far reaching. In the short term it’s great for the investment banks who collect big fees, usually great for the shareholders of the acquired company and tends to feed the speculative juices of who’s next.
Today we had the opposite. We had Fox recanting a bid for Time Warner, Sprint backing away from a T-Mobile merger due to regulatory concerns which means they had no chance of getting through the Federal Trade Commission, and Walgreens decided not to complete a tax inversion with Alliance Boots, it’s European dance partner.
I bring this up to point out a mood and sentiment shift.
The flip side of vibrant is not so hot.
It’s a great lesson in irony. When the market is hot, CEO’s tend to be lose and free with shareholder money. They usually buy other companies at or near tops.
When earnings are increasing and shares prices are rising, nobody complains.
When share prices are declining and earnings don’t look so hot compared to last quarter, most CEO’s run scared and are reluctant to do the right thing at the right time.
The strong and unafraid will step up and make bold moves the market may not necessarily favor in the short term, but they know will benefit the company in the long run.
These decisions are very difficult, and must come with great conviction and an understanding of long term thinking as opposed to short term rewards.
The bigger picture will become very clear to those paying attention.
We will look back in a few months and identify when the market, economy, sentiment and everything else that drives price discovery will be revealed to have turned, and it will have coincided with the cycle turn in late July.
When a market cycle takes hold, it will affect all things relating to money and the markets.
This is beginning to make for a fantastic swing trading environment.
Today we had a big nothing day in the market, but still warrants a daily analysis video found below.