Takeover Madness

OK, I wake up several minutes ago, fire up the computer, go to Bloomberg.com, and what do I see: more friggin takeover news!

Every day for the past couple of months there is more M&A activity than I can remember EVER (perhaps during the last cycle I was not paying attention).

Murdoch wants Newscorp, ABN Amro is being bought (I'm happy about that one, because we're making a few bucks off of that), Now Mr. Bill Gates and Co. want to buy Yahoo! Yahoo as of last night was a broken stock, now this morning I expect big action and the corresponding pompom waving on CNBC. It might even give the Nasdaq a little nudge, at a time when the QQQQ's are looking just a tad vulnerable too.

What does all this mean?

It seems to be that it would indicate some degree of earnings deceleration in many industries that would make the "synergies" of becoming Hugecorp look good. It would indicate that retail chains have built themselves into a situation where they are cannibalizing their own earnings. Banks are dealing with declining margins and the mortgage industry that is teetering on the brink. Newspapers, even good ones like the Journal are dealing with declining circulation because more and more people get their news from the web. Yahoo, not being Google, is not making so much money, despite being a really great webpage provider.

In short, takeovers are happening because in many cases management thinks it is the only way forward, so that their stocks don't start cratering and they lose their jobs after dealing with angry shareholders. It is the corporate version of throwing maidens into the volcano.

It only works for a limited period of time, but maybe after that these execs will have their huge pay packages and be retired somewhere so who cares.

So stocks are going up; what's the problem??

Indeed...