Market Discussion - What are your thoughts?

I recently read a report which highlighted how the American market space has changed over the last two decades. The two main points which were brought up were:

1.) The decreasing number of publicly traded firms. In 1996, there were ~11,000 firms which traded on NYSE as compared to 5600 today -a decline of almost 50%.

2.) The growth rate of the economy has been low - mainly due to the presence of more behemoth corporations than small independent firms. Smaller firms as a result of their size and lean operations would comparatively post better growth numbers as opposed to big corporations, where seeking growth becomes relatively hard.

In absence of dwindling growth, the big firms have resorted to booming M&A space to seek growth. Private investments into early stage ideas is another means by which the big firms and funds call first dibs on the promising ventures. As a result, a firm which would have IPOd at a much earlier stage 20 years ago, get easy access to private capital and IPOs at a much later stage - posting comparatively lower growth numbers.

In fact, the number of IPOs listed last year was almost 90 lower than the total number of IPOs in 1996. Private equity funds swoop up a majority of these promising startups - followed by a sales pitch to one of the big corporations - resulting in a hefty acquisition. Most of the big names have significant goodwill in the balance sheets, signifying overpaid assets.

My understanding is that the availability of easy money, lower interest rates and as a result easy capital for the PE funds drives these trends. PE is booming now. But if there is a big market correction - resulting in a significantly conservative monetary policy from the feds - PE industry will see a downturn soon.

Would love to hear thoughts.

Just my morning rant

Comments (10)

Jul 26, 2017

Yields are artificially low, crowding funds into equities. Equities are largely overvalued but I agree with others that EPS (not going into buybacks etc) will keep them propped up into early 2018.

On the other hand given that medical is such an expenditure as a percentage of GDP I think that their could be unanticipated collateral damage to the economy.

Jul 26, 2017

The Dow Jones Industrial Average is only an average of 30 major companies. It's a widely quoted number and because the companies are very big and across different sectors it is used as an indicator of the entire market.

Vaping and the E Liquid Industry are just the latest example of how Big Corporations how subverted the political process to dominate markets. Stay active and aware to keep your rights.

Jul 26, 2017

Someone on here must want to discuss something other than internship/b school applications

Jul 26, 2017

USA = Japan in 1990/91.....deficits will continue to rise over the coming decade (think medicare + social security + public option) and if a few treasury auctions fail --> watch rates soar and credit fall apart past current levels.

Commercial Banking will not recover until C&I loans bottom sometime in 2010 or 2011. If you read recent Fed reports, they are most concerned about the coming wave of C&I defaults. Until then, it will be hard for anyone to get credit outside of the debt markets. Things will be real bad if CIT defaults.

Since most commercial lenders are withholding capital for plain vanilla loans, many companies have been turning to the I-Banks to raise capital via formal debt or equity offerings. This has been and will continue to benefit the pure play I-banks (GS, MS, CS, Barclays in US, DB in US).

I'm optimistic about non-cyclical sectors like Technology, Healthcare and Consumer Non-cyclical. The recent deal flow in those sectors has proved their strength even in the face of the recession. The constant "churn" of innovation and branding in those sectors makes it always possible to find areas of strength. I also like anything involved with China and Brazil as they continue to grow and wean themselves off of exports. Not sure about India -- domestic demand needs to catch up.

Dollar will remain weak, especially with other foreign central banks raising rates (e.g. Australia).

Any thoughts?

Jul 26, 2017

I'll take a dozen!

"There are three ways to make a living in this business: be first, be smarter, or cheat."

Jul 26, 2017

really bro?

Jul 26, 2017

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