The past year has seen a long list of “XYZ is at its highest level since XXX” announcements. Some notable examples:
NASDAQ tech stocks are back to 1999 levels
Junk bond yields are even lower than in 2007
Junk bond issuance is higher than in 2007
Margin debt back to 2007 levels
Corporate debt is rising faster than in 2007
Stock prices are higher than 2007
Most recently, US mergers and acquisition activity is back to 2007 levels:
What the M&A surge says about the stock market
NEW YORK (MarketWatch) — Merger Monday is now often followed by Merger Tuesday, and investors are cheering a long-awaited resurgence in corporate mergers and acquisitions. But is the pickup something for market bulls to celebrate, or does it herald the end of the rally?
“You worry a little bit that M&A activity tends to pick up as the market matures, and not in the early stages of a bull cycle,” said Mitch Schlesinger, managing director at FBB Capital Partners in Bethesda, Md.
The pickup doesn’t necessarily signal the end of the recovery or of the bull market, but “you do want to put it in the context of a fairly slower-growth environment where people are either buying growth, or they are consolidating industries because of slow growth,” he said, in a phone interview.
Topping $1 trillion
There have been 5,844 targeted U.S. M&A transactions in the year-to-date valued at $1.04 trillion (see chart above), according to Dealogic. This marks the first year deal volume has topped $1 trillion over that period since 2007. Volume over the same stretch last year totaled $597.8 billion.Big-time first-half deals include AT&T’s agreement to purchase satellite-television provider DirecTV and Medtronic’s pact to purchase fellow medical-equipment maker Covidien for $43 billion.
While surging M&A activity can belie nervousness over the growth environment, it also reflects diminishing unease over potential economic and political pitfalls.
“Everyone we talk to is looking forward, not behind. We’re two more years beyond the ‘08-’09 recession. Not that people have forgotten about it, but they’re more concerned about growth targets than they are about another [round of] financial instability,” said Robert Rubino, head of corporate finance and capital markets at RBS Citizens in Boston, in a phone interview.
Some of the links included here are to articles that, like MarketWatch on M&A, take a cautious approach to such records. But the vast bulk of the reporting in the mainstream media is positive, celebrating the new records as a sign of economic progress without asking the obvious question: “If we’re at 1999 or 2007 levels, what subsequently happened back then?” In each and every case noted here, the answer is “chaos.” Overstretched markets and excessive debt led to crises that nearly crippled the global financial system.
This time the milestones are a combination of 1999 and 2007, which implies a more-broad-based financial bubble than occurred in either of those previous periods.
At the risk of repeating the same tired complaint, if the media’s job is to sense patterns and give today’s news some historical context, you’d think the tone of most reporting would be, rather than “Yippee, we’re growing,” “Ooops, here we go again.”