Proving My Point

The news this morning highlights the tug of war in the market. Jobless claims jumped as the deterioration continues but Intel buys Mcafee for $7 billion in cash. Eventually a bad economy will effect the ability of corporations to buy back shares and do cash takeovers but in trading the journey is more important the destination.

3 comments:

Onlooker said...

I may not have this quite correct, but I believe there was a lot of big company cash hoarding and acquisition activity during the '30-'32 market that kept bull hopes alive also.

Given that I take your point that it can be supportive, at least in the shorter term.

Anonymous said...

As John Hussman has pointed out, the buildup in cash on corporate balance sheets has been counter-weighted by an even greater buildup of debt. It is only in technology and health care where corporations have the true balance sheet strength required for major acquisitions.

Tsachy Mishal said...

I understand that but that is a long term argument. In the short run a lot of cash deals will likely work their way into other stocks. For instance today arbs are buying shares from holders of Mcafee and that cash will likely be redeployed elsewhere.