Why I Would Not Hold Short Over The Weekend

There is a good chance we see a Merger Monday as :
  • Top M&A lawyers have publicly stated in the press that they have been really busy and there is a robust pipeline. Whether agreements get reached is a separate issue but the potential is there.
  • It has never been easier and cheaper to borrow for large companies
  • Many companies are sitting on a lot of cash, especially in tech and healthcare.
  • A number of mega cap companies have publicly stated that they are on the hunt. Nestle, Sanofi and BHP come to mind immediately.
I believe that M&A would have a compounded effect at this point. Not only would the cash entering the market help, but it could have the addittional effect of getting the extremely negative sentiment to swing back towards optimism. If I were a bear I would wait until Monday to see if a merger materializes before going short.

2 comments:

Johnny said...

I will remain short through the weekend, and will add to shorts on Monday. I feel there are too many people saying 'don't be short headed into the weekend.' I also beleive that M&A happens when sellers are willing to sell, which is usually not at rock-bottom prices.

Anonymous said...

Nice call on closing on the high. I increased my short position by about 10% on the close. I too am hearing everyone talk about "don't be short over the weekend". I also saw a lot of people talking about how oversold we were and "due for a bounce". So I expect there to be good supply if we open up higher on Monday.

We'll see what kind of follow through we get from here. I would be impressed if we were able to go more than another 1-2% higher.

I expect the 900s in a matter of weeks and the 800s in a matter of months on the S&P. I expect GDP projections to start getting hacked over the next few weeks, and the earnings estimates will come in after that.

JD