Monday, July 24, 2006

I just can't do it...

This week's Barrons showcased lots of value in large caps. But I just can't bring myself to do it. I can't risk buying anything while the market punishes anything except accelerating growth.

Mergermania is out of control. Today marked the announcement of the largest LBO in history, along with AMD's $4.2 billion buyout of ATI. It looks like mergermania is now bigger than ARM's. Stock buybacks, LBO's, and mergers will add up to over $1,600 billion. That's 13% of GDP. With this much hysteria, we should be able to spot some bad marriages and remember to short them when there's a downturn in the economy. Also, this reminds me of the short I have on IDT. Instead of paying off their debt, they are buying back stock when they have negative cash flow.

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