First day of Hurd'n'Catz at Oracle: It's dis-fur-pointing for Wall St Oracle posted results that missed analysts' expectations yet again on Thursday, in a Q1 2015 earnings report that was all but overshadowed by the unexpected news that Larry Ellison has stepped down as CEO. Revenues for the quarter were $8.60bn, a scant 2.68 per cent gain over the same period a year ago and below even the …
Newsflash To Fed: 122 Billion Bottles Of Beer On The Wall Is About Asset Bubbles, Not Jobs
The item in question is a $122 billion globally syndicated loan to facilitate an Mergers & Acquisition deal between the world’s two largest beer companies—AB InBev with a 20% global market share and SABMiller with 10%. Needless to say, the only possible reason for creating a monstrosity with $60 billion in sales spread among scores of highly differentiated regional and national beer markets is the “synergy” euphemism—-that is, the “savings” from thousands of job terminations especially in those two paragons of job growth known as North America and Europe.
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In fact, at the rumored $122 billion, the loan now brewing would amount to 6.5X free cash flow. In a no-growth business in a world where interest rates must eventually normalize–that is sheer lunacy. But it well explains why our monetary politburo is so reluctant to let interest rates normalize and is so deathly afraid of a Wall Street hissy fit.
None of this would happen in a world with honest interest rates and stable two-way capital markets for the simple reason that the financing could not be raised; boards and CEOs would have no momentum driven stock market inducing them to engage in patently irrational mergers; and, in any event, short sellers would swiftly punish serial roll-up machines that destroy rather than create sustainable economic value.
You'll be telling us next that Wall Street is a pump and dump operation and the job of analysts is to pump and dump stocks on a cycle that suits bank traders. A fine tinfoil hat conspiracy theory.
And then some Marxist will come along and suggest that perhaps companies might be better run if their share prices were not so exposed to the vagaries of the stock market, because perhaps the opinions of a load of traders and analysts who have never delivered a product or service in their lives might be less reliable than the views of people who have. Though, to be fair, "private equity companies" seems to be a euphemism for "pirates who loot everything while nobody is looking". So there is that argument.
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