Jorge Piedrahita

Bulls Likely To Keep Rally Going For Another Quarter

Just in case you have not been reading the news, from Al-Waleed to KKR, numerous hedge funds, Chinese companies, etc. you name it but everybody seems to be rushing to issue equity before the window closes.

And even a company like Ford is issuing shares in therii tender offer for the convertible preferred they issued in 2002 -- More equity because they sense that June automotive sales at 15.6 million units (annualized) is providing a signal of harder times ahead?

Bulls Likely To Keep Rally Going For Another Quarter

The market now more than ever expects the US consumer to carry on -- I believe the consumer is facing pressure from three fronts:
-- Higher oil prices
-- Lower house prices
-- Tighter credit

In addition we have inflation to continue to feed through the headline number -- it seems the Fed is now looking it as well. I guess Ben also drives and eat.

And finally, the M&A boom will slow down significantly. Yes the private equiyt guys have cash to put to work, but the debt part of it will either be more expensive or less available. Remember, banks hold $250 billion of bridgge loans in their books and praying for a high yield issuance to take them out. The PE guys also have deals that need the HY maket to close -- you saw KKR today quickly realizing that the landscape changed and agreeing to debt limitation covenants in Europe.

The market may continue to go up, but if you buy based on last quarter earnings it is like driving looking at the rear mirror... ...do it at your own risk.