Market Timing 1st Quarter 2018
Trump Bump Sustainability?
... In 2016, the Dow was up 14% while corporate earnings were down 19%. The S&P is trading at 26 times trailing earnings while historically it traded at 14 times earnings. These statistics combined with interest rates increases and deficit concerns over the new Federal budget have caused the market corrections and volatility of February 2018.
Supply and Demand
... There are 15 million baby boomers that own companies. What happens when they all come to market? Supply and demand … you will get less for your company. In the next few years, experts believe there will be an $11 trillion wealth transfer to baby boomers. Be sure to get your piece of the pie.
... Right now there is a half-trillion dollar PE overhang. Private Equity Groups have a half a trillion dollars to put to work now by buying companies. Don’t miss the boat.
... Strategic buyers cannot grow organically so they are buying private companies at record levels. Additionally, private equity buyers have such a great overhang; they are paying nearly as much as strategic buyers.
… We’re running a $21 trillion debt and growing daily. The average debt per household is $62,500.00 while the median income per household is $51,000.00. The tax reform changes in December 2017 will nominally bring in less revenue to the US Treasury. Furthermore, the new Federal budget will increase our national debt. Unless the tax reform stimulates the economy at break neck levels, this simply isn’t sustainable.
… In 2017 the Fed raised the short term borrowing rate 3 times with 3 more projected increases in 2018. When that happens your company is losing value and there is nothing you can do about it.
… affect our markets more so than ever. Another September 11th type event or a war with North Korea could put our markets in turmoil or recession for years.
Current M&A Activity
… The first half of 2017 showed an increase of 12% over the first half of 2016 for middle market companies. However, we are well past the initiation of this bull market. The longest bull market in history lasted 113 months. Owners have a window of opportunity right now. All windows eventually close.
You can only control when to enter the market.