Quote:
Originally Posted by turbo6bar
Risk is being repriced.
Two years ago, I predicted housing woes would eventually take down the economy. However, I never expected it to roll like this.
I wonder when the market will realize the environment has changed. It may no longer be feasible to grow earnings via stock buybacks.
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Don't think stock buybacks will be affected. Typical buyback is a company w/ $1BN cash, zero debt, strong cash flow borrows additional $0.5BN and does accelerated repurchase of $1.0BN in stock. Don't think credit risk has increased much on that $0.5BN of borrowing.
Think LBO and some M&A will be affected. That will be negative.
OTOH, looking at strong pipeline of IPO and secondaries in 2H07. If that dries up, is bullish for stock mkt.