Financial markets are different from other markets. And the way we relate to them is different too.
Shops, for example, would never seek to win new customers by advertising ‘Prices increased 10% last week’. Instead, they splash red signs across their windows featuring their ‘new, lower prices’.
But sellers of financial products do the exact opposite. Their advertising focuses on funds that have recently moved up in price. Neither they, nor share tipsters, spend much time on companies whose price has recently fallen.
CEO’s are just the same as the rest of us. None got out their cheque book to make an acquisition 2 years ago, when most shares were dirt cheap during the height of the Crisis. But now prices have doubled, or more, they are lining up to buy.
As Bloomberg note:
• Specialty chemicals have seen deals worth $25bn so far this year
• This is the highest M&A (Mergers & Acquisition) level for a decade
• In 2010, just $3bn of deals were done in the whole of H1
Are specialty chemical prospects suddenly that much better than a year ago, or 2 years ago, when expectations and prices were very much lower? The blog, being a good contrarian, rather thinks not.
Lubrizol, Danisco, Rhodia and the other recent acquisition targets are all good businesses. But the current frenzy of deal-making is perhaps yet another warning sign that the top of the market is not far away.