Is This a Sign That the End of the Bull Market Now Looms Near?
The end of our venerable bull market in stocks may loom near, according to this Wall Street Journal article.
Actually, the article doesn't exactly speak to the issue of the stock bull market. Nor do the facts exactly fit the pattern of events that may accompany the end of the line of such markets. Rather, we're told a group of wealthy investment professionals will offer their however-gotten gains to the general public - that's us - in the near future. Or at least the general public in the UK.
It seems these gents who run a private equity concern called Apax Partners LLP want to cash in, and soon. Now, normally if a private equity company offers shares to the public, we would take this as a warning that the stock market may have seen better days. For example, Blackrock offered shares right before the 2008 debacle. The selling partners made a fortune; the shareholders lost value almost from the time they purchased.
But this time, it seems these Apax partners aren't selling shares of the funds they offer to institutional and wealthy investors. In a twist of the normal pattern, they've apparently squirreled away certain investments that were never offered through their funds. Indeed, these investments were held only by the individual partners.
Perhaps our best bet would be to count on the offering of securities by these private equity mavens to the general public as a sign that these particular investments have seen better days. After all, if they were in the the spring of their youth, said investments would likely remain in the personal portfolios of these wise, seasoned investors. Why sell when you've got something you know will be heading up?
Yes, one can make the arguments that these folks simply want to diversify their holdings, somewhat like the corporate executive who sells his company stock from time to time to broaden the composition of his investment portfolio. But that's unlikely, since these folks make a king's ransom in fees charged to their paying customer in their funds. They can invest that cash however they see fit. Plus they now face the public scrutiny that comes with this offering. Indeed, the bloodhounds were already baying having sniffed out the fact that the partners held certain investments privately, rather than offering same to their customers:
We must, however, oppose this interpretation to the various "divergences" that exist, the most publicized of which is the Dow Transports having failed to confirm the highs of the Industrials lo these last six months. Other divergences exist, less publicized but no less stark. These indicate the possibility of - at the very least - a significant correction, if not a looming bear market.
On the other hand, without meaning to jerk this back and forth too much, could it be that the central banks' massive liquidity injections around the world have so compromised the ability of markets to determine fair pricing over time that this time we will indeed witness the end of the bull even as "wall of worry" remains standing? In other words, are market prices so distorted by central bank policy that now one really knows which end is up?
Actually, the article doesn't exactly speak to the issue of the stock bull market. Nor do the facts exactly fit the pattern of events that may accompany the end of the line of such markets. Rather, we're told a group of wealthy investment professionals will offer their however-gotten gains to the general public - that's us - in the near future. Or at least the general public in the UK.
It seems these gents who run a private equity concern called Apax Partners LLP want to cash in, and soon. Now, normally if a private equity company offers shares to the public, we would take this as a warning that the stock market may have seen better days. For example, Blackrock offered shares right before the 2008 debacle. The selling partners made a fortune; the shareholders lost value almost from the time they purchased.
But this time, it seems these Apax partners aren't selling shares of the funds they offer to institutional and wealthy investors. In a twist of the normal pattern, they've apparently squirreled away certain investments that were never offered through their funds. Indeed, these investments were held only by the individual partners.
The investments, which the executives identified and then bought for themselves after rejecting them for Apax private-equity funds, are now being offered through the flotation of a new fund called Apax Global Alpha Ltd., according to official documents.This isn't the usual pattern one finds amidst the professional doings of private equity managers. As the article rightly notes,
The personal investment strategy of the Apax executives is unusual and fraught with potential conflicts of interest because managers should be dedicated to their clients and invest their own money alongside them rather than doing separate deals for themselves...Which leaves us with a bit of a dilemma. Do we count this offering as something akin to the Blackrock offering of days gone by? Can we count on the coming sale of these assets as a sign that stocks are about to be thrown into the dumpster after the longest bull market on record? Something worth pondering?
Perhaps our best bet would be to count on the offering of securities by these private equity mavens to the general public as a sign that these particular investments have seen better days. After all, if they were in the the spring of their youth, said investments would likely remain in the personal portfolios of these wise, seasoned investors. Why sell when you've got something you know will be heading up?
Yes, one can make the arguments that these folks simply want to diversify their holdings, somewhat like the corporate executive who sells his company stock from time to time to broaden the composition of his investment portfolio. But that's unlikely, since these folks make a king's ransom in fees charged to their paying customer in their funds. They can invest that cash however they see fit. Plus they now face the public scrutiny that comes with this offering. Indeed, the bloodhounds were already baying having sniffed out the fact that the partners held certain investments privately, rather than offering same to their customers:
“They should eat their own cooking and not take different approaches,” Mr. van Gisbergen said. “That’s the only way to get full transparency and alignment of interests.”But in the end, we think it best to simply note the offering as a "maybe" warning. Other indicators of impending doom aren't so ubiquitous. Besides, too many people have expressed worry that this bull is ready to expire. Usually the end comes amidst the general feeling that there's more money to be made. Historically, the consensus doesn't call the end of a bull market. Besides, they say a bull market climbs a wall of worry. Worry usually doesn't signal the end.
We must, however, oppose this interpretation to the various "divergences" that exist, the most publicized of which is the Dow Transports having failed to confirm the highs of the Industrials lo these last six months. Other divergences exist, less publicized but no less stark. These indicate the possibility of - at the very least - a significant correction, if not a looming bear market.
On the other hand, without meaning to jerk this back and forth too much, could it be that the central banks' massive liquidity injections around the world have so compromised the ability of markets to determine fair pricing over time that this time we will indeed witness the end of the bull even as "wall of worry" remains standing? In other words, are market prices so distorted by central bank policy that now one really knows which end is up?
Comments