Merger Monday – Dealmakers love trend following

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  • on November 20th, 2006

FreePort (FCX) is being bought out at BIG all-time highs and Equity Office Properties (EOP) the same, proving once again that the biggest trend followers on Wall Street are dealmakers and the investment bankers.

It is too early to tell whether they are stupid prices, but surely both companies could have been had 2-3 years ago at fractions of their cost. So who really is a trend follower and why pay up?

I have to be honest, the bankers suck. They have the analysts, resources, information – the connections to get these deals done at better prices but instead of doing their job, they have become order followers of ego driven corporate management teams.

They see industries and stocks on the rise and they pay up. Chase Manhattan is my favorite bank because they are not ashamed of what the do and have taken the name :) . They Chase clients, accounts and deals.

Of course there are some smart private equity guys, but they do homework. They look for deals and give the marching orders to banks.

Banks are too lazy and poorly structured to find great new ideas because they are chasing industries on the move. They have become momentum hedge funds that make stocks overshoot on the upside and overshoot on the downside.

Until something changes, trends will take prices higher much faster and the same in reverse. It is a good time to be a trend follower despite the low volatility.

No wonder the Private Equity market has exploded in the last 5 years.

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