Morning Commentary
It was leaked this week that the Justice Department would look to block two proposed mega-mergers in the healthcare insurance sector over fears of less competition. Forgetting about the richness of that rationale based on the lack of pro-competitive features missing from Obamacare, the reasoning follows an old fear of business and doing business that doesn’t take into account the global competition or the Internet.
With behemoths including Walmart (WMT) that’s struggling against its web-based rivals, it stands to reason that brick-and-mortar sellers of office supplies would be getting crushed; well, they are. The best thing the administration could have done was to expedite the merger of Staples (SPLS) and Office Depot (OPD), buying two American companies some time to try and stay alive.
Halliburton (HAL) and Baker Hughes (BHI) are the number two and number five drillers in the world, but the number one driller is Schlumberger (SLB) with a value about equal to the combined American rivals. As oil prices plunged, U.S. oil rig count tumbled from 1,929 back in November 2014, to a recent low of 404 in May of this year -China has retaken big chunks of the share.
Still, the Obama administration drew a line in the sand because of its principles.
Announced Deals |
Value |
Staples & Office Depot |
$6 billion |
Halliburton & Baker Hughes |
$28 billion |
Aetna & Humana |
$37 billion |
Anthem & Cigna |
$48 billion |
However, that line was blurred and principles dumped yesterday when the administration gave the greenlight to a $108 billion merger, blending together the world’s number one and number two brewers, Anheuser-Busch In-Bev, Budweiser (BUD) and SABMiller (SBMRY). The administration took pride in caveats that protect craft brewers, but failed to mention the biggest American winner in this deal is Warren Buffett.
Announced Deals |
Value |
In-Bev & SAB Miller |
$108 billion |
President Obama’s war on business and the antiquated notion of U.S. monopolies has hurt the nation, resulting in a weak recovery and disappointing job growth. That’s an ideological mistake. The news this week proves this is more than just ideology, and that means it’s more than a mistake. It’s even more than hypocrisy; however, that’s the nicest word I can use.
Today’s Session
Earnings this morning are mixed at best, and as a result, equity futures, which were up big time earlier this morning, are now drifting and pointing to an up open but unconvincing start to the session. With the nine day Dow winning streak now snapped, investors might need something special to jump back into the fray. The train, which had left the station, is now stalled. But keep in mind if previous resistance continues to hold as support, it will give the next leg higher credibility. In other words, big money is on the edge of its seat and you should be as well.
Comments |
Watched the RNC and Trumps acceptance speech last night. Although he is NOT Reagan, he does share something I haven't seen since. Namely a STRONG leader. We have a leadership vacuum. His strength to not only invite all his opponents to speak and NOT control their content is remarkable. But the real tell was his having read Cruz speech two hours before and letting him go ahead and give it. That only comes from strength. Mark my words, this election will not even be close, it will be a landslide. many will not know why, they will just vote for Trump. That is what happens to a true leader. Oh, and of course just like Reagan there will be the haters...Trump truly is for all of us! Ray Weldon on 7/22/2016 9:48:25 AM |
Obama's antitrust analysis and policy is based on two simple things: 1. "Reward your friends and punish your enemies" - his words. Crony capitalism and the converse(e.g. Halliburton = Dick Cheney/defense contractor = evil); and 2. Advancement of collectivist and Marxist principles by distorting and destroying free markets, thereby paving the way for for government regulation leading to government control. j levin on 7/22/2016 10:02:50 AM |
Maybe Donald can get the trains (and planes) to run on time. z on 7/22/2016 10:38:02 AM |
Totally agree with your assessment on the M&A situation. The approval of InBev/Miller makes no sense. Letting #1 & #2 merge in an industry that has little or no regulation on pricing and profit vs. #2 & #4 (Anthem/Cigna) or #3 & #5 (Aetna/Humana) in health insurance where premium rates are either regulated in the small group and individual coverage markets or, for larger customers, negotiated heavily. The EU generally fights mergers very strongly, but many other countries also approved InBev/Miller. Perhaps the lack of a significant block of business outside the US is what hurt the insurers in these mergers. It is almost as if the payback for agreeing to Obamacare and causing carriers to lose millions on the individual market wasn't enough, so no thank you - merge for strength in the future is out of the question. Insanity reigns in the DOJ. Lee Doble on 7/22/2016 11:05:13 AM |
Great comments all. Dave Begley on 7/22/2016 11:22:52 AM |
DITTO!! TOM HOLCOMB on 7/22/2016 2:04:36 PM |
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