Doug Casey: It’s not a sign of healthy capital allocation. Brokers are packaging all manner of cats and dogs to generate fees and commissions. It seems they’re scraping the bottom of the barrel now. Meanwhile, the hoi polloi—I hesitate to call them investors—are desperate for ways to maintain their standard of living in the face of serious currency debasement.
A Disease in the Publi...Thomas FlemingBest Price: $7.17Buy New $32.99(as of 05:25 UTC - Details)
The public is reaching for high yield wherever they can find it. They don’t realize that high yield is usually a sign of high risk.
Brokers and investment banks want to take everything public, to generate fees and get papered up with cheap stock. The public thinks these deals will make them rich. That’s why margin debt has about doubled over the last year.
Owners of perfectly ordinary businesses are led to believe the market will make them wealthy overnight, too, something their business itself could never do.
A lot of small businesses are owned by people getting ready to retire. They’re looking for a way out. But, assuming a buyer can be found, the typical small business can only be sold for three to five times earnings. Hardly enough to fund a retirement.
However, if it becomes publicly traded or merged with a bigger business, it can magically sell for 10 or 20 times earnings.
These are signs of how over-financialized the US economy is.