Cash Takeovers At Six-month Record In Cautionary Sign For U.S. Equities: Trim Tabs

Cash takeovers of U.S. listed companies hit a record $457.8 billion for the six months through October, breaking the previous six-month record of $406.5 billion for the period through July 2007, just before the credit crisis hit, TrimTabs Investment Research said Tuesday. The record is being fueled by continued cheap borrowing costs and stagnant revenue, TrimTabs Chief Executive David Santschi said in a statement. "It's a lot easier to buy growth with cash or borrowed money than it is to grow a company organically, particularly when the economy isn't expanding much," he said. The trend should be viewed as a cautionary signal for equities, as merger activity tends to rise around market tops as executives use deals to boost earnings late in an economic cycle, he said. Among the bigger cash deals of the last six months were Dell's agreement to buy EMC for $46.2 billion in cash and Anthem's agreement to buy Cigna for $45.0 billion in cash.