Business Insight Zone

You know that old curse — “May you live in interesting times”? Given what’s happened over the past couple of weeks in the financial world, “interesting times” may be upon us.

Perhaps you noted that the stock markets fell hard, and repeatedly, last week. Perhaps you noticed that some big companies experienced big declines at the same time that the overall market indices have been flying very high. Big deals are going sour, and some of the biggest deals on the table may not even happen now. And all of this is happening even though the US economy has been pretty robust.

What’s underneath Wall Street’s jitters? Call it a “credit crunch,” or just say that the ocean of cash that’s been sloshing around the markets for the past year-plus seems to be drying up. It’s a funny thing about cash: big spenders (corporations, buyout firms, the Chinese government, Arab oil billionaires, whoever) will spend it freely so long as conditions seem safe and sound, but then it’s very, very easy to put the wallet back in the pocket as soon as conditions appear to head south.

The boisterous M&A market over the past couple of years reflects the Goldilocks conditions that have prevailed in the world of high finance. Maybe the markets will shrug off these problems and resume their money-printing ways. Or maybe the big-money movers are discovering that the porridge has turned cold.

Brace yourself: it could be a bumpy ride.

Category: Deals, Economics