Jim Jubak
It all comes down to cheap money.
Cheap money is fueling the buyout boom. Cheap money is prompting companies to buy back billions of dollars worth of their own shares. Cheap money is fueling big increases in corporate dividend payouts. Perhaps best of all -- for investors long on the market, anyway -- cheap money is keeping the current rally running, even as the U.S. economy runs out of steam, by convincing investors that stocks are undervalued even as they hit historic highs. So how does cheap money work its magic?Sallie Mae's Dance With Debt
Let's start with a recent deal, the $25 billion buyout of student-loan giant SLM Corp.(SLM Quote - Cramer on SLM - Stock Picks), better known as Sallie Mae. On April 16, private-equity investors J.C. Flowers and Friedman Fleischer & Lowe, along with Bank of America(BAC Quote - Cramer on BAC - Stock Picks) and JPMorgan Chase(JPM Quote - Cramer on JPM - Stock Picks), announced a $25 billion bid for Sallie Mae. At $60 a share, the offer represented a 50% premium above the prebuyout bid price of the shares. As you can imagine, shares of Sallie Mae rocketed toward the offer price -- though, thanks to saber-rattling by Washington politicians, the stock stalled short of $60. It seems some folks on Capitol Hill believe that having private investors control a company that makes government-guaranteed loans might be a bad idea. (Wherever do members of Congress get these notions?)
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