Has the M&A bubble just burst with the withdrawal of Twenty-First Century Fox's bid for Time Warner? Does the broken proposal have adverse consequences for the broader market? These questions will be asked by many investors tonight.
Remember on October 13, 1989, there was a mini market crash after the breakdown of the leveraged buyout of what was then UAL Corp. (arguably caused by the Association of Flight Attendants pulling out of the deal). The arbitrage community was hit badly; some larger arbs even went out of business.
Not only did the U.S. stock market fall by about 7% in one day (and the transports dropped by more than 12% in two days) but the junk bond market also collapsed.
A mini Black Swan then -- and possibly now.
After Jim Cramer read the above post, he suggested that I should craft a column on why 2014 will likely be different than the 1989 mini market meltdown.
Jim has a wonderful idea, and he is 100% correct that conditions in 2014 (economic, interest rate, etc.) are indeed different than 25 years ago.
So without further ado, here is my follow-up to Jim Cramer's suggestion that I might explain why 2014 is different than 1989, when the UAL leveraged buyout was aborted, and why it is not a given that this year's stock market might fall in reaction to the abandoned M&A deals of Sprint (S)/T-Mobile US (TMUS) and Twenty-First Century Fox/Time Warner as deeply as it did 25 years ago.