An Alternative To Money Market Funds
November is behind us and what a month it was!! Last month, all of the major indices reached all time highs. The latter part of November brought news of a new Covid strain (Omicron) which has provided fresh concerns about the spread of this new strain. As of December 3, the yield on the 10 Year US Treasury fell to 1.35% as investors sought refuge in this safe haven asset.
Last Friday’s Nonfarm Payroll Report (NFP) was surprisingly weak. 210,000 jobs were added last month, well below the forecast of 573,000 jobs. On a positive note, the unemployment rate fell to 4.2% from 4.6% in October. The Labor Participation Rate rose to 61.8%, up from 61.6% in October. Finally, the widely followed U-6 rate fell to 7.8% from 8.3% in October. By the way, the first NFP report of 2022 will be released on January 7.
On November 22, the White House announced Jerome Powell has been nominated for a second term as Fed Chairman while Lael Brainard has been nominated for Vice Chairwoman.
On November 8, Federal Reserve Governor Randal Quarles announced he was stepping down in late December. As a result, President Biden will have four slots to fill at the Federal Reserve.
Note the Fed’s final meeting of 2021 will take place December 14-15.
NEW REGULATORY ENVIRONMENT
On November 16, the US Senate confirmed Jonathan Kanter as Assistant Attorney General of the Antitrust Division of the Department of Justice. As a result, the landscape for Mergers and Acquisitions has changed dramatically. On June 15, Lina Khan was confirmed as Chairwoman of the Federal Trade Commission while earlier this year Tim Wu was appointed as an advisor for the National Economic Council. These 3 appointments have sent a clear message to corporate America that large corporate combinations resulting from mergers and acquisitions will receive a great deal of scrutiny, thus limiting the chance for success.
All 3 of these individuals have stated their firm opposition to large corporate combinations. Let’s look at recent examples. Back in June, the FTC sued to block Aon’s acquisition of Willis Towers Watson. This deal was called off days later!! Then last Thursday (December 2), the FTC sued to block Nvidia’s acquisition of Arm Ltd., the UK chip designer, all but killing this deal as well. This new regulatory environment is a clear sign of how differently the Biden Administration will treat M&A activity as compared with the previous Trump administration.
A clear beneficiary of the new regulatory regime is the Private Equity industry (PE). These firms have rarely seen any of their proposed acquisitions receive much regulatory review. As a result, firms such as KKR, Apollo, Carlyle et al. will face scant competition for their acquisition targets with corporate America sidelined by the Biden administration’s new regulatory regime.
My weekly radio show is now on holiday and should return soon on WWPR 1490 AM. My prior radio shows and newspaper columns are available here.
If you are unhappy with the returns now offered by money market funds, feel free to contact us.