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Finding a Sea of Calm in the Rising Market Mania – Martin Hutchinson – Money Morning

The markets have begun to swoon and one of the canaries was two Thai tycoons.

This pair of Thai tycoons, neither of them well-known internationally, has made a total of $27 billion in acquisitions in the past year, more than all Thai companies spent abroad in the preceding three years.

That’s the kind of statistic common in today’s global deal mania, fueled by the glut of funny money. It raises a dreaded question: what happens when the music stops, and when global leverage stops being so available?

We’re about to see….

The Thai billionaires – 74-year-old Dhanin Chearavanont and Charoen Sirivadhanabhakdi, 69 – were both well-established in the Thai business community, but nevertheless their combined $27 billion of acquisitions represented a risky gamble.

One bought a wholesaler on 50 times earnings, while the other bought the flagship Singapore brewer Fraser and Neave for $11 billion, quadrupling his holding company’s debt-to-earnings ratio.

The Trouble is Thailand has been here before – and well within living memory. It was an orgy of leveraged and overpriced acquisitions that led to the Thai banking and monetary crisis of 1997 that sparked an Asia-wide crisis and led to the Thai stock market losing nine tenths of its value.

In today’s markets, the aggressive Thai acquirers seem likely to be the first victims of any credit squeeze that might occur.

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Why You Can’t Afford to Ignore the Hindenburg Omen – Money Morning

The Hindenburg Omen-a harbinger of stock market crashes-eerily appeared again last week…and the Dow Jones promptly dropped 205 points. But its appearance brought mostly scorn from the mainstream financial media.

Here are just a few of the headlines from the past week:

  • “Hindenburg Omen is Just Hot Air”
  • “Why ‘Hindenburg Omen’ Is Just a Superstition”

And our personal favorite:

  • “Hindenburg Omen is idiotic, and if you believe in it, you should lose your right to own stocks-or anything”

Several Wall Street analysts reacted as if even being asked about the Hindenburg Omen offended them.

“Let’s not mince words on this subject: This is an example of the worst kind of ‘technical analysis’ – a market signal essentially designated for media sound bites,” Adam Grimes, chief investment officer at Waverly Advisors., told The Wall Street Journal. “The markets may well decline from this point, but they will not do so because of some cleverly named signal. The Hindenburg Omen, we have to say, is mostly hot air.”

Nonbelievers in the Hindenburg Omen say it correctly predicts a stock market crash only 25% of the time, and point out the last time it appeared, in 2010, the markets just kept on rising.

“In 2010 the accuracy of the ‘Hindenburg Omen’ indicator went up in flames and the current situation suggests the same result in 2013,” huffed Daryl Guppy on the CNBC Web site.

Yet an appearance by the Hindenburg Omen has preceded every stock market crash but one since 1985, and if you look closely at the numbers this indicator’s track record is remarkably accurate.

Maybe the doubters don’t know as much as they think they do.

“They call it bogus because they don’t understand it,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald, who called the Hindenburg Omen one of his favorite indicators.

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