Thursday, 26 July 2007

Market tumbles

Three weeks ago, a "banker who knows" told me that the ability of the PE sector to raise "Cov-Lite" funding had stopped abruptly. I was told that the Alliance-Boots deal was some £7b light and having great problems. Since then, the extent of their fund raising difficulties has been made public.

PE-backed "Public to Private" deals have been fueling the rises in the Stock Markets of late - including the tech. sector. For some reason, today seemed to be the day that the markets woke up to the fact that without "Cov-lite" PE deals the market may be ever so slightly overvalued. Given that I am hardly an "insider" I wonder why they took so long? The FTSE100 fell 203 points (c3.15%) to 6251. Wall Street seems to be going the same way as I write.

Is this a "one day blip" - of the kind that gets everyone worried and then it all gets forgotten as the market recovers and, indeed, continues its one way climb?

Or is this the start of the long forecast "correction"?

I'll stick my neck out and suggest the latter. Don't think we will see a crash though, which I think is defined as a 10% decline. But I wouldn't be surprised if we didn't "test" 6000 again soon.

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