We are on pace to surpass 2007’s record year for M&A activity which was just over $4 trillion dollars. Reading that line again, I can’t help but put the years in focus that followed – everything kicked off with the collapse of New Century Financial.

The Wall Street Journal purports that the increase in activity is a consequence of corporate executives and boards not wanting to be left behind in the frenzy of M&A activity. Kind of like a domino effect with such momentum that traditional barriers and red flags are ignored.

Back in 2007, it all started off with the collapse of New Century Financial. I remember that one clearly, as I held shares in the company – not when it folded fortunately, but shortly beforehand when it was still producing a handsome dividend. The sub-prime lender was supposed to be the value / income part of my portfolio (what a delusion). The panic didn’t immediately ensue, as the denial mentality wrote it all off as a one time event, unrelated to anything in the macroeconomic picture.

What’s going on so far this year in terms of corporate bankruptcies? We have a number of companies on the docket that are spread out against consumer retail, entertainment, and major industrial:

  1. Radio Shack – It’s been on the decline for quite some time
  2. Wet Seal
  3. Ceasars Entertainment – what will Celine Dion do (#WWCD)?
  4. Molycorp – major rare earth metals industrial struggling
  5. Sony – on the decline for many years and has entered some analysts watch list for the next 1-2 years
  6. TransOcean (RIG) – The downturn in oil prices hasn’t helped this one, and repercussions will be felt widely

With major indices trading at high multiples, it’s not like M&A will yield good pricing – if anything, you are paying a premium over a market already being sold at a premium. Example? Royal Dutch Shell recently purchased BG Group at a 50% premium over it’s recent closing price in April. A clear example, recognized by many, of pulling the trigger too quickly so they are not left behind. The deal totaled a massive $70 billion dollars.

I’m still focused on July 30th’s GDP report – this will be a critical indicator on if we can continue to sustain Obama’s printing press policy. Contraction in the United States will send shocks through out the worlds economies.