With today's announcement that, ATT is buying T-Mobile USA for $39 billion, Ma Bell is to be congratulated for yet another poorly-timed purchase once again signaling a market top.
Back in 2000 it was their MediaOne purchase (making ATT America's largest cable company) occurring near the tail end of the "New Era in technology" (fueled by the shadow banking system's still-functioning infinite multiplier) — a merger that marked the beginning of the end of "benefits" accrued to equity following 1998's Long Term Capital Management panic (whose effect was to capture the Federal Reserve's commitment to prop up at all costs leverage over physical assets put in place via a mountain of mis-priced credit risk).
Ever a slow-moving behemoth, ATT in reacting to competition ravaging its telephony-based data communications capacity took the "easy money" bait from those Fed-backed scam artists financing the so-called "new era" and further levered its balance sheet that the company might remain relevant in an environment whose unlikely sustainability apparently defied the imagination of those managing the company's finances. Shareholders have been paying the price for this poor decision ever since...
Bottom line, industry consolidation becomes rather necessary when too much leverage exists atop a physical economy not growing fast enough to sustain the debt. All of today's nostalgic spin suggesting a status quo employing the power of a wink and a smile might indefinitely sustain a mountain of credit securities marked to fantasy simply finds too many crippled, Titanic-like vessels still taking on water and in peril of suddenly sinking under the weight of Captain Bernanke's hyperinflationary attack on excess capacity.
So, in keeping with Friday's U.S. Treasury blessing allowing bailed out U.S. banks to once again offer a dividend — this as reward for yet another "stress test" revealing all is well (go figure) — ATT's proposed acquisition of T-Mobile USA appears just as much a show specially made for those whose calendar reads March 1999...
(Eat 'em up while they're still hot, sucker, before they turn cold.)
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