Too many of everything? Too many stores? Too many trucking companies? Too many airlines? Too many banks?
And nothing that can be done about it except survival of the fittest.
For the longest time, the free market pretty much took care of itself. The big fed on the small, the mergers came hot and heavy and we had rational markets based on companies that are able to combine and take out costs.
But in the last few years, the federal government has turned violently against these deals and we are seeing the havoc now as companies that have grown through acquisition are no longer automatically given a higher stock price and the activist government has chilled the whole process. I think some of this is a backlash to the willingness to bless too many airline mergers, with the straw breaking the camel's back being the American Airlines-US Air deal. That raised rates big time for the entire group.
It's been all downhill for big mergers ever since, in large part because the government's gotten so active.
Think about what happened here most recently in the M&A world. We have way too many oil and oil service companies out there. So Halliburton (HAL) and Baker Hughes (BHI) tried to merge. Nope, too much overlap.
Think about what happened in the oil patch. There had been so many opportunities to get together, so many companies had been clobbered like Anadarko (APC), Apache (APA), Range (RRC), EOG (EOG), Cimarex (XEC), nothing. No deals. Nobody budged. Nobody. The only big pipeline deal is the craziness involving Energy Transfer (ETE) and Williams (WMB). That deal could have made so much sense. Instead, because of ludicrous terms, it's stuck in the Delaware courts to be decided by the end of the week.
There is just a gigantic amount of Big Pharma companies out there, but when Pfizer (PFE) tried to get together with Allergan (AGN), the government nixed it. Given there were tax consequences the government didn't want blessed -- the merged company would not be a U.S.-based taxpayer even though both companies are American -- it made sense from an IRS proposition. But boy, did it ever freeze mergers.
And now consider the DuPont (DD)-Dow (DOW) deal. Have you noticed that one's not getting done, at least for now? I think it's because the government doesn't want to bless two big seed producers merging to become the No. 1 company so it might dictate prices to farmers.
We haven't heard anything about the Walgreens (WBA) deal to buy Rite Aid (RAD) either, and that's all about market share, too. Two of the three largest drugstore chains getting together isn't something the FTC wants, especially given that the Dollar Tree's (DLTR) acquisition of Family Dollar (FDO) is being perceived as a giveaway to Dollar Tree.
The government's putting out the word that it wants the Anthem (ANTM)-Cigna (CI) deal on ice, and what does that mean for the Humana (HUM)-Aetna (AET) deal? DOA? Could be.
There's a huge impact here. You see that we've got something big going on here, big and bad for stocks, and while it is difficult to measure, it's a huge overhang for the market. If you don't have any new money in the market and we have record-high cash positions in part because of fears of a Brexit, then you need to take out existing supply. Buybacks can do that. But not enough. Takeovers are the answer.
Let's talk retail, for example. Right now we have a huge number of department stores that seem to be on the endangered-species list, everyone from Kohl's (KSS) and Macy's (M) to J.C. Penney (JCP), Nordstrom (JWN), Sears (SHLD) and Neiman's.
In an era of Amazon (AMZN), we just don't need that many. It's absurd. There's real estate that can be sold in mergers, there's power to be had from market share vs. the suppliers, there's a huge amount of cost takeouts. The way around these problems? Mergers. But they just aren't taking advantage of the chances. Sure, Sports Authority went under and so did Eastern Mountain Sports, but those are just Amazon roadkill and not a lot of capacity takeout there.
We can't expect Home Depot (HD) and Lowe's (LOW) to merge, but there are so many smaller chains that should be gobbled up that aren't. At least some of the suppliers are getting together, notably Valspar (VAL) and Sherwin Williams (SHW). Yet, still there are way too many suppliers fighting for aisle space in these stores.
Have you even tried to count all the restaurant chains that are out there? Wendy's (WEN), Restaurant Brands (QSR), also known as Burger King (BKW), Buffalo Wild Wings (BWLD), Taco Bell and Pizza Hut (YUM), Domino's (DPZ), Papa John's (PZZA), you name it. It's ridiculous. But there's nothing happening.
I know that Honeywell (HON) tried to merge with United Technologies (UTX) and that one was stillborn. But the best thing going in the industrials right now is thIs Tyco (TYC)-Johnson Controls (JCI) deal. The auto parts companies need to merge to get more power over the automobile manufacturers for certain.
Media mergers make so much sense here. Yet they keep getting blocked by stubborn possible participants. Fox (FOXA) wants Time Warner (TWX) but Time Warner gave them the Heisman. Gannett (GCI) wanted Tribune (TRBAA) but Tribune went rogue and it looks like that deal blew up for no good reason other than ego. The chief way to solve the Viacom (VIAB) problems? Have it merge with CBS (CBS). Makes so much sense. But not if you are Les Moonves, who runs CBS.
How about biotech? They finally came alive today with a snapback rally based on a Medicare ruling that allows for decent price increases. But do we need Celgene (CELG), Biogen (BIIB), Amgen (AMGN), Gilead (GILD), Regeneron (REGN) and so many other, smaller players? The smaller ones have come down a great deal yet nothing's happening. Maybe it never will ... at least at these prices.
Finally, there's tech. Talk about an area where you need consolidation. Tonight on Mad Money, I will be talking to a company called New Relic (NEWR), a terrific analytics company that would be such a natural for IBM (IBM), which wants so much to be more of a factor in the cloud and social and network analytics. What a natural. But I am sure it isn't on IBM's radar screen.
Or how about Fitbit (FIT), which I am also talking to tonight on Mad Money. This is not a watch company. Not a device company. It is a health and wellness company. How can Under Armour (UA) not scoop it up? Or Apple (AAPL) for that matter, as it is a very different price point with lots of repeat business. (Amazon and Under Armour are part of TheStreet's Growth Seeker portfolio.)
I listened to Adam Bain from Twitter (TWTR) talking about his company's prospects. Sure, they are better than they have been, but the stock's worse. That's an opportunity for somebody, anybody. But it's not being taken even though Microsoft's (MSFT) stock is up nicely since its alleged overpay for LinkedIn (LNKD). (Allergan, Dow, Walgreens, Biogen, Apple and Twitter are part of TheStreet's Action Alerts PLUS portfolio.)
I just don't get it. I don't get why more companies don't see the need to merge other than they fear the government will derail or delay, and when the government does it, then everyone gets hurt.
Look, maybe I am incredibly conscious of the huge number of companies that are out there, as I have to study up furiously for the Lightning Round. Endless new stocks. Endless numbers of oil and gas and tech and big data analytics companies out there. Way too many. The clock is ticking. The bids should be made. But it sure doesn't look like they will be. Oh, and I can't resist the obvious coda in the room: the deal we do get? Tesla (TSLA) bailing out sister company Solar City (SCTY), with Elon Musk gaffing his own shareholder base, including a huge number of new buyers who came in at $215 -- $2 billion worth! The stock's now below $200. You know my view: You like Tesla, buy the car, not the stock. Today the only unwanted merger in the book once again tells you exactly why I feel that way.