Dell M&A financing set to close in on a $67 billion deal

Not too long ago the prediction was made here that we'll be on our way to witnessing nine figure deals in closings as the desire to grow to megalitihic proportions spreads through commerce. At the time we cited some eight figure deals halfway up the scale.

Well, we've move another notch up. Dell is making gestures toward ECM, Inc. a figure has been worked out, and Dell claims they are "working on schedule" toward a consummation. The closing depends on approval by the ECB to O&G's understanding, similar to approval by US authorities in charge of anti-monoplist acquisitions if that is still in effect.

Why this should be of interest to us at Duff's is a matter of watching the value of the dollar fade and inflation gnaw away at value. It may be slow in surfacing to some, but the truth is that when something like this occurs in the business world, commerce is not leading the way into a new or yet to be born situation. . . It is here, now! The executives have no desire to be on the leading edge of paying too much for an acquisition; they'd prefer to delay and will hem and haw their way through a deal until they'll end up underpaying as inflation shoots past them in a flash. . . So, there, in the space of a sentence or two, are two options for describing the current condition.

True accounting will surface one way or another and this is the only way we'll know where we stand in relation to other currencies. Normally, inflation advances at a rate difficult to track, but we have been beset by the reverse inflationary condition of wages falling away from prices rather than prices running away from wages. Beset with this reverse situation for the past forty years our inability to recognize what is transpiring can be understood.

The public generally does not recognize just what is transpiring under the normal rising prices conditions. They receive their wages, their wages are paid in good, stable, American currency, yet the money "doesn't go as far as it did." In our case we'd say, "It's still an American dollar, is it not?" This self-deception was referred to art one time as the "money illusion". The term is hardly used anymore. But, rest assured it will come back into vogue.

When a leader like the Dell/EMC, Inc. suddenly springs out at us, we might give a little whistle, roll our eyes and mutter, "Boy, if that isn't one hell of a deal." Truth is, it's not a hell of a deal, but it is a hell of lot of money. And, the total value of the 2 company's has not risen, but the value of the dollar has fallen. Just as it took 30 some pages of solid reasoning for Ricardo to get the idea across to Parliament that the value of gold was not increasing but the purchasing power of the pound was decreasing, it will take a good deal of time before the impression will no longer be a surprise, though the general public still may not understand the difference. All they know is they can no longer afford to purchase things that were once within their reach.

In a few months, Dell's leap out in front will no longer be surprising. Others will jump into the fray at a higher level, expectations will be that the climb will persist. Prices will increase as that anticipation is fed, the valuation of the dollar will fall off further. Generally the "money lllusion" will mask the progressively dwindling purchasing power until a once common purchase of an item that did not command such a large percentage of the weekly income makes its new cost felt. It is then that the recognition shocks us into the new reality. Just so suddenly we will be seeing mergers and acquisitions that will stagger imaginations. No doubt GDPs will take an enourmous bounce and everyone will declare we're on the way to another Boom when in fact we'll be well on our way to a Bust.

It is then that income shrinks while prices are still adjusting upward, exacerbating the real condition and unveiling the deception in the "money illusion".


Now, if you can think back onto how we arrived at this last milepost, it may be true that the $67 Billion price tag on the Dell/EMC.Inc merger is the first true signal we are in the Bust phase of a collapse! Is this a play on words and the imagination?

We'll see.

Thanks Old and Gray

Thanks for the quick reminder that inflation/deflation can appear different than the normal overly simple definition that people are accustomed to hearing.
I've been in the deflation camp for many years. recently I am beginning to see signs of inflation, which I personally feel to be a greater problem than what deflation has purported and claimed by the media.
You are absolutely correct about purchasing power. It doesn't really matter whether central banks proclaim whether we are in a deflationary or inflationary environment when the majority of people are realizing that their purchasing power is eroding.
My personal opinion is that we are entering/entered the latter stages of deflation which will cause central banks to panic, over react, and induce inflation.
While inflation is clearly evident in housing prices on both the western and eastern coasts of America, London, Canada, New Zealand, the majority of economists don't realize that it is a direct result of monetary policies in developing countries (BRIC type nations) causing those natives trying to protect their wealth by fleeing to what they consider a safer haven.
Closer to home, rail freight volumes have been flat or down for approximately a year now. the exception has been motor vehicles and parts which continually show steep increases in volumes. There has been a steep increase in off the lot costs for passenger vehicles and light trucks during the past 5 yrs (some estimates claim 55% when financing costs are included). I am amazed at the car payment costs that people have committed to during the past 12-18 months. 35% - 40% of take home pay is not an exaggeration. Actual costs are higher when including the increased cost for insurance for a 40k vehicle.
I think we are approaching saturation for new car sales and prices will crash. Unfortunately, most people will not be able to benefit from the reduced cost since credit will be tight.
Five yrs ago, the RR category of motor vehicle and parts include a sizable amount of heavy trucks and construction equipment. Not so today.

Focus On The Tie-In

When people talk about inflation now, I say-- Where have you been? We have realized STEEP inflation all this century and it was integral to hyper-appreciation before that. You can't give administrators and professionals more money as in payment without in coming from something else. Simply-- administrators and professionals are costs, not economic boons and stalwarts. What the world is-- now that is diametrically opposed to Central Bank meddling is-- no enterprise and a gross need for real native grassroots down-to-Earth selling minus the pariah with his/her hand out. There are those who still whine about "welfare" but studies show that most recipients are able people formerly employed and/or stable... no longer, today. Color doesn't matter. The Civil Rights Act is bogus. Hucksters will rise now, but they will be clawed down quickly by those in pursuit of quality and integrity on which to recover with and by.

When two people work the same number of hours... and one does so in labor that produces something of value and the other schemes something that induces pay-out for it... and the labor generates destitution, then Central Banks have ZERO value, regardless of their inflationary or deflationary label. Flat-out... catering to the rich for bail out in Puerto Rico creates a premise for exploitation and abuse. The rich will make it a haven and then the poor created by corrupt credit extension by Goldman Sachs-- get killed for doing so. Maybe Saldeck can validate this-- but I believe the Greek Isles are aligned now for this type of scenario.

You can't be daunted by fake money today. It has no way to sustain itself. Deflation or Inflation... who cares? The world is awash with two toxic aspects-- too much cheap junk and a total lack of sustainability skills. We are about to see a massive shift. Anybody read the small banner headline that Jeb Bush closed his campaign? Hillary is the only remaining US Presidential candidate tied to our corrupt past Administrations. Want to bet on her Fate? It has to be evident now that the very landscape on which our last 50 to 75 years was built and rebuilt on, is about to get plowed over. That said-- we also know that Technology does not hold the key to the new economy... not do a bunch of administrators with degrees and no viable labor histories or skilled trade exposure.

It seems clearer everyday that the gas line has been cut on complacency. You will want to intimately know how to progress on foot from now on. Few do, today.

Focus On The Tie-In- Part Deux...

Each nation reliant on or majorly involved in oil is toppling. It wholly appears that the plot is illuminating and the plotters are apparent. There are almost ZERO American Stock-Issuing Entities not tied to Big Oil. Together they scam, in stagnant surplus they fall.

Sell your stocks now. They drop like rocks.