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It seemed like by early 2020 the market had been steadily improving since the financial crisis, and that it was due for some form of drop/recession. COVID looked like it would be the thing that caused things to level off, and then it ended up having the opposite effect.

Presumably this pace of M&A can't go on forever right? Most of the forecasts suggest this pace won't end anytime soon, and I know it's basically just guessing, but this level of M&A activity has to level off somewhat soon right?

Why would it level off? New companies continue to be founded, spun off, taken public/private. As long as the global economy keeps creaking along, there will be plenty of grist for the mill here.

Anonymous User wrote: ↑

Mon Oct 04, 2021 1:43 pm

It seemed like by early 2020 the market had been steadily improving since the financial crisis, and that it was due for some form of drop/recession.

This is meme economics. Recessionary economies are like Tolstoy's unhappy families; they happen for particular reasons. Not because all the analysts downtown look at their watches and go "gee it's been a solid decade since we sold off all our equities, how about another go, chaps?"

Moreover, stock prices aren't even that strongly correlated to the economy, and neither is necessarily a determinant of M&A activity. But all three seem to be spiced up by near-zero interest rates, for which the end is not in sight.

Obviously, reading the macro tea leaves is a fool’s errand, and anybody can find a metric to support their preferred narrative, but a historically high CAPE ratio (to me) suggests that the market is fundamentally & maybe dangerously overpriced right now. Pretty sure that Shiller just published something to that effect in the NYT last week.

That said, (1) the market can stay irrationally overpriced for a really long time, and (2) it probably will take something more than a 10-20% correction to level-set biglaw activity down to something approaching humane hours.

Anonymous User wrote: ↑

Mon Oct 04, 2021 2:25 pm

Obviously, reading the macro tea leaves is a fool’s errand, and anybody can find a metric to support their preferred narrative, but a historically high CAPE ratio (to me) suggests that the market is fundamentally & maybe dangerously overpriced right now. Pretty sure that Shiller just published something to that effect in the NYT last week.

That said, (1) the market can stay irrationally overpriced for a really long time, and (2) it probably will take something more than a 10-20% correction to level-set biglaw activity down to something approaching humane hours.

I get that you're not calling the top or anything, but it's worth pointing out that the statement "the CAPE ratio is historically high" has been true almost continuously since the late 1990's, with only a brief interlude at the depths of the financial crisis.

Yes, of course. Hoping for a gradual slow down though. If there is a dramatic slow down that is proportionately inverse to what we are experiencing now, no doubt law firms will be proportionately ruthless in cutting associates as to how they are currently desperately onboarding non/low-qualified associates.

Love the discourse here, hate when people pretend like recessions just happen every 10 years. I actually took a class in undergrad that argued all recessions are connected and occur in part due to the correctionary actions taken to fix the previous pandemic.

That being said, I think it'll slow down. PE firms had a lot of dry powder and startup founders were scrounging for money in this IR environment. My guess is as the fed tapers and interest rates rise we won't see the level of LBO/SPACs we're currently seeing.