Is This 1985 All Over? Cramer Thinks So

Cramer (TheStreet.com video link) thinks that this year is looking like stocks and the cycle are going to be a 1985 re-run.  The stocks started running and the companies became huge.  The share buybacks and private equity are creating a similar environment.  Right now the blip up in interest rates is just a blip.  You need to look at your stocks that are lower and you want to look back at your valuations and entry levels and decide what you want to buy.  There will be mild 3% to 5% pullbacks here, but you probably won’t get the panic selling large drops you would hope for.

This may be true, and it might not.  I have my own opinion on this even if Cramer is right that it feels this way.  But Joe Q. Public is being left in the dust and current shareholders on the newer multi-billion dollar buyouts are not being rewarded to the same tune they were just a few months ago.  If you look at what private equity is buying and what prices they are paying you would really think that most companies are now willing to accept a small buyout premium to avoid being a public company.  Just keep in mind that portfolio managers do have to show "realized returns" at some point down the road, even if they are private equity or pension managers.  The cash flow may justify prices paid but a large portion of the gone-private crowd will actually have to come back onto the public market either via an IPO or by a resale to a large niche play or conglomerate.

If this is really going to be 1985 all over again, how many people will start jumping back to the argument "Don’t forget October 1987!"?

Jon C. Ogg
May 16, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.