Bernanke: "I Want To Bring Back Irrational Exuberance"

On January 25th we got word from the Fed that ZIRP would be extended until at least 2014. Bernanke's guarantee of another two years of cheap-cheap money has lifted the market's animal spirits. Since the Fed announcement (33 trading days), the S&P got a 7% lift. But that's not the measure of Ben’s success. I’m seeing it in deal flow:

*There have been 29 IPO's that raised $3.3B

*Another 35 deals got inked for secondary issuance of common, preferred and/or convertible stock totaling $3.7B

*The visible calendar for both IPOs and secondaries is big. $4.3B is registered for sale; another boatload of paper wants to get sold on top of that.

*The High Yield market blew out $70B of paper.

*Leveraged loan activity has totaled $75B.

I want to focus on six deals (of the 22 that got completed) from last week that I find troubling. These are referred to as Dividend Deals. The borrower takes on new debt in order to pay a stock dividend to common shareholders. (I prefer to see dividends paid from cash flow from operations, not new debt.)

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