The Money Printers’ M&A Ball——Where The Debt Zombies Go To Mate

Fed governor Jerome Powell is living proof that we are heading for another calamitous financial meltdown. This clueless monetary apparatchik averred yesterday that the Wall Street casino is in the pink of good health with no evidence of irrational exuberance in sight. Said the former LBO guy from Carlyle Group,

“Things are fully priced, but I really don’t see bubble territory,” Powell said. “I can’t say we’re at significant risk of financial instability.”

Maybe he should glance at the financial papers, starting with the Merger Monday stories. Comes word this week that two more bloated debt zombies plan to mate—–and their financials scream bubble mania.

To wit, Energy Transfer Equity (ETE), which has a TEV (total enterprise value of market equity plus debt) of $89 billion, plans to acquire Williams Companies (WMB), which sports a TEV of $79 billion. Needless to say, this is not about smart new technology or some other cutting edge mousetrap. The resulting TEV of $168 billion—-or a tad less than the GDP of Greece’s woebegone 11 million citizens—–is all about rolling-up dumb old technology into a bigger bundle.

The proposed merger’s massive TEV purportedly measures the value of approximately 100,000 miles of steel pipe; a few thousand pumping stations which are based on 50-year old natural gas engine designs that work by the simple expedient of siphoning fuel from the flowing gas; and various and sundry liquefaction and gasification plants that extract liquids along the way.

But what this combination really measures is the degree to which the Fed’s insane QE and ZIRP policies have transformed business executives into deal junkies and the corporate securities market into an out-of-control arena of rank speculation.

Let’s start with the cash flow of this pending nuptial. In the LTM ending in March, the combined companies generated exactly $10 billion of EBITDA. That doesn’t seem like much against $168 billion of TEV, but that’s not the half of it. It seems that the combo also consumed $6.2 billion of cash on CapEx——that is, laying pipe and maintaining pumping stations.

So we are

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