12 replies to this topic

[eminimee]

and other top private equity companies.........these guys aren't stupid. I've been mulling over what all this private equity action is signaling for the next 10 years or so. I did some searching on the net last night to see what was going on in the eighties just before one of the greatest stock market run ups in history. These private equity guys see a much higher stock market ahead...they must do...or there is a ton of smart money that is wrong. Slim chance.

This is one of the best papers I found. If we are repeating (albeit slightly different) the 80's....hang on to your hats.

http://www.oycf.org/...ged_Buyouts.htm

Edited by Teaparty, 09 March 2007 - 07:53 AM.

[greenie]

They said the same thing about VCs in 2000 - exactly same thing even including the 1980s, 1990s similarity. Truth is very few high-tech investments by VCs made money since 1998.

[eminimee]

That was late in the cycle....and a totally different kettle of fish. That was a "throw at the dart board" period".....and not smart money as far as I'm concerned.

[A-ha]

and other top private equity companies.........these guys aren't stupid. I've been mulling over what all this private equity action is signaling for the next 10 years or so. I did some searching on the net last night to see what was going on in the eighties just before one of the greatest stock market run ups in history. These private equity guys see a much higher stock market ahead...they must do...or there is a ton of smart money that is wrong. Slim chance.

This is one of the best papers I found. If we are repeating (albeit slightly different) the 80's....hang on to your hats.

http://www.oycf.org/...ged_Buyouts.htm

This is caused by low interest rate environment that has been around for some time now, more than it normally should. Liquidity soon will vaporize quickly as the rates go higher but it is not the only danger. This time something is very different. This time Mr 6Pack who has been living on credit and second mortgages now has nothing left to rely on. Take a wild guess what is next for Mr 6Pack when rates start rising. Results of this can go beyond the wildest imaginations of a possible financial crisis .... it can extend to a civil war that someone else predicted sometime ago.

Edited by xD&Cox, 09 March 2007 - 08:53 AM.

[greenie]

This is caused by low interest rate environment that has been around for some time now, more than it normally should. Liquidity soon will vaporize quickly as the rates go higher but it is not the only danger. This time something is very different. This time Mr 6Pack who has been living on credit and second mortgages now has nothing left to rely on. Take a wild guess what is next for Mr 6Pack when rates start rising. Results of this can go beyond the wildest imaginations of a possible financial crisis .... it can extend to a civil war that someone else predicted sometime ago.

Civil war in California still remains my FF.
I do not think interest rate (treasury bond) will go up - no way. That does not mean public will be restricted to access from credit, because tougher lending standard effectively puts them at higher interest rate. This is happening now, just like I anticipated - that too before the recession actually started.

[paulstan]

Historically private equity is like VC money -- I don't believe either is a reliable "smart money" indicator. They chase the markets whenever there is sufficiently low risk aversion. If anything, they are just another indicator that aggregate investor appetite for investment risk is high (risk aversion is low).

[PorkLoin]

Teaparty: If we are repeating (albeit slightly different) the 80's....hang on to your hats.

Fascinating stuff, TP. I see things as a LOT different from the 1980s now -- bonds had a massive low in 1981 and stair-stepped higher for 24 years after that. The Nikkei was still on its way to the 1990 high. US equity indices were way down low, and somnolent, as the decade got underway.

It may be my own personal wall of worry, but I wonder how long those capital inflows will go on. House of cards or game of musical chairs - when does the music stop? How long can the Liquidity Wagon roll, in the face of US Dollar weakness? Maybe a long time yet....


Best,

Doug

[jawndissedi]

Yep, those Blackstone fellas really snookered old Sam Zell -- conned him into parting with EOP for a measly $39 billion (a 4.5% cap rate). Those guys are just too shrewd for words. Yes, indeed, great bull runs always begin with folks paying top dollar for assets. So you rubes better get your wallets out and start buyin' while they're still some stocks to be had.

[eminimee]

...well....I guess the only answer is...time will tell.

[kaiser soze]

I think there is a third possibility. Namely that both private equity and the people selling to them such as Zell are correct. Sam Zell maybe correctly selling at the top of the business cycle but perhaps smart money is anticipating hyperinflation or a hyperinflationary depression, one in which financial assets such as stocks lose value but hard assets and productive assets (generating cashflow) maintain theirs.