Monday, August 13, 2007

Private Equity's Bubble

"We're witnessing the unwinding of the whole dynamic that propelled the stock market ... to record highs. ... And then came an unmistakeable sign of a top: Private equity firm Blackstone went public. ... Ready access to a seemingly bottomless source of funds, encouraged the buyout shops to make ever bigger and bolder bids", Fortune, 20 August.

It is said that on Wall Street they rarely ring a bell. Well, Blackstone's going public was a tocsin if I've ever seen one. Private equity only was feasible because the banks and bond market systematically mispriced the debt used to effect the private equity firms' purchases.

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