Friday, July 6, 2007

Scary predictions

The Economist is probably the best magazine in the world. So, when it makes a prediction that (a) the private equity market is in for a storm, and (b) the storm may end up hurting pension funds and insurers and other major investors big-time, and (c) the result could be huge defaults on debts, bankruptcies and redundancies (that wonderfully British term for layoffs), I listen.

There's been a heck of a run. But if this prediction is correct, and the life blood is taken out of many companies in order to continue large returns -- not to mention the massive earnings (I can't say income, since they are not taxed at the income rate like us normal folk) these new-fangled Masters of the Universe command -- then we are in for a major correction in the equity market and perhaps one in commercial real estate to boot. I'm not going to be Chicken Little, because most dirt is still comparatively cheap in the US, but I am keeping an eye out for what may be to come. And I'm sure my opportunistic clients, some of whom are largely on the sideline right now or raising funds quietly to take advantage of the next downturn, will be ready too.