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Blackstone's Private Equity Head Warns: "We Are In The Middle Of An Epic Credit Bubble"

Tyler Durden's picture




 

Blackstone Group have arguably been at the center of inflating the new echo bubble in real estate by bidding (all cash) for property across the US. So it is somewhat ironic that just two months after we noted that "the smartest money is selling," the head of Blackstone's Private Equity Group had the following words for an audience at a Dow Jones Equity conference in New York:

"We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven’t seen in my career in private equity."

Joseph Baratta had plenty more to say including "the good times are not going to last forever," and "we are not leveraging US GDP," as he expects a 'mean reversion' in multiples and "that largesse goes to the seller."

 

Via Dow Jones,

The U.S. is "in the middle of an epic credit bubble," according to Blackstone Group's global head of private equity, Joseph Baratta , and that bubble is affecting how one of the world's largest private equity firm's invests its billions.

 

The firm has slowed its investments amid such concerns, with Mr. Baratta saying he sees easy credit as adding risk for buyers of companies, even if it benefits sellers. "That largesse goes to the seller," Mr. Baratta said, speaking at the Private Equity Analyst conference in New York.

 

The firm is still bullish on prospects in the U.S. economy, but focused on certain investment areas. Energy, transport infrastructure, consumer finance and housing and construction remain attractive investment theses, Mr. Baratta said.

 

"We are not leveraging U.S. GDP," he said, because the good times are not going to last forever. The firm expects what Mr. Baratta called a "mean reversion," which he said will ultimately affect exit multiples at portfolio companies.

 

"The single biggest assumption we make is the multiple we can sell [a company] at five years hence," said Mr. Baratta, and right now those projections do not seem to warrant a lot of deal activity.

 

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Mon, 09/30/2013 - 09:40 | 4005210 Dr. Engali
Dr. Engali's picture

Three words...no fucking shit.

Mon, 09/30/2013 - 09:44 | 4005236 Sudden Debt
Sudden Debt's picture

Shit no fucking... and there goes the weekend...

Mon, 09/30/2013 - 09:46 | 4005250 synergize
synergize's picture

Maybe that's why gold is leaving COMEX - 3% of total gold just last week...

http://seekingalpha.com/article/1718882-weekly-comex-gold-inventories-total-falls-3-in-one-day

Mon, 09/30/2013 - 09:50 | 4005261 Call me Ishmael
Call me Ishmael's picture

This Blackstone guy's bubble comments were a story on Business Insider about a week ago.

Mon, 09/30/2013 - 09:54 | 4005267 Zer0head
Zer0head's picture

now that's effing scarey - so you better have a link Ishmael

Mon, 09/30/2013 - 10:09 | 4005315 insanelysane
insanelysane's picture

You guys are crazy!  There's never been a better time to buy.  The people on Bloomberg and CNBC tell me so all day long every day.

Mon, 09/30/2013 - 11:55 | 4005372 Fredo Corleone
Fredo Corleone's picture

The U.S. is "in the middle of an epic credit bubble," according to Blackstone Group's global head of private equity, Joseph Baratta...

The firm has slowed its investments amid such concerns, with Mr. Baratta saying he sees easy credit as adding risk for buyers of companies, even if it benefits sellers.

That being said, Blackstone's investment thesis ? Why, easy credit !

"[C]onsumer finance and housing and construction remain attractive..."

 

Mon, 09/30/2013 - 10:08 | 4005311 asteroids
asteroids's picture

Don't fight the fucking FED! They blew this bubble. Can they pop it safely?  History suggests a big fucking no.

Mon, 09/30/2013 - 09:48 | 4005259 falak pema
falak pema's picture

fucking no shit?

You are out of step with the Bernanke!

He does it all the time sitting in his helicopter with Draghi. Drowning in it! 

Mon, 09/30/2013 - 10:02 | 4005292 Max Damage
Max Damage's picture

Another 3 words. Tesla up again!!!!!!!!!!!!

Mon, 09/30/2013 - 10:32 | 4005362 Boondocker
Boondocker's picture

Is he supposed to tell the muppets?

Mon, 09/30/2013 - 10:39 | 4005396 Ruffcut
Ruffcut's picture

epic bullshit ain't gonna make it better, either. 

Mon, 09/30/2013 - 09:42 | 4005211 Sudden Debt
Sudden Debt's picture

It all depends in what kind of reality you live...

 

IN MY REALITY SILVER JUST GO A STEP CLOSER TO 1$ TODAY!

READY TO LOAD UP BIGTIME!!

Mon, 09/30/2013 - 09:42 | 4005223 unwashedmass
unwashedmass's picture

yes, this is what happens when the peasantry runs out of money to loot. it just isn't worth the effort any more to steal the last bits of what they have. five years of now when we've reached the HIGHLY VISIBLE stage of 90% of our peasants living in third world poverty conditions.....you can't expect to show even "faux" growth to the "greater fool". 

Mon, 09/30/2013 - 09:45 | 4005227 SheepDog-One
SheepDog-One's picture

The most insane part is Blackstone actually calls this 'the good times'?

Oh my fuck.

Mon, 09/30/2013 - 11:09 | 4005483 Crash Overide
Crash Overide's picture

Good for them, bad for the rest of the former middle class.

Mon, 09/30/2013 - 09:42 | 4005233 all-priced-in
all-priced-in's picture

If the FED holds all debt is it still a bubble?

 

 

Mon, 09/30/2013 - 10:03 | 4005291 BorisTheBlade
BorisTheBlade's picture

If the Fed holds all then debt, then it's not a bubble, it's a beatiful-soon-to-be-ugly-again fairy tale. Cinderella cycle for capital markets and asset prices.

Mon, 09/30/2013 - 11:21 | 4005525 bagehot99
bagehot99's picture

Holding it isn't the problem. Selling it is when the ride starts.

Like falling out of an airplane - the drop doesn't get you; it's the sudden stop.

Mon, 09/30/2013 - 09:43 | 4005238 ClassicCommodity
ClassicCommodity's picture

Tide begins turning 2014. This is my prediction and I think i'm gonna be right.

Mon, 09/30/2013 - 10:05 | 4005295 quasimodo
quasimodo's picture

For better or worse? Please clarify. This is after all a world where up is down and less is moar

Mon, 09/30/2013 - 09:43 | 4005240 NoDebt
NoDebt's picture

Thanks, Captian Obvious.  What was your first clue?

Mon, 09/30/2013 - 09:45 | 4005241 firstdivision
firstdivision's picture

Blackstone in no way contributed to this credit bubble....

Mon, 09/30/2013 - 10:11 | 4005321 NoDebt
NoDebt's picture

Better comment than mine.  +1

Mon, 09/30/2013 - 09:45 | 4005242 fonzannoon
fonzannoon's picture

Bullish on consumer finance and housing and construction in the middle of an epic credit bubble LOL.

Dr. Frasier Crane (reading): "It was the best of times, it was the worst of times..."

Norm: "Which one was it?"

 

Mon, 09/30/2013 - 09:48 | 4005260 OwnSilverPlayMusic
OwnSilverPlayMusic's picture

+1 Thanks for the laugh.

Mon, 09/30/2013 - 09:44 | 4005243 ArkansasAngie
ArkansasAngie's picture

Housing and construction?

Surely you jest.

Oh ... that's right ... you're selling like Goldman does.  Please somebody take these houses off our hands.

Greater fool theory?

 

Mon, 09/30/2013 - 09:44 | 4005247 Son of Loki
Son of Loki's picture

You can buy virtually anything --- from a $600,000 house to a $65,000 plastic surgery total body/face makeover---  with no money down and no interest payments for years.......while you're getting a free college degree [online from your bedroom in your PJs]  with $100,000 student loans.....

I guess that may be what he's referring to partially.

Mon, 09/30/2013 - 09:59 | 4005276 Spastica Rex
Spastica Rex's picture

Do you want to make  more money? Sure, we all do!

Oh, for the simpler days.

Wish I had gone for "gun repair."

Mon, 09/30/2013 - 10:07 | 4005309 quasimodo
quasimodo's picture

I took the TV/VCR repair but then those damn meddling kids and that dog invented that DVD thingy!

Mon, 09/30/2013 - 09:46 | 4005249 OwnSilverPlayMusic
OwnSilverPlayMusic's picture

Will people still fall for the old adage of "we didn't see this coming!"? YES! People are stupid.

Mon, 09/30/2013 - 09:56 | 4005272 NoWayJose
NoWayJose's picture

You have to be careful when interpreting any comments on real estate from these guys. I would rather own rental property and get that income, than own treasuries. Also throw in location - where there is a huge move going on for retiring boomers. The average US house in the average US town may suffer, but these guys are not buying those properties.

Mon, 09/30/2013 - 10:01 | 4005273 Zer0head
Zer0head's picture

the spawn of Satan

 

... is in contract to sell his six-story townhouse at 1 E. 94th St., which had a $26 million asking price, down from $28 million.

The buyer is Joseph Baratta, global head of private equity at Blackstone.

The six-bedroom home off Fifth Avenue is a 25-foot-wide limestone mansion with an 1892 Cass Gilbert façade. The residence, which even Upper West Side mainstay Jerry Seinfeld took a look at, comes with an elevator, a patio, a windowed basement and an eat-in kitchen with access to a garden. The full-floor master suite has a planted terrace with Central Park Reservoir views.

Baratta and his wife, Abigail, had been renting another townhouse after returning to NYC from London.

 

http://nypost.com/2012/12/06/whats-cooking-2/

and these are pics of the $26 million dump that mr. epic credit bubble purchased http://ny.curbed.com/archives/2011/02/04/music_honcho_lyor_cohens_ues_ma...

Mon, 09/30/2013 - 09:57 | 4005274 kurzdump
kurzdump's picture

Bernanke is playing 'Bubble Bobble'?

Well, seems he forgot to pop all these bubbles to get credit, otherwise the bubbles pop on their own, releasing monsters hunting him down.

Mon, 09/30/2013 - 10:00 | 4005278 pods
pods's picture

The whole system needs to be burned to the ground.

Skimmers speaking about bubbles.

I can't even bear to read about this crap anymore.  

pods

Mon, 09/30/2013 - 10:03 | 4005288 Spastica Rex
Spastica Rex's picture

Fire and Ice

Some say the world will end in fire,
Some say in ice.
From what I've tasted of desire
I hold with those who favor fire.
But if it had to perish twice,
I think I know enough of hate
To say that for destruction ice
Is also great
And would suffice.

Robert Frost

Mon, 09/30/2013 - 10:05 | 4005302 wonderatitall
wonderatitall's picture

when does he recant and blame bush?

Mon, 09/30/2013 - 10:21 | 4005346 Spastica Rex
Spastica Rex's picture

Whose fault that Obama got elected?

Bush.

Mon, 09/30/2013 - 10:32 | 4005363 ...out of space
...out of space's picture

so we are in the middle ? still room to expand

Mon, 09/30/2013 - 10:57 | 4005440 Randoom Thought
Randoom Thought's picture

No shit, Sherlock. What was you first clue?

Blackstone being at the center of the credit issue, should certainly know. The question to ask is why say something now? Oh, is it time to set things up for the 2015 collapse?

Mon, 09/30/2013 - 10:56 | 4005446 moneybots
moneybots's picture

"We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven’t seen in my career in private equity."

 

Who was that guy at the FED that just said .com and housing were bubbles, but that there is no bubble now?

 


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