Private Equity

The markets are not recognizing the clear signals that things are changing behind the scenes. This is precisley how 2007 lead to 2008.

• At least 74 dead in crashes similar to those GM linked to faulty switches (Reuters)
• Obama Calls for $1 Billion Europe Security Fund; Will Increase U.S. Military Presence in Eastern Europe (WSJ)
• Euro Inflation Slowing More Than Forecast Pressures ECB (BBG)
• China accelerates as euro zone stumbles (Reuters)
• Russia says Ukraine situation worsening, submits U.N. resolution (Reuters)
• Secondary Sales Squeeze Investors (WSJ)
• Barclays Said to Start Cutting Jobs in Investment Banking Unit (Bloomberg)
• Backlash Grows on Release of Sgt. Bowe Bergdahl in Taliban Prisoner Swap (WSJ)
• For fallen soldiers' families, Bergdahl release stirs resentment (Reuters)
• PIMCO's Gross stares at record outflow (Reuters)

• Unstoppable $100 Trillion Bond Market Renders Models Useless (BBG)
• Afghan president fumes at prisoner deal made behind his back (Reuters)
• Spain to Unveil $8.6 Billion Stimulus Package (AP)
• How fracking helps America beat German industry (Reuters)
• Obama to Urge European Allies to Stay Tough on Russia (WSJ)
• Frenchman 'admits' Brussels shooting in video (AFP)
• Heloc Payment Jump to Take Bite Out of Consumer Spending (WSJ)
• Obama Said to Propose Deep Cuts to Power-Plant Emissions (BBG)
• Lehman Lesson Lost as Bank Lobby Gains Clout (BBG)
• WSJ reports that WSJ reporting on Icahn insider trading probe may have killed it (WSJ)
• KKR liquidates former Goldman Sachs traders-run hedge fund (Reuters)

The unmitigated gall...

• Snowden: 'no relationship' with Russian government (Reuters)
• Bond Surge Worldwide Drives Index Yield to One-Year Low (BBG)
• Shares flirt with record highs on ECB easing bets (Reuters)
• Goldman Shuns Bonds Pimco’s Gross Favors in ‘New Neutral’  (BBG)
• Porn may be messing with your head (Reuters)
• Dish to Become Largest Company to Accept Bitcoin (AP)
• To Make a Killing on Wall Street, Start Meditating (BBG)
• Apple to get Beats, music mogul Iovine for $3 billion (Reuters)
• Fink Says Leveraged ETFs May ‘Blow Up’ Industry  (BBG)

Unrestricted flow of capital is the most effective way to encourage reforms, and North Korea is no exception. History has proven time and again that regime change does not occur when conditions are at their worst, but when circumstances begin to improve and the people grow impatient for further progress.

• Vietnam, China trade accusations after Vietnamese fishing boat sinks (Reuters)
• SEC Set to Spur Exchange Trading (WSJ)
• Bank of Japan quietly eyes stimulus exit (Reuters)
• Japan Risks Low Growth Even as Easing Spurs Inflation (BBG)
• Hello Japan: Bond Market Message to Fed: Your 4% Rate Outlook Is Too High (BBG)
• Malaysia, UK firm release satellite data on missing MH370 flight (Reuters)
• Fighting rages in eastern Ukraine city, dozens dead (Reuters)
• Bad Credit No Problem as Balance-Sheet Bombs Rally 94%  (BBG)
• Draghi’s Asset-Backed Drive Rouses Academic Skeptics (BBG)
• For-Profit Colleges Face Test From State, Federal Officials (WSJ)

After the crisis, many expected that the blameworthy would be punished or at the least be required to return their ill-gotten gains—but they weren’t, and they didn’t. Many thought that those who were injured would be made whole, but most weren’t. And many hoped that there would be a restoration of the financial safety rules to ensure that industry leaders could no longer gamble the equity of their firms to the point of ruin. This didn’t happen, but it’s not too late. It is useful, then, to identify the persistent myths about the causes of the financial crisis and the resulting Dodd-Frank reform legislation and related implementation...."Plenty of people saw it coming, and said so. The problem wasn’t seeing, it was listening."

It seems that no market tops until the bag has been fully passed to retail muppets, and we appear to be in the process of that happening right now. The retail investor is getting back into the stock market and is seemingly focused on the riskiest types of shares; unlisted penny stocks. They aren’t just dipping their toes in either, the pace exceeds that of the tech boom of the late 1990?s and has just hit the highest amount on record.

Three weeks after the formation of his company which "plans to" (as opposed to "is doing") "buy underdeveloped land and rill shale wells," 27-year-old Mark Hiduke raised $100 million from a local private equity firm. Makes perfect sense of course - especially after Dubai's 31x over-subscribed IPO for a firm with no operations - but perhaps the following sums it all up... "These guys are going to be the poster children of self-made oil and gas tycoons... or they could be the poster children of how too much money is chasing deals." Indeed...

It is not too early to ask how the present US business cycle expansion, already more than five years old, will end. The history of the last great US monetary experiment in “quantitative easing” (QE) from 1934-7 suggests that the end could be violent. Autumn 1937 featured one of the largest New York stock market crashes ever accompanied by the descent of the US economy into the notorious Roosevelt Recession. As we noted previously - it's never different this time...

The Bitcoin space is heating up so quickly that not only are hundreds of millions of dollars being funneling into startups, PayPal has introduced a product that actually undercuts Bitcoin payment processors! Uh Oh Visa/Mastercard! Margin compression, here we come!

The days of Bernanke's "non-Giffen good" speech circuit may come to an end far sooner than the ex-Chairsatan wishes: "UBS and Goldman Sachs considered his fees too high." Others were quick to point out the obvious:"You can spend $250,000 for Bernanke’s time at a private dinner, or you could just sit down and read what people like Janet Yellen and Mark Carney have to say," David Rosenberg said"... Indeed, this is one deflation which we are confident the Fed Chairman wishes he was 100% certain he could stop in 15 minutes. Sadly, like in the case of everything else relating to Bernanke, when paying for smoke and mirrors it is only a matter of time before everyone, even the uber-richer poseurs, realize that the product they are buying is nothing but a cheap commodity.

Bitcoin's competitive environ is already prompting a race towards negative margin, and despite such VCs have dumped nearly $100 million in 3 companies in as many months. Here's what I see coming down the pike...

After losing $4 billion as both a lender and equity-holder, Deutsche Bank has decided now is the time to sell The Cosmopolitan of Las Vegas. The lucky buyer of the 3000-room hotel and casino... none other than America's largest landlord - Blackstone Group. The formerly biggest "buy-to-rent" private equity firm is paying $1.7 billion for the Vegas hotspot after having piled $3.5 billion into property across the city and other parts of Nevada. It is ironic that it was Steve Wynn, another Vegas magnate, who recently noted just how great times were for the 'big guy' seeking cheap financing (and, unfortunately, just how bad it was for the average joe).