Cerberus Investors Barred From Redemptions
Title link here.
I really don't care for Cerberus for one simple reason - it is the private equity equivalent of Goldman Sachs. Cronyism reigns where the who's who of former politicians and connected business leaders land. Not because of their merit but because of their connections.
It's no irony that for decades we heard Wall Street tell the auto industry, as an example, how to fix their business. Then Cerberus acquired Chrysler basically for free from Daimler and promptly mismanaged it into bankruptcy. Pushing money around has little resemblance to running an actual capital-producing business.
Private equity is in serious trouble. Very serious trouble. It's pretty common knowledge that fees as the main source of income for private equity firms. Yes, there is the infrequent Google and other investments but private equity generally is a zero sum game. Especially when private equity firms can't ride the asset inflation trade as we wrote about a few years ago.
I have told many of my friends in the finance industry that there is a reasonable probability private equity could literally disappear from the economy. That would be quite a severe outcome but it is not implausible. Mostly because private equity is an extension of the Wall Street bubble that really performs little to no quantifiable benefit to capital production in the economy.
If the economy worsens, many private equity investors will likely end up in legal proceedings as they attempt to get their money back. They'll need it back as a matter of economic survival as their other sources of income and wealth evaporate.
I really don't care for Cerberus for one simple reason - it is the private equity equivalent of Goldman Sachs. Cronyism reigns where the who's who of former politicians and connected business leaders land. Not because of their merit but because of their connections.
It's no irony that for decades we heard Wall Street tell the auto industry, as an example, how to fix their business. Then Cerberus acquired Chrysler basically for free from Daimler and promptly mismanaged it into bankruptcy. Pushing money around has little resemblance to running an actual capital-producing business.
Private equity is in serious trouble. Very serious trouble. It's pretty common knowledge that fees as the main source of income for private equity firms. Yes, there is the infrequent Google and other investments but private equity generally is a zero sum game. Especially when private equity firms can't ride the asset inflation trade as we wrote about a few years ago.
I have told many of my friends in the finance industry that there is a reasonable probability private equity could literally disappear from the economy. That would be quite a severe outcome but it is not implausible. Mostly because private equity is an extension of the Wall Street bubble that really performs little to no quantifiable benefit to capital production in the economy.
If the economy worsens, many private equity investors will likely end up in legal proceedings as they attempt to get their money back. They'll need it back as a matter of economic survival as their other sources of income and wealth evaporate.
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