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There has been a lot of talk about how the US real estate market is in a bubble. But people are getting it wrong. The real bubble is in a little corner of the finance industry that is unknown to the average person. This industry has trillions of dollars in assets, and the companies it owns employ roughly 12 million Americans. The industry that I’m talking about is Private Equity. In this video we are going to cover how this bubble in private equity formed, when it could burst, and most importantly what this means for the economy.
Private equity has long been considered the gilded class of high finance. Its big bets and ginormous pay days are the envy of Wall street. Private equity firms such as Blackstone, KKR, and Carlyle are considered some of the most prestigious companies in the entire world. Even relatively junior employees at these funds can see their pay approach half a million dollars annually with senior investors regularly taking home 7 figure paydays.
Yet for all their savvy dealmaking, even the titans of private equity are getting caught off guard by the swift rise in interest rates. Higher interest rates are costing companies owned by private equity billions of dollars in higher interest payments and threaten to push many of the portfolio companies into bankruptcy. The consequences of which would be devastating to investors, the economy, and the millions of people employed by these companies.
*Disclaimer: Neither this video, not any content produced on this channel should ever be considered investing advice or official financial advice. All content is made for entertainment and educational purposes.
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31 Comments
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2 years have passed since publishing this video and the bubble hasn't popped…
There are almost always multiple bubbles existing at the same time. PE, Legacy Auto, LLM based AI, Commercial Real Estate…the list goes on and on.
On PE, we’d be better off without most of them
Failed on that call, now they are after the 401k's wrong place for retirement as when the sht hits the fan they stay whole and everyone else gets the shaft.
Only thing 401 k needs is a stop loss
If I'm a millionaire, I'm just dumping my money into the S&P 500. Why would I do business with these scam artists for a lower ROI?
Low fees and high interest rates: DeFi enables any two parties to negotiate interest rates directly and lend cryptocurrency or money via DeFi networks.
The potential of DeFi in traditional finance
DeFi can reduce the need for intermediaries at traditional banks when it comes to payments or lending, and means that money can be sent around the world in minutes, rather than having to spend hours at the bank going through bureaucracy, and the future of DeFi looks bright, with continued innovation and adoption. Key trends include clearer regulation, improved interoperability, advanced security measures and integration with traditional financial systems.
AI's Role in DeFi
Furthermore, AI can enhance security in DeFi applications by identifying fraudulent activities and mitigating cyber threats. For example, AI can analyze user behavior to detect abnormal patterns that may indicate potential fraudulent activity.
Which DeFi exchange has the lowest fees?
Nomiswap stands out for its comparatively low fees, specifically offering 0% in swap fees.
Uniswap stands out as one of the safer options in DeFi, with several features that contribute to its strong security reputation.
OKX is considered the best DeFi exchange overall.
Nomiswap is the best DeFi exchange for low fees.
Uniswap is considered the best DeFi exchange for beginners.
Personalized Financial Services
Through machine learning, AI systems can analyze user behavior and preferences to offer tailored financial advice and recommendations. This personalization helps users navigate the complex DeFi landscape more effectively, making it more accessible to a broader audience.
DeFi has the potential to disrupt traditional PE models by offering investors a new way to invest in private companies. DeFi platforms allow investors to invest in private companies by using smart contracts, i.e. self-executing contracts stored on a blockchain.
Some clever ones have sold their duds further into other companies saving not only their asses, but some of those who invested in them, there are lot out there who did that last 10 years or so.
People used to have values, but that’s clearly gone out the door. The PE sector runs on a combination of willful ignorance and fake growth (downsize, inflate, outsource) and will crash. PE at its core contributes to stagnation/inflation with the disguise of growth.
God I hope so, these ppl are scumbags. Idek know how it’s legal to do these leveraged BOs and not hold any accountability to the debt in the account
Using an lbo don’t mean it a PE
You look for companies that have value, and leverage all the equity in that company.
In fact, you loan them more than they're even worth… what could go wrong?
I love you experts… what sort of bailout you have in mind this time? Going with the great reset everyone is talking about?
Hindsight says you're using same ploy as a century ago, swallowing up banks for pennies per share (First Republic was $140 stock, Chase got for 25 cents each)
Amazing… tons of value…. Thank you.
I worked for a company owned by a PE firm. Their interest payments shot up pretty damn substantially.
What are stocks or ETFs to monitor that ate tied to that $3 trillion private equity funds?
Excessive babbling-rambling talk that's indiscernible with a squeaky voiced irritable speaker
“Alternative” is scary enough for an investment. Heck, Carlyle used to be the gold standard, but when it went public that should have been a warning.
0:39: Private equity firms like Blackstone, KKR, and Carlisle are considered prestigious and their employees earn high salaries.
1:06: Rising interest rates are causing private equity-owned companies to face higher interest payments and potential bankruptcy.
2:04: Private equity firms primarily invest money from outside investors rather than their own funds.
5:17: Firm B was able to generate a 200% return by using debt to acquire more houses.
6:22: Alternative asset classes, such as Art, have become popular for diversifying portfolios.
7:10: Masterworks allows investors to invest in multi-million dollar works of art and has seen profitable exits.
10:43: As interest rates rise, the company's profitability decreases due to higher interest payments.
11:29: Higher interest payments can completely eliminate a company's profits.
12:00: This scenario is becoming a reality for many companies in the private equity industry.
Recap by Tammy AI
Matatan
Ribirin <®>(((".🤔.")))<®>
WRONG. They have unlimited money it can't burst. Every economist has been saying this for years while PE owns literally every market.
So will these lead to massive sell offs of homes?
Great vid
good educational video – would be nice to have more of these even if covers the basics. Thank you.
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Great presentation.
Hi I like the video, but why did you not show a cost for the mortgage to buy the properties?
VNSH,I have an idea instead of using your crappy holster,stop .the griff please and invent something that will help society and bring them together.
Mahalo