Debt on Top of Debt: The $8 Trillion PE Bubble
By Ed D'Agostino | August 23, 2024
Early in my career, I worked at a small brokerage doing mergers and acquisitions. Our buyer base included private equity groups. These were smart people, with deep industry knowledge that allowed them to add real value to the businesses they bought. They would grow the businesses over a period of five or so years, and then sell—capitalism at its best.
That old private equity model is now mostly extinct. In its place, my good friend Jared Dillian sees an $8 trillion bubble, built on massive layers of debt across 17,000 private equity firms. He says this bubble poses a systemic threat to the entire financial system, with the potential to implode in ways similar to what we experienced during the 2008 financial crisis.
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Jared recently released a comprehensive white paper on the private equity bubble—and what he’s calling the “Big Short 2.0.” It’s also the focus of our interview today for Global Macro Update.
Longtime Mauldin Economics readers are familiar with Jared’s work. He’s the editor of our Street Freak investment letter and the author of several books. Years ago, he ran the ETF trading desk at Lehman Brothers. He was set apart from the departments that made the investment bank implode, but close enough that he can spot the precursors to a crisis.
In our interview, Jared explains why private equity is a massive bubble and the opportunities it presents for investors who get ahead of it.
You can access a free copy of Jared’s exposé on the private equity bubble by clicking here.
Watch my interview with Jared Dillian by clicking the image above. A full transcript of our conversation is available here.
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