Private Equity as Footwear
Is private equity the next financial shoe to drop? That’s the question answered affirmatively by Doug Kass over at TheStreet.com, and then seconded by Jim Cramer (vid after jump). None of what Kass argues should be terribly surprising to readers of this space, but the very existence of his argument may portend a revival of private equity as public whipping boy. It might have to wait its turn behind the credit card companies and hedge fund managers, but there certainly would be plenty of thong and cracker left for the onetime kings of capitalism. The Kass case is basically that private equity firms binged on leverage, and that the repercussions will be devastating both for the firms and for their investors. That latter class is particularly vulnerable, Kass says, because illiquid private equity investments “will result in a crowding out of inflows into other alternative strategies.” Kind of the denominator effect’s flipside. Kass doesn’t explicitly say it, but he hints that LP troubles would have a trickle-down effect to the economy at large, because so many of them are
