Joseph Baratta, the head of Blackstone’s Private Equity Group recently said,
“We are in the middle of an epic credit bubble, in my opinion, the likes of which I haven’t seen in my career in private equity.”
Blackstone which was founded by two men who had worked together at Lehman Brothers before the collapse. It is owned by the most powerful of the Too Big To Jail Institutions.
(From Zero Hedge) Blackstone Group had been at the center of inflating the new echo bubble in real estate by bidding (all cash) for property across the US. What they were doing was paying cash for distressed homes and turning them into rentals. There was another group paying cash for homes. Some wealthy overseas Chinese were paying cash for homes which they would use for birthing centers. Women would come from China to give birth to children who would under America’s fried judicial system become instant American citizens thus giving their parents and siblings instant access to American Green Cards (work permits.) Other Chinese have been buying homes for cash either to occupy or to rent. But paying cash is the Chinese way. And it is a good way of dumping dollars and laundering the proceeds of illegal transactions.
Blackstone has slowed its investments amid such concerns, with Mr. Baratta saying he sees easy credit as adding risk for buyers of companies, even if it benefits sellers. “That largesse goes to the seller,” Mr. Baratta said, speaking at the Private Equity Analyst conference in New York.
The firm is still bullish on prospects in the U.S. economy, but focused on certain investment areas. Energy, transport infrastructure, consumer finance and housing and construction remain attractive investment theses, Mr. Baratta said.
“We are not leveraging U.S. GDP,” he said, because the good times are not going to last forever. The firm expects what Mr. Baratta called a “mean reversion,” which he said will ultimately affect exit multiples at portfolio companies.
If it is not enough that the man from Blackstone just said the American real estate Bubble is over, Mr Baratta also said,
“The single biggest assumption we make is the multiple we can sell [a company] at five years hence,” said Mr. Baratta, and right now those projections do not seem to warrant a lot of deal activity.”
Let me explain. We have had declining interest rates for several decades. This has made morons look like geniuses. Suppose you cousin Harold had a job managing a 10 billion dollar investment. The original investors put up a billion dollars. He borrowed 9 billion dollars. The Federal Reserve pumped the money supply which increased the value of his assets and lowered the cost of his borrowing which is to say that Greenspan and Bernanke lowered interest rates. When it came time to renew his loans, Harold got a lower rate which cut his borrowing costs. Harold is looking great. His costs are going down and his assets are going up. Harold is a genius. Not Quite.
Leveraging made him look great. His investment was going up in value while he was getting lower interest rates. What did Harold do to magnify his returns? He borrowed 9 billion dollars. That made his return on rising asset prices which were created by the Federal Reserve’s Magnificent Bubble Machine look great.
But now we are headed in the opposite direction. It is called deleveraging in an era of declining asset values and rising interest rates. If Harold were in real estate, that fellow from Blackstone would tell him he was screwed. The real estate market has hit a top, is going down and they are pulling out. And Harold’s interest rates are rising. The next time his loans are up for renewal Harold will have rising costs of borrowing and declining value of his investments. Harold has to sell everything and liquidate before loan renewal time.
Now you understand how precarious these markets are. And how idiotic some of these money managers are. Blackstone knows it is time to get out though they are staying in certain selected markets. Not everything is crashing. I recently read of radioactive water being found near a fracking site in Pennsylvania. The same is happening in Colorado. Fracking is derived from Hydraulic Fracturing and refers to a new means of drilling for oil using water pressure, caustic acids and other toxic substances. Apparently, it has become a common practice in the New United States to dump radioactive waste into fracking wells to pollute America’s drinking water. We have doubled our population which has more than doubled our demand for water while destroying our water resources. But this is good for a few businesses owned by the New World Order.
I have been telling you for some time that Professor Steve Keen says we are in the greatest market bubble in 500 years and that we are headed in the direction of the worst Depression 500 years. MIT said half a billion people will die of starvation when the dollar, the pound, the euro and the yen collapse. There are others calling for a severe stock and bond market sell off which will accelerate the deleveraging process. It is like buying stocks on margin 1929 in New York. Things were great on the way up but on the way down men got margin calls. Sell your assets and pay off your loans today. That will happen soon enough in America and in the world. There are other weak points in Japan and southern Europe and in England where Debt Leveraging is worse than in any other major country.
Of course all of these Bubbles were made possible by the Bank of England- Federal Reserve fractional reserve banking system and by our interest bearing currencies. What a wonderful system we have when banks can charge us interest for money they created out of nothing. And Central banks can create Asset Bubbles so they can make a killing by running the markets up and down selling at the top and buying at the bottom for pennies on the dollar. And they did that with stolen money.
Remember Donald Rumsfeld his Comptroller rabbi Dov Zakheim saying on September 10, 2001 that they could not find 2.3 trillion dollars that had gone missing at the Pentagon. I have said many times that I estimate the Bankers are allowed to steal 3 to 4 billion dollars a week from federal spending that we commoners are not allowed to adequately audit. You do realize that the auditing of government contracts is done by subsidiaries of America’s defense industry?
And whatever happened to all that gold at Fort Knox? Gold plated tungsten alloy bars have been found several times. And bullion banks have been allowed to lease gold from the Federal Reserve and other Central banks which they have been allowed to sell to five different buyers. As I mentioned before, Dr Jim Willey has said he estimates that between 20 and 40,000 tons of gold that customers paid for and thought was on deposit at their account has gone missing.
And then there is the money that you thought you had in a pension. Pension fund mangers for public employees are the dumbest people on the planet. They bought mortgage backed securities that people like Catherine Austin Fitts told them were worthless. And now pension funds in Poland and Spain are being seized. In the US civil service pension funds are short the money they need to pay retirees. Detroit wants to cut retirees 90% so they can pay 100 cents on the dollar to financial manipulators and other criminals.
This is a very Big Bubble. And it will crash soon. Longtime readers know that I have promised to tell you when it is time to buy silver on a credit card and run for the hills. That time is not yet. Let me repeat what Max Keiser said. When gold hits $5,000 an ounce, I will go into hiding. That is when you will want either a private militia in America or a safe house in Patagonia.
Or maybe an American military coup. Dr Steve Pieczenik, the former Black Ops man who served 4 Presidents and was the late Tom Clancy’s business partner, went on the Alex Jones show some months ago and argued the case for an American military coup.
Who knows what happens next. But I can absolutely guarantee you that it will not be long now until it does go down.
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The video below is from the same man who did the Revolution and Resistance and videos.