Junk Debt

"Private Equity" is what everyone is being told is the new deal....Everything should be considered for the opportunity to go private. Why would anyone want to run a public company, why would anyone want to "hassle" with the public market place and why would anyone want the "cost" of being public? SUCH NONSENSE. Lets set some facts for the debate. 1) These transactions are highly leveraged deals. Two decades ago they were called Leveraged Buy Outs (LBO'S) with junk debt...2) These are nothing more than giant flips for the horse traders..ie..bankers, accountants and lawyers and but a very select few insiders who will stay on to run the companies.

This enormous bet with yet more leverage is assuming the following: 1) Interest rates don't go higher. 2) The stock market has to go much higher so that these private companies can be resold back to the public for a premium flip in two to three years.

There were many great success stories from the "old leveraged buy outs with junk debt" and there were too, many incredible failures and some pretty high profile ones at that...the analogy here is just like the current blow up in sub prime lending that also is getting a lot of press...There were simply too many people given access to too much capital that bought too big a house for their needs or financial where with all...now it is correcting....the problem is these big bets by KKR are with pension funds and endowments....this is different and potentially more dangerous...certainly more illiquid.

Danny Boy seen here (you have to look closely) enjoys the afternoon warming sunshine. He likes to have many options as he can move freely to the left of right which ever is better!