High valuations, dry powder concerns for PE investors

D

dealmaker

High valuations, dry powder concerns for PE investors
The top concern for consultants and asset owners that invest in private equity in 2018 is high portfolio company valuations, according to a survey by eVestment released Wednesday. Valuations were indicated as a top concern by 60 percent of those surveyed, up from 48 percent in 2017, which was also the top concern. Dry powder was the second most cited concern with 40 percent, up from 26 percent last year. (Pensions & Investments)
 
I can see why valuations might be a concern! What is the "dry powder" concern? That they don't have enough $ set aside to buy in at lower levels in a pullback?
 
I'll share my thought process...There may be some truth here...Maybe not. The government is printing money like a drunken sailor. This money is going to government employees and retirees (federal, state, city, special districts). They are looking for a place to invest it. You also have a lot of dot com money out there looking for investments. Baby boomers are retiring and looking for investments. Also you have money from around the world looking for safe investments (example Asia). You see many people paying cash for homes...The reason is people are looking for investment options without creating a business. They have the cash, but don't know where to put it. CD yields are so small, they look to stocks. My dad told me (40 years ago), never buy a stock with a PE higher than 10!! How times have changed...
 
Cabin111 said:
I'll share my thought process...There may be some truth here...Maybe not. The government is printing money like a drunken sailor. This money is going to government employees and retirees (federal, state, city, special districts).
More...
You may want to review that section in your econ course that covers how "the government prints money". It doesn't work anything like you appear to think it works.
 
The Fed buys treasuries...With what??



US_national_debt.png


If China were to stop buying treasuries...AHHH we would be in deep do do.

So much like Germany in the 1930s...

On November 7, 2016, debt held by the public was $14.3 trillion or about 76% of the previous 12 months of GDP.[5][6][7][8] Intragovernmental holdings stood at $5.4 trillion, giving a combined total gross national debt of $19.8 trillion or about 106% of the previous 12 months of GDP.[7] As of December 2017, $6.3 trillion or approximately 45% of the debt held by the public was owned by foreign investors, the largest of which were Japan (about $1.06 trillion) and China (about $1.18 trillion).[9]
 
dealmaker said:
High valuations, dry powder concerns for PE investors
The top concern for consultants and asset owners that invest in private equity in 2018 is high portfolio company valuations, according to a survey by eVestment released Wednesday. Valuations were indicated as a top concern by 60 percent of those surveyed, up from 48 percent in 2017, which was also the top concern. Dry powder was the second most cited concern with 40 percent, up from 26 percent last year. (Pensions & Investments)
More...

There’s always cash on the sidelines until there isn’t.

Since I started my second career 7 years ago, multiples have gone up 2-3 turns as money pushes into smaller and smaller deals.
 
Cabin111 said:
The Fed buys treasuries...With what??



US_national_debt.png


If China were to stop buying treasuries...AHHH we would be in deep do do.

So much like Germany in the 1930s...

On November 7, 2016, debt held by the public was $14.3 trillion or about 76% of the previous 12 months of GDP.[5][6][7][8] Intragovernmental holdings stood at $5.4 trillion, giving a combined total gross national debt of $19.8 trillion or about 106% of the previous 12 months of GDP.[7] As of December 2017, $6.3 trillion or approximately 45% of the debt held by the public was owned by foreign investors, the largest of which were Japan (about $1.06 trillion) and China (about $1.18 trillion).[9]
More...
So first, China doesn't have a choice to stop buying treasuries as long as they peg their currency and have a trade imbalance. It's a mechanical result of the cash flows, again basic macro. And I think you're conflating national debt and monetary policy (and where local governments get the money to pay pensions, for that matter!). In all seriousness, you'd probably find a macro econ class to be very interesting, there are a number of very good free MOOCs out there taught by some rockstar professors.
 
Are they printing money big time?? Yes, and it effects where the money is invested. Will a president walk the states into bankruptcy in the next few years? Yes...No question about it. You have both the federal and state issues. But they both effect the economy. See below...Concerning Illinois. Their bonds are "trading" at junk level status...

https://www.wsj.com/articles/near-junk-illinois-to-sell-more-bondswill-investors-buy-in-1524574801

Yes, we know that China could shoot themselves in the foot by not buying our bonds. But they could take the hit and just trade with the rest of the world. Almost like what the world did after the USSR broke up. It took them 10 years to redevelop their economies...

Another story about California bonds...

http://l.facebook.com/l.php?u=http://sanfrancisco.cbslocal.com/2017/09/25/california-pension-reform-calpers/&h=ATMH4uzTKHuj7WFgQF9s2bt7sQQ08taDx1y2swIVfuz5PgHlnpbiJEJNSmHdBk6W958C9fIfIElyKXL4Odc4Brr2qg3dQo-Z_W_h7lUWxMIDF3H3zQTRVNw-1RKNLEmr8Sttw6ux9VUJOckn

The above...California is short by one trillion dollars (not billion)!!

So how are your PIIGS doing now??

These states include Portugal, Italy, Ireland, Greece and Spain and if combined together, they form the acronym PIIGS. The reason why these countries were grouped together is the substantial instability of their economies, which was an evident problem in 2009.
PIIGS - Portugal, Ireland, Italy, Greece and Spain
piigs.net/
 
Last edited:
You must log in or register to reply here.
Back
Top