Thursday, January 31, 2008

Tell me, which side are you...?

Amidst the high drama and speculation surrounding the prospect of a global recession, I get to hear all kinds of theories from everyone. I just quote a couple that made me snort.

Louis Gerstner, Chairman of PE firm Carlyle Group (Ex- CEO, IBM Corp./ Amex / RJR Nabisco) –
"We are in a welcome period for private equity. Capitalism is not a steady state but goes to extremes and...after excesses have built up...we needed to see a correction. The media and government might have converted this state to a 'crisis' but it is not that."
Here he goes further -
Carlyle had $30bn of dry powder to strike more deals and the firm was turning towards the developing world where deals were "more unleveraged" and private equity firms took minority stakes. However, there would be fewer secondary buyouts where portfolio companies are switched between private equity firms."
Now turn to famed investor Jim Rogers -
"Conceivably we could have just had recession, hard times, sliding dollar, inflation, etc., but I'm afraid it's going to be much worse".
"[Ben] Bernanke is printing huge amounts of money. He's out of control and the Fed is out of control. We are probably going to have one of the worst recessions we've had since the Second World War. It's not a good scene."

But Rogers is so hooked on China -

"Some parts of the Chinese economy are going to be untouched, however. They won't even know America's in recession. They won't care if America falls off the face of the earth."

I go we are there already... MF portfolios are down by 30%. Quarterly numbers are getting flatter. Sovereign Wealth Funds are buying out American banks on the cheap. Will it look any different than it is now...?

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