Ross joins the PE fundsmen of the market apocalypse

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If you want to see Maria Bartiromo aggressively contradict Wilbur Ross (pause to let that soak in), click here and watch CNBC's Closing Bell from yesterday. Ross was on CNBC joining the doomsday club of major PE players sharing his own not very unique vision of how the next downturn will play out.
Ross feels that the recent market surge is a result of the net reduction in the floating supply of equities due to high LBO volume, which is where Maria jumped on him to make a point he was getting to anyway. Maria interjected, "so the smaller float is going to push prices up, but that's not quality Wilbur," upon which Ross reacted as if talking to an over-eager granddaughter and gave a polite, "you're worth less than an OEM that needs to scramble for A/R securitization facility increases every quarter just to stay afloat," response.
Ross also thinks equities in China may catalyze a greater Asian market tumble. Equities in China are trading at above 30x earnings on average (which has been a bubble threshold in the past, as the last US bubble burst when the S&P was trading at similar levels (~33x)) and new investing in the country has been more the result of an uninformed public fervor than anything else.
Ross conludes by giving a LBO 101 lesson, and a reason for PE investors to worry. If entry and exit multiples are the same, which is a base assumption of many PE deals, usually things are swell (assuming the PE firm's done its job), as long as interest rates are constant (or drop). Since Ross thinks rates are going to spike, along with defaults in the next two years, a lot of those projected returns in PE models aren't going to pan out.
Wilbur Ross Sees Private Equity, China Bubbles [CNBC]

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