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Remember this link if private equity companies start laying off their employees, or start collapsing on their own weight, https://www.ft.com/content/be9e095f-71b8-402f-a404-1172d6df1fb7

Because from the way I understood it, some of them have started to borrow capital AGAINST their portfolio to lend to the companies that are IN their portfolio.

Nested leverage investing. ::)

That's how the economy works! PE companies lend money to the other companies for a stake and then they borrow money from banks by showing their portfolio of investment. That's a very common practice. Even banks do that quite often.

They lend money to common people, then sells off the loan portfolio to the asset management companies to borrow money against that. Debt over debt over debt - keeps the modern economy rolling!

This is a common practice of privet companies in that they borrow money from the bank by showing a companies share to lend money to that same companies. This methods help them to increase their exposer to the market because they do not have to sell the share at the same time they made profits from that lended money.

Nested leverage investing has their own risk because it significantly increases debt of a companies so if the value of the investment goes negative they might face financial problem.

Competition for attractive investment opportunities has intensified leading to higher valuations & reduced returns. Market volatility & uncertainty make it harder to predict & manage investments effectively. Regulatory & compliance requirements have become more stringent imposing additional costs & complexities. Impacts of the COVID-19 pandemic still linger, global markets are still suffering from economic instability which impacts the performance of portfolio companies. These combined factors contribute to the growing difficulties faced by private equity firms in navigating the economy.

I believe not always, and not as a rule. Because the more logical move is to let them go from their portfolio and not cause the whole company to be at risk. What some of them did is they took MORE risk, which could be good. But in the current state of the company, it could be very bad.

 8)


But do you believe it will never stop with falling liquidity in the system?

Plus lend money to common people? In the context of what's written in that link, I think you and I have a different idea of what private equity companies are?

Not sure if I get his tone right but I feel he is being satirical about it. This is one of the obvious flaws of how a modern economy works that has been posted many times on the internet. I'm pretty sure there is a documentary explaining how debt works and how risky it is in general.

If he is not though, then I don't see why we believe Bitcoin is a better alternative compared to fiat if the debt is deemed necessary to allow the company to grow their wealth (or their reliance on fiat).

There was a phase in my Bitcoin journey when I believed that it could be a replacement for the current form of "money". But I'm currently not anymore with that camp. I believe Bitcoin is a back up or fall back IN CASE the financial system collapses, but as a direct alternative? I believe not, although it has its own utility and reason to exist side by side with the legacy system economically, socially, politically.

Laying off workers, reducing salaries and reducing unnecessary spending on sectors in companies are all measures to enhance profits to obtain more financing or loans, which has become more difficult due to the Federal Reserve’s policies that raised the interest rate and thus greater pressure on companies to achieve higher profits with fewer expenses.

it is true that things are a little bad, but the hope is that the economy will improve in the coming years. Therefore, companies may sacrifice a little profits to maintain distinguished employees or those who are difficult to replace, and then the jobs that can be replaced or quick replacements for them. companies that can change their production plans and strategy will quickly stand and will be ones that are less affected.

There's nothing wrong with using your own assets(the companies in your portfolio) as a collateral in order to borrow more capital.
The real problem here is the lack of proper risk management.
1.Getting more loans in times of growing interest rates seems financially irresponsible.
2.The financial institutions, that give such loans to private equity companies should be held responsible. I guess that the banks keep acting irresponsible and keep making risky financial decisions because they are "too big to fail" and when "the shit hits the fan", the central banks will always print more money and come and save them.

The link you provided is paid. Can you quote a free copy of it or clarify the points contained in it?

Companies do not only borrow to strengthen their assets, but rather buy part of their stock to maintain the strength of the company. Part of the expenses of these companies goes to advertising, buying shares, and enhancing profits, which brings more money to expand the worker base, but they are the first to be fired if a problem happen and the last to be added if gains are achieved.

Yeah this is how everything is cross collaterized pretty much and unless a massive alt coin crypto crash which makes many cross margined accounts go bust, the same can happen in the real world.

I remember in 2008 it was impossible to get any loans what so ever. People bought luxury items like cars, boats, etc and they had to liquidate them to no buyers. Liquidity just disappears because credit disappeared. And with people over leveraged the way they are, it’s a call for disasters.

You have touched upon essential strategies that generally companies employ during the period of economic uncertainties to sustain profitability, especially when dealing with relatively high interest rates. However, I think they should not cut their spending and continue investing on research and development (R &D). Reducing spending on R&D can hinder a company's ability to innovate, develop new products to remain competitive in the market and for long term growth and success of their business.

Yes that's true! It's not a rule but definitely a survival strategy for the PE companies. If they can sell off their stressed assets, it's good for their own survival.


I said it from the perspective of banks and not PE. I said it to compare banks with PE companies on how they act similarly. Being a student of business, I surely know what PE companies and and how they operate.

In modern economy, it's debt based. Government prints money on debt. There are other parameters like interest rate, current and fiscal deficit, GDP etc.

I mean it would also mean that they would be able to hold the strong ones a lot longer, which means that when the economy grows bigger they would be able to get a lot more. Obviously they would rather hold everything as long as possible and even get more, that's how PE companies work and that's how they make a profit, the more they hold the better, they would rather have double the size of what they have, even the stressed ones but sometimes they can't, like right now, so selling some of them would allow them to keep the others longer and they would make a profit accordingly.

This allows them to keep things on their books and when they are sharing their quarterly reports they would be looking fine without a trouble.

I have read a lot of forecast that many industries are going to fall like certain layoffs will be massively done. Many of it are from the tech industry for which it happened a lot already this year. Take the example of what Elon did to a lot of X's former employees.

While there are companies that seek the goodness and show kindness to their employees but not all of them are the same. Despite that there could be a loss that's occurring on their reports, as much as they can they want to retain humanity.

But it's not a sustainable attitude of a company if they've been incurring losses and there's a need to cut the budget for their employee's salary and the best solution is to layoff as much as they can and retain only those that are good and productive to them.

Even the government who are responsible for printing money have challenge of paying their  workers and you think private companies won't be affected also. Private companies will definitely drop some of their workers because as the economy is getting more terrible the government is increasing the tax of private companies which they won't be able meet up with the payments of their workers, the  only way to meet up is to drop some of their workers. The economy is not even in favour of the government. Hard economy has always been limitation for private companies to expand.

There are many things already wrong with the way the fiat and centralized economy works because whenever you had an unpredictable experience with them, it only works by one way direction such that you have no remedy than to face the economic consequence of the present situation, maybe all these were part of the things that engenders for the development of a new decentralized system that each individual will have access to control their own financial economy without receiving a general negative consequences altogether, very soon more influence of bitcoin will begin to unleashed towards a centralized economy, but many would have already paid the huge price for it just as found in this subject matter and discussion.

That is why before investing in a company especially the private companies, you have to do a thorough research on their balance sheet because a falling company in the bid to get fund to finance the debts might hide all traces that will get an invest hint of what is happening in the finance of the company.

Government need to do more to support SMES because they are actually the engine that helps grow the economy and provide jobs to support the macro economic. However, we may keep having this drop because of the inflation rate and more job losses from the advent of AL taking over human places as entrepreneurs move to reduce cost.

Private equity companies are no different than any other company, in that the managers making decisions can sometimes make the wrong decisions leading to their own demise. There is this illusion that bankers are somehow more sophisticated, and the can be over the average investor, but they can often get caught out by trends they read incorrectly (like borrowing rates staying low) or thinking that demand for a certain good/service can be squeezed ever higher without any consequences. Ultimately they're just playing a balancing game, hoping they can swoop in to take valuable assets by borrowing at one rate and hoping the company can sustain enough profits that they can take the difference in between.

Currently government is not even interested in her citizen again in some certain couand especially in Africa country I don't know about European countries and Asian countries, but in Africa government doesn't make a provision of employment whereas it's their duty to create employment opportunities to lesser massive suffering in the society as well, so what i believe concerning Government is that they do anything they wants to do on their detriment time, when we talk of inflation rate in a country we are pointing at the economic conditions of the country because when a country lacks management that's when the economy will crash and inflation will take over the nation couple with high rate of unemployment

What a load of crap, borrow against a made belief made of thin air share for money? They are just trading against their non existence promise, as I always said those companies are all morally bankrupted in the eyes of me, but they have no shame they still can trade among two morally bankrupted companies, because they no longer value reputation (albeit good reputation), how long can they get away from it again and again? I believe they could run out of idea when gullible investors finally wake up en mass, just like how we can witness recently and people distrust banking service all of a sudden.

The bankrupted company also by the hard work get into the real business,the impact of the company to the society will be the important all the time.If the company was not good to the society,you can do the close of such private sector.The bankrupt of any private sector will allow the people to loss some money with the certain mode.When the reputation of the company was changed,the company will not easily get back to their old profit.For this reason the people will start the new business after the big loss in the old game.

Investors in these companies are not affected in the same way as employees, as investors and stock owners have the ability to diversify their investments, and they often have diversification of investments and protection from the government if they declare bankruptcy, but the employee does not have all these procedures that may protect his job, and his income may be directly affected if this happens. It has nothing to do with his total dependence on the job and the lack of a surplus, not to mention the spiral of debt that he will enter if he has not already entered into it.
Poor economic conditions affect employees more than shareholders.

Employees often have the opportunity to become shareholders in the company they work for. Yes, this requires raising funds, but if you are tying your future to a particular organization, it is worth it. Employee turnover often depends on the economic situation, but by becoming a shareholder, you can protect yourself from being laid off.

There are two ways of this, and they are very different things. First of all, you could be a simple apple worker, making a bit more than the minimum wage, save some money, and then buy shares of it on the market, there is nothing against that and you can do that which is allowed and you would own the shares of your own company that you work in.

However, that's not the good one, the good one is that you could do such a great job that they would pay you a salary +shares, I worked in a place before where the general manager was so great that they gave him 2% of the company for being the general manager, he didn't take a salary, but he was making more than anyone I have ever seen.