1/19 @ttmygh of the wonderful Things That Make You Go HMMMM newsletter just wrote a scathing piece on the emerging #pension fund disaster in lagged marks from private #equity.

loom.ly/YyomXW4
2/19 As he explains:
#PrivateEquity is taking down Pension Funds as they struggle to keep the game of hot-potato going. “Hot potato” being the business practice of selling slices of companies back and forth to one another at ever higher #valuations.
3/19 The “solution” appears to be PE firms building funds to buy #assets from themselves at possibly fraudulent valuations set by themselves.
4/19 What’s remarkable about Grant’s piece is that it highlights just how quickly comically overstated high rates of reported #returns can be wiped out by big negative marks.
5/19 We have written at length about this arithmetic folly. This was us at the end of 2018, highlighting that the stuffed pipeline of #IPOs scheduled to go public in 2019 would likely be overvalued by 50%+...
6/19 ...how the consensus BUY of PE by #Pension #Funds made no sense and it lead out with a discussion of how these forces would conspire to demolish pension funds.
7/19 Get the #whitepaper Private vs. Public Markets – Identifying Potential Sources of Risk and Reward 👇🏼

kailashconcepts.com/white-papers/p…
8/19 Excerpts from news reports highlighted by Grant’s recent report are posted below. They make for an incredible read.
9/19 "Equable expects the national funded ration avg to decline from 83.9% in 2021 to 77.3% in 2022"
10/19 "A growing number of PE firms are establishing new funds to buy #portfolio #companies from funds they already control."
11/19 "...The Access Group has risen an eye-watering 3,800% since 2015."
12/19 Building funds to buy assets from themselves so they can set marks are now 87% of all secondary deal transactions. In the search for suckers* more $ for these funds, the industry is trying to stuff “continuation funds” in ‘40Act wrappers & PE is racing for 401k inclusion.
13/19 This is an issue we questioned in #PrivateEquity Returns: Are Private Markets “Safe”?

Get it here 👇🏼

kailashconcepts.com/private-equity…
14/19 We also highlighted the dubious methods PE was using to keep debt-to-EBITDA ratios under the Office of the Comptroller of the Currency’s high-risk flag of 6x as they made the most expensive acquisitions in the #industry’s history in 2021.

kailashconcepts.com/debt-to-ebitda…
15/19 Excerpt from @FT article reporting how these private continuation fund marks have been used to value a couple obscure companies in the UK at valuations that make them among the largest companies in the country – with reported returns of 600% and 3,800%, respectively.
16/19 Who knew a British windshield repair company could be worth so much?!
17/19 As the excerpts from the @FT show, some are now publicly calling these practices #pyramidschemes with insiders at pension funds privately confirming the possibly criminal nature of these transactions.
18/19 After the longest and largest bubble in the history of US markets, State & Local Pension Plan Funding status is now just off the 2009 lows and public #equity valuations (never mind these privates) have just hit the #dotcom peak levels.
19/19 Meanwhile, US regulators continue to investigate a few billion lost by #FTX – an offshore brokerage firm that pretended to be an exchange where people could trade #tokens…..

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More from @KailashConcepts

Mar 1
1/8 Amazing vid from @EPBResearch

Debt #Crisis - Yup, It's Coming. Check it our ⬇

2/8 What we've been saying: banks and the consumer are no longer the problem. #Banks are the new utilities.
3/8 The #government and business sector are the problems. Businesses have seen record #debt and record low #tax rates help inflate margins to unsustainable levels.
Read 8 tweets
Feb 28
1/10 Have you read our recently published #whitepaper?

The Art of #Stock Picking #Returns

Highlights below ⬇
2/10 “We’ve had 40+ years where all the money went into broadband, or internet, or #Netflix or the cloud and no money went into basic productive capacity…”

–Robert Friedland, CEO, Ivanhoe group of companies
3/10 What follows is KCR’s attempt to create a simple walk-through of the #risks and #opportunities offered today. We believe both the structure and implications of this paper are easy to grasp.
Read 10 tweets
Feb 28
From @MarketWatch

Interest in #EVs is outpacing infrastructure development

loom.ly/EhmwHWg
2/4 In our piece, The Role of Critical Minerals in Clean Energy Transitions we stated, " The electrification of transportation is going to require a massive amount of #mining. The stocks are incredibly cheap."

kailashconcepts.com/white-papers/t…
3/4 The chart below shows the total change in annual #mineral demand by these scenarios. Demand growth is enormous.

Despite incorporating significant future efficiencies, the IEA predicts that mineral #demand will grow 4x. Image
Read 4 tweets
Feb 27
1/7 This was a FASCINATING article from @FortuneMagazine

Overconfident #tech #CEOs have overpaid for ‘box tickers’ and ‘taskmasters.’ Here’s why the real ‘creators’ will survive the mass #layoffs

yahoo.com/entertainment/…
2/7 "$CRM CEO Marc #Benioff and $META CEO Mark #Zuckerberg have admitted that they hired too many employees under the assumption that the growth their #sector experienced during the pandemic would continue."
3/7 "In periods of growth, the errors made by overconfident #CEOs are often buffered by the upswing of the economic cycle. In contrast, during upswings, underconfident CEOs lose out because they stay hamstrung with #risk aversion."
Read 7 tweets
Jan 9
1/21 Let's talk about $WE. Last month @SeekingAlpha reported that WeWork could declare bankruptcy in 2023. They have a $ problem.

loom.ly/roQICwI twitter.com/i/web/status/1…
2/21 Their analysis of WeWork's failed business model is spot on.

"The problem for $WE is the margin between what they pay and what they receive from their #customers has not been enough to cover the very large administrative/marketing/advertising #expenses." Image
3/21 Their story is wild. WeWork was founded in 2010. By 2014, it "the fastest-growing lessee of new #office space in New York" and was on track to become "the fastest-growing lessee [lessor] of new space in America."
Read 21 tweets
Dec 30, 2022
1/6 It's not that complicated. When a company issues #stock to employees or the public, it increases shares outstanding and dilutes #earnings per share.
2/6 Give the #stock to the employee, and the cash doesn’t show up on the balance sheet. Robbing Peter to pay Paul. In #broaddaylight
3/6 In the run-up to the peak of the dot com bubble, #stockcomp felt good. Until the stocks started going down and it felt awful. That is precisely where we are today. It tends to be a self-reinforcing spiral.
Read 6 tweets

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