Why the private equity crunch is not a prelude to the nex...

What’s Happening

Not gonna lie, Everybody is clueless, and when you are clueless, you are scared.

Why the private equity crunch is not a prelude to the next big economic crisis We are fixated on two problems: the price of oil and the frailty of our banking system. We are catastrophizing at a pace I have rarely seen, accelerated who are rarely proven right but are always given the microphone — either because they are super-rich or because they are super-short. (plot twist fr)

The oil situation is so fluid that its difficult to opine today and have it hold up overnight.

The Details

But the banking issue is more static and lends itself to more-than-momentary analysis. So lets leave the oil story to the crush of events, and instead address the dangers to the system posed and private credit.

Where does it stand in the pantheon of crises? Is it the global economic crisis of 2007-2009, or something lesser, such as the Long-Term Capital Management collapse of 1998, or the savings and loan crisis of the 1980s and 1990s?

Why This Matters

Or has there never been anything like whats occurring now, and its so difficult to analogize to anything? The inability to understand the crisis and the fear it engenders makes it hard to grasp the real concerns here and magnifies them to the point where it feels like one of those earlier ones. Many are too young to remember the S & L crisis, but it was hard to grasp at first, before we realized that crooks had gamed the system until it almost brought it down.

Market watchers are paying close attention to developments like this.

The Bottom Line

Spoiler alert: I am going to spend the rest of this piece arguing that it is none of those three, just a difficult-to-understand tale made worse of several of the perpetrators, and the desire among a host of commentators to analogize to canaries in coal mines at a drop of a problematic hat. One of the most unnerving things that almost instantly happens when you try to analyze how much trouble we are fr in is that we dont know how much money is actually at stake in private equity and private credit; how big is the problem?

Is this a W or an L? You decide.