{"id":22058,"date":"2017-07-03T12:09:38","date_gmt":"2017-07-03T19:09:38","guid":{"rendered":"https:\/\/goldco.com\/?p=22058"},"modified":"2017-07-03T12:09:38","modified_gmt":"2017-07-03T19:09:38","slug":"private-equity-buyouts-at-highest-level-in-a-decade","status":"publish","type":"post","link":"https:\/\/goldco.com\/private-equity-buyouts-at-highest-level-in-a-decade\/","title":{"rendered":"Buyout Levels: Private Equity Buyouts at Highest Level in a Decade"},"content":{"rendered":"

If you\u2019ve been watching financial markets for the past couple of years, you\u2019ll know that the signs of a growing bubble are all around us. Stock and bond markets have been in bubbles for months, real estate prices are heating up again, and now private equity buyouts are at their highest level<\/a> in a decade. But booming business isn\u2019t necessarily a good sign.<\/p>\n

Highest Level in a Decade<\/h3>\n

When you hear that something is \u201cat the highest level since 2007\u201d you can be pretty sure that it\u2019s reaching bubble territory. The problem with unsustainable economic booms is that everyone assumes that the levels reached during the boom times are normal, and that is what they aspire to reach again.<\/p>\n

It\u2019s an attitude that crosses all business sectors, not just financial markets. Yes, as the economy grows it should eventually surpass the levels seen in 2007. But that growth needs to be sustainable and based on sound underlying economic fundamentals. Growth that is stimulated by artificially cheap credit can\u2019t be maintained.<\/p>\n

Everyone Feels Rich<\/h3>\n

The prosperity brought about by the boom times is illusory and only created by the central bank\u2019s loose monetary policy. But very few people know and understand this. Everyone else feels rich, flush with cash, and they think the boom times will never end. \u201cDow 30,000 in five years!<\/a>\u201d you might hear some people say.<\/p>\n

Companies such as private equity firms that are highly leveraged<\/a> and rely on cheap debt to finance their acquisitions are particularly susceptible to this euphoria. They\u2019re essentially playing with house money, being able to get loans for next to nothing, enabling them to make all sorts of acquisitions. But once interest rates start to rise, their investments suddenly don\u2019t look so good. The companies that they acquired start to fail and soon the private equity firms themselves aren\u2019t\u00a0 in great shape.<\/p>\n

Protect Yourself Against the Bubble<\/h3>\n

An economy that has overheated because of cheap money and credit is an economy that is on the verge of a major crash. The business cycle is real<\/a> and will continue as long as central banks continue to artificially lower interest rates. Students of economics know about the business cycle and its effects, which is why they aren\u2019t susceptible to the allure of the perma-boom.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

If you\u2019ve been watching financial markets for the past couple of years, you\u2019ll know that the signs of a growing bubble are all around us…<\/p>\n","protected":false},"author":13,"featured_media":33395,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[207],"tags":[],"class_list":["post-22058","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy"],"acf":[],"yoast_head":"\nBuyout Levels: Private Equity Buyouts at Highest Level in a Decade – Goldco<\/title>\n<meta name=\"description\" content=\"If you\u2019ve been watching financial markets for the past couple of years, you\u2019ll know that the signs of a growing bubble are all around us. 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