Things you are low(high)-key hoping this recession will wipe out

The current economic system has some really disgusting trends that have been mostly driven by the reckless spending by the government, reckless spending by banks due to low interest rates and reckless investment by institutional investors, specially in their VC portfolios, that I really hope get completely wiped out. 

I'm just going to share the main one for me and hopefully other people can also share theirs. Here is one that I think will definitely be gone once we are 2-3 years into this recession: American tech-workers earning California-tier salaries but living and working remotely from places like Costa Rica. Seriously, this is the definition of excess. These people come to these high COL cities, get jobs, and then bounce to the poorest third world country they can name on a map. I think it must be some kind of fetish for these people. I am a finance guy so I have no issue with wealth or being wealthy, however I do think it is a bit disgusting when you are wealthy and  you actively seek out to live among people who are substantially poorer than you. In Costa Rica you would be considered middle class if you made $1,000 a month. Now here comes this fucker making $15,000 a month just to flex on you and what does he do? He buys up a house like 10 miles away from you and pretends to be part of your community.

And this is real. I've read that these expats are not going to Costa Rica and living in secluded 'expat-only' cities. They come to existing cities and neighbourhoods, buy all the available real state, drive prices up, and in about 5 years the COL of the surrounding area is already way beyond what the local people can afford so they leave and then even more expats come to buy the real state left behind by these impoverished locals. This is, in my opinion, very fucking disgusting. Imagine if you were an MD making 7 figures a year but just for some kind of sick fetish of yours, you decided to live in the poorest neighbourhood in Mississippi just to flex on the yee-haws. 

I am hoping this recession forces tech companies to either fire all of these people, or adjust their compensation to local Costa Rica level salaries ($1,000 per month). I have nothing against remote working or even working abroad but this kind of shit is just way beyond reasonable. 

 

Lol was just about to say the same thing. As someone that recently made the switch from finance to tech, isn’t this similar to what finance (especially PE folks do). They fire a bunch of poor to middle class workers, make a boatload of money, pay a lower income tax and then flex with expensive cars and 2nd / 3rd vacation homes. Of all the quirks / insecurities of finance folks, complaining about someone else making more money (gross or net) is the funniest imo. 

 
Controversial

For me the big one is real estate, renting a 1br for $3500 is ridiculous and should not be seen as "the new normal". I hope all the people sitting on real estate, driving prices up and only renting to high earners to create a bidding war get expeditiously wiped out. I don't care how many people we'll see jump from buildings in the fall out, those people are the definition of evil and I wish the worst for them. 

My uncle once had a 2br for $2000 in the city barely 5 years ago and now you'll be lucky to see a studio for that in Midtown and if you do be prepared for a bidding war or to pay a $5000 broker fee. 

 

These obese Boomer assholes basically priced out their kids and all future generations from decent home ownership due to greed, obnoxiousness and ignorance of globalism's downstream effects.

It's not just the boomers dude. Look around you with open eyes. That greed is in the heart of your friends, your family and yourself - will you act on it if given the opportunity? A lot of people act on this greed and will abuse people for the sake of excess hoarded wealth. We need to put measures in place to stop this.

Also, supply and demand - coastal land is limited. All land is limited, that's why everyone's trying to control supply.

 

All those people that got that free PPP money are saving up, so if there'sa RE crash they can buy shit on sale and reduce supply for the average person, thereby raising rents and causing greater wealth disparity and societal unrest. Kind of wish we could skip the foreplay and get straight into people forcing change.

Anyway. Doubt your rental woes will be solved.

 

Second this. What’s even more insane is these drooling middle class idiots (note, not saying middle class = idiots ) that barely meet the income requirement and eagerly slave away for a shitty 1 bd just because it’s by a Starbucks, Whole Foods or a couple of bars. These idiots continue to effectively bid up real estate in terms of rent / housing prices and shit on it for everybody. All the while they don’t realize their rent is a large part of the reason they will never build wealth. 

 

That’s because a large amount of decent paying corporate jobs are in NYC. I’m not saying that’s the only city of course but I challenge you to actively try to secure a job in a MCOL city such as Phoenix, Nashville, Dallas proper, etc. You’ll find that there is a lot of recruiting from regional state schools, and you as an outsider will probably lose out to the locals for the few well paying jobs that exist for juniors. Maybe a $65k-$70k FLDP takes you, but then rent is like $1800-$2000 and you need a car which you didn’t need in NYC and hence  things are still financially tight (although admittedly the quality of your complex is certainly better than NYC).

It’s easy and intellectually lazy to assume everyone is stupid, but the more nuanced reality is a lot of people have considered the alternatives but it’s not as easy or necessarily better as you think. BlackStone and other huge firms are investing like crazy in tier 2 markets right now and jacking up rents there as well, and wages are often adjusted less than they are in NYC to inflation.
 

And before you bring up remote work, that’s extremely challenging to find as a junior, because most companies decided hybrid or fully back is the way to go. Again if you don’t believe me, just try it and you’ll soon realize that juniors really are stuck between a rock and a wall.

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i.can.make.it

For me the big one is real estate, renting a 1br for $3500 is ridiculous and should not be seen as "the new normal". I hope all the people sitting on real estate, driving prices up and only renting to high earners to create a bidding war get expeditiously wiped out. I don't care how many people we'll see jump from buildings in the fall out, those people are the definition of evil and I wish the worst for them. 

My uncle once had a 2br for $2000 in the city barely 5 years ago and now you'll be lucky to see a studio for that in Midtown and if you do be prepared for a bidding war or to pay a $5000 broker fee. 

Well it kind of depends on the real estate, doesn't it?  A 1br for 3,500 may seem egregious in Plano, TX... but that's a freakin bargain in Tribeca.  Also, how big is it?

And a recession won't do anything to real estate prices in the long term except cause poor and middle class Americans to lose their homes. The only solution to a tight housing market is to build more.  Unfortunately.... the people who approve new buildings tend to be homeowners with a vested interest in constraining supply.

 
i.can.make.it

For me the big one is real estate, renting a 1br for $3500 is ridiculous and should not be seen as "the new normal". I hope all the people sitting on real estate, driving prices up and only renting to high earners to create a bidding war get expeditiously wiped out. I don't care how many people we'll see jump from buildings in the fall out, those people are the definition of evil and I wish the worst for them. 

My uncle once had a 2br for $2000 in the city barely 5 years ago and now you'll be lucky to see a studio for that in Midtown and if you do be prepared for a bidding war or to pay a $5000 broker fee

The law of supply and demand no more cares about your subjective sense of morality as the laws of physics care that you think it's unfair you can't fly like a bird.  

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Why specifically do you say "Chinese" in "Canada/ USA"? I would have said the same things about Russians in London. The amount of so called "dirty" money being washed in cities is a disgrace. Qu: what s the state of the economy got to do with it?

 

Hölder

The current economic system has some really disgusting trends that have been mostly driven by the reckless spending by the government, reckless spending by banks due to low interest rates and reckless investment by institutional investors, specially in their VC portfolios, that I really hope get completely wiped out. 

I'm just going to share the main one for me and hopefully other people can also share theirs. Here is one that I think will definitely be gone once we are 2-3 years into this recession: American tech-workers earning California-tier salaries but living and working remotely from places like Costa Rica. Seriously, this is the definition of excess. These people come to these high COL cities, get jobs, and then bounce to the poorest third world country they can name on a map. I think it must be some kind of fetish for these people. I am a finance guy so I have no issue with wealth or being wealthy, however I do think it is a bit disgusting when you are wealthy and  you actively seek out to live among people who are substantially poorer than you. In Costa Rica you would be considered middle class if you made $1,000 a month. Now here comes this fucker making $15,000 a month just to flex on you and what does he do? He buys up a house like 10 miles away from you and pretends to be part of your community.

And this is real. I've read that these expats are not going to Costa Rica and living in secluded 'expat-only' cities. They come to existing cities and neighbourhoods, buy all the available real state, drive prices up, and in about 5 years the COL of the surrounding area is already way beyond what the local people can afford so they leave and then even more expats come to buy the real state left behind by these impoverished locals. This is, in my opinion, very fucking disgusting. Imagine if you were an MD making 7 figures a year but just for some kind of sick fetish of yours, you decided to live in the poorest neighbourhood in Mississippi just to flex on the yee-haws. 

I am hoping this recession forces tech companies to either fire all of these people, or adjust their compensation to local Costa Rica level salaries ($1,000 per month). I have nothing against remote working or even working abroad but this kind of shit is just way beyond reasonable. 

I feel the exact opposite of you. I have seen firsthand when my sister was living in Mexico and all the gringos came in with money and really helped the small businesses. The standard of living seemed to go up for the local residents and everyone was happy.

There were certain areas where expats would live and the locals called it “gringo hill.” My sister lived here in a nice place renting it for $600/mo, which is low for our standards, but a level of money the locals didn’t have and they lived in another area. The locals generally got along well with the expats. I don’t see the problem here.

There was a group of people that went to Stanford D school who loved to visit this area of Mexico. One of the girls fell in love with a local and now they have a kid and live happily in the area.

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

I think different people will have different experiences. However there are many articles portraying the exact opposite of what you say. Of course, business and rental real state owners will benefit but everyone else will suffer.

However that is not the main issue. On a moral level I dislike it, but then I see it financially. Why am I, as an investor, subsidizing some fucker living in Costa Rica to live like a king? If the fucker wants to be over there then pay him the same as you’d pay a local Costa Rican programmer. If he won’t take it, fire him and hire someone who is actually here working with the business. One thing is working remotely, another is having to take a plane to be able to attend a meeting with your fucking co-workers. Imagine how much you could cut your operating expenses by just firing all of these dummies and how much productivity could be increased by having your tech teams existing in the same city.

 
Hölder

I think different people will have different experiences. However there are many articles portraying the exact opposite of what you say. Of course, business and rental real state owners will benefit but everyone else will suffer.

However that is not the main issue. On a moral level I dislike it, but then I see it financially. Why am I, as an investor, subsidizing some fucker living in Costa Rica to live like a king? If the fucker wants to be over there then pay him the same as you'd pay a local Costa Rican programmer. If he won't take it, fire him and hire someone who is actually here working with the business. One thing is working remotely, another is having to take a plane to be able to attend a meeting with your fucking co-workers. Imagine how much you could cut your operating expenses by just firing all of these dummies and how much productivity could be increased by having your tech teams existing in the same city.

Times have changed. I have a book for you. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Your posts reek of envy. Of all the current issues, a few people taking advantage of geographical arbitrage is really the hill you’re gonna die on? And in your example, once enough people do this, the advantage will cease to exist anyway at a certain point, won’t it?

What bothers me about your opinion is that plenty of people do this for retirement, so why is it so wrong for someone to do it while working? Plenty of people retire from HCOL cities and move to LCOL cities, do you take issue with this as well? It has arguably the same impact.

Remote workers get paid for the job they do, not where they work. Compensation is determined by the job market. If there’s 10 people lined up to do the job for cheaper, they’re going to hire those people anyways.

And lastly, only in finance do I find so many people thinking in person meetings = productivity. I don’t blame you, as when I was in finance I can see why that was the case. But in tech, if you’re a code monkey, meetings are a barrier to productivity, not an aid. People doing the hard thinking and production need more time to focus, not more time in random calls breaking up their day.

 

Woke culture. Tough to be so laser focused on bullshit that doesn't matter when you're having a hard time staying warm and feeding yourself. 

"The obedient always think of themselves as virtuous rather than cowardly" - Robert A. Wilson | "If you don't have any enemies in life you have never stood up for anything" - Winston Churchill | "It's a testament to the sheer belligerence of the profession that people would rather argue about the 'risk-adjusted returns' of using inferior tooth cleaning methods." - kellycriterion
 
snones

Can you not see why people would want to live in Costa Rica vs the poorest neighborhood in Mississippi?? The low COL is obviously a part of it but the country is gorgeous and if you're into surfing, the beach, jungles etc you're not gonna find that shit in Mississippi.

Exactly. I get that thought behind it but I'm surprised that Costa Rica was the example used. I visit Costa Rica all the time- for the clean air- nature- safety and just general peace and enjoyment. I'd personally like to retire to Costa Rica myself. 

Like the unadjusted- only with a little bit extra.
 

Gig economy work for white collar workers. Jumping jobs every 2-6 months for a pay raise. If a recession happens and you happen to work in an industry that is cyclical - it can backfire big time. Get really annoyed by certain Youtubers I used to follow who are like this especially in Tech.

I do think corporate / brand loyalty is not great to have (you should always be looking for opportunities but I do think leaving jobs that frequently can back fire long term). 1.5-2 year stints at places isn't a red flag, a handful of 2-6 month stints for 2 years to finally break 150K? Can backfire when few companies are hiring and many are downsizing. Especially relevant in tech nowadays.

Also would love to see some annoying finance hardos I know get humbled by low bonuses and fear of losing their "prestigious job." A few I can think of who just really rub me the wrong way and think they're better than people at non-"high finance" firms/companies.

 

I dont like the job hoping, but its almost the only way to get a raise. 1-3 percent yearly raise when inflation is at 8 percent is laughable. Had a company give me a 3 percent raise and said I should be happy then I got offered a 40 percent raise by a competitor. 

 

I hope it will humble people, and we can get back to reality. The pandemic gave people that never had more than $1000 in their checking account thousands of dollars that they didn't deserve overnight. Too many men and women think they don't need each other. Especially women that think they don't need a man for shit because life is so comfortable for them. Many people don't respect hardworking, blue-collar workers and 9-5 workers. Too many people look down on people for having a regular job. This bull market has been kinda surreal, and too many people don't know what a fucked up economy looks like. Too many people buy a lot of crap they don't need. Too many people think they're smarter than they are because everything only went up for over a decade. I hope it brings people back to Earth.

 

😂 yeah it's that 1,000 dollar check that people got two and a half years ago and not the 750 billion for "paycheck protection" that was pretty much entirely pocketed by business owners without any systems in place to make sure it actually protected paychecks.

Many people don't respect hardworking, blue-collar workers and 9-5 workers. Too many people look down on people for having a regular job.

I think you're the one who doesn't respect them, you're still seething they got a check in the mail how many years ago?

 

Absolute roasting from "GeorgeSorosFinanceMaster"

Having worked blue collar jobs this is pretty spot on, the way business owners acted in 2020 was just shameful. The only thing I can agree on is criticizing consumerism, which is honestly a bigger thing with the rich than the poor. However, consumerism is also one of the pillars of our national economy. It makes stock prices go up. Just because I refuse consumerism doesn't mean it isn't a major part of the economy.

It's always weird when rich people try and use blue collar workers as a bargaining chip. It's like Mike Rowe LARPing as a blue collar hero while being a multi-millionaire Hollywood celebrity. Blue collar workers are having a hard time like everyone else, they are on the bottom looking up, but rich people are like: "Look at this hardworking everyman and toughen up, you ungrateful poors. It's time to cut corporate taxes, am I right plumber Bob?"

Surreal.

 

Hölder

And this is real. I've read that these expats are not going to Costa Rica and living in secluded 'expat-only' cities.

Random pet peeve of mine, when it's a random U.S. citizen living in another country because they believe it offers them a better lifestyle, it's called being an "ex-pat".

When you come to the U.S. for a better lifestyle, you're an "immigrant".  

 

They have different meanings though, the difference is intentional. 
 

Expatriate is for people who intend to come back to their native country; immigrant is for someone who intends to move permanently 

 

And tons of immigrants to the U.S. w0uld actually like to return to their home countries eventually especially in retirement. In fact, if you ask almost any immigrant frankly, their American dream would be to make a bunch of money and then return to their home country. Does that make them all expats?

 

The "Cryptocurrency" is the future mentality that permeates the crypto industry. The entire space is largely speculation and bullshit propagated by individuals that seem to think the laws of economics don't apply to them. I'm yet to meet a CEO or VC that can articulate genuine use cases for Web 3.0, in spite of huge investment flows into the space. 

 
jackwestjr

The "Cryptocurrency" is the future mentality that permeates the crypto industry. The entire space is largely speculation and bullshit propagated by individuals that seem to think the laws of economics don't apply to them. I'm yet to meet a CEO or VC that can articulate genuine use cases for Web 3.0, in spite of huge investment flows into the space. 

I don't see a problem with cryptocurrency from a law of economics standpoint. The issue is that in one fell swoop, governments can criminalize (or otherwise shutdown) the crypto exchanges. As a result, crypto has no real future challenging national currencies. It's like a video hockey game where one user has a cheat code that allows him to change the score at the end of the game. If crypto ever becomes too ubiquitous, it just gets shut down by the government. 

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I hope it wipes out the attitude where virtually all goods are seen as a "flip". Watches, cars, homes, etc, etc. I'm sick & tired of people that have no brand loyalty - and really can't afford most of these things to begin with - buy everything on credit, get the IG shots and then want to flip things for a profit. I don't think that's healthy for the long term and contributes to a greedy little piglet culture. 

 

i may be mistaken, but arent watches, cars etc hard to buy w/o relationship w dealer so those that can't afford it aren't really in a position to flip them to begin with

 

And this is why people hate Wall Street.

You guys can’t seem to let anyone have a shred of happiness except for yourself. Selfishness to the height.

Tech worker able to work from a beach? Let’s put pressure to cut his salary by 90%! Working class family with a home? Let’s outsource the man’s job, buy the home and force them in an apartment they can barely afford! Doctor making millions in private practice? Let’s try to reduce salaries across the board in healthcare. Nobody should be making more than me!

And then the worst part is you turn around and mock the people who you made poor and call them lazy and stupid while patting yourself on the back.

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I mean this might be true but also everyone complains non stop about how much wall street people make when they keep the economy going and give out the capital for most people to afford these crazy lifestyles on credit. 

 

Retail Banking isn't the same as M&A/PE/RE. They are completely different divisions within a bank or at completely different firms.

Although, even in retail, banks got bailed out in the GFC after they over-leveraged on risk. So in that sense, the average person feels that bankers get all the reward, without any of the risk (and they aren't wrong). 

Also one of the reasons people need so much credit is due to the depressing of wages, plus the rising cost of everything. People need a car to get a job, and that car will require a loan, and the job they can get won't really cover the costs of the car purchase for many years. 

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Money is being earned based on other people suffering and having a worse quality of life. Not organic growth, not technological innovation, but jacking up prices and depressing wages. Society is worse off. Your neighbors are harmed. All for some basis points increase in returns that isn't even needed and the people earning it will throw the money somehwere else to make more people miserable. 

You should look at Deal Team 6's lengthier comment on PE below where he uses a specific example to describe this overall trend. 

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tackytech

Grifting populist right-wing politicians. 

I absolutely think the right has a place in politics, but the current breed of conmen ain't it.

I'm not really sure what this even means. Other than foreign policy, which has radically shifted in activist circles since the Bush era, I can't find a material difference between the political Right's positions today than 20 years ago from the perspective of moving to the extreme right. Even on foreign policy, while activism today is more oriented toward Reagan than Bush, in Washington, D.C. virtually all Republicans and Democrats are in lockstep on foreign policy. We keep hearing, "the Republicans have moved further and further to the right" and I'm thinking, "on what issues, specifically?" If anything, there has been a big shift on a few key issues, such as spending and gay marriage, in which the political Right has more or less adopted the Left's positions.    

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Really doubt this will happen. Maybe the unlucky few who depend on their primary jobs to service their debt and end up getting let go but those are likely to be very rare instances. They'll probably try to sell.

 

Resi home prices are going to come back to Earth which is enough for me. In many secondary and tertiary markets (Phx, LV, TN, some metro areas in TX, etc) home prices have already been falling MoM. With a FHA loan and other first time subsidies given by the state, I’ll be able to get some type of multi family (3+ units) in my area right outside a primary market.

 

I live a pretty good life. I’m blessed for that. There’s certainly things I don’t like about the current state of affairs, sure. But I don’t hope anyone gets wiped out by this recession. It’s crazy to me some of the things people are wishing for. It’s one thing to say you hope expensive housing gets reset, that I can get behind. But shitting on remote workers, or people job hopping, or people who made a little money from x flipping is just so crazy to me. You’re largely talking about a bunch of barely middle class people who found a way to improve their quality of life a bit and you all want to see them wiped out. Just blows my mind the lack of empathy. I’ve seen it here often but it’s still terrible every time I’m reminded of how some of you think

 

As the recession hits and valuation multiples decline, I hope it will rid the world of the many mediocre PE firms out there. Contrary to what many young finance professionals think, the majority of PE funds dont add meaningful value, just like a significant % of hedge funds. However, as hedge funds often dont take control, they typically don't have the ability to negatively impact a company quite as much as PE funds do. 

50+% of PE funds don't increase revenue organically or EBITDA margin to drive an increase in EV, but simply buy a company for a lower multiple than they sell it for and use pre-existing cash flows to pay down debt. Bain published an article showing that 56% of value creation over the past 10 years was through multiple expansion, with only 6% through margin expansion, and 38% through revenue growth.

Bain Analysis on PE Value Creation

Here is additional commentary on how 50% of the time multiple expansion is the core driver, 

"Since 2010, EV/EBITDA multiple expansion at exit has been the main driver of returns, surpassing revenue growth or margin expansion (EV = enterprise value; EV / EBITDA is enterprise value as a multiple of its earnings measured in EBITDA). An analysis of CEPRES data for about 430 fully realized buyout deals completed between 2010 and 2019 in the US and Western Europe finds that growth in multiples led to nearly half of the increase in enterprise value"

Friend of a friend recently sold his company for 200 mm - 1 bn to a well-known MF. The MF went on and on about how this was a meaningful roll-up for a strong growth platform and how maintaining the integrity of the company was of the utmost importance to them. This was one of the drivers that won them the auction process. Without getting into the specifics too much, niche business with extremely high barriers to entry. The MF ran it into the ground, laid off a meaningful % of the employees, and everyone who hasn't left wants to quit. The owner sites the sale as the biggest mistake of his life. He thinks he is personally responsible for destroying the lives of all the employees who helped keep his company great for decades. When PE goes wrong it can get very dark. Not just for the fund itself, but for the innocent individuals who simply worked at a company that was bought out.   

Contrary to the belief of many on this site, PE is generally not great unless you're an LP / GP. Sure, if you make VP / Principal life is probably pretty good too, as you likely have meaningful carry at that point. But the other players in PE process likely suffer. Working for a PE owned company isn't great unless you're a top dog receiving equity. 

I have looked at so many PE deals coming to auction and the company's sales have been flat, with EBITDA only growing YoY due to price increases. When you buy assets like this it just becomes a question of which PE fund is left holding the bag when the market tanks. 

A bit of a scatterbrained response, but the main point is that if you're a specialist investor looking to own and operate a company, you should have some idea of how to improve / grow the company, or you should be out of business. If you are solely relying on a higher exit multiple to generate your IRR, you should not be in PE whatsoever. 

 

I think companies that cannot prove growth will either go flat or decline in sales, so the PE funds will be in real trouble if they cant actually address inflation / supply chain issues / come up with growth strategies. They will then have to brainstorm real "solves" for their portcos or they will decline in performance and the valuation will plummet. 

I have nothing against PE funds that can improve businesses, but I am adamantly against all funds that adopt a multiple expansion approach because they do not actually bring any value to the table. 

 

Perfect summary as always @rabbit, I want the next recession to be a sink vs. swim moment. Are you truly a fund run by industry experts with strong connections, capabilities, and business reform strategies? If so, you will separate yourself from the pack and your fund will continue to grow even during an economic downturn. Your investors will recognize this and likely double their investment when it comes time for your next fund. 

My post sounds very pessimistic but the inherent upside will be that the strongest funds (and the emerging ones who prove they can perform) will only strengthen their LP relations, giving them excellent ground to stand on when it comes time to raise their next fund. 

 

But this analysis misses the forest through the trees. People start businesses sometimes with the intention of becoming rich by selling their business. PE firms provide a very valuable source of liquidity for company owners to exit, which provides the incentive for starting the business in the first place--the value isn't in what the PE firms do with the companies thereafter. I feel like this critique of PE is similar to the critique that buying and selling stocks creates no value--but the fact that there is a market for buying and selling stocks allows company owners to access equity capital to expand their businesses and to even exit their businesses. The benefit to society of PE is the liquidity they provide, not in their management of the companies. 

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I dont think it misses the forest through the trees at all. Quality assets will still continue to be extraordinarily sought after, and less than desirable assets can always be sold for the right price. Trimming the PE fat will not reduce the number of companies capable of being acquired, but it may bring the purchase prices down to a more reasonable level. These companies will still be bought at a fairly material premium, so long as they are strong companies. Weaker companies may realize a reduction in value, but weaker companies already arent selling, despite PE funds having 1.78 trillion in global dry powder. I dont think your analysis holds. 

Reducing the number of PE buyers by ~50% will not cut capital allocated toward investing in half by any means, as the top funds hold the lion's share of the capital. Smart funds look at all deal sizes when it comes to roll-ups, so the LMM / MM companies going to auction wont necessarily receive less interested parties. I worked on a 20 MM EV transaction a few years ago that was bought out by a PE fund with 3+ BN AUM

 

This is a big hope, but hopefully the next recession or a recession at some point gets us to a better understanding of a smarter/simpler life. 

Meaning, my grandparents raised their kids in a house with 1 bathroom, I was raised in a house with 2 bathrooms, I have siblings that now have houses with 3 bedrooms (all with the same amount of kids and not a multiple of income). 

Case in point, I know a lot of people who complain about the cost of things, yet, throw massive birthday parties for their kids, drive expensive cars, have every streaming service.

We're at a point where people have 20 pairs of shoes but think they're poor. 

 

I agree with this.  When I was younger, I really aimed to get a fancy car, big house, and all the essentials of wealth.  I believe it was from the viewpoint of growing up in a low-income (ghetto) area.  However, over the years (30s now), material possession in general means little to nothing for me when it comes to my personal well-being.  I would still like a cozy house in a good area to raise a family in, but I would want to be financially smart about it.

For example, it was recently I cut out a lot of my expenses and it has helped put me in a better financial profile.  I know plenty of people making way past six figures with huge amount of debt, but can't bring the thought of cutting costs down or reducing their debt problems.  The way I see things - a house in a decent/good area, wife, kids, a car that gets me from point A to point B, a job that I find interesting (or running a small company), then my life is set.  


Also for context, I work part time right now and make much more then my teacher in elementary school was making when he was my age.  He and his wife are both educators that came here from my native homeland.  They lived frugally and worked hard everyday to save up to buy a house while still being teachers (who are paid little).  They both raised four kids in all, and was able to pay a part of their kids tuition at their universities.  Unfortunately, I am one of those who took a lot of things for granted, and spent my money irresponsibly.  I am doing my part now to become more fiscally responsible.   

 

Also for context, I work part time right now and make much more then my teacher in elementary school was making when he was my age.  He and his wife are both educators that came here from my native homeland.  They lived frugally and worked hard everyday to save up to buy a house while still being teachers (who are paid little). 

I know people like this, but you also have to remember that the cost of housing has soared tremendously. Houses in a working class neighborhood close to where my parents raised me have gone up ~300% in the past decade. I can say with confidence that the salaries of teachers are not 4X what they were a decade ago. So I feel that these examples of people who were less fortunate being able to "save up" are things of the past. The prices today have far exceeded the growth in wages, and truth be told you'll be lucky if you can even match their lifestyle.

I agree with this.  When I was younger, I really aimed to get a fancy car, big house, and all the essentials of wealth.  I believe it was from the viewpoint of growing up in a low-income (ghetto) area.  However, over the years (30s now), material possession in general means little to nothing for me when it comes to my personal well-being. 

I believe basically the "new normal" is going to be to prioritize. I know you said in another thread you're from SoCal, so people in that area are basically evaluating whether the nice weather, beaches, and things to do are worth the tradeoff of the extremely high COL. While many are coming to your conclusion, others are deciding that Boise or Reno or Pheonix is a better option, and while these cities lack the coastal proximity, they offer a decent QOL for something that is actually affordable (to the eyes of the person from SoCal). 

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This has never happened and been sustained long-term after a major financial crisis. People were living large in 2007 then got wiped out over the next 1-2 and then were right back at it in 2019-2021. Things may calm down for a few years, but eventually people will forget, and we will have another bubble and a generation growing up too young to remember the last one. 

 

You are 100% right and it is in part due to the naivety of society, but it also isnt a completely bad thing. When citizens have goldfish-like memories they are more likely to ramp up spending quickly to give the economy an adrenaline shot. There is a happy medium there where people save a marginal percentage more than they did previously, but that seems forever unlikely. These days, there are simply too many people living paycheck to paycheck.

 

i agree with what you're saying, its most likely won't happen (but it is a topic about what we want to see, not what we think we will see). You're definitely right about history repeating itself and bubbles happening. People buying stocks in the 90s with no idea what they owned and people buying houses in the 2000s with the same thing. 

Point is, trees don't grow to the sky, children cannot always live better than their parents. Too many people out here is working to have an HGTV house and "look at me life".

 

Meaning, my grandparents raised their kids in a house with 1 bathroom, I was raised in a house with 2 bathrooms, I have siblings that now have houses with 3 bedrooms (all with the same amount of kids and not a multiple of income). 

When people complain about rising costs, they aren't complaining that a 3BR is more expensive than a 1BR a decade ago. In fact, it many cases it's the exact opposite. A 1BR home today costs more than a 3BR did a decade ago, while wages have remained stagnant.

 Case in point, I know a lot of people who complain about the cost of things, yet, throw massive birthday parties for their kids, drive expensive cars, have every streaming service.

Costs have risen significantly in the past decade. That is a fact. When those costs rise though, people will prioritize the things they enjoy and still life life how they can whether it be a birthday party for the kids or the streaming service. 

 We're at a point where people have 20 pairs of shoes but think they're poor. 

I would caution you against this type of reasoning, because you really have no idea how much those shoes cost. In college I wore shoes to the gym, that looking at you would have thought I paid $150 for. It actually had some small defects and hence I paid $20 for it from an outlet mall. I wore several nice shirts that I paid <$10 each for from thrift stores. People who you think are poor but have seemingly nice clothes aren't necessarily stupid people buying it brand new from a luxury store. They're probably getting it seond hand through thrift stores and flea markets or it could be clothes with slight defects, irregular stitches, etc or inventory that doesn't sell in the regular shops that are sold in outlet malls. 

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IncomingIBDreject

Meaning, my grandparents raised their kids in a house with 1 bathroom, I was raised in a house with 2 bathrooms, I have siblings that now have houses with 3 bedrooms (all with the same amount of kids and not a multiple of income). 

When people complain about rising costs, they aren't complaining that a 3BR is more expensive than a 1BR a decade ago. In fact, it many cases it's the exact opposite. A 1BR home today costs more than a 3BR did a decade ago, while wages have remained stagnant.

 Case in point, I know a lot of people who complain about the cost of things, yet, throw massive birthday parties for their kids, drive expensive cars, have every streaming service.

Costs have risen significantly in the past decade. That is a fact. When those costs rise though, people will prioritize the things they enjoy and still life life how they can whether it be a birthday party for the kids or the streaming service. 

 We're at a point where people have 20 pairs of shoes but think they're poor. 

I would caution you against this type of reasoning, because you really have no idea how much those shoes cost. In college I wore shoes to the gym, that looking at you would have thought I paid $150 for. It actually had some small defects and hence I paid $20 for it from an outlet mall. I wore several nice shirts that I paid <$10 each for from thrift stores. People who you think are poor but have seemingly nice clothes aren't necessarily stupid people buying it brand new from a luxury store. They're probably getting it seond hand through thrift stores and flea markets or it could be clothes with slight defects, irregular stitches, etc or inventory that doesn't sell in the regular shops that are sold in outlet malls. 

You are working tirelessly to start an argument, I am almost impressed. Congrats on being able to simultaneously miss three points at the same time. 

1. Find me concrete data supporting that a 1BR is on average more expensive than a 3BR. You wont be able to do this anywhere except for MAYBE SF or NYC

2. No one is debating whether or not costs have been rising, because we arent retarded. Congrats on picking up on inflation, the trend that has been going on since we started tracking economic data. @ironman32  is calling out SUPERFLUOUS spend, the thing he is hoping the recession will remove. 

3. What a weird anecdotal example that also isnt relevant. Is your logic seriously that just because there are a few low income folks frugally sourcing designer goods that we should operate under the assumption that every low income person with a Gucci bag isnt an idiot?

These are some of the worst and most half-assed counter arguments I've seen since I started using the internet, I am sincerely impressed. 

 

Okay, fair, but it misses my overall point. 

Today people in the USA have more than we did 50 years ago, not just in terms of good but also experiences. 

Central air, 2,000 SF+ homes, a theater in your house, a designed bar area in your house; going out to eat everyday, multiple vacations every year, those use to be extreme luxuries.

Now everyone needs a podcast/therapist to tell them its okay if they don't buy Starbucks everyday, or your 4 year old doesn't play on a travel soccer team for $15K a year.

 

Zoning laws.

I should clarify, I don't want to eliminate zoning altogether (power plants next to kindergartens, and all that jazz), but we need to radically upzone and rezone a lot of our urban and suburban land. Having wide swaths of land dedicated to single family homes on 5,000 SF lots is unsustainable, having residential completely excised from retail and commercial uses is non-sensical, parking and open space requirements just increase costs when they aren't needed, this one is specifically for California but CEQA needs to get seriously overhauled, etc. 

I think we're starting to see some progress on this, California (barely) eliminated SFH zoning, NIMBYs are getting less political love, NYC city council members are starting to think twice about members deference, and in general people realize that to solve the housing crisis you need to, you know, build housing. 

 

If you're only referring to the SFH market, I really don't know enough about it to provide a solid answer. That being said, I'd wager that most foreign investment in this area is in expensive condos and removing their access to the market would just make the projects infeasible, not reallocate housing to the middle class. 

If you're referring to the commercial real estate market I'd have to disagree with you, we have LPs from around the world and it helps us build real estate on US soil, real estate that is adding to our housing supply. I don't see the benefit to eliminating that except for purely political reasons (i.e. starting an economic war by shutting out foreign investment in general). 

 
jarstar1

Zoning laws.

I should clarify, I don't want to eliminate zoning altogether (power plants next to kindergartens, and all that jazz), but we need to radically upzone and rezone a lot of our urban and suburban land. Having wide swaths of land dedicated to single family homes on 5,000 SF lots is unsustainable, having residential completely excised from retail and commercial uses is non-sensical, parking and open space requirements just increase costs when they aren't needed, this one is specifically for California but CEQA needs to get seriously overhauled, etc. 

I think we're starting to see some progress on this, California (barely) eliminated SFH zoning, NIMBYs are getting less political love, NYC city council members are starting to think twice about members deference, and in general people realize that to solve the housing crisis you need to, you know, build housing. 

I don't think this should be a state-wide policy. People should be allowed to locate themselves in communities that have big, single-family houses if that's what they want. We shouldn't have zoning laws (or we shouldn't eliminate zoning laws) with impacts on millions or tens of millions of people. Individuals should be able to move to communities that are designed the way they prefer. For example, in the last year or so I moved from a dense urban area into the downtown of a small town, and I'm thinking about moving to a large suburban house. I don't want representatives who live 3 hours drive from me making my zoning laws. If I want a small condo in a dense urban neighborhood then I'll move to such a place that has it.  

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I hope the people that get laid off go into construction and development and create some competition for the shitty developers that really aren't worth their markup.

If i had the capital, I would poach talent from each specialty  from job sites and create my own dev company. There's plenty of fruit to juice.

 

Would like to see the entire private equity and VC ecosystem get completely wiped. I’m talking 50%+ markdowns on entire funds. The avaricious asset classes that think they can perpetually enter trash businesses at ludicrous multiples (PE) and hand the bag off to a bigger set of PE idiots, and continue ad infinitum. Nothing would make me happier than seeing an entire decade worth of vintage funds get blown up, and the smug Principals and VPs who have MiLLiOnS oF DoLLaRs aT WoRk get big fat zeros in carry.
 

Same goes for smug VCs who’s entire jobs boil down to being marketers/promoters of their shit “investments” that will never turn a profit, all the while hoping a bigger group of morons comes in after them and marks the asset price up, just so the whole lot of these idiots can eventually cash out on the backs of public market fools.

Finally, would also love for the entire cryptocurrency ecosystem to quite literally disappear.

 

Interestingly this will probably happen and now it makes sense for why suddenly plenty of PE funds which are available to the public have popped up. I wonder how many of these PE funds geared towards common people will buy up failing companies from other funds and then oops, the 'invisible' hand of the market just fucked retail investors once again. 

Be on the lookout for increased volume of 'PE to PE' sales in the following years. Some people are about to get fucked big time. 

 

It will be interesting to see how much of the returns were driven by simply multiple expansion. There’s all this talk about operational focus, but it doesn’t seem true in reality. It’s mostly leverage, a growing economy and multiple expansion that has driven returns in the past few years.

I almost wonder when there is a recession if the new focus will actually be to try and improve operations.

 

AirBnbs.  At this point they're more expensive than hotels and they offer significantly worse service with a million stupid rules and hidden "cleaning fees".  Whoever runs the app has been selling "stay in fancy places for super cheap" to the renters and "make shitloads of money doing nothing" to the tenants and these two conflicting messages are on a collision course.

 

AirBnB's aren't more expensive than hotels. Even hotels that use AirBnB offer a notable discount due to booking for a few months instead of a few days .This doesn't include the fact of course that properties worse than hotels can list on AirBnB, and hence you can find rooms for cheaper than just using a hotel. 

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