The Private Equity Bubble Is About to Deflate
Whether valuations fall suddenly or gradually, the industry is due for a reckoning, and the consequences for the economy are dire.
Find the bubble.
Photographer: Maja Hitij/DPA/AFP via Getty Images
Markets today pose a new existential question: Can there be a bubble in something if it has no price?
As a believer in efficient-ish markets, I am uncomfortable calling anything a bubble. Recognizing a bubble requires spotting an asset or asset class that is objectively overvalued before everyone else does. Making this determination is almost always impossible in real time, even if it’s screamingly obvious in hindsight. And that’s in public markets, where prices are easily observed and constantly updated as investors form views and incorporate information.