Friday, January 13, 2023

Short Takes: Private Equity Volatility Laundering, Problem Mortgages, and more

What a difference a year makes.  During the COVID-19 lockdowns, many people saved a lot of money, either from their pay (if they were lucky enough to keep their jobs) or from government payments.  As the world opened up, people started spending this money and businesses couldn’t keep up.  These businesses still can’t get all the new employees they want but the problem has eased considerably compared to a year ago.  I saw a small example in Florida recently.  I was in a burger chain restaurant and saw a sign saying they were looking for employees at $12 per hour.  Last March, the sign in this same restaurant offered $18 per hour and implored workers to “START RIGHT NOW!”

Here are some short takes and some weekend reading:

Cliff Asness accuses private equity investors and managers of “volatility laundering.”  Failing to value private equity frequently and accurately creates the illusion of smooth returns.

Scotiabank’s new President and CEO Scott Thomson explains how they identify potential problem mortgage customers.  Currently, he sees about 1 in 40 as being “vulnerable.”  It’s not clear how many of these vulnerable customers are likely to default under different interest rate scenarios.

Robb Engen at Boomer and Echo
tells us what type of investing headlines to ignore.

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