Animal Spirits Podcast - Talk Your Book: The Next Big Short

Episode Date: October 28, 2024

On today's show, we are joined by Jared Dillian, Founder of Jared Dillian Money to discuss Jared's bearishness on private equity, understanding the demand side of private equity, a private equity sentiment bubble, an explosion of HVAC private equity deals, and much more! Find complete show notes on our blogs... Ben Carlson’s A Wealth of Common Sense Michael Batnick’s The Irrelevant Investor Feel free to shoot us an email at [e-mail] with any feedback, questions, recommendations, or ideas for future topics of conversation.   Check out the latest in financial blogger fashion at The Compound shop: https://www.idontshop.com Past performance is not indicative of future results. The material discussed has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed.   Investing involves the risk of loss. This podcast is for informational purposes only and should not be or regarded as personalized investment advice or relied upon for investment decisions. Michael Batnick and Ben Carlson are employees of Ritholtz Wealth Management and may maintain positions in the securities discussed in this video. All opinions expressed by them are solely their own opinion and do not reflect the opinion of Ritholtz Wealth Management. The Compound Media, Incorporated, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers see here https://ritholtzwealth.com/advertising-disclaimers. Investments in securities involve the risk of loss. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. The information provided on this website (including any information that may be accessed through this website) is not directed at any investor or category of investors and is provided solely as general information. Obviously nothing on this channel should be considered as personalized financial advice or a solicitation to buy or sell any securities. See our disclosures here: https://ritholtzwealth.com/podcast-youtube-disclosures/ The views expressed by Jared Dillian are their own opinions and do not necessarily reflect the views of Ritholtz Wealth Management, LLC. The information discussed should not be relied upon as a recommendation to buy or sell any of the securities discussed. Investing involves risk and possible loss of principal. Learn more about your ad choices. Visit megaphone.fm/adchoices

Welcome to Animal Spirits, a show about markets, life, and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Riddholt's wealth management. This podcast is for informational purposes only and should not be relied upon for any investment decisions. Clients of Riddholt's wealth management may maintain positions in the securities discussed in this podcast. Welcome to Animal Spirits with Michael and Ben. On today's show, we're joined by Jared Dillian to talk about what he describes as

the biggest bubble in history. I didn't ask him, I didn't ask him this. I wish I did. Is this a bit pung-in-chi, not pung-a-chie? Is this hyperbolic? And I would say, yeah, I don't actually think that Jared thinks this is the biggest bubble in history. Maybe he does.

I know Jared is a student of history, so. But listen, he is a. provocateur. He wants people to read the white paper, which is quite good. So, all right, whatever. If I quibble with the title of the paper and the way that he describes it, no big deal. I was thinking about something that Jared said after we recorded and not to step on too much material. But Jared said, I don't trust the stock market. That's his nature. And it's not just in his nature. It's because of the market that he came up in. Jared started his career. In 1999, obviously we had the dot-com bubble bust, you know, shortly after he started.

And then he worked at Lehman Brothers for a couple of years. I believe he was on the ETF trading desk and cabloy. Stock went to zero. Economy and shambles, market went down 57%. And I was thinking because Ben and I are, of course, big, we have a lot of trust in the stock market. Stock market has treated us and our investors, our clients quite well over the years. But if I started when Jared did, I don't.

know that I'd be that different from it. I think it's very easy for me to say, you know what? Like, it's easier for me to say, man, how does he not trust the stock market? Hasn't he seen what's happened since, since Lehman? But I wasn't there. And so if I was and I saw my equity go to zero and that of so many of my colleagues, I don't know where I would be, but I can easily understand where he's coming from. He said, he said, listen, I admit it. I don't trust the stock market as much as you guys do. I invest in these other strategies because I don't trust it. And I guess at least he admits that because that's better than investing in the stock market and jumping in and out or not. So I don't know. It's interesting to talk to someone like that

who has completely different views about the market than we do. Yeah. And this, it never got contentious, but in this podcast, we push back a lot against his thesis. And he, the good thing about him is he's very open-minded. He doesn't take offense to people pushing back on his, on his theories about shorting private equity. But I think we agreed for the most part in the conclusion, which is that, listen, I hope it's not a giant bubble, the biggest bubble in history, because it would be if that's true, it would be horrible for the economy. Forget the stock market.

87% of businesses with over $100 million in revenue are private equity backed. So it better not be the biggest bubble in history. Otherwise, we're all in big trouble. But the conclusion that I think we landed was, he's like, listen, there's a set. I would say there's a sentiment bubble in private equity. No doubt in private investments. Check my inbox. I've been talking about this for a you know.

I get, I don't know, six emails a day from companies I've never heard of. I got a cold call last week. There's absolutely a mania of frenzy in getting investors' dollars allocated into private credit. And what I would do if I could do or what, I don't know if I would do it or whatever, but I can't do it so it doesn't matter. But I think what we're agreeing with is a lot of these third, fourth, eighth tier companies that are getting into the private asset space short them to zero. Of course you can't.

But the blackstones of the world, not only do I not want to short them, I want to be long. And in fact, I literally am long blackstone because there is a transformation in the structure of the economy, in the structure of markets, there was a transfer away from bank balance sheets. And I don't know if there's maybe this is the hidden risk that Jared's worried about. And, you know, that's a, you know, I can't really comment on that. But these are the, these are the most powerful asset managers in the world. these are proven money printing companies, and I don't want to be short, I want to be long.

So I don't know where this goes from here. I don't know. I would say it's probably a fair conclusion to say that in all likelihood, there is more money than available deals, so that should compress returns, if nothing else. But is this a bubble that's going to burst and take us all down? Got to help not. Right.

Got to help that. Yeah, people who are reaching for different types of funds for better returns or better yields, though some people will get harmed. It's hard to say like this whole thing is going to blow up, but they're going to be people who make poor decisions and are not going to end up very well. So like Ben said, I thought this is an interesting discussion and credit to Jared for allowing to push back. And in no way, shape, of form does get contentious. I think this is one of the great things about getting off the internet and into the real world where you can have a discussion with somebody that you maybe disagree with that. It's not like you MF her, you know, it's not a big deal.

And I think a lot of things that we did find common ground on a lot of the things. I think maybe just a conclusion or whatever of where this goes is different. So anyway, enough. I want to step in the material too much. This is a really great conversation. So thank you, Jeff, for coming on and allowing us to disagree. So here's a conversation with Jared Dillian about what he calls the biggest bubble in history. We're joined today by Jared Dillian.

Jared is the founder of Jared Dillian Money. All right, Jared, welcome to the show. Okay, thank you. So, Jared, you have a 48-page memo up on a site. What's a site? Is a site short private equity? Shortprivate equity.com. All right, shortprivate equity.com.

So that's what we're going to be talking about today. Jared thinks this is the next big short. And maybe before we get into the current thinking, let's remind listeners that you were at the epicenter is too strong. But you were at Lehman Brothers during 2008 when everything went Kiblui. So you were there for the first big short. Yeah, I was. I was, I was the recipient of it. So, you know, what was funny was, you know, when I was at Lehman, I was very much, you know, I believe there was a housing bubble. And I, you know, I believe that Lehman had exposure to it. And I actually was, at the

time, I was running around with Vinny Daniel and Porter Collins from Front Point. And we were, you know, sharing these ideas on the housing bubble, and I worked at the firm that was, you know, totally doomed because of its exposure to it. So you've written it in the past that, and the next big short that we're going to be talking about today is private equity, maybe specifically private credit, but you've written it in the past. And one of the reasons why I was so impressed with your writings is you're very honest and transparent. And you said that you have a bearish bent, particularly because the deep scars from 2008. So before we give you the mic to walk us through what you call the biggest bubble in history

in private equity, is it possible that your experience at 2008 is leading you to a conclusion that might be biased from your own experiences? Oh, for sure. You know, I mean, I think, you know, there's Neil Howe, who's, does the fourth turning and all the generational studies and stuff like that. And basically, you know, his belief is that who you are as a person is, is a, is a function of when you were born and where you grew up and your surroundings and stuff like that. So, you know, I started my career in 1999. We had the dot com bust in 2000. And I started working at Lehman in 2001.

And then we had the financial crisis in 2008. And never mind, 9-11. Um, we had. You know, so I stayed the first 10 years of my career were these two gigantic explosions, you know, so I've not to be impacted by that. Yeah, I mean, I think it, I think it affects your psychology. How many, how many coworkers and friends and peers did you see that like just lost almost everything from Lehman? A lot. I think, I mean, it's actually kind of a personal finance question because I think, you know, there was, in addition to being a housing bubble, there was a hedge fund bubble in the mid 2000s. And I think there were a lot of people that thought that was going to go on forever and they bought expensive apartments and they bought expensive cars and they were over leveraged. And, you know, I actually was very conservative. I had a teeny tiny house in New Jersey.

I was, you know, very conservative with my money. So I was actually fine, ultimately. So I'm so curious if those experiences shaped you, are you a more bearish-like investor or have you figured out ways to like take your hands off? or take that psychological part out of you and be more bullish when it makes sense? How much do those emotions play into your investing decisions? You know, it's funny because I don't have a degree of comfort with the stock market that most people have, right? Like, I don't have a trust of the stock market. I trade lots of other stuff. I trade bonds.

I trade commodities. I trade FX. I have a degree of comfort with those asset classes that I just don't wish. stocks because what I learned when I was 27 years old is that you get rug pulled. And the thing with stocks also is that they're very asymmetric. It's up on an escalator. It's down on an elevator. So I actually think stocks are harder to invest in and stay invested than just about any other asset class. So all right. Let's go from stocks, which are public businesses, to private equity, which are private businesses, and the explosive growth and the shift from public capital

to private formation has been massive. Torson stock from Apollo says that in the United States, 87 percent of firms with revenue greater than $100 million are private, which is kind of fucking nuts, like how much they dominate this economy. So what is it, Jared, I'll give you the Mike, what is it about private equity that has you not just worried, but calling this, I think these are your words, the biggest bubble in history. Yeah. So first of all, you know, if you go back 25, 30 years ago, there were like 24 private equity firms.

And now there's 17,000. There are literally 17,000 private equity firms in the United States. And this statistic that you gave, I actually hadn't heard of before, that 80% of businesses with 100 million in revenue are private. You know, I think a publicly traded corporation is kind of a cool financial innovation. You know, it was an innovation that happened like 400 years ago with a Dutch East India company. You know, I don't, I think there are significant benefits to being public. I think there's also downsides to being public.

There's, you know, you have to deal with Wall Street analysts. There's increased scrutiny of your financial statements, et cetera. but in terms of being able to raise capital, like being public is the way to go. And I think there's been a shift in the mentality over the last 10 years where it firms actually believe there are more benefits to being private rather than being public. So I kind of don't, I kind of don't understand it. I think there's more benefits to being public. So I think we're actually going backwards in time, you know, because liquidity is the most

important thing in the world, right? That is the most important thing, liquidity. It helps you raise capital. So, Jared, I want to walk you through my experience with this because I think I came to many of the same conclusions that you did in the 2010s. And I feel like I was wrong and I've kind of changed my mind. So I came up in the institutional world and I saw all these pensions and foundations endowments putting 30, 40, 50 percent of their money into liquids, hedge funds and private equity in venture capital. And I was on the front lines of this. I was on, I was like on the operational duty of managing our private equity book, which was only like 10% of our portfolio, but that 10% took up 90% of my time because it was capital calls and distributions and I'm trying to track

the returns on these things and do calculate the IRAs and stuff. And I realized like this stuff is impossible to report on or to understand like what are we actually doing here? Like what are we getting out of this? And I would talk to all these other investors and these institutions that were doing the same thing. And I'd say, how do you actually know what your returns are on these funds? Because it's impossible. You put your money in over, like half the time, let's say you put $10 million in as a commitment. Half the time you give them like $7 million. You don't even give them $10 million, but it happens over the course of like eight or 10 years. And sometimes the money comes back to you and then it goes right back to them and you're paying fees on the committed

capital, not the money they have, the money that you committed to them. And so I'm looking at all this going, this is ridiculous. Like, if you're not in the top decile or quartile of these fund managers, you're screwed. And guess what? Everyone can't be in the top quartile, by definition. And so I looked at this and I said, this is like a Hail Mary for a lot of these pension funds and endowments. And there, it's ridiculous. And I think what I've come to realize is that that illiquidity is almost like a savior for the, for the asset class. Because it takes so long, these people don't, it's not an event that happens on a single day. Like, layman fair. and like the stock market falls and right it's something that takes place over the course of years

and maybe like a decade for some of these funds and that's where i've come to change my thinking of is that it's more of a death by a thousand cuts than it is like the singular event and i feel like that's why they can just continue to string this out even if it doesn't work out for these investors i think they can just continue to string it out further and further along and it takes way longer for this to ever have a comeuppance what do you think about that theory no i i actually agree with that theory. And there's, first of all, you have to talk about, you know, people talk about the supply side of private equity, but you have to talk about the demand side of private equity. Yes. The demand side with the endowments and the pensions, I mean, you know, they've been shoveling

money into private equity for years. And like you said, they're, you know, they're getting charged fees on committed capital and stuff like that. The returns, look, I, you know, the white paper that I wrote is fairly apocalyptic, right, the next big short. But there is another possibility. And the other possibility is that the returns of private equity go down, okay, for some period of time. And pension funds and endowments, look at this. And they say, look, I'm getting charged all these fees. I'm making three or four percent. This doesn't make any sense. Maybe they get out of private equity and into public equities or into some other asset class. And the asset class, and the asset class just falls out of favor over time because of lower returns, and it's kind of a soft landing.

Like, that is, that's totally a possibility. I don't think that's how it's going to play out. You know, I think liquidity always finds a way, right? And I'm not sure the mechanism. I'm not sure how it's going to happen. But when you have, you know, 17,000 private equity firms, like there will be a forced liquidation at some. point. There will be a forced liquidation. That's what I believe. That's how markets always find a way. So when I read your post or your white paper, I was reminded of the quote from the judge and my cousin Vinnie, where he says, that is a lucid, intelligent, well thought out, objection overruled. And I think my conclusion is similar to Ben's. And I agree with both of what

you just said, which is that I think that returns going forward are going to be lower. And I almost don't see any way how that doesn't happen. Yeah. Because there is more money looking for deals that there are deals available. And Jared, I know you're very big on the sentiment stuff. I got a cold call the other day from a private credit company. I get emails. I get a dozen emails a day.

And why is it happening? The story is very simple. call it 30% of institutional portfolios are invested in private vehicles. They're not going to go to 70, okay? The juice has been squeezed. And so what's the next frontier? It's wealth management because the ordinary investor, the average millionaire next door, has effectively 0% of their portfolio exposed to this asset class.

And so the dam is opening up and yield in particular with this private credit is an extremely easy, compelling sale to the end investor. And so there is such a flood of demand from retail investors, let's call it. So does this end well? I don't know. I would think that the most like the outcome is the returns, I don't know, I don't want to say go to crap because it's a wide. spectrum, but the returns of the asset class are going to be lower, whether it's private equity or private credit than they have in the past. I just don't see any way around that. Yeah. I mean, private equity, if you look at this, like private equity made sense in the

2010s, like the mid-2010s because rates were zero and companies, you know, private companies were trading it four or five times EBITDA, right? And now rates are 5% and companies are trading at 10, 12 times EBITDA or more. If you have 17,000 private equity firms competing for deals, there's just, like you said, there's just no more deals. Like, they've gone to ridiculous prices. And as a result, there's no exits. Because if you buy something at 10 times, can you realistically sell it at 15 times to somebody

else, you know? So there's no exit. So, you know, the number of portfolio companies that are being held for more than five years is skyrocketing. The returns are going to be lower. And, you know, private credit, you know, I think about high yields on stuff don't really get me excited. They kind of get me scared, you know. If you're looking at like 10 to 12 percent yields on something, like there's usually a reason to be worried.

And I think banks are more discerning when it comes to lending money to companies. And I think the bond market is more discerning when it comes to lending money. but I think private equity I think endowments and pension funds are less discerning, you know. I think they're less discerning as lenders and I think I don't think it's going to end well. Let me take the other side of that argument just for the sake of conversation. So when banks did these syndicate loans, they would get a bunch of hedge funds together or institutional investors or whoever it was and they would they would package the loan. They would get it off their balance sheet.

they would take the transaction fees. And if something went poorly, then you would have the distress investors come in. You would have the hedge fund suing each other. And it would be really a knife fight every man for himself. With these private credit funds and it's a loan from one lender and it's their reputation on the line and their investor money on the line and their carry on the line. And they have the ability to either termin out or do a refinance or something like that to extend the term of the loan to be more favorable for the company.

that could put a floor under this. But you might say, exactly. That's not a good thing. That's a bad thing because eventually the bill comes due and you can't termin out forever. Yeah, exactly. Jared, is your short thesis like you should go out and short these publicly traded private equity companies

or is this more short of like the investors you're going to get screwed? Where do you fall on that? Well, there's really three parts to it. One is the trading part. you know, you're just a trader and you want to profit off of this. So really the only vehicle is the publicly traded private equity firms. So, you know, Blackstone and KKR and Apollo and TPG and Carlisle, right? Like it's basically it. So you can short those stocks. You can buy puts

on those. You know, I, it's ugly. I bought puts on Blackstone last December. I bought some in 25 and some in 26. The 25 options are pretty much worthless at this point. I've lost some money on that. So, you know, I'll try it again if I see some weakness in the stocks. The other part of this is there's, I think it's important, you know, there's a lot of people in this country who own small businesses. And now is an incredible time to sell to private equity. You probably saw the article that was in the journal a couple of days ago about these HVAC companies. You know, you have these blue collar guys who own HVAC companies that are getting bought up by private equity for like 10 or 20 million. That's unbelievable. They're living in a gated community.

Like they're done. Like they, you know, they're set. So if you, you know, if you're 60 years old and you have a business and you have the ability to sell it, you know, the solution to that is to sell it now, not five years from now or 10 years from now when the valuation is going to be lower. I feel like this is just, it's a structural change, which sounds dangerous to say out loud. But I actually, I bought, I own Blackstone and Blue Owl and not because I am like bullish on anything other than the very basic fact that there is so much demand for these investments. Like the end investor is just shoveling money in. And I don't know enough about the underlying loans to really ascertain. Like I don't, I'm not looking at the actual financials of the companies that they're loaning to.

do. Like, I understand the concept of it, but what I understand and what I see is, A, it's an up trend. And B, there's just, there's just so much demand from an end investor. So where does this go? How does this end? I mean, obviously, that's, you know, we'd all love to see the future. But if you had to guess what a catalyst is, is it just a recession and liquidity dries up and everybody's just in trouble? It could be a recession. It could also be interest rates skyrocketing, right? Like, let's say, you know, one of these ding-dongs. gets elected and the budget deficit goes from $2 trillion to $4 trillion. We have all this issuance tens go from four, four and a half to six, six and a half. We just have this complete meltdown

in the bond market. That's when things get really ugly for private equity. So they are very rate sensitive. The private equity, the publicly traded private equity firms actually, you know, when rates were declining over the last six months, they actually did really well. So they're very rate sensitive. Or it just could be economically sick. we head into a recession and that's the catalyst and yeah. I do think your liquidity point on if there is a recession, what I saw during the 2008 crisis was you had this denominator effect where the private equity companies take so long to mark their books down,

right? The stock prices get marked down immediately in publicly traded markets. But the privately traded companies, they take 18, 24 months to maybe catch up. And so what you do is you have your portfolio if you're an endowment and you have 30% in private equity, that 30% if the stock market crash, crash is 40%. Your 30% is now up to 40% or something or 45%. And you go, I have to,

if I'm getting back to my weights that I picked for asset allocation purposes, I have to sell some of this private equity to get back in line with my target. And that's when you start seeing these huge discounts and you realize what these companies are actually worth. That's actually a point where I could see to your point where, okay, there's some sort of reckoning here. The only thing is, I agree with you on the returns coming down and that means that the carry fees are lower for these companies. The thing is, is that they still charge the one and a half to two percent management fees. And I think there's so much more money in there that they can live off those management fees. They don't need to carry fees anymore. So they call them fee-related earnings.

And if you listen to the conference calls, they are just going up until the right as the demand continues. I guess the private equity owners make way more money than investors. Yeah. Yeah. I don't want a short, I don't want to name any names. But these are some of the most powerful, richest people in the world. And I know liquidity finds away, but, man, these money people, they find a way too. I think that part of the frustration that a lot of investors have, particularly investors in liquid markets, it seems unfair. It seems like an illusion. Cliff Azins is constantly talking about this. It seems like an illusion. And we're all in on it. And I get it. It does seem unfair. But this is the thing. It seems like they're in sort of like a gated

castle. And I hate to use the word impenetrable because of course, nothing is. But it does seem like the advantage of illiquidity and being able to just push it out. I don't know what what ends that. I think I can't. I mean, it would have to be a recession, I would think. Yeah. I mean, I think illiquidity is viewed as an advantage until it's not until there's a get me out moment, right? Like, that's really, that's really what could happen. Um, you know, there is no get me out. That's the thing. You can't. Like, what are you going to do? Like, you can't get out. Yeah. It's a good business. I mean, Cliff, you know, Cliff, Cliff, He was tweeting about this on August 5th when the markets went down like 8%.

Like we had that mini crash. And he's like, yeah, private equity was unch, you know. But that's the advantage that they have. And you could scream and kick all you want. And believe me, I get it. But this, you have to play the field as it lies, as Schroda McGavin would say. Yeah, I get it. I, you know, I think ultimately it's going to work.

I think ultimately it's going to work. I think both of you guys can agree with me that it is a bubble, right? Like, it's reached a frenzy. You know, this website that I have, shortprivateequity.com, I don't know if you guys went to it, but it is like a drudge-style website with links that we update every day on private equity. There is always something. You did a very good job with this. The charts and stuff that you included here in the data, like this isn't just like you're

throwing this out there. You've done the work on this. Yeah. Yeah. So, Jared, I would agree with you, but with the caveat, I think for sure it's a sentiment bubble. If you look at my inbox, if you look at, I got, I told you, I said this earlier, I got a cold call. Everybody is trying to get in. But I don't know, I don't know enough to say definitively, it's a bubble that will burst because I think there are structural reasons for the rise in AUM, and if you look at it in a vacuum, it sure, it looks like a bubble, but I just don't know enough about the valuations, the covenants.

Michael's permanently plateauing this. It's a permanent plateau. No, come on. I just don't know that it's a, because bubbles pop, right? Like, bubbles can't be inflated forever. So that's the part where I just, I don't know. I agree with you from the sentiment, the froth, all the articles that you grab the headlines, it feel, it, you get the feels. Yeah. But the one thing from our side of our side of this is, being in the wealth management industry is that the private the big institutions have already been tapped out they're they're full they're at 30 40 percent of their allocation and the private equity people are coming for the RIA industry in a huge way

and I think that the RIA industry is going to be receptive because yield is the easiest thing to sell right to especially to wealth management clients we can give you 12% yield I no more questions sign me up and I think I think that's and and obviously that's there are going to be some people who find some pain in that and that those 12% yield are not going to come for free. Here's who I would short, if I could. I would, I would not, I would not go up against the big boys. But the second, third, and the fifth tier players that you're like,

Stone River, who are you? Like, if there was a vehicle that could short those to zero, I would do that. Yeah. And that's, that's another problem with the thesis is that, you know, the only vehicle to short them are the players, that will undoubtedly survive, right? And actually will probably, you know, do well off of any deals they can scoop up off, you know, the carnage.

If there was a way to short the 16,900, you know, private equity firms, like that would be a lot better. The other thing I'll say is also is that the big private equity firms are also private credit and they're also real estate. Like Blackstone is bigger in real estate than it is in private equity. And infrastructure, too, now. Yeah. So, Jared, you've obviously looked into, like, the, based on all your research, you've dug into, like, the pre-Quinn data, which is something maybe only people in this space would know.

But you mentioned, like, the 16,000, whatever. Once you start digging in, it's insane how many of these funds are out there. And you think the whole point is, like, there can't be, everyone can't be top quartile. But the problem is, the dispersion between, like, the best and the worst large-cap growth manager in mutual funds is not that wide, right? It might be, I don't know, 2% on average. But the dispersion between the top quartile and bottom quartile on private equity, you can drive a truck through it. And so the really bad funds are going to be really, really bad for people. So if you're in those good ones, you're probably going to still be okay.

Even if you get an S&P 500 leveraged return or something, that's probably what most private equity investors would be okay with. It's when you're investing in those bottom tier private equity funds and you don't get the good deals, you don't get the good terms. You're screwed. And you're stuck in there, too, for 10 years. Yeah. Yeah, those businesses are going to go away. like those private equity those those the bottom decile they're not getting access to capital in the recession no way yeah 100% so all right jad as we come to a close what else is on your mind

in terms of the markets uh you mean like outside of private equity just just anything yeah well you know thinking about the election um i saw a tweet yesterday from a guy named will slaughter uh he's bama bonds on twitter and you know i just have to i have to give him props because i totally agree with the tweet. And basically what he's saying is, he's like, everybody is operating under this playbook that if Trump gets elected, stocks are going to rip and you're going to get a big bear steepening in the yield curve. He's like, that's probably not going to work twice. It does seem consensus now. It does seem consensus. That just happened. We just got both of those things. Literally, you got the bear steeper and you got stocks ripping. So probably, I think the election

is a sell-the-news event. If Trump wins and it's probably, it's probably sell the news if Kamala Harris wins as well. So I'm actually going to be up trading that night, you know, watching the results come in. So it will be fun. It will be fun. There probably will be more movement in the after hours than there will be in the actual market open.

You don't be so poetic if there's like crazy volatility in the after hours and then like the S&P like closes unchanged in the next day. I know. Just to fuck everybody over. Jared, you did a ton of work on this. So remind us again what the website is because I think it's worth it for people to least understand how this industry has changed over time. And you've done a really good job of putting it out there. So remind us of the website here. Yes, shortprivate equity.com. I bet you didn't have a

hard time getting that that URL, right? No, that was that was that was open. Yeah. Shortprivate equity.com. All right, Chad. Really appreciate the time today. I have fun discussion. All right. Cool. Thanks, guys. Thank you.