REO Capital Predicts American Loses Because of Debt Crisis

A record breaking Stock Market is distorting a frightening reality. The U.S. is being eaten alive by a horrific cancer that will ultimately destroy the economy and impoverish the vast majority of its citizens. That's according to Peter Schiff, the best selling author and CEO of Euro Pacific Capital, who delivered his harsh warning to investors in a recent interview on Fox Business.


"I think we are heading for a worse economic crisis than we had in 2007" Schiff said. "Your going to have a collapse in the dollar... a huge spike in interest rates... and our whole economy, which is built on the foundation of cheap money, is going to topple when you pull the rug out from under it"

Schiff says that, despite "phony" signs of an economic recovery, the cancer destroying America, stems from a lethal concoction of our $16 trillion federal debt oin its way to $20 trillion and the Fed's never ending money printing. Currently, Bernanke and company is buying $1 trillion of Treasury and mortgage bonds a year. That's about $85 billion per month against a budget deficit that is about the same level.

According to Schiff, these numbers are unsustainable. And the Fed has no credible "Exit Strategy." Eventually interest rates will have to rise and when they do, Schiff says, stocks will tank and bonds dip to nothing. Massive new tax hikes will be imposed and programs and entitlements will be cut to the bone. The $2 Billion budget for your Obama Phones will quickly disappear and so will your Food Stamps! The Crisis is Imminent, Schiff said. "I don't think Obama is going to finish his second term without the bottom dropping out." "The average American and the average Stock Market Investors are oblivious to these problems"

"America is Broke" Schiff added. "We owe trillions. By the end of Obama's second term we will owe over $20 trillion dollars! Look at our Debt to GDP Ratio, the unfunded liabilities. If we were in the Euro Zone, they would kick us out".

Schiff points out that the market gains experienced recently, with the Dow topping 14,000 on its way to setting record highs, are giving investors a false sense of security. These levels of the Dow are also unsustainable with current economic conditions.

"It's not that the stock market is gaining value... it's that our money is losing value. And if you have a debased currency.. a devalued currency, the price of everything goes up! Stocks are no exception," Schiff says.

"The Fed knows that the US Economy is not recovering", Schiff notes, "It's simply being kept from a Collapse by artificial low interest rates and easing. As that support goes, the economy will implode"!!!

REO Capital agrees with Peter Schiff's predictions and suggests you protect your assets with Private Equity Investments that are real assets purchased at deep discounts that take time to show real double digit appreciation in value in a Private Equity Fund. Contact REO Capital, LLC today, to see what unique, niche investments we represent that have passed our Rigorous Due Diligence process.

John Denes
CEO
REO Capital, LLC
www.reocapitalllc.com
johndenes@reocapitalllc.com
248-313-9966

REO Capital Shares Data on Capital Raising in 2013

PEI Research & Analytics department released first quarter 2013 fundraising figures this week showing fund managers had raised more than they’d targeted. Globally, 130 private equity funds held final closes worth $69.3 billion during the first quarter - $9.4 billion more than their collective target. When you strip out the funds that had no stated target, the amount raised was roughly 5 percent above target – an increase on the comparative 2 percent above target figure for all of 2012.

There are some caveats to consider  before  any would – be fund managers assume there’s capital falling from the sky.  To begin with, a fund stated target may not actually be what the GP wants to raise. Their real target is somewhere between the target on the cover and the hard cap. In this market, which is very competitive, GP’s are tending to set their targets more conservatively and give themselves more room with the cap being higher above their target.

The strong start to 2013 for some GP’s is also to do with pent-up demand from LP’s who’d hoped to be more active during 2012, says managing partner of Mecury Capital Advisors. And sentiment is generally better – at least for North American assets. It has been several years since we’ve seen this level of appetite for US products. The pessimism in Europe and the cautiousness that has crept into the Asian Markets has caused the liquidity flows to be redirected towards the US.

Indeed, PEI data shows North American – focused funds attracted the largest share of the capital during the first quarter - $23.3 billion – followed by global funds, which raised $18.8 billion. The two together accounted for just over 60 percent of total funds closed in Q1 2013.

John Denes

CEO

REO Capital, LLC

Johndenes at reocapitalllc.com

REO Capital Predicts LPs to Increase Private Equity Allocation

Although just about half of the LPs in the study have had difficult conversations with GPs about performance, nearly two-thirds said private equity is performing better than other investments in their portfolio

Good news for GPs on the fundraising trail: LPs are optimistic about private equity and are planning to increase their allocations to the asset class in the coming year.

Nearly two-thirds of investors, interviewed for Duff & Phelps’ Alternative Investments Outlook 2013: Limited Partner Survey, said private equity is performing better than other investments in their portfolio. Approximately half of the respondents said private equity is beating their expectations.

The financial advisory and investment banking firm quizzed 100 LPs operating in Western Europe and North America. Two-thirds of them plan to reconsider their allocation to private equity in the next 12 months, 95 percent of which plan to increase their allocation. 

“I expect a private equity investment boom is on the cards. We have already identified many funds in the US and Europe for new investments,” one US pension fund official said in the study.

Nevertheless, 48 percent admitted they have had difficult conversations with GPs about fund performance, with many LPs expecting returns on 2012 investment vintages to fall below levels achieved in the past.
In fact, 91 percent of respondents said they have been more vocal about fund investment strategies in the past 12 months. When allocating capital, transparency was named as a key concern by 70 percent of LPs.

Within Western Europe, the Germanic countries were the most popular with investors. The economic environment, political uncertainty and price expectations remained the biggest concerns for LPs investing in the region. In addition, European investors were more optimistic about Southern Europe than their North American counterparts, the study showed. 72 percent of European LPs said they would be likely to invest in funds with exposure to Southern Europe, compared to only 40 percent of North American investors.

“Countries like Greece, Spain and Italy are very unsafe for private equity investments and we are not considering any investment,” a vice president at a US pension fund said in the study.

But it is not just American LPs that remain wary about Southern Europe. Francesco Di Valmarana, a partner at Pantheon Ventures, expressed similar concerns in a recent interview with PEI.

Information provided by PEI

John Denes

CEO

REO Capital, LLC

Detroit, MI USA

London, England UK

www.reocapitalllc.com

REO Capital Predicts SP 500 Valuations and Predicts LP's in PE Funds

While many strategists used the 10% rise in stocks in 2013 first three months to boost their 2013 S&P 500 targets, others adopted a more wait-and-see approach, and stuck to their original forecasts. 

 

The New High coincided with a precarious time in the market cycle — just before the release of first-quarter earnings for most of the S&P 500 and at the start of the year’s traditionally most bearish six months. 

 

With that in mind, REO Capital turned to two strategists who not only ranked among the best S&P 500 forecasters in 2012 but who have also not modified their original 2013 predictions in the light of market gains, asking them what they expect for the rest of the year and what advice they’re giving clients.

 

Starting with the most bearish forecast, Gina Martin Adams sees the S&P 500 ending the year at 1,390  down 11% from Thursday’s close. In 2012, her beginning of the year forecast of 1,360 was less than 5% short of the year end 1,426.

 

The sell-side strategist expects weak corporate earnings growth and the potential for the Federal Reserve starts scaling back measures in the second half of the year as major headwinds for stocks. 

 

“Another aspect to look forward to is the market tracing a top, so your best performing sectors are defensive,” she said. “Even though they’ve led, they’re pretty well positioned.”

 

Defensive sectors including health care, consumer staples and utilities have been the year’s best performers so far with gains of between 12% to 16%, and Adams expects that trend to continue as investors search for yield.

 

On the other hand, a stronger U.S. dollar and economic weakness in Europe will likely squeeze earnings for companies with a large international exposure, she said. That means staying away from sectors such as technology, materials, energy, and industrials. For those sectors, “the fundamental backdrop is unfortunately still quite weak, the dollar rally works against those sectors, and they’re most exposed to Europe,” she said. “I think it’s tough times for international earnings.” 

 

Brian Belski’s track record in predicting the S&P 500 has been fairly solid over the past few years. His 1,400 forecast, made while he was at Oppenheimer, fell short of the 2012 close by a handful of points. When he joined BMO in April, he was forecasting 1,425, a point shy of the 2012 close. His forecasts for 2010 and2011 were within less than 5% of the benchmark’s finish for those years.

 

The strategist is holding onto his 2013 S&P 500 target of 1,575, and sees the recent spate of analysts raising forecasts as a fairly good contrarian indicator. Like a baseball pitcher trying to tinker with his form mid-game, many under invested investors are straying from their discipline to chase outperformers, and the results are poor at best, he said.

 

That also applies to trying to time the market. If you’re going to invest, it’s important to stay invested because missing just a few of the market’s strongest days will slash your overall returns, he said. Calculating the S&P 500’s annual performance since March 2009, Belski found an average 22.7% annual rise in the index. But eliminating the S&P 500’s three best days, the yearly gain slumps to 9.2%. Take out the best five days and you pocket just 3.1% annualized.

 

Belski says investors need to go beyond just parking their money in defensive sectors in what he considers a more active stock picking market. Rather, he suggests investors should take a tactical approach over the historically bearish second and third quarters. Since 2010, the S&P 500 has averaged a 7.4% gain the first quarter, followed by a 5.2% loss in the second quarter, a 0.7% gain in the third quarter, and a 6.8% gain in the fourth.

 

Belski’s tactical approach is to “rent” selective defensive strategies rather than own defensive sectors. The way to do that is by focusing on stocks with high dividend yields, low volatility, and a narrow earnings estimate dispersion. 

 

REO Capital Predicts that the attitude regarding Limited Partners Investing in Private Equity versus Stocks in the Global Market is changing. REO Capital predicts that in 2013 and 2014 a greater allocation will be made to Private Equity Funds!  

 

To back up this prediction we have enclosed some findings from EMPEA’s 8th Annual Global Limited Partners Survey in April 2013 collected the views of 106 LPs from 28 countries around the world to better understand their changing attitudes toward private equity investing in emerging markets. This study provides EMPEA Members and the broader industry with a greater understanding of how LPs view the asset class, how their attitudes have changed over time, what their plans are for investment and what factors will shape the future of private equity investment in emerging markets. 

 

Key findings include:

 

1. Three-quarters (75%) of LPs expect their commitments to emerging markets to increase over the next two years. By contrast, only 26% of LPs anticipate they will expand their investments in developed markets over the same time period.

 

2. 72% of LPs expect 2011-vintage EM PE funds to deliver net returns of at least 16%, compared with only 26% of LPs believing the same of developed market PE funds.

 

3. More than half of LPs (57%) expect that emerging markets will account for 16% or more of their total PE allocation in two years’ time. 

 

Join us at REO Capital to discover which Private Equity Funds will be ahead of the curve when the hundreds of Billions of dollars presently sitting on the sidelines is invested in some of the Private Equity Funds we represent for various Capital Raises!

 

John Denes

CEO

REO Capital, LLC

johndenes at reocapitalllc dot com

248-313-9966