To paraphrase Cramer: Buying stock in private equity companies now is like buying technology in 2000. There’s no point to getting in at the top.
And that’s where private equity is, Cramer said. Sure, PE firms have had an incredible run, but when Blackstone CEO Stephen Schwarzmann sells a huge block of his own company’s stock, then why would another investor want it?
If the Democrats take the White House in 2008 – and Cramer thinks they will – then billion-dollar companies like Blackstone, Apollo and KKR could be taxed back to the Stone Age. Not to mention, private-equity firms on the whole have raised so much money there’s tremendous competition to find the next great buyout and that most likely means higher interest rates to make the transaction happen.
The biggest warning flag, though, is that the Street only takes hot companies public at the end of the cycle, and not the beginning. It floods the market with their stock, depressing share price for everyone in the industry.
Bottom Line: Do you want to invest like a private-equity manager? Don’t buy their stock. Do what they do: Sell!
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