Private Equity prides itself as the pinnacle of financial sophistication – reserving for itself the moniker of smart-money.  When measured by its Ivy connections it may well be the case but not when measured solely on performance.  Today with the throw away prices, PE would have emerged as the buyer of value – the ultimate countercyclical investor!  But it is doing just the opposite?!  The drive at this point is not as the smarts but the balance sheet strength.  And here PEs are anything but kings.  They bank on limited partners for capital and banks for cheap debt, both of whom are in no mood to play ball because they have their own redemption pressures to deal with.  

 So who is the ultimate store of capital?  The answer for now is the government – overextended and inefficient as it may be.  Or is it a slight of hand where by monetzing deficits we get the –pleasure of not having to deal with the problem today.  This is just the government’s ability to muscle up its books after the event by printing money.  But what about an entity that is geared to this? Can there be an entity that invests only in debt that can spruce up returns by buying cheap equity in a downturn?   What ever happened to the conservative European banker or the highly regulated re-insurer - an entity with formal bounds on investments to counter greed.