May 15, 2025 • 37 mins
Summary:
In this episode, the hosts discuss the current economic environment, tariffs, and their impact on private equity. They also explore the concept of "trapped equity" and how it affects private equity firms. The conversation touches on the uncertainty created by tariffs, the risk premium required, and how it changes the dynamics of buying and selling assets.
Key Takeaways:
Tariffs create uncertainty: Tariffs lead to uncertainty, which can result in inaction and trepidation among investors and private equity firms.
Trapped equity: Trapped equity refers to assets that have appreciated in value but are difficult to sell or liquidate due to market conditions.
Impact on private equity: Tariffs and economic uncertainty can decrease transaction volume, making it harder for private equity firms to sell assets and return capital to investors.
Risk premium: The risk premium required by investors increases in uncertain times, making it more expensive for private equity firms to finance deals.
LPs want liquidity: Limited partners (LPs) want to see liquidity and returns on their investments, which can put pressure on private equity firms to sell assets.
Contrarian opportunities: In a recession, some private equity firms may see opportunities to buy distressed assets at lower prices.
Predictions:
Tariff situation: The hosts predict that the tariff situation will improve because it cannot get much worse.
Recession likelihood: Ed predicts a 100% chance of a recession in the next 18 months, while Rory agrees that it's almost inevitable.
Recession depth: The hosts believe that the recession will not be as severe as the 2008 financial crisis and that there will be intervention to mitigate its effects.
Advice for Founders and Private Equity Firms:
Be prepared for uncertainty: Founders and private equity firms should be prepared to navigate uncertain market conditions.
Look for contrarian opportunities: In a recession, look for opportunities to buy distressed assets at lower prices.
Vet private equity firms: Founders should carefully vet private equity firms and consider their investment thesis and approach in uncertain markets.
Conclusion:
The hosts conclude that private equity firms will continue to adapt to changing market conditions
==============================
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Three insiders. One mic. All things private equity — explained. Hi 👋 We’re Ed, Rory, and Emily — a CEO, a CFO, and a Chief of Staff — here to demystify the world of private equity. Between us, we’ve sat in the founder’s chair, run PE‑backed companies, and worked on the deal side, so we know the wins, the pitfalls, and the jargon (and we’ll explain it).
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Emily (00:34):
Hello?
Private equity boys.
How we doing?
Rory (00:37):
We're good.
It's been a minute.
It's been a
emily-sander_1_05-08-2025_ (00:39):
It's been a while.
squadcaster-4i7c_1_05-08- (00:40):
Gosh.
Ed (00:41):
tax.
It's tax season's
squadcaster-4i7c_1_05-08- (00:42):
Yeah.
Yeah.
emily-sander_1_05-08-2025 (00:44):
Yeah,
squadcaster-4i7c_1_05-08- (00:44):
Seems like the whole
emily-sander_1_05-08-2025_150 (00:45):
I was gonna, yeah.
squadcaster-4i7c_1_05-08-20 (00:46):
the last, uh, couple months in a
way.
emily-sander_1_05-08-2025_ (00:48):
Yes, so, so we took a little hiatus
because of tax season.
Ed gets buried in tax season.
He just goes, he just goes away.
Then he resurfaces and he hascome up for air now.
So it's nice to see you, ed.
squadcaster-4i7c_1_05-08-2 (01:05):
Yep.
emily-sander_1_05-08-2025_1 (01:07):
I'm glad to get a, a proof of life
on this podcast with you.
Um, and Rory, you've been,you've had some changes as well.
squadcaster-4i7c_1_05-08- (01:14):
yeah.
I went from doing a lot ofconsulting work to going full
blown, you know, headfirst intoworking for a startup, or I
should say early stage business,so not totally a startup, but
much earlier business than I'veworked for in the past.
so, you know, as, as thosethings go, kind of all
consuming, but, um, yeah, it'sbeen a ride and it will continue
(01:35):
to be a ride.
So
emily-sander_1_05-08-2025_ (01:36):
Your you're CF Oing.
squadcaster-4i7c_1_05-08-20 (01:38):
am, yep, yep.
I, uh, started with this companyto a financial, gosh, it's been
over a year that I, I starteddoing some consulting work for
'em, but then as soon as I gotinto the hood and I saw what was
there, I was like, boy, this isa gold mine to.
FinTech platform and consumerlending platform.
And I was like, I wanna ridethis thing to the top because
there's some special, uniquestuff going on there.
(01:59):
So, um, been a good ride, but,you know, never easy, uh,
running a, running a startup,that's for sure.
I.
emily-sander_1_05-08-2025_150 (02:05):
I had some conversations about
that decision.
I was like, which, which way doI go?
squadcaster-4i7c_1_05-08-2 (02:09):
some serious heart to hearts about
that.
emily-sander_1_05-08-2025 (02:11):
Yeah, we did.
squadcaster-4i7c_1 (02:12):
instrumental and, and kind of helped me get
off that fence of, uh, hedging,which I like to do a lot.
You know, try to not be too muchoptionality.
emily-sander_1_05-08-2025_15 (02:21):
Oh my gosh.
squadcaster-4i7c_1_05-08-20 (02:22):
you can only go one way with a, with
a startup.
And that's, you know, all inkind of, so, yeah.
So it's been good.
It's
emily-sander_1_05-08-2025 (02:29):
Yeah.
squadcaster-4i7c_1_05-0 (02:29):
though.
Yeah.
emily-sander_1_05-08-2025_ (02:31):
Very cool.
Okay, Rory, you took the plunge,
squadcaster-4i7c_1_05-08- (02:33):
Yeah.
emily-sander_1_05-08-2025_1 (02:34):
got load of risk.
Is this like a true startup?
squadcaster-4i7c_1_05-08- (02:37):
Well,
emily-sander_1_05-08-20 (02:37):
you're.
squadcaster-4i7c_1_05-08-202 (02:38):
of those things without going too
deep into the weeds, uh, youknow, it's a business that's
been around about 10 years.
Uh, started as a buy now, paylater, uh, business in Canada,
and then pivoted to being a fullfledged, um, personal loan
provider in the us.
And a lot of businesses, theystart with an amazing vision and
(02:59):
things, but do go like acircuitous path.
out what it's, what's reallytrying to be in the market.
So, I came into the businesswith A-A-C-E-O that was brought
in by, uh, the founder, theboard, awesome, CEO.
And, um, now we're operating thebusiness and it's really, it's,
it's, uh, all of the tech andinfrastructure really already
(03:21):
been built.
So it's really just making, uh,making the product and, and
market.
to life, and that's where wespend our time.
So, and then also a lot ofcapital raising too, of course.
You know,
squadcaster-530f_1_05-08- (03:31):
How's the, who's the sponsor there?
squadcaster-4i7c_1_05-08-20 (03:34):
uh, it's a widely held, um, investor
base in Canada.
A lot of
squadcaster-530f_1_05-08- (03:39):
okay.
squadcaster-4i7c_1_05-08-2 (03:39):
very wealthy, highly successful
Canadian business people, a lotof'em from the Calgary oil and
gas industry.
Um, so it's one of those, youknow, hundreds of investors,
individual investor type ofdeals.
But once we.
get to the next funding round,it'll, it'll be led by more of
an institutional venture capitaltype type group.
So yeah,
emily-sander_1_05-08-2025_1 (04:02):
And Ed, will you rega us with your
tales of tax returns or.
squadcaster-530f_1_05-08-20 (04:07):
You know, I,
squadcaster-4i7c_1_05-08-202 (04:08):
an acquisition roll up strategy
over the last.
squadcaster-530f_1_05-08-20 (04:10):
was about to say, I've been working,
I've been working really theacquisition, the tax season, put
the, put a lot of the rolluppiece slash integration piece on
hold.
Um, the last thing you do as a,as a financial professional is
try and make major changes inQ4, Q1.
squadcaster-4i7c_1_05-0 (04:25):
Mm-hmm.
squadcaster-530f_1_05-08-202 (04:26):
we closed in Q4.
Um, so we, we essentially were,were running three different.
Maybe four different accountingplatforms, bookkeeping
platforms.
We're running two differentpayroll platforms.
We're running two different taxplatforms.
Um, so we're just starting nowto do some of those integrations
and, you know, continuing to runinto interesting issues.
(04:49):
Um, know, that, let, let's justsay that the, uh.
The systems that were, that werein place, were very, uh,
customized.
So 175
squadcaster-4i7c_1 (05:02):
Proprietary.
Yeah.
squadcaster-530f_1_05-08-20 (05:04):
Um, so we're working to standardize
those.
'cause what's happened, ofcourse, is.
You have an acquisition.
This is typical in professionalservices where you do an
acquisition, someone you know,you have folks who are like,
yeah, I, I, you know, it's timefor me to go.
Um, so folks decide to leave atthat point, and then you end up
in a situation where
squadcaster-4i7c_1_05-08-2 (05:24):
Yep.
squadcaster-530f_1_05-08- (05:25):
those 40 clients had 40 different
custom processes that you can'ttransition in.
squadcaster-4i7c_1_05-08- (05:31):
Yeah.
squadcaster-530f_1_05-08-20 (05:31):
Um, so, you know, it's been a real
challenge, uh, from thatperspective.
Having said that, it was a goodtax season, busy tax season
we're turn, we were turning downwork and are still in the
process of like being veryselective as to who we take it.
It's been shocking
squadcaster-4i7c_1_05-08- (05:47):
Yeah.
squadcaster-530f_1_05-08-202 (05:48):
at the, uh, at really how much
demand there is for, um, basicfinancial services.
emily-sander_1_05-08-2025_ (05:56):
Just to give people a sense, like not
a deep sense, but just a highlevel sense of tax season.
There's like rolling waves ofthis thing.
There's like business tax andindividual tax, and.
squadcaster-530f_1_05-08-20 (06:07):
so, so the first, the first
squadcaster-4i7c_1_05-08-2025 (06:08):
K ones.
Yeah.
squadcaster-530f_1_05-08-202 (06:10):
31 to Jan to, or December 31 to
January 31, where you gotta fileall your information returns, 10
90 nines, W twos, W four, uh, Wtwos, 10 90 fives, all those are
gotta get out.
And then you roll into the neinto 90 eights, and then you
roll into next phase, which isall your corporate partnership.
(06:30):
Returns are due by the 15th ofMarch, then your individual
returns are due by the 15th ofApril.
But if anybody extended theirpartnership or, or, or s corp
returns, anything that impactsthose, um, individuals, then you
have individual extensions.
So we still have,
squadcaster-4i7c_1_05-08-2 (06:49):
Yep.
squadcaster-530f_1_05-08-202 (06:49):
we have probably 1200 clients in
the firm.
Um, we still have probably 500returns left to file
squadcaster-4i7c_1_05-08- (06:56):
Yeah.
squadcaster-530f_1_05-08-202 (06:57):
of extensions.
And
emily-sander_1_05-08-2025 (06:59):
Okay.
squadcaster-4i7c_1_05-08-20 (07:00):
I'm one of those extenders myself,
just putting off the inevitablebill that's coming up with, with
minimal interest incurred.
Yeah.
emily-sander_1_05-08-2025 (07:09):
Those were a lot of tax return
numbers.
Um, for the four listeners whoare still with us, we're gonna,
we're gonna talk about
squadcaster-530f_1_05-08-2 (07:16):
the,
squadcaster-4i7c_1_05-08-202 (07:16):
Oh
emily-sander_1_05-08-2025_1 (07:16):
the economy, what's happening in the
market.
Tariffs, but the impact is on pe'cause they're getting, they're
getting smooshed, they'regetting, that's a technical
term.
They're getting smooshed.
squadcaster-4i7c_1_05-08- (07:26):
Yeah.
emily-sander_1_05-08-2025_1 (07:27):
um, maybe let's, let's.
squadcaster-530f_1_05-0 (07:29):
outline
emily-sander_1_05-08-2025_ (07:30):
Like what is going on in the economy
right now?
Some people say, we might bedipping into a recession.
We got the whole tariff thinggoing on.
What's what?
What is the fancy words forwhat's happening in the economy
here?
squadcaster-4i7c_1_05-08- (07:45):
Yeah, that's, that's, that's one way
to put it.
The other one I think that comesto mind, I hear banding about
multiple times, daily.
It's just uncertainty.
There's been a lot of
emily-sander_1_05-08-2025 (07:53):
Yeah.
squadcaster-4i7c_1_05-08-20 (07:54):
uh, which, which has.
squadcaster-530f_1_05-08-20 (07:55):
has
squadcaster-4i7c_1_05-08- (07:56):
Broad uncertainty, which in so many
ways brings on inaction andtrepidation.
Um, and so a lot of thingsunfolding from, from that sort
of viewpoint.
You know, fear, you know, fearsort of for some, uh, you know,
hardy folks, it meansopportunity, I guess.
Um, but in, in a lot of waysit's just a lot of, you know,
(08:19):
not knowing which way to go, uh,with your business, with your
investment strategy.
Your options become potentiallymore limited in how you execute,
you know, your private equitystrategy, and then there's so
many things you can dig into onthat.
emily-sander_1_05-08-2025_1 (08:33):
How does like connect the dots
between like tariff, like what'shappening with tariffs and why
that affects
squadcaster-530f_1_05-08-2025 (08:41):
I
emily-sander_1_05-08-2025_150 (08:41):
a PE firm?
squadcaster-530f_1_05-08-2025 (08:42):
I really think it goes back to
what Rory just said.
It's, it creates thisuncertainty of most businesses.
It doesn't, it almost doesn'tmatter what the business is.
Even service businesses
squadcaster-4i7c_1_05-08- (08:52):
Yeah.
squadcaster-530f_1_05-08-20 (08:53):
the one I run, they're.
in scope.
They have, their supply chainsare run internationally.
They may have internationalclients, they may be sourcing
labor internationally.
And so just, just the tariffsalone, uh, as Rory said, it
creates this uncertainty whereyou're not sure what the future
economic return of that asset isgoing to be.
(09:14):
It's, it could be really high,it could be really low.
It could, you know, because the,because of the nature of those.
Um, kind of uncertain events onthe attack side.
It, it tariffs our taxes.
And so as a result, folks arelike, forget it.
I'm just not gonna, you know, I,I'm gonna hold until I can see,
um, until some of thatuncertainty comes out, or if
(09:34):
they go to sell.
And I know we've talked aboutthis, I
squadcaster-4i7c_1_05-08- (09:36):
Yeah.
squadcaster-530f_1_05-08-2025 (09:37):
I know you get really excited,
Emily, when I talk about it, butit changes the risk premium
required.
And so as a result,
emily-sander_1_05-08-2025 (09:44):
Thank God you brought up risk premium.
I was waiting for this.
squadcaster-530f_1_05-08- (09:46):
gonna pay less, you know, because the
risk premium's higher.
squadcaster-4i7c_1_05-08- (09:49):
Yeah.
emily-sander_1_05-08-2025_15 (09:51):
So you mentioned a few things
there.
So like the whole time, so wetalked about, hey, like five to
seven years, like typical onaverage whole time, if you're,
if you were in a a fund where,hey, like, or in a company where
we're on like the seventh year,so we were looking to sell, does
this economic environment nowpush that out?
squadcaster-4i7c_1_05-08-20 (10:09):
But very potentially.
Um, there's a few things at playthere.
So in order to sell, you need tohave buyers, right?
You know, we've talked on thispodcast, it's in our book,
squadcaster-530f_1_05-08- (10:19):
book,
squadcaster-4i7c_1_05-08-20 (10:20):
you know, much of the PE investment
strategy involves leverage andcost of funds related to that.
So taking on debt to finance andacquisition.
Well, even as of the, you know.
Dates of this very recording,and it was very recently put out
there that the fed's gonna, um,you know, delay making rate
cuts, right?
(10:40):
So
squadcaster-530f_1_05-08-202 (10:40):
So
squadcaster-4i7c_1_05-08- (10:41):
think about that in, in every
layperson terms, it just meansthe cost of money is gonna stay
relatively high for a time,right?
So, uh, the ability to, youknow, to.
Take on more debt to finance andacquisition means potentially
less buyers if you don't haveaccess to that, which if, if
less buyers, as a seller you maynot be in a position to have a,
(11:06):
as much of a competitive processfor selling the company or asset
you're holding.
Um, you know, you may haveother, uh, obligations on your
own fund related to debt, maybeon the company.
There's a whole litany ofreasons where.
What we're talking about, rightthis very moment means that
there's just not as much,
squadcaster-530f_1_05-08-20 (11:26):
um,
squadcaster-4i7c_1_05-08-20 (11:27):
um, transaction volume happening in
the market for so many reasons.
And if you don't have that, thenit just makes your outcomes more
uncertain.
And there's a lot of ways toskim that cat per se.
But that's what it means is justdeal activity is just down, uh,
overall.
And there's, now there's firmscollectively that are holding 3
(11:48):
trillion of assets.
with half of that they've heldfor over five years in the
space.
So think about that for a minutein a lot of ways that one might
relate this to their ownpersonal life, and we talk in
our book a lot about, you know,real estate and kind of people
relate to, it's like, thinkabout your home.
And so many people sit ontrillions of dollars of what,
(12:11):
what's called trapped equity.
Meaning your home is appreciatedsince you bought it.
squadcaster-530f_1_05-08-20 (12:15):
You bought it
squadcaster-4i7c_1_05-08 (12:15):
Great.
That's awesome.
You have a, you have a.
squadcaster-530f_1_05-08-2 (12:17):
have
squadcaster-4i7c_1_05-08-20 (12:18):
And assets that, that's appreciated.
But on, in, in, order to
squadcaster-530f_1_05-08-202 (12:23):
to
squadcaster-4i7c_1_05-0 (12:23):
realize that value, you'd need to, uh,
unlock that equity or take thatequity out, cash out, what have
you.
But if you sell your home, youget a big profit, well, you have
to go buy another home, know?
But then you'd have to take a,on an interest rate, that's
maybe two times as much as whatyou've been paying on your
current mortgage.
So you have to think through.
squadcaster-530f_1_05-08-20 (12:44):
pay capital
squadcaster-4i7c_1_05-08- (12:44):
That.
Um, so double, triple, quadruplewhammy.
So you just need to think aboutthe outcomes of Yes.
You, you know, if you move to,to sell an asset, what does that
mean?
On the next step, you go buymore assets at a higher price,
you know,
emily-sander_1_05-08-2025 (12:59):
Okay, hold on.
Okay.
squadcaster-4i7c_1_05-08-2 (13:01):
much
emily-sander_1_05-08-2025_ (13:01):
I'm, I'm trying to,
squadcaster-530f_1_05-08 (13:02):
trying
emily-sander_1_05-08-2025_15 (13:02):
to hang in with you.
Okay.
So first of all, trapped equity,
squadcaster-530f_1_05-08 (13:05):
That's a
emily-sander_1_05-08-202 (13:06):
that's a cool term.
Trapped equity.
So
squadcaster-4i7c_1_05-08- (13:08):
super
emily-sander_1_05-08-2025_150 (13:08):
I have a house,
squadcaster-4i7c_1_05-08-202 (13:09):
to unstrap it and it's trapped in
your own life,
emily-sander_1_05-08-2025_ (13:12):
what free, what's equity free?
squadcaster-4i7c_1_05-08- (13:13):
Yeah,
emily-sander_1_05-08-2025_15 (13:14):
if I have a house
squadcaster-4i7c_1_05-08- (13:15):
yeah.
emily-sander_1_05-08-2025_1 (13:15):
and it's like appreciated, so I have
like, I'm sitting on equity.
I wanna sell it, but there's no,first of all, there's no buyers
is the first problem.
squadcaster-4i7c_1_05-0 (13:23):
Because
emily-sander_1_05-08-2025_15 (13:23):
in this economy right now,
squadcaster-4i7c_1_05- (13:25):
interest rates to be able to afford that.
Your home you're selling.
emily-sander_1_05-08-2025_1 (13:29):
So, so like the analogy is, um, I'm
a PE firm.
I have this company that Ibought.
It's grown in, it's appreciatedin value.
I wanna sell it, but there's nobuyers.
That's problem one.
squadcaster-530f_1_05-08- (13:40):
yeah,
squadcaster-4i7c_1_05-08-202 (13:40):
To
emily-sander_1_05-08-2025 (13:40):
Okay.
squadcaster-530f_1_05-08-202 (13:41):
no
squadcaster-4i7c_1_05-08-202 (13:41):
is probably a little overstated,
emily-sander_1_05-08-202 (13:43):
There.
Okay.
There's.
squadcaster-4i7c_1_05-08- (13:44):
point is spot on.
Yeah.
emily-sander_1_05-08-2025_ (13:46):
The, the buyers are, are skittish and
a little more reluctant thanthey normally are because,
squadcaster-530f_1_05-0 (13:50):
willing to buy at a price you're willing
to sell for.
emily-sander_1_05-08-2 (13:53):
because, what did you say, Roy?
The cost of money is uncertain.
squadcaster-4i7c_1_05-08-202 (13:57):
Or high straight up.
It's just high right now.
So for them to be able to buyyour company, they need to
probably put up more cash out oftheir own back pocket, or I
should say, out of their LPs onback pocket.
Um, and to take on the debt,they would have to pay a higher.
(14:22):
Price for that money.
Let's just use real numbersright now.
Like, so, um, you know, back inheyday, let's call it a couple
years back, you know, you mighthave had an interest rate of
like four, 4.5%, where the costof money was, like, the
risk-free rate was like zero.
you add a 4% spread on that,you're looking at four to 5%
interest rate.
Well, guess what?
Now it's closer to eight, ninefor the highest grade debt.
(14:46):
9%.
So that's double your cost.
So if you just
emily-sander_1_05-08-2025_1 (14:49):
Oh,
squadcaster-4i7c_1_05-08-2 (14:49):
like if you bought a, a home and your
mortgage payment was a thousanddollars per month for, you know,
uh, 360 months, you, you'relooking at maybe like almost
doubling your payment for thatsame, same,
emily-sander_1_05-08-2025 (15:06):
okay.
squadcaster-4i7c_1_05-08-2 (15:07):
just to be able to afford it.
So you have to think again aslike, well, I could sell my home
bank a lot of profit, and toEd's point.
to hire Ed's firm to help youcalculate the cap capital gains
tax you're gonna have to pay.
But then you also have to go buya new home and place to live,
just like private equity is thesame way they're in the business
of doing deals.
emily-sander_1_05-08-2025 (15:25):
Okay.
Okay.
squadcaster-4i7c_1_05-08-20 (15:27):
in.
They, they,
emily-sander_1_05-08-2025 (15:28):
Okay.
So then,
squadcaster-4i7c_1_05-08-202 (15:29):
of continuing to buy deals and sell
deals.
emily-sander_1_05-08-2025 (15:31):
okay, so first problem is I have
trapped equity.
squadcaster-4i7c_1_05-08-2 (15:34):
Hmm.
emily-sander_1_05-08-2025 (15:34):
Buyer market lower than it was.
Second problem.
If I sell this sucker, I have topay capital gains, which is now
more than normal or nor more.
squadcaster-4i7c_1_05-08- (15:43):
Move.
squadcaster-530f_1_05-08-20 (15:44):
the same.
squadcaster-4i7c_1_05-08- (15:44):
Yeah.
squadcaster-530f_1_05-08-20 (15:44):
the same, but you, you, when you
have a transaction, if there's again on that transaction, which
you, you would certainly hopethere would be.
You have a tax that's gonna bedue at the LP level or at the
corporate level.
Essentially you got a profitthat you gotta pay tax on and
you need to figure out where.
Probably more importantly to, toRory's point is you now gotta
(16:07):
figure out where to put thatmoney back to
squadcaster-4i7c_1_05-08 (16:09):
Right.
squadcaster-530f_1_05-08 (16:09):
'cause
emily-sander_1_05-08-202 (16:09):
that's the third one.
squadcaster-530f_1_05-0 (16:10):
savings
squadcaster-4i7c_1_05-08- (16:11):
Yeah.
Yeah,
squadcaster-530f_1_05-08 (16:11):
That's the
emily-sander_1_05-08-2025_1 (16:12):
the third one, but like the second
one.
squadcaster-530f_1_05-08-202 (16:15):
is
emily-sander_1_05-08-2025_ (16:15):
that like, is that affected by the
market as well?
Does the capital gains ratechange or is that un unaffected?
squadcaster-530f_1_05-08-2 (16:22):
it's relatively unaffected because
it's,
emily-sander_1_05-08-2025 (16:25):
Okay.
squadcaster-530f_1_05-08-2 (16:25):
set, but
emily-sander_1_05-08-2025_1 (16:27):
Ah, okay.
squadcaster-4i7c_1_05-08 (16:28):
that's right.
Yeah.
emily-sander_1_05-08-2025_1 (16:28):
So, okay, so like the big problem,
second problem is I've sold itand now I have to redeploy that
capital.
And now I'm in this like higherinterest rate environment.
I'm like, this is stupid.
I might as well.
squadcaster-530f_1_05-08-20 (16:39):
and here's where, and here's where
that tax piece comes in.
If you don't have a goodalternative, I.
To reinvest that money and makeback the taxes you just paid
plus a return.
squadcaster-4i7c_1_05-08- (16:49):
Yeah.
squadcaster-530f_1_05-08 (16:50):
You're better off
emily-sander_1_05-08-2025_ (16:50):
Hmm.
Okay.
Yes.
Okay.
Got it.
Okay.
squadcaster-4i7c_1_05-08-20 (16:53):
But here's the problem with that.
Introducing a segue.
New topic, same subject.
Well, term LP limited partner,they want to get their money
back at some point.
squadcaster-530f_1_05-08-20 (17:05):
uh,
squadcaster-4i7c_1_05-08-202 (17:07):
So what does that mean?
There's pressure to sell, You,you, in order to generate
liquidity, which meansbasically.
Accessing cash.
squadcaster-530f_1_05-08- (17:21):
cash.
squadcaster-4i7c_1_05-08-20 (17:21):
You have to sell an asset, but you
need the, you need to be able tosell that asset to pay back your
squadcaster-530f_1_05-08-2 (17:27):
your
squadcaster-4i7c_1_0 (17:28):
investors, call it.
Now, we can get into someesoterica around that because
you could then sell secondariesin your position, yada, yada,
yada.
But point being is, it's achallenge right now because LPs,
as we just talked about.
squadcaster-530f_1_05-08- (17:44):
about
squadcaster-4i7c_1_05-0 (17:45):
general have been in these deals longer.
They wanna see their ownliquidity.
'cause at the end of the day, anLP is a person or a firm
squadcaster-530f_1_05-08-2 (17:52):
firm
squadcaster-4i7c_1_05-08-2 (17:52):
that is invested in your fund and
they have their own obligationsin their life too.
At some point they put a dollarin, they want to get, you know,
$4 back so they can do what theywant to do in their lives.
Right.
So, so that's the other part.
And if you're not able to, thisis the other point, is if you're
not able to return capital toyour LPs.
(18:13):
How can you raise more capitalfor your, your current or new
fund?
So
emily-sander_1_05-08-2025 (18:17):
Yeah.
squadcaster-4i7c_1_05-08- (18:18):
chain of reaction and it's not just,
you know, not just, um, uh, youknow, tied to private equity,
private credit's the same wayother Strat investment
strategies.
It's just a money flow thing.
And that's what really comesdown to tariffs and stuff at the
end of the day is money flows.
It's, there's been some activityon the part of the current
(18:39):
administration to try to governand.
squadcaster-530f_1_05-08-20 (18:42):
and
squadcaster-4i7c_1_05-08 (18:42):
Impact money flows in a big way, which
has created uncertainty, whichhas had this trickle down effect
all the way to how much I'mfreaking paying for a dozen eggs
and it's hot.
emily-sander_1_05-08-2025 (18:52):
Yeah.
squadcaster-4i7c_1_05-08-2 (18:52):
much on that front, I can assure you
that.
emily-sander_1_05-08-2025 (18:56):
Yeah.
My grocery store had a quota onthe number of egg cartons.
You could buy a two, and I waslike, Hey, if I want a fricking
whatever, 10 egg omelet, Ishould be able to have one.
squadcaster-4i7c_1_05-08-202 (19:06):
my protein.
Exactly.
Yeah.
emily-sander_1_05-08-2025_ (19:09):
It's the most bioavailable protein
out there.
Come on.
Um, so LPs, so it's, it's like Iwant my return, but also, hey,
if you want me to reinvest in afuture fund, you better, you
better pay up.
And if other people, if new LPsare sniffing around going like,
Hey, like, should I be investinghere?
Ooh.
Like they have been waiting fortheir payback for a while now.
(19:31):
I don't know about this one.
Then it's hard to fundraise.
Yes.
squadcaster-4i7c_1_05-08- (19:34):
Yeah.
emily-sander_1_05-08-2025_150 (19:35):
a double whammy.
squadcaster-4i7c_1_05-08-2 (19:36):
time is not on your side when you're
calculating internal rates ofreturn as well.
So, you know, again, gettinginto the how way in which PE
groups get paid, you know, it'sbased on a carried interest,
which is effectively a profitshare based on the returns that
you're distributing to your LPs.
So the more the the, the moreand quicker you can get money
(19:57):
back to your LPs, the higher.
Their investment return is gonnabe, which then speaks to how
effective your fund is, whichspeaks to how well you can
market your fund to the existinginvestors and new investors.
So,
squadcaster-530f_1_05-08-20 (20:11):
So,
squadcaster-4i7c_1_05-08-20 (20:11):
you know, now is a hard time, and I
can tell you from personalexperience, is, is not the
easiest time to be raisingequity, period.
Yeah.
squadcaster-530f_1_05-08-20 (20:20):
How long
emily-sander_1_05-08-2025_ (20:21):
long can PE stay in this stage of
things
squadcaster-530f_1_05-08-20 (20:24):
it?
emily-sander_1_05-08-2025_15 (20:24):
it starts to get really bad?
squadcaster-4i7c_1_05-08-20 (20:25):
Oh, it's a resilient.
Resilient asset class pe if theycan get through the great
recession of 2008 through 2010.
We'll, you know, we'll weatherthis storm.
It just, it makes for justinteresting, um, dynamics.
You know, like, it, it, youknow, it's not totally
(20:47):
uncorrelated to the overallmarket.
I mean, we all.
Our stock market portfolio, ourpublic equities portfolio got
smashed in early April.
I'm glad I was sitting in Hawaiiand not, you know, at that time
and, and not just, you know, cutcurled up in a fetal position in
rainy Seattle at the time whenthat, know, liberation day
happened.
Um, but that being said, I, I,joking aside, it's just, you
(21:10):
know, these things ebb and flow.
You know, this is a differenttype of,
squadcaster-530f_1_05-08-20 (21:14):
Uh,
squadcaster-4i7c_1_05-08-20 (21:15):
for correction, but it's a
correction nonetheless.
And like.
Private equity, private credit.
They're foundational to theeconomy world and, and kind of
squadcaster-530f_1_05- (21:24):
domestic and
squadcaster-4i7c_1_05-08-20 (21:25):
you know, it'll, it'll, it'll,
squadcaster-530f_1_05-08-2 (21:28):
will
squadcaster-4i7c_1_05-08- (21:28):
it'll still be there,
squadcaster-530f_1_05-08 (21:29):
there,
squadcaster-4i7c_1_05-08- (21:29):
know?
squadcaster-530f_1_05-08-20 (21:29):
you know,
emily-sander_1_05-08-2025_15 (21:30):
So if they, if they've weathered
these, these types of stormsbefore, is it predictable in the
sense like, okay, when thishappens, PE firms do
squadcaster-530f_1_05-08- (21:38):
this.
emily-sander_1_05-08-2025_1 (21:38):
I'm assuming there's like for the,
for the Port cos in in flightthey might tinker with that or
change some things there andthey might say, okay, for this
next round we're gonna do some afew things differently.
Did they do any
squadcaster-530f_1_05-08-2 (21:52):
like
emily-sander_1_05-0 (21:53):
adjustments or they just kind of let it
ride?
squadcaster-4i7c_1_05-08-20 (21:57):
Ed, jump in.
I got some things today, but yougo.
squadcaster-530f_1_05-08-202 (21:59):
my experience has generally been.
the, if there's an opportunityfor them to exit that investment
to do it in a way where they cantake some chips off the table,
they're going to do it, it'sgoing to, they're not gonna go,
well, you know, we're, we'rejust gonna kind of let it ride
because I.
macro level, we're lettingthings ride.
They're still gonna be lookingat deals at the deal level.
(22:22):
They're still gonna be goingwell, there's deals to be had.
We're gonna look for'em.
They're just harder to find.
squadcaster-4i7c_1_05-08- (22:26):
Yeah.
squadcaster-530f_1_05-08-20 (22:27):
Um, and it's, and so the deal flow
slows,
squadcaster-4i7c_1_05-08- (22:30):
Yeah,
squadcaster-530f_1_05-08-2 (22:31):
it's not, it's not like they, they, I
don't, at least my experiencehas been, and you know, we were,
Rory and I were heavy in theprivate equity world when
squadcaster-4i7c_1_05-08 (22:39):
during the great recession.
Yeah.
squadcaster-530f_1_05-08 (22:41):
crisis
squadcaster-4i7c_1_05-08-2 (22:42):
Deep in it.
Yeah.
squadcaster-530f_1_05-08-2 (22:44):
our,
squadcaster-4i7c_1_05-08 (22:44):
That's our entire business consumer.
squadcaster-530f_1_05-08-20 (22:46):
say our parent co or our, our fund
was, was essentially going outand trying to buy everything
they could find,
squadcaster-4i7c_1_05-08- (22:52):
Yeah.
squadcaster-530f_1_05-08- (22:52):
know?
Well,
squadcaster-4i7c_1_05-08- (22:52):
Yeah.
squadcaster-530f_1_05-08-20 (22:53):
and they still were executing sales
as well.
You know, sales are real estatesale leaseback agreements.
They, I mean, it was, it wasdeal by deal.
Um,
squadcaster-4i7c_1_05-08-202 (23:02):
It is true,
squadcaster-530f_1_05-08-2 (23:04):
they felt like.
If we exited investment X, wecould put the money to work in
investment Y and still get thereturn that we're looking for.
It's just that some of thoseinvestment Y's are harder to
find.
squadcaster-4i7c_1_05-08-2 (23:16):
yes.
emily-sander_1_05-08-2025_1 (23:17):
So, so if a recession hits, are you
saying like, the contrarianpoint of view is just like blood
in the water, like buyeverything you can.
squadcaster-4i7c_1_05-08- (23:23):
think there's, there's a whole swath
of firms that, that, that istheir entire strategy.
Yeah.
squadcaster-530f_1_05-08-20 (23:30):
Um,
squadcaster-4i7c_1_05-08-2 (23:31):
what was I gonna say along those
lines is that, uh, one person'strash is another person's
treasure in some ways.
And I think there's so much cash
squadcaster-530f_1_05-08-2 (23:43):
cash
squadcaster-4i7c_1_05-08-20 (23:44):
the fact that.
You know, it's uncertain times,accessing, you know, debt
capital's expensive.
There's still a ton of cash outthere.
So if you're sitting on cash andyou're, you're looking to buy,
uh, deals priced withuncertainty in there, IE you
know, um, higher risk, premium,lower price, then you're in a
(24:05):
good position because you canget deals done.
And then
squadcaster-530f_1_05-08-20 (24:08):
And
squadcaster-4i7c_1_05-08-2 (24:09):
when the interest rates become more
attractive back, leverage yourdeal and do really, really well.
For the same relative risk.
So,
squadcaster-530f_1_05-08-20 (24:17):
um,
squadcaster-4i7c_1_05-08-2 (24:17):
the, the point I'm trying to make, I
suppose, is that
squadcaster-530f_1_05-08-2 (24:20):
that
squadcaster-4i7c_1_05-08-202 (24:21):
no matter what the environment is,
there's always innovation andpeople trying to figure things
out.
These are really, really smartpeople that run these firms, so
they figure out ways to do a lotof financial engineering to make
things work.
And I, I talked touched on it alittle bit, but one of the
things that's happened aroundcreating liquidity is, uh,
private equity groups sellingtheir, their positions.
(24:43):
Even though they're still owningthe bus,
squadcaster-530f_1_05-08-20 (24:45):
own
squadcaster-4i7c_1_05-08-20 (24:46):
the business, perhaps they're not
selling the business, they'reselling their, their, investment
in the business to otherparties.
So they're syndicating out thatduration risk to get liquidity,
pay
emily-sander_1_05-08-2025_1 (25:01):
Um,
squadcaster-530f_1_05-08- (25:02):
their investors
squadcaster-4i7c_1_05-08-2 (25:03):
then raise more capital and do
whatever they will do.
So
squadcaster-530f_1_05-08-202 (25:06):
So
squadcaster-4i7c_1_05-08- (25:06):
point is where there's a will, there's
a way.
squadcaster-530f_1_05-08-2 (25:08):
way.
squadcaster-4i7c_1_05-08-20 (25:09):
And with money, people always find a
way to.
Figure,
emily-sander_1_05-08-2025_1 (25:12):
did you say that was individuals
doing that?
squadcaster-4i7c_1_05-08-20 (25:14):
Oh, I'd know there, I mean there,
well shoot.
Yeah, there is individuals.
I've seen a lot of privateofferings where I can go log
into a website and buy privateequity secondaries.
Yeah.
emily-sander_1_05-08-2025 (25:26):
Whoa,
squadcaster-4i7c_1_05-08 (25:26):
buying their, their,
squadcaster-530f_1_05-08 (25:27):
their,
squadcaster-4i7c_1_05-08- (25:28):
think about it the same way as you'd
think about owning a publicshare of stock private equity
groups parsing out theirpositions in these companies and
selling it to accreditedinvestors privately.
squadcaster-530f_1_05-08-2 (25:41):
they would
emily-sander_1_05-08-2025_ (25:41):
they would prefer the liquid cash.
Now.
squadcaster-4i7c_1_05-08- (25:43):
Well, they need to, yeah, for
emily-sander_1_05-08-2025_ (25:44):
Need to,
squadcaster-4i7c_1_05 (25:45):
operating agreement reason or just
practical, I need to get moneyback to my investors to get more
capacity.
emily-sander_1_05-08-2025_15 (25:52):
so you're saying that can happen at
like the individual, like, man,like managing director level or,
and or like a, a.
squadcaster-4i7c_1_05-08-20 (25:59):
I'm just like, like, let's use, you
know, I don't know KKR, thatthey're probably not necessarily
doing this, but like, maybe theyhave, uh.
500 million of in a series ofcompanies, and they wanna half
of that share, can parse that upand sell it privately as opposed
to listing on an exchange orsomething like that, you know,
emily-sander_1_05-08-2025_ (26:22):
Hmm.
Okay.
squadcaster-4i7c_1_05 (26:24):
positions and then they can get, you know,
liquid.
emily-sander_1_05-08-2025_ (26:26):
Are, are there PE companies that.
squadcaster-530f_1_05-08-20 (26:31):
are
emily-sander_1_05-08-2025 (26:32):
built and meant for down markets.
So I'm thinking like there'sETFs and then there's like
inverse ETFs, which like whenthe market goes down, they do
well and they're just structuredin a way to, to perform when
there's a down market.
Are there PE firms?
squadcaster-530f_1_05-08 (26:46):
funds.
Yeah.
emily-sander_1_05-08-2025 (26:47):
Yeah.
Are they like licking theirchops right now?
squadcaster-4i7c_1_05 (26:50):
literally probably a fund out there called
Contrarian Capital Management.
I guarantee I'm almost certainof that.
I'm sure
squadcaster-530f_1_05-08- (26:57):
Sure.
squadcaster-4i7c_1_05-08-2025 (26:57):
I could Google it right now, but
I'm not.
just know
emily-sander_1_05-08-2025_15 (27:00):
So like there might be those firms
out there where they're like,this is, this is our, this is
our prime time.
And or Rory, you mentioned like
squadcaster-530f_1_05-08-2025 (27:06):
a different
emily-sander_1_05-08-2025_15 (27:07):
if you have a different risk
premium or different riskprofile,
squadcaster-530f_1_05-08-2 (27:11):
Some
emily-sander_1_05-08-2025_15 (27:11):
of those might come into play here
too, where they might not get asbig of the bite of the apple in.
A bullish economy becauseeveryone wants like the top
rated, you know, um, blue Staror whatever you wanna call it,
squadcaster-530f_1_05-08-202 (27:23):
it
emily-sander_1_05-08-2025_15 (27:24):
PE firms.
But now, okay, we're willing totake a, on a little bit more
risk because we need to deploythis capital somehow.
Is that a thing?
squadcaster-530f_1_05-08-20 (27:32):
it?
It is.
I mean, if you think about, um,Rory and I had worked with, um,
lone Star Funds and Lone StarFunds.
Certainly at the time that wewere there.
Their entire investment thesiswas, can we find assets?
Distressed.
Can we buy contrarian?
Can we look at, you know, assetliquidation values?
(27:54):
How do we look at theseinvestments differently than as
a, know, a, a, can we grow thisand, you know, get a multiple on
an operating
squadcaster-4i7c_1_05-08- (28:03):
Yeah.
squadcaster-530f_1_05-08-2 (28:03):
they were very contrarian.
That was their, that was theirkey.
emily-sander_1_05-08-2025 (28:09):
Okay, so if I'm like a founder
thinking about this, and I waslike, I, I wanna partner with PE
but I'm, I'm being smart and I'mlistening to this podcast.
I know the market conditions andso I might
squadcaster-530f_1_05-08-2 (28:20):
keep
emily-sander_1_05-08-2025_ (28:20):
that in mind when I'm vetting the PE
firms.
And then the other way around,are PE firms looking for certain
types of companies?
Are they're looking fordifferent types of companies now
or does that remain the same?
squadcaster-4i7c_1_05-08-2 (28:33):
Hmm.
squadcaster-530f_1_05-08-20 (28:35):
Um, no, I think there, I don't think
it's, I think it's less type,
squadcaster-4i7c_1_05-08-2 (28:39):
it's more situational.
squadcaster-530f_1_05-08-2 (28:41):
that these are, that, you know, the.
cyclical.
So it's gonna be how does thiscycle?
And, you know, those kind ofthings.
It's, it's gonna be more, it ismore, how do I get to a return?
That I'm comfortable with, howdo I get to, is this an
undervalued opportunity thatsomeone else, you know, like
Rory said, sometimes they haveto raise money for capital calls
(29:03):
or other things.
There's, you know, issues aroundfund level debt where they're
gonna have to get liquid.
So sometimes funds are in aposition where they're forced to
sell
squadcaster-4i7c_1_05-08- (29:11):
Yeah.
squadcaster-530f_1_05-08-20 (29:12):
and there's a, you know, that's
gonna be one of those where itmay be a company that's
completely, you know, kind ofcounter to the current economic
trend.
Um.
Or maybe right in line with thecurrent economic trend, but
they're gonna look at it deal,deal by deal and go, Hey, is
this an undervalued asset?
Do we think, you know, over thenext three to five years,
(29:32):
typical hold period, we're gonnabe able to get a good return on
it.
And if we can, you know, we'regonna take advantage of the fact
that this owner, this founder,this, um, other private equity
firm is
squadcaster-4i7c_1_05-08- (29:43):
Yeah.
squadcaster-530f_1_05-08 (29:43):
forced to get liquid.
And we're going to, we're gonnajump in and, uh, you know, kind
of profit from that opportunity.
So.
emily-sander_1_05-08-2025_1 (29:50):
So, I mean, we've talked about this
before, where a PE firm couldsell to another PE firm.
Could this be a catalyst for,okay, we're just gonna move our
money over to this other PEfirm?
'cause they're willing to takethis on and we're not.
squadcaster-4i7c_1_05-08- (30:02):
Yeah, and who knows what kind of
squadcaster-530f_1_05-08-202 (30:03):
of
squadcaster-4i7c_1_05-08-2 (30:04):
deal making there could be under the,
you know, behind the scenes.
There could be reciprocalagreement to, to buy an asset
from that same PE firm underdifferent terms.
But, you know,
squadcaster-530f_1_05-08-20 (30:16):
you know,
squadcaster-4i7c_1_05-08-2 (30:16):
it's in, it's in the interest of both
parties to do a deal on eitherside, you know,
emily-sander_1_05-08-2025 (30:22):
Yeah.
squadcaster-4i7c_1_05-08-2 (30:23):
it's a small world people, you know,
people figure out ways to.
squadcaster-530f_1_05-08-2 (30:26):
ways to
squadcaster-4i7c_1_05-08-2 (30:27):
Meet their objectives and a lot of
times, you know, similar typesof firms have the same
objectives and they're in thesame sort of macroeconomic
situation.
emily-sander_1_05-08-2025_1 (30:39):
All right, so prediction, prediction
time as we look forward here,tariffs.
Do you two think that thesituation with tariffs is going
to get better, stay the same, orget worse?
squadcaster-530f_1_05-08- (30:53):
It'll get better because it can't get
much worse.
squadcaster-4i7c_1_05-08- (30:55):
Yeah, I was gonna say something very
similar.
Yeah.
squadcaster-530f_1_05-08-2 (30:59):
this has been, uh, and I've, I've
said this to numerous folks.
Um, you know, I, I think thecurrent approach to tariffs is,
the worst.
Piece of economic malpracticesince the Hoover administration
they also were like, okay, we'regonna be able to do X, Y, or Z
and help the, help the domesticeconomy by increasing tariffs,
(31:24):
the Smoot-Hawley Tariff Act, andtherefore, you know it's gonna
drive the domestic production'cause we're gonna cut off
imports.
And all that did was just craterthe economy.
And make the great it, itbrought in a Roosevelt
administration a new deal, andit really just was nasty.
squadcaster-4i7c_1_05-08- (31:41):
Yeah.
squadcaster-530f_1_05-08-20 (31:42):
is, this is, I hear the exact same
rationale for these set oftariffs.
And right now, I wouldn't besurprised if we don't get the
exact same result.
squadcaster-4i7c_1_05-08- (31:50):
Yeah, without being the history buff,
that is, I would say theconsumer.
US will feel the pain on thisfor a while.
Yeah, we'll be frustrated byprices and things like that for
some time.
squadcaster-530f_1_05-08-2 (32:01):
The, the only, the only good thing is
from, from my seat, um, thepresident doesn't really have,
he, he's not a, like a, died inthe wool.
He, he's a pragmatist.
He's, so if things start goingsouth fast, he'll blame somebody
else for it
squadcaster-4i7c_1_05-08 (32:19):
That's right.
Yeah.
Yeah,
squadcaster-530f_1_05-08-20 (32:20):
you know, I'm, I'm kind of counting
on that
squadcaster-4i7c_1_05-08- (32:22):
yeah.
emily-sander_1_05-08-2025_15 (32:25):
In terms of recession likelihood,
what percentage would you say
squadcaster-530f_1_05-08- (32:31):
we're
emily-sander_1_05-08-2025 (32:31):
gonna be going into?
Like, like a hundred percentwe're going into recession or
like, uh, I give it 25% in thenext, next 12 to 18 months we'll
be in a recession.
squadcaster-530f_1_05-08-2025 (32:41):
A hundred
emily-sander_1_05-08-2025_15 (32:41):
It is a hundred percent.
squadcaster-530f_1_05-08 (32:44):
Matter of fact, we just had a, we had
one quarter of negative economicgrowth last quarter.
if you get two quarters ofnegative economic growth, that's
technically a recession to thiseconomist.
And so you're gonna end up, Ithink we've got a hundred
percent chance that in the next18 months we're gonna have a
declared recession, two
emily-sander_1_05-08-2025_1 (33:01):
Two consecutive quarters,
squadcaster-530f_1_05-08-202 (33:03):
of
squadcaster-4i7c_1_05-08 (33:03):
That's right.
squadcaster-530f_1_05-0 (33:04):
growth.
squadcaster-4i7c_1_05-08-2 (33:04):
Yep.
emily-sander_1_05-08-2025 (33:07):
Rory?
squadcaster-4i7c_1_05-08-20 (33:07):
no, I I'm not in any disagreement
with Ed on that one.
Yeah.
emily-sander_1_05-08-2025_150 (33:11):
A hundred percent.
squadcaster-4i7c_1_05-08- (33:13):
Yeah.
emily-sander_1_05-08-2025_ (33:14):
Wow.
Is there
squadcaster-4i7c_1_05- (33:15):
there's,
emily-sander_1_05-08-2025_ (33:15):
any.
squadcaster-4i7c_1_05-08-202 (33:16):
of the depth of recessions and such
like that.
So there that I think remains tobe seen.
And what we have seen in thepast is,
squadcaster-530f_1_05-08-202 (33:24):
is
squadcaster-4i7c_1_05-08-2025 (33:24):
I guess, you know, uh, there will
be intervention if and when thathappens in one way, shape, or
form, monetary, most likely.
Um, so yeah, I think it's, it's,it's, I would say almost
inevitable.
Yeah.
emily-sander_1_05-08-2025_15 (33:43):
Do you think that last question
here.
Do you think that America and orother world leaders will be able
to get us out of the recession
squadcaster-530f_1_05- (33:53):
quickly?
squadcaster-4i7c_1_05 (33:57):
probably.
squadcaster-530f_1_05 (33:58):
Probably.
squadcaster-4i7c_1_05-08- (33:58):
Yeah.
Relatively quickly.
Yeah.
Yeah.
emily-sander_1_05-08-2025_ (34:03):
Ed's face is, I don't like Ed's face
squadcaster-530f_1_05-08-202 (34:05):
I, I, I'm, you know, the, the
lawyer in me is going, so how doyou define quickly?
Right?
squadcaster-4i7c_1_05-08 (34:10):
Right.
emily-sander_1_05-08-2025 (34:12):
Fair.
squadcaster-4i7c_1_05-08 (34:12):
it'll, I don't think we'll sink into a
depression by any stretch.
squadcaster-530f_1_05-08-202 (34:15):
to say, I, what I don't expect is
that we're gonna be in a, in adepression where there's no
recovery for years.
Like there was, after the GreatDepression, which really took us
World War ii, was, was thecatalyst that got us outta the
Great Depression was a 10 year,10 year recession essentially.
you know, I, I don't expectsomething like that to occur
because again, I think that thegood news in this particular
(34:39):
situation is.
The American voter votes theeconomy.
And so if the economy sucks, theAmerican voter's going to change
the administrations in the, youknow, in the next, in the next,
uh, cycle.
And then, you know, the, thepiece of good news is we've got
a lot of levers to pull oneconomic growth.
And so as a result, you know, I,I think it's a, you know,
(35:03):
nothing major, but I think youcould see a recession for three
to four quarters.
squadcaster-4i7c_1_05-08- (35:07):
Yeah, I agree with that.
squadcaster-530f_1_05-08- (35:09):
don't think
emily-sander_1_05-08-2025 (35:09):
Okay,
squadcaster-530f_1_05-08-2025 (35:10):
I don't think it's gonna be a 2008
type
squadcaster-4i7c_1_05-08-20 (35:12):
No,
emily-sander_1_05-08-20 (35:13):
crater.
squadcaster-4i7c_1_05-08-20 (35:14):
no.
emily-sander_1_05-08-2025 (35:14):
Okay.
Okay.
Any other good news tidbits toleave us on?
What's something good happeningin the economy
squadcaster-530f_1_05-08-202 (35:21):
In the economy?
emily-sander_1_05-08-2025_15 (35:23):
or in the world?
I'll broaden it.
Just, just anything good.
squadcaster-4i7c_1_05-08-2 (35:26):
Hmm.
emily-sander_1_05-08-2025 (35:26):
don't wanna leave it on like the
downbeat of,
squadcaster-530f_1_05-08- (35:28):
we're a
emily-sander_1_05-08-2025_150 (35:28):
a hundred percent gonna be in
recess.
squadcaster-4i7c_1_05-08- (35:31):
Yeah.
Well, why do I have to think sohard about, I mean, like why is
it so hard for me to come upwith something?
emily-sander_1_05-08-2025_ (35:38):
Long pause here.
squadcaster-530f_1_05-08-202 (35:39):
no kidding.
I mean, that's
squadcaster-4i7c_1_05-08- (35:40):
Yeah.
squadcaster-530f_1_05-08-2 (35:41):
the, the, the honest to god truth of
it is there isn't a lot I canpoint to and go, this is just
great news.
Uh, you know, the, there's, thisis a great opportunity that's
coming down the pike.
I, right now, the biggest thingfrom, from my seat is like, I
kind of said at the, at thebeginning.
in a position right now, likeprofessionally, where folks who
(36:06):
are, you know, in, inconsulting, in financial
services, in, you know, thatwhere we can help people who are
concerned with uncertainty,
squadcaster-4i7c_1_05-08- (36:16):
Yeah.
squadcaster-530f_1_05-08-202 (36:17):
of get them calmed down and get'em
strategized for a way throughthat uncertainty.
For folks like, for folks likeme professionally.
That's great.
squadcaster-4i7c_1_05-08- (36:25):
Yeah.
squadcaster-530f_1_05-08-202 (36:25):
no argument there.
I, that's actually, uh, I'mlooking kind of positive.
Anything that's a little bitshaky provides the, you know,
consultant in me a, a good mealticket.
But it's not great.
There's not much great for theentire universe.
squadcaster-4i7c_1_05-08- (36:39):
True.
Yeah.
Well said.
emily-sander_1_05-08-2025_1 (36:41):
All right, so it's good for Ed.
Um, so take that to heart.
squadcaster-4i7c_1_05-08- (36:45):
Well, we got our, we got, you know, we
got our health and we
emily-sander_1_05-08-2025_1 (36:47):
And Rory.
Yeah,
squadcaster-4i7c_1_05-08- (36:48):
know,
emily-sander_1_05-08-2025_15 (36:49):
so feel good about that.
We do have some levers to pull.
It sound like if we go intorecession, we have some levers
to pull and it might be time tolike be a contrarian and look
for those opportunities.
There's always like a
squadcaster-530f_1_05-08 (36:59):
upside
emily-sander_1_05-08-2025_15 (37:00):
or silver lining if you, if you
look for it and get creative.
squadcaster-530f_1_05- (37:03):
Alright, private
emily-sander_1_05-08-202 (37:05):
equity experience.
We're back baby.
squadcaster-4i7c_1_05-08-202 (37:07):
We are back.
It's good to be back.
Great to be back.
Good to see you both.
squadcaster-530f_1_05-0 (37:12):
Thanks,
emily-sander_1_05-08-2025_1 (37:12):
ed.
Thanks Rory.
squadcaster-530f_1_05-08- (37:13):
guys.
squadcaster-4i7c_1_05-08-2 (37:14):
Bye.
Hello?
Private equity boys.
How we doing?
Rory (00:37):
We're good.
It's been a minute.
It's been a
emily-sander_1_05-08-2025_ (00:39):
It's been a while.
squadcaster-4i7c_1_05-08- (00:40):
Gosh.
Ed (00:41):
tax.
It's tax season's
squadcaster-4i7c_1_05-08- (00:42):
Yeah.
Yeah.
emily-sander_1_05-08-2025 (00:44):
Yeah,
squadcaster-4i7c_1_05-08- (00:44):
Seems like the whole
emily-sander_1_05-08-2025_150 (00:45):
I was gonna, yeah.
squadcaster-4i7c_1_05-08-20 (00:46):
the last, uh, couple months in a
way.
emily-sander_1_05-08-2025_ (00:48):
Yes, so, so we took a little hiatus
because of tax season.
Ed gets buried in tax season.
He just goes, he just goes away.
Then he resurfaces and he hascome up for air now.
So it's nice to see you, ed.
squadcaster-4i7c_1_05-08-2 (01:05):
Yep.
emily-sander_1_05-08-2025_1 (01:07):
I'm glad to get a, a proof of life
on this podcast with you.
Um, and Rory, you've been,you've had some changes as well.
squadcaster-4i7c_1_05-08- (01:14):
yeah.
I went from doing a lot ofconsulting work to going full
blown, you know, headfirst intoworking for a startup, or I
should say early stage business,so not totally a startup, but
much earlier business than I'veworked for in the past.
so, you know, as, as thosethings go, kind of all
consuming, but, um, yeah, it'sbeen a ride and it will continue
(01:35):
to be a ride.
So
emily-sander_1_05-08-2025_ (01:36):
Your you're CF Oing.
squadcaster-4i7c_1_05-08-20 (01:38):
am, yep, yep.
I, uh, started with this companyto a financial, gosh, it's been
over a year that I, I starteddoing some consulting work for
'em, but then as soon as I gotinto the hood and I saw what was
there, I was like, boy, this isa gold mine to.
FinTech platform and consumerlending platform.
And I was like, I wanna ridethis thing to the top because
there's some special, uniquestuff going on there.
(01:59):
So, um, been a good ride, but,you know, never easy, uh,
running a, running a startup,that's for sure.
I.
emily-sander_1_05-08-2025_150 (02:05):
I had some conversations about
that decision.
I was like, which, which way doI go?
squadcaster-4i7c_1_05-08-2 (02:09):
some serious heart to hearts about
that.
emily-sander_1_05-08-2025 (02:11):
Yeah, we did.
squadcaster-4i7c_1 (02:12):
instrumental and, and kind of helped me get
off that fence of, uh, hedging,which I like to do a lot.
You know, try to not be too muchoptionality.
emily-sander_1_05-08-2025_15 (02:21):
Oh my gosh.
squadcaster-4i7c_1_05-08-20 (02:22):
you can only go one way with a, with
a startup.
And that's, you know, all inkind of, so, yeah.
So it's been good.
It's
emily-sander_1_05-08-2025 (02:29):
Yeah.
squadcaster-4i7c_1_05-0 (02:29):
though.
Yeah.
emily-sander_1_05-08-2025_ (02:31):
Very cool.
Okay, Rory, you took the plunge,
squadcaster-4i7c_1_05-08- (02:33):
Yeah.
emily-sander_1_05-08-2025_1 (02:34):
got load of risk.
Is this like a true startup?
squadcaster-4i7c_1_05-08- (02:37):
Well,
emily-sander_1_05-08-20 (02:37):
you're.
squadcaster-4i7c_1_05-08-202 (02:38):
of those things without going too
deep into the weeds, uh, youknow, it's a business that's
been around about 10 years.
Uh, started as a buy now, paylater, uh, business in Canada,
and then pivoted to being a fullfledged, um, personal loan
provider in the us.
And a lot of businesses, theystart with an amazing vision and
(02:59):
things, but do go like acircuitous path.
out what it's, what's reallytrying to be in the market.
So, I came into the businesswith A-A-C-E-O that was brought
in by, uh, the founder, theboard, awesome, CEO.
And, um, now we're operating thebusiness and it's really, it's,
it's, uh, all of the tech andinfrastructure really already
(03:21):
been built.
So it's really just making, uh,making the product and, and
market.
to life, and that's where wespend our time.
So, and then also a lot ofcapital raising too, of course.
You know,
squadcaster-530f_1_05-08- (03:31):
How's the, who's the sponsor there?
squadcaster-4i7c_1_05-08-20 (03:34):
uh, it's a widely held, um, investor
base in Canada.
A lot of
squadcaster-530f_1_05-08- (03:39):
okay.
squadcaster-4i7c_1_05-08-2 (03:39):
very wealthy, highly successful
Canadian business people, a lotof'em from the Calgary oil and
gas industry.
Um, so it's one of those, youknow, hundreds of investors,
individual investor type ofdeals.
But once we.
get to the next funding round,it'll, it'll be led by more of
an institutional venture capitaltype type group.
So yeah,
emily-sander_1_05-08-2025_1 (04:02):
And Ed, will you rega us with your
tales of tax returns or.
squadcaster-530f_1_05-08-20 (04:07):
You know, I,
squadcaster-4i7c_1_05-08-202 (04:08):
an acquisition roll up strategy
over the last.
squadcaster-530f_1_05-08-20 (04:10):
was about to say, I've been working,
I've been working really theacquisition, the tax season, put
the, put a lot of the rolluppiece slash integration piece on
hold.
Um, the last thing you do as a,as a financial professional is
try and make major changes inQ4, Q1.
squadcaster-4i7c_1_05-0 (04:25):
Mm-hmm.
squadcaster-530f_1_05-08-202 (04:26):
we closed in Q4.
Um, so we, we essentially were,were running three different.
Maybe four different accountingplatforms, bookkeeping
platforms.
We're running two differentpayroll platforms.
We're running two different taxplatforms.
Um, so we're just starting nowto do some of those integrations
and, you know, continuing to runinto interesting issues.
(04:49):
Um, know, that, let, let's justsay that the, uh.
The systems that were, that werein place, were very, uh,
customized.
So 175
squadcaster-4i7c_1 (05:02):
Proprietary.
Yeah.
squadcaster-530f_1_05-08-20 (05:04):
Um, so we're working to standardize
those.
'cause what's happened, ofcourse, is.
You have an acquisition.
This is typical in professionalservices where you do an
acquisition, someone you know,you have folks who are like,
yeah, I, I, you know, it's timefor me to go.
Um, so folks decide to leave atthat point, and then you end up
in a situation where
squadcaster-4i7c_1_05-08-2 (05:24):
Yep.
squadcaster-530f_1_05-08- (05:25):
those 40 clients had 40 different
custom processes that you can'ttransition in.
squadcaster-4i7c_1_05-08- (05:31):
Yeah.
squadcaster-530f_1_05-08-20 (05:31):
Um, so, you know, it's been a real
challenge, uh, from thatperspective.
Having said that, it was a goodtax season, busy tax season
we're turn, we were turning downwork and are still in the
process of like being veryselective as to who we take it.
It's been shocking
squadcaster-4i7c_1_05-08- (05:47):
Yeah.
squadcaster-530f_1_05-08-202 (05:48):
at the, uh, at really how much
demand there is for, um, basicfinancial services.
emily-sander_1_05-08-2025_ (05:56):
Just to give people a sense, like not
a deep sense, but just a highlevel sense of tax season.
There's like rolling waves ofthis thing.
There's like business tax andindividual tax, and.
squadcaster-530f_1_05-08-20 (06:07):
so, so the first, the first
squadcaster-4i7c_1_05-08-2025 (06:08):
K ones.
Yeah.
squadcaster-530f_1_05-08-202 (06:10):
31 to Jan to, or December 31 to
January 31, where you gotta fileall your information returns, 10
90 nines, W twos, W four, uh, Wtwos, 10 90 fives, all those are
gotta get out.
And then you roll into the neinto 90 eights, and then you
roll into next phase, which isall your corporate partnership.
(06:30):
Returns are due by the 15th ofMarch, then your individual
returns are due by the 15th ofApril.
But if anybody extended theirpartnership or, or, or s corp
returns, anything that impactsthose, um, individuals, then you
have individual extensions.
So we still have,
squadcaster-4i7c_1_05-08-2 (06:49):
Yep.
squadcaster-530f_1_05-08-202 (06:49):
we have probably 1200 clients in
the firm.
Um, we still have probably 500returns left to file
squadcaster-4i7c_1_05-08- (06:56):
Yeah.
squadcaster-530f_1_05-08-202 (06:57):
of extensions.
And
emily-sander_1_05-08-2025 (06:59):
Okay.
squadcaster-4i7c_1_05-08-20 (07:00):
I'm one of those extenders myself,
just putting off the inevitablebill that's coming up with, with
minimal interest incurred.
Yeah.
emily-sander_1_05-08-2025 (07:09):
Those were a lot of tax return
numbers.
Um, for the four listeners whoare still with us, we're gonna,
we're gonna talk about
squadcaster-530f_1_05-08-2 (07:16):
the,
squadcaster-4i7c_1_05-08-202 (07:16):
Oh
emily-sander_1_05-08-2025_1 (07:16):
the economy, what's happening in the
market.
Tariffs, but the impact is on pe'cause they're getting, they're
getting smooshed, they'regetting, that's a technical
term.
They're getting smooshed.
squadcaster-4i7c_1_05-08- (07:26):
Yeah.
emily-sander_1_05-08-2025_1 (07:27):
um, maybe let's, let's.
squadcaster-530f_1_05-0 (07:29):
outline
emily-sander_1_05-08-2025_ (07:30):
Like what is going on in the economy
right now?
Some people say, we might bedipping into a recession.
We got the whole tariff thinggoing on.
What's what?
What is the fancy words forwhat's happening in the economy
here?
squadcaster-4i7c_1_05-08- (07:45):
Yeah, that's, that's, that's one way
to put it.
The other one I think that comesto mind, I hear banding about
multiple times, daily.
It's just uncertainty.
There's been a lot of
emily-sander_1_05-08-2025 (07:53):
Yeah.
squadcaster-4i7c_1_05-08-20 (07:54):
uh, which, which has.
squadcaster-530f_1_05-08-20 (07:55):
has
squadcaster-4i7c_1_05-08- (07:56):
Broad uncertainty, which in so many
ways brings on inaction andtrepidation.
Um, and so a lot of thingsunfolding from, from that sort
of viewpoint.
You know, fear, you know, fearsort of for some, uh, you know,
hardy folks, it meansopportunity, I guess.
Um, but in, in a lot of waysit's just a lot of, you know,
(08:19):
not knowing which way to go, uh,with your business, with your
investment strategy.
Your options become potentiallymore limited in how you execute,
you know, your private equitystrategy, and then there's so
many things you can dig into onthat.
emily-sander_1_05-08-2025_1 (08:33):
How does like connect the dots
between like tariff, like what'shappening with tariffs and why
that affects
squadcaster-530f_1_05-08-2025 (08:41):
I
emily-sander_1_05-08-2025_150 (08:41):
a PE firm?
squadcaster-530f_1_05-08-2025 (08:42):
I really think it goes back to
what Rory just said.
It's, it creates thisuncertainty of most businesses.
It doesn't, it almost doesn'tmatter what the business is.
Even service businesses
squadcaster-4i7c_1_05-08- (08:52):
Yeah.
squadcaster-530f_1_05-08-20 (08:53):
the one I run, they're.
in scope.
They have, their supply chainsare run internationally.
They may have internationalclients, they may be sourcing
labor internationally.
And so just, just the tariffsalone, uh, as Rory said, it
creates this uncertainty whereyou're not sure what the future
economic return of that asset isgoing to be.
(09:14):
It's, it could be really high,it could be really low.
It could, you know, because the,because of the nature of those.
Um, kind of uncertain events onthe attack side.
It, it tariffs our taxes.
And so as a result, folks arelike, forget it.
I'm just not gonna, you know, I,I'm gonna hold until I can see,
um, until some of thatuncertainty comes out, or if
(09:34):
they go to sell.
And I know we've talked aboutthis, I
squadcaster-4i7c_1_05-08- (09:36):
Yeah.
squadcaster-530f_1_05-08-2025 (09:37):
I know you get really excited,
Emily, when I talk about it, butit changes the risk premium
required.
And so as a result,
emily-sander_1_05-08-2025 (09:44):
Thank God you brought up risk premium.
I was waiting for this.
squadcaster-530f_1_05-08- (09:46):
gonna pay less, you know, because the
risk premium's higher.
squadcaster-4i7c_1_05-08- (09:49):
Yeah.
emily-sander_1_05-08-2025_15 (09:51):
So you mentioned a few things
there.
So like the whole time, so wetalked about, hey, like five to
seven years, like typical onaverage whole time, if you're,
if you were in a a fund where,hey, like, or in a company where
we're on like the seventh year,so we were looking to sell, does
this economic environment nowpush that out?
squadcaster-4i7c_1_05-08-20 (10:09):
But very potentially.
Um, there's a few things at playthere.
So in order to sell, you need tohave buyers, right?
You know, we've talked on thispodcast, it's in our book,
squadcaster-530f_1_05-08- (10:19):
book,
squadcaster-4i7c_1_05-08-20 (10:20):
you know, much of the PE investment
strategy involves leverage andcost of funds related to that.
So taking on debt to finance andacquisition.
Well, even as of the, you know.
Dates of this very recording,and it was very recently put out
there that the fed's gonna, um,you know, delay making rate
cuts, right?
(10:40):
So
squadcaster-530f_1_05-08-202 (10:40):
So
squadcaster-4i7c_1_05-08- (10:41):
think about that in, in every
layperson terms, it just meansthe cost of money is gonna stay
relatively high for a time,right?
So, uh, the ability to, youknow, to.
Take on more debt to finance andacquisition means potentially
less buyers if you don't haveaccess to that, which if, if
less buyers, as a seller you maynot be in a position to have a,
(11:06):
as much of a competitive processfor selling the company or asset
you're holding.
Um, you know, you may haveother, uh, obligations on your
own fund related to debt, maybeon the company.
There's a whole litany ofreasons where.
What we're talking about, rightthis very moment means that
there's just not as much,
squadcaster-530f_1_05-08-20 (11:26):
um,
squadcaster-4i7c_1_05-08-20 (11:27):
um, transaction volume happening in
the market for so many reasons.
And if you don't have that, thenit just makes your outcomes more
uncertain.
And there's a lot of ways toskim that cat per se.
But that's what it means is justdeal activity is just down, uh,
overall.
And there's, now there's firmscollectively that are holding 3
(11:48):
trillion of assets.
with half of that they've heldfor over five years in the
space.
So think about that for a minutein a lot of ways that one might
relate this to their ownpersonal life, and we talk in
our book a lot about, you know,real estate and kind of people
relate to, it's like, thinkabout your home.
And so many people sit ontrillions of dollars of what,
(12:11):
what's called trapped equity.
Meaning your home is appreciatedsince you bought it.
squadcaster-530f_1_05-08-20 (12:15):
You bought it
squadcaster-4i7c_1_05-08 (12:15):
Great.
That's awesome.
You have a, you have a.
squadcaster-530f_1_05-08-2 (12:17):
have
squadcaster-4i7c_1_05-08-20 (12:18):
And assets that, that's appreciated.
But on, in, in, order to
squadcaster-530f_1_05-08-202 (12:23):
to
squadcaster-4i7c_1_05-0 (12:23):
realize that value, you'd need to, uh,
unlock that equity or take thatequity out, cash out, what have
you.
But if you sell your home, youget a big profit, well, you have
to go buy another home, know?
But then you'd have to take a,on an interest rate, that's
maybe two times as much as whatyou've been paying on your
current mortgage.
So you have to think through.
squadcaster-530f_1_05-08-20 (12:44):
pay capital
squadcaster-4i7c_1_05-08- (12:44):
That.
Um, so double, triple, quadruplewhammy.
So you just need to think aboutthe outcomes of Yes.
You, you know, if you move to,to sell an asset, what does that
mean?
On the next step, you go buymore assets at a higher price,
you know,
emily-sander_1_05-08-2025 (12:59):
Okay, hold on.
Okay.
squadcaster-4i7c_1_05-08-2 (13:01):
much
emily-sander_1_05-08-2025_ (13:01):
I'm, I'm trying to,
squadcaster-530f_1_05-08 (13:02):
trying
emily-sander_1_05-08-2025_15 (13:02):
to hang in with you.
Okay.
So first of all, trapped equity,
squadcaster-530f_1_05-08 (13:05):
That's a
emily-sander_1_05-08-202 (13:06):
that's a cool term.
Trapped equity.
So
squadcaster-4i7c_1_05-08- (13:08):
super
emily-sander_1_05-08-2025_150 (13:08):
I have a house,
squadcaster-4i7c_1_05-08-202 (13:09):
to unstrap it and it's trapped in
your own life,
emily-sander_1_05-08-2025_ (13:12):
what free, what's equity free?
squadcaster-4i7c_1_05-08- (13:13):
Yeah,
emily-sander_1_05-08-2025_15 (13:14):
if I have a house
squadcaster-4i7c_1_05-08- (13:15):
yeah.
emily-sander_1_05-08-2025_1 (13:15):
and it's like appreciated, so I have
like, I'm sitting on equity.
I wanna sell it, but there's no,first of all, there's no buyers
is the first problem.
squadcaster-4i7c_1_05-0 (13:23):
Because
emily-sander_1_05-08-2025_15 (13:23):
in this economy right now,
squadcaster-4i7c_1_05- (13:25):
interest rates to be able to afford that.
Your home you're selling.
emily-sander_1_05-08-2025_1 (13:29):
So, so like the analogy is, um, I'm
a PE firm.
I have this company that Ibought.
It's grown in, it's appreciatedin value.
I wanna sell it, but there's nobuyers.
That's problem one.
squadcaster-530f_1_05-08- (13:40):
yeah,
squadcaster-4i7c_1_05-08-202 (13:40):
To
emily-sander_1_05-08-2025 (13:40):
Okay.
squadcaster-530f_1_05-08-202 (13:41):
no
squadcaster-4i7c_1_05-08-202 (13:41):
is probably a little overstated,
emily-sander_1_05-08-202 (13:43):
There.
Okay.
There's.
squadcaster-4i7c_1_05-08- (13:44):
point is spot on.
Yeah.
emily-sander_1_05-08-2025_ (13:46):
The, the buyers are, are skittish and
a little more reluctant thanthey normally are because,
squadcaster-530f_1_05-0 (13:50):
willing to buy at a price you're willing
to sell for.
emily-sander_1_05-08-2 (13:53):
because, what did you say, Roy?
The cost of money is uncertain.
squadcaster-4i7c_1_05-08-202 (13:57):
Or high straight up.
It's just high right now.
So for them to be able to buyyour company, they need to
probably put up more cash out oftheir own back pocket, or I
should say, out of their LPs onback pocket.
Um, and to take on the debt,they would have to pay a higher.
(14:22):
Price for that money.
Let's just use real numbersright now.
Like, so, um, you know, back inheyday, let's call it a couple
years back, you know, you mighthave had an interest rate of
like four, 4.5%, where the costof money was, like, the
risk-free rate was like zero.
you add a 4% spread on that,you're looking at four to 5%
interest rate.
Well, guess what?
Now it's closer to eight, ninefor the highest grade debt.
(14:46):
9%.
So that's double your cost.
So if you just
emily-sander_1_05-08-2025_1 (14:49):
Oh,
squadcaster-4i7c_1_05-08-2 (14:49):
like if you bought a, a home and your
mortgage payment was a thousanddollars per month for, you know,
uh, 360 months, you, you'relooking at maybe like almost
doubling your payment for thatsame, same,
emily-sander_1_05-08-2025 (15:06):
okay.
squadcaster-4i7c_1_05-08-2 (15:07):
just to be able to afford it.
So you have to think again aslike, well, I could sell my home
bank a lot of profit, and toEd's point.
to hire Ed's firm to help youcalculate the cap capital gains
tax you're gonna have to pay.
But then you also have to go buya new home and place to live,
just like private equity is thesame way they're in the business
of doing deals.
emily-sander_1_05-08-2025 (15:25):
Okay.
Okay.
squadcaster-4i7c_1_05-08-20 (15:27):
in.
They, they,
emily-sander_1_05-08-2025 (15:28):
Okay.
So then,
squadcaster-4i7c_1_05-08-202 (15:29):
of continuing to buy deals and sell
deals.
emily-sander_1_05-08-2025 (15:31):
okay, so first problem is I have
trapped equity.
squadcaster-4i7c_1_05-08-2 (15:34):
Hmm.
emily-sander_1_05-08-2025 (15:34):
Buyer market lower than it was.
Second problem.
If I sell this sucker, I have topay capital gains, which is now
more than normal or nor more.
squadcaster-4i7c_1_05-08- (15:43):
Move.
squadcaster-530f_1_05-08-20 (15:44):
the same.
squadcaster-4i7c_1_05-08- (15:44):
Yeah.
squadcaster-530f_1_05-08-20 (15:44):
the same, but you, you, when you
have a transaction, if there's again on that transaction, which
you, you would certainly hopethere would be.
You have a tax that's gonna bedue at the LP level or at the
corporate level.
Essentially you got a profitthat you gotta pay tax on and
you need to figure out where.
Probably more importantly to, toRory's point is you now gotta
(16:07):
figure out where to put thatmoney back to
squadcaster-4i7c_1_05-08 (16:09):
Right.
squadcaster-530f_1_05-08 (16:09):
'cause
emily-sander_1_05-08-202 (16:09):
that's the third one.
squadcaster-530f_1_05-0 (16:10):
savings
squadcaster-4i7c_1_05-08- (16:11):
Yeah.
Yeah,
squadcaster-530f_1_05-08 (16:11):
That's the
emily-sander_1_05-08-2025_1 (16:12):
the third one, but like the second
one.
squadcaster-530f_1_05-08-202 (16:15):
is
emily-sander_1_05-08-2025_ (16:15):
that like, is that affected by the
market as well?
Does the capital gains ratechange or is that un unaffected?
squadcaster-530f_1_05-08-2 (16:22):
it's relatively unaffected because
it's,
emily-sander_1_05-08-2025 (16:25):
Okay.
squadcaster-530f_1_05-08-2 (16:25):
set, but
emily-sander_1_05-08-2025_1 (16:27):
Ah, okay.
squadcaster-4i7c_1_05-08 (16:28):
that's right.
Yeah.
emily-sander_1_05-08-2025_1 (16:28):
So, okay, so like the big problem,
second problem is I've sold itand now I have to redeploy that
capital.
And now I'm in this like higherinterest rate environment.
I'm like, this is stupid.
I might as well.
squadcaster-530f_1_05-08-20 (16:39):
and here's where, and here's where
that tax piece comes in.
If you don't have a goodalternative, I.
To reinvest that money and makeback the taxes you just paid
plus a return.
squadcaster-4i7c_1_05-08- (16:49):
Yeah.
squadcaster-530f_1_05-08 (16:50):
You're better off
emily-sander_1_05-08-2025_ (16:50):
Hmm.
Okay.
Yes.
Okay.
Got it.
Okay.
squadcaster-4i7c_1_05-08-20 (16:53):
But here's the problem with that.
Introducing a segue.
New topic, same subject.
Well, term LP limited partner,they want to get their money
back at some point.
squadcaster-530f_1_05-08-20 (17:05):
uh,
squadcaster-4i7c_1_05-08-202 (17:07):
So what does that mean?
There's pressure to sell, You,you, in order to generate
liquidity, which meansbasically.
Accessing cash.
squadcaster-530f_1_05-08- (17:21):
cash.
squadcaster-4i7c_1_05-08-20 (17:21):
You have to sell an asset, but you
need the, you need to be able tosell that asset to pay back your
squadcaster-530f_1_05-08-2 (17:27):
your
squadcaster-4i7c_1_0 (17:28):
investors, call it.
Now, we can get into someesoterica around that because
you could then sell secondariesin your position, yada, yada,
yada.
But point being is, it's achallenge right now because LPs,
as we just talked about.
squadcaster-530f_1_05-08- (17:44):
about
squadcaster-4i7c_1_05-0 (17:45):
general have been in these deals longer.
They wanna see their ownliquidity.
'cause at the end of the day, anLP is a person or a firm
squadcaster-530f_1_05-08-2 (17:52):
firm
squadcaster-4i7c_1_05-08-2 (17:52):
that is invested in your fund and
they have their own obligationsin their life too.
At some point they put a dollarin, they want to get, you know,
$4 back so they can do what theywant to do in their lives.
Right.
So, so that's the other part.
And if you're not able to, thisis the other point, is if you're
not able to return capital toyour LPs.
(18:13):
How can you raise more capitalfor your, your current or new
fund?
So
emily-sander_1_05-08-2025 (18:17):
Yeah.
squadcaster-4i7c_1_05-08- (18:18):
chain of reaction and it's not just,
you know, not just, um, uh, youknow, tied to private equity,
private credit's the same wayother Strat investment
strategies.
It's just a money flow thing.
And that's what really comesdown to tariffs and stuff at the
end of the day is money flows.
It's, there's been some activityon the part of the current
(18:39):
administration to try to governand.
squadcaster-530f_1_05-08-20 (18:42):
and
squadcaster-4i7c_1_05-08 (18:42):
Impact money flows in a big way, which
has created uncertainty, whichhas had this trickle down effect
all the way to how much I'mfreaking paying for a dozen eggs
and it's hot.
emily-sander_1_05-08-2025 (18:52):
Yeah.
squadcaster-4i7c_1_05-08-2 (18:52):
much on that front, I can assure you
that.
emily-sander_1_05-08-2025 (18:56):
Yeah.
My grocery store had a quota onthe number of egg cartons.
You could buy a two, and I waslike, Hey, if I want a fricking
whatever, 10 egg omelet, Ishould be able to have one.
squadcaster-4i7c_1_05-08-202 (19:06):
my protein.
Exactly.
Yeah.
emily-sander_1_05-08-2025_ (19:09):
It's the most bioavailable protein
out there.
Come on.
Um, so LPs, so it's, it's like Iwant my return, but also, hey,
if you want me to reinvest in afuture fund, you better, you
better pay up.
And if other people, if new LPsare sniffing around going like,
Hey, like, should I be investinghere?
Ooh.
Like they have been waiting fortheir payback for a while now.
(19:31):
I don't know about this one.
Then it's hard to fundraise.
Yes.
squadcaster-4i7c_1_05-08- (19:34):
Yeah.
emily-sander_1_05-08-2025_150 (19:35):
a double whammy.
squadcaster-4i7c_1_05-08-2 (19:36):
time is not on your side when you're
calculating internal rates ofreturn as well.
So, you know, again, gettinginto the how way in which PE
groups get paid, you know, it'sbased on a carried interest,
which is effectively a profitshare based on the returns that
you're distributing to your LPs.
So the more the the, the moreand quicker you can get money
(19:57):
back to your LPs, the higher.
Their investment return is gonnabe, which then speaks to how
effective your fund is, whichspeaks to how well you can
market your fund to the existinginvestors and new investors.
So,
squadcaster-530f_1_05-08-20 (20:11):
So,
squadcaster-4i7c_1_05-08-20 (20:11):
you know, now is a hard time, and I
can tell you from personalexperience, is, is not the
easiest time to be raisingequity, period.
Yeah.
squadcaster-530f_1_05-08-20 (20:20):
How long
emily-sander_1_05-08-2025_ (20:21):
long can PE stay in this stage of
things
squadcaster-530f_1_05-08-20 (20:24):
it?
emily-sander_1_05-08-2025_15 (20:24):
it starts to get really bad?
squadcaster-4i7c_1_05-08-20 (20:25):
Oh, it's a resilient.
Resilient asset class pe if theycan get through the great
recession of 2008 through 2010.
We'll, you know, we'll weatherthis storm.
It just, it makes for justinteresting, um, dynamics.
You know, like, it, it, youknow, it's not totally
(20:47):
uncorrelated to the overallmarket.
I mean, we all.
Our stock market portfolio, ourpublic equities portfolio got
smashed in early April.
I'm glad I was sitting in Hawaiiand not, you know, at that time
and, and not just, you know, cutcurled up in a fetal position in
rainy Seattle at the time whenthat, know, liberation day
happened.
Um, but that being said, I, I,joking aside, it's just, you
(21:10):
know, these things ebb and flow.
You know, this is a differenttype of,
squadcaster-530f_1_05-08-20 (21:14):
Uh,
squadcaster-4i7c_1_05-08-20 (21:15):
for correction, but it's a
correction nonetheless.
And like.
Private equity, private credit.
They're foundational to theeconomy world and, and kind of
squadcaster-530f_1_05- (21:24):
domestic and
squadcaster-4i7c_1_05-08-20 (21:25):
you know, it'll, it'll, it'll,
squadcaster-530f_1_05-08-2 (21:28):
will
squadcaster-4i7c_1_05-08- (21:28):
it'll still be there,
squadcaster-530f_1_05-08 (21:29):
there,
squadcaster-4i7c_1_05-08- (21:29):
know?
squadcaster-530f_1_05-08-20 (21:29):
you know,
emily-sander_1_05-08-2025_15 (21:30):
So if they, if they've weathered
these, these types of stormsbefore, is it predictable in the
sense like, okay, when thishappens, PE firms do
squadcaster-530f_1_05-08- (21:38):
this.
emily-sander_1_05-08-2025_1 (21:38):
I'm assuming there's like for the,
for the Port cos in in flightthey might tinker with that or
change some things there andthey might say, okay, for this
next round we're gonna do some afew things differently.
Did they do any
squadcaster-530f_1_05-08-2 (21:52):
like
emily-sander_1_05-0 (21:53):
adjustments or they just kind of let it
ride?
squadcaster-4i7c_1_05-08-20 (21:57):
Ed, jump in.
I got some things today, but yougo.
squadcaster-530f_1_05-08-202 (21:59):
my experience has generally been.
the, if there's an opportunityfor them to exit that investment
to do it in a way where they cantake some chips off the table,
they're going to do it, it'sgoing to, they're not gonna go,
well, you know, we're, we'rejust gonna kind of let it ride
because I.
macro level, we're lettingthings ride.
They're still gonna be lookingat deals at the deal level.
(22:22):
They're still gonna be goingwell, there's deals to be had.
We're gonna look for'em.
They're just harder to find.
squadcaster-4i7c_1_05-08- (22:26):
Yeah.
squadcaster-530f_1_05-08-20 (22:27):
Um, and it's, and so the deal flow
slows,
squadcaster-4i7c_1_05-08- (22:30):
Yeah,
squadcaster-530f_1_05-08-2 (22:31):
it's not, it's not like they, they, I
don't, at least my experiencehas been, and you know, we were,
Rory and I were heavy in theprivate equity world when
squadcaster-4i7c_1_05-08 (22:39):
during the great recession.
Yeah.
squadcaster-530f_1_05-08 (22:41):
crisis
squadcaster-4i7c_1_05-08-2 (22:42):
Deep in it.
Yeah.
squadcaster-530f_1_05-08-2 (22:44):
our,
squadcaster-4i7c_1_05-08 (22:44):
That's our entire business consumer.
squadcaster-530f_1_05-08-20 (22:46):
say our parent co or our, our fund
was, was essentially going outand trying to buy everything
they could find,
squadcaster-4i7c_1_05-08- (22:52):
Yeah.
squadcaster-530f_1_05-08- (22:52):
know?
Well,
squadcaster-4i7c_1_05-08- (22:52):
Yeah.
squadcaster-530f_1_05-08-20 (22:53):
and they still were executing sales
as well.
You know, sales are real estatesale leaseback agreements.
They, I mean, it was, it wasdeal by deal.
Um,
squadcaster-4i7c_1_05-08-202 (23:02):
It is true,
squadcaster-530f_1_05-08-2 (23:04):
they felt like.
If we exited investment X, wecould put the money to work in
investment Y and still get thereturn that we're looking for.
It's just that some of thoseinvestment Y's are harder to
find.
squadcaster-4i7c_1_05-08-2 (23:16):
yes.
emily-sander_1_05-08-2025_1 (23:17):
So, so if a recession hits, are you
saying like, the contrarianpoint of view is just like blood
in the water, like buyeverything you can.
squadcaster-4i7c_1_05-08- (23:23):
think there's, there's a whole swath
of firms that, that, that istheir entire strategy.
Yeah.
squadcaster-530f_1_05-08-20 (23:30):
Um,
squadcaster-4i7c_1_05-08-2 (23:31):
what was I gonna say along those
lines is that, uh, one person'strash is another person's
treasure in some ways.
And I think there's so much cash
squadcaster-530f_1_05-08-2 (23:43):
cash
squadcaster-4i7c_1_05-08-20 (23:44):
the fact that.
You know, it's uncertain times,accessing, you know, debt
capital's expensive.
There's still a ton of cash outthere.
So if you're sitting on cash andyou're, you're looking to buy,
uh, deals priced withuncertainty in there, IE you
know, um, higher risk, premium,lower price, then you're in a
(24:05):
good position because you canget deals done.
And then
squadcaster-530f_1_05-08-20 (24:08):
And
squadcaster-4i7c_1_05-08-2 (24:09):
when the interest rates become more
attractive back, leverage yourdeal and do really, really well.
For the same relative risk.
So,
squadcaster-530f_1_05-08-20 (24:17):
um,
squadcaster-4i7c_1_05-08-2 (24:17):
the, the point I'm trying to make, I
suppose, is that
squadcaster-530f_1_05-08-2 (24:20):
that
squadcaster-4i7c_1_05-08-202 (24:21):
no matter what the environment is,
there's always innovation andpeople trying to figure things
out.
These are really, really smartpeople that run these firms, so
they figure out ways to do a lotof financial engineering to make
things work.
And I, I talked touched on it alittle bit, but one of the
things that's happened aroundcreating liquidity is, uh,
private equity groups sellingtheir, their positions.
(24:43):
Even though they're still owningthe bus,
squadcaster-530f_1_05-08-20 (24:45):
own
squadcaster-4i7c_1_05-08-20 (24:46):
the business, perhaps they're not
selling the business, they'reselling their, their, investment
in the business to otherparties.
So they're syndicating out thatduration risk to get liquidity,
pay
emily-sander_1_05-08-2025_1 (25:01):
Um,
squadcaster-530f_1_05-08- (25:02):
their investors
squadcaster-4i7c_1_05-08-2 (25:03):
then raise more capital and do
whatever they will do.
So
squadcaster-530f_1_05-08-202 (25:06):
So
squadcaster-4i7c_1_05-08- (25:06):
point is where there's a will, there's
a way.
squadcaster-530f_1_05-08-2 (25:08):
way.
squadcaster-4i7c_1_05-08-20 (25:09):
And with money, people always find a
way to.
Figure,
emily-sander_1_05-08-2025_1 (25:12):
did you say that was individuals
doing that?
squadcaster-4i7c_1_05-08-20 (25:14):
Oh, I'd know there, I mean there,
well shoot.
Yeah, there is individuals.
I've seen a lot of privateofferings where I can go log
into a website and buy privateequity secondaries.
Yeah.
emily-sander_1_05-08-2025 (25:26):
Whoa,
squadcaster-4i7c_1_05-08 (25:26):
buying their, their,
squadcaster-530f_1_05-08 (25:27):
their,
squadcaster-4i7c_1_05-08- (25:28):
think about it the same way as you'd
think about owning a publicshare of stock private equity
groups parsing out theirpositions in these companies and
selling it to accreditedinvestors privately.
squadcaster-530f_1_05-08-2 (25:41):
they would
emily-sander_1_05-08-2025_ (25:41):
they would prefer the liquid cash.
Now.
squadcaster-4i7c_1_05-08- (25:43):
Well, they need to, yeah, for
emily-sander_1_05-08-2025_ (25:44):
Need to,
squadcaster-4i7c_1_05 (25:45):
operating agreement reason or just
practical, I need to get moneyback to my investors to get more
capacity.
emily-sander_1_05-08-2025_15 (25:52):
so you're saying that can happen at
like the individual, like, man,like managing director level or,
and or like a, a.
squadcaster-4i7c_1_05-08-20 (25:59):
I'm just like, like, let's use, you
know, I don't know KKR, thatthey're probably not necessarily
doing this, but like, maybe theyhave, uh.
500 million of in a series ofcompanies, and they wanna half
of that share, can parse that upand sell it privately as opposed
to listing on an exchange orsomething like that, you know,
emily-sander_1_05-08-2025_ (26:22):
Hmm.
Okay.
squadcaster-4i7c_1_05 (26:24):
positions and then they can get, you know,
liquid.
emily-sander_1_05-08-2025_ (26:26):
Are, are there PE companies that.
squadcaster-530f_1_05-08-20 (26:31):
are
emily-sander_1_05-08-2025 (26:32):
built and meant for down markets.
So I'm thinking like there'sETFs and then there's like
inverse ETFs, which like whenthe market goes down, they do
well and they're just structuredin a way to, to perform when
there's a down market.
Are there PE firms?
squadcaster-530f_1_05-08 (26:46):
funds.
Yeah.
emily-sander_1_05-08-2025 (26:47):
Yeah.
Are they like licking theirchops right now?
squadcaster-4i7c_1_05 (26:50):
literally probably a fund out there called
Contrarian Capital Management.
I guarantee I'm almost certainof that.
I'm sure
squadcaster-530f_1_05-08- (26:57):
Sure.
squadcaster-4i7c_1_05-08-2025 (26:57):
I could Google it right now, but
I'm not.
just know
emily-sander_1_05-08-2025_15 (27:00):
So like there might be those firms
out there where they're like,this is, this is our, this is
our prime time.
And or Rory, you mentioned like
squadcaster-530f_1_05-08-2025 (27:06):
a different
emily-sander_1_05-08-2025_15 (27:07):
if you have a different risk
premium or different riskprofile,
squadcaster-530f_1_05-08-2 (27:11):
Some
emily-sander_1_05-08-2025_15 (27:11):
of those might come into play here
too, where they might not get asbig of the bite of the apple in.
A bullish economy becauseeveryone wants like the top
rated, you know, um, blue Staror whatever you wanna call it,
squadcaster-530f_1_05-08-202 (27:23):
it
emily-sander_1_05-08-2025_15 (27:24):
PE firms.
But now, okay, we're willing totake a, on a little bit more
risk because we need to deploythis capital somehow.
Is that a thing?
squadcaster-530f_1_05-08-20 (27:32):
it?
It is.
I mean, if you think about, um,Rory and I had worked with, um,
lone Star Funds and Lone StarFunds.
Certainly at the time that wewere there.
Their entire investment thesiswas, can we find assets?
Distressed.
Can we buy contrarian?
Can we look at, you know, assetliquidation values?
(27:54):
How do we look at theseinvestments differently than as
a, know, a, a, can we grow thisand, you know, get a multiple on
an operating
squadcaster-4i7c_1_05-08- (28:03):
Yeah.
squadcaster-530f_1_05-08-2 (28:03):
they were very contrarian.
That was their, that was theirkey.
emily-sander_1_05-08-2025 (28:09):
Okay, so if I'm like a founder
thinking about this, and I waslike, I, I wanna partner with PE
but I'm, I'm being smart and I'mlistening to this podcast.
I know the market conditions andso I might
squadcaster-530f_1_05-08-2 (28:20):
keep
emily-sander_1_05-08-2025_ (28:20):
that in mind when I'm vetting the PE
firms.
And then the other way around,are PE firms looking for certain
types of companies?
Are they're looking fordifferent types of companies now
or does that remain the same?
squadcaster-4i7c_1_05-08-2 (28:33):
Hmm.
squadcaster-530f_1_05-08-20 (28:35):
Um, no, I think there, I don't think
it's, I think it's less type,
squadcaster-4i7c_1_05-08-2 (28:39):
it's more situational.
squadcaster-530f_1_05-08-2 (28:41):
that these are, that, you know, the.
cyclical.
So it's gonna be how does thiscycle?
And, you know, those kind ofthings.
It's, it's gonna be more, it ismore, how do I get to a return?
That I'm comfortable with, howdo I get to, is this an
undervalued opportunity thatsomeone else, you know, like
Rory said, sometimes they haveto raise money for capital calls
(29:03):
or other things.
There's, you know, issues aroundfund level debt where they're
gonna have to get liquid.
So sometimes funds are in aposition where they're forced to
sell
squadcaster-4i7c_1_05-08- (29:11):
Yeah.
squadcaster-530f_1_05-08-20 (29:12):
and there's a, you know, that's
gonna be one of those where itmay be a company that's
completely, you know, kind ofcounter to the current economic
trend.
Um.
Or maybe right in line with thecurrent economic trend, but
they're gonna look at it deal,deal by deal and go, Hey, is
this an undervalued asset?
Do we think, you know, over thenext three to five years,
(29:32):
typical hold period, we're gonnabe able to get a good return on
it.
And if we can, you know, we'regonna take advantage of the fact
that this owner, this founder,this, um, other private equity
firm is
squadcaster-4i7c_1_05-08- (29:43):
Yeah.
squadcaster-530f_1_05-08 (29:43):
forced to get liquid.
And we're going to, we're gonnajump in and, uh, you know, kind
of profit from that opportunity.
So.
emily-sander_1_05-08-2025_1 (29:50):
So, I mean, we've talked about this
before, where a PE firm couldsell to another PE firm.
Could this be a catalyst for,okay, we're just gonna move our
money over to this other PEfirm?
'cause they're willing to takethis on and we're not.
squadcaster-4i7c_1_05-08- (30:02):
Yeah, and who knows what kind of
squadcaster-530f_1_05-08-202 (30:03):
of
squadcaster-4i7c_1_05-08-2 (30:04):
deal making there could be under the,
you know, behind the scenes.
There could be reciprocalagreement to, to buy an asset
from that same PE firm underdifferent terms.
But, you know,
squadcaster-530f_1_05-08-20 (30:16):
you know,
squadcaster-4i7c_1_05-08-2 (30:16):
it's in, it's in the interest of both
parties to do a deal on eitherside, you know,
emily-sander_1_05-08-2025 (30:22):
Yeah.
squadcaster-4i7c_1_05-08-2 (30:23):
it's a small world people, you know,
people figure out ways to.
squadcaster-530f_1_05-08-2 (30:26):
ways to
squadcaster-4i7c_1_05-08-2 (30:27):
Meet their objectives and a lot of
times, you know, similar typesof firms have the same
objectives and they're in thesame sort of macroeconomic
situation.
emily-sander_1_05-08-2025_1 (30:39):
All right, so prediction, prediction
time as we look forward here,tariffs.
Do you two think that thesituation with tariffs is going
to get better, stay the same, orget worse?
squadcaster-530f_1_05-08- (30:53):
It'll get better because it can't get
much worse.
squadcaster-4i7c_1_05-08- (30:55):
Yeah, I was gonna say something very
similar.
Yeah.
squadcaster-530f_1_05-08-2 (30:59):
this has been, uh, and I've, I've
said this to numerous folks.
Um, you know, I, I think thecurrent approach to tariffs is,
the worst.
Piece of economic malpracticesince the Hoover administration
they also were like, okay, we'regonna be able to do X, Y, or Z
and help the, help the domesticeconomy by increasing tariffs,
(31:24):
the Smoot-Hawley Tariff Act, andtherefore, you know it's gonna
drive the domestic production'cause we're gonna cut off
imports.
And all that did was just craterthe economy.
And make the great it, itbrought in a Roosevelt
administration a new deal, andit really just was nasty.
squadcaster-4i7c_1_05-08- (31:41):
Yeah.
squadcaster-530f_1_05-08-20 (31:42):
is, this is, I hear the exact same
rationale for these set oftariffs.
And right now, I wouldn't besurprised if we don't get the
exact same result.
squadcaster-4i7c_1_05-08- (31:50):
Yeah, without being the history buff,
that is, I would say theconsumer.
US will feel the pain on thisfor a while.
Yeah, we'll be frustrated byprices and things like that for
some time.
squadcaster-530f_1_05-08-2 (32:01):
The, the only, the only good thing is
from, from my seat, um, thepresident doesn't really have,
he, he's not a, like a, died inthe wool.
He, he's a pragmatist.
He's, so if things start goingsouth fast, he'll blame somebody
else for it
squadcaster-4i7c_1_05-08 (32:19):
That's right.
Yeah.
Yeah,
squadcaster-530f_1_05-08-20 (32:20):
you know, I'm, I'm kind of counting
on that
squadcaster-4i7c_1_05-08- (32:22):
yeah.
emily-sander_1_05-08-2025_15 (32:25):
In terms of recession likelihood,
what percentage would you say
squadcaster-530f_1_05-08- (32:31):
we're
emily-sander_1_05-08-2025 (32:31):
gonna be going into?
Like, like a hundred percentwe're going into recession or
like, uh, I give it 25% in thenext, next 12 to 18 months we'll
be in a recession.
squadcaster-530f_1_05-08-2025 (32:41):
A hundred
emily-sander_1_05-08-2025_15 (32:41):
It is a hundred percent.
squadcaster-530f_1_05-08 (32:44):
Matter of fact, we just had a, we had
one quarter of negative economicgrowth last quarter.
if you get two quarters ofnegative economic growth, that's
technically a recession to thiseconomist.
And so you're gonna end up, Ithink we've got a hundred
percent chance that in the next18 months we're gonna have a
declared recession, two
emily-sander_1_05-08-2025_1 (33:01):
Two consecutive quarters,
squadcaster-530f_1_05-08-202 (33:03):
of
squadcaster-4i7c_1_05-08 (33:03):
That's right.
squadcaster-530f_1_05-0 (33:04):
growth.
squadcaster-4i7c_1_05-08-2 (33:04):
Yep.
emily-sander_1_05-08-2025 (33:07):
Rory?
squadcaster-4i7c_1_05-08-20 (33:07):
no, I I'm not in any disagreement
with Ed on that one.
Yeah.
emily-sander_1_05-08-2025_150 (33:11):
A hundred percent.
squadcaster-4i7c_1_05-08- (33:13):
Yeah.
emily-sander_1_05-08-2025_ (33:14):
Wow.
Is there
squadcaster-4i7c_1_05- (33:15):
there's,
emily-sander_1_05-08-2025_ (33:15):
any.
squadcaster-4i7c_1_05-08-202 (33:16):
of the depth of recessions and such
like that.
So there that I think remains tobe seen.
And what we have seen in thepast is,
squadcaster-530f_1_05-08-202 (33:24):
is
squadcaster-4i7c_1_05-08-2025 (33:24):
I guess, you know, uh, there will
be intervention if and when thathappens in one way, shape, or
form, monetary, most likely.
Um, so yeah, I think it's, it's,it's, I would say almost
inevitable.
Yeah.
emily-sander_1_05-08-2025_15 (33:43):
Do you think that last question
here.
Do you think that America and orother world leaders will be able
to get us out of the recession
squadcaster-530f_1_05- (33:53):
quickly?
squadcaster-4i7c_1_05 (33:57):
probably.
squadcaster-530f_1_05 (33:58):
Probably.
squadcaster-4i7c_1_05-08- (33:58):
Yeah.
Relatively quickly.
Yeah.
Yeah.
emily-sander_1_05-08-2025_ (34:03):
Ed's face is, I don't like Ed's face
squadcaster-530f_1_05-08-202 (34:05):
I, I, I'm, you know, the, the
lawyer in me is going, so how doyou define quickly?
Right?
squadcaster-4i7c_1_05-08 (34:10):
Right.
emily-sander_1_05-08-2025 (34:12):
Fair.
squadcaster-4i7c_1_05-08 (34:12):
it'll, I don't think we'll sink into a
depression by any stretch.
squadcaster-530f_1_05-08-202 (34:15):
to say, I, what I don't expect is
that we're gonna be in a, in adepression where there's no
recovery for years.
Like there was, after the GreatDepression, which really took us
World War ii, was, was thecatalyst that got us outta the
Great Depression was a 10 year,10 year recession essentially.
you know, I, I don't expectsomething like that to occur
because again, I think that thegood news in this particular
(34:39):
situation is.
The American voter votes theeconomy.
And so if the economy sucks, theAmerican voter's going to change
the administrations in the, youknow, in the next, in the next,
uh, cycle.
And then, you know, the, thepiece of good news is we've got
a lot of levers to pull oneconomic growth.
And so as a result, you know, I,I think it's a, you know,
(35:03):
nothing major, but I think youcould see a recession for three
to four quarters.
squadcaster-4i7c_1_05-08- (35:07):
Yeah, I agree with that.
squadcaster-530f_1_05-08- (35:09):
don't think
emily-sander_1_05-08-2025 (35:09):
Okay,
squadcaster-530f_1_05-08-2025 (35:10):
I don't think it's gonna be a 2008
type
squadcaster-4i7c_1_05-08-20 (35:12):
No,
emily-sander_1_05-08-20 (35:13):
crater.
squadcaster-4i7c_1_05-08-20 (35:14):
no.
emily-sander_1_05-08-2025 (35:14):
Okay.
Okay.
Any other good news tidbits toleave us on?
What's something good happeningin the economy
squadcaster-530f_1_05-08-202 (35:21):
In the economy?
emily-sander_1_05-08-2025_15 (35:23):
or in the world?
I'll broaden it.
Just, just anything good.
squadcaster-4i7c_1_05-08-2 (35:26):
Hmm.
emily-sander_1_05-08-2025 (35:26):
don't wanna leave it on like the
downbeat of,
squadcaster-530f_1_05-08- (35:28):
we're a
emily-sander_1_05-08-2025_150 (35:28):
a hundred percent gonna be in
recess.
squadcaster-4i7c_1_05-08- (35:31):
Yeah.
Well, why do I have to think sohard about, I mean, like why is
it so hard for me to come upwith something?
emily-sander_1_05-08-2025_ (35:38):
Long pause here.
squadcaster-530f_1_05-08-202 (35:39):
no kidding.
I mean, that's
squadcaster-4i7c_1_05-08- (35:40):
Yeah.
squadcaster-530f_1_05-08-2 (35:41):
the, the, the honest to god truth of
it is there isn't a lot I canpoint to and go, this is just
great news.
Uh, you know, the, there's, thisis a great opportunity that's
coming down the pike.
I, right now, the biggest thingfrom, from my seat is like, I
kind of said at the, at thebeginning.
in a position right now, likeprofessionally, where folks who
(36:06):
are, you know, in, inconsulting, in financial
services, in, you know, thatwhere we can help people who are
concerned with uncertainty,
squadcaster-4i7c_1_05-08- (36:16):
Yeah.
squadcaster-530f_1_05-08-202 (36:17):
of get them calmed down and get'em
strategized for a way throughthat uncertainty.
For folks like, for folks likeme professionally.
That's great.
squadcaster-4i7c_1_05-08- (36:25):
Yeah.
squadcaster-530f_1_05-08-202 (36:25):
no argument there.
I, that's actually, uh, I'mlooking kind of positive.
Anything that's a little bitshaky provides the, you know,
consultant in me a, a good mealticket.
But it's not great.
There's not much great for theentire universe.
squadcaster-4i7c_1_05-08- (36:39):
True.
Yeah.
Well said.
emily-sander_1_05-08-2025_1 (36:41):
All right, so it's good for Ed.
Um, so take that to heart.
squadcaster-4i7c_1_05-08- (36:45):
Well, we got our, we got, you know, we
got our health and we
emily-sander_1_05-08-2025_1 (36:47):
And Rory.
Yeah,
squadcaster-4i7c_1_05-08- (36:48):
know,
emily-sander_1_05-08-2025_15 (36:49):
so feel good about that.
We do have some levers to pull.
It sound like if we go intorecession, we have some levers
to pull and it might be time tolike be a contrarian and look
for those opportunities.
There's always like a
squadcaster-530f_1_05-08 (36:59):
upside
emily-sander_1_05-08-2025_15 (37:00):
or silver lining if you, if you
look for it and get creative.
squadcaster-530f_1_05- (37:03):
Alright, private
emily-sander_1_05-08-202 (37:05):
equity experience.
We're back baby.
squadcaster-4i7c_1_05-08-202 (37:07):
We are back.
It's good to be back.
Great to be back.
Good to see you both.
squadcaster-530f_1_05-0 (37:12):
Thanks,
emily-sander_1_05-08-2025_1 (37:12):
ed.
Thanks Rory.
squadcaster-530f_1_05-08- (37:13):
guys.
squadcaster-4i7c_1_05-08-2 (37:14):
Bye.
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