You Will Be Fooled Again: Private Equity’s Exit Scam and Wall Street’s Same Old Lies

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Wall Street is running the same con—just with new packaging. As private equity investors demand their money back, fund managers are taking once-illiquid investments public, only to watch them crater far below their so-called “net asset value.” From BlueRock to FS Specialty Lending, the numbers don’t lie—investors were sold fantasy valuations to keep the music playing.
At the same time, the SEC is quietly dismantling the few guardrails meant to protect everyday investors, scrapping the Global Research Analyst Settlement and reopening the door for analysts and investment bankers to collude like it’s the dot-com bubble all over again. Former regulators now admit what many warned about years ago: Wall Street research was never about truth—it was marketing.
This is a hard warning to individual investors: don’t be the greater fool in a rigged game of musical chairs. Do your homework, question valuations, and remember—on Wall Street, you’re not the client, you’re the product.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it will have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
You will be fooled again, Yeah, the old whose song
won't be fooled again nineteen seventy one. Yeah you will,
Yeah you will. And we've called it interesting Jason's Wig.
Wall Street Journal just put this out net asset value. No,
not an asset value, not actual value. And I'm talking

(00:36):
about private equity now going public. Yes, we told you
this was going to happen for a while. These private
equity companies been cruising along, CRU's on. They limit the
amount of money that you can withdraw. But now a
lot of their investors are getting rambunctious. We won out,
we won out. We were told we could get our

(00:57):
money out. So what they're doing is they're going public.
They're going public. But guess what. Guess what when they
go public? Gee whiz, they tank. A couple hard lessons
have been learned over the past couple of weeks. One
in particular, Blue Rock Total Income in Real Estate Fund

(01:19):
began trading on New York Stock Exchange as the Blue
Rock Private Real Estate Fund. Uh huh. The private equity
company said it was worth twenty four dollars and thirty
six cents a share. Yeah. Opening day, the thing closed
at like fourteen seventy. I don't know what it's around
fifteen at this point in time. There was another one
as well, FS Specialty Lending Fund net asset value. They

(01:44):
told everybody eighteen dollars and sixty seven cents. Yeah, I
think it's at around thirteen at this point and time,
and you're going to see more and more of this happen. Basically,
what a lot of these fund managers are going to
do is like, okay, fine, fight you don't want to
see and hold on, Well, fine, we'll go public. Actually
one of them, one of the funds, actually said well, okay,

(02:06):
we'll go public, but all of you investors in this
thing can't sell for two hundred and seventy days. And
after that happened, the vote was canceled. This is a
major issue that's facing You want to call the financial markets,
not so much, it's the private markets at this point
in time. What I've been trying to do for a

(02:28):
while is to warn individual investors that you don't want
to become the next greater fool Wall Street. And many
of the things that they sell is garbage. They sell
a lot of crap. I call it demonic game of
musical chairs. You basically can ladder something up for a
period of time and then eventually you pass it off

(02:50):
to the last person. Now as a rule, as a rule,
this works. Okay, this is Benjamin Graham. It's worth there's
an intrinsic value. It's worth something. It's worth something. What
is intrinsic value? Well, you know what various different things
multiples can put into a cash flow management? What type

(03:11):
of industry in has various different multiples. However, okay, sometimes
sometimes things trade well above what they're actually worth, then
it might be a good time to get out. And
then other times they trade below. All of these private
equity company Hale sorry, uh ninety five percent plus out there,

(03:33):
have put absolutely ridiculous valuations on the companies in their portfolio.
Why wouldn't they? They tell everybody, Okay, you're into this,
you're special. You got to hold it for an extended
period of time. They charge two percent, and then they
charge twenty percent if it goes up. Sure, sure, they
will let you sell a little portion every quarter here
and there. They can manage that. They can't have massive outflows. However,

(03:58):
when it goes public, everybody can sell, and everybody that's
been holding on for an extended period of time they
want their money back, and that's what they're doing. So
you have to beware of these things. These things are
going to be coming down the pike, and there's going
to be many, many more of them. Another interesting story
is actually the Arthur Levitt wrote a piece in the

(04:20):
Wall Street Journal and this was basically taking me back
in time. This is you know, this is a Dolorean
moment for us here at the watchdog on Wall Street Show.
He writes, investors rely on Wall Streets analysts for objective,
independent research, right, sure is. But two decades ago investigators

(04:41):
revealed that some analysts had deep conflicts of interest and
were misleading investors. They were collaborating with the investment banking
counterparts to generate businesses, our business for their banks. Again, okay,
we told everybody this. Okay, Arthur Levitt, yes you worked

(05:01):
at the SEC buddy, great job. How is it that
I got it before everybody else. I'm jumping up and
down telling everybody what exactly what was going on, exactly
how all these stock analysts were buddy buddies with the
investment bankers. The investment bankers drive revenue. You're an analyst,
your base analysts became nothing more than a marketing department

(05:25):
for the investment banking arm, and they let it slide.
Arthur Levitt writes, Oh yeah, an analyst that Solomon Smith
Barney famously labeled a company a buy, that called it
a pig in an email to colleagues. A marilynch analyst
publicly recommended buying certain shares while privately discouraging bank clients

(05:47):
from doing the same. He also championed another company he
privately called a pos a piece of boop in an email.
At one point, he received a note from a we
are losing people money and I don't like it. John
and Mary Smith are losing their retirement because we don't
want an investment banking client to be mad at us. Well, dude,

(06:12):
you decided to do it. You didn't have to. You
could have walked away. You didn't have to lie. I mean,
I'm sorry lying to people for living that. You know,
because you put on a you know, a five thousand
dollars suit and got a fancy time piece and you've
got yourself a merrow lynch or a Morgan Stanley business card.

(06:35):
Makes that okay, it's gross man. Anyway, we covered this
extensively into the fact that not only that man you had,
you had executives, the higher ups at city. There's like
a pecking order in New York City, like certain private
schools that the hoity toity want to make sure that

(06:58):
their kids get into. And yeah, you would have the existencey, Yeah,
you want to get your kid into this. Well, you know,
be easy on at and t be easy on that
analyst report whatever you were writing at this point in time.
And guess what you too, You too can have your
kids go to the same school where Sting sells his
sends his kids. That's how it works anyway, Levitt goes

(07:22):
on research analysts didn't act as truth tellers, but as
IPO co marketers with their investment banking colleagues. Bankers could
influence analysts guidance and the timing of their reports to
boost investment banking fees. It was an outrage. Yeah, it
was art, and nobody did a damn thing. And then

(07:46):
when it all came out, guess what, nobody did a
damn thing. This this part here is funny. I'm sorry,
I'll do spec. Dude. Okay, either you lose in your
memory or you're not being honest. New York's Attorney General,
Elliot Spitzer, discovered the worst of these abuses and failures

(08:08):
in the wake of investors losing billions in the dot
com bubble. Prodded by the investigation, the SEC and two
thousand and three required banks to separate the research in
banking operations under a far reaching settlement known as the
Global Research Analyst Settlement. Bill Donaldson was the SEC chairman

(08:29):
at the time. Remember William Donaldson, he was you know,
he used to be in charge of DLJ, DLJ membory
all that. Anyway, he said that research analysts had become
cheerleaders for banks investments. He was right, dude, You guys
knew the whole time. For crying now out, Elliot Spitzer
sat down at there's an Italian restaurant. I don't even

(08:52):
know if it's still there anymore. It was on Sullivan
Street in downtown New York. Manetta's Tavern. Don't even if
it's still there anymore, Okay, I really don't, but yeah,
he had a meeting there with It was kind of
like a you know, the heads of the flying Families,
all the big firms were there, and Elliot Spitzer cut
a deal with them. Yeah, they poonted up some cash.
They had agreed on this, and they also agreed to
give Elliot Spitzer a ton of money so he could

(09:15):
run for governor and he did, and then he got
himself in trouble because he liked hookers and we'd liked,
you know, going to visit hookers, and he also liked
prosecuting him at the same time, which kind of mean,
you know, kind of a dick move quite honestly, you're
putting them behind bars and you're also doing business again.

(09:35):
That's why he fit in really well on Wall Street
for crying out if if it right in there. Yeah,
Elliot Spitzer. I remember the pr pieces that he used
to do himself. I'm like, this guy is such a
dirt bag. He used to take. He'd be down on
Wall streets on the sherif on Wall Street. He'd have
a baseball bat that looked like it was on fire,
and he's like he's taking it to the big Wall
Street firms. Nobody, nobody did any jail time except one guy.

(10:03):
One guy did, guy by the name of Ted. Ted
Sepel was a back office guy. I forget. I think
it was a Bank of America. I can't remember exactly.
And what Ted did wrong was he got bullied. Ted
got bullied by mutual fund companies who were calling him

(10:25):
up after hours and they're like placing trades after out
messing around with the NAV. He got in trouble. I
didn't go to jail for a long time. But do
you think any of these other crooks. Did you think
any of these other crooks did? And this was their solution. Oh,
we are gonna peaky promise. We promise that our stock

(10:49):
analysts are not going to talk to the investment bankers anymore. Right, Sure, No,
that never happened anyway. Oh, they wanted to make it official.
I guess I didn't even know about this. Earlier this year,
a group of banks filed motions to terminate the Global Settlement.

(11:10):
They claim that other regulations made the two thousand and
three rule redundant. Wall Street's got you know, Wall Street's
got a lot of redundance. It's kind of like with
you know, the mafia. It's like a lot of buffers.
There's a lot of redundancies in the rules. You know
therese redundancies do they go the weaves around and it

(11:33):
creates all sorts of gray areas and loopholes. Now, when
you have gray areas and you're dealing with the children
at the SEC, the kids that work there because they're
kids right out of college, you're dealing with them, and
you're dealing with those attorneys compared to the high powered

(11:54):
attorneys that really know what they're doing at the big firms.
They make mince meat. They love gray areas. They find
the loopholes and hey, you know what, e well, you
know what, we'll make this going you know we'll do
We'll cut you a check and we'll make it go away.
And rinse and repeat, rinse and repeat, rins and repeat. Anyway,

(12:17):
the SEC agreed to scrap the Global Settlement now need
for lower compliance friction anyway, one of the settlements requirements
and the investment firms, big investment firms don't like this. Again.

(12:37):
They call it the firewall that separates investment banking from
research analysts. Not smart, aren't supposed to be this Chinese wall.
That's like, I's just called a Chinese wall between the two. Yes,
no unchaperone, No gotta have a chaperone. No unchaperone. Business
related conversations emails, meetings, texts, or other core nation could

(13:01):
go on between bankers and researchers at the same bank.
Do you believe that? Do you? Anyway? Arthur says it
protected both sides. Outsiders wanted to keep investment bankers from
compromising research analysts. Again, Arthur said many research anaus were

(13:23):
looking to be compromised when a bank did well. So
today chaperoning calls between bankers and analysts was purposely intrusive.
The two parties needed a babysitter for their conversations because
left to their own devices, they would happily collude to
boost their bank's revenue. Again, what does this teach you?
Right here? What does this teach you? He's basically saying

(13:45):
that again, all of these people working at the firm,
all they care about is their firm and their bonuses. Basically,
they have all had ethical bypasses at birth. These are
the big firms. So with that being said, why in
God's creation would you ever have an account at one
of these firms. Why, oh, my guys, will he nice?

(14:08):
He takes me out to dinner and we get to
go golfing, and they send me these these little uh
these things to put on top of my golf clubs,
and they're really nice. Are you a schmuck? You're a
number period the end. You always have been for crying
out loud anyway, neither here nor there, Glevitt goes on.
The Global Settlement wasn't perfect, but it restored the possibility

(14:29):
of objectivity and independence to Wall Street research. It forced
investment banks to rebuild a culture where research analysts told
the truth about the companies they cover.

Speaker 1 (14:41):
Ry.

Speaker 2 (14:42):
Sure they do. Sure, let me put it to you
this way. Okay, get rid of the global sandwith it
doesn't make it if it's just gonna do whatever the
hell they want. Okay, they're omnipping it. Do you understand?
Pretend they don't even Superman has got big power, big

(15:03):
straight kryptonite bothers him. They don't even have kryptonite, nothing, nothing. Hey,
you know they get off the beat track a little bit.
Oh you know, well, we're wells Fargo. We're making up
fake accounts and open up accounts and charging people fees. Okay,
we'll write a check and make it go away. It's
nothing that's going to change. Nothing is going to change.

(15:27):
The only way, the only way that this you know,
and be the greatest thing for this this economy right now. Okay,
you want to break something up. And I've been calling
for this since they decided to get rid of Glass Steagle. Okay,
break up the big banks. You want to be a
commercial bank, God bless you, you'd be a commercial bank.
You want to be, hey, an investment bank. You can

(15:50):
be an investment bank. You want to manage individuals money.
That's fantastic. That's a business in of itself. The buyside
shouldn't be hanging out with the cell side. They need
to be separated, period the end. It's supposed to be
a profession. Profession you put your client's interests above your own.
They don't do that. They haven't done. The only big,

(16:15):
big firm out there, the last big firm out there
that used to do it, this was Goldman Sachs and
they only dealt with the super wealthy. And then they
went from a private partnership to going public and straight
downhill from there. That's the reality kids. Okay, that's what
you're dealing with. You know, you want to be fooled again,

(16:38):
be fooled again. What they're going to be doing right now.
One of the reasons why they want to get rid
of this global settlement, quite frankly, is they need their
research analysts writing happy joy joy fluffy fluffy fluff pieces
on what private equity and alternative investments. They have to
package it to sell it to you so they can

(17:00):
get their big clients out. It's how it works, guys,
you understand, it's how it works. Ken, Do your homework.
Do you homework, Go back and read. I covered all
this stuff back during the dot com run up, Post
dot Com, Elliott Spitzer, all of these things. Nothing really changes.

(17:23):
They change the game a little bit, but guess what,
You're just a number and they don't give a damn
about you. Watchdog on Wall Street dot com