Goldman Sachs Makes Private Equity Public, US Goes on Real Estate Spree

Marxist theory tells us that capitalism is eventually undone by its own 'contradictions.' Of course, it's all hooey. But we recalled it when we read in today's news that Goldman Sachs (NYSE:GS), one of the sparkliest crowns of capitalist creation, is now introducing a new market - in private equity.

Huh? Yes, we asked the same question. How can you have a public market in private equity? We don't know, but the Wall Street Journal reports that Goldman has introduced the GSTRuE - a market where investors will be able to buy and sell stocks that aren't public.

Round and round the wheel-a-deal turns. Buy, sell, take it public, take it private, take it public again! Oh what a wheel of fortune! Whee!

Meanwhile, yesterday brought news that the Americans were on a house-buying spree in April...with the biggest surge in 14 years. What caused so much house- shopping? Analysts were quick to explain it - the biggest decline in housing prices since 1970.

The biggest decline in 37 years sounds impressive. But reading on we discover that the median house is only down a couple percentage points from its all- time high. Not exactly a "Going out of Business" sale. You wouldn't think a 2% discount would bring out so many buyers.

Someone ought to say to the buyers "Hey...don't you know that houses are still near an all-time high? Don't you realise that if housing follows typical market patterns, your house will lose 30% to 50% of its value in real terms over the next 10 years?"

If you wanted to be very conservative about it you could mention yesterday's prediction from the chief economist at S&P, who said he expected an 8% drop in house prices in '07 and '08.

Bill Bonner
The Daily Reckoning Australia

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