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Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

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Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#21

Post by clairity »

itsoktocry wrote: post #18
clairity wrote: post #11

Earlier quoted context omitted.

this is a symptom of the short-termism in equity markets that we get from abstracting ownership away from involvement. it's a direct consequence that such markets become centers of gambling rather than long-term interest, because otherwise your focus would be on growing your main source of equity, rather than spraying and praying. it's also why we should be wary of anyone spouting "markets provide liquidity" dogmatic…

> this is a symptom of the short-termism in equity markets that we get from abstracting ownership away from involvement. Except this is explicitly talking about private markets. You know, those places that VCs and people like Elon Musk claim companies need to be to avoid "short-termism" of public markets and have ownership be rewarded. The reality is these money men want to be private so they never have to mark-to-ma…

yes, you're right. i misread the title and didn't originally read the article because it was behind a paywall, but just saw the archive link and read through it now.

i think a similar dynamic happens in PE though, which is a private market, but a very large one, so not like the illiquid, opaque private markets we'd otherwise imagine. PE firms try to inflate valuations and get out while leaving others holding the bag (i.e., take the inflated risks and therefore take the eventual losses).

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#22

Post by kasey_junk »

itsoktocry wrote: post #20
anm89 wrote: post #17

Earlier quoted context omitted.

This is a completely invalid definition of a ponzi scheme. What you have described is anything that is sold on an open market that is not directly used by the first buyer. By nature, every one of those things only pays out earlier investors when later investors buy in. A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. So uber isn't a…

> A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. Which is exactly what Uber has done for 10 years. Revenue has nothing to do with it. How else do you explain people becoming filthy rich owning companies losing 10s of billions of dollars?

Uber is quite upfront about their revenue/profits. A key characteristic of a Ponzi is that you disguise new investments as revenue/profit.

Uber might be a bad investment but it’s not a Ponzi scheme.

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#23

Post by anm89 »

itsoktocry wrote: post #20
anm89 wrote: post #17

Earlier quoted context omitted.

This is a completely invalid definition of a ponzi scheme. What you have described is anything that is sold on an open market that is not directly used by the first buyer. By nature, every one of those things only pays out earlier investors when later investors buy in. A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. So uber isn't a…

> A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. Which is exactly what Uber has done for 10 years. Revenue has nothing to do with it. How else do you explain people becoming filthy rich owning companies losing 10s of billions of dollars?

Googled Uber 2021 Revenue.

> $5.78 billion

>Uber wrapped 2021 with strong revenue growth and greater adjusted profitability. Today

I guess $5.78 billion dollars is pretty close to 0 dollars right ?

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#24

Post by jjoonathan »

zeruch wrote: post #15

Parts? I'm quite biased here, having been in a few ventures that got absorbed by PE; "Vulture Capital" is being kind, and I maintain that I'd love to see PE as a category, regulated into oblivion. But the market writ large is mostly fine. PE I find trash.

I thought it wasn't Ponzi so much as a strategy for attentive management companies to front-run inattentive investors to liquidation. It's the management version of employees walking out of a failing startup with aeron chairs and coffee machines -- so, naturally, a thousand times more damaging and a thousand times less punished.

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#25

Post by Wohlf »

Animats wrote: post #14
dpflan wrote: post #4

Is “everything a Ponzi scheme” unless the entity actually can create “value” greater than the money put into it? Is everything that exists in economies within the bounds of national economics and central banks a Ponzi scheme? A reshuffling of money within the closed economic system?

A Ponzi scheme is something where the payout for early investors comes from the pay-in of later investors. There's a lot of stuff with that property, from Uber to Bored Ape Yacht Club.

Don't social safety nets and pensions also meet this definition?

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#26

Post by tootie »

dislikedtom wrote: post #2

sometimes i feel the whole market resembles ponzi. things getting expensive because there is a promise of price rising and more people getting into the market.

That's not a Ponzi scheme. So long as the sun shines, people are born, resources are extracted, raw materials are converted into finished goods then there is still real economic growth happening. When we turns rocks into computers and sunlight into seedless grapes we are creating value that didn't previously exist. The characteristic of a Ponzi scheme is money chasing money and no value being created.

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#27

Post by yieldcrv »

if you respect something that pays out prior participants with the money from new participants, you will refuse to call it a ponzi

if you don't respect something that pays out prior participants with the money from new participants, you will call it a ponzi

that seems to be the entire distinction based on seeing these kind of conversations over many years, and also watching for what prompts SEC enforcement actions towards managers that launch new funds and what doesn't, as well as DOJ enforcement actions, as well as the structure of many credit and government products

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#28

Post by kodah »

kasey_junk wrote: post #22
itsoktocry wrote: post #20

Earlier quoted context omitted.

> A ponzi scheme involves a company who has no underlying revenue model and just shuffles money from late investors to early investors. Which is exactly what Uber has done for 10 years. Revenue has nothing to do with it. How else do you explain people becoming filthy rich owning companies losing 10s of billions of dollars?

Uber is quite upfront about their revenue/profits. A key characteristic of a Ponzi is that you disguise new investments as revenue/profit. Uber might be a bad investment but it’s not a Ponzi scheme.

There really does need to be a term beyond SPAC that we can use to describe profitless companies seeking investment.

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#29

Post by cuteboy19 »

Wohlf wrote: post #25
Animats wrote: post #14

Earlier quoted context omitted.

A Ponzi scheme is something where the payout for early investors comes from the pay-in of later investors. There's a lot of stuff with that property, from Uber to Bored Ape Yacht Club.

Don't social safety nets and pensions also meet this definition?

No it's like insurance, you are paying a premium for reduced risk.

It should not been seen as an investment but rather as a service you pay for. So the question becomes 'worth it or not' instead

Re: Amundi warns that parts of private equity market resemble ‘Ponzi schemes’

#30

Post by jandrese »

yieldcrv wrote: post #27

if you respect something that pays out prior participants with the money from new participants, you will refuse to call it a ponzi if you don't respect something that pays out prior participants with the money from new participants, you will call it a ponzi that seems to be the entire distinction based on seeing these kind of conversations over many years, and also watching for what prompts SEC enforcement actions to…

> if you respect something that pays out prior participants with the money from new participants, you will refuse to call it a ponzi

Or if you simply go by the textbook definition of a Ponzi scheme.

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