As I go around the country looking for assets to acquire for our Asian wealth management group, it is becoming ever more clear that we are reaching the upper levels of sound valuation. As I am sure most of you know, there is little distressed assets left that have any reason to be acquired, and it is only the odd situation that makes the grade. Even in secondary markets, where there is a chance sometimes to find an off market situation due to special circumstances with the current partners or some other event, it is now more likely that even here, the asset will end up going to market in some limited way pushing the price higher than is good for the buyer. I am involved in two of those situations right now. The seller in each case was seemingly ready to do an off market deal, and then a lawyer or someone else intervened and said put it out to market and bid.

Everyone I speak to who has been around for several cycles, not just the crash, is feeling like we maybe have one or two years left, and that is only due to the manipulated low rates, and the enormous rush of capital, mainly offshore money, that is keeping the bubble inflated. Some of the really smart owners are now net sellers. The trend is just beginning, but as the yea r progresses and we get to 2016, and as rates start to rise, there will be more net sellers. Some of the funds are realizing it is time to begin to harvest the large gains they have in their portfolios now and to lock in those 20% bonus payments from the fund.

Lenders are starting to do all of the same dumb things they did every prior cycle. Underwriting is slipping. There is some proforma based lending , and quality of the sponsor is totally out the door. I am watching some really bad actors get big loans from some very smart lenders. The lenders are making the same old mistakes of believing their docs are solid and their collateral position is good. They forget that the bad guys do not care what the docs say and when the balloon bursts, the collateral is worth a lot less than they thought. Based on my own experience as a plaintiff and as an expert witness, I have watched how no matter what the docs say, the bad actors will lie and their lawyers will swear to it. They will concoct interpretations of clauses that nobody ever imagined, but they will use this as an aggressive litigation strategy to force a settlement so they view it as investing in lawyers to bet a much bigger deduct in what they owe as the return on investment. In the end if the case goes all the way as I pushed mine against Stan Thomas, the good guys win, but 95% of cases settle and that is exactly what the bad guys count on.