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IN THE next week or so, private equity firms will complete their December 31 asset valuations and send their investors letters telling them just how much – or little – the companies they invested in are worth today.

According to guidelines adopted by private equity funds in Australia, individual assets are valued according to a formula that estimates their mark-to-market valuation. With the Australian sharemarket down 14.3 per cent for the year, the equity in several private equity assets will be bordering on worthless, particularly those funds that overpaid for assets in 2006 and 2007 and used mainly debt to pay for them.

In private equity land, it is a case of the weak getting weaker and the strong getting stronger.

This year, the divide will only widen as the private equity cycle comes full circle as funds raised back in 2006 and 2007 and not yet deployed look for a home, assets bought before the global financial crisis need to be flipped and billions of dollars in debt need to be refinanced.

In the past few weeks the emergence of two high-profi…………… continues on Sydney Morning Herald

Everyone, especially politicians, wants a quick fix to one of the biggest ecnomic issues (after jobs); the beleaguered housing market. 

President Obama’s State of the Union speech, or pre-campaign pitch depending on your perspective, touched upon the fun subject of housing.

Buried in the president’s lecture was something about helping homeowners with more mortgage debt than home equity to refinance to loans with lower interest rates. Will it be enough to jumpstart the housing market?

The Refinancing Proposal
The president’s latest proposal to help the housing market focuses on existing homeowners with a mortgage.

According to the president, responsible owners would be given ‘the chance to save about $ 3,000 a year on their mortgage by refinancing at historically low interest rates.’ All borrowers, even those without government backed ones, would be eligible to participate.

The current rate on a 30-year fixed mortgage (NYSEArca: MBB) is a lowly 3.88%, but many borrowers have not been able to refinance their higher rate loans. Nationwide home prices (NYSEArca: XHB) have fallen roughly 40% from their 2006 peak, which has locked out homeowners, who have negative equity. Under the current system, refinancing would require coming up with more capital to pay down the existing loan. 

Where would the money come from…………… continues on NASDAQ