Soros Says ‘Bloodletting’ Yet to Come for LBOs

(Bloomberg) -- Billionaire investor George Soros said a “bloodletting” may be coming for leveraged buyouts and commercial real estate amid the worst slowdown in 70 years. “In commercial real estate and leveraged buyouts, the bloodletting is yet to come,” Soros said today during a lecture organized by the Central European University in Budapest, where he was born. “These factors will continue to weigh on the American economy, and the American consumer will no longer be able to serve as the motor for the world economy.”

Lenders worldwide have logged $1.66 trillion of writedowns on bad loans since the start of the credit crisis in 2007, according to data compiled by Bloomberg. Moody’s Investors Service expects the global speculative default rate to peak at 12.5 percent this quarter as the U.S. and European economies struggle to recover. The rate rose to 12 percent in the third quarter, from 2.8 percent a year earlier, Moody’s said Oct. 6. The global economic recovery is “liable to run out of steam,” and a “double dip” recession may follow in 2010 or 2011, said the 79-year-old Soros.

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Global Crash of 2008 Was Caused by ‘Super-Bubble,’ Soros Writes 

(Bloomberg) -- The global crash of 2008 was caused by the collapse of a “super bubble” that had been growing since 1980, and attempts by authorities to intervene only inflated it further until it exploded, financier George Soros wrote in today’s Financial Times. Super bubbles are caused by a series of smaller bubbles, triggered because markets don’t have a tendency to equilibrium; bubbles aren’t irrational and it pays the investor to join in, if only for a while, and as a result regulators can’t rely on market forces to curb their excess, he wrote.

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