Blackstone IPO Is a Must-Miss

You can learn a lot about the state of the stock market from the popularity of a bad deal.

And since the proposed initial public offering by the Blackstone Group is a very, very, very bad deal for investors -- though one that I expect to be hugely popular anyway -- I believe investors are about to learn a great deal about this market.

What are we likely to learn? That we're witnessing the end of the cheap-debt era that has provided so much support for stock prices. Equities, which have been along for the ride, are going to have to start carrying more of their own weight -- and that's not good for stock prices in general.

Let me start by telling you why this is such a bad deal for investors, and then I'll explain why it is a bad sign for stock prices in general.

Hot Cakes

Here's the outline of the deal. The Blackstone Group, a private investment group with almost $80 billion in assets under management, has filed to go public.

Those assets broke down this way on March 1, according to the group's filing for a potential initial public offering: $31 billion in private-equity funds that do buyouts of public companies, $18 billion in real estate investment funds, $17 billion in funds of hedge funds, $7 billion in senior-debt investments and $6 billion in hedge funds that invest in distressed bonds, stocks, near-equity debt (called mezzanine debt) and closed-end mutual funds.