Sweat a Private Equity Bubble Later

This column was originally published on RealMoney on Nov. 17 at 8:36 a.m. EST. It's being republished as a bonus for TheStreet.com readers.

The bubble in private equity isn't really a bubble ... yet. We've had a massive number of deals, that's for certain, and I am convinced that a lot of the properties being bought are in secular decline or face tremendously difficult competition and a changing landscape. Radio's dropping like a stone. Print magazines are severely challenged. You can't get excited about a hospital chain when hospital pricing could come under attack from the Democrats -- certainly more than pharma, even though pharma gets all the print.

But a plethora of deals isn't a bubble. A plethora of deals at high interest rates is, and the rates at which these deals are occurring are so low that the deals most likely can work, as the Hertz(HTZ Quote) deal shows.

Hertz is quite instructive because the two things that would 1. create a bubble and 2. have it burst are higher rates and a unforgiving exit strategy. The fact that Hertz was able to pay a dividend to the firm that bought it and come public, because for now the public will buy anything, says it is way too early to fret. We also had two other deals that busted in recent memory, Sealy(ZZ Quote) and Burger King(BKC Quote), and no one seemed too perturbed by those.

As long as rates stay down and the market is dumb enough to take the paper -- bonds and stocks -- it is not prudent to worry about this. Remember how I view the world: There is always a sense that it is prudent to worry. I fret about opportunity costs and bubbles. If you missed the run-up in Toll(TOL Quote) and Lennar(LEN Quote) and Centex(CTX Quote) because you were worried about the bubble, you didn't get the performance you should have.