Kass: Private Equity Is the Next Shoe to Drop

Worse yet, many of those investors now face capital calls to support poorly structured deals in which cash flows are now hemorrhaging in a deteriorating business backdrop. Importantly, these capital calls will result in a crowding out of inflows into other alternative strategies -- for instance, last week Calpers announced that its private equity calls will result in lower commitments to other hedge fund asset classes.

Based upon the new economic/credit realities, it is not surprising that the shares of publicly traded private equity shops are now priced at hat sizes.

Don't be tempted by their large share price declines in 2007 and 2008; they are value traps.

And for investors in private equity deals that were put in place over the last five years, the outlook is even worse, as they are generally illiquid and only now are beginning to be marked down in price.

Private equity will be the next shoe to drop.

But, hell, maybe the Treasury Department will save them, too!

Doug Kass writes daily for RealMoney Silver, a premium bundle service from TheStreet.com. For a free trial to RealMoney Silver and exclusive access to Mr. Kass' daily trading diary, please click here.