Get Ready For Bankruptcies To Explode! - Private Equity is Failing

These last few years, we have been seeing bankruptcies, both corporate and personal, steadily on the rise. And things are about to actually get worse with these bankruptcies due to private equity. Private equity firms are having such a bad year. Earlier this year, they were all in the news. We talked about this here on the channel, about freezing investors' redemption. So if you had money in these companies, you couldn't even take it out if you wanted to, which was a huge red flag because they're worried about the funds collapsing. Well, now we just got a report showing how vulnerable these private equity funds really are. Some of the biggest bankruptcies we saw happen over the past year were companies like Saks Fifth Avenue, Eddie Bauer, Joanne Fabrics, Kmart, and Steward Healthcare. All of those were owned by big private equity firms. That's something that they all had in common. And the reason why that's important is because those private equity firms are on the brink of collapse right now. They own so many companies who are basically failing at this point and they can't offload them to anybody else because nobody wants to buy a company that's failing for the most part without getting it four pennies on the dollar. And if you think about the private equity business model, it's starting to fail as well because what they do is they buy companies using borrowed money. So there's leverage already from day one. Then they attempt to restructure the business and sell it several years later for a profit, or they hang onto it after the restructuring and try to collect the income sometimes. But what we've all seen happen is when they do these restructurings, especially when it comes to food companies, for example, they make the product significantly worse and expect you to pay more for it. They've already seen that doesn't work. But when it comes to service-based businesses or businesses that sell other types of products, just staying relevant can be a problem or making some sort of product or service worse and expecting to charge more. That just doesn't work anymore. In fact, private equity investors now own businesses throughout the entire economy. Things like local dentist offices, hospitals, shopping malls, fast food restaurants, and other major consumer brands. Private equity-owned companies now employ more than 13 million Americans. So the survival of these companies affects real Americans, guys. A lot of people say, oh, let the private equity companies fail. But the problem is they are almost too big to fail now in the sense that they are responsible for keeping so many different Americans employed. Here's a few more examples. You have companies like Dave's Hot Chicken, Two Men and a Truck, School of Rock. Those are all owned by Rourke Capital. PetSmart is owned by BC Partners. Center Lane Partners owns Pyrex. And private equity has purchased thousands of other healthcare facilities, including rural hospitals and even hospice providers and small town dental offices. So there's a good chance that your local dental office or local hospital is owned by private equity and you might not even know it. All these private equity companies were banking on one thing, low interest rates. These companies have been slammed by the high interest rates lately. When interest rates were low, the private equity firms could borrow a lot of money cheaply, purchase companies, restructure them and sell those businesses several years later for a higher price. But the persistently higher interest rates since 2022 have made the debt payments exponentially more expensive and they can't borrow as much as before or as cheaply as before. And they're having trouble selling their companies at the prices they expect. So they're on the verge of losing money. And that's why a lot of the investors wanted those redemptions because you're sitting there watching your share prices go down, but yet your money's stuck there and you can't take it out because the whole fund could collapse. And today I'm walking in downtown Sausalito on Caledonia Street. But these private equity firms now are sitting on a record number of unsold companies. So they have a bunch of companies that they would like to sell, but haven't been able to. And many of these companies have remained in their portfolios for a lot longer, years longer in some cases than they originally intended, because selling them today could force them to accept a disappointing price and probably lose money. I mean, take a look at this chart here, guys, going back to 2001, the amount of companies that these private equity firms are holding onto has absolutely exploded to over 13 and a half thousand across the country. And they're all the different types of businesses that we mentioned earlier. It's not just one sector of the economy, it's everything. And so the biggest concern is that companies who are carrying this much debt could eventually collapse. Sound familiar? But a lot of these companies, they provide jobs to 13 million people. And if these companies were to actually go under, it could hollow out entire towns and communities across America. And basically how they borrow money to buy these companies is the company that they are borrowing for is the company that actually takes on the debt, not the private equity buyer. And that debt can place an enormous pressure on the acquired company's cashflow. That's why you see also when a lot of these private equity firms take over, there's a tremendous amount of pressure to reduce operating expenses and reduce quality and somehow try to increase profit amongst all of that and get ASAP because of the amount of debt that they take on. There's been so many different examples of this in the recent economy, we can't even name them all. These days, it seems like every type of company out there wants access to your personal data. Everything from your credit card company to the AI companies, even your TV is spying on you and watching what you are watching and reporting it back and using your data. And that's why today's video is sponsored by Delete.me. Delete.me is a hands-free subscription service that will remove your personal information that's being sold online. Delete.me's privacy experts remove you from hundreds of data brokers all year long. They remove information like your name, your age, your address, photos of you, email addresses, past addresses, phone numbers, and much more. And the more of your data that's exposed, the more susceptible you are to things like identity theft, scams, phishing attempts, harassment, and doxing. I've personally been using Delete.me for over two years now. They have removed my personal information from hundreds of different data brokers on my behalf. So make sure to get 20% off your Delete.me subscription by joining today using my link in the description down below at joindelete.me.com slash board and arrow, or use the QR code on the screen. And guess what? The more money that these private equity firms pay for any given business, then the more they have to cut expenses or increase prices in order to extract more cash from the business. But clearly this business model is broken. In the 2026 economy with inflation where it's at, people do not have that extra wiggle room to pay more for a worse product. And people have been voting with their wallets, guys. Basically every company that has tried that recently has failed. You've seen McDonald's do it? Failed. Wendy's did it? Failed. KFC, still failing miserably at it, just to name a few. And that's why we can see a ton more, especially corporate bankruptcies moving forward. But if a lot of these corporate bankruptcies actually happen, that guess what? All the people working for them lose their job and that leads to more personal bankruptcies as well. So it's that cascading domino effect. In fact, private equity backed businesses accounted for the majority of large corporate bankruptcies during 2025 and the first half of 2026 so far. And these private equity firms will load up about 50% of the company's total value in debt sometimes. So it's very easy to go belly up with that much debt. And guess what? Debt is going to continue getting more expensive. Why? Because inflation is not going away. Because the treasury market doesn't believe the Fed is going to get the national debt under control ever. And so the treasury yields keep going up, which means the cost of debt keeps going up. So this is basically the worst case scenario for private equity, just like it is for the US government. And then these private equity firms take over and expect people to pay all time high prices for the worst product ever. It just doesn't work anymore, guys. The entire business model is broken. And so on the one hand, these companies need to fail because it's not compatible with today's economy, right? But at the same time, a lot of people will suffer if they do fail, which is kind of similar to the situation we saw with 2008. And that's why they came with the big bailout. That's why they bailed out the automakers and the banks. And we're seeing this all over again. Only this time, the stakes are higher and the situation is much worse. And the worst part about all of this is the workers and retirees of these companies can be the ones left holding the bag. Typical, right? That's what we saw in the 2008 great financial crisis as well. Who ends up holding the bag in the end? The American taxpayer. For all these companies' mistakes and all of their leverage and all of their borrowing that they couldn't afford to pay back, American taxpayers were on the hook. And when it comes to these companies, it's people who work for the companies who are on the hook. Workers lose their jobs. They lose any benefits they might have had. They lose pensions. They lose the contribution to their retirement accounts. The customers of those businesses lose access to stores or restaurants or the service that that business provides. Now, supposedly the government is trying to regulate private equity firms a little more than they are, because right now there's almost no regulation at all. And the argument's always been that, well, it's mainly wealthy people that invest in these companies, but that's not really the case anymore. Even regular people's retirement funds can now be invested in these private equity firms, which is something that a lot of people don't know. But sitting around and waiting for government to intervene is never really the answer, guys. And when they do intervene, somehow, they always find a way to make things worse. So I wouldn't be holding my breath waiting for that to happen, unfortunately. So it's going to be interesting to see how all these companies that are owned by private equity firms are going to fare over the next couple of years. Because with their current business model broken, I don't see how they're going to sell these companies for profits when they're already struggling companies. And the whole notion of increasing prices and making services worse doesn't work anymore. But not every company is doing bad in 2026. We've talked a lot about companies that are struggling. And one of them that's been doing good has been the dollar stores, specifically Five Below. Now, Five Below is a type of dollar store, but maybe a more realistic one where they try to keep all their products at $5 or less. And they've been very good in this economy at getting their customers to come back with new products, viral merchandise, rewards, and making in-store shopping easier than ever. In fact, they're doing so well that Five Below's second quarter net sales jumped almost 23% in one quarter, guys, while comparable sales jumped 14%. And that's the retailer's fifth consecutive quarter of double-digit comparable sales growth. So it's pretty safe to say they are crushing it. And I want to highlight this because not everything is bad news, right? But also it shows that even in a bad economy, there are opportunities and there's money to be made. They also opened 52 new stores, bringing it to a total of 2,022 locations in 46 states. And they're seeing their foot traffic go up. And about 80% of the products at the Five Below store are still priced at $5 or less, which is kind of rare to see these days at the dollar store. That's the biggest joke with the dollar stores, right? Now it's the $5 store, hence Five Below. They were kind of already ahead of the curve there thinking, wait a minute, we're going to have to increase prices because we can't make a profit at these numbers. So Five Below was a pretty good name for their store. One thing that's also surprising about why Five Below is doing so well, is it's in categories that pretty much are discretionary spending, guys. Things like collectibles, beauty products, candy, Pokemon merchandise, toys that go viral on social media. Basically, nobody needs any of those things. You can argue that beauty products are a necessity. Women need beauty products. But all the other stuff is just stuff that no one needs. And this has also led to a situation where Five Below's stock price is up 31% over this past quarter. They're also raising their outlook for future sales. On the contrary, when we're talking about companies like Walmart, America's largest retailer is going down right now and they sell a lot of cheap products. But in some cases, it's just not cheap enough. They also have expanded how many products they're selling above $5 as well, which I'm sure really helps pad those profit margins. And it's all about the customer experience, right? If somebody walks into your store and they feel like they're getting a good enough deal on the things they kind of intended to buy, they might be more willing to make that impulse purchase and buy something that costs $20 instead of $5 every once in a while. And that can really make a big difference as we're seeing. And of course, as you all know, the holidays are just around the corner, guys. And I always like to talk about holiday spending and expectations versus reality because basically every year we keep hearing how people are broke, people are broke, but yet all of these retailers claim record sales during the holiday season. So how can both be true at the same time? How can you have more people than ever broke, but seeing these sales hit record highs year after year? Well, according to the latest survey on Americans from PWC, they say that Americans plan on spending 2% less this year compared to last year. They'll spend about $708 this holiday season versus 721 last year. And they look at this as a consumer resiliency, the fact that it hasn't gone down that much. This means that people are being resilient, but actually has gone down, guys, because already it's a 2% reduction nominally. And when you look at the cumulative amount of inflation that we've had over the past year, it could actually be a 10% drop or even further in real spending for consumers this holiday season. So to sit there and say that it means that people are resilient is fake news in my opinion. They say that people are continuing to spend despite high gas prices and the lowest consumer sentiment we've ever seen. And they think that's going to persist throughout the holiday season. But most of that's not even true. We saw retail sales crash in July. And when you factor in inflation, they also crashed a lot more than what people want to admit. But they're using 2025 as the reference because in 2025, with this same survey, people said they planned on spending 11% less on gifts, but ended up spending 6.5% more. So they think we're going to see a similar scenario happen this year, which could very well be true. And you know, it's all going to be based on debt and money that people don't have. We continue to see consumer debt, credit card debt spiral out of control quarter after quarter. You know, I find it fascinating that all of these companies that do these surveys and all these businesses that sell these products and gifts, they continue to expect sales to go up year after year, even though their customers are broke or on the verge of going broke if they go and spend more than they're supposed to. So it's like they continuously want this unrealistic economy to continue forward, regardless of people's finances. They also say that overall, the consumer is employed and they're showing strong wage growth that allows them to be current on their obligations. Like, what are you talking about? This is the COO, Michael Linford of the Buy Now Pay Later company, a firm. Oh, no wonder you have somebody in his position saying things like that, because his company directly benefits from people spending money they don't have. The Buy Now Pay Later firm. To sit there and say that people are employed? Dude, 25% of this country is functionally unemployed. It means they're not working. It means they've been out of work for over six months. It means they are making below poverty wages. How can you sit there and say that people are employed and that wage growth remains strong? In fact, it was in the official news. Mainstream media reported on this just a couple of weeks ago, guys, how wages have been falling below the official rate of inflation. And they have not said that at all up until recently. But then they have this guy sitting here telling you that people still have the money and the economy's strong. I think they're going to continue saying things like this until it's burning to the ground, which I hope doesn't happen. I'm not saying I hope that happens. I'm just saying as like a sarcastic way that they're going to sit there and tell you that things are great basically no matter what until it's 100% obvious to everyone that it isn't. But I think there is a good shot at the holiday sales being higher than what people say it's going to be. Because when you look at the psychology of a holiday shopper, they're buying for their loved ones. And when you go to the store, you're looking for something online. And if it's a little bit outside of your budget, you're likely to buy it anyhow because you want to make that person happy, which it comes from a good place. But people are ruining their financial lives over it, and it's not good. So let me know if you have any concerns about these private equity companies. Let me know what you're planning on doing for the holiday spending. And if you enjoyed this video as I stand outside an empty storefront here in Sausalito, make sure you subscribe to the channel. And if you don't want to wait for my next video to come out, check out this one on the screen right over here, and I'll see you in the next one.