Business Blog: Hoover’s Business Insight Zone

In today’s “Ahead of the Tape” column (subscription required), the Wall Street Journal’s Henny Sender writes this:

“The president of one of the largest private-equity firms estimates that without private equity’s demand, stock prices would be 20% lower today.”

Wow. Even factoring in a large grain of salt*, that’s a huge number — and one that could become ominous for the stock market if (or when) the Goldilocks conditions prevailing in the economy turn sour. If, for example, junk-bond financing started to dry up . . .

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* The grain of salt is this: (1) Presidents of private-equity firms tend to be constitutionally averse to understating their industry’s importance in the economy, so this could be wishful talk. (2) Presidents of the largest private-equity firms are, without exception, extraordinarily shrewd. It would make sense for one of them to put out a high number like this — which implies a devastating impact on stock markets if private-equity demand turns south — to chill efforts to, oh, I don’t know, make tax regulations harsher for private-equity firms.