Is the Sure thing ever Sure?

Today we have been bombarded with the news that EOP has been taken out - LBO by Black Rock private equity fund. $39 billion the largest ever real estate transaction.

The fund was the biggest REIT in the US controlled by Sam Zell he we recently hosted in SA, and I had the pleasure of meeting.

Every single analyst report points to this being great for the REIT sector, even though private equity buyouts have been pretty common this year. The above deal was struck at a "modest" 8% premium to market.

My comments are what enables a private equity fund to pay more than market for a major asset. There is only 1 simple answer its ability to borrow large sums of money. There is no value add through management or technology, it is simply being given a license to go BIG on debt.

Now lets take a look at history; recent and not so recent history has proven that being too leveraged has resulted in blood bathes in times of interest rate volatility and or economic downturns.

Why shoudl this time be any different. I believe the numbers coming out of the US via weak GDP numbers and the yield curve inversion point to a coming recession, or perhaps can we postulate a little more gloomily a depression should the housing bubble burst.

The way things look technically from an Elliott Wave point of view is that I can finally see a clear 5 wave move over the last year which on its own without looking at where it features in the broader wave count, towards a healthy 15 - 20% correction.

As the market commentators shout from the bleechers that this is great for the REIT market, I am not so sure they will be right this time, but then again is the sure thing ever sure?????