A good quote has been making the rounds in cyberspace. It comes from a New York Times article about the state of the private equity industry these days:

"They see the handwriting on the wall," said Martin S. Fridson, a leading expert on junk bonds, said of buyout firms. "They're staring into the jaws of hell."

The message is as true today as it was last week when the original article came out. Here are some of the key data points from the piece:

• Blackstone (NYSE: BX) earnings tumbled 89% in the final three months of 2007.
• On paper, Blackstone's CEO Stephen Schwarzman has personally lost $3.9 billion as the price of Blackstone's stock has sunk -- and that loss is even bigger today, as Blackstone's stock continues to fall (as of Thursday morning, it is below $15 a share).
• Banks are saddled with billions of dollars of buyout-related debt they cannot sell, serving as the next possible wave of write-downs after the subprime mortgage debacle. Citigroup, Goldman Sachs and Lehman Brothers are currently holding what some analysts estimate is $130 billion in leveraged loans, or those supporting private equity deals.
• Surveying junk debt offerings since 2002, the analytical firm FridsonVision found that companies taken private tend to suffer more distress than their peers.

Amazingly, a former Blackstone executive claims that no one saw this collapse coming: "'No one saw this kind of outcome,' Michael Holland, chairman of the New York investment firm Holland & Company, and a former Blackstone executive, said of the buyout industry's troubles." It's hard to know what to make of that. Is this statement evidence that at least some bankers believed their own hype, that what goes up never comes down?

But the more practical question is, when are things likely to turn around, or at least hit bottom? Not until the market has fully accounted for the bad debt stuffed into all the corners of the global capital system. And that may take a while. As Hamilton James, Blackstone's president, put it: "Our view is that things will get worse before they get better."

That loud cracking sound you hear is the sound of The Blackstone's Group's (NYSE: BX) Steve Schwarzman's wallet opening to the tune of a $100 million donation to the New York Public Library, according to The New York Times.

That's what it takes, apparently, to rename the main Fifth Avenue landmark building, which will be called the Stephen A. Schwartzman Building when its renovation is completed in 2014. That's pending approval of the landmark commission and the ability to withstand the roar of the chattering classes, which the Times politely referred to as the inevitable "spirited commentary."

Schwarzman has come under scrutiny because though his high-spending habits have been commensurate with the the size of his personal fortune, his charitable giving has not. While he has given more than most people could ever dream of, as chronicled in James Stewart's article in The New Yorker, this major donation to the New York Public Library is his biggest yet.

Stewart notes that Schwarzman's alma mater, Yale, balked at renaming a dining hall after him for an oddly-structured $17 million donation, and the offer was withdrawn. So for any Yalies out there with only $20 million or so to give, that naming opportunity remains -- it will take five times as much to get your name etched at 42nd and Fifth.

Yesterday I predicted that The Blackstone Group (NYSE: BX) would close its first day of trading at $90 a unit. Instead, it's currently trading up a mere 14.9% from its offering price of $31.

It's a bit silly I realize to say that an IPO is disappointing which leaves its CEO worth about $8 billion. But there are a couple of reasons why this modest first day rise bodes poorly for the stock and sector:

As I posted earlier this month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

Despite fears of legislation that would increase the tax that investors pay on the income from Blackstone, the Wall Street Journal reports that investors are clamoring for the soon-to--be publicly traded units of Blackstone's master limited partnership.

Meanwhile, Blackstone is clipping the fees of the advisors who will help take Blackstone public. Bloomberg News reports that the 17 banks taking it public will get a fee totaling a mere 3.6% of their fraction of the IPO amount -- $170 million -- a bit more than half of the 6.2% IPO fee average. But there's quite a bit of trading going on here. By giving every investment bank a piece of the IPO business, Blackstone is assuring that none of their analysts will criticize the deal. And then there's the promise of big fees down the road to help Blackstone finance and close future deals with its $19.6 billion fund. Blackstone paid $571.4 million in such fees in 2006.

It must be something in the water, but Blackstone Group LP's workers produce nine times the profit as their counterparts at Goldman Sachs Group Inc. (NYSE:GS), according to an analysis by Bloomberg News.

Blackstone's 770 workers produced an average of $2.95 million in net income last year compared with $360,000 at Goldman Sachs which has about 31,000 workers, Bloomberg says. This raises some interesting questions about how the market will value the New York-based hedge fund company.

If investors value it like Goldman, it will trade at about 10 times earnings with a market capitalization of $23 billion while a Fortress Investment Group LLC (NYSE:FIG) multiple would value Blackstone at about $29 billion, Bloomberg News says. Goldman's market capitalization is $87 billion and Fortess Investment Group's is $37 billion.

Blackstone, though, will trade at a premium to both companies -- at least at first -- because its performance has been amazing over the past few years.