Thursday, July 31, 2014

Carlyle Hits Record AUM: Over $200 Billion

Pensions & Investments reported:

Carlyle Group reported $202.7 billion in assets under management as of June 30, a 1.9% increase from three months earlier and up 12.4% from the previous year, in its second quarter earnings report released on Wednesday.

In February 2000 Carlyle had a mere $3.3 billion in AUM.   Carlyle grew by $88.2 billion during the George W. Bush Presidency, before falling $5.4 billion during the 2008 financial crisis. 

The Obama White House saw Carlyle grow another $111.2 billion.  Politicians Red and Blue love PEU (private equity underwriters).

Monday, July 28, 2014

Ex-GM CEO Akerson Testifies to Detroit Free Press

Former GM CEO Daniel Akerson, currently with longtime employer The Carlyle Group, finally spoke on GM's ignition switch debacle.  However it was not under oath to a Congressional committee.  Here's what he said:

Had he testified before Congress on the ignition switch recalls, he would have said: “I’ve been here 3½ years. I’ve had a raft of problems every year, and we addressed them straight up and don’t blink and we try to solve them.”

That's not answering his knowledge of the problem under a legal oath.

Akerson said because he was a relative newcomer at GM, he may have gotten fairer treatment from Congress if he still had been CEO when the ignition switch crisis came to light.

“I think it would have been easier for me to defend the company, because quite frankly I thought Mary got treated a bit unfairly by virtue of, ‘You’ve been with the company 30 years. Why didn’t you change things?’ ” Akerson said.

“I could have said, ‘Hey, look, we had to change 30 things. This one dates back to eight, 10 years ago.’ It’s a little unfair, but life isn’t fair, and you own the problem.”

Akerson's tenure is roughly half of eight years and one third of ten years.  It's not credible that an engaged CEO would be ignorant of such a critical issue, especially if he modeled problem solving by facing issues straight up without blinking or blaming the messenger. 

Carlyle went to great lengths to protect their good reputation in the cases of LifeCare and SemGroup.  I imagine word got around an Akerson led GM not to bring the boss bad news.  Fear and other extrinsic motivators cause huge quality problems.  

The automaker’s recent ignition switch recall crisis shows that problems with GM’s corporate culture were far more serious than executives realized.

Akerson's abdicating his role in shaping corporate culture fits with his CEO ilk. 

“Managers are the day-to-day interface with employees and the carriers of culture.  Unless they are effectively and properly trained, organizations will struggle to meet their top training objective of building an ethical culture.”

It's easier to blame complacent employees for abject leadership failures.  "The buck stops here" is long gone in our PEU world. 

Sunday, July 27, 2014

USAID to Help Young Biden: The Burisma File

Economic Policy Journal reported:

Senate Bill 2277 "directs the U.S. Agency for International Development to guarantee loans for every phase of the development of oil and gas" in Ukraine, Moldova and Georgia.

A key player in this exploration is Vice President Biden's son, Hunter, recently appointed to the board of Burisma, a private Ukrainian oil and gas company.  How many Ukranians, which make up the board and management of Burisma, speak like this?

Burisma aims to become the leading independent natural gas producer in Ukraine, by both sales volume and asset base. The Company intends achieve this by monetizing its existing asset base and potentially through opportunistic acquisitions of companies with existing reserves, both domestically and internationally, while maintaining its focus on profitability.
Frankly, it's PEU worthy.  Burisma applauded the Senate move to support Ukrainian oil drilling:

As engagement progresses, we are hopeful that Burisma can serve as a resource for US and other Western leaders to provide needed context and perspective on the Ukrainian market.”

The Blue Team has shown Bush-like ability to overthrow a sovereign government for access to America's global energy resources. 

Ukrainian troopers help installing shale gas production equipment near the east Ukrainian town of Slavyansk, which they bombed and shelled for the three preceding months, the Novorossiya news agency reports on its website citing local residents. 

“Civilians protected by Ukrainian army are getting ready to install drilling rigs. More equipment is being brought in,” they said, adding that the military are encircling the future extraction area." 
Bush, Biden, Baker, and Clintons circle the globe on a mission for private enrichment.  Armies, national budgets and central banks are but tools for them to manipulate.

Next Household Hit: Health Coverage

WSJ reported:

Nearly 75% of employers say the Affordable Care Act will negatively affect profits, according to a survey by Cherry Bekaert Benefits Consulting. Nearly 25% said they are considering eliminating employer-sponsored medical plans because of the law.

Is health insurance the next beating employees face?  The Bush-Obama decade saw median household net worth decline 36%.  Each President served five years of this disturbing period 2003-2013. 

On September 10, 2009 I wrote:

While unstated as an objective, I believe reform sets the table for employers to shed that pesky health insurance benefit.
The nearly 25% may do so sooner, but even an architect of health reform believes most employers will follow.  This gives more credence to my earlier prediction.  The great shedding looms, as opposed to the slow motion one over the last fifteen years.

Employees have been paying more of their insurance premium the last decade.

Will they soon shoulder an even greater portion?   It's highly likely.  It will be interesting to see if anyone tracks corporate ownership of firms dumping employer health insurance.  Will private equity be a leader or laggard in further taking apart the average American?

The Callous PEU Decade

NYT reported:

The typical American household has been getting poorer, too. The inflation-adjusted net worth for the typical household was $87,992 in 2003. Ten years later, it was only $56,335, or a 36 percent decline.

While the middle was dropping top earners soared.  A former business reporter made this observation three years ago.

I have seen so many people -- particularly those in their 50s - 70s -- taken apart by what has happened in their industry as greed has hollowed out the economy. These are people took pride in their jobs and held themselves to this invisible standard that we all just took for granted, but is being wiped out.

How did the greed boys do between 2003 and 2013?  The Carlyle Group grew from $17.5 billion in assets under management to $185 billion.

Median household down 36%
Carlyle Group up 960%
Private equity became ubiquitous during this decade, flipping companies for huge profits.  Not everyone in the business world is a fan.

The Carlyle Group scares me more than anything I've ever seen on Wall Street. It seems to exist to corrupt politicians and it's hard to know who they even represent.

I watched a video interview of (David) Rubenstein and his arrogance is really beyond tolerance. He was going on about the debt ceiling problem and how there would need to be cuts in services and higher taxes. When the reporter asked him about tax on carried interest he turned really disdainful and said that this "only" amounted to $22 billion over some number of years and this was not serious money. Boy, nothing like everybody doing their small part to save the country from oblivion!

However, Congress and the White House are fans.  It's a PEU world.  Politicians Red and Blue love PEU.  As :former Treasury Secretary Larry Summers said, the loyal get their reward from giving their sponsors their way.

Tuesday, July 22, 2014

Replacing Equity with Debt: The PEU Decade

Corporate leaders learned from private equity underwriters how substituting debt for equity can pay off.  Juggling Dynamite reported:

The glaring overshoot of corporate profits as a percentage of GDP the past 5 years has some re-coupling to do.  And when that happens, those owning stocks today valued at 26 times average 10 year earnings, are likely to feel the financial pain of excessive optimism.
The glaring overshoot seems to begin around 2005.  Private Equity Underwriters became ubiquitous the last decade and it appears their methods have spread to corporations in general.

Leverage is a two edged sword and it cut deep during the fall 2008 financial crisis.  Someday it will wound again, sometimes mortally.

Monday, July 21, 2014

Carlyle Group Homeland Security Franchise Adds Palantir Tech Advisor

Monument Capital Group Holding's advisory board reads like a Carlyle Group legends list.  It includes James A. Baker, III, Frank Carlucci, Thomas F. "Mac" McClarty, III and Mustafa V. KoƧ.  Monument Capital added a new Senior Advisor from Palantir Technology, the group that ensures Davos and Bilderberg attendees are kept safe and sound from mere common folk.

Michael Leiter is Head of Global Government, Cyber Operations and Senior Counselor to the CEO of Palantir Technologies. From 2007 to 2011 he was Director of the United States National Counterterrorism Centre. Mr Leiter has joined MCGH as a Senior Advisor. He will work the MCGH team to provide analysis of the changing global cyber security space and help to inform the firms' target market and acquisition strategy.
Here's why there's a need for rocks that spy.  

"We are developing a team of world class experts who have an unrivaled understanding of the pioneering development and application of technology within the fast moving security and data industries. We are one of only a handful of private equity firms focusing exclusively on the global security market and these appointments give us the insight and edge needed to deliver high growth returns." 

Spending on technology and services in the global and national security sectors currently exceeds more than $1.3 trillion globally and is expected to continue to grow in excess of 7% per year.

PEU's go where the money is, hire ex-government insiders to steer strategy and acquisition of government contracts.  Monument Capital wants to make big money off spying.   A younger Thomas Jefferson would be appalled, the older version, not so much