Sunday, November 17, 2013

Carlyle Co-Founder's Cheap Gas: Unique American Advantage

Crain's Business News reported:

Cheap domestic natural gas supplies will lead to a rebirth of American manufacturing, according to a presentation Thursday by William Conway Jr., co-CEO and managing director of the Washington, D.C.-based Carlyle Group.

"Shale has changed everything. We can use this cheap energy to make a more energy-efficient America," said Conway, who recommended investing in companies that provide supplies, such as pipelines, to the natural gas industry, as well as companies that use a lot of energy, since lower costs of operation will lead to improvements in the bottom line.

"The U.S. has a huge advantage over the rest of the world, including China, because of cheap energy costs. And those costs can be sustained. The reindustrialization of America will give us a competitive advantage for a long time," Conway said. 

Under Bill Conway's tutelage United Components shifted thousands of jobs to China under Carlyle Group ownership (2004-2010).

The man who helped deindustrialize America under the siren song of cheap Chinese labor plans to reindustrialize it with cheap gas?  The catch is Carlyle has major investments in cheap gas and any new industrial jobs will need ample public subsidy.

Despite his long-term optimism in U.S. investment opportunities — he likes health care services and medical devices
Carlyle cut its teeth on Uncle Sam funded companies and sees PPACA as one way to make their next killing.  Obama's health reform was led by a former PEU, who returned to private equity after public service.  PPACA's landscape is a PEU paradise

Recall when Carlyle co-founders words come back to haunt them in court, their defense is "puffery."  I consider Conway's talk a different form of cheap gas, a sales call.