Saturday, November 8, 2014

The Sore is Private Equity

Carlyle co-founder David Rubenstein told fellow billionaire Ron Baron at an investor conference:

"In other words, if you have a sore ... you eventually figure out how to live with the problem."

"It's an illness we've been suffering from," he continued. "If we could get rid of this sore, could get rid of this problem, I think the economy would do better." 

Rubenstein referred to dysfunction in Washington, but his words equally apply to private equity.  The rise of private equity corresponds with the decimation of America's middle class.  Many believe the relation is not just correlation. but cause and effect.  Ironically, Carlyle Group is investing in companies that sell to China's rising middle class

Since 2000 PEU greed and leverage spread to other public and nonpublic companies.  By manipulating debt and equity companies dressed up earnings per share, ensuring executives got their absurd executive incentive compensation.

Every industry expects Washington to provide preferred legislation, backstop their failures and enhance their profits.  Washington in turn expects donations, which the big money boys provide.  Mr. Rubenstein is correct about the sore and he is one infectious agent.