Wednesday, January 29, 2014

Beware Bair's Naming to Bank Board


Former FDIC Chair Sheila Bair gifted BankUnited to a consortium of private equity underwriters (PEU's) in the midst of the financial crisis.  After getting $2.4 billion in cash from the FDIC, BankUnited's PEU owners took the bank public a mere year after "saving it."  They stand ready to cash in further.  South Florida Business Journal reported:

BankUnited announced that its largest shareholders would sell a combined 8 million shares to the public in a secondary stock offering.

The Miami Lakes-based company (NYSE: BKU), the owner of the largest bank based in South Florida, said it would not receive any proceeds from the sale of its stock by the Blackstone Group, The Carlyle Group, WL Ross & Co. LLC and Centerbridge Partners.

Oddly, she dinged Tim Geithner's decision to cash in big as a PEU.

Former FDIC Chair Sheila Bair on Wednesday defended ex-Treasury Secretary Timothy Geithner's move to the private equity firm Warburg Pincus, but delivered a backhanded compliment to Geithner in the process.

When asked about the revolving door between Washington and Wall Street during an interview with HuffPost Live, Bair said that some people are actually better suited for the banking world than for policymaking -- and Geithner might be one of them.

"I don't think people should go work for entities they regulated, and Tim didn't, and I have not criticized Tim for that," Bair said.

After making this statement Sheila Bair accepted a board position with Banco Santander. (She already serves on the Host Hotels Board, think Marriott).

Santander values Bair’s experience and knowledge of financial markets in the U.S. where the bank runs retail banking and auto-loan businesses.

Apparently Bair's mirror offers little reflection.  Santander USA's largest shareholders is its Spanish parent and a number of PEU's, including Tim Geithner's Warburg Pincus Private Equity, KKR and Centerbridge (amply enriched in Bair's BankUnited gifting).

The little spat between Bair and Geithner is for public consumption.  Bair enriched PEU's as FDIC Chair and its time for PEU's to return the favor.  

Update 3-16-14:  FT mentioned Warburg's ownership stake in Santander

Update 3-27-14:  Sheila Bair's Banco Santander failed the latest round of Federal Reserve stress tests, as did Citigroup

Tuesday, January 28, 2014

State of the PEUnion


The American History Association approved the nomination of David Rubenstein, Founder, Carlyle Group, as the recipient of the 2013 Roosevelt–Wilson Award. I find it odd that Teddy Roosevelt and Woodrow Wilson took on Robber Barons of their day. Rubenstein certainly fits the modern day Robber Baron as a private equity underwriter (PEU).

An interest in the Declaration of Independence led Rubenstein in early 2013 to Monticello, home of the Declaration’s principal author, Thomas Jefferson. Inspired by his visit, Rubenstein donated $10 million to the Thomas Jefferson Foundation to support projects at the site that could better tell Jefferson’s story.
Rubenstein and Jefferson shared early career idealism and a later obsession with money over those very ideals.   The winners get to write history and that means our times will be PEU authored.

Sunday, January 26, 2014

PEU Jobs Suck Life Out of Youth


Captains of finance can get snarky with one another.  Take Randall Dillard, managing director and chief investment officer at Liongate Capital Management, a fund of hedge funds.  Speaking to students at the London School of Economics Dillard offered advice on working long hours in investment banking.  Dealbook reported:

But he was rather dour on the private equity sector. “Trust me, after eight or nine years you will want to commit suicide,” he said, calling it the “roughest business to do well in.” He managed $22 billion in private equity assets, he said. “I couldn’t go to the movies without feeling guilty.”
I would venture most investment banking, hedge fund and PEU jobs are largely soulless.  There aren't enough extrinsic rewards in the world to fill an empty soul.  It always needs more.  

Saturday, January 25, 2014

Carlyle's Rubenstein Quoted from Davos


While America's Congressional delegation remained mostly silent in Davos, Switzerland, Carlyle Group co-founder David Rubenstein was finally quoted. Bloomberg did a double team on Rubenstein.

Q:  Rubenstein on whether philanthropy is the answer to inequality:

A.  “No. Philanthropy is — we have to remember, philanthropy isn’t going to solve all the world’s problems.  Right now, philanthropy in the United States, people give away roughly — about 2 percent of GDP, so it’s a small percentage of GDP that’s involved in philanthropy.  It’s important, but a small percentage.

Interesting that small philanthropy is an important part of the solution, while "small" taxes from elimination of carried interest is absurd.  Note how Bloomberg reporters help Rubenstein recruit talent away from Wall Street:

Q.  Rubenstein on income inequality and whether it’s fair that talent move from Wall Street banks to Carlyle because of higher compensation, when that money could go to those who have important jobs, like teachers, but get paid less:

A.  “You can always cite examples of how the world would be better off if teachers got paid more money, and teachers should get paid more money.  Probably teachers deserve more money than private equity deserve money, but the system is what it is.  I can’t overnight change the system.  Probably the highest paid people should be interviewers on Bloomberg.
Score one PEU pander point.


The interviewers returned the love to the great philanthropist:

Q.  Could Carlyle be a $500 billion firm?  Are there enough valuable assets to invest in if Carlyle did get to $300 billion, $500 billion?
And visions of billionaire sugar-daddies danced through their heads, especially those sporting North Face or Moncler.

 
But quotable billionaire Rubenstein wasn't done. Dealbook reported:

“You shouldn’t enter college worried about what you will do when you exit,” said Mr. Rubenstein, who majored in political science.  

But the reasoning skills that come with a well-rounded humanities education actually result in higher-paying jobs over time, Mr. Rubenstein said. 

“H=MC. Humanities equals more cash,” Mr. Rubenstein said.
The PEU billionaire speaketh.  Just as he made a fortune from Alaskan natives in the "Great Eskimo Tax Scam," Rubenstein now has his sights set on Africa.

Carlyle did their second African deal, which was announced in the midst of Davos.

J&J Africa is a transport company that also provides warehouses for bulk and container cargo.
Rubenstein went on to offer the next day:

Over the last couple of years people have gotten a lot less worried, but there are always things like black swans that come around,” Rubenstein said in an interview. “I just wanted to make sure everybody remembers that and that we are likely to have some bumps along the road.” 
People have gotten a lot less worried?  The table has been reset to December 2007.  How long before President Obama says "Wall Street got drunk?"

Bonus:  Davos Central site links are below for those wanting to find more Rubenstein:

Bloomberg
Guardian
FT
Reuters
Reuters Davos Live
NYT
Dealbook

For business reporters, no pander - no access to PEU legends. 

Thursday, January 23, 2014

PEU's Harpoon Middle Class in Global Race to the Bottom


Business Insider revealed an essential globalist truth, one repeatedly cited on PEUReport:

Google Chairman Eric Schmidt just gave a "fireside chat" in Davos, Switzerland, at the World Economic Forum.

In the context of talking about global inequality, which Schmidt thinks is partly the result of technology and is going to get worse before it gets better, Schmidt revealed a critical truth about the economy that few other successful investors and executives appear to understand (or at least admit):

The stagnation in middle-class wages is not just a middle-class problem. It's an economic problem. And it's one of the main reasons that global economic growth is so lousy.

Right now, companies are so focused on cutting wages — by paying their employees as little as possible and replacing them with technology whenever possible 
I've written many times about the global race to the lowest common denominator on employee wages and benefits, as well as taxes (another priority from the Davos crowd.)  This is from July 2011:

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. 
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!
Private equity underwriters (PEU's) like The Carlyle Group own thousands of companies.  PEU's are so focused on affiliates cutting wages, by employing as few as possible at rates as low as possible, and replacing them with technology (with public subsidies).  Take Brintons, a British carpet maker Carlyle repossessed in 2011.  Carlyle fired seventy people, threatening to move jobs to China.  This was after Carlyle cleaved the employee pension, dumping it on British taxpayers.

Carlyle's billionaires make public policy in our PEU world.  Who thought we'd made progress in the last 238 years?  

A short trip back in time had President George W. Bush and Secretary of State Condi Rice stating democracies require a rising middle class.

Davos is the new Philadelphia, but rest assured, this crew is not leading on my behalf.

Update 3-1-14:  Regional airlines are deep into the race to the lowest common denominator on employee pay.

Update 4-13-14:  Executive compensation is inverse to employee pay.  It continues to grow in super-sized fashion.

Update 8-3-14:  Heaven forbid someone has to live off safety net programs, where the holes get bigger and bigger

Wednesday, January 22, 2014

WEF Sightings: The Blair Stair


Not every global profiteer is on the official invitation list.  Tony Blair makes huge money speaking at private equity underwriter (PEU) gatherings.  Davos 2014 has its usual high number of PEU attendees.  They need people like Tony to garner political access.

“The bottom half of the world’s population owns the same as the richest 85 people in the world.”

Tony works for the 85. 

They need protection. 

Monday, January 20, 2014

Davos 2014's Grand Opening


Carlyle Group co-founder David Rubenstein went from Michelle Obama's 50th birthday party to the World Economic Forum in Davos, Switzerland.  In between many in the U.S. celebrated Reverend Martin Luther King Day.

Descending on Davos are Bloomberg's Eleven, the Congressional Thirteen and PEU's galore.  Let the all nighters begin!

Michelle Obama's 50th PEU


Members of the Government-Corporate Monstrosity celebrated Michelle Obama's 50th birthday at the White House.  They include a number of private equity underwriters:

Google’s Eric Schmidt, Facebook’s Sheryl Sandberg, Disney’s Bob Iger, 32 Advisors’ Robert Wolf, American Express’s Kenneth Chenault, Blackstone’s Tony James, Carlyle Group’s David Rubenstein, Haim Saban, Paul McCartney, Nancy Shevell, Bill and Hillary Clinton. 

I imagine Rubenstein gave a toast at the party.  Did he raise a glass to Carlyle's virtual nonprofit status?  The would be symbolic given Carlyle's rush into healthcare, recently buying a division of J&J and investing in a glaucoma treatment company.

President Obama served this group well in his time in office and should get huge rewards after an obligatory time working for a think tank.  Will Michelle also go for the big money, like Hillary?  

Sunday, January 19, 2014

Western Prince to Profit from African Frontier


Former Blackwater founder Erik Prince has major positions in several firms wanting to profit from Africa's vast natural resources.  Prince started Frontier Resource Group in 2012.  Frontier Resource Group is an Abu Dhabi based private equity underwriter (PEU) with the following mission:

Frontier Resource Group (FRG) is a Private Equity Investment Firm focused on natural resource development in leading edge regions.
FRG typically makes $2mm to $25mm investments in:

 • Management Buyout • Growth Financing • Acquisition • Project Investment • Asset Leasing • Feasibility and Exploration 

Prince's second foray into Africa comes through China, a country with huge natural resource needs.

DVN Holdings purchased Prince's Frontier Services Limited in November 2013.  Their press release stated:

DVN acquired Frontier Services Limited (FSL), an aviation and logistics services company operating in East Africa, from Mr. Prince with the goal of building FSL into the premier logistics, aviation, and risk management provider in Africa.

They liked it so much they turned the whole company over to Erik's vision:

"Over the past five years, China has become the principal foreign investor in sub-Saharan Africa and is expected to contribute at least an additional one trillion US dollars in capital to economic development of the continent during the coming decade," Mr. Ko explained, "hence the demand for 'secure logistics' in Africa can only increase and offers superb business prospects."

Mr. Ko added that given such compelling business reasons and Mr. Prince's proven track record in the logistics and security fields, "The DVN Board of Directors believe it is in the interest of the company's shareholders to align the DVN business strategy more closely with Mr. Prince's vision, to entrust him with the role of chairman, and to grant him stock options in the amount of 9% of the company's outstanding shares."
Crisis creates opportunity, especially for PEU salesmen.

"I'm confident if we had been on the job in Benghazi, Ambassador Stevens would still be alive," Prince said.  November 

A Western Prince will lead Chinese businessmen in offering protection for those taking Africa's natural resources.   Consider it colonialism with a modern PEU face, one framed by greed and revenge.

Saturday, January 18, 2014

Bloomberg's Super Bowl Sized Team Descends on Davos


Bloomberg's team of eleven will need to play offense and defense at the World Economic Forum in Davos, Switzerland.  Four long days of:

The elite meet to greet, and ugly moments happen. The exhaustion of all-nighters clicks in on Thursday at 11:24 p.m. And yes, there is a tangible out-of-touchedness.

I search for a more current theme.  It has been the Davos of Our Discontent, Bewildered Davos, and Davos Disruptive.

Big vision and “transformation,” bow ties, snow boots, Swiss francs, Alka-Seltzer, profound thoughts …

Bloomberg's Eleven will compete with Fox News' Money Honey for the right to pander to private equity underwriters in attendance.  These generals of captains of industry flip their corporate equity and debt positions for monstrous gains.  News sources, including Bloomberg's Billionaire Editor, will toss softball questions.  This provides PEU giants the opportunity for sales talk, sometimes characterized in hindsight as puffery.  The big money boys are in Davos to do deals.   

For those who believe Bloomberg conducts impartial PEU journalism, consider the words of a former Blooming reporter:

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.

They also can be judged by the company they keep.  Party on Bloomberg machines!

U.S. Public Officials at Davos


U.S. taxpayers should know that a number of their government representatives and public servants will travel to Davos, Switzerland this week for the World Economic Forum 2014 meeting.

The U.S. Economic Outlook - January 23 from 5:30 pm to 6:15 pm
Treasury Secretary Jacob Lew
Commerce Secretary Penny Pritzker
U.S. Trade Representative Michael Froman

The Big Brother Problem - January 22 at 10:30 am
Senator Patrick Leahy (D-VT) will talk alongside Peter Thiel's Palantir Technologies CEO Shyam Sankar.

The Future of U.S. Power - January 24 at 11:00 am
Senator John McCain (R-AZ) is one of three speakers moderated by a BBC representative

The Drugs Dilemma: Consequences for Society -January 23 at 2:45 pm
Texas Governor Rick Perry (R) is part of a five person panel moderated by a Univsion anchor.

Rethinking Global Food Security - January 23 at 9:00 am
USAID Administrator Rajiv Shah will moderate a five person panel

Davos holds many private sessions for members of the Government-Corporate Monstrosity (those with money/connections).

Rep. Eric Cantor (R-VA) is not on the public list of speakers.  Cantor’s office declined to share details about what the No. 2 House Republican plans to address this year at the forum.

The following Red Team members will be at Davos:

Senator Rob Portman (R-OH)
Senator Bob Corker (R-TN)
Representative Patrick McHenry (R-NC)
Representative Mario Diaz-Balart (R-FL)
Representative Kay Granger (R-TX)
Representative Jeb Hensarling (R-TX)
Representative Darrell Issa (R-CA)

Blue Team members going to Davos include:

Senator Claire McCaskill (D-MO)
Representative Chris Van Hollen Jr. (D-MD)
Representative Carolyn Maloney (D-NY)

I expect the American people to get very little of value from these people attending the annual meeting of global tamperers. We'll see what they say, if anything about their trip and travels. 

Note:  The Government-Corporate Monstrosity (GCM) is President Eisenhower's Military-Industrial Complex on trillions in federal steroids.  Exposing it causes the GCM to break into roid rage.

PEU Players at Davos Include The Bain Ten


The "complete" list is out for this year's World Economic Forum, only this meeting of global tamperers always has an unpublished list of participants.  Those people may come to light in the glare, glitz and partying at Davos.  Many private equity underwriters (PEU's) will be in Davos, including:

Al Gore - Double PEU with Generation Investment Management and Kleiner, Perkins, Caufield, Byers

Anthony Scaramucci - SkyBridge Capital

The Bain Ten - best viewed in the image below:


Bono - Elevation Partners

David Rubenstein - The Carlyle Group

George Soros - Soros Capital Management

Stephen Scwarzman - Blackstone

Larry Summers - Studied PEUs and watched their back in financial reform post the 2008 financial crisis.

Orit Gadiesh -  Chair of Bain and Company

Paul Singer - Elliot Management

Peter Thiel's Palantir Technologies CEO which specializes in spying via massive secret databases.

Mason Capital Management has two attendees.  Consider their WEF description:

Mason Capital is a US$ 8 billion event-driven hedge fund that combines deep fundamental analysis with a hard catalyst and a global perspective. 

Event driven, global perspective.   Is there a better place than Davos to source global tampering events?



What would a meeting of the monied and powerful be without a Clinton?  The question is how many will show up.  My money is on Bill, Hillary and Chelsea appearing.  They love the limelight, they love to boogie...

Update 1-19-14:  I missed a number of PEU's going to Davos.  CVC Capital Partners has two attendees, co-founders and co-chairmen Steve Koltes and Rolly von Rappard.  CVC has $20 billion to put to work, according to FT.  The article identified factors contributing to increased deal costs and further bubble stress:

The insufficient supply of new deals means competition will be intense, said Graham Elton, head of Bain & Company’s private equity practice in Europe.
“The deal supply and demand imbalance has become something of a fixture, inflating prices,” he said. “Corporate buyers with large cash piles and a need for growth are coming back on the scene, creating yet another layer of competition for quality assets.”

Perry, Kerry, Lew and Banksters Headed to Davos for Deals


CNN reported:

U.S. Secretary of State John Kerry will attend Davos and deliver remarks on "the United States' commitment to and engagement in the Middle East region," according to the State Department.


Gov. Rick Perry of Texas will attend according to a public list obtained by NYPost.  This follows Perry's attendance at The Bliderberg Group meeting in Istanbul, Turkey.

NYPost reported on banksters going to Davos.   

The big-bank CEOs are well represented with Goldman Sachs’ Lloyd Blankfein, Jamie Dimon of JPMorgan Chase, Morgan Stanley’s James Gorman and Brian Moynihan of Bank of America.

Reuters reported:

Central bankers Mark Carney, Mario Draghi and Haruhiko Kuroda and U.S. Treasury Secretary Jacob Lew are also taking part, as well as IMF chief Christine Lagarde and World Bank boss Jim Yong Kim.

It's a special week for global tamperers.

Tuesday, January 14, 2014

Carlyle Group's Rubenstein Gives PEUpdate

Carlyle Group co-founder David Rubenstein made numerous news stories early this week.  The famous private equity underwriter (PEU) was:

1.  Appointed to the new advisory board at Duke Kunshan University.  The new university will open in Fall 2014 and is a partnership Duke, Wuhan University and the city of Kunshan.

2.  Named a headline speaker at The Venture Capital/Private Equity Underwriter Club, a student club at Harvard Business School, will hold its 20th Annual VC/PEU Conference February 9, 2014, on the Harvard Business School campus in Boston.

3.  Had a message for all the young people on Wall Street concerned about burning out on long hours.  "If you love what you do, it's not 'work'" - Carlyle's David Rubenstein, on banking interns' workload.  Did he later add? "If it's not work, then pay becomes a non-issue." 

4.  Said on CNBC's "Squawk Box", "Things are not cheap. Right before the recession in 2007 and 2008, the average EBITA [earnings before interest, taxes and amortization] multiple for a buyout was 9.7 times.  It went as low as maybe six or seven times a couple of years after the recession.  Today, the average EBITA multiple for a buyout is back at 9.7 times.  You have to be very judicious looking for things that you can find ways to make 20 percent to 30 percent rates of return."  Rubenstein said activity is accelerating a bit because "financing is readily available ... on attractive terms." That's also a marker of the heady PEU days before the 2008 financial crisis.

5.  Is part of an industry with over $1 trillion in dry powder.  PEU's raised $431 billion globally in 2013.   Large players, like Rubenstein's Carlyle Group, are expected to prevail in 2014.

6.  The Carlyle Group has more than $185 billion in assets under management from 1,550 investors in 74 countries.  Assets per investor = $120 million

7.  "Talked about indicators to watch for in 2014. Rubenstein said after seven years of a recession, the US economy is finally picking up steam, growing about 3%. The US is still the best place to invest, although China remains attractive. He likes the energy and financial sectors in particular. Europe, especially northern Europe is doing reasonably well. Rubenstein expects Janet Yellen to continue Chairman Ben Bernanke's policies when she takes the helm at the Federal Reserve next month as it is the only game in town. He added, the Fed will not taper in large amounts to harm the economy. Finally, Rubenstein said Congress needs to pass the appropriations bill to help the economy grow."

Consider this your Rubenstein PEUpdate for 1-14-14.

Sunday, January 12, 2014

Hillary Clinton Gets 2nd Carlyle Interview


Politico Magazine reported on December 11, 2013:

In Manhattan last week, Hillary Clinton sat down with the Carlyle Group’s David Rubenstein for their second question-and-answer session in the last two months.

Unlike the first one, held for his private equity firm’s investor conference, this was a more public appearance, part of a program honoring the late diplomat Richard Holbrooke at the Metropolitan Museum of Art. Hillary easily regaled the well-heeled crowd with stories from her past before Rubenstein ended their half-hour chat with a joke about her future: Would she be interested in joining a private equity firm?

“Is that an offer?” Clinton asked, laughing as the audience knowingly joined in. She may soon need many things from the titans of finance, but a job is probably not one of them.

The PEU boys are happy to pay her $200,000 per speech as she positions for the Presidency in 2016.  It pays to stay on Hillary's good side as her staffers hold grudges for the disloyal.

Bill Clinton enriched the big money boys while President and they've returned the favor several times over.  Bill frequently pushes PEU positions on aid and taxes.  Beware the Clinton sleaze, which seems to be unending.

Update 3-2-14:  The Daily Star noted Hillary's taking big money in speaking fees from modern day robber barons.  The paper is not in Lebanon, New Hampshire but the Middle East Lebanon.

Update 3-22-14:  HuffPo expressed concern about Clinton's speaking fees.

Congressman Eric Cantor to Join Global Tamperers at Davos

Politico reported:

House Majority Leader Eric Cantor is leading a congressional delegation to Davos, Switzerland, later this month for the World Economic Forum.  The Virginia Republican made the trek to the event in 2013, where he spoke on a panel about “creating economic dynamism.

Cantor’s office declined to share details about what the No. 2 House Republican plans to address this year at the forum.
The World Economic Forum will take up Syria, Income inequality, climate change, health and population growth in its public agenda.  Private meetings at Davos determine the real agenda for global tamperers.  Cantor's "economic dynamism" program from 2013 did not make the public agenda

Others making the Davos announcement include Maria Bartaromo (now with FOX Business News), Huffington Post (going global), Korean singer-rapper Psy, Brazil's President Dilma Rousseff, Iran's President Hassan Rouhani, Japanese Prime Minister Shinzo Abe, Georgian Prime Minister Irakli Garibashvili, Pakistani Prime Minister Nawaz Sharif, billionaire George Soros, InterContinental Hotels CEO Richard Solomons (which has a new hotel in Davos), Korean President Park Geun-hye, World Bank President Jim Yong Kim and World Trade Organization Director-General Roberto Azevêdo.

Israel is sending four leaders to Davos, President Shimon Peres, Prime Minister Benjamin Netanyahu, Finance Minister Yair Lapid and Justice Minister Tzipi Livni. 
 
ManpowerGroup is sending four leaders as well, Chairman and CEO Jeffrey A. Joerres, President Jonas Prising, Executive Vice President-Global Strategy and Talent Mara Swan, and President of Northern Europe Hans Leentjes.  
 
CNN business correspondents Richard Quest, Nina dos Santos and John Defterios, as well as lead anchors Christiane Amanpour and Fareed Zakaria, will provide live daily coverage from Davos.
 
Former Vice President and PEU Al Gore will speak on:

Forces Reshaping our World
Through a powerful visual narrative, Al Gore reveals six forces that are radically changing our planet.
How many solutions to these six forces does Generation Investment Management or 
 
One of those world reshaping forces is American branded Government-Corporate Monstrosity, which will work to enhance its global breadth and control at the World Economic Forum.
 
Dealmakers love Davos and this event will have the creme de la creme.  Expect many more names to be revealed.

Saturday, January 11, 2014

Fran Townsend Lands Two More Board Slots


Frances Fragos Townsed, the author of the hapless Hurricane Katrina Lessons Learned report, had a banner 2013.  Western Union appointed Fran Townsend to their Board of Directors in August.  Western Union is a leader in global payment services.

For Christmas Fran received a board seat with Freeport McMoRan Copper and Gold.  It's odd that incompetence in public service is rewarded with private sector governance positions. 

Frances Townsend is also Chair of the Board of Directors for SAP National Security Services, Inc. and serves on the boards of SIGA Technologies and Scientific Games Corporation.

Five boards and one with a Chair seat, for the person who omitted the hospital with highest death toll post Hurricane Katrina in her woeful homeland security analysis.  I take it this is her reward for loyalty to the club.

Townsend voiced strong views on the NSA issues, arguing that the government needs privacy in order to do its job, and that any objection to what the NSA has done is incomprehensible.
Fran Townsend is a water carrier for the Government-Corporate Monstrosity (GCM), Eisenhower's Military-Industrial Complex on trillions in federal steroids.

The GCM, American branded but global in focus, handsomely rewards club members.  Speaking of such, Davos is just around the corner with its sessions:

The Big Brother Problem
What are the consequences of growing public alarm over personal privacy, data security and the lack of transparency in the gathering of data by public and private organizations? Dimensions to be addressed:
- Regulating ubiquitous data collection
- Balancing security, transparency and privacy concerns
- Building trust in public and private institutions
BBC World Debate: The Future of US Power
Syria, shutdown, Snowden and surveillance: has America lost touch with the world? Dimensions to be addressed:
- Global impact of the inconsistent US political system
- Risks of declining US engagement in the Middle East
- Geopolitical implications of a multipolar world

Might Fran be presenting in either session?  Stay tuned! 

Thursday, January 9, 2014

Carlyle Insurance Brokerage Goes Bi-Coastal


Atlanta Business Chronicle reported:

Private equity powerhouse The Carlyle Group is building a national insurance brokerage firm. And, it's leaning on a 40-year-old Atlanta insurance broker to build that business.

On Jan. 6, The McCart Group of Atlanta was acquired by San Francisco, Calif.-based insurance broker Edgewood Partners Insurance Center (EPIC) for an undisclosed amount.

The Carlyle Group subsequently invested in the combined entity.

The McCart Group, which employs about 115 in Atlanta, provides risk management, property and casualty and employee benefit and personal risk management products to large employers.
McCart will add to EPIC's footprint, which Carlyle plans to grow.  Insurance Journal reported:

EPIC’s strategic plan calls for a dramatic increase in its current $100 million in revenues to $250 million by 2018 and further expansion across the country, according to Derek Thomas, EPIC chief strategy officer.
The McCart Group will add approximately $20 million in revenue to EPIC in 2014.
How many Carlyle affiliates will seek bids from the combined EPIC/McCart in 2014?  Carlyle had BankUnited for affiliates to use until they flipped their publicly subsidized investment for massive gains.  Now they have an insurance broker.  

Watch how employer sponsored health insurance changes nationally for employees and retirees.  How might EPIC/McCart advance the shift to defined contribution health care from employers?  How many retirees will be left out in the cold by large employers via the dump to private insurance exchanges? 

Carlyle reads the tea leaves and invests accordingly.  For Carlyle to profit handsomely seismic shifts are in order.  They like disequilibrium.

Tuesday, January 7, 2014

Bloomberg Pushes Carlyle's Move into Mutual Funds

Bloomberg reported on private equity underwriters' starting mutual funds to garner access to big money.  The individual investor could already invest in Carlyle as a unit holder.  Soon they'll be able to park a chunk of their retirement in a PEUtual Fund.  Let's hope they do better than Carlyle Capital Corporation, which individual investors could purchase on the Amsterdam market.  Flashback to March 8, 2008:

Carlyle Capital Corp. Ltd. (CCC.AE), a listed investment company managed by a unit of private equity firm the Carlyle Group, said it "can and will do better" after losing 30% of net asset value between its July listing and Dec. 31.

Net asset value per share declined to $13.11 at Dec. 31 from $18.65 shortly before the listing, while the stock price has dropped 34% from its $19 offer price to $12.50 Friday. 

Chief Executive John Stomber said in the annual report the company did not fully anticipate the repricing of risk that took place in the second half of 2007, "but we make no excuses for our performance." 

He said the company has taken decisive action to reduce risk, enhance liquidity and preserve the long-term value of shareholder capital
One week later Carlyle declared their intention to put CCC into bankruptcy.  A March 15, 2008 press release stated:

As expected, the Company received default notices from its remaining two lenders and it believes that its lenders have now taken possession of substantially all of its U.S. government agency AAA-rated residential mortgage-backed securities (RMBS). As a result, the Company believes its liabilities exceed its assets.

The recommendation was made by the Board following extensive analysis of the Company’s prospects and careful consideration of other options for continuing the business. The Company will work with the court appointed liquidator to ensure an orderly realization of assets and their subsequent distribution.
What a difference a week can make in the PEU world.  As for Carlyle's sales claims public investors may wish to recall The Carlyle Group's admission of puffery in regard to another investment that imploded.  This news won't be found on Bloomberg.   They need to keep their PEU access.

Update 1-12-14:  InvestmentNews offered an editorial on new PEUtual funds.

Monday, January 6, 2014

Carlyle Pockets Former FCC Chair

Dealbook reported:

The former chairman of the Federal Communications Commission has taken a senior role at the Carlyle Group, the big private equity firm with longstanding connections in Washington.

Julius Genachowski, who was chairman of the F.C.C. until last May, joins Carlyle as a managing director and partner in the United States buyout group, the firm said on Monday. Mr. Genachowski, a proponent of a free and open Internet, will work on investments in the technology, media and telecommunications sectors, including the Internet and mobile.

The last FCC Chairman Carlyle hired was William Kennard.  Mr. Genachowski, who started at Carlyle on Monday, was once an adviser to another private equity underwriter (PEU), General Atlantic. It's a PEU world, where Red and Blue love PEU.

Update 4-21-14:  Genachowski landed a newly created slot on affiliate Syniverse's Board of Directors.

Saturday, January 4, 2014

Mysterious SEC Filing Has Carlyle Group Offering Two Mutual Funds


InvestmentNews reported yesterday morning:

The Carlyle Group plans to launch its first two '40 Act liquid alternatives mutual funds, one a long/short commodities fund and the other a balanced risk global allocation fund similar to risk parity, according to a filing with the Securities and Exchange Commission.
Reuters reported the names of the funds hours later:

Carlyle Group LP is preparing to launch its first two publicly listed mutual funds, according to a regulatory filing by the latest alternative asset manager seeking to offer its investment platform to retail investors in this way.

Carlyle Enhanced Commodity Real Return Fund will mainly invest in commodity sectors including energy and metals, while Carlyle Global Core Allocation Fund will invest across equities, debt, real estate, commodities and currencies using primarily exchange-traded funds, according to the filing published this week by the U.S. Securities and Exchange Commission.

Here's why Carlyle is offering small investors a PEU stake.  


"I do think that the retail investors are just a lot bigger pile of money than all the other piles of money we can get from investors," Carlyle co-founder and co-CEO William Conway told a Goldman Sachs financial services conference last month.


It's about The Carlyle Group's co-founders making the most hay for their 47 million shares.

Curious for more information I sought out the regulatory filing.  It was not on the SEC website under Carlyle Group LP or on Carlyle's website:



OK, it wouldn't be unusual for the filing to be under the specific fund name.  I searched each fund on both the SEC and Carlyle's website.  Goose eggs!



It would be interesting to find out how InvestmentNews' Jason Kephart and Reuters reporters Greg Roumeliotis and Linda Stern got access to the SEC filing, when it is not available to the public. Is it business reporting in a PEU world?

There are very few people out there who will talk and write honestly about private equity. I know from personal experience that the financial press is so eager to break news on "deals" that reporters (who are increasingly compensated on the number of "market moving stories" they write) can't afford to be critical of Carlyle, KKR and Blackstone, and risk losing access to people at those firms.
I can remember Bloomberg's private equity reporter going on TV to talk about the HCA dividend and calling it a "liquidity event." The reporters are trained by the PE firms' PR people to use language that they find acceptable. Wouldn't want to say they're "cashing out." I've never seen anything like it before.
As for cashing out, that's the big pile of money so attractive to the DBD's.  The question is where they'll park the profits?

Update 1-7-14:  No sign of the filing yet.

Update 1-10-14:  No sign of the filing on Edgar.  So much for public information.  Also, no word from Jason on how he got the filing or a link to its location.  However, he did another story which could well help generate interest in PEUtual Funds. 

Monetizing Ezra Explanatory Journalism & Health Deform


Ezra Klein of WaPo's "Wonkblog" wants to monetize his brand, just as health reform becomes a reality.

Although the stated goal of the law was to cover the uninsured, at least 4.7 million insured people had current individual policies canceled that didn’t measure up to new requirements.
Wonkblog reports the four measures that would indicate health reform success:

1.  Are more people covered?
2.  Do people have better access to health care?
3.  Are people getting healthier?
4.  Is healthcare becoming more affordable?
The post puts these answers off, waiting for census data and overall health care spending numbers to come in.  I offer a few observations for those who desire more:

Are more people covered?  The government claims:

Health and Human Services Secretary Kathleen Sebelius told reporters that 2.1 million have signed up for coverage through Dec. 28. That includes the 1.1 million that the White House had announced this past Sunday, who had enrolled through Dec. 24 on HealthCare.gov. There are also 3.9 million people who have been found eligible for Medicaid.

Eligible for Medicaid is not enrolled in Medicaid, making the "6 million people covered" a spurious number.  Until real data comes out on Medicaid enrollment, fewer people under PPACA are covered as of January 1, 2014.

-4.7 million lost coverage
 2.1 million signed up
----------------------------
-2.6 million

Also, Obama issued a waiver for those with canceled policies:

Hundreds of thousands of people whose health plans are being canceled because their coverage doesn’t meet Obamacare rules will be exempt next year from the U.S. mandate that all Americans carry medical insurance.  

Note:  The White House backed away from their prior prediction to enroll 7 million people through exchanges in 2014.

Given many employers are jettisoning retirees from their plans and onto private exchanges, it's not clear more people will be covered.  Many elderly retirees will miss their opportunity to spend hours per person signing up for new coverage.  A number of employers shafted retiree health in the same way pensions changed over the last two decades from defined benefit to defined contribution.  Recall that PPACA provided $5 billion to employers to ensure retirees keep coverage.

Do people have better access to healthcare?   The issue is how many people with new coverage, private insurance and Medicaid, are able to get into a primary care physician practice.  Many physicians do not accept new Medicaid patients into their practice.  Many Medicaid recipients may only have a hospital ER at their disposal, until primary care capacity can be expanded. 

One of the hurdles in getting access is meeting the plan deductible.  Who knew President Obama's health reform would make George W. Bush's high deductible health plans look like gold plated coverage?  PPACA will ensure legions of underinsured people, still at risk for medical bankruptcy. 

After spending hours per person signing up for private exchange coverage by phone, retirees get to navigate complex networks and variable pharmaceutical formularies.  Will they get to keep their physicians and have their existing medicines paid?  It's a PPACA dice roll.

Are people getting healthier?  PPACA's pay for performance will not make people healthier, just as it hasn't improved education test scores or any measure that requires collaboration and knowledge.  It will usher in a new era of fraud as providers lie, cheat and steal to garner the prize.  Think executive stock options, where widespread cheating soiled the "most pure" incentive/reward system.

Is healthcare becoming more affordable?  That depends.  It's becoming more affordable for employers as they continue their longstanding practice of shifting responsibility and costs to employees.  For the individual rising deductibles and co-pays are a larger hurdle for using healthcare services.  This explains the Wonkblog condundrum:

Perhaps surprisingly, these two metrics (overall healthcare spending and citizen opinions on healthcare affordability) don't always add up: Even with health costs growth slowing dramatically. public survey research shows Americans feel even more pinched when it comes to their health bills.

They add up for those who understand the shift of responsibility to the individual from employers and Uncle Sam's pushing exceedingly high deductibles.  It's not a conundrum, nor an unfortunate byproduct.  It's the plan.  Employers will continue to shift responsibility to workers, even jettisoning the plan and paying employees a defined amount to buy health coverage. 

PPACA follows what I've noticed leaders offering in both the public and private sector, complexity, dishonesty about the true aims of their program and ignorance about the heavy losses they cause the people they say they're serving.  I see leaders self-serving, but serving the people?  No way.

Ezra Klein wants eight figures from the landed gentry to fund his next venture in "explanatory journalism."  Sorry, Ezra missed a key cause of PPACA's private sector profitgasm, it's designer Nancy-Ann DeParle.  Did Ezra find Obama's carefully grown Surgeon General nominee?

"Explanatory" refers to why things happened, i.e. it looks backward.  "Predictive" states what will happen in the future based on theory.  I made a number of predictions in 2009:

1.  Reform sets the table for employers to shed that pesky health insurance benefit.
2.  Incentive pay will make things worse
People with knowledge and understanding can make predictions, recognizing that differing outcomes are an opportunity for learning.  My health reform predictions are on the table.

Here's another.  If Ezra raises eight figures from the people who fund the Blue Team, I predict he'll push their memes.

 Mr. Klein has had discussions with several potential investors and venture capitalists in an effort to start the website himself

I don't expect that to be good for the average citizen.  That's what we've gotten the last fifteen years from both the Reds and Blues.   However, it greatly benefited their sponsors, which Ezra aims to tap.

Update 1-29-14:  Ezra will join Vox to start an innovative news site.  I recommend they name it "Wankerblog."

Update 2-17-14:  Private equity is betting on PPACA funding their next profitgasm.

Update 2-24-14:  Becker's Hospital Review listed 19 health care investment areas for PEU's.  These are hardly niche areas.

Update 3-26-14:  NYT ran an article by Ezekial Emanuel under The Agenda:  Why Employers Will Stop Offering Health Insurance."   That was my prediction of PPACA's intent in 2009 when the bill passed.

Update 6-19-14:  It seems House Ways and Means Committee staffers wanted their personal profitgasm.  They weren't content remaking the table for others to make huge profits.

Update 5-22-15:  Rising deductibles have many people underinsured, a new barrier for access to healthcare.

Friday, January 3, 2014

Joe Lieberman PEU


Fortune reported on the latest ex-public servant to cash in as a private equity underwriter (PEU):

Former U.S. Senator and vice presidential candidate Joe Lieberman  announced that he has joined Victory Park Capital, a $1.3 billion firm that focuses on small-cap public companies and mid-market private companies, often at times of distress. Portfolio companies include Jamba Juice, Kabbage and Silver Airways.

Lieberman will be chairman (and the first member) of VPC's executive board, a new group aimed at advising Chicago-based Victory Park on a variety of operational issues facing its portfolio companies. Expect that his focus will be on government and regulatory matters, although he will not directly lobby on behalf of Victory Park or its companies.

"Many of our portfolio companies have to deal with the government, whether they're involved in aviation or oil and gas or food service, and we also have an SBIC fund" explains Victory Park co-founder Brendan Carroll, who once interned for Lieberman while getting his undergraduate degree at Georgetown.

Other Blue team members, from Bill Clinton to Evan Bayh, jumped on the PEU train post public service.  They spent their careers setting up private equity for huge profits and nonprofit status.    

In a prepared statement, Lieberman said: "While in the U.S. Senate, I fought for policies that would allow small businesses to thrive. I look forward to a long-term partnership with Victory Park Capital that will position the firm for continued growth."
Private equity is hardly small business.  But it's what Jolting Joe Lieberman fought for during his PEU sponsored Senate career.  A look at his top PAC donors in 2006 revealed:

Sempra Energy, joint venture partner with The Carlyle Group/Riverstone, donated nearly $130,000 to Joe's campaign.  Bear Stearns, UBS and Lehman Brothers donated a combined $310,000 to keep Lieberman in office.  Two of the three factored greatly into America's financial meltdown. 
Just as Senator Joe positioned the above firms for growth, he'll work his magic on behalf of Victory Park. The Government-Corporate Monstrosity would have it no other way.  Red and Blue love PEU.  Joe's the latest to cash in from his "public service."

Wednesday, January 1, 2014

The PEU Year in Review


Seeking Alpha reported:

Private-equity firms are set to return over $120B to their investors for this year, surpassing the 2012 record of $115B, Cambridge Associates estimates.
The P-E sector has been assisted by low interest rates, which have helped P-E backed companies to sell $66.2B worth of debt in 2013 to fund dividends to their owners, up from $64.2B a year earlier.
The Fed's easy money policies and subsequent stock boom have also been a factor, with a record 94 companies with P-E investors bringing in $33.3B in IPOs.
The high payouts have helped buyout funds raise $143.5B in 2013, the most since 2008.
Blackstone (BX) and KKR (KKR) are among those to have benefited, while others include Carlyle (CG), Fortress Investment Group (FIG), BlackRock (BLK) and Apollo Global (APO). 
Add that the U.S. housing market is back and debt comes nearly covenant free and things look surprisingly like the last PEU boom.   Back then private equity underwriters (PEU's) did club deals to lower buyout competition.  Today's strategy is buying minority stakes in companies.  
With $585B of "dry powder" money to put to use in North America, private-equity firms are increasingly looking to take minority stakes in companies and partner with them rather than buy them outright.
Carlyle (CG) and Blackstone (BX) are among those taking such an approach, with the latter this week agreeing to purchase a 13% stake in Crocs for $200M.
The logic of the strategy is that full deals are expensive, competition for minority stakes is less, the transactions can be custom-made, and they often don't involve auctions.
PEU buying and selling of companies became ubiquitous in the last thirteen years. What luck do they have in store for the average citizen in 2014?  Bubble, bubble, boil and trouble...