Saturday, June 22, 2024

Carlyle Goes After Mediterranean Oil & Gas

The Carlyle Group's latest energy deal has the private equity underwriter (PEU) acquiring Mediterranean oil and gas assets from Energean.  The deal is expected to close later this year.

Carlyle has done a number of oil and gas deals over the years.  It hired two former BP CEOs, Lord John Browne and Tony Hayward.  Hayward will head up Carlyle's new Mediterranean venture, in addition to serving as Executive Chairman of Carlyle's Colombian onshore energy venture SierraCol.

Hayward headed a cost conscious BP during the Gulf of Mexico Oil Spew, while Lord John Browne slashed maintenance costs prior to the Texas City refinery explosion.  

Carlyle employed Browne at Riverstone and Hayward at SierraCol.  The public can rest easier knowing the two men "got their life back" after their respective horrific disasters.

Carlyle's Mediterranean energy venture will target offshore oil and gas fields.  This is likely a 3D chess move for giant fields off Israel/Gaza/Lebanon and elsewhere in the Mediterranean. 

Thursday, June 20, 2024

Drink from the PEU LP Cup?

Motivation guru Tony Robbins partnered with a firm that sells secondary private equity stakes from limited partners wanting an exit.  That partnership produced the book "The Holy Grail of Investing."  So what's going on with limited partners (LPs) and why do they need to flip their private equity holdings?  There has been a dearth of returns since 2022 and LPs want their principal plus profits.

Axios reported:
Private equity's exit drought has led to a record number of dividend recaps, which is when PE funds pay themselves to kick the debt grenade down the road and into a storm drain
A Bloomberg story echoed the practice.  The issue is PEU asset valuations.  There is a discrepancy between private and public market valuations.

My wise friend offered:
Valuations?  LOL.  There are no principles dealing with principal 
There's more to know about being an LP.

Private equity underwriters (PEU) charge fees on committed capital, not just the amount deployed.  Institutional Investor reported: related to sourcing deals, networking, and preliminary due diligence should be paid using the management fee. According to Preqin’s data, just 8.2 percent of the funds it looked at were compliant with this principle.
My retirement account could fund PEU private jet travel?  Sign me up as extremely uninterested.

"The Holy Grail of Investing" website  offered:

My wise friend recently offered:
Former Fed Chair Alan Greenspan set the stage for the greatest concentration of wealth for the billionaire class via a policy mistake. Wasn't he part of the dream team, the infamous committee to rule the world with the likes of Robert Rubin and Larry Summers? The Champions of removing Glass Steagall 

That foamed the runway so his successors could move the monetary needle to create MORAL hazard passes for the most monied cl-asses. The same conductor that believes self regulating organizations are a good thing to prevent fraud and now all we have is fraud. And the bigger the fraud the bigger the payout. What an era/error? 

When I make mistakes it has a real cost. That's why most of us don't take on terminal risk because we want to fight another day.  Not the billionaire Boy Club. They get to socialize their risk and expand on the backs of many. They knew what they were doing all the time. 

Money is political. There are no Ned Starks, i.e. people that die on their principals, only a lot of little fingers that run houses of ill repute. They will make deals with the devil to get their hands on a bigger piece of the pie. The public be damned.  There is nothing normal about the distribution.  
There are no principles in dealing with principal.

Very well said.  Drink from the PEU LP cup at your own risk.

Monday, June 17, 2024

Bloomberg on Our PEUture

Three Bloomberg stories portend a future of scarcity (Bitcoin), secrecy (private equity) and absurdity (artificial intelligence).  The Bitcoin halving story indicates more electrical power will be needed to mine new Bitcoin.  Great, a non-currency capable of a small number of transactions becomes more inefficient to generate.    

Bitcoin's future is in the hands of the crypto lobby, which somehow arose en masse from FTX's burial crypt to storm Capital Hill.

The Great Huckster said he wants to the Crypto President and have all Bitcoin mined in the U.S.  Flashback to 2019:

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.  Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”
My wise friend noted crypto's use of the private equity playbook, the subject of the second video "How Private Equity Ate Britain."
If you think about it and go back 30 years, the Crypto Industry is using the same playbook as private equity. They used payoffs, consultants, lobbyists, capture, etc. to infiltrate the pension system and this is exactly what Crypto is doing.
It doesn't matter if it's a good asset or not. They want what they want and they'll get it.

My pet name for the greed and leverage boys is private equity underwriter (PEU).  The PEU infestation grew to the point someone noticed and made a Bloomberg video.  It's rather unappetizing.

Private equity has its sights set on professional sports, equity stakes in major college conferences (CVC and the Big12) and virtually anything a consumer spends their hard earned money on.  If you buy or rent it, they want to lever that asset, fee it up long term and flip it for massive gains.  Don't ask them to share their fee structure, it's a bleeping national secret.  

That leads us to our next video, an interview with an early visionary of artificial intelligence (AI).  Jaron Lanier excoriates social media for the damage it's done to individuals and society.  He's optimistic artificial intelligence will deliver something better.  He does recommend people ask AI where they got their information.  Knowing sources helped him understand when AI came in from left field.  

Neural networks learn from trial and error.  The sad thing is AI will learn from politics, a body known for manipulating, distorting and outright unethical behavior.  If the aim is to win, then anything goes.  Given the harms social media has done to society, I have no desire for AI to create a much bigger wake.  

Like Bitcoin, AI is expected to increase demand for electricity.  Rest assured they will lock up electricity at decent prices for a long term.  That leaves the little people to pay the full freight for new infrastructure.  Once again the monied get the subsidy.  The common person is on their own.

FT ran a story on preferred PEU carried interest taxation.

"Private equity firms have amassed $1 trillion in ‘carry’ fees as taxation debate mounts" 
In the US, recent presidents, including Barack Obama, Joe Biden and even Donald Trump vowed to end the special tax treatment but ultimately retreated.

Politicians Red and Blue love PEU and increasingly more are one.  The game is afoot and the worst of us wants to win.

Wednesday, June 12, 2024

Greed Making World Unmanageable

UnHerd reported Twitter founder Jack Dorsey saying social media is robbing us of free will:

“We are being programmed based on what we say we are interested in,” he said. “As we engage and interact with this content, the algorithm continues to build more and more of this bias."
CNET reported on artificial intelligence (AI) and its ability to cause harm:
"AI companies possess substantial non-public information about the capabilities and limitations of their systems, the adequacy of their protective measures, and the risk levels of different kinds of harm," they wrote. "They currently have only weak obligations to share some of this information with governments, and none with civil society. We do not think they can all be relied upon to share it voluntarily."
Among the possible harms: entrenchment of existing inequalities, an increase in misinformation, and the "loss of control of autonomous AI systems potentially resulting in human extinction."
Dorsey shared his concerns about social media manipulation:
"It’s effectively a black box — you can’t predict how it’s going to work or what it’s going to show you.”
And AI is a black box of much greater magnitude.

Dr. Edwards Deming, noted management theorist, stated in his last interview:
Any decision that management makes, that anybody makes for himself or for other people, is prediction. The simplest plan is prediction, with a chance to be wrong. How may I get home tonight? I predict that my automobile will start and run, or that the bus will come, or that the train will come. I make plans. Those plans are predictions. Management is prediction; our lives are prediction. We predict what will happen. We try to choose a course of action that will react in favor of us. That's our aim. We predict the consequence of actions.
Robbed of free will and unable to predict?  There would be lots of suckers to fleece.

And what's being sold to the manipulated masses?  Cryptocurrencies, private equity and AI.  They're all high tech pick pockets and care not if its your wallet or your will.  They may just take both.

Beware the social media bump and lift, the AI fast one, fraud based crypto and the PEU bunco.  What's predictable?  The rich will get much richer, the powerful will become even more powerful as the choreographed dance between them becomes more dysfunctional and distorted. Our leaders have no intention of protecting citizens.  You are on your own.  

Greed is making the world unmanageable.

Monday, June 10, 2024

CEO Pay Nearly 200 Times that of Median Worker's

CNN reported:
The median CEO in the S&P 500 was paid 196 times as much as the median employee in 2023, according to an analysis by Equilar and The Associated Press. That’s up from a ratio of 185 in 2022.

CEO pay — which is closely tied to share prices — is rising notably faster than that of employees. Many workers, in fact, are struggling to keep up with the cost of living.

The annual pay hike amounted to about $4,300 for workers. For CEOs, it was an extra $1.5 million.
The story share legendary CEOs making 510 times to 672 times their company's median salary.  Everything is outsized in our PEU world.

The piece noted employees are likely frustrated over these obscene pay differentials.  At least it didn't call the workers lonely or disgruntled.  

Greed is insatiable.  
Greed is not only associated with immorality and unethical behavior in philosophy and religion, but has also been considered to be a cause of many financial problems and scandals
Share prices....Yes.  Many can recall CEOs cheated by backdating stock options under the "most pure of incentives."

Version One of the scheme had executives changing the date on the option to match the lowest stock price of the period.  Version Two had the stock price manipulated lower on the date of the option grant.

Those under greed's spell will never stop.  An ethical life is its own reward.

Sunday, June 9, 2024

Carlyle to Again JV in UAE?

Carlyle Group co-founder and founder of family office Declaration Partners David Rubenstein met with official in the United Arab Emirates regarding partnerships with the storied private equity underwriter (PEU).  Carlyle, a politically connected PEU based in our nation's capital, was once part owned by an Abu Dhabi based sovereign wealth fund.  
Mubadala purchased a $1.35 billion chunk of Carlyle in 2007 adding another $500 million in 2010.
Rubenstein's history in the country facilitated the exchange of compliments between the parties. 

The First Deputy Ruler of Dubai spoke to their innovative public-private partnerships (several of which have been with Carlyle)..  He highlighted Dubai's business friendly environment and government sponsored growth.  
The Carlyle Group is legendary for taking advantage of both.  It's in their DNA.
Update:  Mr. Rubenstein has yet another investment connection to the UAE.  Paxos, a Dcclaration Partners holding, will offer its yield generating dollar "Lift" stablecoin via the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market.  That deal was announced on Thursday.  UAE is open for greed.

Friday, June 7, 2024

SPEURTS is All the Rage

Private equity underwriters (PEU) are now investing in sports.  What can a 60 something year old billionaire not do?  Take Carlyle Group co-founder David Rubenstein.

He can rap.

Carlyle owned music rights for the most popular singer on the planet.

He is the new majority owner for the Baltimore Orioles.

Carlyle has a stake in the Seattle Reign (women's professional soccer).

The NFL just postponed a vote allowing private equity investments in professional football teams.  

It's coming.   

Since 2019, there have been at least 20 private equity investments in major league sports teams, according to Kyle Walters, associate analyst, private equity at PitchBook. Sixty-two major North American sports teams, valued at $179.7 billion, have “connections” to PE.
The NFL has experience with owners having a greed and leverage background.
Carolina Panters owner and billionaire David Tepper threw a drink on a Jaguars football fan. The NFL is aware of the video.
The English Premier league has a number of storied teams under PEU ownership.  A Chelsea soccer fan lamented private equity's impact on his beloved team and the departure of an experienced coach.

..when Private Equity Demons force reasonable people out of their jobs, the wheels start to fall off. Or get stripped off. 
If it’s possible to mathematically win just enough games that the team is a return on investment, or to buy enough success that everyone shuts up about the brutal backroom dealings that squeeze beloved players out, they’re going to do it. And in the meantime, they’re all so convinced that they’re the only rich smart ones in the room that they’ll blame every failure on someone down the chain. You’ve heard this story before. Most of you have lived it. I certainly have, but I wish I didn’t have to be reminded of it every time Chelsea goes down two-nil to fucking Brentford.

777 Partners, an early PEU buyer of professional sports teams, recently "missed a £250,000 payroll at its British basketball team it owns" (Semafor

Minnesota Timberwolves ownership is the latest PEU battle in the NBA.  The Carlyle Group and Blue Owl Homecourt were "lined up" to provide financing for Alex Rodriguez and Marc Lore but neither came through.  The deal is headed to arbitration with Mike Bloomberg joining the ARod/Lore team.  It remains to be seen if any new billionaire owners will push for a new stadium (with massive public subsidies).

The PEU boys ran Toys "R Us, Manor Care, Steward Health. BeautyCounter and Red Lobster into the ground.  Let's see what they can do for professional speurts in their ceaseless pursuit of outsized profits (profitgasm).   

Update 6-9-24:  Barron's ran s PEU sports story.

As did Global Finance.