Tuesday, January 31, 2017

Kushner Transfers 666 Fifth to Family Trust

The Real Deal reported:

Jared Kushner sold his equity stake in 666 Fifth Avenue, once the most expensive office building in America. According to a spokesperson for Kushner Companies, the stake was sold to a family trust, but the company declined to comment on who exactly would control it.
“Mr. Kushner’s ownership interests were sold using a third-party appraisal for fair market value to a family trust, of which he is not a beneficiary,” the spokesperson said.

Earlier this month, Kushner’s attorney Jamie Gorelick announced that upon taking the position of senior adviser in Donald Trump’s White House, Kushner would divest from more than 35 assets, selling many of them to either his brother Josh or a trust controlled by his mother, Seryl Kushner.

With 666 Fifth Avenue transferred to the trust of a close relative what will happen to Kushner's stake in Thrive Capital?  The Obama administration couldn't follow White House Health Reformer Nancy Ann Deparle's residual private equity stakes from CCMP Capital Partners health care investments.  The Trump White House appears to have even less attention to detail. 

Kushner's attorney Jamie Gorelick beat a multi-year accounting fraud rap as Chief Operating Officer of Fannie Mae.  Her bonuses totaled $2.8 million during the period of accounting fraud.  She negotiated with the Obama White House on behalf of BP for their 2010 Gulf of Mexico Oil Spew.  The Greed Queen of Disaster is on the Kushner case.  

Update 1-15-23:  A Kushner company biographer called the deal around 666 Fifth Avenue a ticking time bomb. I wonder if the Jamie Gorelick link will surface in the investigation.

Monday, January 30, 2017

Trump's Navy Man is PEU

President Donald Trump nominated Phillip Bilden for Secretary of the Navy.  Bilden is founder of Harbourvest Partners, a private equity underwriter (PEU).  Here's how a PEU qualifies one for Navy Secretary:

“has experience with moving large sums of money which is helpful when filling the Navy budget.”
Refilling the swamp with the Red Team's greed and leverage boys, that's Donald.  

Carlyle Ready to Cash In UniRush

Bloomberg reported:

Prepaid-card provider Green Dot Corp. is in talks to buy UniRush, a smaller competitor co-founded by Russell Simmons, the music industry entrepreneur behind rap label Def Jam, according to people familiar with the matter.

UniRush, which is backed by private equity firm The Carlyle Group, is worth about $150 million, one of the people said.
AltAssets reported Carlyle is shopping UniRush and its RushCard.  Carlyle might be able to squeeze maximum value given all the talk of cashless societies at the recent World Economic Forum in Davos, Switzerland.  

Carlyle invested in UniRush in 2010.  A year later Florida's Attorney General investigated the company for hidden fees.  Private equity firms have long been accused of hidden fees.  It should be no surprise that an affiliate might have been doing likewise.

Poor people did not love Rushcard's tech glitch in October 2015 that prevented users from paying bills or buying gas to get to work.  Dealbook said UniRush set aside $2 to $3 million dollars to refund customers for losses and inconvenience.  Carlyle and UniRush wrapped up this liability in 2016 (Bloomberg):

"agreeing to settle a lawsuit from holders of its RushCard who temporarily lost access to their money due to a system glitch."
Recall Carlyle's reputation as a savvy tech operator.

The Carlyle Group is exiting investments at a rapid pace (yet again).  What will their RushCard reward be?

Update:  Naked Capitalism and Washington's Blog ran stories on the the global cashless society push.

Update 2-2-17:  UniRush will pay $10 million in restitution on top of the $19 million settlement in a class action suit.  I wonder how much of this will hit Carlyle Group limited partners.  Note the MarketWatch story made no mention of Carlyle's ownership stake in UniRush. Reporters need to keep access to the general partners. 

Wednesday, January 25, 2017

Blue Presidential Foundations Taking Different Arcs

The tarnished Clinton brand can be seen by the shuttering of the Clinton Global Initiative, a popular annual gathering of global tamperers.  The Clinton Foundation remains a going concern but it will lose its most visible face.

The rising Obama Foundation intends to build a monument to President Obama's practical years of catering to the insider class, the type of people who make up the majority of his foundation board.  Six members come from the financial world, most are private equity underwriters (PEU).

Naked Capitalism reported on Obama's final gift to the PEU boys, having Fannie Mae and Freddie Mac back private mortgage loan pools.  The very programs intended to help struggling home buyers will backstop billionaire landlords raising rents on the people Fannie and Freddie were supposed to help.  That's been the role of government the last two decades, to protect and serve rapscallion financiers. Both the Reds and Blues played the game hard.

The Clintons' backing down should help the Obama's generate serious donations and possibly a new job for the ex-President.  Will the grateful offer him direct employment or millions in speaking fees like Bill and Hillary?  

Tuesday, January 24, 2017

Warrior Connected to War on Cash?

New Eastern Outlook reported on India's war on cash:  

Overnight, Modi’s government de facto outlawed an estimated 86 percent of all cash in circulation by value. People had 50 days to hand in the notes or they become worthless. Yet the government, despite stating it would issue new, more secure 500Rs and 1000Rs bills, had nowhere near the equivalent value of new notes ready for replacement. They say it may take up to a year to print enough, which means confiscation, de facto. Faked opinion polls with slanted questions done only via smart phone apps of which only 17% of the population has access, claimed that “90% of Indians approve” the demonetization.
Yet it’s far worse. India is an underdeveloped country, the largest in the world in population terms with more than 1.3 billion people. By demanding Indians turn in all 500Rs and 1,000Rs bills to banks, Modi is forcing major change in how Indians control their money in a country high on the corruption scale where few trust government let alone private banks, and prefer to deal strictly in cash or hoard gold for value. Nearly half the population, some 600 million Indians, do not hold a bank account and half of those, some 300 million Indians, lack a government identification, necessary to open an account.

When he presented his shock announcement, Modi pitched it in terms of going after India’s black economy. Soon he shifted gears and was praising the benefits of a “cash-less society” to enable Indians to enter the digital age, appealing to younger Indians, savvy in smart phones and digital networks, to convince the older of the benefits of online banking and consuming. The drastic demonetization declaration was planned by Modi and five other inner-circle ministers in complete secrecy.
It illuminated the United States role in advancing a cashless society:

The Modi cash-less India operation is a project of the US National Security Council, US State Department and Office of the President administered through its US Agency for International Development (USAID).
Astonishingly, the report, prepared for USAID by something called the Global Innovation Exchange, admitted that “97% of retail transactions in India are conducted in cash or check; Few consumers use digital payments. Only 11% used debit cards for payments last year. Only 6% of Indian merchants accept digital payments…Only 29 percent of bank accounts in India have been used in the last three months.” The US and Indian governments knew very well what shock they were detonating in India.
The Global Innovation Exchange includes such dubious member organizations as the Bill & Melinda Gates Foundation, a major donor to the Modi war on cash initiative of USAID. It also includes USAID itself, several UN agencies including UNICEF, UNDP, UNHCR. And it includes the US Department of Commerce and a spooky Maclean, Virginia military contractor called MITRE Corporation whose chairman is former CIA Director, James Rodney Schlesinger, a close associate of Henry Kissinger.
PEU Report recalled MITRE from a 2009 piece pushing Obama appointee Ashton Carter as an outsider, when basic research showed him to be the consummate insider.  At the time Carter was a PEU:

Senior Partner for Global Technology Partners, a defense oriented investment firm. He is also a member of the Board of Trustees of the MITRE Corporation.
Obama's Pentagon Chief was on the board of a spooky beltway military contractor pushing a cashless society.  For seventeen years Ash Carter served on MITRE's board.  Between Pentagon stints Carter joined the Markle Foundation to assist their Economic Future initiative.  The 2014 press announcement stated:

"The addition of Dr. Carter will strengthen our efforts to help Americans at all income levels transition to the economy of the future."
Does cashless fit into Markle's future?  Cashless societies were the topic du jour at the recent World Economic Forum in Davos.  Carter spoke at the 2016 WEF meeting stressing the need for technology and partnerships to keep America and the globe secure.  

Update 1-28-17:  Europe proposed restrictions on use of cash. 

Monday, January 23, 2017

Carlyle Monetizing Affiliates

Carlyle Group co-founder David Rubenstein spoke in Singapore before going to Davos.  The Business Times reported:

"We're trying to sell a lot, and we have sold a lot. We're very judicious in what we buy.  People are paying earnings multiples for companies which are historically high."

"I think when interest rates go further up, as I suspect they will, and the stock market goes down a bit, I suspect valuations will come down, but right now they are not cheap."

"High valuations mean that future returns will be lower. But client expectations have come down."  He noted that a net internal rate of return (IRR) of 15 per cent a year is still achievable and acceptable to clients. This means about 20 per cent a year before fees.
 As private equity returns came down investors adjusted.   Not long ago Mr. Rubenstein dangled 30% return on equity as consistent Carlyle achievements.

Private equity as an asset class has gained favour in the last five to 15 years, and is no longer regarded by governments as harming the environment or harming employee interests.
That because many, if not most, former public servants join private equity firms in retirement.  PEUs populated the last two White Houses, Red and Blue, and Presidet Trump has shown much PEU love.  The Clintons received numerous $250,000 checks for speaking to private equity investors at their annual meeting.

Ex-President Obama populated his foundation with numerous PEUs.  They are ubiquitous and their rise correlates strongly with income stagnation and employee benefit deterioration.  The Carlyle Group jettisoned more than one pension fund, Brintons and RAC, in their drive to buy low and sell high.  I would think that would've harmed employee interests.

Update 1-28-17:  Wall Street and other corporate insiders are also raising cash by dumping stock.

Sunday, January 22, 2017

Media Encouraged to Get in Line

Donald Trump started his term as U.S. President as a billionaire real estate developer (in PEU fashion).

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.
Trump expects the media to serve him.  Businessman Trump did not have to talk to the media.  He could set boundaries as to allowable questions and punish violators with permanent shunning.  I believe that's what the first White House Press Conference was about.  It wasn't really about numbers or counts.  It was about Trump's image.  Those he perceives as tearing him down will feel his wrath.   

Anthony Scaramucci, Trump interpreter at the World Economic Forum in Davos, provided insights:

"He's a counter punching sort of person.  I've never seen him throw the first punch, but boy if you are hitting him he likes to punch back hard."
Donald interpreted his inauguration attendance as a direct reflection of himself, therefore it had to be the biggest and best ever.  Period. The press corp got punched hard.  However bizarre on a mathematical level, Trump is training the press to stay within his bounds.  Members of his team know to give President Trump what he wants.

Here's what I think he was trying to say and if I'm wrong, believe me, my cellphone will be ringing and he'll correct me.  He's a great media coach.  Trust me.  He watches you on television.  He'll tell you what he likes about you, what he doesn't like about you.
Image management to the exclusion of truth is the PEU way.  Part of The Carlyle Group's mission is to protect their good name and that came front and center when Carlyle Capital Corporation imploded.

America elected a billionaire who has benefited from leverage, bankruptcy, tax havens, preferred taxation of partnerships, and keeping workers wages stagnant.

You can take the billionaire out of the tower, but you can't take the towering ego out of the billionaire, President or PEU. 

Trump's Scaramucci Used to Rich Man's Games

White House Advisor Anthony Scaramucci founded Skybridge Capital.  Scaramucci was the only Trump appointee to attend the World Economic Forum in Davos last week.  He described his experience at a Trump rally where he asked a number of supporters what brought them to the event.  Most had lost a job and were struggling to get by.  Anthony acted like he had nothing to do with jobs going overseas and corporate leaders prioritizing capital and fees/compensation over people. 

In 2006 Skybridge formed Skybridge Capital Cayman Ltd..  Ten years later they added another Cayman Islands fund, Skybridge Opportunity Fund Ltd and intended to begin fundraising.

As of September 30, 2016 a six month report for Skybridge Multi Advisor Hedge Fund Portfolios LLC stated:

The Company has analyzed tax positions taken or expect ed to be taken in the course of preparing the Company’s tax return for all open tax years and has concluded, as of September 30, 2016, no provision for income tax is required in the Company’s financial statements. 
Anthony Scaramucci is not a populist but the very person who benefited from preferred taxation for a decade while corporate leaders depopulated the U.S. workplace and gave pittance for raises.  

SEC filings show Scaramucci as an insider for two Skybridge vehicles,  The Skybridge G II Fund lists dozens of investments.  Starting at the top I researched Omega Capital Investors, which has billionaire Leon Cooperman at the helm.  The SEC charged Cooperman with insider trading in September 2016.

The Securities and Exchange Commission charged hedge fund manager Leon G. Cooperman and his firm Omega Advisors with insider trading based on material nonpublic information he learned in confidence from a corporate executive.
The SEC alleges that Cooperman generated substantial illicit profits by purchasing securities in Atlas Pipeline Partners (APL) in advance of the sale of its natural gas processing facility in Elk City, Oklahoma.  Cooperman allegedly used his status as one of APL’s largest shareholders to gain access to the executive and obtain confidential details about the sale of this substantial company asset.  Cooperman and Omega Advisors allegedly accumulated APL securities despite explicitly agreeing not to use the material nonpublic information for trading purposes, and when APL publicly announced the asset sale its stock price jumped more than 31 percent. 

According to the SEC’s complaint, when Omega Advisors received a subpoena nearly a year-and-half later about its trading in APL securities, Cooperman contacted the executive and tried to fabricate a story to tell if questioned about this trading activity.  The executive was shocked and angered when he learned that Cooperman traded in advance of the public announcement. 
Skybridge G II's investment in Omega was relatively minor.  However, the end justifies the means nature of high finance portends Scaramucci will look after his insider class, not the populist group that put President Trump in the White House.

Curse of Cash at World Economic Forum

The World Economic Forum "Future of Finance" session mentioned the "curse of cash."  Panelists discussed draconian negative interest rates and the elimination of large currency bills.  One panelist had this to say:

"One of the wonderful things about financial technology is that it will make everybody have access to financial services and payment systems and credit much more readily than before.  All of that will unfold over the next five and ten years and I think people will be pleased with this.  You won't need to carry a credit card.  You won't need to carry your wallet.  You won't even need to carry your cell phone because everything will probably be through your fingerprint or your eye but we do have greater cyber crime that's likely to occur as well.  A whole variety of things you can invest in now are the things that are going to prevent these cyber crimes.  As you get more financial technology and it becomes a more important part of your life you will find more people trying to get around the system.  I encourage everybody who has some kind of financial tech device to make sure they are protected and make sure they have taken the steps to protect themselves against money being stolen or their identity being stolen.  This is increasingly going to be a big problem in the whole fintech revolution." -- Carlyle Group co-founder David Rubenstein
Which Carlyle Group fintech affiliates are creating the vision Rubenstein painted?  UniRush has the Rushcard and has a stake in several banks, domestic and international.  He said Carlyle and other private equity underwriters (PEU) are investing heavily in fintech.  Trump's Treasury Chief is a former PEU.  In the future I expect Mr. Mnuchin to serve his financial peers vs. the public.

Saturday, January 21, 2017

Family Affair for Davos Future of Finance Session

Two of five panel members pondering the future of finance at the World Economic Forum are related.  Carlyle Group co-founder David Rubenstein is married to Alice Rogoff.  Harvard Economist Kenneth Rogoff is Alice's cousin. What are the odds that 40% of the expert guest would come from the same family?

Friday, January 20, 2017

Thiel Sold Trump & More

Silicon Valley Trump supporter Peter Thiel showed his understanding of what it takes to sell in Davos, Switzerland

Two doors down from the Facebook house, the software giant Palentir has built a party venue with a replica front section of a private jet plonked in the middle of the room.
Thiel backed Palantir protects another annual gathering of global tamperers, The Bilderberg Group.  Palantir is maximally invasive:

Using Palantir technology, the FBI can now instantly compile thorough dossiers on U.S. citizens, tying together surveillance video outside a drugstore with credit-card transactions, cell-phone call records, e-mails, airplane travel records, and Web search information.
How does Palantir protect billionaires in private jets?  Might they be selling populist tracking services.  I can picture the demo:

Video shows Citizen A purchased tar from Home Depot in Lausanne.  They met up with Citizen B who'd bought several dozen goose down pillows and Citizen C who had a gas grill and large pot.  A camera outside the Davos airport showed tar bubbling on the grill and the three populists using a knife to cut a hole in feather pillows.
What lucky Davos attendee got to engage Palantir's private plane counter-populist security features?

Given the fear of an angry populace I'll venture most went to the most severe punishment, the Dynamo feature.

Now that Davos is over Thiel's future includes a possible California Governor run or a Trump appointment as German Ambassador.  The theory is once maximally invasive, always maximally invasive.  We'll see if it holds or requires revision.

Update 4-21-18:  Palantir is above the law according to ZeroHedge

Update 11-11-23:  Billionaire Peter Thiel had this to say about his past support for Donald Trump:

“There are a lot of things I got wrong,” he acknowledged. “It was crazier than I thought. It was more dangerous than I thought. They couldn’t get the most basic pieces of the government to work. So that was—I think that part was maybe worse than even my low expectations.”
And these are the people driving government policies...


Thursday, January 19, 2017

Davos' Lone Trump Man Sells to China Capitalist

Years before President Xi Jinping attended the World Economic Forum Carlyle Group co-founder David Rubenstein lauded China's state sponsored capitalism and opined that only three to four years remained to shift to such a model.

Donald Trump will be sworn in as President of the United States tomorrow.  His lone White House appointee in Davos, Anthony Scaramucci, sold his 45% stake in Skybridge Capital to China's HNA Group Co. and RON Transatlantic EG.  The deal will garner Scaramucci roughly $100 million.

The newly endowed Scaramucci will occupy the Assistant to the President, Director in the Office of Public Liaison position in the Trump White House, which commences in roughly fourteen hours. 

Scaramucci will work with both the US business community and political interests to further the goals of the Trump administration. 
It's more like the office of PEU liaison.  Seeking Alpha noted Trump's propensity to appoint and rely on the advice of private equity underwriters (PEU).  The greed and leverage boys have a direct connection to the White House, which has the PEU lobby encouraged.  

Dream for All Now Dream for One

The annual billionaire gathering of global elites in Davos, Switzerland has a dream.  Large swaths of people expressly rejected the World Economic Forum vision where machines replace people in the workplace, billionaires do deals in $100,000 a day suites, debt is maximized to optimize capital and cash is recalled in favor of electronic transactions, justified by "the poor will like it."

Consider a different dream nearly six decades old: 

"I look forward confidently to the day when all who work for a living will be one with no thought to their separateness as Negroes, Jews, Italians or any other distinctions. This will be the day when we bring into full realization the American dream—a dream yet unfulfilled. A dream of equality of opportunity, of privilege and property widely distributed; a dream of a land where men will not take necessities from the many to give luxuries to the few; a dream of a land where men will not argue that the color of a man's skin determines the content of his character; a dream of a nation where all our gifts and resources are held not for ourselves alone, but as instruments of service for the rest of humanity; the dream of a country where every man will respect the dignity and worth of the human personality. That is the dream..."  Martin Luther King 1961
Eight men control half the world's financial assets.  Add the cumulative billions of others in Davos and the percentage soars to what?  Sixty percent, seventy five percent?

Many voters in the U.S. and Britain reacted to the raw deal they've had in the workplace for decades as executives enriched themselves massively while acting on their belief that workers are dispensable and easily replaced/interchanged.  This dehumanization made it easier to cut benefits and scrimp on pay, mostly to ensure executive incentive compensation was maximized.

Voters reacted to the insider class which traverses between government, corporations and think tanks.  The public glimpsed their boldness and greed in the pursuit of power via John Podesta's e-mails.  Rest assured both the Red and Blue political parties aggressively play this insider game, where the main measure is who wins the election and can steer the federal might and budget toward their sponsors for the next four years.

In the early 1960's Reverend Martin Luther King spoke about injustice, moral, psychological and economic. 2017 has the injustice of criminal Wall Street that serially buys its way out of fraud and market rigging investigations.  The psychology of Davos is "lived excess" by the very insider class that benefited so disproportionately the last few decades.  Fittingly, this week consummate insider Larry Summers pontificated on the plight of the middle class, decimated by corporate flippers.  Long ago Larry promised not to bite the hand that feeds him, no matter how greedy or malevolent.  He's stuck to his word and the rewards have been great.

Contrast Larry's dream of acceptance by the greed and power boys with that of Martin Luther King.  One dreams for all, while the other dreams for one (their self).

Sunday, January 15, 2017

Private Equity Targets Korea

Private equity underwriters (PEU) have Korea in their sights for expansion.

Korean firms that hold a competitive edge against their peers and capability to generate ample cash from running their business are attracting global PEUs. In addition, the weakening Korean won against the U.S. dollar that lowers the prices of company stakes in dollar term is expected to further encourage global PEUs to seek investment targets in Korea.
Ample cash is needed to cover deal fees, rising interest expenses, annual management fees and assure debtholders who may fund the next massive PEU dividend.

What happens when private equity becomes ubiquitous in Korea?  How stagnant will wages have become?  How much will their middle class have shrunk?    

Saturday, January 14, 2017

CGI Closing as Clinton Brand Tarnished

Global tamperers will have one less gathering in 2017.  The Clinton Global Initiative is closing shop.  It had been one of the must attends for the greed and power class.

"Always do your best to do the research and find people that are consistently going to Milken-level type conferences -- CGI, Davos. Anyone who knows those really big brands that cost over $10,000 to [attend] -- they know what they’re talking about.

Twenty two CGI employees will be laid off come April 15th, America's traditional tax day.  The Davos confab will have something else to talk about during this week's World Economic Forum gathering.

Update 9-19-22:  The Clinton Global Initiative is back.  Fall needed a Davos type gathering for deals to get done.

Carlyle to McPEU in China

The Carlyle Group and Citic Capital purchased 80% of McDonald's China business, which has more than 2,400 outlets.  Chinese government backed Citic Ltd./Citic Capital Partners will own 52% and Carlyle 28%.  McDonald's will retain a 20% interest.  The deal is valued at $2.08 billion.

Bloomberg reported:

The McDonald’s transaction is Carlyle’s second-biggest deal in China, trailing only its investments in China Pacific Insurance Group Co., according to a person with knowledge of the matter. The U.S. private-equity firm invested a total of more than $700 million in China Pacific Insurance in 2005 and 2007, the person said, asking not to be identified because the information is private. A spokeswoman for Carlyle declined to comment.
Carlyle's China Pacific investment returned huge profits.  China Daily reported in 2013:

Carlyle began selling its stake in the insurer in late 2010. It earned about $4 billion from stock sales over that time, five times the $800 million it had invested between 2005 and 2007 for a 17 percent stake in the Chinese firm, according to calculations by Thomson Reuters.
Did Bloomberg do Carlyle a favor by invoking the monstrously profitable China Pacific in their piece?  Might the writer get an interview with Carlyle co-founder David Rubenstein in Davos, Switzerland?

Carlyle's news release on the deal stated:

China’s consumer sector is growing rapidly, benefiting from continued urbanisation, an expanding middle class and increasing disposable household incomes
Give the PEU boys enough time and they will reverse the trend.  Private equity's rapid rise corresponds with several decades of income stagnation and American middle class decline.  The greed and leverage boys became far richer while the average person struggled.  More than once Carlyle dumped pension plans when they acquired affiliates.

Five years ago in Davos Carlyle's David Rubenstein predicted capitalism would shift to a China style, state backed model.  China President Xi Jinping will attend the World Economic Forum meeting, the first Chinese head of state to do so.  The annual gathering of global tamperers loves to talk about equality while billionaires do deals at extravagant soirees.  I'm sure Carlyle and China backed Citic are ready for more.

Biden, Kerry Davos Men 2017

Vice President Joe Biden is headed to Davos for the Annual World Economic Forum soiree, as is Secretary of State John Kerry.

The gathering of billionaires is known for its deal making atmosphere.  Those deals have not trickled down.  The general public finally noticed, much to the surprise of the Davos crowd.

“Since the recession, the boom has benefited the upper-income earners and done little for those in the middle or on less."  

"The Davos vision of the world has not delivered a broad-based economic recovery.”
No, but it might get Joe Biden or John Kerry their next gig.  Will either join a private equity underwriter (PEU)?  Biden is a frequent Thanksgiving diner with Carlyle Group co-founder David Rubenstein.  Rubenstein regularly descended on Capital Hill to preserve PEU preferred taxation via carried interest.  The defense started when both Kerry and Biden were U.S. Senators.

Update 1-14-17:  The Speaker's List includes Carlyle's David Rubenstein, Larry Summers, Moelis' Eric Cantor, Bridgewater's Ray Dalio, GM CEO Mary Barra, Dow CEO Andrew Liveris, Honeywell CEO David Cote,  Carlyle JV partner Aliko Dangote, BlackRock's Larry Fink, Bill Gates, Al Gore, Bank of America CEO Brian Moynihan, Skybridge Capital's Anthony Scaramucci, Vista Equity's Robert Smith, WPP CEO Sir Martin Sorrell, UBS Chair Axel Weber, HP CEO Meg Whitman,

Wednesday, January 11, 2017

D.C. Mayor Invites Congress to Toast Carlyle's Rubenstein

Washington D.C. Mayor Muriel Bowser invited Congress to toast Carlyle Group co-founder David Rubenstein as she awards him the key to the city.  As often as Rubenstein visited The White House under Presidents Bush and Obama I thought he had a master key that unlocked any door in the Nation's Capital.

It's America's Government-Corporate Monstrosity, otherwise known as The Deep State, hiding in plain sight.

Tuesday, January 10, 2017

American Branded Global Finance Behind Cashless India

The World Economic Forum, the annual gathering of deal making billionaires, is a sponsor of an America envisioned cashless India

Update 3-3-17:  Some people have caught on to the shift to a cashless world.

Update 12-15-17:  The Carlyle Group acquired a stake in SBI card, second-largest and fast-growing credit card franchise in India. 

Sunday, January 8, 2017

Carlyle Group Helped Jared Kushner, GP for Thrive Capital

The Trump White House stands to embody economic elitism, a primary concern of financially beleaguered voters.  President elect Trump is a billionaire.  His son-in-law Jared Kushner helped Trump get elected.

SantaFe-NewMexican reported:

Kushner has hired a Washington law firm, WilmerHale, to advise him on how to comply with federal ethics laws should he join the White House staff as an adviser to the president. 
Jamie S. Gorelick, a WilmerHale partner who served in the Clinton administration, said that while plans were not final, Kushner was taking significant steps to extricate himself from the family business.
Jamie Gorelick is the greed queen of disaster,having served as Chief Operating Officer of Fannie Mae during a time of fraudulent accounting and represented BP for its 2010 Deepwater Horizon Gulf Oil Spew.  Kushner hired a prominent Blue Team attorney in Gorelick.

He will resign as chief executive of Kushner Cos., and though the law does not require it, she said he would divest “substantial assets.” She did not name them, but Heller said they would include his stake in 666 Fifth Ave.
The Carlyle Group invested $525 million in 666 Fifth Avenue in June 2008 as financial markets deteriorated.

The overheated lending market seized up and Kushner Cos. struggled to repay its considerable loans — and to hold on to 666 Fifth Ave. To the rescue came the Carlyle Group, a giant private equity firm.
Carlyle flipped their holdings for over $1 billion four years later.  Little did Carlyle know the man they helped would get Donald Trump elected and stands to serve as one of his main advisers.

Kushner’s representatives declined to detail his personal financial interest in Kushner Cos.’ properties, and they said he intended to keep his interest in other properties beyond 666 Fifth Ave. He also has a stake, through a family investment vehicle, in a private equity firm run by his brother, Joshua.
Thrive Capital is that private equity underwriter (PEU).  A 2011 SEC document lists Jared Kushner as a General Partner in Thrive.

Private equity exploded under Red and Blue White Houses.  President Bill Clinton set the stage for private equity to thrive with it's repeal of Glass-Steagall.  Clinton privatized the government security check function.  It became USIS and endured a number of PEU purchases and flips.  Presidents Bush and Obama hosted legendary PEU founders at the White House.

As for Kushner's employ:

WilmerHale has concluded that one potential sticking point, a federal anti-nepotism law, is not applicable, though not all ethics experts agree. While the law prohibits federal officials from hiring relatives for agencies they lead, Kushner’s lawyers argue the White House is not an agency and is therefore exempt.  As for conflicts of interest, Kushner would be required to make limited financial disclosures.
If Jamie Gorelick's stance holds President Trump's White House may well employ a PEU owner.  That's degrees beyond an Obama White House official getting a private equity payout, not formerly disclosed.

Washington is the swamp of insider connections and huge financial paybacks.  How ironic that voters who wanted this eliminated could find it ramped up.

Update 1-31-17:  Kushner transferred his stake in 666 Fifth Avenue to a family trust.  As for the Greed Queen Jamie Gorelick, Kushner's attorney, she said Kushner's vast holdings would be sold to his brother Josh or a trust held by his mother.   

Update 3-13-17:  Chinese conglomerate Anbang Insurance struck a deal for 666 Fifth Avenue where the Kushners get $400 million in a $4 billion transaction. 
Update 1-25-23:   In July 2020 CNBC reported:

President Donald Trump’s son-in-law and senior advisor has decided to remain an investor for the time being in real estate tech start-up Cadre, which he co-founded.

PEU New Fund Size Hits Record for 2016

Pensions+Investments reported:

807 private equity funds closed on a total of $345 billion in 2016, up from $328 billion by 944 private equity funds in 2015. Half of the private equity funds exceeded their target sizes. The average private equity fund size was a record $476 million, exceeding the previous high of $446 million in 2007. 
PE fund size's previous reported high was a mere nine months before the September 2008 financial crisis.  Harbinger Carlyle Capital Corporation imploded in March 2008.  Consider the words of two Carlyle co-founders on CCC's failure:

“I’m at a loss to say how the whole market can be wrong about the product at this time and we are right,”Carlyle co-founder David Rubenstein

“Maybe,” Carlyle co-founder Bill Conway wrote, “panic is appropriate.”
One burned CCC investor is financing a $1 billion lawsuit against Carlyle.  The judge's decision is due in early 2017.  As litigation funding is now an asset class of its own the decision will be bullish for one party and bearish to the other.

On the real estate side private funds shifted from equity to debt in 2016.  The Real Deal reported:

Private real estate funds raised near-record levels of capital in 2016, as the industry saw a noticeable shift away from equity investments toward debt.

The global shift toward debt mirrors a trend within New York’s real estate industry. Several development firms have launched debt businesses over the past year, as inflated property prices make equity investments less appealing and cautious banks create an opening to issue loans.
The overall volume of dry powder – or money that has been committed by fund investors but has not been invested in properties yet – rose to a record $237 billion, up from $229 billion in 2015 and $136 billion in 2012. The Blackstone Group’s real estate funds alone sat on $33.2 billion in dry powder as of September..
Debt holders have recourse when equity is wiped out, be it corporate or real estate.  Private equity underwriters (PEU) have been known to force a prepackaged bankruptcy.  Ask the Brintons' family about their experience with The Carlyle Group.  It was distinctly distasteful.

Saturday, January 7, 2017

Trump Refills Swamp with Goldmanders

Presidential candidate Donald Trump's harsh words for Goldman Sachs evaporated after his election victory.  He's now a full fledged admirer of the Goldman boys, having appointed a number to official positions within his looming administration.  Goldman has long prioritized greed over ethics and real people over multiple White House reigns.  Serial criminal behavior results in relatively minuscule fines relative to the size of their fraudulent enterprise.  More Goldmanders are under consideration for the Trump swamp refill.

Update 1-30-17:  ZeroHedge noted same with their Nomi Prins observation.

Update 1-31-17:  Wall Street on Parade did likewise.

Update 2-12-17:  Trump is now worried about it.

Update 11-9-17:  The Trump swamp stinks.

Thursday, January 5, 2017

Trump Tax Cut = Gaming Capital

The Intercept reported on corporate plans should the Trump's repatriation tax break windfall materialize:

Executives are telling analysts at large banks that they are eager to take the money to increase dividends and stock buybacks as well as snap up competitors.
Those are common private equity underwriter (PEU) moves.  Increasing pay/benefits or adding jobs are not high on any list.

Cisco’s CFO Kelly Kramer told securities analyst:

First it would make changes to its debt structure, and then “we would have a blend of actions we can certainly take with our dividend as well as our share buyback, as well as leading flexibility for us to be able to do M&A and strategic investments.”
HP reported a similar interest:

When asked in an earnings call whether HP would use a Trump repatriation tax cut “for a dividend, or to raise the buyback,” the company’s CFO answered “yes” and then extolled the company’s “aggressive” policy on share repurchases.
 Other firms expressed:

CEO of the $2 billion Florida food service company Manitowoc, explained that “of course, we would like to use [it] for industry consolidation purposes” — i.e., buying other companies.

Agilent CEO Mike McMullen explained they’d use the money “for U.S.-based M&A” — that is, mergers and acquisitions — and “situations where we’ve been using debt, such as our share repurchases.”  

Corporations adopted PEU management methods to game quarterly results and maximize executive incentive pay.  Industry consolidation has not produced the benefits projected by expensive economic consultants, many hired by PEU firms.

Housing and PEU bubbles led to the 2008 financial crisis.  The aftermath led to and the eventual merging of housing and private equity, to the bane of many home renters

The last tax repatriation break for corporations, intended to boost employment, occurred in 2004.

Instead they used the money for stock buybacks and increased executive compensation, while the prime beneficiaries actually cut their U.S. payroll.
Private equity was in serious stealth growth mode in 2004.  That year Carlyle Group received $35 million from Texas Governor Rick Perry to add 3,000 Vought Aircraft Industries jobs.  By 2010 Vought's website showed the company reduced 35 jobs in Texas (for a public subsidy of $1 million per job cut).  Somehow Rick Perry took a 35 job cut and turned it into a 29,000 gain with his special economic development calculator.

Private equity underwriters will game the system to their advantage and politicians, like Rick Perry, will distort the most egregious behavior as success.

Oddly, if trillions in capital inflows are competing for corporate buyouts the next PEU bubble may be on its way, courtesy of a huge Trump tax break.

Monday, January 2, 2017

Behind Monopoly Power Stands Private Equity

ProPublica reported:

American industry is more highly concentrated than at any time since the gilded age.
Insider economist Larry Summers blamed this on "monopoly power," missing the impact of private equity underwriters, a chief buyer and integrator of companies.  President Bill Clinton privatized government security checks, which enable The Carlyle Group to profit more than once from its stake in U.S.I.S.   PEUs became ubiquitous the last few decades. 

Mergers peaked last year at $2 trillion in the U.S. The top 50 companies in a majority of American industries gained share between 1997 and 2012.
A common PEU tactic is to buy a company and add acquisitions to it over time. The Carlyle Group's assets under management grew from $3.3 billion in 2000 to $170.2 billion at the end of 2012.  Likely a number of the companies gaining market share over the fifteen year people were PEU owned.

While the impact of this wave of mergers is much debated, prominent economists such as Lawrence Summers and Joseph Stiglitz suggest that it is one important reason why, even as corporate profits hit records, economic growth is slow, wages are stagnant, business formation is halting, and productivity is lagging. “Only the monopoly-power story can convincingly account” for high business profits and low corporate investment, Summers wrote earlier this year.
PEU practices can account for high business profits and low corporate investment. Private equity underwriters prioritize interest, dividends and management/deal fees over capital and human resource investments.  Money is frequently spent on interest expenses several orders higher than pre-buyout levels.  Once cash begins to build it's spun off to PEU sponsors as dividends.

The story highlighted the role of economic consultants in facilitating mergers and buyouts.
Economists who specialize in antitrust — affiliated with Chicago, Harvard, Princeton, the University of California, Berkeley, and other prestigious universities — reshaped their field through scholarly work showing that mergers create efficiencies of scale that benefit consumers. But they reap their most lucrative paydays by lending their academic authority to mergers their corporate clients propose. Corporate lawyers hire them from Compass Lexecon and half a dozen other firms to sway the government by documenting that a merger won’t be “anti-competitive”: in other words, that it won’t raise retail prices, stifle innovation, or restrict product offerings. Their optimistic forecasts, though, often turn out to be wrong, and the mergers they champion may be hurting the economy.
The piece noted the role Jonathan and Peter Orszag have in facilitating deals.   Peter Orszag became Lazard's Managing Director and Vice Chair of Investment Banking in February 2016.  The World Economic Forum highlights Lazard's role in mergers and acquisitions.

Lazard's website shows two pages of deal consulting for The Carlyle Group.

Any merger over a certain dollar size — currently, $78 million — requires government approval. The government passes most mergers without question. On rare occasions, it requests more data from the merging parties. Then the companies often hire consulting firms to produce economic analyses supporting the deal.
Peter Orszag, former Obama OMB Chief, is a good fit for Lazard.  Federal News Radio reported in 2012:

Private equity involvement in the government contracting market has grown during the past few years, with major players including Carlyle Group, Cerberus Capital Management and others buying consulting, information technology and logistics vendors.

Brother Jonathan is Managing Director for Compass Lexecon, the premier economic consulting firm on antitrust/mergers.

At Orszag’s urging, the firm relaxed its conflict of interest rules, according to multiple people who have worked with or for Compass. Now, Compass Lexecon experts can, and do, advise both sides in disputes.  

Compass economists can reach very different answers to the same question, depending on who is paying them.
Compass Lexecon's July 2016 annual letter shows work on behalf of private equity firms.  There a a number of notable items in the company's list of accomplishments.

1.  Compass helped Goldman Sachs go free in September 2015 on bad RMBS investments from 2006-2007.  Goldman settled with the Justice Department for $5 billion "related to Goldman’s conduct in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2005 and 2007."

Goldman has today acknowledged that, “Goldman received information indicating that, for certain loan pools, significant percentages of the loans reviewed did not conform to the representations made to investors about the pools of loans to be securitized.”
2.  Jon Orszag's Compass Lexecon aided Citigroup with an RMBS settlement.  Brother Peter served as Vice Chairman of Global Banking for Citi at the time of the $1.125 billion settlement.

3.  The ultimate irony was Compass' work on behalf of BP for its May 2010 Oil Spew in the Gulf of Mexico.  They helped BP with Deepwater Horizon Oil Spill Phase III Litigation.  OMB Chief Peter Orszag helped BP's risk management after rig explosion by low balling the amount of oil spewing from the wellhead.

Compass Lexecon was retained by counsel for British Petroleum (BP) to analyze corporate governance issues and the economic implications of the magnitude of BP’s fines under the Clean Water Act (CWA) relating to the Deepwater Horizon oil spill.  BP later settled with the United States.

4.  Compass helped defend PEU Thomas H. Lee's private equity fee abuse case with the SEC.  Naked Capitalism took the other side by asking for public pension refunds.

5.  The firm aided four private equity firms in squeezing more money from the buyout of Dole Foods. Compass Lexeco worked for Merion Capital Group, Magnetar Capital, Hudson Bay Capital Management and Fortress Investment Group, LLC.  Dole and its predecessor United Fruit had a rich history of government assistance, such that President Eisenhower overthrew a foreign government (Guatemala) to benefit the banana grower.

I thank ProPublica for enlightening me on the role economic consultants play in buyouts, the majority of which today have a private equity link.  I believe the insidious connection between the billionaire boys and corporate sponsored government led to the two decade decline in income for the common person and the outsized enrichment for club members, like the Orszag brothers.

A mere decade ago President George W. Bush lectured the world that democracy requires a rising middle class.  PEU power led to the dismantling of America's middle class.   Larry Summers is once again defending the insider club and not listening to "outsiders."

Update 1-15-17:  Nine men have as much money as half the world.   That's a change from 62 men last year.  Wealth concentration continues for the monopoly PEU class. 

Update 1-20-17:  Carlyle co-founder David Rubenstein spoke to WSJ at Davos. 

Update 5-5-22:  The PEU "public pension savior" narrative may burst if one New York Assemblyman gets his wish for PEUs to reveal their contracts and fee arrangements with New York's public pension funds.   

Update 5-20-23:  A judge smacked down Compass Lexecon's economic analysis in an airline competition case.  Matt Stoller has the story.

PEU Sponsored Cylance President Offers Davos Mea Culpa

Quartz offered a confession from a ten year attendee of the World Economic Forum in Davos, Switzerland.  Cylance President Felix Marquardt called the billionaire populated Davos "the good guys."

If educated progressive elites worldwide are serious about sharing the proceeds of globalization in a much fairer way, then we need to not just talk the talk, but walk the walk.
Marquardt's company is sponsored by the greed and leverage boys, who love to buy companies with government clients and ones they can cross sell within their holdings.  Cylance fits both bills.

And the fact that some of Cylance’s clients are in Blackstone’s portfolio was one of the reasons why the PE and venture funding icon chose to invest in it.
Will Felix rub elbows with other "progressive elites" like KKR's Henry Kravis or Blackstone's Stephen Schwarzman at Davos?   Davos has been the place for deals that decimated the middle class the last decade.  Machine intelligence Cylance has at least four PEU sponsors as a result of such deals.  There are few signs that is changing as the global economy turns to machine employment vs. actual people.. 

Sunday, January 1, 2017

It's a PEU New Year!

Billionaires will gather in Davos, Switzerland later this month for the annual World Economic Forum meeting.  Private jets will swarm the Swiss Alps and the lucky ones will safely settle in hangars.  The unlucky will have to drop off their star passengers and spend the night elsewhere 

The Federal Council has also imposed security restrictions on the airspace over Davos to safeguard air sovereignty. 
The Swiss people will go all out to protect the Western globalist ruling and corporate elite:

All cantons in Switzerland make personnel and equipment available for maintaining security and for protecting people and property as part of an inter-cantonal police operation. The Federal Assembly has also authorised the deployment of up to 5,000 armed forces personnel for civil support duties to assist the canton of Graub√ľnden.
Anyone trying to enter Davos will undergo scrutiny:

Precautionary personal, vehicle and baggage checks will however be carried out on all access roads. The primary concern is to prevent any dangerous items, such as firearms and other weapons from being brought into Davos. The checks are intended to protect people attending the conferences, residents and visitors. The Graub√ľnden authorities guarantee that the checks on access routes to Davos will take place quickly and without harassment. However, delays at checkpoints remain possible
The Davos elite are the mix of political and corporate power that have undone so many the last few decades. Inequality has been a theme at Davos since 2013.  A symbol of this growing inequality is the shipping container accommodation staff may endure at Davos 2018.  Another symbol is of worsening inequality is CEO vs. employee retirement funding.

It will be interesting to see whose private plane jets out early to attend the January 20 inauguration of President Donald Trump.  Might Trump, himself a billionaire, make an appearance at the World Economic Forum?  Interesting questions as the world becomes less predictable on an event by event basis.  The arc of the greed and power boys winning remains firmly in place.