Saturday, July 20, 2024

Vance Man of the PEUple


Vice Presidential candidate J. D. Vance completed a financial disclosure form as a member of the Senate.  His 2023 form is yet to be filed but his 2022 disclosure shows holdings in two private equity underwriters (PEU), Narya Capital and Revolution's Rise of the Rest.  Vance founded Narya Capital and he disclosed that he held limited and general partner stakes in the firm without estimating their value.  

While many citizens struggle with daily finances, Vance had multiple high paying "full time" jobs.  

Consider the following on Narya CapitalSkyNews reported:

Mr Vance subsequently went to work for Revolution, a VC firm based in Washington DC, before launching his own VC firm, Narya Capital, in 2019.

Financial Review reported on Vance's two private equity positions:

Vance was recruited by AOL co-founder Steve Case for a new venture: a $US150 million Washington-based fund that tapped big investors such as Jeff Bezos and Ray Dalio to jump-start young companies in overlooked American cities.

Narya was backed with about $US100 million from Thiel and a cadre of his acquaintances, including former Google chief executive Eric Schmidt and prominent venture capitalists Marc Andreessen and Scott Dorsey.

Surely these heavy hitters require more than 40 hour a week work.  Nope.  Axios reported:

Vance and (fellow Narya co-founder) will continue as advisers to Rise of the Rest, which raised its second fund of $150 million in October.

Vance also holds stakes in Narya affiliates as well as dozens of other private companies.  

Many Narya affiliates are direct or indirect recipients of federal programs.  His next report is due by August 13, 2024.  

J. D. informed his party and the viewing public that he will not forget his roots.  Neither will former Blue Team Senator Kyrsten Sinema, who saved PEU preferred "carried interest" taxation.  

Neither Vance nor Sinema will return to their hard scrabble days.  They swim comfortably in our great money wash.

Politicians Red and Blue love PEU and increasingly, more are one.

Update:  WaPo wrote about tech bros sudden love for Trump and the Red Team.  The Guardian did as well.

A Narya Capital affiliate is helping determine property values for Tom Green County, Texas. 

Friday, July 19, 2024

RNC's Last Day: Thank Heaven

The Red Team national convention closed with a "burn it down" song by Kid Rock before their "burn it down" candidate gave his "unity speech."  

Unity is an invitation to get in line behind a messianic Christian Nationalist and blindly follow him.  It's where there are no Red or Blue states because federal law won't allow state to state variation on issues important to his followers, like reproductive rights.  I still don't know how devoted Christians picked the least demonstrable follower of the Gospels.  They got an Old Testament "two eyes for an eye" kind of guy (because you have to hit back harder).

Former President Trump plans a second American Revolution should he win another term in office.  In this revolution money has free speech rights, the president is immune from criminal prosecution and property has voting rights.

The live forever, amoral tech bros have lined up behind Trump hoping to keep their gargantuan tax breaks. Federal law protects this insufferable group of pinheads from lawsuits from damage done by social media.  A columnist addressing Elon Musk's deleterious impact wrote about the

"...social dangers of endowing self-interested personalities with the money to buy unaccountable influence in conflict with the public interest."

Private equity underwriters (PEU) do likewise.  They've long played both sides of the political spectrum.  Keeping their highly unpopular preferred "carried interest" taxation has been a bipartisan effort.  So how can something the public hates go on for decades?

Once upon a time elected officials struck a balance.  Now they accept checks. 

The Red Team's tent is big, very big, even big enough to incorporate the whole country into their will, or else.  Unity becomes unity by "fight, fight, fight," by imposing one's will  That's the way of a monarch and I don't mean butterfly.

Remember politicians Red and Blue love PEU and increasingly, like J. D. Vance, are one.

The Blue Team confab is next.  

Lord, help us all.

Crowdstrike Delivers Plague Update


The cost of poor quality has worldwide implications as a Microsoft Windows Host update took down critical computer systems.  Crowdstrike delivered the plague update which has shuttered hospital computer systems.

The current self inflicted IT disaster should be a warning.  Can bad actors take the day off?  Nope, they are working to mine the response to the plague update, like post hurricane gas gougers.  

I wonder if AI produced code is in the disastrous"fix."  If not, my guess is that day will come.

Monday, July 15, 2024

Trump's VP Pick Portends PEUnity


Red Team presidential nominee Donald Trump announced his Vice President pick.  It's none other than Senator J.D. Vance, a former private equity underwriter (PEU) with Peter Thiel's Mithril Capital.  Mithril comes from J. R. Tolkein's Middle Earth writings.  It's a fictional metal with the potential for good or evil.  Thiel sponsored Vance in his political run. 

Thiel had given $15 million in total to bolster Vance — the largest amount ever given to boost a single Senate candidate.

So how does a first term senator rise to the VP slot?   By punching hard and raising lots of dough amongst his Silicon Valley bros.  Axios reported:

Vance's crown jewel is a fundraising dinner with Trump in San Francisco on June 6, led by tech investors David Sacks and Chamath Palihapitiya, co-hosts of the hot "All-In" podcast. Tickets start at $50,000.

David Sachs is speaking at the Red Team National Convention.  The Silicon Valley "live forever" bros have counted on Uncle Sam for liability protection for predatory social media.  They've enjoyed the Trump billionaire tax cuts and don't want to see them disappear into the sunset.  They've awakened to Uncle Sam funded disruptive technology, new drug development, fintech, crypto, AI, cybersecurity, electrical infrastructure, education, transportation, defense and anything the government can buy.

I heard a talking news person opine that Vance's appointment opens a Senate slot for Vivek Ramaswamy, another PEU.  

Politicians Red and Blue love PEU and increasingly, more are one.  Trump's bringing PEUnity.  Lord help us all.

Update 7-16-24:  And they will be served:

Government should restrain the worst of us, not cater to their wishes.  The guardrails are gone.  Welcome to feedom.

It was a big day for PEUs in Milwaukee.  Silicon Valley scion David Sachs spoke as did former Carlyle Group co-CEO and Virginia Governor Glenn Youngkin.  Even Red Team members can sense something in their gut:  Politico reported:

Despite his notoriety among SF elite, Sacks’ remarks on Monday night were met with a tepid response, at best. Many attendees talked over his speech, and several of his applause lines fell largely flat.

Viewers were treated to a MyPillow commercial in the middle of Sacks speech.


Governor Youngkin delivered his speech at full volume.  Will Ferrell's SNL character Jacob Silj came to mind.

Comical was Glenn's reference to "Made in America" given Carlyle's shipping thousands of jobs to China under his watch and his monitoring traffic in Beijing.

Update 7-17-24:  Other noted Red Team speakers with PEU backgrounds included Senator Rick Scott and Vivek Ramaswamy.  Three years ago Scott was cheering for the inflation he foresees in his Joe Biden nightmare.

Tonight the Mitrilic J.D. Vance speaks.  Good thing Mithril is malleable metal.  Trump requires others to bend back on themselves.  It's not unity if it's a demand from "someone who never backs down."

We are seeing the Red Team side of this:

Our oligarchy is the public face of the plutocracy.   An oligarchy is a government where the public discussion and agenda are significantly controlled by an elite minority.   A plutocracy is a government controlled by a few wealthy individuals. 

Politicians Red and Blue love PEU and increasingly, more are one.

...the US is ruled by a credentialed oligarchy, for the benefit of a wealthy few, then a lot of things will make better sense as you  look at them.

Voters may wish to look at a 2021 Vance interview where he suggests Alex Jones is right.

Update 7-18-24:   Vance emphasized:

“I will never forget where I came from,“ and, “We are done catering to Wall Street. We’ll commit to the working man. We’re done importing foreign labor.”

Done catering to Wall Street, door's wide open for the fintech boys.

Done importing foreign labor, what about foreign wives?  Hope his father-in-law doesn't hear about this position.

Update 7-20-24:  After Mithril Capital Vance went to Revolution (former home of Blue Team's Ron Klain) and established Narya Capital, which invested in Vivek Ramaswamy's Strive Capital.  It's a small PEU world after all.

Co-founded by Vance in 2020, Narya Capital is a reference to one of the “rings of power” in The Lord of the Rings. 

Narya was backed with about $US100 million from Thiel and a cadre of his acquaintances, including former Google chief executive Eric Schmidt and prominent venture capitalists Marc Andreessen and Scott Dorsey.

Vance is clearly high up in the ring of power.  This group takes more and more each day from the common person.

Friday, July 12, 2024

Family Office/PEU Does Secondary for Founder David Rubenstein


Buyouts
reported that Declaration Partners founder and anchor limited partner David Rubestein sold a stake in the family office/private equity underwriter (PEU).  Rubenstein's family wealth arose from his co-founding The Carlyle Group.

The story suggested Rubenstein needed to cash in his Declaration holdings to fund his buyout of the Baltimore Orioles.  It also drew a distinction between Declaration Partners and Declaration Capital, something not noted by Crunchbase.  It reminded me of Carlyle's distancing from the carcass of Carlyle Capital Corporation, a rigor mortis canary for the Fall 2008 financial crisis.

Buyouts was not sure if StubHub equity was included in the secondary.  The firm announced today its postponement of its IPO.  Yesterday StubHub announced layoffs and a move from Utah to Atlanta, Georgia.  

Utah offices opened in 2017 to great fanfare when the company was owned by Ebay. Rubenstein et al bought StubHub in early 2020 prior to the COVID-19 pandemic.  

StubHub's Utah office closing will result in the loss of hundreds of jobs. A recent Glassdoor review revealed:

Not enough focus on product quality; some teams seem unbothered by shipping frustrating experiences.
• A poorly maintained development environment that yields nearly 2-minute wait times for incremental builds of the frontend.
• An incomprehensible performance review system that occurs “periodically,” with no accompanying compensation adjustments, no peer feedback, and no formal process for providing feedback to one’s manager.
• While discussion and debate among engineers are encouraged, senior management is sensitive to dissenting opinions. Some leaders view their positions as above discussion.
• Itchy trigger finger: you’ll meet a lot of people if you join because you’ll be losing teammates to termination, resignation, and reorganization on a regular basis. By the end of my time at the company, I saw my entire team dispatched within a year. I’ve been through reorganizations before, but I’ve never seen an entire team turnover in 12 months.
Consider adopting a performance review model that enables employees to provide feedback about their managers. This would promote a more balanced and transparent evaluation process, ensuring that management is also held accountable and can improve based on constructive feedback.

Now that's a PEU like work experience, no voice, no raises, bad systems/technology.

Rest assured David will walk away from StubHub.  The question is how much richer will he be for it?

Update 7-13-24:  Bloomberg ran a story on the crazy things the PEU boys are doing to push cash back to investors in a low to no flip environment.  And it all generates fees!

Wednesday, July 10, 2024

Gray Lady Highlights PEU Damage: Synapse & BeautyCounter


The New York Times shared two cautionary tales the last two days.  Yesterday, subscribers read about a missing "up to $96 million" from a fintech company that represented itself as an insured bank to customers.  Synapse, backed by Andreessen Horowitz, exists outside of any regulatory authority leaving customers without access to their funds and no legal recourse.  Did Synapse declare bankruptcy in an effort to avoid responsibility for the missing money?   A forensic accounting and software analysis is in order.  That should be completed before the company is wound up in bankruptcy court.

Andreessen Horowitz announced the establishment of an office in Washington, D.C.   

 

Today, NYT reported on The Carlyle Group's Humpty Dumpty like cracking of BeautyCounter.  Carlyle turned a multilevel sales force of 60,000 into 35,000 by changing (cutting) the pay structure.  New technology turned out to be unreliable.  Ordinary BeautyCounter people endured extraordinarily difficult things from private equity underwriter (PEU) ownership.

Carlyle founded in 1987 in Washington, D.C., the new home of Andreessen Horowitz.  Why D.C.?  Because politicians Red and Blue love PEU and increasingly, more are one.

Update 7-11-24:  Semafor held its Future of Fintech meeting and Synapse was a hot topic:

When Synapse filed for bankruptcy in April, it shut off a critical system, freezing hundreds of millions of dollars in deposits.  

The bank behind Synapse stated:

Synapse’s abrupt shutdown of essential systems without notice and failure to provide necessary records needlessly jeopardized end users by hindering our ability to verify transactions, confirm end user balances, and comply with applicable law.

Any insinuation suggesting that Evolve has intentionally mishandled or withheld funds is entirely false and defamatory.
Yet customers have been cut off from their funds for weeks.  It's clear Evolve did not have contingency plans for Synapse customers no longer able to use the forward facing interface.  

Evolve got ransom wared shortly after Synapse failed.  They state:

we have backups available and experienced limited data loss and impact on our operations.
I hope they have a backup available from close to the time Synapse imploded.  

Marc Andreessen and his Silicon Valley ilk like to break things.  That they did with Synapse's failure.  And the people in Washington weren't there to protect customers, i.e. the little people.  

Those who broke it should fix it.  

....discrepancies in Synapse’s records and a potential shortfall of $65 million to $96 million

Fintech's future should involve jail for bad actors.  Beware the middlemen wanting fees.

Sunday, July 7, 2024

Caymans Spared by Beryl: PEU Phew!


It's a challenge evacuating a building housing 19,000 corporations.  Fortunately, Category 3 Hurricane Beryl stayed offshore of the Cayman Islands.  

Before the storm approached entities affiliated with The Carlyle Group sold shares in OrthoQuidel, a healthcare diagnostic company.  Those entities included a number of Cayman firms.

Carlyle Partners VI Cayman Holdings, L.P. being the record holder of the shares. The Carlyle Group Inc., through its various subsidiaries and affiliates, including Carlyle Holdings II GP L.L.C., Carlyle Holdings II L.L.C., CG Subsidiary Holdings L.L.C., TC Group Cayman Investment Holdings, L.P., TC Group Cayman Investment Holdings Sub L.P., TC Group VI Cayman, L.L.C., and TC Group VI Cayman, L.P.

The Carlyle Group is still monetizing Ortho Clincial Diagnostics, which it bought from Johnson & Johnson in 2014.  Carlyle took Ortho public before Quidel purchased the company in 2022.  

As of April 2024 Carlyle owned over 12 million shares of QuidelOrtho (18% of the float).  That leaves much more cashing in to do.  Even after the sale Carlyle holds nearly 11.8 million shares.

Flashback to 2009 when a Carlyle SEC filing clarified:

Pursuant to an agreement between DBD Cayman, Ltd. and its Class B member, Carlyle Offshore Partners II, Limited, voting power over the shares of common stock of the issuer is held by Carlyle Offshore Partners II, Limited. Carlyle Offshore Partners II, Limited has 13 members, with no member controlling more than 7.7% of the vote, consisting of William Conway, Jr., David Rubenstein, Daniel D'Aniello, Peter Clare, Robert Grady, Allan Holt, Bruce Rosenblum, Glenn Youngkin, Jean Millet, Adam Palmer, Daniel Akerson, Robert Stuckey, and Peter Nachtwey. The directors of Carlyle Offshore Partners II, Limited are Allan Holt, Bruce Rosenblum, Jeffrey W. Ferguson, Daniel D'Aniello, William Conway, Jr. and David Rubenstein. Each of the members and directors disclaims beneficial ownership of the shares of common stock of the issuer.
"DBD" refers to the Carlyle Group's three founders, David Rubenstein, Bill Conway and Daniel D'Aniello. The SEC's website showed:

Note that Virginia Governor Glenn Youngkin played the tax avoidance game while a private equity underwriter (PEU).

Beryl spared the Cayman's on July 4th, Independence Day.  That's symbolic for the U.S. given the PEU boys outsized political sway.  Politicians Red and Blue love PEU and increasingly, more are one 

Glenn Youngkin at 6'8" has the height to do better in storm surge than most people.  Let's not kid ourselves.  In a dangerous situation Youngkin and his Carlyle peers would've private jetted their way out.  

As Beryl approaches the Texas coast it may strike close to Aransas Pass.  The Carlyle Group abandoned its lead developer role for an oil terminal at Harbor Island.  Glenn Youngkin was co-CEO and responsible for infrastructure projects.  He's never said why Carlyle flaked on that public-private partnership.  

Once Beryl weakens it is projected to drop significant rainfall near the Dallas area where Carlyle took $35 million in state tax money to provide 3,000 jobs at Vought Aircraft but never did.  

It just occurred to me Tropical Storm Beryl may follow the path of PEU storm Carlyle.  They both can sneak up on you and do a lot of damage.

Update 7-21-24:  Carlyle continued to monetize OrthoQuidel even after Beryl spared the Caymans.  Over five trading days various Carlyle affiliates (many with Cayman names) sold shares worth over $10 million.  Ka-ching!

Seized Crypto Assets Hit Market


The Block
reported the U.S. Marshals Service signed a contract with Coinbase:

The Marshals Service has a specific requirement for "managing and disposing of large quantities of popular cryptocurrency assets."

The law enforcement agency did not buy any cryptocurrency.  It seized it from criminals.   Flashback to 2020 when the Marshals Service sought bids for thousands of seized bitcoins.

Coinbase was rated the #2 cryptocurrency exchange in 2020.  #1 was Binance which settled with the Justice Department for $4.3 billion for:

“knowingly failed” to register as a money services business and “willfully” failed to implement an effective anti-money laundering program to “profit from the U.S. market without complying with U.S. law.”
In other words, criminals were welcomed.

As for the 2020 auction my wise friend wrote:

Why do I have to bid for a freely exchanged asset that is liquid throughout the world on a minute to minute basis? Why wouldn't the confiscated asset just be liquidated on a first in-first out basis at the exchange rate at that time? And how does a federal agency set up an account that the SEC has ongoing litigation with and basically legitimizes the exchange?

Meanwhile:

German authorities have begun making regular sales of their multi-billion dollar tranche of bitcoin, which was seized through various criminal cases.

Government sales helped drive down the value of bitcoin, as well as the attempted recovery of funds from bankrupt exchange Mt. Gox (which failed in 2014 after a massive hack stole millions in bitcoin).  Consider what Wired stated a week after that event:

Bitcoin promises to give a bank account to anyone with a mobile phone, no ID required. It's clearly an amazing and potentially world-changing technology -- the first viable, decentralized, reliable form of digital cash. 
Wait.  Didn't a crypto friendly bank fail in 2023?  Yes, and it recently settled with the SEC over anti-money laundering charges.

The crypto-friendly Silvergate Bank settled charges with a litany of government agencies and paid $63 million in fines over suits that it had not sufficiently monitored nearly $1 trillion in crypto transactions, including those from FTX. Further, regulators had argued that the bank had misled the public as to the effectiveness of its internal compliance programs for crypto customers. 

So bad people steal crypto, use crypto and crypto exchanges have been lax in monitoring them.  With that as the backdrop, the same bunch that brought us predatory social media are pushing politicians to make crypto more available to the public?   Yes, and they want it in your retirement account.

Aren't elected officials responsible for ensuring the dollar remains a stable and safe currency?  Absolutely.

My wise friend noted:

So this is just semantics and the whole game is rigged beyond all of our imaginations and whether we accept it or not these crap coins are our FIBERTY coin. Guess we exchanged Lady Liberty for a prostitute and the American Eagle for a pigeon.

Something just fell from the sky.  Beware the droppings.

Wednesday, July 3, 2024

Tony Hayward to Lead Egypt Deepwater Exploration


The man who headed BP for the 2010 Gulf Oil Spew will lead The Carlyle Group's deepwater exploration off Egypt.  OilPrice reported:

During the meeting with Egyptian officials this week, Carlyle’s representatives said that the North African country provides attractive investment opportunities, and Carlyle intends to use advanced technologies for deepwater exploration activities

Carlyle plans to boost production of oil and gas in Egypt and turn it into a hub for receiving and distributing the group’s production in the Mediterranean.

Egypt, for its part, is currently looking to import in the coming months the highest number of LNG cargoes in years as it looks to ease the strain on its grid and industry amid energy shortages that have led to rolling blackouts this summer.

Let's review Hayward's leadership right after the rig explosion:

"The Gulf of Mexico is a very big ocean. The amount of volume of oil and dispersant we are putting into it is tiny in relation to the total water volume".

"It is impossible to say and we will mount, as part of the aftermath, a very detailed environmental assessment but everything we can see at the moment suggests that the overall environmental impact will be very, very modest."

"The first thing to say is I'm sorry. We're sorry for the massive disruption it's caused their lives. There's no one who wants this over more than I do. I would like my life back."

Eleven workers died in the rig explosion and family members found Hayward's comments insensitive and offensive.  It sealed Tony's wanker status with the common person.  The Carlyle Group, a politically connected private equity underwriter (PEU) felt otherwise, hiring Hayward in 2016.

Consequences?  There are no consequences for the PEU boys.  Hayward got his "life back" and more.  It's like they have immunity with imPEUunity.  

Someone should warn the Egyptians.  Tony can destroy a Delta in his search for alpha.  It's what leviathans do.  

The Carlyle Group knows because it's one, reshaping the world for ever increasing power and profit.  Lord, make it stop.

Update 7-4-24:  ZeroHedge reported:

Egypt is now undergoing a mass structural transformation, with millions of people plunged into poverty and wealth accumulating in the hands of a few, namely the military elites and their cronies. 

The piece mentioned a $35 billion investment from the United Arab Emirates.  Carlyle's Harvey Schwartz and David Rubenstein just spoke about being in Dubai at the Forbes Iconoclast Summit.

No Iconoclasts Here: Just PEUs

Carlyle Group co-founder David Rubenstein interviewed Carlyle CEO Harvey Schwartz at Forbes Iconoclast Summit.  Rubenstein did his usual affable, low key job of lobbing softball questions.  Schawartz joked during the session that "none of this had been rehearsed."  

Questions included the migration of private equity executives into White House administrations, the ethical benefits of working for a private equity underwriter (PEU) and how it contributes to a "good life."  They tackled the Presidential election and which is harder, firing people or working as a bouncer in a nightclub.  

Rubenstein worked hard to make Harvey look somewhat accessible.  Neither man looked like an iconoclast given private equity's "holy grail" status.

The PEU infomercial covered why anyone should invest in private equity.  The session closed with Rubenstein asking if Harvey was stranded on a deserted island and could only have one magazine, what would it be?  Harvey said "Forbes" and the moderator said "Right answer."  Thus punctuating the non-iconoclast nature of the session.

Monday, July 1, 2024

Advantaged Get More Power from Supremes

The conservative Supreme Court of the United States issued a ruling in what is known as the Chevron case.  It effectively eliminated the preference courts gave federal regulators charged with interpreting laws, sometimes decades or centuries old.  

Better Markets stated:

“This decision threatens to return the United States to the 1910s when the government had very limited ability to protect the health, safety, and welfare of Americans. It’s going to affect everything from airbags in peoples’ cars to the quality of the food they feed their families and the water they drink. It is going to re-order the relationship between the government and the courts and the American people. It also has the potential to return the country to the control of Wall Street banks, financiers, corporations, CEOs, and the modern-day robber barons because it will be much more difficult for the government to constrain their predatory and often illegal conduct in a timely or effective way.

The public must rely on Congress to not only fund the government, something it seems incapable of doing without theatrical deadlines. but to update prior laws so regulators have the basis to perform their job.  

Congress has been asleep in regard to current and future threats to citizens.  They can't protect children from the well documented harms of social media, keeping in place liability protection for tech companies facilitating or directly causing that harm. 

The Supreme Court placed a larger burden on an incapable Congress, one already oriented to the richest elements of our society.  Private equity underwriters (PEU) want access to Uncle Sam's wallet but hate paying taxes.  Both political teams campaigned on eliminating PEU preferred "carried interest" taxation, yet they never got together over the last fifteen years to accomplish this simple feat.  

The ruling makes clear that the advantaged deserve more advantages, billionaires deserve more billions and that they are the focus of the "guards on duty", not we the people.  It builds on the Citizens United which turned the passing of money into "free speech."  The system has "rich man" momentum, changes are happening exponentially (like the growth of billionaire wealth).   

The Federal Trade Commission recently sought public comment on health care consolidation, many of those deals done by private equity underwriters.  The PEU lobby wrote:

The private equity industry is an essential pillar of the modern American economy, a catalyst of competition and innovation, and a critical partner to small businesses.
Yet, there are thousands of letters detailing the harm private equity firms have inflicted upon citizens.  Many are from emergency room physicians.  News reports show PEU ownership hurting autistic children.

Don't expect this clown car of Congress to fulfill their current, much less added duties.  This group of under performers is too busy making fundraising calls (to the people pushing secondary PEU investments, cryptocurrencies and artificial intelligence).

As for insider trading and other SEC violations the public knows Congress excels at profiting from nonpublic information, as did many Federal Reserve Bank Governors.  I imagine the Supreme Court, with its hands off approach to judicial ethics, enables similar behavior.  That explains the need to minimize whistleblowers, one of the few tools left to equalize the PEU power differential.

Politicians Red and Blue love (PEU) and increasingly, more are one.  The Supreme Court just did their bidding.  It's a PEU world.  Fees, fraud and fealty, oh my!

Update:  The Supremes also made it harder for the SEC to go after crypto-criminals, which widely occupy the space.

Update 7-3-24:  With Independence Day fast approaching the Supreme Court gave former President Donald Trump immunity which he will use with impunity.  I'm not such they could have picked a worse person to enable.  The Purge may just be in our future.

Conservative icon Michael Luttig characterized the immunity decision:

“This is indeed an historic day in constitutional history as well as for the nation” and represents the “unsouling of America.”

“America’s democracy and rule of law are this country’s heart and soul,” he continued. “Our democracy and the rule of law are what had made America the envy of the world and the beacon of freedom to the world for almost 250 years now. Today, the Supreme Court cut that heart and soul out of America.” 

“No longer can it be said that in America no man is above the law,” he added.

Update 7-4-24:  Former Trump DOJ officials suggest the Supreme Court ruling on Presidential immunity gives tacit approval for Trump to weaponize the Justice Department for vengeful purposes.

Wednesday, June 26, 2024

Women's Soccer: PEU Pioneers


Who'd have thought equality oriented women's soccer would be the first professional league to embrace private equity underwriters?  Semafor's Liz Hoffman hosted National Women's Soccer League Commissioner Jessica Berman.  Hoffman wrote

We talked about the influx of Wall Street money into sports in general and NWSL in particular, which was the first major sports league to allow institutional investors to control teams. “We have to be very cautious and careful [but] I’m obviously a fan of it,” she said, singling out Sixth Street, which owns San Francisco’s Bay FC through its evergreen fund. A sports team “is not something that you hold for five years and expect to make money,” she said, “and that requires a different kind of investor.”
The greed and leverage boys aren't known for sharing their winnings with anyone other than limited partners.  Actual employees of PEU affiliates have shared the short stick that comes with deal fees, management fees, drastically higher interest expenses and special distributions.  That is if they keep their job after the PEU job shedding (initial and subsequent rounds).

Sports is the perfect investment for those obsessed with winning in the financial world and willing to invest heavily in politicians to tilt the economic table for maximum PEU advantage.  The Carlyle Group located in Washington, D.C. for this very reason.  Carlyle invested in Seattle's Reign.


Women's soccer, college sports, NBA, MLB, NFL, NHL and even Cricket want access to PEU money.  Players will experience owners gunning for return on equity (ROE).  They may rue the day the greed and leverage boys came to play financial hardball.

Monday, June 24, 2024

PEU Arrogance Beyond Comprehension: Alaska Big


Stories regarding billionaire families hit the news recently.  The first involves Carlyle Group co-founder David Rubenstein and his daughter Ellie who serves as Vice Chair of the Alaska Permanent Fund Corporation board.  Ellie Rubenstein, like her infamous father, is a private equity underwriter (PEU).  The Alaska Permanent Fund Corporation has $800 million invested in Carlyle's private equity funds.

Upon her July 2022 appointment to the APFC board the organization announced:

As CEO and Co-Founder of an investment firm, Trustee Rubenstein brings extensive private equity, investment management and corporate experience to the Board. Trustee Rubenstein also supports numerous organizations and initiatives through her family office and dedicates countless hours volunteering with the Red Cross of Alaska. 

“The Alaska Permanent Fund is a globally recognized sophisticated investor. I am humbled and honored to serve on the Board. I look forward to getting to know the Trustees and Staff and working with them in service to the people of Alaska.” ~ Trustee Rubenstein
Ellie Rubenstein wants the fund to reach $100 billion by expanding investments in private equity, which sits at 16% of fund assets.  


Background set.  Emails reveal a strange set of interactions from a board Vice Chair.  
“As we all know she has made dozens upon dozens of investment manager referrals in her 18 months on the APFC board. Many of these have been in the private credit space and my team has declined to pursue all of them.”

Those referrals included TCW (Carlyle), Churchill Asset Management (formerly owned by Carlyle) and Goldman Sachs private credit.  Several of those firms have stakes in Ellie's Manna Tree.

The board Vice Chair did more than cross the conflict of interest line.  She targeted APFC staff, saying her infamous father was "not impressed" with a staff member.  I thought  David Rubenstein was affable and took a personal interest in people he met.  Churchill's CEO said this in a 2022 interview:   


Who leaves their mentor after three short years?

Back to the unimpressive junior staffer.  Apparently father Rubenstein was miffed that the Permanent Fund didn't send more "senior people" to hear his sales pitch.  How lucky he had his board appointed daughter to deliver that message.

The Vice Chair targeted another staffer in private credit for being "like 25."  That person had ten years tenure with the "globally recognized sophisticated investor."  

This PEU apple fell directly under the tree.  Flashback to 2011:

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!

That not serious money ended up being $1 trillion in accumulated carried interest.

Ellie also implied that she would soon be top dog on the APFC board as the current chair "would not be reappointed."    

"Arrogance beyond tolerance" birthed "arrogance beyond comprehension."  Welcome to our PEU world which brings us to our second billionaire family story.  Four members of Britain's wealthiest family were convicted in Switzerland for exploiting staff.

How would you like $8 pay for an 18 hour shift?

Switzerland had the guts to do what most countries won't, charge the super rich, politically connected for crimes committed.  

The "jury is in" in Geneva but remains out regarding the Alaska Permanent Fund Corporation.  Will investigating attorneys go after the leaker(s) and ignore powerful bad actors (as so frequently happens in the U.S.)?  Stay tuned.

There is one final commonality between the Rubenstein's and the richest family in Britain.   David Rubenstein coined "patriotic philanthropy" and the Hinduja Group's core value is "work to give."  Odd that these givers do so much taking.

Politicians Red and Blue love PEU and increasingly, more are one.  Those who make laws are often loathe to enforce them, at least within their circle.  

Update 6-25-24:  Members of the public were able to view the Executive Session where the board discussed the leak controversy.  
Rubenstein, who remained quiet during the public portion of the meeting, became animated during executive session,...
...at one point APFC CEO Deven Mitchell and Scott Balovich, the head of IT for the APFC, were asked to leave the executive session at the request of Rubenstein.   
...the meeting was intensely focused on identifying the source of the leak. 
Rubenstein expressed concern about staff making “unchecked allegations.”
She went on state that there had been no head of private equity for nine months, and that the CIO had worked to undo relationships.
Translation:  Bad news for the little people.

News stories show the Alaska Permanent Fund employing leverage to juice returns, a signature PEU strategy.  Also, Ellie Rubenstein spoke at this year's FII Conference in Saudi Arabia and shared the APF's future strategies (not all of which were endorsed by the APFC board).  The moderator introduced her as an LP with the Alaska Permanent Fund.  Odd.  

During the FII session Ellie shared her personal health concerns that led her to invest in firm working to improve infant gut health.

Update 6-26-24:  Citadel's Ken Griffin reached a settlement with the IRS after a leaker revealed his preferred tax status.  The leaker got five years in prison.  Will David Rubenstein be as successful in defending his daughter?

News of  the Griffin settlement came from "a person familiar with the situation who asked not to be identified discussing confidential information."  In other words, a leaker.  It all depends on who you serve.  

The billionaire boys know how to play the system because they are ever redesigning it to their advantage.
 
Update 7-21-24:  Board chair Ethan Shutt was reappointed by Alaska's governor, thus ending any immediate rise by the younger Rubenstein.

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:
...travel 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.