Private equity continues to make headlines, and not in a good way, despite industry efforts to spin otherwise. The latest shoe to drop is that private equity firms are trying to rewrite some well-established fund terms to allow them to continue to rake in egregious profits even as the returns of most funds have underperformed the stock market.
Read more...Private equity fund managers keep insisting that private equity limited partnership agreements need to remain confidential or their businesses will suffer irreparable harm. We’ve already shown that claim to be ludicrous.
We published a dozen of these supposedly sacrosanct documents at the end of May. They had been accidentally made public by the Pennsylvania Treasury, but no one seemed to have noticed. They included funds of major industry players such as KKR, TPG, and Cerberus. Yet miraculously, they sky has not fallen in on their businesses as a result of the release of this information. We have obtained ten more limited partnership agreements from a source authorized to receive them who is not bound by a confidentiality agreement. These include limited partnership agreements from Blackstone, Oak Hill, and New Mountain, as well as smaller players. You can see all these limited partnership agreements here.
Read more...In case you managed to miss it, there’s been a fair bit of hand-wringing over the fact that Japan has fallen back into a recession despite the supposedly heroic intervention called Abenomics, whose central feature was QE on steroids.
But Japan of all places should know that relying on the wealth effect to spur growth has always bombed in the long term.
Read more...I never dreamed that a class I took in college, The Politics of Popular Education, which covered the nineteenth century in France and England, would prove to be germane in America. I didn’t have any particular interest in the topic; the reason for selecting the course was that the more serious students picked their classes based on the caliber of the instructor, and this professor, Kate Auspitz, got particularly high marks. The course framed both the policy fights and the broader debate over public education in terms of class, regional, and ideological interests.
The participants in these struggles were acutely aware that the struggle over schooling was to influence the future of society: what sort of citizens would these institutions help create?
As the post below on the march of school privatization in Wisconsin demonstrates, those concerns are remarkably absent from current debates. The training of children is simply another looting opportunity, like privatizing parking meters and roads.
Read more...As someone old enough to have done finance in the Paleolithic pre-personal computer era (yes, I did financial analysis using a calculator and green accountant’s ledger paper as a newbie associate at Goldman), investor expectations that market liquidity should ever and always be there seem bizarre, as well as ahistorical. Yet over the past month or two, there has been an unseemly amount of hand-wringing about liquidity in the bond market, both corporate bonds, and today, in a Financial Times story we’ll use as a point of departure, Treasuries.
These concerns appear to be prompted by worries about what happens if (as in when) bond investors get freaked out by the Fed finally signaling it is really, no really, now serious about tightening and many rush for the exits at once. The taper tantrum of summer 2013 was a not-pretty early warning and the central bank quickly lost nerve. The worry is that there might be other complicating events, like geopolitical concerns, that will impede the Fed’s efforts at soothing rattled nerves, or worse, that the bond market will gap down before the Fed can intercede (as if investors have a right to orderly price moves!).
Let’s provide some context to make sense of these pleas for ever-on liquidity.
Read more...Yves here. While the findings of this short paper on the merits of employers promoting their workers’ job conditions, that viewpoint is perversely unfashionable today. It is somehow seen as more beneficial to employers to keep their minions cowed and fearful. One of the most active threats is the ease of firing workers. And of course, the belief that employment is tenuous works against the notion of making any investment in employees, even ones that are actually self-serving. But notice that this article does have a specific definition as to what “wellbeing” amounts to, which is workplace satisfaction. A major element appears to be bosses not acting like jerks.
Read more...Earlier this year, it looked as if the University of Southern Maine might become one of the rare places where students and faculty would be able to hold the line against the yet more looting by the bureaucratic classes. The woes besetting the USM are a microcosm of how higher education expenses are escalating as a result of administration feather-bedding and vanity projects. When those prove to be too costly, it’s the faculty and students that bear the brunt of the expense-shedding. As Lambert wrote in March:
Read more...Yves here. You can also read Zephyr Teachout answering questions about her book at last weekend’s Book Salon at Firedoglake.
Read more...One of the reasons that private equity has managed to flourish is that its biggest investor group is what is traditionally referred to as dumb money: public pension funds, which account for 25% of industry assets. Readers may recall that even CalPERS, widely considered to be the savviest public pension fund, recently had a public board meeting where the questions asked of prospective gatekeepers, the pension fund consultants, were, with one exception, softballs. And that question was the only one to address the SEC’s revelation that private equity firms have been engaging in large scale fee-skimming and other forms of grifting. And remember, the SEC also stated that the investors in these funds, known in industry nomenclature as limited partners, have done a crappy job of negotiating their agreements.
But in predictable fashion, as one group of marks, um, sales targets, starts to dry up, private equity funds, aka general partners, are hunting for new ones. And having gone very systematically after every conceivable large pot of money, the only place left for them to go is down market, in terms of size and sophistication.
Read more...Yves here. We’ve been giving regular updates, with the considerable help of our man in Japan Clive, on how the the prospects for Japan signing up for the TransPacific Partnership look extremely slim. Mind you, “extremely slim” is not impossible, but the reason we deem the probability to be that low is that the Administration appears unwilling to bargain at all, let alone offer Japan some critical and large concessions that it requires to sign up. And since Japan is a linchpin to the entire deal, if Japan is a no-go, you can kiss the TransPacific Partnership goodbye.
These TransPacific Partnership discussions have also given yours truly, and even more so our real expert Clive, the opportunity to do some cross-cultural translating, which I personally enjoy. The Japanese are a sufficiently alien culture that you are forced to suspend or retrain your assumptions about how things work. So to watch the US Trade Representative, which along with the State Department, ought to be a US agency particularly attuned to how Japan needs special handling, instead do the equivalent of repeatedly step on a rake and get smacked in the face, is entertaining in a perverse way. How can they NOT know that what they are doing is counterproductive? And how can they NOT course correct when it should be obvious that what they are doing isn’t working?
However, even though, as we have discussed, the USTR has acted in a way almost guaranteed to offend the Japanese, the government has reasons for being cool on the TransPacific Partnership yet having to feign otherwise. And they aren’t terribly mysterious either, even though they do vary with US baseline assumptions.
Read more...One of my hats is as a climate interpreter to the interested lay person. I have something of a science background and can read the papers “in the original.” Another hat is as an occasional interviewer for Virtually Speaking. This month the two hats merged on the same head, and I got to interview the “Hockey Stick graph” climate scientist, Dr. Michael Mann.
For this interview I focused on the basics:
▪ Can humans burn more carbon, create more emissions, and still stay below the IPCC’s “safe” +2°C warming target?
▪ Is the IPCC’s +2°C warming target truly “safe” at all?
▪ We’re already experiencing warming of about +1°C above the pre-industrial level. Even if we stop now, how much more is “in the pipeline,” guaranteed and unavoidable?
▪ How do we defeat the Big Money ogre that stands in our way?
And my personal favorite:
▪ Will the answer to global warming come from the “free market”?
Read more...Yves here. Bill Black discusses his favorite topic, fraud, with Marshall Auerback of the Institute of New Economic Thinking. Some of this talk is familiar terrain for those who know Black’s work, such as Black’s well-argued criticism of the failure of financial regulators to make criminal referrals for misconduct in the runup to the financial crisis. Even so, many readers are likely to find new information here, such as the number of FBI agents assigned to handle white collar fraud, and how some regulators during the savings & loan crisis defied Congressional pressure to go easy on failing and defrauded banks, and the career costs they paid.
Read more...
