Author Archives: Yves Smith

Obama’s Climate Plan is Leaking Methane

Obama’s climate plan encourages electrical plants to convert from coal to natural gas, completely ignoring methane as a potent greenhouse gas.

Links 6/4/14

Private Equity Limited Partners Don’t Get Independent Valuations of Fund Investments

It is perversely considered to be normal to allow private equity general partners to value fund assets on a “trust me” basis. And the limited partners are also awfully trusting in allowing for very thin explanations of distributions (payments) from the funds.

Gaius Publius: Obama’s Flawed Cap-and-Trade, Um, Pay-to-Pollute, Emissions Plan

There’s little force in most market-based systems for carbon emissions. Cap-and-trade works better (depending on the implementation) if the goal is to reduce pollution (like sulphur) by an industry you want to preserve (like coal-burning energy facilities). Cap-and-trade works terribly for an industry you want to destroy — like coal-burning energy facilities. But Obama wants the public to believe that this sort of “market-based approach” is a great solution.

Links 6/3/14

Debunking the Myth of Private Equity’s Superior Returns

Why private equity returns are nowhere near as juicy as most investors in private equity believe.

A Reflection on Piketty’s “Rentiers Always Win” or r > g

The Piketty postulate that r > g, meaning the return on wealth exceeds overall economic growth, is simply not a universal truth. This post provides a tidy and accessible debunking.

Mathew D. Rose: When European Politicians Cannot Read the Handwriting on the Wall

Despite the alarming results of the European elections last week, Angela Merkel remained unflinching. That is a cause for concern. European politicians believe the solution to voter ire is better messaging, as opposed to a change in policy.

Is That a Good State/Local Economic Development Deal? A Checklist

Yves here. This post addresses an important but oft-neglected topic: that of the stealth subsidies to the rich and connected that take place via economic development projects.

Links 6/2/14

The KKR Capstone Scam: A Picture Worth 10,000 Words

A revealing image, and more investigation of KKR’s all-too-clever wordsmithing strongly indicate its claim that KKR Capstone is not an affiliate does not stand up to scrutiny. This is a serious charge because if the critics are right, KKR is embezzling.

Piketty’s Wealth Tax Won’t Hurt Investment

Transfers don’t matter for investment, and most savings are transfers. Thus Piketty’s wealth tax won’t hurt investment.

Bill Black: Spain’s “Stimulus” Plan – Austerity, Rebranded

Spain’s conservative government, eager to change the media’s emphasis on its repudiation in recent EU elections, has launched a media campaign stressing its adoption of an aggressive “stimulus” program. But once you get past the hype, this new program is the same old failed austerity snake oil.

Ilargi: The Illusionary Economy Revives Helocs, the Home ATM

Yves here. Ilargi is duly skeptical of the enthusiastic financial press response to an increase in home equity liquidation, um, borrowing using home equity lines of credit, or Helocs. While the party line is that this development reflects an rise in home equity and increased consumer confidence, Ilargi stresses that prices appreciation that the Fed has created, the Fed can also take away. I have to wonder how many of these Heloc borrowers are doing so out of necessity or near-desperation.