The IRS is turning up the spotlight on hedge funds and private equity firms. It appears that some may have been taken what might politely be called overly aggressive tax positions. It’s going to be pretty hard for these captains of capitalism to convince the public that they need to keep their favorable tax treatment […]
Read more...The New York Times today, in “More Profit and Less Nursing at Many Homes,” describes the often shameful behavior of private equity owners of nursing homes towards their charges: Some excerpts: As such investors have acquired nursing homes, they have often reduced costs, increased profits and quickly resold facilities for significant gains. But by many […]
Read more...In a March post, “Private Equity’s Image Problem,” we expressed considerable reservations about Blackstone’e effort to form a lobbying group (the Private Equity Council) to among other things, press for the continued favorable tax treatment of carried interest, and specifically, the approach taken by its leader. From that post: So the industry could use some […]
Read more...The Wall Street Journal’s Deal Journal quoted veteran deal hand Steve Rattner, now DLJ’s head of merchant banking, taking a comparatively upbeat view of the difficult conditions in the LBO market: Yes, “the oversupply is the worst we’ve ever seen,” said Rattner, whose private-equity fund closed last year with $2.1 billion of capital. “The market […]
Read more...The Financial Times’ Lex column today takes issue with those who take comfort in the oft-quoted statistic that default rates are at a 25 year low. The article shows a long-term, unrelenting decline in average ratings and notes that bond defaults tend to peak two to four years after issuance. We’ve had an increase in […]
Read more...In case you haven’t come across it yet, I highly recommend the blog Overcoming Bias, where a number of academics write about epistemology. Given how we are bombarded with new factoids, studies, and commentary on a daily basis, it’s helpful to consider the views of those who think about the nature of knowledge and the […]
Read more...Nouriel Roubini, on his RGE Monitor, discusses the distinction between risk (variability in outcomes that can be estimated) and uncertainty (unknown or unmeasurable outcomes). Risk can be priced; uncertainty can’t (or at least can’t be priced by rational agents). Roubini argues that part of the panic in the markets stems from the fact that investors […]
Read more...Bloomberg reports that analysts at Sanford Bernstein estimate that Citi will suffer up to $3 billion in losses this quarter due to subprime and LBOs writeoffs: The New York-based company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the […]
Read more...As readers doubtless know, a nasty day in the markets yesterday was followed by distress overnight as the Japanese central bank injected funds into the marketplace and the European Central Bank added liquidity a second day, following an unprecedented, unlimited injection Thursday. The Dow opened down over 100 points, and due to a spike up […]
Read more...Two major types of hedge fund strategies, namely event-driven (Newspeak for risk arbitrage) and statistical arbitrage (typically, very high volume trading to capture and correct anomalies in prices relationships in various markets, such as among stocks bonds, or derivatives, or across markets) are having trouble. It isn’t yet clear how far reaching these problems are. […]
Read more...Currently docked in Marseille (managed to get a Financial Times yesterday in Monaco, so I feel slightly less cut off from the symbol world) and catching up on the grim market news of yesterday. It seems that the equity markets are getting the message that things are bad enough in the credit markets so as […]
Read more...The era of lax lending is inflicting damage on one of its biggest perps, namely, investment banks. Wall Street firms, overeager to win funding mandates from private equity firms, agreed to terms that were very much in favor of the private equity firms. And now the LBO firms are holding them to their financing commitments, […]
Read more...At junctures like this, when markets have come a bit unglued and may be undergoing a sea change, making forecasts is as scientific a process as reading tea leaves. And since I am (literally) at sea with pricey satellite access, I’m limiting myself to checking the usual suspect media sources rather than being as comprehensive […]
Read more...We warned earlier that if conditions deteriorated in the financial markets, investment banks were particularly exposed by virtue of their taking on multiple exposures to the same underlying risk. For example, they lend to hedge funds via their prime brokerage operations, and also may be exposed to them by providing credit default swaps on assets […]
Read more...Jamie Dimon, CEO of JP Morgan, fesses up that commercial banks like his have overdone it on LBO debt and are likely to take writedowns. At this point, this statement is no revelation. The main point of Dimon’s remarks is to reassure investors that the prospective losses are not significant relative to JP Morgan’s capital […]
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