Post by unlawflcombatnt on May 1, 2009 14:28:23 GMT -6
from Yahoo.com
Chrysler Bankruptcy:
End of "Dumb Money" Era for Private Equity(??)
May 01, 2009
by Aaron Task
"Chrysler's bankruptcy filing is a watershed moment for the U.S. auto industry but also harkens the end of an era for private equity too, says Daniel Gross, columnist at Slate and Newsweek and author of Dumb Money.
Cerberus, which acquired 80.1% of Chrysler and its finance arm for $7.4 billion in May 2007, is just one of several high-profile private equity firms facing big losses on deal done in 2007-08.
Others include:
"Nine of the 10 biggest leveraged buyouts were done between 2006-2007," Gross notes. "They bought into cyclical industries right at the peak and loaded a ton of debt on them, which is not a winning proposition. "
Gross compares these corporate financiers, who issued debt to pay themselves a dividend they considered income, to individuals who took out home equity loans and thought of it as income vs. a liability to be repaid."
[Paying themselves dividends off borrowed money seems like fraud to me.]
"While none of the private equity moguls are going to go hungry, neither should you think this is just a case of a bunch of rich guys who bet wrong. Investing in private equity has been in vogue for pension funds and endowments in recent years, meaning a lot of "average" Americans are directly exposed to the industry's fate. Furthermore, private equity had been a major source of capital for distressed industries and is now going to be far less eager to come rescue some floundering firm.
That means less private equity deals - which often reward common stockholders - more potential bankruptcies, and yet more potential candidates for bailouts by (you guessed it) the Federal government."
finance.yahoo.com/tech-ticker/article/239826/Chrysler-Bankruptcy%3A-End-of-%22Dumb-Money%22-Era-for-Private-Equity
I doubt this is the end of "dumb money" from private equity. As long as the government gleefully refills their coffers with taxpayers' money, they'll continue with their risky investments, as the likelihood of government bailouts removes most risk.
Our Ponzitocratic leaders have learned nothing, other than how to scare Congress into freely handing over taxpayers' money to Financial Industry miscreants.
Chrysler Bankruptcy:
End of "Dumb Money" Era for Private Equity(??)
May 01, 2009
by Aaron Task
"Chrysler's bankruptcy filing is a watershed moment for the U.S. auto industry but also harkens the end of an era for private equity too, says Daniel Gross, columnist at Slate and Newsweek and author of Dumb Money.
Cerberus, which acquired 80.1% of Chrysler and its finance arm for $7.4 billion in May 2007, is just one of several high-profile private equity firms facing big losses on deal done in 2007-08.
Others include:
"Nine of the 10 biggest leveraged buyouts were done between 2006-2007," Gross notes. "They bought into cyclical industries right at the peak and loaded a ton of debt on them, which is not a winning proposition. "
Gross compares these corporate financiers, who issued debt to pay themselves a dividend they considered income, to individuals who took out home equity loans and thought of it as income vs. a liability to be repaid."
[Paying themselves dividends off borrowed money seems like fraud to me.]
"While none of the private equity moguls are going to go hungry, neither should you think this is just a case of a bunch of rich guys who bet wrong. Investing in private equity has been in vogue for pension funds and endowments in recent years, meaning a lot of "average" Americans are directly exposed to the industry's fate. Furthermore, private equity had been a major source of capital for distressed industries and is now going to be far less eager to come rescue some floundering firm.
That means less private equity deals - which often reward common stockholders - more potential bankruptcies, and yet more potential candidates for bailouts by (you guessed it) the Federal government."
finance.yahoo.com/tech-ticker/article/239826/Chrysler-Bankruptcy%3A-End-of-%22Dumb-Money%22-Era-for-Private-Equity
I doubt this is the end of "dumb money" from private equity. As long as the government gleefully refills their coffers with taxpayers' money, they'll continue with their risky investments, as the likelihood of government bailouts removes most risk.
Our Ponzitocratic leaders have learned nothing, other than how to scare Congress into freely handing over taxpayers' money to Financial Industry miscreants.