Two WSJ stories this morning that capture the radically contrasting moods of America: "Frugality Moves In for Long Stay" focuses on ordinary Americans freaking out at the high unemployment rate and trying to save their pennies.
Meanwhile, Wall Street's resuming its "pro-risk strategies" with deal after deal, as are other world markets, as the WSJ points out in "Futures Rise as Risk Appetite Grows." See this Reuters piece about the deals being fueled by cheap money.
The planet's biggest shark, Blackstone, will start selling and buying again in a pretty big way after a couple of years of relative caution. Steve Schwarzman, head of the leveraged-buyout firm,, says in the Financial Times, "We see the world changing once again. At least for private equity, the worst is behind the industry."
Everything's coming up roses? The WSJ cautions, "The LBO is back. Barely." More difficult to line up financing, takes longer.
Last night on TV, 60 minutes (well, not the full hour) of self-serving bullshit. Commenter OrneryBabe on Gawker provides the best review of the post-game show: "The only explanation I can think of for his exploits is that he probably has a very small penis."
Smart, shrewd story: "The Web can be a mean-spirited place. But when it comes to online reviews, the Internet is a village where the books are strong, YouTube clips are good-looking and the dog food is above average."
Good piece, once you get past a typical New Yorker lede sentence: "In early August, Lawrence H. Summers, President Barack Obama's top economic adviser, accompanied Vice-President Joseph Biden aboard Air Force Two on a trip to Detroit."
Hedge funds recovering, mergers and acquisitions are starting up again, the big banks are frantically trying to figure out how to spin their impending resumption of big bonuses. Meanwhile, "the job market is bleaker than ever in the current recession."
A pox on the G-20, at which "the lack of questioning of the status quo was spectacular." Halligan notes: "Obama's oratory was typically impressive. The trouble is, it wasn't true. ... Nothing 'bold' was done to lessen systemic dangers or overhaul the global regulatory regime."
Russian oligarch's pending purchase of New Jersey Nyets continues an odd, tragicomic history of ownership of the franchise that once boasted Dr. J. Funny little story by Brad Parks notes that Bruce Ratner, who bought the team in 2004 for $300 million, wound up spending about $1.5 million per win.
Even bears are optimistic about impact on market. "One big reason for the market's continued strength is that expectations were so low for the economy and corporate earnings that the market was able to rise even on modestly good news."
A modern-day Father Coughlin. "Crazy-quilt cosmology" mixes with populism to blanket the country. (Sounds like another media creation to me.) Read Salon's "The making of Glenn Beck," if you want.
Relying on Kaiser Family Foundation's last Employer Benefits Survey, Ezra Klein notes:
The average health-care coverage for the average family now costs $13,375, according to Kaiser. Over the past decade, premiums have increased by 138 percent. And if the trend continues, by 2019 the average family plan will cost $30,083.
Big money's big institutional investors are in open revolt — finally. After years of pension funds and other big pots of money being manipulated as limited partners in skeezy schemes with outrageous terms by big money's general partners, the pension funds and other big investors are fighting back.
Somewhat humorously, though not anybody on either side of this LBO war, the institutional investors are trying to get private equity firms' general partners to agree to something called "Private Equity Principles." Pushing for this is the Institutional Limited Partners Association, the industry group consisting of many of the biggest public pension funds and other huge institutional investors. VC Circle's Shrija Agrawal writes:
The private equity ecosystem may be in for some serious shakeup. In a move where limited partners (investors) are clearly calling the shots, the Institutional Limited Partners Association has come out with a set of best practises that could potentially impact the way general partners manage the funds.
The LPs are the pots of money; the GPs are the people who move those pots around. So the LPs took a shellacking during the meltdown when they agreed to be limited partners in ventures recklessly run into the ground by private-equity general partners. You don't have to be a Harvard or Yale grad whose endowment has plummeted as a result of bad investments by GPs to realize that there's something wrong here. (See "Harvard, Yale Are Big Losers in 'The Game' of Investing.")
There wouldn't be nearly as many huge deals if pension funds weren't willing to be used and abused by ventures' general partners.
Will the GPs ever agree to these "principles"? They may want to consider it, because all of this is voluntary. Someday, perhaps never but maybe someday, the LBO boys may even face government regulation if they don't at least act as if they're cleaning up their act.
The L.A. Times, in its very first paragraph of a hometown big-news story, calls Disney's conquest of Marvel's superheroes a "reinvention" — no wonder that readers are flocking away from dull daily newspapers. Much better, as usual, is the Wall Street Journal's take: "By bringing in macho types such as Iron Man, Thor and Captain America, the Marvel deal would expand Disney's audience, adding properties that appeal to boys from their preteen years into young adulthood. That demographic group hasn't been swept up by Disney's recent hot properties, such as High School Musical and the Jonas Brothers." Marvel becomes a Mickey Mouse operation as Disney tries to jump-start flagging DVD sales. The film industry is in deep trouble from all sorts of Web-based diversions, and the WSJ sees more consolidation in Hollywood. Meanwhile, Disney's Bob Iger sounds like a pedophile: "We view this as an opportunity to attract more boys and older kids." The Big Money's Chadwick Matlin spoofs "Exclusive Disney-Marvel Synergy Memo." Click on video above (or here) for Disney's subliminal messages.
Riffing on David Cho's scary story last weekend in the Washington Post, "Banks 'Too Big to Fail' Have Grown Even Bigger," Salmon urges that someone has to force Wells Fargo, JP Morgan Chase, and BofA "to start shrinking today."
"In a perfect world, we would simply ban leveraged buyouts. The vast majority of these debt-laden corporate takeovers are no less predatory and value-destroying to a company than a loan shark who charges usurious rates of interest." However, it's an imperfect world, so why not force private equity buyers "to pony up at least 50 percent of the purchase price"?
Puts the lie to current spin. With links. Behind all this is that sharks are using corporate welfare to churn shitty banks, and that's not going to accomplish anything but profits for individual sharks. His conclusion: "Recognize bad debt instead of continuing to pretend it will work itself out eventually. Stop funding insolvent institutions and use those funds to seed new, healthy banks instead."
Oh, and Tom Ridge lied about those Homeland Security alerts he flashed at us during the 2004 campaign. Which means that Howard Dean was right when he accused the Bush-Cheney regime of political manipulation of terror alerts. But that's just old news, right?
Regular investors don't think much of Citigroup stock right now (it fell 3.9 percent this morning in early NY trading), and energy trader Andy Hall got $100 million last year, so why should he do this? Traders like Hall don't have to disclose their compensation and don't fall under the aegis of pay czar Ken Feinberg, so the feds may have to send some leg-breakers to Hall's mansion.
Advertisers not only suddenly frugal but also increasingly turning to the Web. Uh-oh. The Internet virus is spreading from the newspaper industry (which started to waste away before the recession) to the slicks.
The S&P 500 "has soared 48 percent since it reached a 13-year low on March 9." That says something about the manic-depressive economy. Read the rest of this overview by Michael J. Moore. Goldman's equities revenue was up 59 percent over the first quarter, Wall Street firms have raked in $4.2 billion in underwriting fees because of all the action. The rally bolsters confidence in companies "that cater to wealthy and corporate clients." But, speaking of manic-depression, see this WSJ story: "After Dow's 42% Run, Roadblocks Looming." Lithium may be indicated.
"It's easier to call the economy than stocks, and the economy has been experiencing a dead-cat bounce. I have some charts that I looked at recently, and I think that the likelihood of a normal post-recession bounce is very low."
Of all the people unhappy about Michael Jackson's death, no businessman is suffering as much as Philip Anschutz, the secretive, right-wing Christian tycoon from Colorado who controls a sports and entertainment empire.
The heavily in-debt Jackson's death wipes out the extremely expensive MJ comeback already financed by Anschutz's AEG Live concert-promotion behemoth and set to kick off July 8 in London.
Despite the millions of dollars that his empire had a chance to make off the King of Pop, Anschutz didn't even want to get involved: Jackson's very existence — not to mention the star's so-gay behavior (and his ambiguous sexuality and various molestation accusations) — had to have deeply offended Anschutz. He had to be persuaded by private-equity pal Tom Barrack of Colony Capital to invest in Jackson.
Part of that tale was told only a few weeks ago in an L.A. Times piece about Barrack's rescue of Jackson, "To this financier, Michael Jackson is an undervalued asset."Chris Lee and Harriet Ryan lay out an interesting yarn about Barrack, who controls casinos, hotels, et al. around the world, stepping in to buy Neverland and rescue Jackson:
In Jackson, Barrack saw the sort of undervalued asset his private equity firm, Colony Capital, had succeeded with in the past. He wrote a check to save the ranch and placed a call to a friend, conservative business magnate Philip Anschutz, whose holdings include the concert production firm AEG Live. ... Barrack said the prospect of helping Jackson, given his recent criminal case, gave Anschutz, a devout Christian, pause.
(Yeah, no doubt. Anschutz has been a heavy contributor to various anti-gay and other "morality" causes; his money played a crucial role in the passage of Colorado's anti-gay Amendment Two in 1992.)
But Anschutz agreed, and he put Jackson in touch with his AEG subsidiary. The rest was going to be history: the biggest, baddest career re-launch ever. And a series of deals by which Anschutz and Barrack would have raked in millions — concerts staged by an Anschutz subsidiary and appearances in venues controlled by Barrack.
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