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Wow, a super-shady, leveraged buyout and commodities markets manipulation firm with a founder who was associated with the scummiest of junk bond firms _during_

Wow, a super-shady, leveraged buyout and commodities markets manipulation firm with a founder who was associated with the scummiest of junk bond firms _during_ their most criminal of activities, is telling us not to hate pizza restaurant owners and electricians. The thing is, we weren't disliking them, nor do we. We hate 30:1 longshot bet "investors", market manipulators and corporate raiders. That won't change no matter how flashy your flash splashscreen is.

yummyfajitas 16y ago
30:1 longshot bet "investors", you mean like VC's and angels? And corporate raiders? You mean the people who buy and improve the value of existing companies [1]? I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? [1] Or occasionally shut them down and sell their assets to more productive companies.
- deleted 16y ago
  [deleted]
- muhfuhkuh 16y ago
  >you mean like VC's and angels Since when do VCs bet 30:1 on anything? If anything it's 1:1, because they can't borrow more money against their fund. That's the whole point behind venture capital - people put money in where tradtional banks {d,w}on't. I was referring to CDOs and default swaps, you know, the stuff that almost crashed the American economy a couple years back. >I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? Sure. He's using pizza shops and construction contractors and other working class small businesses as a cover to justify his job of moving rich people's money from one place to another and calling it productivity. In other words, he takes the example of people who, you know, actually provide a product or service to the bulk of Americans as an emotional crutch to justify his firm's greed by pretending that it's largess for Main Street businesses. And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet.
  - ryanwaggoner 16y ago
    And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet. Yes, because populist journalists and working folks who lose their jobs because a poorly-performing company gets shut down and sold off piecemeal are great, unbiased sources of truth in such matters. Sometimes the best thing that can happen to a company is for it to die. If we'd had the balls to let some of our airlines and auto companies and banks die the painful death they deserve, we probably wouldn't have to face the prospect of repeatedly bailing out underperforming companies in those (now heavily-regulated) industries.
    - btilly 16y ago
      I don't particularly mind having poorly performing companies which are worth less than their book value be broken up and sold off for a profit. What I have a lot more trouble with is a stable company being bought in a transaction designed to load it with debt for the tax benefit, deliberately run into the ground, and then flipped around for profit. To name a random example, Sealy and Serta used to make good mattresses before they got bought and destroyed by private equity. And a lot of people's local community hospitals used to be decent and are now crap because private equity saw a profit opportunity.
  - yummyfajitas 16y ago
    I assumed that by "30:1", you were referring to odds. Now I take it you are referring to leverage? In any case, why do you believe Blackhawk trades in CDO's and CDS? Near as I can tell, they do mostly private equity, also some commodities. http://blackhawkpartners.com/Portfolio.aspx http://blackhawkpartners.com/Portfolio.aspx And, there's a reason they're called raiders. Yes, the reason is that they are outsiders coming in against the wishes of insiders. Typically their goal is to increase shareholder value at the expense of entrenched interests (e.g., management which cares more about their paycheck than about growing the company).
- btilly 16y ago
  Blackhawk Partners is in private equity. The short version is that they are the scum of the finance world. Private equity companies perform leveraged buyouts. By structure these deals are high risk for everyone except the private equity firm, and the profit potential mostly comes from the fact that companies get a tax deduction for interest owed. Therefore the huge debt from the buyout creates a tax write-off that can then go as dividends to the private equity fund. (As much as they claim to despise government regulation, they derive their profits from exploiting a tax loophole.) These are the same folks who were called the junk bond kings in the 1980s. They went crazy, their funds crashed (though because of the financial structure the junk bond kings made a ton of cash), and the investors in their funds lost money. You may have heard of the S&L crisis? Yeah, the savings and loans institutions had invested in the junk bond funds in a big way, and when it collapsed the taxpayer stepped in and lost about $124 billion. (Unlike most of the TARP funds, the government didn't get this money back.) Since then they've changed their name, and in the last period of easy credit they went even crazier. You're going to hear a lot about them in the next 3 years. You see, most of their deals have principle due back in 2011 or 2012, most of the companies they bought don't have the cash, and this is going to result in a lot of bad credit. Oh, and this time around the investors in their funds who are likely to lose their shirts are mostly government pension funds. So we're going to see a wave of bankruptcies (and people losing jobs from that), a credit crunch, and more financial problems on overstretched governments at all levels. It is at least an order of magnitude bigger than the S&L crisis, and I wouldn't be surprised if the combination turns out to be bigger than the subprime crisis. But never worry. The way the deals are structured, the private equity fund only puts up 20% of the cash (the other 80% is born by the company purchased), and of that 20% only about 20% is the actual money from the private equity folks. Conveniently they get their 4% back almost immediately in management fees and closing costs, so no matter how badly the rest of us get hurt, they've made their fortune.
ryanwaggoner 16y ago
Isn't this pretty much the definition of an ad hominem attack? Why not dissect the argument he's making instead?
- btilly 16y ago
  If you know what private equity is, you'd know that this destroys the fundamental assumption of the article that the person talking made money by creating value. No. The person talking made money by structuring deals that left him with profit, everyone else with risk, plenty of people unemployed, and the US government without tax revenue due to a silly tax loophole. As for the argument itself, it is reasonable when it applies to people who actually made money by creating value. But that set of rich people doesn't include the author of that piece.
  - ryanwaggoner 16y ago
    Umm, do you know what private equity is? Last time I checked, private equity included any form of investment in private companies not traded on public exchanges. This would include venture capital, angel investment, growth capital, etc. I consider that to be creating value. And as for this specific firm, I can't find a ton of info on them, and I can't tell from your comments whether you know a lot about them specifically, or if you're lumping them in with all other private equity folks. I'd like to know more before assuming they're the "scum of the earth" and dismissing their argument.
    - btilly 16y ago
      You're right. There are different kinds of private equity. And some aren't nearly as bad as some of the others. If you want to know more about the author of this article, look at http://en.wikipedia.org/wiki/Ziad_K_Abdelnour http://en.wikipedia.org/wiki/Ziad_K_Abdelnour. His career has focused on investment banking, high yield bonds (nice name for junk bonds), and distressed debt (buying up the debt of failing companies, taking them over for not paying, restructuring them, then relaunching). He learned the private equity business in the 80s, which he finished at Drexel. That was the heart of the junk bond disaster, it was the company that made Michael Milken famous. At Blackhawk Partners he has been focusing on distressed debt. In short, he doesn't look like the nice kind of private equity.

yummyfajitas 16y ago

30:1 longshot bet "investors", you mean like VC's and angels? And corporate raiders? You mean the people who buy and improve the value of existing companies [1]? I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? [1] Or occasionally shut them down and sell their assets to more productive companies.

deleted 16y ago
[deleted]
muhfuhkuh 16y ago
>you mean like VC's and angels Since when do VCs bet 30:1 on anything? If anything it's 1:1, because they can't borrow more money against their fund. That's the whole point behind venture capital - people put money in where tradtional banks {d,w}on't. I was referring to CDOs and default swaps, you know, the stuff that almost crashed the American economy a couple years back. >I'm really not sure what your criticism of Blackhawk Partners is. Could you elaborate? Sure. He's using pizza shops and construction contractors and other working class small businesses as a cover to justify his job of moving rich people's money from one place to another and calling it productivity. In other words, he takes the example of people who, you know, actually provide a product or service to the bulk of Americans as an emotional crutch to justify his firm's greed by pretending that it's largess for Main Street businesses. And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet.
- ryanwaggoner 16y ago
  And, there's a reason they're called raiders. They don't usually "improve" anything except for their wallet. Yes, because populist journalists and working folks who lose their jobs because a poorly-performing company gets shut down and sold off piecemeal are great, unbiased sources of truth in such matters. Sometimes the best thing that can happen to a company is for it to die. If we'd had the balls to let some of our airlines and auto companies and banks die the painful death they deserve, we probably wouldn't have to face the prospect of repeatedly bailing out underperforming companies in those (now heavily-regulated) industries.
  - btilly 16y ago
    I don't particularly mind having poorly performing companies which are worth less than their book value be broken up and sold off for a profit. What I have a lot more trouble with is a stable company being bought in a transaction designed to load it with debt for the tax benefit, deliberately run into the ground, and then flipped around for profit. To name a random example, Sealy and Serta used to make good mattresses before they got bought and destroyed by private equity. And a lot of people's local community hospitals used to be decent and are now crap because private equity saw a profit opportunity.
- yummyfajitas 16y ago
  I assumed that by "30:1", you were referring to odds. Now I take it you are referring to leverage? In any case, why do you believe Blackhawk trades in CDO's and CDS? Near as I can tell, they do mostly private equity, also some commodities. http://blackhawkpartners.com/Portfolio.aspx http://blackhawkpartners.com/Portfolio.aspx And, there's a reason they're called raiders. Yes, the reason is that they are outsiders coming in against the wishes of insiders. Typically their goal is to increase shareholder value at the expense of entrenched interests (e.g., management which cares more about their paycheck than about growing the company).
btilly 16y ago
Blackhawk Partners is in private equity. The short version is that they are the scum of the finance world. Private equity companies perform leveraged buyouts. By structure these deals are high risk for everyone except the private equity firm, and the profit potential mostly comes from the fact that companies get a tax deduction for interest owed. Therefore the huge debt from the buyout creates a tax write-off that can then go as dividends to the private equity fund. (As much as they claim to despise government regulation, they derive their profits from exploiting a tax loophole.) These are the same folks who were called the junk bond kings in the 1980s. They went crazy, their funds crashed (though because of the financial structure the junk bond kings made a ton of cash), and the investors in their funds lost money. You may have heard of the S&L crisis? Yeah, the savings and loans institutions had invested in the junk bond funds in a big way, and when it collapsed the taxpayer stepped in and lost about $124 billion. (Unlike most of the TARP funds, the government didn't get this money back.) Since then they've changed their name, and in the last period of easy credit they went even crazier. You're going to hear a lot about them in the next 3 years. You see, most of their deals have principle due back in 2011 or 2012, most of the companies they bought don't have the cash, and this is going to result in a lot of bad credit. Oh, and this time around the investors in their funds who are likely to lose their shirts are mostly government pension funds. So we're going to see a wave of bankruptcies (and people losing jobs from that), a credit crunch, and more financial problems on overstretched governments at all levels. It is at least an order of magnitude bigger than the S&L crisis, and I wouldn't be surprised if the combination turns out to be bigger than the subprime crisis. But never worry. The way the deals are structured, the private equity fund only puts up 20% of the cash (the other 80% is born by the company purchased), and of that 20% only about 20% is the actual money from the private equity folks. Conveniently they get their 4% back almost immediately in management fees and closing costs, so no matter how badly the rest of us get hurt, they've made their fortune.

ryanwaggoner 16y ago

Isn't this pretty much the definition of an ad hominem attack? Why not dissect the argument he's making instead?

btilly 16y ago
If you know what private equity is, you'd know that this destroys the fundamental assumption of the article that the person talking made money by creating value. No. The person talking made money by structuring deals that left him with profit, everyone else with risk, plenty of people unemployed, and the US government without tax revenue due to a silly tax loophole. As for the argument itself, it is reasonable when it applies to people who actually made money by creating value. But that set of rich people doesn't include the author of that piece.
- ryanwaggoner 16y ago
  Umm, do you know what private equity is? Last time I checked, private equity included any form of investment in private companies not traded on public exchanges. This would include venture capital, angel investment, growth capital, etc. I consider that to be creating value. And as for this specific firm, I can't find a ton of info on them, and I can't tell from your comments whether you know a lot about them specifically, or if you're lumping them in with all other private equity folks. I'd like to know more before assuming they're the "scum of the earth" and dismissing their argument.
  - btilly 16y ago
    You're right. There are different kinds of private equity. And some aren't nearly as bad as some of the others. If you want to know more about the author of this article, look at http://en.wikipedia.org/wiki/Ziad_K_Abdelnour http://en.wikipedia.org/wiki/Ziad_K_Abdelnour. His career has focused on investment banking, high yield bonds (nice name for junk bonds), and distressed debt (buying up the debt of failing companies, taking them over for not paying, restructuring them, then relaunching). He learned the private equity business in the 80s, which he finished at Drexel. That was the heart of the junk bond disaster, it was the company that made Michael Milken famous. At Blackhawk Partners he has been focusing on distressed debt. In short, he doesn't look like the nice kind of private equity.