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You are tossing out a bunch of weakly connected arguments that don't make a lot of sense. Everyone can agree that using political connections to produce economi

You are tossing out a bunch of weakly connected arguments that don't make a lot of sense. Everyone can agree that using political connections to produce economic advantages are bad, but what does that have to do with PE firms in general? Most PE firms are just investment funds run by people trying to make the best decisions they can. They provide very important liquidity to entrepreneurs and early stage investors so they can actually be rich. Few are great operators, but the successful ones understand value and capital structures very well. To quote Tommy Boy, "Sometimes you have to take a few companies behind the shed and bash them on the head with a shovel". Warren Buffett took control of Berkshire Hathaway through a hostile takeover, threw out the management and drained it of all it's operating capital and profits until the original business died. He did that because the original business was dying, and management was destroying investment capital trying to keep it alive. Warren didn't know how to run a successful US based textile firm, but he was smart enough to know at the time it was almost impossible and that the management couldn't do it and would kill the company trying. Today Berkshire Hathaway employs hundreds of times more employees at far higher income levels than it did then. Successful PE firms are good at separating productive assets from failing businesses, and funding good businesses that need scale, and those are things that create a lot of value.

etrabroline 7y ago
It's not an issue with the theoretical concept of private equity, it's an issue with what these vehicles are being used to do in the real world. https://www.counterpunch.org/2020/04/03/hospital-bailouts-begin-for-those-owned-by-private-equity-firms/ https://www.counterpunch.org/2020/04/03/hospital-bailouts-be... https://www.bing.com/search?form=MOZLBR&pc=MOZI&q=private+equity+bailouts https://www.bing.com/search?form=MOZLBR&pc=MOZI&q=private+eq... Outside of a your theoretical framework that is not what creating new wealth means to any normal person. If some businesses fail then so be it. You are trying to conflate that with what is being discussed by @doctorow. How about this. In turn, explain to me how these three activities create wealth instead of just redistribute it upwards: - government bailouts - selling off assets whose long-term value PE doesn't understand or care about - defaulting on pensions Those are the points I'm making, if you want to discuss something else, go ahead. >PE firms are good at separating productive assets from failing businesses Good for whom, and no, many of these businesses are not failing when PE sells off all their assets. Boeing did the same thing with much of the 787 production line and weren't in any financial trouble at all. EBITDA is just a short sighted power grab by finance capital. >provide very important liquidity The banks are just middle men for the Fed at this point, and stingy ones at that. The banks are so bad, it would be better for the Fed to just give the money to businesses directly. >funding good businesses that need scale This is more a critique of leverage in general, but this is how amazon put profitable competitors out of business by not turning a profit and is now cranking up profits probably beyond the point of sustainability. Also see https://qz.com/1250772/didi-vs-meituan-vs-ele-me-chinas-food-delivery-app-battle-means-basically-free-meals-for-users/ https://qz.com/1250772/didi-vs-meituan-vs-ele-me-chinas-food... and https://supchina.com/2018/01/09/didis-war-century/ https://supchina.com/2018/01/09/didis-war-century/
- valuearb 7y ago
  What do bailouts have to do with PE?

etrabroline 7y ago

It's not an issue with the theoretical concept of private equity, it's an issue with what these vehicles are being used to do in the real world. https://www.counterpunch.org/2020/04/03/hospital-bailouts-begin-for-those-owned-by-private-equity-firms/ https://www.counterpunch.org/2020/04/03/hospital-bailouts-be... https://www.bing.com/search?form=MOZLBR&pc=MOZI&q=private+equity+bailouts https://www.bing.com/search?form=MOZLBR&pc=MOZI&q=private+eq... Outside of a your theoretical framework that is not what creating new wealth means to any normal person. If some businesses fail then so be it. You are trying to conflate that with what is being discussed by @doctorow. How about this. In turn, explain to me how these three activities create wealth instead of just redistribute it upwards: - government bailouts - selling off assets whose long-term value PE doesn't understand or care about - defaulting on pensions Those are the points I'm making, if you want to discuss something else, go ahead. >PE firms are good at separating productive assets from failing businesses Good for whom, and no, many of these businesses are not failing when PE sells off all their assets. Boeing did the same thing with much of the 787 production line and weren't in any financial trouble at all. EBITDA is just a short sighted power grab by finance capital. >provide very important liquidity The banks are just middle men for the Fed at this point, and stingy ones at that. The banks are so bad, it would be better for the Fed to just give the money to businesses directly. >funding good businesses that need scale This is more a critique of leverage in general, but this is how amazon put profitable competitors out of business by not turning a profit and is now cranking up profits probably beyond the point of sustainability. Also see https://qz.com/1250772/didi-vs-meituan-vs-ele-me-chinas-food-delivery-app-battle-means-basically-free-meals-for-users/ https://qz.com/1250772/didi-vs-meituan-vs-ele-me-chinas-food... and https://supchina.com/2018/01/09/didis-war-century/ https://supchina.com/2018/01/09/didis-war-century/

valuearb 7y ago
What do bailouts have to do with PE?