Joel Pett asks, “What if it’s a big hoax and we create a better world for nothing?”  Don’t miss this one.


Peter Arbogast:  “I miss your comments on BOREF.  Did you sell your ‘tons?’”

☞  No – still tons.  With a stock that trades 1,000 shares on a big day, it would be a train wreck to try to sell.  And I would never sell without telling you first, and then we’d all be selling, so it would be two train wrecks.  (I did sell a few shares I had bought at 16, for the tax loss; but replaced them outside the 31-day “wash-sale” window.)

As disappointing as this stock “that is surely going to zero” has been, I would not be amazed to see something come of it.  (According to the company, of course, everything is going deliriously well.  But that’s been the refrain for a decade.)

You have to consider the risk/reward.  For me, at least, the pain of losing what is now not even $2 a share would be but a pinprick compared with the pain – the agony! – of selling, only to see (conceivably), the Borealis ship finally come in.

And speaking of pain . . .


In his new book, Josh Kosman argues that the leveraged-buyout crowd – redubbed “private equity” – have set us up for another fall.  Namely, that excessive debt and mismanagement will likely trigger another economic meltdown within the next five years, wiping out up to two million jobs.

While calling the book strident and one-sided, the Wall Street Journal hardly dismisses it:

The Buyout of America is less concerned with blow-by-blow deal-making or personal stories than with the real-life economic effects of private-equity deals.  Mr. Kosman brings to the subject a relentlessly critical approach that is refreshing, simply because so many stories about the buyout firms are the sort of puff pieces that result from delicate negotiations for access.  He documents dozens of companies acquired in buyouts – such as hospitals, mattress manufacturers and a car-parts maker – whose service or products went downhill, whose employees suffered pay cuts or layoffs, and whose fortunes plummeted, sometimes ending in bankruptcy.

Time and again, Mr. Kosman details how the rest of us suffer at the hands of the buyout barons, 17 of whom are members of the Forbes 400. The private-equity firms pay lowball prices, he says, shortchanging public investors, by teaming up with management to pre-empt competing bids. They cream fees from their acquisitions, generating profits no matter how the companies fare. The companies cut more jobs than publicly owned competitors and sidestep proposed reforms by currying favor with politicians. . . .

Mr. Kosman provides exhaustive specifics.  Linens ‘n Things is acquired in a buyout by Apollo Management, led by deal maker Leon Black, files for bankruptcy and is liquidated.  Nursing staff is cut at a Vanguard Health Systems hospital, owned by Morgan Stanley Capital Partners.   Regulators fine for poor service a Hawaiian phone company acquired by Carlyle.  Warner Music loses Madonna.  At Bain Capital, built by former presidential candidate Mitt Romney, dividends paid to investors siphon off much-needed capital, weakening company after company . . .

☞  There is potentially a lot of pain still to come – from the commercial realty mortgages coming due, from further home foreclosures, and, yes, quite plausibly, according to some plugged-in friends, from the looming private equity meltdown.


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