Abysmal...

[Bronco]

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Greed, debt and Matt Taibbi: What Rolling Stone got right, and wrong, about Bain Capital
CNN/Fortune ^ | 9/4/2012 | Dan Primack


Very few of my friends understand private equity, let alone care about it. But some of them wrote me this past weekend, after reading Matt Taibbi's new cover story for Rolling Stone about Mitt Romney's time with Bain Capital.

Taibbi took out the long knives for this one, which means he sacrificed a bit of accuracy for potency.

His overall thesis is correct: There is a fundamental hypocrisy in a former leveraged buyout investor railing against America's ballooning debt. Leveraged buyouts, by definition, add debt to a company's balance sheet -- weighing it down in the short-term so that it can (hopefully) thrive in the long-term. Romney defenders point out that America is not the same as a private equity-backed company, a truism that only goes to underscore the flimsiness of using Romney's Bain Capital experience as a singular qualification for the Oval Office.

Unfortunately, Taibbi also takes a lot of wild swings at the broader private equity market that don't ring true. So many, in fact, that his valid critique of Romney's candidacy gets lost.


(Excerpt) Read more at finance.fortune.cnn.com ...

[houndawg]

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Greed, debt and Matt Taibbi: What Rolling Stone got right, and wrong, about Bain Capital
CNN/Fortune ^ | 9/4/2012 | Dan Primack


Very few of my friends understand private equity, let alone care about it. But some of them wrote me this past weekend, after reading Matt Taibbi's new cover story for Rolling Stone about Mitt Romney's time with Bain Capital.

Taibbi took out the long knives for this one, which means he sacrificed a bit of accuracy for potency.

His overall thesis is correct: There is a fundamental hypocrisy in a former leveraged buyout investor railing against America's ballooning debt. Leveraged buyouts, by definition, add debt to a company's balance sheet -- weighing it down in the short-term so that it can (hopefully) thrive in the long-term. Romney defenders point out that America is not the same as a private equity-backed company, a truism that only goes to underscore the flimsiness of using Romney's Bain Capital experience as a singular qualification for the Oval Office.

Unfortunately, Taibbi also takes a lot of wild swings at the broader private equity market that don't ring true. So many, in fact, that his valid critique of Romney's candidacy gets lost.


(Excerpt) Read more at finance.fortune.cnn.com ...

Nice source.


Nice source.

[kalm]

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And here's an excerpt of Taibbi's response to Primack's article:

Here Primack is just being disingenuous, particularly in this line:

But the reality is that, for the most part, dividend recaps alone do not generate the types of returns that bring limited partners back for follow-on funds.

This is wild. In the piece I point out that PE firms take over companies and then can induce those companies to pay out massive dividends to their new masters, often taking out giant bank loans to do so. I cited multiple concrete examples of this, like the KB deal where the failing company was induced to pay out a $121 million dividend (financing this with $66 million in bank loans), and the Dunkin’ deal, in which Bain and Carlyle induced Dunkin’ to pay a half-billion dollar dividend, taking out a $1.25 billion loan to finance it.

Primack now takes these passages and calls them factually lacking by arguing that dividend recapitalizations – "for the most part" and "alone" – aren’t a sweet enough carrot to keep investors coming back to the next deal. Which has nothing to do with what I was talking about.

I was never talking about what’s in these deals for Romney’s partners and investors. I was talking about what’s in it for Bain and Romney. And nowhere do I ever talk about whether dividend recapitalizations, "alone," are sufficient to “bring limited partners back.” It would be silly to say that they are.

Instead, the whole "cover story" passage was intended to explain an important point: it’s certainly better for the PE firm if the company turns around, but if it doesn’t, that’s not so bad either, since if all else fails, they can just always just rape the acquired company. And while the "dividend recaps" aren’t by themselves enough to bring investors back to the next deal, you can bet they wouldn’t come to any PE deals at all if the PE firms they invested with didn’t possess this "rape in case of emergency" weapon in their financial arsenals.

As an investor, do you really want to throw your hard-earned cash into a company to whose bottom line Mitt Romney just added $300 million in debt? In a company that just borrowed $300 million not to buy new equipment or invest in R&D, but just to buy the "asset" of new management by Mitt Romney? In a vacuum, you probably wouldn’t invest in that firm – but if you know Romney can force the company to pay out a $120 million dividend on demand, taking out huge bank loans if need be, you’d feel a lot safer.

My point isn’t that it’s not good for PE firms when companies turn around, but that the system is set up so that they don’t have to make companies turn around in order to make profits on takeovers.

Is it better for Bain if a company like Ampad turns around? Absolutely. Did they make a 2000% profit anyway burning the firm to the ground when it didn’t? You bet.

In the long run, sure, a company like Bain will suffer if it leaves behind nothing but a pile of corpses, since that will scare away even the most clueless investors. (Of course that cluelessness can persist for a long time – this same pool of investors needed a world meltdown in 2008 to convince them to stop buying the subprime mortgage bonds bank hucksters were selling them).

But the fact that the occasional bloody casualty not only doesn’t dent the bottom lines of PE firms, but can even enhance them, makes this a very particular kind of capitalism – highly socially destructive, with little or no risk to the PE firm, but with the potential for massive profits to the Bains of the world even when they add zero or negative value to their takeover targets.

I think that sucks. Primack disagrees. He thinks it’s more significant that “legitimate wins matter” in the long run, while I think it’s more significant that they don’t matter in the short run.

This is what you call a difference of opinion. It’s the difference between believing that PE is socially beneficial and believing, as I do, that it’s often predatory and antisocial. It would be healthy to hear this debate aired out normally, but in this case, Primack depicts that disagreement as factual inaccuracy on my part, which is just obnoxious. We just don’t go there in this business unless it’s true (mainly because most experienced writers are cognizantof the "there but for the grace of God" factor when it comes to factual mistakes); you have to learn to distinguish between what is absolutely a wrong fact and what you think is a wrong opinion.

Read more: http://www.rollingstone.com/politics/bl ... z2613eusg4" onclick="window.open(this.href);return false;

[Baldy]

Well of course not Taibbi, but in this context he represents the far left writ large. To varying degrees presidential administrations listen to the squeaky wheels in their base, Obama isn't any different.

Good lord do you guys need to sort out your labels. Obama is a progressive...No wait...Taibbi is mad at Obama because Taibbi is a progressive and Obama is not. No wait...Obama won't move to the center because he listens to progressives like Taibbi. No wait...progressives are anti-capitalism...

Confused much?

Yep, I'd say you're pretty confused.

[kalm]

Good lord do you guys need to sort out your labels. Obama is a progressive...No wait...Taibbi is mad at Obama because Taibbi is a progressive and Obama is not. No wait...Obama won't move to the center because he listens to progressives like Taibbi. No wait...progressives are anti-capitalism...

Confused much?

Yep, I'd say you're pretty confused.

Feel free anytime to break down the facts.

[YoUDeeMan]

Feel free anytime to break down the facts.

Sure.

It's pretty clear that Talibani uses a bare minimum of facts, with a boatload of hyperbole, to write his crappy articles. Let's review some of the wonderful reporting from Matt.

1) "No one in history has ever successfully run for president riding this big of a lie."

What lie?

There's debt, and then there's debt. Romney is campaigning against our huge deficit. To equate that to being against debt, and to link it to mortgage debt, is ridiculous. We all know that running up a deficit, with little hope of paying it down, is more akin to poor credit card use than to home mortgages and business loans. But don't bother explaining that to this turd of a writer.

2) "Private equity firms aren't necessarily evil by definition. There are many stories of successful turnarounds fueled by private equity, often involving multiple floundering businesses that are rolled into a single entity, eliminating duplicative overhead."

Uhhhh...rolling floundering businesses into a single entity and eliminating duplicative overhead is...ahem...cutting jobs, Tally-boy. Thanks for supporting Romney.

3) "Since the initial acquisition of Tricycle Inc. was probably greased by promising the company's upper management lucrative bonuses, all that pain inevitably comes out of just one place: the benefits and payroll of the hourly workforce."

"Probably greased". Yup, no bias there. But wait, there's a reference to those in the "workforce"...but aren't those also the victims of the "many" "successful" turnarounds" Talibani references. And how many, is "many"? We'll find out later.

4) "Once all that debt is added, one of two things can happen. The company can fire workers and slash benefits to pay off all its new obligations to Goldman Sachs and Bain, leaving it ripe to be resold by Bain at a huge profit. Or it can go bankrupt – this happens after about seven percent of all private equity buyouts."

Let me do a little math...if 7% of the "turnarounds" go bankrupt, that would mean...wait for it...93% don't. Please review point #2 for some perspective.

Leveraged buyouts happen to companies that are in trouble. So, to use a phrase from my favorite new author, "one of two things can happen", either the company goes under, and everyone loses their jobs, or some people have their jobs saved. Apparently, Taibbi wants everyone to lose their job, or have some magical pixie dust fix everything for free. I'm sure Taibbi will let us know, in his next article, the better option that companies have for saving their employee jobs.

Taibanni also doesn't bother to even give a hint as to what companies do with all that new "debt". I mean, if a bank gives a loan, then where does that money go? And what, exactly, is that borrowed money used for? Why doesn't Taibanni, the leveraged buyout expert, bother to say where all that money went? Well, that would spoil his article.

Let's review some other facts Taibbi "forgot" to put into his article. Bealls was merged in 1988...it was struggling to survive, and some of the people who built the company were ready to move on. The newly merged company expanded its operations for the next 12 years. How in the world did a company that was struggling badly, manage to do that? Whoops....no explanation from our fact finding writer.

T-boy wants his readers to be upset that a company was able to survive, and provide jobs, for 12 more years before it, along with many other companies, eventually succumbed to bankruptcy (not tied directly to the borrowed money - hey, where did that money go again - as Taibbi would have you surmise, but to a failed business plan).

kalm I know you like this T-boy, but he is a failure of a writer for a variety of reasons. Mainly, he has an agenda and will conveniently select facts that, without proper framework, drive his readers to his biased conclusions.

Dopes such as houndawg, who believe in fairy tales, and D1B, who doesn't have a clue as to how to balance a checkbook, eat this stuff up because it suits their jealousy filled agendas.

[CID1990]

TBH- the search for investigative sources of information that I can trust is tiresome. Every time I think I have found a columnist with intellectual integrity I wind up disappointed. The only one who never let me down was Bill Buckley (reading him also had a positive effect on my vocabulary).

I would even appreciate a left wing columnist, if only they wouldn't skew things to fit their world view. Just show me some integrity- that's all I ask.

C-SPAN is boring as SH!t, but at least nobody is trying to blow smoke up my a$$ there.

[Grizalltheway]

TBH- the search for investigative sources of information that I can trust is tiresome. Every time I think I have found a columnist with intellectual integrity I wind up disappointed. The only one who never let me down was Bill Buckley (reading him also had a positive effect on my vocabulary).

I would even appreciate a left wing columnist, if only they wouldn't skew things to fit their world view. Just show me some integrity- that's all I ask.

C-SPAN is boring as SH!t, but at least nobody is trying to blow smoke up my a$$ there.

How do you feel about George Will?

[CID1990]

TBH- the search for investigative sources of information that I can trust is tiresome. Every time I think I have found a columnist with intellectual integrity I wind up disappointed. The only one who never let me down was Bill Buckley (reading him also had a positive effect on my vocabulary).

I would even appreciate a left wing columnist, if only they wouldn't skew things to fit their world view. Just show me some integrity- that's all I ask.

C-SPAN is boring as SH!t, but at least nobody is trying to blow smoke up my a$$ there.

How do you feel about George Will?

I read him also, but he is on a very short list of objective writers. He has his partisan moments too, but I haven't detected him manipulating data and facts to fit his preconceived narrative.

[Baldy]

Yep, I'd say you're pretty confused.

Feel free anytime to break down the facts.

I think Cluck took care of my light work , but I hope you do realize that Taibbi's writings are agenda driven hit pieces and not actual 'real' journalism, correct?

[kalm]

Feel free anytime to break down the facts.

I think Cluck took care of my light work , but I hope you do realize that Taibbi's writings are agenda driven hit pieces and not actual 'real' journalism, correct?

Aaawwww fuck! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Truth be told, I enjoy reading a good Cluck rant as much as Taibbi - they're very similar stylistically. I love me some cynicism. But my initial thoughts are:

1) As Taibbi pointed out in his rebuttal to Primack, there's a difference between arguing the facts and arguing opinion.

2) Guys like Charles Krauthammer and Thom Friedman are every bit as much agenda driven. That doesn't neccessarily make them wrong or not real journalists.

Now, please excuse me while I go lick my wounds and decide if I even dare attempt a response to Cluck.

[Cap'n Cat]

I think Cluck took care of my light work , but I hope you do realize that Taibbi's writings are agenda driven hit pieces and not actual 'real' journalism, correct?

Aaawwww fuck! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Perhaps, but to be fair to Brother Baldy, Rush Limbaugh had yet to comment on it, so he was unarmed for a period of time.

[Gil Dobie]

Aaawwww ****! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Perhaps, but to be fair to Brother Baldy, Rush Limbaugh had yet to comment on it, so he was unarmed for a period of time.

If you can listen to Rush, you are a better man than me. yuk

[Baldy]

Aaawwww fuck! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Not really, I said all I needed to say in my response to the original column.
It's been waiting for you to whiff on it for over a day now. Feel free to try an rebut it anytime you like.

Truth be told, I enjoy reading a good Cluck rant as much as Taibbi - they're very similar stylistically. I love me some cynicism. But my initial thoughts are:

1) As Taibbi pointed out in his rebuttal to Primack, there's a difference between arguing the facts and arguing opinion.

2) Guys like Charles Krauthammer and Thom Friedman are every bit as much agenda driven. That doesn't neccessarily make them wrong or not real journalists.

1. Taibbi thinks his opinion is fact.
2. The difference between Taibbi and Krauthammer and/or Friedman, is that Taibbi almost exclusively writes highly opinionated hit pieces. Krauthammer and Friedman don't.

[Baldy]

Aaawwww fuck! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Perhaps, but to be fair to Brother Baldy, Rush Limbaugh had yet to comment on it, so he was unarmed for a period of time.

Cappy, you're worrying me. I think you've been chewing on your jack towel for a little too long this time.

[kalm]

Aaawwww fuck! Now I'm gonna have to go back and actually read Taibbi's piece on Romney if I want to respond. But yes, Cluck did an excellent job of carrying your water .

Not really, I said all I needed to say in my response to the original column.
It's been waiting for you to whiff on it for over a day now. Feel free to try an rebut it anytime you like.

Truth be told, I enjoy reading a good Cluck rant as much as Taibbi - they're very similar stylistically. I love me some cynicism. But my initial thoughts are:

1) As Taibbi pointed out in his rebuttal to Primack, there's a difference between arguing the facts and arguing opinion.

2) Guys like Charles Krauthammer and Thom Friedman are every bit as much agenda driven. That doesn't neccessarily make them wrong or not real journalists.

1. Taibbi thinks his opinion is fact.
2. The difference between Taibbi and Krauthammer and/or Friedman, is that Taibbi almost exclusively writes highly opinionated hit pieces. Krauthammer and Friedman don't.

I take it all back. Cluck's response is similar to Primack's, attacking opinion with further...opinion. Which is fine, I don't expect Cluck to back up his "facts" with sourced material. He shoots from the hip real well and is very convincing. It's still opinion, but convincing none the less. And I agree, you said everything you could, full of all the substance you could muster in that first response.

[Baldy]

I take it all back. Cluck's response is similar to Primack's, attacking opinion with further...opinion. Which is fine, I don't expect Cluck to back up his "facts" with sourced material.

Well, Taibbi has been doing it for years, and you don't seem to have a problem with it.

And I agree, you said everything you could, full of all the substance you could muster in that first response.

I see you're taking your queues from your man crush. I didn't say anything even remotely resembling what you just claimed. A vintage Taibbiesque fabrication. He would be proud.

[YoUDeeMan]

kalm,

The bolder parts of my post were Taliban's "facts", not mine. Can't argue both sides on that.

My facts are very easy to find - the history of Bealls is public information. Look it up. Tabby throws out numbers without letting people see the whole equation. His story about Bealls begins in 1988 and ends about 12 years later, with virtually zero facts about what happened in between. I ask again, what happens to the debt a company takes on? Why doesn't Taibbi explain that?

The other "opinion" parts are not arguable...companies that are targeted for LBOs are usually strugglIng with a large amount of inefficiency. Otherwise, it simply would not be profitable to restructure it. There is little argument that a largely inefficient company would have to restructure itself anyway (read that as trimming jobs) because their excess costs are passed on to the customers. We know that most customers are selfish and greedy (that makes them bad people) and will shop elsewhere when costs are passed on to them. The whole "buy American" (with higher prices) loses out the majority of the time.

Oddly enough, people such as hounddippitydawg rant about companies and their drive for profits, yet they expect people to operate under the insular "company town" mentality where everyone works and buys things in a closed environment.

[kalm]

kalm,

The bolder parts of my post were Taliban's "facts", not mine. Can't argue both sides on that.

My facts are very easy to find - the history of Bealls is public information. Look it up. Tabby throws out numbers without letting people see the whole equation. His story about Bealls begins in 1988 and ends about 12 years later, with virtually zero facts about what happened in between. I ask again, what happens to the debt a company takes on? Why doesn't Taibbi explain that?

The other "opinion" parts are not arguable...companies that are targeted for LBOs are usually strugglIng with a large amount of inefficiency. Otherwise, it simply would not be profitable to restructure it. There is little argument that a largely inefficient company would have to restructure itself anyway (read that as trimming jobs) because their excess costs are passed on to the customers. We know that most customers are selfish and greedy (that makes them bad people) and will shop elsewhere when costs are passed on to them. The whole "buy American" (with higher prices) loses out the majority of the time.

Oddly enough, people such as hounddippitydawg rant about companies and their drive for profits, yet they expect people to operate under the insular "company town" mentality where everyone works and buys things in a closed environment.

Yes, you attacked his opinions with your own. Congrats!

[D1B]

kalm,

The bolder parts of my post were Taliban's "facts", not mine. Can't argue both sides on that.

My facts are very easy to find - the history of Bealls is public information. Look it up. Tabby throws out numbers without letting people see the whole equation. His story about Bealls begins in 1988 and ends about 12 years later, with virtually zero facts about what happened in between. I ask again, what happens to the debt a company takes on? Why doesn't Taibbi explain that?

The other "opinion" parts are not arguable...companies that are targeted for LBOs are usually strugglIng with a large amount of inefficiency. Otherwise, it simply would not be profitable to restructure it. There is little argument that a largely inefficient company would have to restructure itself anyway (read that as trimming jobs) because their excess costs are passed on to the customers. We know that most customers are selfish and greedy (that makes them bad people) and will shop elsewhere when costs are passed on to them. The whole "buy American" (with higher prices) loses out the majority of the time.

Oddly enough, people such as hounddippitydawg rant about companies and their drive for profits, yet they expect people to operate under the insular "company town" mentality where everyone works and buys things in a closed environment.

Yes, you attacked his opinions with your own. Congrats!

Exactly. Baldy does this too.

I'll bet on Taibbi before Flunk U any day.

[kalm]

kalm,

The bolder parts of my post were Taliban's "facts", not mine. Can't argue both sides on that.

My facts are very easy to find - the history of Bealls is public information. Look it up. Tabby throws out numbers without letting people see the whole equation. His story about Bealls begins in 1988 and ends about 12 years later, with virtually zero facts about what happened in between. I ask again, what happens to the debt a company takes on? Why doesn't Taibbi explain that?

The other "opinion" parts are not arguable...companies that are targeted for LBOs are usually strugglIng with a large amount of inefficiency. Otherwise, it simply would not be profitable to restructure it. There is little argument that a largely inefficient company would have to restructure itself anyway (read that as trimming jobs) because their excess costs are passed on to the customers. We know that most customers are selfish and greedy (that makes them bad people) and will shop elsewhere when costs are passed on to them. The whole "buy American" (with higher prices) loses out the majority of the time.

Oddly enough, people such as hounddippitydawg rant about companies and their drive for profits, yet they expect people to operate under the insular "company town" mentality where everyone works and buys things in a closed environment.

Nope...you're making decent arguments but you're still fighting opinion with opinion. But keeping it going, I enjoy your thoughts.