Private equity sounds like just another source of investment capital, like venture capital or hedge funds, but while these can be incredibly destructive and toxic, private equity has perfected destroying the real economy, ruining lives and making rich people richer.
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PE is fundamentally about destroying real value and converting it to wealth for already-rich people.
Here's the core play: buy a company, load it up with debt, fire employees, cut wages and squeeze suppliers.
pluralistic.net/2020/07/24/sof…
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Value is transferred from productive businesses and workers to partners, bankers and lawyers in coastal cities. New monies flow in through lobbying, litigation, price-hikes and pension fund looting, paid out as dividends and consulting fees.
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Companies acquired by PE funds see sharp debt hikes, slowed revenue growth, and plummeting capex.
PE is behind so much of what's wrong in the world today, from looting Canada's beloved Mountain Equipment Co-Op:
pluralistic.net/2020/09/16/spi…
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To gutting hospitals and especially emergency rooms, a trend that INCREASED after the pandemic started:
pluralistic.net/2020/05/21/pro…
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They killed Sears, Toys-R-Us and Hertz:
pluralistic.net/2020/05/27/lit…
and they're coming for your pension:
pluralistic.net/2020/06/08/the…
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The US Government kicked off an incredible debt bonanza when it announced that it would buy corporate bonds, no matter how crappy the company's fundamentals were, leaving the largest firms awash in effectively free cash.
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Naturally, PE - which never met a debt it didn't like - hopped on board. The latest PE craze is dividend recapitalisations ("divi recaps"), AKA "borrowing crazy amounts of money on behalf of a company and then just sticking it in your pocket."
ft.com/content/a9ff46…
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ONE QUARTER of all US debt raised in September went to divi recaps (it was 4% over the past two years). That's FOUR BILLION DOLLARS THIS MONTH.
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Oh, then there's this: "investors express concern over loose documentation underpinning the loans, offering little protection to investors should a company end up in trouble." -@JARennison, @FT
What could possibly go wrong?
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This is the true heart of the "zombie economy" - an economy that "improves" whenever sociopaths destroy its productive capacity:
pluralistic.net/2020/08/24/rai…
/eof
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