Archive - Dec 22, 2009

• Eurostar may struggle to move passengers by Christmas (Bloomberg)
• Lithuania let CIA use secret prison for interrogation (Bloomberg)
• A rising euro poses a threat to parts of block (WSJ)
• FBI probes hacker attack on Citigroup (WSJ, AP)
• Dubai stock markets to merge amid debt woe (WSJ)
• Are S&P 500 growth projections realistic (Seeking Alpha)

It is neigh impossible to utter the words "Private Equity" in an introductory paragraph and not mention the firm that defines the industry. Created by three former Bear Stearns colleagues, Jerome Kohlberg, Henry Kravis and George Roberts, Kohlberg Kravis & Roberts (hereinafter "KKR") has been effectively synonymous with the word "buyout" ever since. Founded in 1976 with around $30 million in committed capital when the Discount Rate was between 5.25% and 5.50% the firm thrived, even finding success through 1979's crushing 12.00% (and 1981's ruinous 14.00%) Discount Rate environment. KKR's habit of completing the largest buyout transactions in history goes back at least this far, as it closed what was probably the largest "going private" transaction by that time in the form of the Houdaille Industries buyout in 1979. The firm even raised its second fund in 1980 with over $350 million in committed capital. Interest rates, it would seem, were not a condition for KKR's success.

The stock market rescue operations of 2009 have created pent-up selling demand. We should all anticipate profit-taking on the first two or three trading days of 2010. Previous examples of pent-up selling demand that led to sharp stock market declines in the first two or three trading days of the New Year were 2005 and Y2K. This report examines the Y2K pent-up selling demand model.

The rating agency that has gotten selling out down to an art, just downgraded Greece from A1 to A2, yet kept it two notches higher than where the country is now fairly rated by Fitch and S&P, thereby preventing the country from collapsing into a liquidity crisis. By taking this action, Moody's has once again proven its utter worthlessness, by pretending to be objective while at the same time keeping an artificially inflated rating high enough to prevent the unforeseen spillover effects from Greece's inability to use Treasury's as ECB collateral: the definitive first domino to fall in Europa, about which we wrote 3 days ago.

Econophile reveals his personal Christmas Wish List.

The Alaska Retirement Management Board, a state agency, is suing Mercer and seeking $2.8 billion in damages...