Archive - Oct 6, 2012

Tyler Durden's picture

A Glimpse Inside The Industry That Owns Everything





Standing in Legoland in Carlsbad, California in 2011, fulfilling a promise to my then eight-year-old son William, it hit me. I was strolling around a Blackstone-owned property. We'd woken up in a Homewood Suites, owned by Blackstone-backed Hilton. We'd driven to the park in a rental car from Hertz, owned by private-equity firms Carlyle and Clayton, Dubilier & Rice. Practically every time I'd opened my wallet that day, it had been to a company owned by private equity. Even on vacation, I couldn't escape. A few months later, I had dinner with Greg Brenneman, who'd held top positions at Continental, Burger King, and Quizno's, all private-equity-owned at the time he was involved. Brenneman is now the chairman of CCMP Capital, whose investments have included 1-800-Flowers.com and Vitamin Shoppe. We talked at length about the ubiquity of PE ownership -- my J. Crew sweater, the Dollar General store in my wife's hometown in the Catskills. I started a running list on my BlackBerry that quickly grew to dozens of examples. Brand names piled up, from Toys "R" Us to Petco. The more I looked, the more I found it.  The numbers are staggering. Private-equity firms globally and collectively had almost $3 trillion in assets at the end of 2011. The companies they own account for about 8 percent of the U.S. gross domestic product by one estimate.

 

Tyler Durden's picture

Goldman On The Not-So-Good, The Bad, And The Ugly Fiscal Cliff Scenarios That Remain





Even if both the Bush tax cuts and emergency unemployment insurance are extended, the 'sequester' is mostly postponed, and the fresh fiscal drag is confined to the expiration of the payroll tax cut and the new taxes to pay for Obamacare, Goldman estimates suggest that fiscal policy would shave nearly 1.5% from real GDP growth in early 2013. While it seems the 'market' believes that some compromise will be enough to lift the market to new stratospheric heights; we believe, as does Goldman, that the risks are almost exclusively on the downside of this 'not so good' fiscal scenario.

 

 

CrownThomas's picture

White House Manipulating the Jobs Data? Unpossible...





Certainly the White House would never interfere in unemployment data critical to their re-election hopes

 

Tyler Durden's picture

The Fed's 'Improvisation' Phase





Individually, it seems, most Fed officials accept the chief recommendation of monetary theorists, such as Michael Woodford of Columbia University, about how to conduct policy when the nominal federal funds rate is stuck at its zero lower bound. The problem they face rather explicitly, as Morgan Stanley's Vince Reinhart points out, is how to translate the advice from economic textbooks to the application of policy by the diverse group of people on the FOMC. Reinhart goes on to ask, rhetorically, if a conditional policy rule works so well in theory, why has it not been put into practice? Congress instructs the Fed to foster maximum employment and price stability but gives no guidance on weighing deviations from those goals in the short run. If the FOMC cannot agree on the weights, then they cannot agree on a rule. As a result, the Fed is living out a collective action problem, in that officials individually support a rule but collectively cannot agree to a single rule. This leaves Fed officials are now in the improvisation phase of their monetary policy experiment. That does not seem to us like a 'good' thing for the most powerful entity in the world.

 

Tyler Durden's picture

Guest Post: Housing: Plenty Of Reasons To Be Pessimstic





While everyone and their pet rabbit 'Dave' in the media seems to 'believe', there’s plenty of debate about—and money riding on—the question of whether we are in the midst of a sustainable recovery in the housing market. Nobody knows for sure, of course, but there are plenty of reasons to be pessimistic. While it is easy to focus on the traditional indicators of supply and demand and start believing that the long-awaited recovery in the property market has arrived at last, the fact is that much has changed in the wake of the events of the past decade, a development that is likely to weigh on prices for many years to come.

 

Tyler Durden's picture

Can The Fed Ever Exit?





We have extensively discussed the size (here - must read!) and growth (here) of the Fed's largesse in soaking up massive amounts of the primary and second Treasury (and now MBS) markets with the ongoing theme of 'what about the exit strategy?' among other things. The onset of QEternity likely means the Fed's balance sheet will grow to over $4 trillion within the next year and, as UBS notes, although the Fed has suggested that it will not begin an exit strategy until 2015, the magnitude of the excess balance sheet argues for considering whether the Fed has the ability to unwind their balance sheet. We, like UBS, believe that the Fed will find it far more difficult to exit than they have found it to enter given the limitations of the exit tools frequently cited. There are three main tools for reducing the Fed’s balance sheet: asset sales/maturation (bad signaling), reverse repurchase agreements (size constraints), and interest on reserves (inflationary).

 

Tyler Durden's picture

Guest Post: Nanex: Investors Need To Realize The Machines Have Taken Over





It will come as no surprise to any ZeroHedge readers but High Frequency Trading (HFT) deeply concerns Erik Hunsader, founder of Nanex. He worries that today's investors, our regulators, -- heck, even the HFT algorithms themselves -- don't fully understand the risks market prices face in the brave new era of bot-dominated trading. For instance, Hunsader estimates that HFT algorithms are responsible for 70%(!) of all completed transactions on our exchanges, and for 99.9%(!!!) of all exchange quotes. The pictures of trading floors you see on TV, where the people in bright jackets appear frantically busy in making their trades, have no bearing -- claims Hunsader -- on the actual trading action. The real action happens across fiber-optic cables, on racks of servers in cooled rooms; where an arms race defined by cable length and switching speeds is being waged. The reality is that the machines have taken over.

 

Tyler Durden's picture

The European Disunion: The Richest Increasingly Want To Fragment From The Poorest





Europe, and its apparent Union, is rapidly fragmenting as tensions mount on large and small scales across all of its regions and nations. From Scotland's independence referendum to Flanders' autonomy and now Catalonian separatism on the rise once more, this is no longer a north-south divide, but a rich/poor, debt/no-debt divide. As the NY Times notes, this seems to emerge from the ebbing of the concept of shared sovereignty (richer - or less debt-saturated - nations increasing anger at having to bail out their poorer neighbors), or as Stratfor describes it - the paradox of integration - as 'more Europe' means vastly different things depending on which side of the fence you sit on. Now, as Russia Today reports, Venice is pushing for independence from Rome and there is increasing independence movements in Sicily and Sardinia. As old battles and historical grievance come back to the fore, "when it comes to the crunch, while money may be the catalyst (who commits what to central budgets); it is, as the NY Times puts it, "the meta-narrative and emotions of 'do we feel oppressed?... as the ghosts of history return." From Bannockburn to WWII, "Europe seems shakier; some of the taboo questions are coming out again!"

 

Tyler Durden's picture

Saturday Humor: This Week's Top Headlines





In lieu of a missing Friday humor piece, here is the Saturday edition, which is merely a non-fiction based compilation of this week's Top 10 Bloomberg headlines as they crossed the tape. The conclusion here is that The Onion has now permanently missed its IPO window, as reality is now in no need of embellishment.

 

Econophile's picture

Game of Thrones: The Debate of Liars





Polticians lie. Obama and Romney are politicians. They talk. Therefore they lie. They lied big time during the debate. Are our choices between evil and lesser evil?

 

williambanzai7's picture

CiTiZeN ALeRT...





Maximum Caution Advised!

 

Tyler Durden's picture

Israeli Air Force Releases Video Of Explosive Drone Interception





You read about it earlier here. Now see how it happened in real time. The identity of the "transgressor(s)" has still not been released.

 

 

Tyler Durden's picture

California Gas Price Hits Record $4.614 Per Gallon





We have covered the great California gas rush in the past few days, and here is the confirmation. According to the AAA fuel gauge report, the average California gas price just hit an all time record of $4.614, and shows no sign of slowing down.

 

Tyler Durden's picture

Rosenberg On The Unemployment Rate: "If It's Too Good To Be True, Then It Probably Is"





Much has been said about yesterday's laughable jobs report. Here is a little more, only this time not from some politicized CTRL-C/CTRL-V major who was forced to take out the HP-12C for the first time from their storage closet and pretend they have any idea about finance and economics, but from David Rosenberg.

 

Tyler Durden's picture

Guest Post: Why Spain Is A Riot





Over the past few weeks, Spain has received worldwide attention due to its deteriorating economy and growing outbursts of massive social protests. Most notably, US presidential candidate Mitt Romney said in his debate with President Barack Obama last week that he did not want his country to “go down the path to Spain.” As the world fixes its eyes on the eurozone’s fourth largest economy, analysts continue to offer suggestions as to how to best tackle the Iberian country’s economic woes. However, the reason why Spain is a riot both financially and socially goes beyond matters of economic policy. Spain faces a graver problem, its political institutions. Perhaps the most lamentable element in Spain’s political class is that it is hard, almost anecdotal, to find elected officials with a track record outside the public sector. For too many years, the country has been governed by bureaucrats who have no experience whatsoever in the real world of business. The majority of Spain’s politicians do not know what it is to conceive an idea, to risk one’s own wealth, to deal with banks, workers and suppliers, and, ultimately, to experience failure and success. Sadly, the Spanish taxpayer-financed political establishment understands failure and success only in terms of which side of the aisle their members are seated in parliament.

 
Do NOT follow this link or you will be banned from the site!