Category Archives: Business

Retail’s Existential Threat? Private Equity Firms, by John McNellis

What private equity firms do to companies they buy is often nothing short of criminal. From John McNellis at wolfstreet.com:

A “bust out” is a fraud tactic used in the organized crime world wherein a business’s assets and lines of credit are exploited and exhausted to the point of bankruptcy — Wikipedia.

Bleeding badly, Debenhams, a 200 year old British department store chain, died last week. The coroner trotted out the usual suspects — the internet, the oversupply of retail, rising rents, tighter margins and, at the end of the dreary line-up, private equity. As it happens, Debenhams had been purchased by a private equity consortium led by Texas Pacific Group (TPG) in 2003.

That group paid £1.8 billion for the company, using £600 million in equity and £1.2 billion in debt it forced Debenhams to assume. The private equiteers promptly began selling off assets, dramatically cutting costs (store refurbishments dropped 77%) and awarding themselves large dividends for their efforts. And, no surprise, consumers lost interest in the fraying stores.

Since I first wrote about private equity’s looting and ultimate devastation of Mervyn’s (“On Private Equity and Real Estate” September 2012, behind paywall), retailer after retailer has been similarly gutted. Payless Shoes, Toys ‘R’ Us, Gymboree, Sears Holding, Mattress Firm and Radio Shack — all companies at one point owned or controlled by private equity firms — have since filed Chapter 11. In fact, Debtwire, a financial news service, calculates that about forty percent of all US retail bankruptcies in the last three years were private equity backed.

How do the private equiteers do it? Simple, the leveraged buyout. The LBO is the financial world’s pick and roll, that is, a highly effective play that is difficult to counter, especially if the PE firm takes the prudent first step of bribing its intended victim’s CEO into going along with their acquisition.

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Japan on a Larger Scale, by James Rickard

Go deep enough into debt and you can’t climb out, as Japan has found out and as the US and Europe are finding out. From James Rickard at dailyreckoning.com:

In my 2014 book, The Death of Money, I wrote, “The United States is Japan on a larger scale.” That was five years ago.

Last week, prominent economist Mohamed A. El-Erian, formerly CEO of PIMCO and now with Allianz, wrote, “With the return of Europe’s economic doldrums and signs of a coming growth slowdown in the United States, advanced economies could be at risk of falling into the same kind of long-term rut that has captured Japan.”

Better late than never! Welcome to the club, Mohamed.

Japan started its “lost decade” in the 1990s. Now their lost decade has dragged into three lost decades. The U.S. began its first lost decade in 2009 and is now entering its second lost decade with no end in sight.

What I referred to in 2014 and what El-Erian refers to today is that central bank policy in both countries has been completely ineffective at restoring long-term trend growth or solving the steady accumulation of unsustainable debt.

In Japan this problem began in the 1990s, and in the U.S. the problem began in 2009, but it’s the same problem with no clear solution.

The irony is that in the early 2000s, former Fed Chair Ben Bernanke routinely criticized the Japanese for their inability to escape from recession, deflation and slow growth.

When the U.S. recession began during the global financial crisis of 2008, Bernanke promised that he would not make the same mistakes the Japanese made in the 1990s. Instead, he made every mistake the Japanese made, and the U.S. is stuck in the same place and will remain there until the Fed wakes up to its problems.

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Yesterday’s Country: Not to Worry, They Can’t Innovate, by Fred Reed

The US business community is probably more aware of China’s innovative abilities than Fred Reed believes, but the non-business average American probably still thinks, wrongly, that the Chinese don’t innovate. From Fred Reed at lewrockwell.com:

For many years the United States has regarded itself as, and been, the world’s technological leader. One can easily make a long and impressive list of seminal discoveries and inventions coming from America, from the moon landings to the internet. It was an astonishing performance. The US maintains a lead, though usually a shrinking one, in many fields. But:

China has risen explosively, from being clearly a “Third World” country forty years ago to become a very serious and rapidly advancing competitor to America. Anyone who has seen today’s China (I recently spent two weeks there, traveling muchly) will have been astonished by the ubiquitous construction, the quality of planning, the roads and airports and high-speed rail, the sense of confidence and modernity. Compare this with America’s rotting and dangerous cities, swarms of homeless people, deteriorating education, antique rail, deindustrialized midlands, loony government, and the military sucking blood from the economy like some vast leech, and America will seem yesterday’s country. The phrase “national suicide” comes to mind.

A common response to these observations from thunder-thump patriots is the assertion that the Chinese can’t invent anything, just copy and steal. What one actually sees is a combination of rapid and successful adoption of foreign technology (see Shanghai maglev below) and, increasingly, cutting edge science and technology.  More attention might be in order. A few examples: A few examples from many that might be adduced:

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From The Ashes, by Joel Bowman

The global black market, even excluding drugs, arms, and other contraband, is huge. From Joel Bowman at internationalman.com:

“Nothing makes a man so adventurous as an empty pocket.”

~ Victor Hugo, The Hunchback of Notre Dame

As Paris’ most iconic cathedral was engulfed in flames earlier this week, crowds of somber onlookers gathered on the banks of the Seine.

They sang hymns. They embraced each other. They watched in shocked, helpless silence as 850 years of history looked as though it might collapse.

“It feels like a national hero was shot,” writes a friend, who was standing amongst the crowd. “The mood in the air is like at a funeral. Everyone is in mourning.”

Thankfully, all was not lost. Although the Gothic spire – once the highest point in the city – fell… and the roof was badly damaged… the 12th century oak beams stood, and the towers remain.

The city will rebuild, says the president. (Already, €300 million has been pledged for the purpose, mostly from wealthy families and private companies.)

Of course, the cathedral was more than simply a religious structure. It was a symbol of human achievement… and perseverance.

Recalling our own time living in Paris, where we stayed not two blocks from La Grande Dame, we remember vividly another sort of strength, a type of character that is forged in the crucible of necessity and adversity and even deprivation.

You see it on the streets… and in the peripheral arrondissements … particularly late at night.

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The World’s Hypocritical Silence as China Imprisons its Ethnic Muslims En Masse, by Charles Hugh Smith

Nobody is going to piss off the Chinese government and lose access to over a billion potential customers. From Charles Hugh Smith at oftwominds.com:

The entire world’s ruling elites are silent because they’re terrified that even mild murmurings might limit the blood-soaked billions they want to reap from trade with China.

Imagine the reaction in the global Muslim community if a western nation imprisoned hundreds of thousands of Muslims solely for being Muslim and subjected them to torture, “re-education” that amounts to treating their religious faith as a pathological mental illness, forcefully separating parents and children, incarcerating the children in state-run orphanages, and on and on in a ruthlessly efficient Nazi-like systemic oppression.

The Muslim “street” would erupt in mass protests, burning flags and calling for the downfall of The Great Satan, and the Muslim nations would cancel energy and trade contracts and lodge diplomatic protests.

But the global Muslim community, and indeed, the entire global community, is strangely silent as China pursues a high-tech suppression of its ethnic Muslims. This silence might be the one thing Tehran, Moscow and Washington have in common: a complete and utter disregard for China’s Muslim-only gulags.

While America’s ruling elite greedily rubs its hands over the wealth that will flow from a “trade deal” with China, where is America’s vaunted concern with human rights? Nowhere to be found. Where are the canceled energy and trade contracts between China and Iran, Turkey, Pakistan, Egypt, Indonesia, Malaysia, Iraq, Syria, Saudi Arabia, the Persian Gulf States and other Muslim-majority nations?

The entire world’s ruling elites are silent because they’re terrified that even mild murmurings might limit the blood-soaked billions they want to reap from trade with China. That is the source of the world’s hypocritical silence about China’s Muslim-only gulags: the endless, insatiable, boundless greed of the ruling elites.

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What Could Possibly Go Wrong With This (Continuously Increasing) Neurotoxic and Autoimmunity-Inducing Vaccine Schedule? by Gary G. Kohls, MD

In 1962, children received five vaccines or boosters. In 2016 they receive 72, many laced with the adjuvant aluminum and/or the preservative thimerosal, which is mercury. Both aluminum and mercury can cause brain damage. Yet the government and pharma insist there’s no connection between ever-increasing required immunizations and diseases like autism. From Gary G. Kohls, M.D. at lewrockwell.com:

Any parent (or science writer) that isn’t vaccine hesitant has to be crazy, ignorant, uninformed, indoctrinated, threatened by their pediatricians, worried about job security, afraid of not following the culture- or government-approved narrative or invested in the Big Pharma industry.

Science writers that continuously (and ignorantly) write about “anti-vaxxers” (rather than more accurately depicting the multitudes of truth-telling parents [whose infants and children have been killed, maimed or disabled after being injected with cocktails of unproven-for-safety, neurotoxic and autoimmunity-inducing vaccines] and unbiased, not-for-profit, science-minded scholars as what they really are: “anti-over-vaccination activists”.

Note that none of these combination shots have been tested for safety of effectiveness when used  in combinations. Most US infants get 3 shots in different muscles at their 2, 4 and 6 months “well baby” visits. The peak incidence of Sudden Infant Death Syndrome is at 2, 4 and 6 months of age (just after their well-baby shots. Near-SIDS episodes are not reported to the CDC and, because SIDS events are IATROGENIC, most physicians never report vaccine-related events under any circumstances (hence no stats). Also bad for business.

Here is the first step in getting to understanding about so-called “vaccine hesitancy”. More to come. GGK

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“That’s Something China Can’t Tolerate”: Tensions Erupt As China Slams Australia’s “Irresponsible Comments”, by Tyler Durden

Many nations commercial relationships with China are so extensive that China can throw its weight around. From Tyler Durden at zerohedge.com:

It all started in late February when we reported that a political row had erupted between China and Australia, with Beijing cracking down on imports of coal from Australia, cutting off the country’s miners from their biggest export market and threatening the island nation’s economy at a time when it and its fellow “Five Eyes” members who have sided with the US by blocking or banning Huawei’s 5G network technology.

In the weeks that followed, while Beijing disputed such a draconian export crackdown, China was overtly targeting Australian coal imports with increased restrictions – what Beijing claims were quality checks – that delayed their passage through northern ports. Given Australia has the highest level of income dependency on China of any developed nation as 30.6% of all Australian export income came from China last year, equivalent to US$87 billion (twice the trade volume with Japan, Australia’s next biggest trading partner), and Australia’s coal industry is deeply dependent on its exports to China, which account for 3.7% of Australia’s GDP, this prompted much speculation that Beijing is punishing coal companies as retribution for political acts by Canberra, one of Washington’s closest allies. “The last time Australia was so dependent on one country for its income was in the 1950s when it was a client state of Britain,” Sydney Morning Herald’s international editor, Peter Hartcher Hartcher said in March, according to the SCMP.

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