Sat, 27 November 2010
Josh Kosman returns to once again talk about the Private Equity industry, an industry many of us have little knowledge of and an industry that greatly impacts all of us.
The facts are that the number two private employer in this country is a Private Equity firm, KKR, and among the top ten private employers in this country five of those companies are PE companies. There is no question that PE firms have a direct impact on our economy and thus should be on the radar screens for anyone following the economy.
I asked Josh Kosman to come back on the show to give us an update on PE since we last spoke and to my surprise they are making a dramatic comeback. The reason is simple, with the Federal Reserve keeping interest rates far below the natural rate of interest the investment managers at pensions and mutual funds are looking for some yield to meet the hurdle rate (minimum acceptable rate of return) that is mandated by the fund.
In effect, the Fed is pushing money right into the hands of the very PE firms that saddle good American companies with debt while gutting the infrastructure at the same time. It is a deal that leaves the companies unable to compete internationally and makes the US less competitive as a result. Hopefully Josh can give us some good news that things are changing...
Buy the book "The Buyout of America" by Josh Kosman
Direct download: Episode_72_-_Spotlight_on_Private_Equity_with_Josh_Kosman.mp3
Category:general -- posted at: 8:55 PM
I'm looking forward to reading this book. It sounds like a pretty pernicious practice to acquire a company with a small relative down payment, load the company up with debt and basically cannibalize it for short term gains. I believe that is what Mr. Kosman alleges. I'm especially interested in reading about how the private equity firms further their exploitative efforts by cultivating government. This may be further evidence of the crony capitalism, the insiders game, underlying the American economy. Naturally, I expect to see that former students of Harvard, Yale and other Ivy League institutions are at the helm of these immoral financial vessels.
A good manager should look at an employee as nothing more than a human resource. Jobs should be eliminated if doing so makes the company leaner and more competitive in the market. Because of the high cost of maintaining a single employee, a good manager seeks to work the human resource as hard as he can and for as little money as he can until modernization allows him to eliminate the employee all together. This is just good business.