Brilliant analysis on many levels Matt. As a real estate owner, builder and developer through out the 70’s, 80’s, my partner and I where old school. We only borrowed money from banks when needed to finance or develop an acquisition. We always penciled out a project to make sure we had a safe margin to cover any leverage. By the early 90’s, the deregulation of the banking system causing the Saving and Loan debacle almost wiped us out. The banks where free to give money to friendly developers and family. This over built the market and brought the projects we had to a standstill. Only though great effort, especially by my partner, were we able to recover. I was the deal maker and numbers guy, he was the road and home builder. We were offered many defaulted projects that we turned down. Following you analysis we could have acted like private equity and taken and leverage many of these bad projects the banks where stuck with. Problem was, even with non-recourse financing, it would have felt like stealing money. That was a time when your hand shake was as good as a contract. How times have changed!
Dennis, theory I have,, You write as to S&L fall out. and, not to mean to pick a sore spot. I hope not too. BUT, I felt the S&L issue was made as many things happen as to economy. I like call as to Domono effect or as One throws a rock in the Pond. Is and as too per planning the wave effect going to hit straight back at you on bank. When, IF, one looks, there a Rock 5 feet to left and a log ten feetout on the right, But there is a clear path in middle coming to you. Is that wave STILL going to come straight forward at you? Lets call a open opportunity most would see straight back or is going to change, come sideways, thus making a different wave or market? . But, noting to economy may take two year for that to happen, as that wave to hit the bank- down the road. To that thought. And side markets, as to Supply and demand
ANYWAY, pointing to 1980`s “the leveraged buy outs”. Which to me, changed or made a false demand, thus came a side market, as to Business properties. How that played out on S&L bailout. “IF” one was to see, from this a Demand side, leveage buyout, short term as to 5-7 years.
Then, early 90`s came S&L bailout.
OK, you was in the business, Question I ask, Do you feel, agree With, or by Offering People to buy out business so, to turn a buck on parting out that company, piece by piece. THATS the Levelage buy out. BUT, made a ‘In truth false demand on Properties, “Business Properties”. That, another market opened up, smaller players to play, And was in the South, I watch from Fort worth Texas, We had Business, closed down, empty Building as for leases. mostly in downtown area.
BUT, People was buying, Flipping if you will to another Investor. Game of Musical chairs, once the song stop. Someone left with NO seat, or holding the bag. Thus Small Banks at that time, was turning out loans, at only 5% down for Property that REALLY didnt have a solid market- demand for. Only the next investors, I watch at that time, turning these loans, My bank then, they also, was seeing fast returns, MOST at the height of this market was turning loans on avg. every 2-3 months, then on to the next investor to the next investor. NOT no one, really looking to hold, or buy to lease out. – USE.
I even, watched as Some was building New, when 40% office space, for leasing was already empty. This was insanity to not see. To my local area. THUS, came Bank of America, Wells Fargo, Chase Bank, they were not there before S&L issue. in Dallas, Fort Worth Texas area, at lease. I have question if they played a part in all this?
The S&L debacle to took a good 10 years to crush our real estate development business. Once the banks where deregulated it took that long for the unregulated banks to steal, give to developer friends and outright steal the bank’s money. How did Lincoln savings lose $3 Billion dollars, they stole it because no one was monitoring them. The real estate market got overbuilt with the developers coming to the banks with deals. The developers took the money and left the banks with the useless projects. The premise is simple, an unregulated and unfettered industry leads to an economy that is not free and is controlled by big money. If you take any facet of our economy and regulate it and insure unions will be required so workers get their part of profits, money will end up in the workers hands guaranteeing a strong American financial system. The concentration of wealth will ll be the death of America as will as all those arrogant elites who think they are gods. The pitchforks will get them all in the end.
There really are no more undervalued companies left to invest in.
Breaking up these monopolies is the best way to unleash the power of the economy and shift investment money away from the FTX/ WeWorks/ Ubers and toward competition that creates innovation.
Klobuchar and Lee using their leverage is a good sign that some sitting members will actually do their jobs. Perhaps others will take note. Great article Matt
Also, this continues to be crucial work against monopoly and concentrated power that perverts political power in the United States and extracts economic rent from the American population to the benefit of a few. It's heartening to see that the occasionally victory is actually possible, and winning begets winning. Thanks for your efforts Matt!
"Now, the app is warning users that they must pay as much as $36 a year if they want access to those cumbersome passwords on all their devices."
LOL. And that's why I never bought in to the whole, let's host our passwords in the cloud! Because surely that SaaS company isn't going to point a gun at you, ever. You can trust them!
No.
I highly recommend KeePass and other software that reads/writes that format. I have MacPass on OS X and share it via Google Drive with my iPhone and KeePassium. Works great. Been doing this for a decade now.
Lason, I watch - seen Microsoft presentation on their NEW windows for businesses.
Yeah, Trust the Cloud, I wish not too, IF, one looks at what they are offering. with AI out.
You are handing over Everything to them, Not just pass words, Your whole layout-business.
OH, what if all good, Trust, Then what, just look at an if event say a power outages.
Ever seen a business say a restaurant, better A Bar Lose power. OH, Do not need power to serve drinks, BUT, no computer or Cash register. Thats the big one, as to stop serving.
The Data they are going to be collecting, People are handing over to them. Or do they have a choice now?
as to their Presentation, IF it was a drinking game, as to every time I hear "trust the Cloud" I think i be dead, from drink to mush to fast. there to the end mostly.
I have worked in the industry for over a decade (none of the firms named above but close enough). When I was younger the economy was an abstraction to me, something that happened exogenous to my behaviour. As I age I can see the direct links between what we have done and what is happening now. But many of us are trapped, by our own vanity, and we probably need to be forced to change, no matter how painfully. Unfortunately I cannot see that happening. The FED will pivot, it will expand its balance sheet, which will be transferred almost immediately to the insiders described above, and a small amount will tricky down through spending on services and luxury goods. This will cause further societal ruptures, the cause of which CNN / CNBC / BB / MSNBC / Fox will misdiagnose as cultural. Young, smart people will continue to aspire to be the kind of insiders described above, because that is what our system rewards, at the expense of worthy, productive pursuits (true entrepreneurship, medicine, farming ANYTHING else). I'm sure of this because those in power now are almost all beneficiaries of these ponzi systems (in the case above, super senior management fees that layer the claims of investors), and so they're incentivised to keep them going at all cost. The pivot will be justified by some tortured statistic with no relationship to the real world, and then couched in new language that will obfuscate the simplicity of the scam. A few people like you and Taibbi will say something but nobody will care
"But MPT isn’t isolated, it is interconnected with funds that buy hospitals. As MPT loses its ability to get the cash to buy out private equity-owned hospitals, what happens to those private equity funds who rely on it? That’s where this gets more interesting. Hospitals, especially safety net hospitals, are just not good investments. Some things just can’t be profitable, like taking care of sick poor populations."
Heh. I think ProPublica or NYT had a story where a a PE owner of a hospital in VA actually takes advantage of huge drug discounts if you have such a hospital, but sets up outpatient clinics in rich neighborhoods in VA to write high margin prescriptions, pocketing the savings from serving a poor community on the drug costs. Nice scam, if you can run it.
Oh wow, did I read that in the WSJ of all places? Usually I find this stuff in Pro Publica or even lately the NYT has been good on PE in hospital systems, to my surprise. The horrors that come out of PE ownership of hospitals is truly endless. As national policy this is simply insane. And much like "food deserts" we have entire counties in this country that do not have credible access to emergency care. At all. It's nuts. Health care cannot credibly be a for profit industry.
It may be a trivial distinction but the startup/venture capital world has been a Ponzi scheme for decades.
Companies went public in the 90s with hardly any revenue, let alone profitability. The idea in theory is that companies spend profits and investment $s on growth. Remember webvan? IOW the story they tell is they *could* be profitable whenever they wanted to be.
There’s no pretending anymore. Many VCs pump up startup valuations just to prepare to flip them to retail investors. I don’t think VCs respond directly to Fed actions, but rather their LPs hoard $ when there’s a recession or threat of one, so funding “dries up.”
VCs love the “corrections” because the startups must become more lean and more dependent on investment dollars at a lower valuation. This is the startup game that founders have been convinced to play. The VCs don’t have to put their own in charge.
Unicorns: Fanciful beasts that self-described wizards convince peasants they can own for a fee.
Excellent! Thank you, Matt! On a much smaller scale, we in Minnesota watched a bubble pop with Pipeline Foods, which went bankrupt in 2021. Same situation ~ as the “only organic grain trader in the country”, it was the golden child of our food space up to the very point of its insolvency. It turns out that it was just a private equity outfit, and that they’d been overstating the value of their assets until the debt financing ran dry; particularly to farmers, who simply lost their inventories when whatever value was left went to investors overseas.
Thankfully, they’re getting sued now; but the former CEO still goes around acting like a power broker. My last job was involved with him, and I highly suspect they were up to the same shenanigans. Here, if you build an enticing enough brand with a corporate responsible story behind it; there’s a chance General Mills will buy it from you. No worries if you screw all your stakeholders in the process~ the insiders will cash out the second the monolith buys you and your story of “food justice.”
You’ve really showered us with riches in this edition, Matt. Incredibly valuable reporting.
Best piece you have ever written. A MUST read. Everyone, pass it along.
Brilliant analysis on many levels Matt. As a real estate owner, builder and developer through out the 70’s, 80’s, my partner and I where old school. We only borrowed money from banks when needed to finance or develop an acquisition. We always penciled out a project to make sure we had a safe margin to cover any leverage. By the early 90’s, the deregulation of the banking system causing the Saving and Loan debacle almost wiped us out. The banks where free to give money to friendly developers and family. This over built the market and brought the projects we had to a standstill. Only though great effort, especially by my partner, were we able to recover. I was the deal maker and numbers guy, he was the road and home builder. We were offered many defaulted projects that we turned down. Following you analysis we could have acted like private equity and taken and leverage many of these bad projects the banks where stuck with. Problem was, even with non-recourse financing, it would have felt like stealing money. That was a time when your hand shake was as good as a contract. How times have changed!
To Dennis,, or question,
Dennis, theory I have,, You write as to S&L fall out. and, not to mean to pick a sore spot. I hope not too. BUT, I felt the S&L issue was made as many things happen as to economy. I like call as to Domono effect or as One throws a rock in the Pond. Is and as too per planning the wave effect going to hit straight back at you on bank. When, IF, one looks, there a Rock 5 feet to left and a log ten feetout on the right, But there is a clear path in middle coming to you. Is that wave STILL going to come straight forward at you? Lets call a open opportunity most would see straight back or is going to change, come sideways, thus making a different wave or market? . But, noting to economy may take two year for that to happen, as that wave to hit the bank- down the road. To that thought. And side markets, as to Supply and demand
ANYWAY, pointing to 1980`s “the leveraged buy outs”. Which to me, changed or made a false demand, thus came a side market, as to Business properties. How that played out on S&L bailout. “IF” one was to see, from this a Demand side, leveage buyout, short term as to 5-7 years.
Then, early 90`s came S&L bailout.
OK, you was in the business, Question I ask, Do you feel, agree With, or by Offering People to buy out business so, to turn a buck on parting out that company, piece by piece. THATS the Levelage buy out. BUT, made a ‘In truth false demand on Properties, “Business Properties”. That, another market opened up, smaller players to play, And was in the South, I watch from Fort worth Texas, We had Business, closed down, empty Building as for leases. mostly in downtown area.
BUT, People was buying, Flipping if you will to another Investor. Game of Musical chairs, once the song stop. Someone left with NO seat, or holding the bag. Thus Small Banks at that time, was turning out loans, at only 5% down for Property that REALLY didnt have a solid market- demand for. Only the next investors, I watch at that time, turning these loans, My bank then, they also, was seeing fast returns, MOST at the height of this market was turning loans on avg. every 2-3 months, then on to the next investor to the next investor. NOT no one, really looking to hold, or buy to lease out. – USE.
I even, watched as Some was building New, when 40% office space, for leasing was already empty. This was insanity to not see. To my local area. THUS, came Bank of America, Wells Fargo, Chase Bank, they were not there before S&L issue. in Dallas, Fort Worth Texas area, at lease. I have question if they played a part in all this?
The S&L debacle to took a good 10 years to crush our real estate development business. Once the banks where deregulated it took that long for the unregulated banks to steal, give to developer friends and outright steal the bank’s money. How did Lincoln savings lose $3 Billion dollars, they stole it because no one was monitoring them. The real estate market got overbuilt with the developers coming to the banks with deals. The developers took the money and left the banks with the useless projects. The premise is simple, an unregulated and unfettered industry leads to an economy that is not free and is controlled by big money. If you take any facet of our economy and regulate it and insure unions will be required so workers get their part of profits, money will end up in the workers hands guaranteeing a strong American financial system. The concentration of wealth will ll be the death of America as will as all those arrogant elites who think they are gods. The pitchforks will get them all in the end.
There really are no more undervalued companies left to invest in.
Breaking up these monopolies is the best way to unleash the power of the economy and shift investment money away from the FTX/ WeWorks/ Ubers and toward competition that creates innovation.
Klobuchar and Lee using their leverage is a good sign that some sitting members will actually do their jobs. Perhaps others will take note. Great article Matt
Also, this continues to be crucial work against monopoly and concentrated power that perverts political power in the United States and extracts economic rent from the American population to the benefit of a few. It's heartening to see that the occasionally victory is actually possible, and winning begets winning. Thanks for your efforts Matt!
"Now, the app is warning users that they must pay as much as $36 a year if they want access to those cumbersome passwords on all their devices."
LOL. And that's why I never bought in to the whole, let's host our passwords in the cloud! Because surely that SaaS company isn't going to point a gun at you, ever. You can trust them!
No.
I highly recommend KeePass and other software that reads/writes that format. I have MacPass on OS X and share it via Google Drive with my iPhone and KeePassium. Works great. Been doing this for a decade now.
Lason, I watch - seen Microsoft presentation on their NEW windows for businesses.
Yeah, Trust the Cloud, I wish not too, IF, one looks at what they are offering. with AI out.
You are handing over Everything to them, Not just pass words, Your whole layout-business.
OH, what if all good, Trust, Then what, just look at an if event say a power outages.
Ever seen a business say a restaurant, better A Bar Lose power. OH, Do not need power to serve drinks, BUT, no computer or Cash register. Thats the big one, as to stop serving.
The Data they are going to be collecting, People are handing over to them. Or do they have a choice now?
as to their Presentation, IF it was a drinking game, as to every time I hear "trust the Cloud" I think i be dead, from drink to mush to fast. there to the end mostly.
I have worked in the industry for over a decade (none of the firms named above but close enough). When I was younger the economy was an abstraction to me, something that happened exogenous to my behaviour. As I age I can see the direct links between what we have done and what is happening now. But many of us are trapped, by our own vanity, and we probably need to be forced to change, no matter how painfully. Unfortunately I cannot see that happening. The FED will pivot, it will expand its balance sheet, which will be transferred almost immediately to the insiders described above, and a small amount will tricky down through spending on services and luxury goods. This will cause further societal ruptures, the cause of which CNN / CNBC / BB / MSNBC / Fox will misdiagnose as cultural. Young, smart people will continue to aspire to be the kind of insiders described above, because that is what our system rewards, at the expense of worthy, productive pursuits (true entrepreneurship, medicine, farming ANYTHING else). I'm sure of this because those in power now are almost all beneficiaries of these ponzi systems (in the case above, super senior management fees that layer the claims of investors), and so they're incentivised to keep them going at all cost. The pivot will be justified by some tortured statistic with no relationship to the real world, and then couched in new language that will obfuscate the simplicity of the scam. A few people like you and Taibbi will say something but nobody will care
"But MPT isn’t isolated, it is interconnected with funds that buy hospitals. As MPT loses its ability to get the cash to buy out private equity-owned hospitals, what happens to those private equity funds who rely on it? That’s where this gets more interesting. Hospitals, especially safety net hospitals, are just not good investments. Some things just can’t be profitable, like taking care of sick poor populations."
Heh. I think ProPublica or NYT had a story where a a PE owner of a hospital in VA actually takes advantage of huge drug discounts if you have such a hospital, but sets up outpatient clinics in rich neighborhoods in VA to write high margin prescriptions, pocketing the savings from serving a poor community on the drug costs. Nice scam, if you can run it.
It's the 340B program. https://www.wsj.com/articles/340b-drug-discounts-hospitals-low-income-federal-program-11671553899
Oh wow, did I read that in the WSJ of all places? Usually I find this stuff in Pro Publica or even lately the NYT has been good on PE in hospital systems, to my surprise. The horrors that come out of PE ownership of hospitals is truly endless. As national policy this is simply insane. And much like "food deserts" we have entire counties in this country that do not have credible access to emergency care. At all. It's nuts. Health care cannot credibly be a for profit industry.
Paying yourself rent, a trick used over and over-- educator-run charter schools succumbed long ago to that and other “control fraud” moves: https://lagacetanewspaper.com/charter-school-explosion-following-the-money-part-5-of-7/
It may be a trivial distinction but the startup/venture capital world has been a Ponzi scheme for decades.
Companies went public in the 90s with hardly any revenue, let alone profitability. The idea in theory is that companies spend profits and investment $s on growth. Remember webvan? IOW the story they tell is they *could* be profitable whenever they wanted to be.
There’s no pretending anymore. Many VCs pump up startup valuations just to prepare to flip them to retail investors. I don’t think VCs respond directly to Fed actions, but rather their LPs hoard $ when there’s a recession or threat of one, so funding “dries up.”
VCs love the “corrections” because the startups must become more lean and more dependent on investment dollars at a lower valuation. This is the startup game that founders have been convinced to play. The VCs don’t have to put their own in charge.
Unicorns: Fanciful beasts that self-described wizards convince peasants they can own for a fee.
Demosthenes would have his work cut out for him in 2023.
Excellent! Thank you, Matt! On a much smaller scale, we in Minnesota watched a bubble pop with Pipeline Foods, which went bankrupt in 2021. Same situation ~ as the “only organic grain trader in the country”, it was the golden child of our food space up to the very point of its insolvency. It turns out that it was just a private equity outfit, and that they’d been overstating the value of their assets until the debt financing ran dry; particularly to farmers, who simply lost their inventories when whatever value was left went to investors overseas.
Thankfully, they’re getting sued now; but the former CEO still goes around acting like a power broker. My last job was involved with him, and I highly suspect they were up to the same shenanigans. Here, if you build an enticing enough brand with a corporate responsible story behind it; there’s a chance General Mills will buy it from you. No worries if you screw all your stakeholders in the process~ the insiders will cash out the second the monolith buys you and your story of “food justice.”
https://www.law360.com/articles/1516000/pipeline-foods-ch-11-trustee-alleges-fraud-by-amerra
Matt, you really delivered, out did yourself with this piece.
of course, I'm trying to talk myself back off the ledge after reading it, but there is that tiny amount of hopium to cling to.
oh, the tangled webs we weave....
Didn't know LastPass had been acquired by private equity. I was using it. Now I have to change all my passwords.
What we need is a service that lets us know when a business we use gets acquired by private equity, so we can leave. I would subscribe!
I need to go back and read, after reading commits here, wil save.
Thank you, Matt tho. for what you're doing and Others here