When Republicans regulate, it’s a solemn occasion. (Manuel Balce Ceneta/AP)
Today the White House announces what is being called a comprehensive overhaul of financial regulation in the United States. It is a pre-emptive strike by Hank Paulson, the Treasury secretary, against the many voices clamoring for new rules that would prevent crises like the subprime [...]…
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Amidst the detritus of today’s broken markets, I felt compelled to look back and review some of my thoughts around the Blackstone IPO. Why? Because I had thought their filing had pretty much signaled a frothy equity market, and certainly a top for the private equity business, due both to the "perfect" environment for raising debt capital (e.g., savvy, opportunistic issuers coupled with liquidity-rich, brain-dead investors) and that some of the smartest money in the business wanted to take chips off the table and raise permanent capital. And were willing to take this step even in the face of much criticism and consternation from their LPs and others. Cries of hypocrisy came from every direction. But still Mr. Schwartzman pressed on.
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A new study backs up the notion that hedge fund alpha is decreasing. But it also explores, for the first time, the possible mechanics behind this phenomenon….
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Jefferson County Alabama’s sewer authority was once considered among the most sophisticated issuers in municipal finance. Now they are on the brink of Chapter 9. What happened, and can it happen to other municipal issuers?It all started when investment bankers cooked up a clever way to use derivatives to lower interest expense for municipal issuers. The municipality would sell auction-rate debt, then enter into a pay fixed, receive floating interest rate swap. For tax-exempt issuers, the floating end of the swap is either based on a percentage of LIBOR or the SIFMA Index, which is an index of floating rate municipal debt rates….
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“This is one ‘mother’ of a market,” 83-year old market veteran Richard Russell aptly described what market participants were again faced with during the past week. Sentiment was fragile as the outlook was still dominated by the familiar cast of deteriorating economic data, housing woes and concerns about the financial sector. Read all about this in my regular weekly blog post, highlighting some thought-provoking news items and quotes from market commentators during the past week, and briefly reviewing the week’s market action.
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When it comes to corporate strategy, I have long been in favor of more focused, single-purpose enterprises than those which take a conglomerate approach. The reason: I find the benefits of centralized management largely illusory and only introduce friction to the operation of a portfolio of businesses. Sure, there might be cost savings both in financing and materials purchases through conglomeration, but in my book these benefits are generally outweighed by lack of focus and bureaucracy. For every GE, Danaher and Berkshire Hathaway there are literally hundreds of businesses whose diversification efforts failed and destroyed shareholder value. Give me a bunch of good, focused businesses with great management and I’ll do my own diversification.
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addslashes(Readers of "A Dash" know that for the last year we have been contributing to RealMoney, a subscription service from TheStreet.com (free trial available). Before contributing, we subscribed for many years, finding the site to be a useful source of ideas and discussion.
One of the most helpful contributors is Bob Marcin, founder and General Partner of Defiance Asset Management. Bob has a deep value approach and a nice recent hot streak. He has advised against investment in financial stocks, while recommending early cyclicals which have been enjoying a rebound.
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