The stock market has been a real puzzle to me. I keep hearing how great the economy is and how low inflation is but that rosy view just doesnt seem to match the things I see around me.
Home prices have risen into unaffordable realms. People have been charging up mortgage debt like there is no retirement to continue their personal buying sprees for plasma TV's and toys. Gas is consistently over $3/gallon. Health care costs are higher (and more confusing) than ever. Even milk and food have gone up.
A recent poll indicates that many Americans share my concerns.
America's Economic Mood: Gloomy
Broad Public Pessimism Spurs Democratic Candidates To Target Business Interests
Wall Street Journal
August 2, 2007
WASHINGTON -- Americans are feeling decidedly sour about the economy and those in charge of it, fueling Democratic efforts to target business interests in the 2008 election campaign.
More than two-thirds of Americans believe the U.S. economy is either in recession now or will be in the next year, a new Wall Street Journal/NBC News poll shows. That assessment comes despite the fact the economy has experienced sustained growth with low inflation and unemployment and generally rising stock values ever since the recession that ended early in President Bush's tenure.
In addition, the poll shows a lack of confidence in economic leaders. That includes not just Mr. Bush and Congress, both of whom have the approval of fewer than one-third of all Americans, but the financial industry, large corporations in general and energy, drug and insurance companies in particular.
So I ask myself, who is experiencing this great economy?
Despite numerous financial concerns about consumer spending, the stock market has continued to rise. Corporate profits are still high. And the LBO craze has continued its insane pace.
Because of the cheap loans available, the top investors have been buying everything that isn't nailed down, for ever increasingly prices. Everything from high rise office towers to companies have been going up and up in price and changing hands faster than ever.
This is a great article about what these LBO's mean to regular people - the people who dont invest in hedge funs. The people who depend on paycheck, not capital gains, to pay the mortgage.
This article is more evidence of the increasing divide between the super-rich and the rest of us. A friend of mine who travels often to Latin American countries recently commented to me that the US appears more and more like Mexico every day. That is not a positive comparison in my mind.
How a Blackstone Deal Shook Up a Work Force
Layoffs at Travelport, Dividend for Investors; 'On Pins and Needles'
Wall Street Journal
July 27, 2007
CENTENNIAL, Colo. -- Not long after the Blackstone Group bought Travelport Ltd. last August, workers at the company's office campus here began feeling the squeeze.
Two months after the deal closed, scores of employees were lugging boxes of personal belongings to their cars, having lost their jobs. Under Blackstone's ownership, the travel-reservations conglomerate has laid off 841 people, about 10% of its work force. Blackstone, a private-equity firm, has already recouped all of the money it invested in Travelport.
Similar scenes have been unfolding at companies around the nation, a human toll of the corporate-buyout boom. Private-equity firms, which say they bring sorely needed financial discipline to poorly run companies, have been slashing costs and extracting profits at warp speed. As the cycle of buying and selling companies has intensified, life in the trenches can be unstable and traumatic.
...
To complete their $4.3 billion Travelport purchase, Blackstone and Technology Crossover Ventures, a Palo Alto, Calif., venture-capital firm that now owns 11%, invested $1 billion and borrowed the rest. That debt landed on Travelport's balance sheet. In March, Travelport borrowed an additional $1.1 billion and paid it out as a dividend to the two firms, returning all their money in just seven months.
"This is likely one of the quickest returns of invested capital for a private-equity deal of its size," Travelport's new chief financial officer, Michael Rescoe, said in a May conference call with analysts.
The buyout boom has been lucrative for Blackstone partners and investors, which include large institutions such as pension funds. Last year, Blackstone managed assets valued at about $88 billion and earned $2.27 billion, according to a prospectus for its own initial public offering in June. Its chief executive, Stephen Schwarzman, who resides in a 35-room Manhattan apartment, made more than $650 million on the offering and retained a 24% stake now worth more than $5 billion.
Over the past five years, private-equity firms have bought more than 10,000 companies. This year, through June, 1,399 deals worth $582 billion have been announced, according to data provider Dealogic.
