The hot trend of the moment is buying up publicly traded firms and taking them private--taking them out of the public eye and public oversight--out there where a man's free to wheel and deal, free to smell the smoke of the red man's villages on the wind. Quite the reverse of historic struggles to attract venture capital, work 70-hour weeks and cash in when the firm went public, the smart money today cashes in by going private.
No bothersome congressional investigations. No embarrassing problem with expense accounts and corporate jets, no nasty stockholder meetings with those finger-pointing dissidents expecting miracles and finding mirage.
The boom in private money has become so important to the financial system that major investment banks, including Goldman Sachs, Merrill Lynch, Lehman Brothers and Citigroup are setting up rival private stock markets of their own. But none will be as large as Portal, which will list the shares of about 500 firms on its first day of trading.
That sounds straightforward enough—the big guys playing among themselves for fun and profit. No little guys allowed, so no need to protect little guys, which is what Congress strives to do by constantly muddying up the clear and refined wine of commerce.Ordinary investors can only participate indirectly if their mutual fund creates an account to trade on the private markets.
Oops. Check back a few paragraphs to 'owning banks to get at the little guy’s money.' Banks no longer have money, they just sort of move it around. Do you know anyone with a bank account earning three and a half percent? Neither do I, not since my great aunt Lou. The little guys’ money today is all in IRAs and 401-Ks and mutual funds. Mutual funds.
Bingo.
These markets are creating an alternative and exclusive investment world buffeted from the turmoil that has roiled the major stock indicators in recent weeks. In the public markets, investors dumped stock during a credit crisis caused by the deteriorating mortgage industry. Private-market traders generally are sophisticated financial groups that take a long-term view of their investments.
Buffeted from the turmoil is best if Warren Buffett is doing the buffeting. But I grant you that a little conservative, self-serving wisdom would be good for the markets.
"It's a transformational development in the capital markets," John Jacobs, executive vice president of Nasdaq, said of Portal's arrival.
The rise of private money has created a new class of power-brokers on Wall Street who have enriched themselves even as they have provided billions of investment dollars to companies in all kinds of industries.
Occasionally, they even provided billions to the mortgage industry, which was busily profiting off borrowers who hadn't a prayer of repaying. But that's ancient history, happened weeks ago and the race goes to the swift.
It remains to be seen if this new class of power-brokers have any brains, or if they were just the beneficiary of extraordinary recent circumstance and a president who threw trillions of present (and future) tax un-collections in their path. Along with remains to be seen is the specter of unknown unknowables.
(Colin Blaydon, director of the Center for Private Equity and Entrepreneurship) "While there has been great value creation in the American economy, it has not gone to the large bulk of American citizens," Blaydon said. "It has gone to the very top slice -- and I mean the very top slice -- with no increase of real incomes of American workers, including the middle-class management class. And that is something that people sense in their guts. They know they are not better off, and yet there are a handful of people who are extraordinarily better off."
America has a history of serious philanthropy arising from enormous wealth. Untied from the short-term profit scenario of Harvard and relieved of the considerable burden of congressional interference, it is possible that a new horizon all a-shimmer with profit and increased worker-income gleams on the horizon.
But that would be a very optimistic premise.(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
