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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#411

Post by CGMthrowaway »

MichaelZuo wrote: post #286
derf_ wrote: post #254

Earlier quoted context omitted.

> So if you wanna fix or ban PE, solve pensions. We solved pensions. People have defined-contribution plans now. I would expect insurance float to dwarf pensions as a source of PE funding. The real reason PE exists is because it charges high fees. The financial industry does not make products to serve customer needs, though by happy accident that sometimes happens. It makes products to charge fees. Index funds remove…

Huh? Don’t many jobs still have gold plated pensions? Like millions upon millions? They need to be paid out somehow.

Government jobs, yes. Of which there are more and more every year. https://fred.stlouisfed.org/series/USGOVT

Re: Private equity bought America's essential services

#412

Post by yieldcrv »

spyckie2 wrote: post #118

The irony is that PEs exist largely because of pension funds. So to sum it up (not so nicely) we are transferring value from our current standard of living to pay for retirement checks for our old folks. Pensions fund a significant part of PE and they do so because they need around a 7% return in order to look solvent. If they do not have the higher PE returns, they basically go out if cash in 10 years and everyone w…

These are side effects of PE fund behavior, and where many of them get investors from

There are also many benefits you don’t notice because they don’t bother you

Re: Private equity bought America's essential services

#413

Post by charcircuit »

burkaman wrote: post #175
elevation wrote: post #113

Not all PE problems are existential; they will be outcompeted. What keeps a newly graduated Veterinarian from opening her own clinic and undercutting the PE competition? With no massive loans on her books, she can profitably offer lower prices than PE can. She may even drive the local PE clinic out of business.

How is a new graduate supposed to start a business without a loan?

Find an investor.

Re: Private equity bought America's essential services

#414

Post by gosub100 »

jmyeet wrote: post #398
gosub100 wrote: post #365

Earlier quoted context omitted.

I've never heard of the tie between PE and pensions until today. I find it very hard to believe that if pensions didn't exist, nobody would have come along and exploited the same loopholes.

I've been thinking about that comment and I don't think it makes sense. When it comes down to it, PE is really just doing two things: 1. Taking advantage of a pricing inefficiency; and/or 2. Using local monopolies, inelastic demand and regulation to jack up prices. But what powers PE is the LBO (leveraged buyout). That is, you buy csome company with borrowed money and then you borrow against the assets of that compan…

Sort of off topic but I like HN and comments like yours for educating me about subjects I would otherwise know nothing about. Thank you

Re: Private equity bought America's essential services

#415

Post by wmeredith »

jjmerle wrote: post #85

Interesting seeing a quote from Sen. Josh Hawley that I agree with... Quote (from article) “This didn’t just happen to you accidentally. This is a business decision, isn’t it? You keep these backlogs like this. […] Another word for this would be a heist. This sounds to me like private equity came in; bought up all of these small companies; combined them; shut down their production; rolled up a huge backlog; massive p…

As a Missourian who is regular embarrassed by Senator Hawley, I must say that he brings the goods when he has the opportunity to grill an oligarch.

Re: Private equity bought America's essential services

#416

Post by slibhb »

spyckie2 wrote: post #408
bondarchuk wrote: post #379

Earlier quoted context omitted.

I don't get it. If pensions stopped existing, would people stop doing PE even though it's profitable? If it is possible to get outsized returns "because pensions need them" then isn't somebody gonna notice and get those returns anyway, pensions or not?

Slavery is profitable. People only stopped doing it when it was perceived as immoral. Lots of things are profitable but immoral. People will do crazy immoral and illegal stuff for money, but we outlaw and slander the more abusive stuff, like monopolies and such. If it wasn't pensions that were funding PE, I'm sure PEs would get a lot more criticism and would not be allowed to do what they do.

The idea that slavery is a free lunch that is only banned on moral grounds is wrong.

Slavery is bad economics. If you want your economy to grow, paying workers is not bad. Economic growth isn't zero sum.

Re: Private equity bought America's essential services

#418

Post by slibhb »

no_wizard wrote: post #264
muddi900 wrote: post #240

Earlier quoted context omitted.

The pre 1980s standards were ridiculous though. However, even if the US moves to some 3 quarters of the way towards now would be a huge improvement. The "consumer harm" standard is idiotic.

I don’t see how they were ridiculous on the face it. The economy during that regulatory period grew into a huge juggernaut. Most of the R&D that laid the future of the world happened during that period. The middle class grew to its largest portion during that period. I don’t think the economy was hamstrung in the least

Rose colored glasses.

The classic example is airline deregulation which happened under Carter. The real cost of flights is way, way down since then. But this doesn't stop people from complaining about how "flying is a worse experience now" and wishing for a return to inane regulations.

Re: Private equity bought America's essential services

#419

Post by jeddawson »

thecolorblue wrote: post #157

PE profits sound like other companies opportunities. Unless there are barriers to entry not covered in this article, I would think other companies could move in, deliver a fire truck faster and at a lower cost, and at least take a portion of the market that is able to switch.

The purchasing process is the barrier to entry. Municipalities are required to run a request for proposal on anything over ~10k. The RFP gets awarded to a PE owned manufacturer that then takes 4+ years to deliver. The municipality is locked into the vehicles they don't have so a new market entry needs to simultaneously establish a track record that qualifies them for being awarded an RFP and be able to wait out the purchase lag. Not impossible, but easier said than done.

Re: Private equity bought America's essential services

#420

Post by slibhb »

mmooss wrote: post #261
muddi900 wrote: post #240

Earlier quoted context omitted.

The pre 1980s standards were ridiculous though. However, even if the US moves to some 3 quarters of the way towards now would be a huge improvement. The "consumer harm" standard is idiotic.

Would you share a more detailed argument? Right now we only have adjectives: "ridiculous", "idiotic". The US economy generally did very well with those standards, maybe the best it ever did, especially considering distribution of benefits.

> The US economy generally did very well with those standards

Spurious correlation. Few experts (economists) think old regulations caused economic growth.

If we really want to recreate post-war growth, we should destroy half our infastructure and fight a world war. Then, in the years following the end of that war, we can experience catch-up growth.

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