America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery • Hacker News Board

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#211

Post by SketchySeaBeast » Fri, May 03, 2019, 9:22 PM UTC

godzillabrennus wrote: post #78

paganel wrote: post #36

> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking…

I’ve been shocked to the extent politicians haven’t focused on the lost tax revenue from the gig economy. I’m certain it’s caused a drop in tax revenue from what would normally constitute middle class tax payers.

Does anyone actually make money off the gig economy? I thought it was one of those "Robbing Peter to pay Paul" sort of deals.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#212

Post by Zenst » Fri, May 03, 2019, 9:24 PM UTC

frenchman_in_ny wrote: post #155

Zenst wrote: post #68

Earlier quoted context omitted.

https://en.wikipedia.org/wiki/Asset_stripping by any other name, a scourge of business in the 80's. Today, it's less vocally lambasted and less public outrage as in the 80's, which in today's internet times, raises much thought as why that is so. I suspect that it's due to lack of media attention compared to back then.

This wasn't asset stripping. They did a dividend recap. Asset stripping is transferring assets outside of the credit group.

In this instance they transferred debt from outside the company, into the company.

Not sure what terminology you would pick for that - "debt bombing" or "reverse Phoenixing"! The end result is that they stripped it. Then if any liability, they could write that debt off against tax liability and or factor off the debt. Failing that - asset write-off equally works well on tax gaming. Then there are the remaining assets (Like the Brand name for example) that they could sell off cheaply to a company they indirectly own that specialises in licensing... It's a vicious circle at every level when it comes to finance in business. Good news or bad news - somebody profits and a few more people pay.

I will confess - I'm still unclear of the legal and accounting practice aspects that allowed the parent company to push down debt like that. But then debt loading is another way of stripping a company. Though does read a bit like Phoenixing, just in variation that appears to skirt the law and respective regulations in finance and companies. Though, how they could push down debt without raising any flags would be a candidate for root cause in this travisty.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#213

Post by jeffdavis » Fri, May 03, 2019, 9:25 PM UTC

mwfunk wrote: post #203

nickelcitymario wrote: post #147

Earlier quoted context omitted.

Well, thought experiment: John lives in extreme poverty. He's debt free, but is unable to adequately feed himself or his family. Several of his children have died from malnutrition. Marc lives in a nice suburban home, has 3 square meals a day, so does everyone in his family. However, his debts (including his mortgage, car payments, student loans) exceed his savings. If our intuition is wrong, then John is winning. He…

They’re both screwed. I’d rather have crippling debt than children dying from malnutrition, but obviously both Marc and John are completely screwed in different ways. They’re both losers in this scenario, there are no winners.

It might be more a matter of accounting.

If you imagine that we are all born in a kind of "debt" where we need a home to live in, then a mortgage is just putting that debt on paper.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#214

Post by asdf21 » Fri, May 03, 2019, 9:28 PM UTC

iscrewyou wrote: post #101

_bxg1 wrote: post #77

"Financial engineers" aren't interested in building a sustainable business; they want to play a game cleverly, make a cash-grab, jump ship, and leave thousands dealing with the fallout. It's a similar short-term strategy to that taken by many SV founders who build a company only to sell it, though obviously the latter don't cause nearly the same degree of harm to society. But they still pass on opportunities to creat…

I love the term financial engineers. In my head, it defines the person, the procedure, and the purpose.

Engineering typically builds something useful and long-standing, these financial engineers just tear things apart..

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#215

Post by bdowling » Fri, May 03, 2019, 9:37 PM UTC

pitaj wrote: post #210

mwfunk wrote: post #203

Earlier quoted context omitted.

They’re both screwed. I’d rather have crippling debt than children dying from malnutrition, but obviously both Marc and John are completely screwed in different ways. They’re both losers in this scenario, there are no winners.

That doesn't seem even remotely true. Taking on large amounts of debt can be risky in many cases. But consider the following case: - newly purchased $150k home with down-payment of $30k - $80k savings / investments - $20k car - $80k/yr income This person is not at risk, but they have a net worth of $[30k + 80k +20k - 150k] = $-20k

Your math is off. The home is an asset worth $150k plus a liability of $120k for the mortgage, for a net positive $30k. That puts your hypothetical person with a net worth of positive $130k, not negative $20k as you calculated.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#216

Post by sokoloff » Fri, May 03, 2019, 9:42 PM UTC

WorldMaker wrote: post #104

paganel wrote: post #36

> Because private-equity firms appear frequently as villains in the press, many people assume that they cater mostly to the superrich, earning high returns on investments for billionaire clients. They do. But by far the most important piece of their business — 48 percent, according to the data-analytics firm Preqin — is investing capital for American pension funds. This doesn't get mentioned often enough when talking…

> This doesn't get mentioned often enough when talking about the "1-percenters" and the wealth gap in Western countries, i.e. that most of the capital behind all of the current economic and social system is directly or indirectly held by part of the general populace itself. I think the keyword there is indirectly . It's still easy to blame the 1-percenters for the proportional lion's share of the blame when the major…

> the 401k...is also a full time job that the 401k "owner" doesn't need on top of their existing job that pays into the 401k in the first place

Really? I can't imagine how to spend 20 hours per year on 401(k) related topics, let alone 40 hours per week on it. If you're under 40, buy a broad-based stock fund and forget about it. (Probably true if you're under 50.) Use the 40K hours you save by not having this extra "full time job" however you like.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#217

Post by newsoul2019 » Fri, May 03, 2019, 9:52 PM UTC

mwfunk wrote: post #203

nickelcitymario wrote: post #147

Earlier quoted context omitted.

Well, thought experiment: John lives in extreme poverty. He's debt free, but is unable to adequately feed himself or his family. Several of his children have died from malnutrition. Marc lives in a nice suburban home, has 3 square meals a day, so does everyone in his family. However, his debts (including his mortgage, car payments, student loans) exceed his savings. If our intuition is wrong, then John is winning. He…

They’re both screwed. I’d rather have crippling debt than children dying from malnutrition, but obviously both Marc and John are completely screwed in different ways. They’re both losers in this scenario, there are no winners.

Marc sacrificed himself to provide for his family, they are the winners. He helped make them strong, perhaps they can help take care of him someday.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#218

Post by Rebelgecko » Fri, May 03, 2019, 9:54 PM UTC

sn0n wrote: post #98

I especially liked this bit "The pension fund for the Boston-area public water utility invests in Cerberus. The California State Teachers’ Retirement System, CalSTRS, is a Cerberus client, as is a pension fund for the Presbyterian Church as well as many university endowments, sovereign wealth funds and philanthropic foundations." Made me chuckle a bit inside, as I know a couple people who are less on the side of guns…

CalPERS rejected a push by the state treasurer to divest from gun companies that make guns or gun parts that are illegal in California.

I don't think STRS has had the same push for divestment, but they're known for taking a more activist approach. IIRC CalSTRS actually has multiple employees whose entire job is to lobby gun companies to change their policies.

Of course that sort of political and shareholder pressure is what led Smith and Wesson to start putting integral locks in the frame of their revolvers. That decision has had an almost universally negative response from their actual customers— those in-frame locks have a tendency to get rattled around by recoil and freeze the gun in an unsafe state.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#219

Post by buttcoinslol » Fri, May 03, 2019, 9:57 PM UTC

parrellel wrote: post #164

WillPostForFood wrote: post #100

Earlier quoted context omitted.

It is a huge disservice to take a cheap shot at 401ks. There is almost no case where someone who has the opportunity to contribute shouldn't do so.

Eh, after fees most standard 401Ks are only marginally better than a bank account at this point.

I doubt 1%+ expense ratio funds across the board is the average case, but I could be wrong. Perhaps if you let your 401k provider manage your money.

In my 401k, I pay 1.5 bps/yr on 80% of my portfolio, a Fidelity S&P 500 fund (FXAIX), or $0.15 per $1,000 per year.

My other two funds are a Fidelity Small-Cap and Fidelity Mid-Cap funds (FSSNX and FSMDX), I pay 2.5 bps/yr on the other 20% between these two funds, or $0.25 per $1,000 per year.

If my balance was $100,000 right now, I would pay 80x0.15+20x0.25, or about $17/year for each $100k. $170 per million, and so on.

These 401k mutual funds have better expense ratios than my Roth IRA holding, VTI (Total Market ETF), which is at 3 bps/yr, and the mutual fund couterpart of VTI, VTSAX is 4 bps.

There is absolutely no possible way for a high-yield savings acct that yields (Fed Funds rate minus 15-25 bps) in interest (Goldman's marcus.com pays 2.23% APY, for instance, fed funds is ~2.40%) will ever approach my portfolio after 40 years of returns, barring total societal collapse.

Re: America’s Oldest Gun Maker Went Bankrupt: A Financial Engineering Mystery

#220

Post by iamnothere » Fri, May 03, 2019, 10:11 PM UTC

malandrew wrote: post #199

bluGill wrote: post #185

Earlier quoted context omitted.

If you die deep in dept you managed to cheat at life: your cost of living was higher than input. If you die rich you got cheated: you put more effort into life than you got out of it.

If you died rich and have a family to leave the wealth to and the state isn't set up to steal your wealth by taxing you a second time, you've won at life. A big part of life is spreading your genes and making sure that your offspring are well set up to continue spreading your genes. This either requires heirs and wealth at death or at least making sure you transfer wealth to your heirs before you die.

> A big part of life is spreading your genes and making sure that your offspring are well set up to continue spreading your genes.

According to some. Or, you can opt out of this and enjoy your life anyway.

It's troubling to see so many people in this thread concerned with "winning" at life. In the end we all die, then it's game over. Any high score is quickly forgotten.

Life is brief, treasure it while you still draw breath.