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Private equity bought America's essential services

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Re: Private equity bought America's essential services

#311

Post by bko »

scionaura wrote: post #249
bko wrote: post #10

The premise is that PE firms invest in companies, load them up with debt, and maximize profit. And it's especially nefarious in industries where people have "no choice but to pay" > The result is a backlog that reads like a financial opportunity in earnings calls and a crisis in every fire station in the country. As of 2025, REV Group’s backlog stands at $4.5 billion. Wait times for a custom fire truck run to four ye…

So much condescension in your comment. So little to back it up. > So you make money by ... not delivering? I'm missing something. Precisely. Let's review imperfect competition. Although it's you who so unpleasantly insists on framing the discussion in econ 101 terms, it's your comment that is sunk by a misunderstanding of elementary economics. What you're missing is evidently the things one learns when they go past c…

> In the extreme case the market equilibrium is reached when a monopoly jacks up the price and produces less than it would in a competitive market

Wrong. The amount produced is still the point at which marginal cost is equal to marginal revenue under a perfect competition. However the amount charged is higher. Below is the monopoly model, chapter 7-2 :-)

> The monopoly firm maximizes profit by producing an output Qm at point G, where the marginal revenue and marginal cost curves intersect. It sells this output at price Pm.

Basic economics doesn't not apply when you go past chapter 1.

https://uw.pressbooks.pub/microman/chapter/7-2-the-monopoly-...

Re: Private equity bought America's essential services

#312

Post by protonbob »

WarmWash wrote: post #220
protonbob wrote: post #201

Earlier quoted context omitted.

[flagged]

Everyday I am infinitely grateful I have the ability to understand nuance, and the mental firepower to be able to comprehend data coming from sources rather than tiktoks, twitter, and hyper-partisan news orgs. No one ever said the vaccine would prevent transmission. What they said was that it !could! prevent transmission. But no one would know before studies were done. What they did say is that it would lower mortali…

Yes they did say it would. https://thehill.com/homenews/sunday-talk-shows/553773-fauci-...

Also you don’t know anything about me and what media I consume. You can’t quote me on something I didn’t say. They did say it would stop transmission.

Re: Private equity bought America's essential services

#313

Post by tonyedgecombe »

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…

We all own the means of production. Communism crept in right under our noses.

Re: Private equity bought America's essential services

#314

Post by bombcar »

cj wrote: post #24
sokoloff wrote: post #8

Earlier quoted context omitted.

You understand mortgages, though, right? Even 3% or 0% down mortgages?

LBO's are like buying a rental property where the mortgage is approved based on expected future rental income from the property. That's why the parent is saying "It is like paying for the company with the money from the company you are buying.".

That's exactly HOW rental properties are (supposed to) be bought!

Most small-time single family landlords actually go above and beyond that and "pretend" the rental is a house they're buying to live in (or actually is, for a time) and get a "home owner's mortgage" which is even easier.

Large commercial real estate is sold and loaned based on future rental income, pretty formulaically.

Re: Private equity bought America's essential services

#316

Post by bombcar »

Rp8yXmdmr wrote: post #37
kokken wrote: post #9

Earlier quoted context omitted.

It is not analogous because if you sell your house and the sale money is not enough to cover your mortgage you are still on the hook for what's left of the principal. A leveraged buyout is exclusively on the purchased company's books, so if the company goes to zero the PE parent company is not on the hook for a single penny.

11 USA states have Non-Recourse mortgages where you also are "not on the hook for a single penny."

Some of those are for purchase and not refinance, but the reality is in almost all states (even those that are not single-action by statute, where single-action is "they can go after you, or the house, but not both") are practically single-action.

In fact, they'd much rather single-action foreclose as they'll likely get a house than force you into bankruptcy where they might not even get that.

Re: Private equity bought America's essential services

#317

Post by pphysch »

jmyeet wrote: post #228
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…

This reads as apologia, blame-shifting, "I was just following orders". People have to eat. They need water. They need a roof over their head. Nobody has to buy out all the veterinarians in an area at rates they can't say no to, have them sign non-competes and them jack up all the prices by 300% because, hey, you now own all of them. Nobody has to buy up all the trailer parks, which are normally peopple's last stop be…

Agreed. If we're gonna blame shift PE to pension and university funds, we may as well follow the thread all the way to the glorification of Greed.

Re: Private equity bought America's essential services

#318

Post by dpkirchner »

protonbob wrote: post #312
WarmWash wrote: post #220

Earlier quoted context omitted.

Everyday I am infinitely grateful I have the ability to understand nuance, and the mental firepower to be able to comprehend data coming from sources rather than tiktoks, twitter, and hyper-partisan news orgs. No one ever said the vaccine would prevent transmission. What they said was that it !could! prevent transmission. But no one would know before studies were done. What they did say is that it would lower mortali…

Yes they did say it would. https://thehill.com/homenews/sunday-talk-shows/553773-fauci-... Also you don’t know anything about me and what media I consume. You can’t quote me on something I didn’t say. They did say it would stop transmission.

Your source clearly says that the likelihood of transmission is reduced, not eliminated.

Re: Private equity bought America's essential services

#319

Post by strgcmc »

airstrike wrote: post #96
lenerdenator wrote: post #66

Again, we have broken higher risk, higher reward. If you just keep gutting companies with leveraged buyouts, you're not taking on any real risk. If you're buying up firms that deliver "essential services", you're likely engaging a monopoly. Again, low risk, high reward. A direct violation of the rules of how investments should work. Regulate the monopoly and this goes away.

Do you think losing the equity portion of the investment means no risk? It's not fully debt financed. And that debt financing bears an interest proportional to the riskiness of the asset's cashflows. There are lots to hate about LBOs but they aren't entirely devoid of value

The risks are asymmetric in real world terms. For the PE side, the worst-case outcome is bankruptcy of the company they bought via LBO, but because it was an LBO their own exposure is relatively minimal (the lender is the one with the one most capital at risk). At the end of the day, it's a balance sheet item, a cost of doing business, a few digits on a spreadsheet.

But for the company that was bought? Those are people's jobs, their livelihood. A community that depended on those jobs to sustain a town's economy. And for company's providing essential services with inelastic demand (like fucking fire trucks), the downside is loss of those services, broken fire trucks, and ultimately loss of life.

When you hear "profits over people" as a complaint, it sounds abstract. It is not. Though this specific article is AI slop, the underlying phenomenon is very real (that other commenters have shared other links to better reporting). A very real dollar figure can be crystallized against very real human lives that have been harmed or sacrificed.

Most "regular people" (you know, the ones who just want firefighters to have working trucks and ladders, and to come quickly when there's a fire) don't care about the most hyper-efficient allocation of capital through some skewed financial engineering and legal wizardry (especially when the definition of "efficient" allocation is a biased one, that doesn't account for externalities properly, like people fucking dying due to broken or not-enough trucks). But regular people don't really get a "vote", when it comes to LBOs (and I am specifically focusing on the ones that affect essential services). They just get screwed with the increased tax bills that fund the increasing profit margins of the PE firms. That seems unfair to me, but fairness is a matter of politics and not finance.

---

Personal disclosure: I made a post a few months back about a related topic (https://news.ycombinator.com/item?id=46307300), of PE buying up and consolidating the companies that used to provide software to emergency services, and jacking up the price and taking advantage of inelastic demand. This is a topic I am personally passionate about, and I am still exploring different options for fighting back in various ways.

Re: Private equity bought America's essential services

#320

Post by jordanb »

bs7280 wrote: post #302
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…

I've been saying pensions should not exist, as they are contradictory to our political system. Some politician 40 years ago can promise everyone the moon, and never force the next generation to figure it out. I'm from Chicago which has a nightmare pension system that's keeping me from ever buying a home in the city I love, because my property tax increases just go to retired people who moved to Florida. I really appr…

I own a house in Chicago and my property taxes are much lower than my friends in the suburbs.

I live in a working-class southside neighborhood. The people who are complaining about property taxes for SFUs in the city are people in neighborhoods with skyrocketing home values.

Those people stand to receive a massive windfall when they sell. And while it may be annoying for them if they find themselves having to sell when they didn't want to, the they're vastly better off than all then renters in that neighborhood who got priced out much faster with no windfall.

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