381–390 of 483 posts
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What cope? I work in AI, write code with AI, promote the use of AI... Im just a pragmatic realist man. Not a delusional cool aid drinker...
You're coping. Two years ago they could barely write software. These days they do it just fine.
So, if I’m following: Banks are lending to private equity firms to fund purchases of businesses. Many of these businesses are SaaS which means their valuations are tumbling. It seems possible that valuations tumble so much that the private equity owner no longer has any incentive to operate the business, bc all future cash flows will belong to the bank. What happens in practice then? Will banks actually step in and t…
> Banks are lending to private equity firms to fund purchases of businesses. Yes some businesses are SaaS but here's the real problem: Many businesses' sole purpose is _leveraged buy-outs_ which really is the devil in disguise. It goes like this: A VC specialising in veterinary clinics finds a nice, privately owned town clinic with regular customers and "fair" prices, approach the owners saying "we love the clinic yo…
Whether a PE firm decides to buy it and do the same isn’t some nefarious act or special in any way, it’s just new owners.
Let’s say your neighbor has a lawn mowing business but wants to retire, says they’ll sell for $50,000. You think great! You could run the business better, plus the old man hasn’t raised prices since 1990! But you don’t have $50k, only $30k, so you borrow $20k from your brother. Congrats, you just did a leveraged buyout.
And no, it’s not risk free revenue (I think you mean profit?) because it clearly might go under and PE firms need to pony up some of their own cash too plus money raised through LPs.
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With the current concentration of wealth and banking, it almost seems like there is an incentive for banks to ruin themselves when they end up in a little trouble. If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble.
> If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble It's a game of chicken, though. The folks at Lehman and SVB didn't cash out. JPMorgan did. (Both times. Actually, all of the times since 1907.)
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> now the VC lends the money from the bank, buys the clinic, and here's the important part: _they push the debt onto the clinic's books This mostly correctly describes a leveraged buyout (LBO). LBOs are done by LBO shops, a type of private equity (PE) firm. Not VCs. (VCS do venture capital, a different type of PE.) And LBO debt isn’t “pushed” onto the company’s books, it’s never on the sponsor’s (LBO shop’s) books in…
Guy who works in the PE market here (not a PE shop myself) - this comment is correct.
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> Banks are lending to private equity firms to fund purchases of businesses. Yes some businesses are SaaS but here's the real problem: Many businesses' sole purpose is _leveraged buy-outs_ which really is the devil in disguise. It goes like this: A VC specialising in veterinary clinics finds a nice, privately owned town clinic with regular customers and "fair" prices, approach the owners saying "we love the clinic yo…
I think the free market response is that another vet with fair prices will show up, but A) that's a waste of everyones time and very inefficient and B) a real grass roots business takes time and passion, somebody to start it, buy in from the community etc. That work had already been done. To throw it all away for VC or PE to squeeze the life out of it and by extension the community, that's just sad, and a net negativ…
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That all relies on the assumption of petro-dollar, something that could have been taken for granted during the last 50 years but could easily change within weeks now.
No it doesn’t, the petro-dollar isn’t a real thing. Forcing USD denomination for a transaction doesn’t help USD because there is a buyer of USD and an equally sized seller of USD.
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I think the free market response is that another vet with fair prices will show up, but A) that's a waste of everyones time and very inefficient and B) a real grass roots business takes time and passion, somebody to start it, buy in from the community etc. That work had already been done. To throw it all away for VC or PE to squeeze the life out of it and by extension the community, that's just sad, and a net negativ…
Waste and inefficiency is real. As unpalatable as it is, cleaning up the mess of decay often requires brutal methods. That begs the question, is waste and inefficiency socially undesirable? Maybe not. Maybe not on certain scales or in isolation. But waste compounds.
See Germany's rail network, where almost every time-slot is occupied by a train, and then one train is delayed, and the system collapses with nobody getting to their destination on time for the rest of the day, until the overnight buffer.
In queuing problems, queue length (which means latency) is inversely proportional to slack time. If a network link is running a 90% capacity, on average there are 10 packets queued up and a packet that arrives will have to wait for 10 packet transmission times. At 99%, 100. At 99.99%, 10000. And if you try to use exactly 100% of your network link, the expected queue length is infinity, and the expected latency is infinity, which will not occur in practice because sometimes it will exceed available memory and packets will be dropped, even though utilization never exceeded 99.9999...%.
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The free market solution to this seems to be making it easy / easier for competitors to arise. Then, when private equity does this, the customers, and workers, just hop ship to a competitor that's better managed and the original clinic goes under. I don't expect this happens in reality though. In general the things that happen in a healthy free market are NOT happening in our society.
A business owner lamented to me recently that it wasn't the taxes that were crushing his business, but the costly regulations that keep on coming. The harder the government makes it to operate a business, the less businesses there will be.
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No it doesn’t, the petro-dollar isn’t a real thing. Forcing USD denomination for a transaction doesn’t help USD because there is a buyer of USD and an equally sized seller of USD.
Total USD reserve involved in that transaction is not zero. They have to already hold dollars to do the transaction at all, which means a benefit has already been provided to the US. The transaction doesn't change the US's position, but enabling the transaction to occur does.
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Total USD reserve involved in that transaction is not zero. They have to already hold dollars to do the transaction at all, which means a benefit has already been provided to the US. The transaction doesn't change the US's position, but enabling the transaction to occur does.
Petrodollar hypothesis is debunked. The total volume of petrodollar trade approximates minutes in stock markets. This simply isn’t a real factor anymore; a lot of people think it is because there are writings from the 70s that are compelling.
Which goes up with inflation btw, so you can export inflation. Actors who maintain reserves of your currency will have to keep buying more from you, providing you with benefits.