PEU Masters Gather to Plot Election Strategy

Venture capital legend David Sachs and multi-CEO Elon Musk hosted an "anti-Biden" dinner, attended by a veritable list of future Bond villains.  The Independent reported:

The guest list reportedly included Peter Thiel, Rupert Murdoch, Michael Milken, Steven Mnuchin and Travis Kalanick.  

The group largely talked about how to defeat Blue Team candidates.  I wonder what new tools these tech gods have access to that can influence an election.  They have gobs of money and enjoy preferred taxation.

Michael Milken is the founding father of the current infestation of private equity underwriters (PEU).  A Presidential pardon wiped clean Milken's conviction for securities fraud.  That was the icing on the cake of a multi-decade image rehabilitation effort.  Milken established the Milken Global Institute to advance worldwide progress and his annual confab has been called the California Davos.  It kicks off Monday.  

In a recent interview Milken described the conference:

Individuals with the capital and influence to change the world connect with those who have the expertise and creativity to reinvent sectors from health, finance, technology, science, and more.

The sponsor list for the 2024 meeting is revealing for its high PEU content.

From platinum to gold to silver it's a legendary PEU list.  

 

Fortunately Jared Kushner and his sponsor Crown Prince Mohamed Bin Salman did not attend the dinner.  That would have opened a black hole in the earth's political crust that few could escape.  Now I know why the billionaire class is so into rockets.  "Achieving escape velocity..."

I frequently close with "Politicians Red and Blue love PEU and increasingly, more are one."  Do I need to change Red to Non-Blue?

Saudi Arabia "Increasingly Attractive" to Fink(s)

BlackRock CEO Larry Fink went to Riyadh, Saudi Arabia for the Crown Prince's Vision 2030 show and came away with $5 billion in Public Infrastructure Fund investment and a new Saudi based joint venture. 

“The continued growth of the kingdom’s capital markets and diversification of its financial sector will contribute to future prosperity for its citizens,” said BlackRock CEO Larry Fink. “Saudi Arabia has become an increasingly attractive destination for international investment.” 

The deal came six years after the Crown Prince ran his shakedown prison in the Riyadh Ritz Carlton and the Crown Prince's security service murdered and dismembered Washington Post journalist Jamal Khashoggi in a Turkish consulate.  

The new fund is open to international investors.  Might Jeff Bezos kick in a few billion?  That would be a signal to the billionaire class that the Khashoggi's of the world don't matter.  The rest of the world already got the message.

Davos Crowd Returns to Riyadh Ritz Carlton

Four days ago The Circuit reported:

The Davos crowd will descend on the Ritz Carlton in Riyadh this weekend as the World Economic Forum hosts a special meeting that begins on Sunday on themes of global collaboration and energy policy amid crisis in the Middle East. 

Saudi Arabia will gather top officials from the U.S., EU and the Arab world on the sidelines on Monday, including U.S. Secretary of State Antony Blinken, to discuss Gaza, Bloomberg reports. 

Within the conference halls, the kingdom will look to drive the conversation among the crowd of key partners toward the progress it is making on its Vision 2030 economic diversification strategy.

Saudi Crown Prince Mohammed Bin Salman used the Riyadh Ritz Carlton for his shakedown prison.  The Crown Prince held wealthy Saudis in detention in the hotel beginning in November 2017.   PEU Report did a number of postsnumber of posts on the rolling nonstory:

NBC News reported a year after the event:

...on Nov. 4, 2017, the ultra-luxurious Riyadh hotel — with its marble floors and vast indoor swimming pool — became a gilded prison, when hundreds of Saudi royals, billionaires and senior government officials were detained in an extraordinary power play by the heir to the throne, Crown Prince Mohammed bin Salman. 

 The involuntary guests were told they had to sign away large chunks of their assets to be released.

Washington Post journalist Jamal Khashoggi was executed and dismembered in the Saudi Consulate in Ankara, Turkey on October 2, 2018.  

Al Jazerra reported on the Prince's first public speech after Khashoggi's killing.  It stated:

 “Since 2017, the Crown Prince has had absolute control of the Kingdom’s security and intelligence organizations.."

MBS speech was to the Davos crowd and the meeting occurred in the Riyadh Ritz Carlton.  The topic was Vision 2030.  

MBS' Vision 2030 kicked off in 2018 in the stench filled aftermath of violence, murder and false imprisonment.  I wonder how many people felt that foundation as they walked around the Ritz over the weekend?  

Six years (2018), followed by six more (2024), followed by six more (2030).  That's six, six, six.  And these are the people bringing hope to Gazans?  

 

Update 5-1-24:  It turns out at least one Fink was in attendance.  Is everyone for sale?

BlackRock Riyadh Investment Management will be established under a partnership between BlackRock and Saudi Arabia's Public Investment Fund.

“The continued growth of the kingdom’s capital markets and diversification of its financial sector will contribute to future prosperity for its citizens,” said BlackRock CEO Larry Fink. “Saudi Arabia has become an increasingly attractive destination for international investment.”

Fink folded for $5 billion.

PEU Ownership Risk

 The Carlyle Group and Insight Partners will acquire a majority stake in Exinger.  Intelligent CIO reported:

“Exiger’s AI technology transforms the way organizations identify and manage risk, reduce cost and increase resilience across their supplier and third-party ecosystems. We are thrilled to partner with Carlyle and Insight Partners as we continue to invest in our 1Exiger platform which empowers our customers to make confident, deliberate decisions informed by real-time insights,” said Brandon Daniels, Exiger CEO.

The 1ExigerAI platform addresses the entire risk landscape, including foreign ownership, control or influence, environmental, social and governance, cyber, financial health, reputational, national security, regulatory, product and operational risks.

And what if the risk is private equity underwriter (PEU) ownership?  What if a supplier just experienced a liquidity recapitalization, where their PEU owner just pulled a yacht-load of cash out and saddled the firm with even more debt?  

Companies bought by private equity firms are far more likely to go bankrupt than companies that aren't.

That came from an April 2023 NYT piece, "Private Equity is Gutting America and Getting Away With It"

Supplier bankruptcies could be very disruptive to supply chains.  Would Carlyle/Insight ensure that gets written out of the algorithms?  

It's AI, but its our PEU AI.....would you like to buy?

Update 4-28-24:  HedgeEye's Keith McCullought interviewed Dan Rasmussen of Verdad Capital.  Dan clearly states the risks of PEU investments.

Marc Rowan Has Something P(N)EU to Sell

Apollo Global grew from $40 billion in assets under management in 2008 to $650 billion in 2023.  CEO Marc Rowan talked about massive change, i.e., the world that made those products zing/soar is no longer around.    So what are the products of tomorrow?

Automatic tie ups with insurance companies who no longer invest in financial products on an arm's length basis.  

Private equity underwriters (PEU) take stakes in insurance companies who take stakes in specialty financial firms owned by that very PEU.  Imagine three firms taking fees from just one investment.  

Uncle Sam's budget drives numerous PEU investments.  So clean energy and artificial intelligence are on the list.  Why not do both?

And what of those old products, the one's public pensions have counted on to erase their shortfalls?  I imagine Apollo and peers will keep those on life support as long as possible, continue to draw management fees, deal fees upon refinancing and saddling the affiliate with more debt to pay sponsor dividends.  Life support will entail extending maturity of current debt and if that is not possible, a PEU round robin of "you finance my junk and I'll finance yours."

The irony of the PEU/AI marriage is AI and the tech bros want everything for free, while the greed and leverage boys want everything for fee.

Dramatically increasing electrical demand to feed AI and cryptocurrencies is a colossal waste of resources.  AI will be used by predators to get them more money. control, power and whatever else those "who can never get enough" want.  Predators are already pervasive in cryptocurrencies.  Financial regulators opened the door for regular people to put their hard earned retirement money in BitCoin ETFs.  

Add that firms are coming out of the woodwork to sell small investor sized PEU stakes.  Yes, you too can buy those products of yester-year.  Marc and company are selling.

Update 4-29-24:  My wise friend said:

"Rowan and boys will have a field day once they have the source of funds lined up with the pensions and insurance funds. This is going to be a slice and dice em mix up match up FEE galore party. I'm sure you heard of a field of dreams, Just replace the field with fee. Home run. To Infinity and beyond."

Google Fired 50 for Protesting Israeli Contract

Google included the following in its IPO in 2004: 

"Don't be evil. We believe strongly that in the long term, we will be better served—as shareholders and in all other ways—by a company that does good things for the world even if we forgo some short term gains." 

2018 saw Google make changes.  

Google’s unofficial motto has long been the simple phrase “don’t be evil.” But that’s over, according to the code of conduct that Google distributes to its employees. The phrase was removed sometime in late April or early May

A Summer 2022 story reported:

Hundreds of Google and Amazon workers on Thursday staged protests around the country to speak out against the two tech giants’ cloud contracts with the Israeli government, fearing the military could use the technology to surveil Palestinians.

Google initially  fired 28 employees for protesting what they considered evil, an AI project for the Israeli government.  That number grew to 50.

CEO Sundar Pinchai referred to the situation as political debate.

“When we come to work, our goal is to organize the world’s information and make it universally accessible and useful.”

One might consider sexual assault in the workplace as evil or not the right thing.

Workers who organized a 2018 walkout over the company’s handling of sexual assault allegations said Google punished them for their activism.

The issue is a moral one.  The widespread killing of women and children in Gaza through violence is compounded by the lack of access to food, water, medicines and sanitation that accompanies war.  Someone can be horrified by the horrific Hamas terrorist attack on innocent Israeli citizens and also be disturbed by the current conditions in Gaza.  They are not mutually exclusive.

One can wish for Gazans to share in the same freedom and independence we enjoy without wanting a single Israeli to perish.  Terrorist should not get to redefine words like "river" or "sea" as "death" for use by the rest of the world.

Jewish people and the government of Israel are not the same thing.  One can protest Israeli government policies without any ill will to Jewish persons living in or outside Israel.  

Google employees shared their concerns with their employer as "evil" and  "not the right thing" and learned there is no patience regarding the $1.2 billion contract with the Israeli government which has surveillance capabilities.  Hard lesson learned.  

Meanwhile, super wealthy business legends like Leon Cooperman and Robert Kraft cite university professor tenure as the cause of student protests over the conditions in Gaza.  Isn't the direct cause of protests the obliteration of Gaza and suffering of the Palestinian people?   If that were not happening, students would not be protesting.  

Leon Cooperman cited that Jewish people make up .03% of the world's population but have 20% of the world's Nobel Prize winners.  He said anti-Semitism is like "penis envy."  

I find it hard to believe that the women and children of Gaza are dying from lack of penises.  But I've been wrong before and will be wrong again.  Maybe Google can get a contract for that.

Update 4-25-24:  I'm not sure where Google would get the penises, but I understand they are in large supply in Silicon Valley.

Update4-28-24:  A Johnson did insert himself into the Columbia protest situation.

Levered, Tax Hating PEUs Are Debt Hawks?

Semafor reported:

“Our national fiscal trajectory is unsustainable,” Hank Paulson said. “The national debt we have will ultimately, if unchecked, destroy our economic well-being and our national security, which is rooted in the economy.” 

 The sheer amount of debt doomerism I heard this week was notable. The U.S. will spend more this year paying the interest on its $35 trillion debt than on either national defense or Medicare, according to the Congressional Budget Office — and that forecast assumed rates would start coming down in June, which looks increasingly unlikely. 

“Nobody seems to be worried that much” about America’s soaring debts, David Rubenstein said, “in part because people have been willing to buy our Treasury bills. At some point people won’t be willing to do that.” He reminded us that the Dutch guilder was once the world’s reserve currency. 

It’s easy to brush off Paulson and Rubenstein as hawks whose aversion to debt is generational and personal. Paulson was a spendthrift even when he ran Goldman Sachs, living in a 1,200-square-foot apartment and once returning a new winter coat his wife, Wendy, found too showy. Rubenstein grew up poor in Baltimore, worked in the Reagan White House, and, to hear him tell it, recently bought the Orioles as a bit of “patriotic philanthropy.”

Both Hank Paulson and David Rubenstein are private equity underwriters (PEU).  Rubenstein co-founded The Carlyle Group while Paulson founded and is executive chairman of TPG Rise Climate, the climate investing platform of the global private equity firm TPG.

Several items seem out of place.  First, David Rubenstein worked in the Carter White House, not Ronald Reagan's.  Second, the PEU boys love debt.  They hate paying taxes.

Rubenstein's firm levered Carlyle Capital Corporation out the wazoo with debt 30x equity.  A signature PEU move is to saddle affiliates with more debt to pay a sponsor dividend, aka liquidity recap.  A better term would be dividend bleeding.  

This is the first time I read Rubenstein's purchase of the Baltimore Orioles fit under "patriotic philanthropy."  That usually translates to "gigantic tax write off."  Will it drop Mr. Rubenstein's tax rate below 10%?

Update 4-23-24:  Semafor provided the following graphic today.  I adapted it slightly for this blog.

Also, it is important to remember how hard David Rubenstein worked over the last fifteen years to keep private equity's preferred "carried interest" taxation.  Frequent trips to Capital Hill, phone calls from senators and the most recent "Hail Kyrsten Sinema save" kept Mr. Rubenstein and his PEU peers happy.  It did worsen the deficit he claims to be so concerned about.