T-Bone the Metaphor

Ya gotta love this country:

MISSOULA, Mont. (AP) — A middle school teacher suffered some bruising and a big scratch on his back after he struck a bear while riding his bicycle to school.

Jim Litz said he was traveling about 25 mph Monday morning when he came upon a rise and spotted a black bear about 10 feet in front of him. He didn't have time to stop and T-boned the bruin.

He tumbled over the handlebars, his helmet hit the bear's back and the two went cartwheeling down the road.

The bear rolled over Litz's head, cracking his helmet, and scratched his back before scampering up a hill above the road.

Litz's wife drove by shortly after the crash and took her husband to the hospital. He hoped to be able to return to teaching science at Target Range Middle School on Friday.

* * *

NEW YORK, NY (AP) — Troubled investment bank CEO Dick Fuld suffered a bruised ego and a black mark on his resume after he struck a bear while riding his limousine to work.

Mr. Fuld said he was traveling about 30 mph Wednesday morning when he came upon the intersection of Wall Street and Broad and spotted David Einhorn about 10 feet in front of him. He didn't have time to stop and T-boned the bearish investor.

He tumbled out of the limo, his Blackberry hit the activist's back and the two went cartwheeling down Wall Street.

Mr. Einhorn rolled over Fuld's briefcase, scattering his restructuring documents, and scratched his Gucci loafers before scampering into a Starbucks across the road.

Bart McDade drove by shortly after the crash and took Mr. Fuld to the Fed's Discount Window. He hoped to be able to return to scowling menacingly at creditors and rating agency executives at Lehman Brothers on Friday.

* * *

WASILLA, AK (AP) — Vice Presidential candidate Sarah Palin suffered some jovial ribbing and a big dent to her reputation after she struck a moose while ferrying her children to soccer practice.

Ms Palin said she was traveling about 85 mph Tuesday morning when she came upon a school crossing and spotted a sleeping moose about 10 feet in front of her. She didn't have time to stop and T-boned the herbivore.

She tumbled out of her Expedition, her AK-47 hit the moose's back and the two went cartwheeling down the road.

The moose rolled over Palin's skinning knife but escaped without a scratch before scampering down a hill into the Arctic National Wildlife Refuge.

John McCain drove by shortly after the crash and took Ms Palin to the taxidermist. She hoped to be able to return to field-dressing Barack Obama in Virginia on Wednesday evening.

* * *

WASHINGTON, D.C. (AP) — Treasury Secretary Hank Paulson suffered a bruised balance sheet and a knock to his Teflon image after he struck a sour note while rescuing the federal housing agencies.

Secretary Paulson said he was spending about $200 billion Sunday evening when he came upon the wobbling GSEs and spotted a moral hazard about 10 feet in front of him. He didn't have time to stop and T-boned the metaphor.

He tumbled over the podium, his plan hit taxpayers and GSE shareholders in the pocketbook and the three went cartwheeling into uncharted territory.

The conservatorship rolled over Americans' sensibilities, undermining self-discipline, and cackled and scratched its balls before scampering down the corridor back to K Street.

Ben Bernanke drove by shortly after the crash and took Secretary Paulson to Capitol Hill. He hoped to be able to forget his stint in Washington as quickly as possible.

© 2008 The Epicurean Dealmaker. All rights reserved.

Plan Ahead

"We say to the management of companies: ‘You are here today. Where do you want to be five years from now, and how are you going to get there?’”

— Henry Kravis

Andrew Ross Sorkin and Julie Creswell authored a lengthy piece this past Sunday in the New York Times, entitled "What Does Henry Kravis Want?" Good question.

The gist of the article seems to be some extended head scratching about the private equity honcho's continued interest in taking his General Partner management company—the "KKR" which most people think about when they think about "KKR"—public through an initial public offering, notwithstanding the currently crappy market conditions for IPOs, leveraged buyouts, and bobbleheaded dolls bearing his own likeness or that of his partner George Roberts.

Like the Economist and other mainstream media reporters before them, Mr. Sorkin and Ms Cheswell profess to be confused by the fact that a private equity company would even entertain the thought of exposing its inner workings and private cafeteria menu to the withering gaze of the public markets and other riffraff. I, on the other hand, am confused by their confusion.

Perhaps they concluded that a gentleman of Mr. Kravis' abbreviated stature would naturally be particularly afflicted by the proverbial hobgoblin of consistency and were nonplussed when they failed to find it in his words and actions. But I could have told them that—"tiny eighties relic" or no—Mr. Kravis is by no means possessed of a little mind, and he and his partners and competitors in the institutionalized rape and pillage private equity industry have always had a complicated and situation-contingent love-hate relationship with the public markets.

Talented reportage or not, what amuses me is that the writers seem to have missed the very clue which could have enlightened them in the first place, a clue which they themselves drew attention to in the article. I speak, of course, of the quote from Mr. Kravis which adorns the top of this post, in which he alludes to KKR's standard practice of having their partner management teams develop extensive strategic, operational, and financial plans for the businesses which KKR buys with them. Surely Mr. Sorkin and Ms Cheswell did not think that a clever man like Mr. Kravis would fail to conduct the same simple planning exercise in his own personal and professional life?

Although, to be fair, reporters like Mr. Sorkin and Ms Cheswell would be unlikely to pursue this line of inquiry—even if it had occurred to them—without some sort of documentary evidence to back it up. Fortunately, your Dedicated Correspondent has access to a number of carefully screened, disgruntled current and former employees of KKR and other major PE houses to call upon for the manufacture discovery of titillating pieces of inside dope. A couple of phone calls and a kilo of cocaine later, and my sources delivered me a particularly revealing goody which shows just how far Mr. Kravis takes his own personal planning process.

The document is fragmentary, being just the first page of what appears to be a longer list, but I believe it speaks for itself:


Question answered, no?

Next time, Andrew, give me a call first, and I'll save you some shoe leather.

© 2008 The Epicurean Dealmaker. All rights reserved.

Molon Labe

Ω ξειν’, αγγέλλειν Λακεδαιμονίοις ότι τηιδε
κείμεθα, τοίς κείνων ρήμασι πειθόμενοι.

Go tell the Spartans, stranger passing by,
that here, obedient to their laws, we lie.

— Simonides of Ceos

For some reason, Dear Readers, I have been spending a significant portion of my leisure time recently reading about King Leonidas, his 300 Spartans, and their suicidal stand against Xerxes' Persian hordes at Thermopylae in 480 BC.

I trace my current interest to the 2006 release of the sword-and-sandals epic, 300, which I personally found to be a more enjoyable piece of comic book art than the original Frank Miller creation itself (Gerard Butler's clotted Scottish accent notwithstanding). My interest has unquestionably deepened as I traversed the slippery slope of increasing realism, historical accuracy, and scholarship from Steven Pressfield's fictional Gates of Fire to Paul Cartledge's Thermopylae: The Battle That Changed the World.

Psychologically, the reasons for my current fascination with the topic are less clear to me. Perhaps it has something to do with the story of a small band of elite, hand-picked warriors battling hopelessly against overwhelming odds to preserve their freedom and way of life. One need not be too grandiose to draw parallels with the predicament of a shrinking band of highly trained investment bankers struggling desperately against a relentlessly rising tide of inactivity and an actively hostile society to preserve their right to three Lamborghinis in the driveway of a Hamptons potato mansion. Pathologically self-absorbed and massively egotistical, yes, but not grandiose.

Human psychology is such that we all like to imagine ourselves at the center of a dramatically coherent and meaningful story, whether we work in a Dilbert-style cubicle zoo or commute to weekly Executive Committee meetings on the company G550. And, pace the current wisdom concerning the evolutionary origins of investment bankers, the best scientific evidence available seems to indicate that most of them are indeed human. Investment bankers do have the same hopes and dreams as the rest of society. It just so happens that our dreams contain more champagne, caviar, and expensive Russian hookers than yours do.

Besides, the closer you look into this Thermopylae business, the more eerily exact and disturbing the parallels become. The battle itself is believed to have happened in the dog days of August, traditionally the nadir of capital markets and M&A activity and hence the scariest period on the investment banking calendar. This August in particular has been so dead that the typical jumpy, underemployed i-banker can be forgiven for seeing crouching Medean warriors—or HR associates armed with pink slips—lurking behind every Starbucks counter and Southampton hedgerow.

And notwithstanding the common man's perception of the Spartans as the Western World's first freedom fighters, marching bravely off to certain death for God, for Country, and for Yale, Spartan society was a deeply weird and rather repellent concoction, at least by current standards. The justifiably intimidating standing army of Sparta—which was composed of every adult Spartan male, for whom the role of full-time soldier was the only profession allowed—was in fact established and maintained primarily to control a vast underclass of enslaved Greeks known as Helots, upon whom the full-fledged Spartan citizens, male and female, relied to do all their labor.

Throw in officially sanctioned pederasty, fearsome women who expected their husbands to come home draped in glory or in a body bag, and the educational system of the agoge, which taught young boys to steal, lie, and do whatever it took to come out on top, and Spartan society begins to look disturbingly similar to investment banking culture. (I'll let you figure out where the pederasty comes in.) By many accounts, the Spartans were an arrogant, anti-intellectual, and unpleasant bunch, and their festival days must have looked a lot like the Hampton Classic horse show, minus the Ralph Lauren togs.

But the bugger(er)s were principled; you have to give them that. And, whether you believe it or not, most investment bankers are too. We just don't adhere to the principles most of the rest of society holds dear (or at least the principles the political correctness police loudly tells society it should hold dear). Cigar smoking, misogyny, excessively foul language, and a scornful disrespect for the meek and downtrodden are central to the Darwinian world view of your typical investment banker, and dearly held beliefs, too. On the plus side of the ledger, investment bankers do tend to hew to a punishing work ethic (at least the junior ones, before they learn the tricks of the trade from slacker MDs like me), and they clean up real nice. Some of them even—in a moment of weakness, I grant you—donate to charity. Who knew?

And, like the Spartans at the Hot Gates, the true threat to investment bankers' way of life does not really come from collapsing markets, vengeful regulators, or rioting shareholders: it comes via treachery from within. If any force has the capability to destroy all that is unique and special in investment banking culture, it is the bog-standard Human Resources department of your typical investment bank. Now—when banks are groaning under the pressure of plunging revenues and dousing smoking craters where their balance sheets used to be—is when the craven HR weenies crawl out from under their rocks and start swaggering around the halls waving sheaves of termination notices in their hands. They resort to each and every trick in their book to cull the bloated ranks of former Masters of the Universe, including enforcing the banks' internal PC behavior codes which normally remain dormant and unenforced when said MoUs are raking in the legal tender.

Therefore, we witness senseless little tragedies like the recent termination of fellow bloggist and investment banker 1-2 for the heinous crime of blogging while employed at some nameless über-bank. 1-2 seems to be taking it well, but his fate definitely casts a pall over the rest of us who undertake the occasional character assassination or fierce excoriation of some hapless boob in the industry from behind the comfy firewall of anonymity.

It is at times like these, with the PC Empire bearing down on the narrow defile where Yours Truly and a select few bloggers man the Phocian Gate in defense of truth, justice, and the Investment Banking Way, that my mind turns toward King Leonidas' laconic response to Xerxes' demand that the Spartans give up their weapons:

"Come and take them."

That—plus a few choice Anglo-Saxon epithets of rather more earthy persuasion—is what I mutter to myself whenever I sense the threatened approach of the nannies-that-be to confiscate the laptop, smoking jacket, and case of 20-year old Scotch which comprise the bulk of my blogging tools. They haven't caught me yet, but it may just be a matter of time.

Well, gotta go. Sounds like someone's banging on my office door with a battering ram, reciting the text of the Americans with Disabilities Act over a bullhorn. I guess they're coming for me.

I think I'll sit down, smoke a cigar, and comb my hair.

© 2007 The Epicurean Dealmaker. All rights reserved.

Immigration Forecast

From prefatory remarks to a speech¹ given by Larry Summers in January 2005:

It is after all not the case that the role of women in science is the only example of a group that is significantly underrepresented in an important activity and whose underrepresentation contributes to a shortage of role models for others who are considering being in that group. To take a set of diverse examples, the data will, I am confident, reveal that Catholics are substantially underrepresented in investment banking, which is an enormously high-paying profession in our society; that white men are very substantially underrepresented in the National Basketball Association; and that Jews are very substantially underrepresented in farming and in agriculture. These are all phenomena in which one observes underrepresentation, and I think it's important to try to think systematically and clinically about the reasons for underrepresentation.

Given the vastly diverging fortunes of Wall Street—which is collectively scrounging high and low for a second nickel to rub against the solitary exemplar remaining in its pocket—and the agricultural commodity markets, I posit that we may see a substantial shift in the employment data Mr. Summers identifies going forward.

Investment banking and many other sectors of the financial markets have always been characterized by harsh, inhuman working conditions: long hours, abusive supervisors, physically punishing labor,² and the general social opprobrium attached to being a financial parasite. Now that those conditions are no longer ameliorated by sackfuls of greasy simoleons, the industry seems likely to attract that segment of our population which usually gravitates toward low-paying, low-status, unattractive jobs: namely, illegal immigrants.

As we all know, a very large portion of the illegal immigrants in this country come from Central and South America, where Catholicism holds general sway over the religious beliefs and practices of the laity. Therefore, in a reversal of the trend identified by Professor Summers, I would expect a substantial increase over the intermediate term in the number of Catholics employed on Wall Street. (As an aside, one might wonder whether this will have any improving effect on the attitudes and practices of investment banking in general, or whether it will simply signify the beginning of a widespread corruption of the morals and integrity of a number of previously devout and upstanding citizens. But I digress.)

On the other hand, the recent dramatic rise in the prices of many agricultural foodstuffs has created an impressive economic boom in the formerly moribund and impecunious farm sector. Nowadays, it is difficult to determine whether your typical farmer is harvesting more bushels of corn or of greenbacks. One might even be tempted to update that old chestnut from the 1980s by adding the farmer to the pigeon as the only two creatures who can still make a deposit on a BMW.

I can only hope that farmers are taking full advantage of their current good fortune to reverse generations of socioeconomic warfare in the Grain Belt. They should do this, of course, by repossessing local bank branches in foreclosure, evicting bankers and their families from their homes, and waving merrily as the latter motor dejectedly off to the dust bowls of Orange County, South Florida, and Las Vegas.

Of course, conspiracy aficionados and anti-semitic wackos everywhere know that where there's money, there is or soon will be a large and growing kosher section in the local Piggly Wiggly supermarket and a material improvement in the taste and quality of bagels on offer at the local bakery. Given the impressive creation of remaindered employees on Wall Street and other financial hot spots—and the relatively high percentage of same who profess religious or cultural allegiance to the Tribe—I would therefore expect a rather wholesale migration westward of Jewish ex-financiers to the Elysian fields of Nebraska, Kansas, and Iowa. One can only imagine the culinary and cultural cross-fertilization which will result; led, perhaps, by the widespread adoption of gefilte fish as a cracker spread in preference to Cheez Whiz.

All that being said, however, the performance of the Redeem Team in Beijing gives me little expectation for a reversal in the second trend noted by Professor Summers above.

I suppose two outta three ain't bad.

¹ Yes, that speech. Surprisingly balanced, even-handed, and unstupid when read in the original, actually, rather than through the lens of an over-facile and unsympathetic media. Worth a gander over a long summer weekend, if you are so inclined.
² At least in terms of the excess alcohol intake, soaring cholesterol levels, and general inattention to physical health experienced as the usual side effects to such employment.

© 2008 The Epicurean Dealmaker. All rights reserved.

Das Gift

Schwarze Milch der Frühe wir trinken sie abends
wir trinken sie mittags und morgens wir trinken sie nachts
wir trinken und trinken

— Paul Celan, Todesfuge

Poor Carlyle Group.

I am almost beginning to feel sorry for them. David Rubenstein and his partners must begin to tire of drinking the "black milk of daybreak," more colloquially known here as Bad Shit Which Happens to You When You Stray from Your Knitting.

We learned today that the legendary buyout shop has begun liquidating its Blue Wave hedge fund, which it launched as a joint venture in March 2007 with two former Deutsche Bank traders and in which it invested its own money. Apparently the fund assets have shrunk by a third to around $600 million, which puts it near the rounding-error column in each of Messrs. Conway, D'Aniello, and Rubenstein's personal checking accounts.

While DealBook is trying to characterize this as "the second major black eye for the giant alternative-asset manager this year," it pales in comparison to the $16 billion, highly-leveraged cluster fuck at Carlyle Capital, for which I have excoriated the Three Musketeers sufficiently elsewhere. I would characterize this one as a stubbed toe: painful, true, but hardly rising to the level of a black eye.

To their credit, the Trio Who Must Be Obeyed apparently pulled the plug on Blue Wave before it splashed more than a few gallons of water over the gunwales. I guess this time they remembered one of the key principles from their buyout business: better to fail fast than slow. (They must have gotten over their reflective, introspective phase.)

No, I blame the Germans.

After all, it was holier-than-thou Deutsche Bank which supplied the Blue Wave goons in the first place. (Sure, sure, their names are supposedly "Goldsmith" and "Reynolds," but that's just a smokescreen, I tell you. "Goldschmied" and ... —whatever—are far more likely.) We all know those Frankfurters have been beyond jealous that their pathetic little mittelstadt never made it into the finance big leagues like New York and London. I posit to you that this is just one more piece of evidence that they intend to steal into first place by bankrupting the rest of us first.

Fuckin' Krauts.

Der Tod ist ein Meister aus Deutschland.

© 2008 The Epicurean Dealmaker. All rights reserved.