Good post, and I would agree with this. As I briefly mentioned, many of the "good ones" to which you referred have been instrumental in development of many technology companies.

 

I am somewhat baiting a discussion on the restructure of the tax scenario: reduce corporate income tax, reduce employment taxes, and increase the capital gains tax on assets held

 

I like these three as a successful recipe for long-term economic health. Now, the reduction of corporate income tax is a tough sell unless partnered with an overall simplification of the tax code to cut out "loopholes", which we determined in an earlier thread is a nebulous term that nobody can really define.

Well, that is how you make money!

 

Haha..agreed. However, is it in the best interest of America and its citizens to have more businesses hiring more people or fewer businesses with fewer people who are more pleasing to investors looking for short term gains? That is really at the bottom of my premise.

I would honestly say this question is a little silly. I would argue that private equity firms are more of the engine of our economy. They drive innovation and efficiency. If a business is running efficiently at a profit they aren't going to destroy it. If the company they purchase isn't run efficiently it isn't their fault it's past managements.

 

Like Getslow said there will always be bad apples in any field, but in general they are a good thing. Without private equity most of innovation we have had in recent memory may not exist or it would of taken a much longer time.

Haha..agreed. However, is it in the best interest of America and its citizens to have more businesses hiring more people or fewer businesses with fewer people who are more pleasing to investors looking for short term gains? That is really at the bottom of my premise.

 

The premise of your question here is it good for America to become more efficient and advance it's technology. The answer to that question is yes.

I will agree with Lipton that Equity Firms or Venture Capital firms are probably better for the economy than harmful. The American Railroads and Amercian Steel industries were funded with venture capital from Great Britian who was several decades ahead of the US in terms of the industrial revolution but British bankers particularly in London saw the Indust Rev starting to gain hold in the US and they saw investing money in such as lucrative. That British investment is what built up the US much quicker than if some capital had to come from within. Very quickly the US built its own finance system and was able to fund itself.

 

Where venture capital/private equity has some negative aspect to it is that control of the company is usually no longer local so where you used to work for an owner who was present every day, you know work for an out of town corporation and that can make the work life somewhat impersonal since the out of town owners only see what the company is making, not what changes they put in place do to the culture of the company.

Haha..agreed. However, is it in the best interest of America and its citizens to have more businesses hiring more people or fewer businesses with fewer people who are more pleasing to investors looking for short term gains? That is really at the bottom of my premise.

 

Agreed. But the purpose of hiring people is to put more money in their pockets, which is also the goal of the PE firms. Its a tough spot.

I have a number of more interesting links that discuss this topic. Nothing is conclusive by any means. However, what is known: our manufacturing, investment and employment base has declined. There are multiple reasons, but some I believe related to the financing as well as the cost structure in the US.

 

Insanity is doing the same thing over and over and expecting a different result. I believe we should consider all aspects of our economy and how policies directly or indirectly impact the goals we all want to achieve.

Insanity is doing the same thing over and over and expecting a different result. I believe we should consider all aspects of our economy and how policies directly or indirectly impact the goals we all want to achieve.

 

Agreed.

 

It's really easy to say "capitalism is the freedom to conduct business as you want" and leave it at that. But it's complicated. I don't think you're saying and I'm certainly not saying that we should destroy private equity but they should at least be knowledgeable of what effect they have on the health of the economy.

 

Sometimes managers don't always make great decisions. Happens every day. However, if managers are making decisions solely in the interest of short-term profits at the expense of long-term stability, that has effects. Similarly, and often times in cases like this, managers have their hands tied from making good decisions due to the structure of their companies.

 

Prime example, to my mind, is Churchill Downs, Inc. in Louisville. The nature of the corporate structure puts the board in a position where they ALWAYS have to do right by the shareholders in terms of profits. I, for one, believe that the track would do well long-term to buy back the shares they've let out publicly and become a closely-held corporation again. That would enable them to sacrifice short-term profits in favor of long-term decision making that's going to become EXTREMELY important in and industry that's going through some serious changes.

 

CDI could well run some of these tracks into the ground while chasing unattainable profit margins. The company just slashed purses at Fair Grounds in Louisiana for the upcoming meets. While it might help short-term, ultimately the horsemen are going to go where the purses are beneficial. It's the same with Churchill Downs and both the purses and takeouts. The best thing for them would probably be to back off on the profit margin and the stock price for a while but they can't due to the nature of their corporate structure.

 

All these things have cumulative effects on the economy and to write them off by simply saying "Welp, capitalism." does a disservice to the long-term health of the economy. The people who run private equity firms are pretty smart... but they're not perfect.

I have a number of more interesting links that discuss this topic. Nothing is conclusive by any means. However, what is known: our manufacturing, investment and employment base has declined. There are multiple reasons, but some I believe related to the financing as well as the cost structure in the US.

 

Insanity is doing the same thing over and over and expecting a different result. I believe we should consider all aspects of our economy and how policies directly or indirectly impact the goals we all want to achieve.

 

I'm going to have disagree completely because private equity firms have again been financing and growing the economy since the industrial revolution. I could point out many different reasons for the decline of the things you pointed out in recent history but blaming private equity really seems odd.

 

Again I'm not saying there aren't bad apples. There are bad apples everywhere. But by and large the economy becomes stagnant without private equity and lacks growth .

 

The better question is even if I buy into the theory they are a problem (which I don't ) , what would be the solution ? To have government put more restrictions on the private market and control even more of the economy ?

 

No thank you.

Agreed.

 

It's really easy to say "capitalism is the freedom to conduct business as you want" and leave it at that. But it's complicated. I don't think you're saying and I'm certainly not saying that we should destroy private equity but they should at least be knowledgeable of what effect they have on the health of the economy.

 

Sometimes managers don't always make great decisions. Happens every day. However, if managers are making decisions solely in the interest of short-term profits at the expense of long-term stability, that has effects. Similarly, and often times in cases like this, managers have their hands tied from making good decisions due to the structure of their companies.

 

Prime example, to my mind, is Churchill Downs, Inc. in Louisville. The nature of the corporate structure puts the board in a position where they ALWAYS have to do right by the shareholders in terms of profits. I, for one, believe that the track would do well long-term to buy back the shares they've let out publicly and become a closely-held corporation again. That would enable them to sacrifice short-term profits in favor of long-term decision making that's going to become EXTREMELY important in and industry that's going through some serious changes.

 

CDI could well run some of these tracks into the ground while chasing unattainable profit margins. The company just slashed purses at Fair Grounds in Louisiana for the upcoming meets. While it might help short-term, ultimately the horsemen are going to go where the purses are beneficial. It's the same with Churchill Downs and both the purses and takeouts. The best thing for them would probably be to back off on the profit margin and the stock price for a while but they can't due to the nature of their corporate structure.

 

All these things have cumulative effects on the economy and to write them off by simply saying "Welp, capitalism." does a disservice to the long-term health of the economy. The people who run private equity firms are pretty smart... but they're not perfect.

 

As of today, Churchil is worth 1.68 Billion. That would be difficult to take private, not saying it couldn't be done but to buy all the outstanding shares would require somewhere between 1.75 and 2 Billion probably.

 

Where are you seeing CDI's margins are growing? When I looked at the SEC filings, the Cost of Sales (primarily racing purses) as a percentage of sales were fairly constant over the years. That tells if purses are being cut, then the amount being wagered most also be going down too and CDI is trying to keep their margins consistent. Margins as a whole in terms of dollars were growing but that was due to purchasing other tracks it would appear based upon looking at the Investing Activities on the Statement of Cash Flows.

Edited September 18, 201412 yr by Bert

Agreed.

 

It's really easy to say "capitalism is the freedom to conduct business as you want" and leave it at that. But it's complicated. I don't think you're saying and I'm certainly not saying that we should destroy private equity but they should at least be knowledgeable of what effect they have on the health of the economy.

 

Sometimes managers don't always make great decisions. Happens every day. However, if managers are making decisions solely in the interest of short-term profits at the expense of long-term stability, that has effects. Similarly, and often times in cases like this, managers have their hands tied from making good decisions due to the structure of their companies.

 

Prime example, to my mind, is Churchill Downs, Inc. in Louisville. The nature of the corporate structure puts the board in a position where they ALWAYS have to do right by the shareholders in terms of profits. I, for one, believe that the track would do well long-term to buy back the shares they've let out publicly and become a closely-held corporation again. That would enable them to sacrifice short-term profits in favor of long-term decision making that's going to become EXTREMELY important in and industry that's going through some serious changes.

 

CDI could well run some of these tracks into the ground while chasing unattainable profit margins. The company just slashed purses at Fair Grounds in Louisiana for the upcoming meets. While it might help short-term, ultimately the horsemen are going to go where the purses are beneficial. It's the same with Churchill Downs and both the purses and takeouts. The best thing for them would probably be to back off on the profit margin and the stock price for a while but they can't due to the nature of their corporate structure.

 

All these things have cumulative effects on the economy and to write them off by simply saying "Welp, capitalism." does a disservice to the long-term health of the economy. The people who run private equity firms are pretty smart... but they're not perfect.

 

Now I can get behind how poor leadership affects companies and the economy. The focus on short term profits over long term stability is a growing trend. The focus on quarterly earning reports hurts businesses.

 

Many Ivy League graduates who run companies have this misguided idea you can put tremendous pressure and focus on short term profits and revenue, and it won't impact future long term planning and growth.

 

I get so angry when an innovater comes a long and sees the big picture but because of short term goals can't get his or her plan off the ground.

I'm going to have disagree completely because private equity firms have again been financing and growing the economy since the industrial revolution. I could point out many different reasons for the decline of the things you pointed out in recent history but blaming private equity really seems odd.

 

Again I'm not saying there aren't bad apples. There are bad apples everywhere. But by and large the economy becomes stagnant without private equity and lacks growth .

 

The better question is even if I buy into the theory they are a problem (which I don't ) , what would be the solution ? To have government put more restrictions on the private market and control even more of the economy ?

 

No thank you.

 

No one said any of that. That is the illusion of polarization that gets pumped into our heads every day by the media. It's not just bad government and good business. There are all sorts of things besides those two.

 

What I think he's saying is that bosses aren't perfect. Companies aren't perfect. Markets aren't perfect. They aren't supposed to be.

 

So do the actions of some poorly managed equity firms looking to get rich quick through leveraged buyouts have an overall detrimental effect on the economy by destroying long-term viability in favor of short-term gain? If so, then how did the incentives get so out of whack?

As of today, Churchil is worth 1.68 Billion. That would be difficult to take private, not saying it couldn't be done but to buy all the outstanding shares would require somewhere between 1.75 and 2 Billion probably.

 

Where are you seeing CDI's margins are growing? When I looked at the SEC filings, the Cost of Sales (primarily racing purses) as a percentage of sales were fairly constant over the years. That tells if purses are being cut, then the amount being wagered most also be going down too and CDI is trying to keep their margins consistent. Margins as a whole in terms of dollars were growing but that was due to purchasing other tracks it would appear based upon looking at the Investing Activities on the Statement of Cash Flows.

 

Margins aren't growing. And I don't have the solution to that.

 

But I do think that the nature of corporate structure is going to make it very difficult for Churchill to make the types of innovation necessary to build toward the future. While American racing stands around with its fingers in its ears about what horseplayers and owners and breeders actually want, Churchill is stuck trying to suck every last dollar out of Derby Day at the expense of the rest of the calendar and begging Frankfort to just hand over all gaming rights to them.

No one said any of that. That is the illusion of polarization that gets pumped into our heads every day by the media. It's not just bad government and good business. There are all sorts of things besides those two.

 

What I think he's saying is that bosses aren't perfect. Companies aren't perfect. Markets aren't perfect. They aren't supposed to be.

 

So do the actions of some poorly managed equity firms looking to get rich quick through leveraged buyouts have an overall detrimental effect on the economy by destroying long-term viability in favor of short-term gain? If so, then how did the incentives get so out of whack?

 

I'm not brainwashed my man. This is the world I live in and I read the post.

 

My question stands even if what you say in the last paragraph is true I'm asking how you fix the supposed problem without government intervention.

 

I'm in business to make money. A happy employee base is usually essential to that but when you cut it all down most people in business are in it to make money. What the complaint deals with ignores the fact that almost every business in the country operates on the same principles of any private equity firm.

My question stands even if what you say in the last paragraph is true I'm asking how you fix the supposed problem without government intervention.

 

For me, I think government has already intervened in all of this and has skewed the incentives badly. Government therefore was likely the origin of the problem and therefore might be the solution as well.

 

They've made it more advantageous to rip and run on assets than to build and maintain a company in the long term and I think that's what doomer was getting at when he started the thread.