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Greed and Debt: The True Story of Mitt Romney and Bain Capital

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http://www.rollingstone.com/politics/news/greed-and-debt-the-true-story-of-mitt-romney-and-bain-capital-20120829



To recap: Romney, who has compared the devilish federal debt to a "nightmare" home mortgage that is "adjustable, no-money down and assigned to our children," took over Ampad with essentially no money down, saddled the firm with a nightmare debt and assigned the crushing interest payments not to Bain but to the children of Ampad's workers, who would be left holding the note long after Romney fled the scene
 
matt tiabbi is a top notch critical thinker
 
bobknightfan said:
Romney is a vulture capitalist. Scum of the Earth. Voting for this guy to become President of this country is reprehensible.

(As is voting for a person who made $21 million and refused to release his tax returns.)
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I hear you Bob but the other guy is not any better from what I have seen in the last 3 and 1/2 years.
 
Milhouse said:
matt tiabbi is a top notch critical thinker
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i dig your sarcasm but I don't really know the writer's work well so what do you mean? I read most of it and it was well written and while certainly had an agenda seemed like a well-researched piece and an interesting angle. Ive read maybe 6 or 7 op/eds and articles on Bain and Romney and venture capitalism from "both sides," and it seemed like he painted an accurate picture in this one. What do you mean, my esteemed fellow poster?
 
WakeandBake said:
i dig your sarcasm but I don't really know the writer's work well so what do you mean? I read most of it and it was well written and while certainly had an agenda seemed like a well-researched piece and an interesting angle. Ive read maybe 6 or 7 op/eds and articles on Bain and Romney and venture capitalism from "both sides," and it seemed like he painted an accurate picture in this one. What do you mean, my esteemed fellow poster?
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tiabbi likes republicans and conservatives as much as coulter likes democrats and liberals.
 
Milhouse said:
tiabbi likes republicans and conservatives as much as coulter likes democrats and liberals.
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I figured, writing for that piece of shit Rolling Stone, but still the piece wasn't bad and while biased against the candidate was not inaccurate about his business record - was he?
 
Not very accurate on how private equity and Bain actually work. He picked the worst deals out of the thousands they've done to paint a dark picture imo.
 
I don't know that much about the companies Romney worked with at Bain, but is this implying that he can't condemn the huge debt at the government level because he participated in LBOs? It sounds like the writer is assuming that all debt is evil.
 
If you debt to pay yourself then stick the company with unpayable debt, it's not good.
 
RJKarl said:
If you debt to pay yourself then stick the company with unpayable debt, it's not good.
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I dont know why people say this when it isn't true. First of all, no one is going to lend money if it is obvious that they won't get paid back. Second of all, there is zero motivation for a private equity firm to run a company into the ground. There's more money in a successful company.
 
Yeah, buying a company and intentionally running it into the ground seems like a terrible business strategy. The article talks about Bain piling debt on poor companies as if Bain doesn't own those companies and have a vested interest in their success.

Edit: or at least their ability to generate a return.
 
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Rolling Stone is a bastion of solid journalism.
 
buckets said:
I dont know why people say this when it isn't true. First of all, no one is going to lend money if it is obvious that they won't get paid back. Second of all, there is zero motivation for a private equity firm to run a company into the ground. There's more money in a successful company.
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Well said. Sometimes when RJ or others post wildly speculative bullshit I'm reminded of this scene from a popular movie.

"Was it over when the Germans bombed Pearl Harbor?

Germans???

Shh, he's on a roll."
 
There you go again. Can't help yourself from being personally snarky.
 
Buckets, thoughts on this Bain criticism?

http://www.ritholtz.com/blog/2012/08/attacking-bain-for-wrong-reason/

"Arends calculates that

“Bain Capital, as we’ve seen, produced real dollar-on-dollar investment returns that were, at best guess, somewhere between 20% and 40% a year. If we figure the money was typically tied up for five to seven years, it was below 30%.

From 1984 through the end of 1998, the stock market overall produced gains of nearly 20% a year. If you had leveraged each dollar with $2 in debt at corporate interest rates, your returns would have ballooned to nearly 30% a year. If you’d been able to borrow $3 at corporate interest rates, you’d be up towards 35% a year. That’s how much money you could have made by issuing company bonds and then spending the money picking stocks out of the paper at random.

If they look pretty similar to the returns Bain Capital earned under Mitt Romney, maybe that’s not a complete coincidence.”

In other words, Bain produced all Beta, no Alpha. They used high leverage and took big risk for what was essentially market level rates of return. Any investor who listened to Vanguard’s John Bogle would have done about the same during 1984-1998 – just buy the S&P500 index, and hold it, reinvesting the dividends. The net returns would be ~20% per year — without giant fees or excessive risks necessary.

~~~

In my opinion, the whining (from the right!) about Bain’s outsourcing, layoffs, and the fortunes produced for insiders are misguided. That’s not why Bain should be criticized. Their fundamental flaw, at least according to the math, is that they took lots of risk, use immense leverage, and charged enormous fees, for performance that was more or less the same as indexing."
 
TuffaloDeac10 said:
Buckets, thoughts on this Bain criticism?

http://www.ritholtz.com/blog/2012/08/attacking-bain-for-wrong-reason/

"Arends calculates that

“Bain Capital, as we’ve seen, produced real dollar-on-dollar investment returns that were, at best guess, somewhere between 20% and 40% a year. If we figure the money was typically tied up for five to seven years, it was below 30%.

From 1984 through the end of 1998, the stock market overall produced gains of nearly 20% a year. If you had leveraged each dollar with $2 in debt at corporate interest rates, your returns would have ballooned to nearly 30% a year. If you’d been able to borrow $3 at corporate interest rates, you’d be up towards 35% a year. That’s how much money you could have made by issuing company bonds and then spending the money picking stocks out of the paper at random.

If they look pretty similar to the returns Bain Capital earned under Mitt Romney, maybe that’s not a complete coincidence.”

In other words, Bain produced all Beta, no Alpha. They used high leverage and took big risk for what was essentially market level rates of return. Any investor who listened to Vanguard’s John Bogle would have done about the same during 1984-1998 – just buy the S&P500 index, and hold it, reinvesting the dividends. The net returns would be ~20% per year — without giant fees or excessive risks necessary.

~~~

In my opinion, the whining (from the right!) about Bain’s outsourcing, layoffs, and the fortunes produced for insiders are misguided. That’s not why Bain should be criticized. Their fundamental flaw, at least according to the math, is that they took lots of risk, use immense leverage, and charged enormous fees, for performance that was more or less the same as indexing."
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So, to sum up:

Using leverage to acquire failing companies, and implementing proven management strategies to turn them around and sell at a profit: extremely risky

Using leverage to spend billions of dollars on stocks you picked randomly out of the newspaper: safe
 
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