The political season is in full throat. While everyone is focusing on Mitt Romney’s VEEP selection of Paul Ryan, perhaps it is time to refocus our views elsewhere.

During the primaries, there were all manner of attacks on Bain Capital as a proxy for Mitt Romney. The criticism for outsourcing and layoffs, for the fortune he earned (estimated at $190 – $250 million). Bain saddled some companies with huge debt, using the proceeds to extract large fees. It was a very sharp elbowed form of capitalism. Surprisingly, the criticism came not from the left, but from Romney’s primary challengers on his right. Strange.

This morning, we are going to review how Bain Capital actually performed as investors. No, they did not (as claimed) return 113% per year. In fact, their investment performance, according to their own data, was rather unremarkable.

Ignore the anecdotal attacks from both opponents and supporters. Thanks to two intrepid Wall Street Journal reporters, the full Romney/Bain record has been reviewed. During the GOP primaries, Mark Maremont of the Journal completed a comprehensive assessment of Bain Capital, including all “77 businesses Bain invested in while Mr. Romney led the firm from its 1984 start until early 1999.” And on August 5, Brett Arends released the ebook The Romney Files, which includes extensive reviews of Bain Capital.

Let’s start with the WSJ article. Among its key findings:

• $1.1 billion invested generated $2.4 billion in gains for its investors over 16 years;
• 22% of the companies either filed for bankruptcy reorganization or closed their doors;
• An additional 8% ran into so much trouble that Bain lost 100% of client money invested in each deal;
• Bain’s returns came from just a small number of investments. Ten deals produced more than 70% of the total dollar gains. (4 of the 10 of these businesses later ended up in bankruptcy court).
• Several of Bain’s biggest successes became household names: Staples, Domino’s Pizza Inc. and Sports Authority.

The Journal analysis shows that in total, Bain produced about $2.4 billion in gains for its investors in the 77 deals, on about $1.1 billion invested. This is before fees, which typically run in the range of 2% annually plus 20% of profits (widely known as “2+20”); Some newer Bain funds run 1 & 30, while some older funds ran 1.5 + 20.
That sounds like a great deal – but it is a far less attractive when you do the math and compare to other alternatives.

The Journal sourced its analysis from a list of 77 Bain investments covering 1984 through 1998 that were included in a document Deutsche Bank AG used to raise capital for a new Bain fund in 2000. The Deutsche Bank doc cites Bain as a source; these deals accounted for about 90% of the money Bain invested during that period. (The Journal days it obtained “updated information from a similar 2004 prospectus.”)

BAIN

 

That January 2012 analysis looked at the specific deals Bain did. How did they actually perform as a fund over that same time period?

For that, we need to go to Brett Arends’ new ebook: The Romney Files: From Bain to Boston to White House Bid.  (excerpt here).

Let’s start with that silly 113% per year: Thats a more than doubling each year, and it would have turned $1.1 billion into $9 trillion over the same time period. So please ignore that absurd silliness. As Arends explains, it derives from the way Private Equity calculates internal rates of return. You can use it to compare private equity investments to each other, but not for anything else.

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.

Said differently: Bain’s sins are the same sins most of Wall Street committed: Too high leverage, too much risk, excessive fees for too little performance.

Bain is worth criticizing not because they are so different, but rather, because they are pretty much just like the rest of Wall Street. And THAT’S nothing to brag about . . .

 

 

 

Sources:
Romney at Bain: Big Gains, Some Busts
Mark Maremont
WSJ, January 9, 2012
http://online.wsj.com/article/SB10001424052970204331304577140850713493694.html

The Romney Files: From Bain to Boston to White House Bid, Brett Arends (August 5, 2012)

 

Category: Investing, Politics, Venture Capital

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

66 Responses to “No Alpha: Bain Capital’s Investment Results”

  1. BennyProfane says:

    I’d love to jump into a time machine and read the same study for 2000 – 2020. Will these leeches be able to make such fortunes in the future, just churning money?

  2. Hugh says:

    Bain earned less than 30% p.a., whilst the stock market returned 20%……..

    Magic times!

  3. albnyc says:

    I’m shocked, shocked.

  4. Savage1701 says:

    Exactly how do we know Maremont and Arends are the “gold standard” for getting Bain’s returns correct?

    ~~~

    BR: feel free to do the heavy lifting yourself.

  5. Moss says:

    We will never really know until those tax returns show up somewhere.

  6. streeteye says:

    Leveraged and long in a bull market, and thinks that makes him a genius.

    From 1984-1999, S&P went from 167 to 1469. Plus dividends.

    Typical private equity empty suit.

  7. A says:

    Fortunately for Mitt, the focus of politics is on the creating of impressions, not on providing factual information to a disconnected population.

    As a former British politician wisely noted: An ignorant public is far easier to govern.

  8. b_thunder says:

    The thing that drives me nuts is the fact that PE firms have no real downside: if they were forced to repay the debts of the companies they owned, there would be no Mitt Romney, the successful multimillionaire businessman.

    Who the f*&^ was the corrupt shill who wrote the law that PE or any other “acquirer” is able to borrow against the entities that they acquire, and then not be responsible for the debts? This is not Capitalism. And who are the morons who kept lending to Bain and other PE firms? Obviously, when “Other People’s money” is involved the rules of capitalism do not apply.

  9. Orange14 says:

    “Bain’s returns came from just a small number of investments” This is actually the case for lots of mutual funds as well. I remember some years ago when Peter Lynch was the great investor. When one took a close look at the Fidelity Magellan portfolio which held lots of stocks (and for a while he was crazy for IPOs), the big bucks were made from some very sage targeted investments. The one I particularly remember was Chrysler. He bet big that it would not go into bankruptcy and was well rewarded.

  10. Frilton Miedman says:

    Awsome report, what I’d really, really like to know – his net “job creation” vs lost revenues in tax deductions, write-offs & credits relative to the tax rate he’d have actually paid if his income were taxed as regular income.

    In other words, How much money are we allowing him to skip in taxes per job he’s created?

    In 2010 he paid 14% on $21.6 mil, where his bracket was 35% that means we lost $4.5 million in revenues.

    How many jobs did that $4.3 million create in 2010?…are we getting any “trickle down” or “job creation” ROI on these tax breaks?…are we going to get a better multiplier or velocity by cutting benefits to those at the bottom to offset those lost revenues?

  11. Frilton Miedman says:

    Awsome report, what I’d really, really like to know – his net “job creation” vs lost revenues in tax deductions, write-offs & credits relative to the tax rate he’d have actually paid if his income were taxed as regular income.

    In other words, How much money are we allowing him to skip in taxes per job he’s created?

    In 2010 he paid 14% on $21.6 mil, where his bracket was 35% that means we lost $4.5 million in revenues.

    How many jobs did that $4.3 million create in 2010?…are we getting any “trickle down” or “job creation” ROI on these tax breaks?…are we going to get a better multiplier or velocity by cutting benefits to those at the bottom to offset those lost revenues?

  12. gordo365 says:

    Frilton – how many net new jobs are created when a car elevator is installed?

  13. machinehead says:

    ‘[Bain's] 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.’

    Performance the same as indexing? That sounds pretty good, compared to the bigger and uglier case of TBTF banks. Since 1926, they have returned just over 6.0% annually compounded. (This value comes from splicing together various sources, including Moody’s index of NYC bank stocks (1929-1975); individual bank share prices; and XLF since 1989. All series are total returns including dividends.)

    By contrast, the S&P 500 returned 9.6% annually compounded over the 86 year period (again, a total return).

    So banking — a highly leveraged, low productivity, low value-added industry — underperformed large-cap stocks by an annual 3.6% over 86 years.

    It takes serious, multi-generational incompetence to rack up a record this sorry. But America’s banksters delivered it. And in return, they only expect below-market borrowing privileges from the Fed, plus bailouts on demand.

    Abolish the freaking Fed already …

  14. AHodge says:

    complete, concise, accurate
    the best two pager on Bain out there, by a wide margin
    i like to draw a line between genuine Venture Capital—staples, dominoes–often big job creators and often unleveraged

    and leveraged buyouts, where the social damage and often long term investtor and funder damage outweighs any gains and is often worth less than zero

    Bain did both. it would be interesting to explore whether Bain actually got into the VC
    partly to do some business that did not smell so much
    there was a clear major PR drive in the 90s to combine VC and leveraged buyout.
    two very different forms of modern finance
    and lump them together as “Private Equity” a term not around 20 25 years ago,
    and act like its all virtuous.

  15. AHodge says:

    they started out as straight leveraged buyout i believe and only later added on some VC?

  16. BITFU Search Engine says:

    “Let’s start with that silly 113% per year: Thats a more than doubling each year, and it would have turned $1.1 billion into $9 trillion over the same time period.”

    That’s straight outta the Kim Jong Il playbook. The Republican mouthpieces touting this “factoid” must have come from Pyongyang media.

    Incidentally, here was their take on the Jong Il’s foray into golf:

    “On his first ever trip to the golf course, The Eminent Leader shot 38-under par, including 5 hole-in-ones! This was no fluke, either. In subsequent golf outings, He routinely shoots 3 or 4 hole-in-ones every time out.”

    [Lest the cynics among you think this was some Miniature Golf Affair, think again: The course in North Korea plays to about 7,700 yards, making Jong-il’s feat even more impressive as the 38-under par effort came on one of the longest courses in the world.

    But, really what did you expect?

    Jong Il, coming in at a robust 5’11 -–after taking into account the 8 inch Elton John Platform High-Risers, replete with the counterfeit Nike Swoosh–- The Supreme Dictator was quite an impressive physical specimen, indeed.

    Oh, to witness The Great One stalking the course with Tiger-like prowess in his classic fashion line, known as “The Jong Il”[The iconic Communist Bloc Gray Jump Suit-- "simple, sporty, yet elegant!"] as he drilled Double-Eagles, like he was T. Woods in a dimly lit parking lot having an Viagra-fueled interlude with a Perkins Waitress/Reality TV Skank….

    Even the most seasoned golf observers were reduced to the shrieking mania of a teenage girl at a Beatles concert, circa 1964…or…Tagg and the rest of Mitt’s brood at a Boy-Bander-Lollapalooza.

  17. Christopher says:

    So how does that compare to Obama’s track record of success in private enterprise?

    Oh….yeah….there is none.

    The only fact that matters to me and and most of the folks I know is that it has become obvious that Obama is not qualified, nor up to performing the duties of his position.

    I suspect I’m far from alone in that belief.

  18. techy says:

    Does anybody know how he can legally convert thousands in 401k/IRA into 100 million?? is it something where you transfer your earning from outside into your IRA, such as IRA gets 1000% profit and your outside fund loses 95% or more?? is that legal??

  19. kek says:

    “Let’s start with that silly 113% per year: Thats a more than doubling each year, and it would have turned $1.1 billion into $9 trillion over the same time period”

    That is a lame comment which does not take into account sequence of returns and the amount of investment capital during each year of that period. Arend’s should know better.

    ~~~

    BR: That wasn’t Arends, and it was me.

    You do the math on the claim of 113% per year for 15 years . . .

  20. James Cameron says:

    > Does anybody know how he can legally convert thousands in 401k/IRA into 100 million??

    The Secret Behind Romney’s Magical IRA

    http://goo.gl/ANnFY

  21. Frilton Miedman says:

    Christopher Says:
    August 15th, 2012 at 10:05 am
    “So how does that compare to Obama’s track record of success in private enterprise?”

    I can scroll through a list of friends that own small businesses whom were able to stay afloat, even hire, as a result of Obama’s stimulus tax incentives, contractors, plumbers, electricians, appliance sales, window replacements and their suppliers/vendors.

    These are real small businesses that create jobs right here in America, not Swiss or Cayman Island bank accounts or Chinese sweat shops that only serve the gain of wealthy playboys who cannot even closely consume the percent of income that a working family does. (Friedman’s “Permanent Income Hypothesis” for reference)

    Romney’s vested job creation

  22. Frilton Miedman says:

    - net is estimated in high end @ tens of thousands, to as low as 1,500 jobs, pair that with untold tens of millions he has avoided in taxes in the name of “job creation”, the ROI doesn’t even come close.

    (I again truncated my post above)

    I suspect the reason he refuses to show his tax forms is that it would completely verify my point, net/net he’s a sponge on the economy.

  23. celestus says:

    I would want to see annual returns before I ruled “no alpha.” What if the fund’s alpha was 15% and its beta was 0.5? Then 30% market returns -> 30% Bain returns but Romney and his team would still be brilliant investors. Maybe alpha was zero, maybe negative, without the annual data I don’t really know. But you know who might? Bain’s investors, who saw the returns come in and generally invested more money, at least suggesting that they thought they could get better/less correlated returns there. Or I don’t know. Maybe Romney’s just such a likable, chummy guy that he could take biz school classmates and former consulting bosses out, throw back some decaf coffees, and convince them to throw money away.

    And Barry, surely you know that a lot of investors don’t have the psychological discipline to buy & hold. Even if all Romney got paid to do was be an unemotional indexing robot, he probably did better than many big investors would have done in his place and, while depressing, it’s not surprising that they might pay him for that.

  24. TLH says:

    Again, a Wall Street entity exists for the benefit of those running it, not the people investing in it. WS does mind leverage when betting with other people’s money. WS needs to change for the public to come back. It would help to get the corruption out of government. Why is J Corzine not in jail? 2008 will go down as the greatest robbery in history.

  25. AlanB says:

    There is a missing element to the WSJ analysis, and I am surprised BR missed it: investor behavior.

    According to Dalbar (http://www.tgsfinancial.com/pdfs/UnderstandingDalbarReport_Fall2011.pdf), the S&P Return for the 1984-1998 period was 17.90%, but the average equity fund investor in that same period only experienced 7.25%.

    Whatever the return to Bain investors–20%? 30%?–they actually experienced it. Illiquidity is one of the biggest knocks on PE investments, when actually it might be its most redeeming feature.

  26. Joe Friday says:

    Christopher,

    So how does that compare to Obama’s track record of success in private enterprise?

    You’ve got that backwards. Obama never claimed a “track record of success in private enterprise“, but Romney does.

    Yes, Romney was very successful, in enriching himself and his cohorts, while kicking both creditors and workers, along with their looted healthcare and pension plans, to the curb. Hardly the attributes for operating the federal government.

    The purpose of business is to make a profit, the purpose of government is to serve.

    When I hear anyone campaigning for office claiming the want to ‘run government like a business’ or ‘bring their business experience to government’, I run as fast as I can in the other direction, as they don’t have a clue.

  27. DrSandman says:

    Aaaaah — the demonstration of “unfamiliarity with empirical data” and incomplete understanding of complex systems is on full display today.

    “he paid 14% on $21.6 mil, where his bracket was 35% that means we lost $4.5 million in revenues”

    WE LOST?!?!!?

    No, we did not lose one red cent. First, all money earned through the fruits of ones sweat, labor or efforts (whether you like how it was earned or not) is rightfully the possession of the laborer. Anything else is slavery. We consent to be taxed as the price paid for a civil society. He paid all required taxes based on the law at the time. As did I. As did you. (Otherwise, we would be in jail!) To imply otherwise is slanderous.

    Your money that YOU EARN is NOT owned by the government overlord, who parcels it back to the hoi polloi, slice-by-slice like a loaf of bologna. The brobdingnagian government can’t lose anything by low tax rates, unless you wrongly think that the money was the leviathan’s to begin with!

    Second, the tax rate on dividends is 15% on money that is paid out from AFTER-TAX corporate monies, so it’s really about 45% (35% + 15% on the 65% remaining) when you count everything. But that would require you to look at the system in its entirety, instead of the laser-like approach that you seem to favor here, ignoring anything that upsets your meme.

  28. frodo1314 says:

    BR – thanks for this. Sure appears to be good, level headed, fair analysis.

    For me it is eye opening, but also leads to the question for us all to contemplate: “And during this time what did Romney’s opponent do?”

  29. frodo1314 says:

    Joe Friday,

    Does it really matter that Obama never claimed a track record of success in private enterprise? The fact is Romney claims it, it’s true (to what extent, yes, we can debate), and Obama doesn’t have it. For many of us that IS VERY important.

  30. krice2001 says:

    @ Joe Friday
    Agreed. We’re thinking along the same lines.

    The key is that Romney is making his case for the Presidency by touting his successful business experience. And of course that leads to assessing just what he really did in that sphere. Additionally, of course, one has to decide whether business experience compares in any significant way with the responsibilties of the Office of the President.

  31. ottnott says:

    BR – you missed an important implication

    You wrote:
    “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.”

    The root of the problem is the fortunes produced for the insiders. Pursuit of that fortune was the motivation for the outsourcing, layoffs, enormous fees, immense leverage, and middling returns to those who provided the capital [along with some factors you didn't mention - unpaid debts, unmet pension obligations, etc.].

    Viewed that way, the criticism of Bain expands and morphs into something very similar to your economic criticisms voiced in Bailout Nation, The Big Picture, and other forums: the current US economic system provides very large financial rewards to people who provide no net contribution to the real economy while creating massive amounts of risk that must be absorbed mostly by the innocent when things go wrong.

  32. [...] Should we be surprised that any private equity firm, including Bain Capital, doesn’t earn much alpha?  (Big Picture) [...]

  33. Carl says:

    Having been in the investment business for 40 years, the only ones that Bain consistently made money for was Romney and other managers, not investors. He had a couple of home runs which masked all of his failures. Romney’s primary success was in 3 retail companies. These are not the types of businesses that are reflective of higher level thinking. They do not create high paying jobs. They do not create the types of jobs that the worker bees can make a living that supports an improving life style. They can however make lots of money for a few people at the top.

  34. Frilton Miedman says:

    DrSandman Says:
    August 15th, 2012 at 12:16 pm
    ” Aaaaah — the demonstration of “unfamiliarity with empirical data” and incomplete understanding of complex systems is on full display today.

    “he paid 14% on $21.6 mil, where his bracket was 35% that means we lost $4.5 million in revenues”

    WE LOST?!?!!? ”

    I’m glad you’re catching on.

    Condescendingly tossing the word “complex” into a nonexistent mathematical quantification doesn’t make it solvent, it might convince you of something, it has stopped blinding the mainstream.

    Even Paul Ryan is trying to backpedal on his Ayn Rand ideology, stating he “didn’t realize what Ayn stood for” this past week, despite his statement that Ayn is the reason he got into politics.

    Ayn Rand was a second rate sci-fi writer with emotional issues, nothing more.

    Your rant about Romney’s “blood, sweat and tears” is meaningless, talk to a builder, plumber, mechanic or other “real” worker who started as a common laborer, built a successful business, then has to retire for back problems as a result of his hard work, explain to him that in order to afford tax breaks for Romney’s “hard work”, he’s going to have to accept a $2,000 tax increase along with cuts to medicare or social security, while at the same time the average millionaire is going to get a $340K tax cut…..because, apparently, Romney “works” harder.

    His “blood, sweat and tears” apparently is nothing compared to a vocation devoted to tax avoidance, excess leverage at the expense of pensions and jobs.

  35. ToddMPeters says:

    Does Maremont provide any evidence that the companies that did file for bankruptcy were due exclusively (or mainly) to Bain levering up the balance sheet? Or were most of these companies damaged goods to begin with and Bain was brought in to try and resusitate them?

  36. RW says:

    Bain’s results are consistent with the research on hedge funds and private equity firms: No evidence of systematic excess returns, just a market like any other with the end investor obliged to research and select quality outfits.

    Bain was average, likely below average on a risk-adjusted basis, but limited partners with a big stake who demanded and got a seat at the inner table may have done better than the average would indicate.

  37. Joe Friday says:

    DrSandman,

    First, all money earned through the fruits of ones sweat, labor or efforts (whether you like how it was earned or not) is rightfully the possession of the laborer. Anything else is slavery.

    You do realize that is lunacy ?

    He paid all required taxes based on the law at the time.

    Does that include the Marriott “Son of Boss” and its related shelters, which according to the IRS, is likely the largest tax avoidance scheme in history ?

  38. Joe Friday says:

    frodo1314,

    Does it really matter that Obama never claimed a track record of success in private enterprise?

    Well, of course, if someone is attempting to claim it is somehow a deficiency.

    The fact is Romney claims it, it’s true…

    Again, only for himself and his cohorts. How does that translate to governing ?

    and Obama doesn’t have it.

    Again, you assume that’s a deficiency.

  39. forteology says:

    Someone doesn’t understand the difference between debt and equity.

  40. DrSandman says:

    @Filton: thank you for your following commenting guideline, “Any irrelevancies you can mention will also be appreciated,” and forgoing civility in your discourse. This I will ignore.

    You never answered the question, is the money you earn — even if you don’t like how its earned — yours or the government’s? Do you get to decide what you do with your own money, or does an enlightened class of technocrats get to decide that for you to protect you from making bad choices?

    That is the fundamental question you raised when you imply that a 44.75% total tax rate on dividends somehow nets less revenue compared to the 35% marginal rate on personal income. Furthermore, since you believe that the government loses money on that transaction, one must assume that the money was the government’s to begin with, and that the amount Romney was left with was too great. Therefore, tax is a means to punish people who have become too successful. Is that fairly representing your views?

    I think all day for a living as a scientific researcher in — wait for it! — complex and nonlinear systems. Is my production valued less than laborers who dig ditches? If so, why?

    The dismal science of economics is so complex — in the mathematical sense — that I can’t fathom anything more s0. Seven billion independent actors, all acting with imperfect information under different incentives with the rules applying more to some than others, with fundamental time constants different for each actor…. so yeah, it’s “complex.”

  41. DrSandman says:

    BR — I agree with the main thrust of the article and the viewpoint you expressed “Too high leverage, too much risk, excessive fees for too little performance.” That’s the nut, there.

    Here’s the thing, the left in this political silly season is going to follow the right’s GOP Primary criticisms about outsourcing/layoffs/insider profits. Yet all of the companies that Bain took over were either failing or dead already. They were the GM/Chryslers of late 2008.

    Should empiricists turn around the Stimulus/Porkulus arguments that “without (pick one: [Porkulus/Bain]), the economy/company would have been worse off.”

  42. socaljoe says:

    I’d be happy to pay anyone 2+20 for 30%/year return for 15 years.

  43. jonathanloosle says:

    Isn’t this the same for all the major commercial investors? Whether it’s banks, Wall Street, or corporations they all play the game of taking out immense loans to invest and then charge consumers high fees for something consumers won’t or can’t do.

  44. DeDude says:

    @machinehead;

    “It takes serious, multi-generational incompetence to rack up a record this sorry”

    No actually what it takes is a company where the CEO and management has total control and can ensure that the profits made are handed directly to them, and only to a small extend trickle down to the investors. Since the losses are 100% on the investors, the reckless risk taking and high leverage are a no-brainer.

  45. Frilton Miedman says:

    DrSand, thanks for enlightening everyone on how complex economics can be, and that only you know how to interpret it for us.

    You strike me as an Austrian, personal experience has taught me that arguing with someone who’s greatest academic inspiration is a fiction writer is pointless, the basis for your understanding of economics, is, after all, fiction.

  46. Frilton Miedman says:

    DeDude Says:
    August 15th, 2012 at 3:57 pm
    ” No actually what it takes is a company where the CEO and management has total control and can ensure that the profits made are handed directly to them, and only to a small extend trickle down to the investors. Since the losses are 100% on the investors, the reckless risk taking and high leverage are a no-brainer. ”

    Awesome and true, now, maybe DrSand can give us a deeply intellectual lecture on the detriments of regulation, ’cause economics is too complicated.

  47. Glen says:

    Not sure why Bain’s performance will reflect his ability to be President. (I think the last “CEO” President we had was a disaster, but it could have been because he was a shitty CEO.) Looking at his time as MA governor is a better indicator of his expected performance. But then, he tends to look just like his opponent if one makes that comparison.

  48. Carl H says:

    Having been in the investment business for 40 years, the only ones that Bain consistently made money for was Romney and other managers, not investors. He had a couple of home runs which masked all of his failures. Romney’s primary success was in 3 retail companies. These are not the types of businesses that are reflective of higher level thinking. They do not create high paying jobs. They do not create the types of jobs that the worker bees can make a living that supports an improving life style. They can however make lots of money for a few people at the top.

  49. Christopher says:

    Obama has shown he’s not up to the job.

    So Romney gets my vote.

    I expect no major changes or improvements with Romney.

    As long as our government is owned and operated by the Banksters and their Corporate Friends…..nothing changes.

    There is only One Party now…..that is the DC Party….and they are not our friends.

  50. ‏@interfluidity

    Bain produced alpha for the alphas, and beta for the betas. the natural order of “fiduciary” finance.

  51. James Freeman ‏@jfreema2

    So you’re saying: The gains of Bain fall mainly in the plain

  52. [...] No Alpha: Bain Capital’s Investment Results Barry Ritholtz [...]

  53. Ezra Abrams says:

    sandman
    what would you say to this: suppose that a small group of wealthy people spend huge sums to elect officials, and then spend huge sums to get think tanks and economists and lobbyists to get the elected officials to pass tax laws that are highly beneficial to wealthy people.
    It may be “legal” but it ain’t right.
    Following that line of logic, Mitt may have paid all he owed (although his performance with son of boss suggests he pushs boundarys, and he may have undervalued contributions to his 401K, or had unreported swiss accounts) legally, but that doesn’t make it right.

    I think when choosing a president, we want someone with moral fiber; M Romney has ,as a matter of factual record, demonstrated a lack of moral fiber:
    he has flip flopped consistently (oxymoronic, that) on , say abortion and gay rights
    He has picked as running mate someone who is known to use absurd projections (<3% unemployement in ryan budget plan)
    During the GOP candidates debates, a gay soldier asked a question via video, and the crowd jeered at an *active duty* service member; romney stood silent.
    In response to th greatist financial crisis of our time, the great recession of 2008, romney's proposal was..let GM go under.

    I'm sure there are a lot of other things, and I'm sure you will have a stack of counter points about obama
    In regard to the "debt" run up by obama:
    you have to show what the alternative was, and if the debt is bad and so forth – something I've never seen from a conservative.

  54. Ezra Abrams says:

    Glen -
    I think there is a lot of mythology about Romney as Gov of MA
    1st, he totally changed all his posistions to get elected
    2nd, his signature achievement, the MA healtcare reform, is complex; if you look carefully at the history, you see MA had a long history of reform, and that prior to the Romney care bill, MA was facing a huge loss of fed money, and that prior to Romney picking up the issue, the State senate president (traviglini) had proposed a public option like plan.
    After healthcare reform, with veto proof dem majorities in both houses of hte MA state legislature, Romney was largely AWOL, as he was running for president, and not doing his job as governeor.
    Sadly, I’m to lazy to pull up all the links to support this. but I do have em somewhere on the silicon storage devices..

    also, depsite the corruption and one party rule in state gov’t (and i speak as a liberal) My impression, havinggmoved here from NY, is that state gov’t works reasonably well; certainly, the level of efficiency and reasoanableness is much greater in MA then in NY.

    I would also point out that the largest thing going on in MA when Rom was elected was the big dig, the highway project in Boston, and tunnels to Boston’s Logan airport. True, the project was ongoing when mitt was elected, but it was a total disaster, as follows. The feds agreed to pay for 90 or 95% of the project cost; which was way, way more money then the state had; that is, the project was way to $ without fed help.
    However, the cost balloned way out of control, and at some point, the feds said you have to pay for the overruns.
    the result is taht the state borrowed a lot of money, and th interest on those bonds is crippling to state gov’t

    Further, the GOP governors (Weld, Romney) shut down the state engineering dept that would have overseen QC and construction, and outsourced QC to a private company.
    The result is taht the quality of the road is low, and taxpayers are paying a lot for repairs on a brand new road.
    the most notorious incident is when a very heavy (i want ot say ton) concrete ceiling panel fel on a car and killed a lady.
    It turns out, it is standard practice to GLUE thousand pound pieces of concrete to the ceiling of tunnels; strange but it works – but only if you follow the directions on teh indsutrial glue !!
    the workers didn’t follow directions, the panel fell, and then we (the taxpayers) had to have all of the panels pulled.
    and their are other problems (I omit the fact that the signage is god awful; this seems to be a generic MA problem, that they for some wierd reason can’t put up decent road signs)

  55. Ezra Abrams says:

    sandman
    quote: Second, the tax rate on dividends is 15% on money that is paid out from AFTER-TAX corporate monies, so it’s really about 45% (35% + 15% on the 65% remaining) when you count everything. But that would require you to look at the system in its entirety, instead of the laser-like approach that you seem to favor here, ignoring anything that upsets your meme.

    I think you have a problem here.
    1) where does the 35% number come from ? is that a real world number ?
    2) If what you say is true, then you have to ask, who paid the tax in the first place – does the tax simply fall on the owners of the corporations (ie, wealthy people like romney )?
    If that is so, and corp taxes are a tax on the owners, then why do we have a low corp tax rate – shouldn’t it be higher, since it is passed on to high bracket people?
    ON the other hand, if, as people like Mankiw used (past tense) state, corp taxes are simply passed to consumers, then consumers (middle class) people paid the corporate tax…..?

  56. Rookie says:

    You guys are missing the main point. Let’s just say Romney has an average batting average . . . Obama has never even been to a game. He isn’t even a benchwarmer. And this is who you want to run the country?

  57. DeDude says:

    @Rookie;

    No Obama was never a vulture capitalist, he served his community rather than raping it for his own personal benefit. He never took over a company just to export its jobs to other countries or saddle it with enough debt to ensure that it would sink as soon as he had unloaded it on some suckers. He never abused his control over a business to make sure that it would purchase million dollar consulting services from the Romneys IRA consulting group. Obama never did the kind of sociapathic robbing and raping that Ronmey did – and that is why he is a much better candidate. The only company Obama ever attempted to turn around (GM) was actually turned around for real, not just used a personal cash cow before slaughtered.

  58. Rookie says:

    DeDude . . .

    ‘sociapathic robbing’ . . . ‘vulture capitalist’ . . . ‘raping’ . . . yep, it sounds like election season.

    Again, and I appreciate you trying to argue Obama’s case, this is an election about freedom vs. big govt, but also about an accomplished business man and a man who acheived very little . . . prior to becoming President. Sadly, this lack of experience was painfully obvious over the last 4 yrs. I hope you will reconsider your vote in November – if you have children or grandchildren, they will thank you.

  59. DeDude says:

    “freedom vs. big govt”

    Actually GOP presidents have been growing government spending a lot more than Democratic presidents. It is just that the GOP presidents do it on credit. And for the sake of future generations (I even worry about those who are not in my blood line) I would not want to elect another “taxcut and spend on the credit card” GOP president. The freedom of Cheney/Bush with their secret detention centers is also something I can do without.

    “accomplished business man and a man who acheived very little”

    The salvation of America’s auto industry and creation of 4 million new jobs after the bottom of the Bush depression is a far better accomplishment than the destruction of american businesses for own personal gain, and export of our jobs overseas. There are certain types of “experience” and skills that the leader in the White House does not need to have. On the other hand sufficient compassion for your fellow man and felling so responsible for the common good that you will forego a huge income in your professional area, just to help organize and improve things in your community – that is the kind of character and social responsibility that I think we need in the white house. Gang bullying a long haired guy and cutting his hair off – or using every loophole in the system to pay as little as possible to the common pot and building a multimillion IRA account with 3K per year contribution limits – that does not impress me.

  60. Joe Friday says:

    Rookie,

    this is an election about freedom vs. big govt

    Where’s the “big govt” ?

    We haven’t seen government spending this low since Eisenhower.

    but also about an accomplished business man

    The problem is what Romney is “accomplished AT.

  61. Frilton Miedman says:

    Rookie, Venture capitalism, and capitalism itself, is like a boxing match….the participants are no more noble than the rules force them to be, think Mike Tyson, he was an incredible boxer, but I don’t think anyone would debate he ought be a boxing regulator solely for that fact.

    The idea in boxing (and capitalism) is to find the best, the one with the most stamina, the most agile and powerful, the one who was most devoted to training.

    If you allow boxers to pay the ref or judges to turn a blind eye or bend the rules, the winner is no longer the better boxer, it’s no longer a competition of the best – You then have world championship titles held by fat, out of shape rich kids.

    Same with Capitalism, when you allow anyone more advantage over the other, it’s no longer a contest of the best product, technology or price, it’s all about whomever can monopolize and control.

    Romney is not the best “boxer”, his specialization was tax code/tax avoidance, He also cut corners that were illegal when he could get away with it, search for the “son of boss” scandal, largest tax evasion scam in IRS history – headed by Romney.

    He never built a better product, he never bettered anything or built a better widget, his sole focus was on cheating taxes.

    Romney’s ONLY record in governance was Massachusetts, he left the state with dismal employment – ranking 47th in an economic boom, he increased the states debt, he also increased taxes through municipal fees so he could claim he “didn’t” increase taxes.

    He was so bad that the Democratic Senate shot down many of his fee recommendations, namely, a paperwork fee on blind people, another $400 fee for testing positive for Tuberculosis, both denied by the MA Senate, but numerous other fee’s he was able to pass the mostly hurt the middle class.

  62. [...] Some intrepid reporters from that leftist rag The Wall Street Journal have dug into whether Bain Capital earned a risk-adjusted rate of return for its investors that is actually worth bragging about. The answer is a resounding “no”. [...]

  63. [...] to this analysis of the Wall Street Journal‘s Bain Capital analysis, the answer is, no, not really. All of Bain Capital’s earnings were the earnings that any [...]

  64. Rookie says:

    DeDude – I appreciate that Bush ran up some debt during his 4 yrs, but Obama made him look like a piker. And, regarding auto bailout, I just can’t get behind the govt violating the capital structure (read: screwing bondholders and giving their interest to union pensions). This ‘recovery’ is the weakest in history – mostly due to Obama’s harmful policies. I feel most sorry for the poor – Obama’s policies are destroying jobs and he is pursuing a weak dollar policy. Poor folks are getting hammered on both sides – thus the huge amounts of people going on food stamps and welfare.

    Joe Friday – The govt employs 1 in 6 people. That’s big govt.

    Frilton Miedman – If we are going to debate whether our country should be based on capitalism, I don’t think it would be a very good use of time. The problem with govt restricted capitalism is that govt screws it up. Think banks. Govt rescued banks because they didn’t enforce the rules they had in place. Now we have this huge moral hazzard issue. What a mess.

    ~~~

    BR: No, that’s wrong. Indeed, Sorry, not just wrong, but wildly, embarrassingly, talking points wrong on the data.

    1. No, the govt DOES NOT “employ 1 in 6 people” — the Federal government civilian employment base is 3 million out of a labor pool of 150M — that’s more like more 1 in 50.

    2. George W. Bush wildly out spent Obama — from both wars to both tax cuts to Medicare prescription drug plan D, the George W. Bush debt contribution was $6.1 trillion. And note that he began with a surplus. The current eejit began with a house on fire.

    3. Do you understand bankruptcy law and creditor priorities? Apparently not. Otherwise, you would not be on the erroneous side of the GM BK issue as well. Bankruptcy Judges are kingds of their court, and do WTF they want. If you dont like it, you can appeal on the grounds of abuse of discretion. (Good luck with that)

    You are entitled to your own opinions, but not your own facts.

    EPIC FAIL

  65. Joe Friday says:

    Rookie,

    This ‘recovery’ is the weakest in history

    No.

    Just as an example, there were more jobs created in 2010 than during all eight years of the Chimpy Bush administration, AND there were more jobs created in 2011 than during all eight years of the Chimpy Bush administration.

    mostly due to Obama’s harmful policies.

    No, the problem is the MASSIVE economic HOLE created by the egregiously failed policies during the Chimpy Bush administration.

    Obama … is pursuing a weak dollar policy.

    Except the dollar, according to the DXY INDEX, hasn’t gone much of anywhere over the last four years, and if anything is slightly UP.

    BR covered the rest of your gibberish.