I'm reminded of this recent post on naked capitalism:

naked capitalism: Private Equity Firms Expected to Show 20-30% Losses for 2008

OK, you gotta help me. Private equity is basically levered equity. Yes, the claim to add value in various ways, but many academic studies question that theory. The big source of profits is leverage and financial engineering. Neither of those approaches were spectacularly successful in any sector I can think of in 2008.

In addition, many PE firms have companies in their portfolio that are in a world of hurt right now, due to a combination of fundamentals that fell off a cliff, high debt loads, and in many cases, debt maturing in the next year or so.

So how can PE companies (on average) possibly report returns that are better than equity averages last year? It strains credulity. Leverage cuts both ways, and it most certainly would not, in most cases, have done PE owned firms much good last year.

And making the expected mere 20-30% losses (versus public market declines of more like 40%) comes when PE firms are held to more rigorous standards in valuing their holdings. That alone should have a return-depressing effect.

To its credit, the Financial Times article does say the losses could be considerably worse than the rumored level.

There were articles in the Arkansas Democrat Gazette today, (Wednesday,) about layoffs by LM in Little Rock.  These layoffs are attributed to a drop in sales due to lack of availability of credit, according to Randy Fox, vice president and North American general manager LM Glasfiber.  They are closing the plant in which they started production here and transferring some workers to their new plant at the Little Rock Port.  

Mr. Fox was at pains to point out that, even with these layoffs, LM is ahead of projections for total employment by Jan, '09 and that they will be here for the long term.  He also notes that some of these workers could be re-hired.  The article goes on to note that DMI Industries of Fargo, N.D. has announced a 20% reduction in employment, also attributed to the credit squeeze.  We can hope that the Obama administration will give some attention to some of the consequences of the financial implosion other than trying to provide first aid for the perpetrators.

"It is not necessary to have hope in order to persevere."

The problem with highly leveraged PE firms is that they can be forced into a firesale situation when their loans are called in or mature.  This may simply be a case of not having sufficient cashflow to keep the business ticking over, or needing the cash flow to pay back loans rather than progress the business.

notes from no w here

How much did the workforce of LM Glasfiber expand in the 4 years since it was acquired by the British PE firm?

Most economists teach a theoretical framework that has been shown to be fundamentally useless. -- James K. Galbraith

Independent: 'Strange lights' reported as wind turbine damaged

An investigation was under way today into how a blade was mysteriously torn off a wind turbine amid reports of "strange lights" in the sky.

The turbine at Conisholme in Lincolnshire was left wrecked after the incident.

The Sun quoted residents speculating the damage could have been caused by a UFO.

Yup - the little silver people with big eyes are not pleased...

You can't be me, I'm taken

Turbulence in the markets?
No power in the windbank?
What goes around, comes around?
Fibreglass rotors caught in Melt-down?

Just trying to think of some snappy headlines for your op ed piece on this.  You ARE going to publish it, aren't you?

notes from no w here

Why don't you think the reaction will be, that there is need for a gov't sponsored bail out of the wind industry?

After all the car industries all over the world get bail outs,despite it is clear, that there are overcapacities.

Der Amerikaner ist die Orchidee unter den Menschen
Volker Pispers

For whatever it is worth. :-)

Jay Leno's MagLev Wind Turbine Is Bigger Than Ed Begley's (VIDEO)

Jay Leno may have a ton of old cars that probably get four or five miles to the gallon, but at least he's talking about wind power on television! Or. Hang on. At least he talks about wind power on NBC.com!

In the video below, he's staring at a MagLev wind turbine -- that's a turbine that works well because it's levitating on a magnetic field. Less resistance means more conserved energy and less mechanical wear. Very cool stuff, and it's the kind of toy that a mechanical geek like Leno can get into.

This baby's going on Ed Begley's house, but Leno brags that the one he'll buy is bigger.