>Chris’s comments on this blog on August 7th appeared in the WSJ today on In Defense of Flash Trading. If you get a chance get onto the comments section of the journal. There is quite a buzz that Chris has created with his comments. Not that they were controversial but it sure is a subject of different opinions.


>Talked to some lower middle market private equity guys last week–they said they were having trouble borrowing more than 2 turns on anything–and that is based on recession-reduced EBITDA. They are considering doing deals, taking the 2 turns, praying for a refi opportunity within 12 months so they can keep the excess equity for additional deals. A private wealth sales guy confirms that he’s just not seeing new liquidity from business owners–they don’t want to sell to private equity firms at the low prices implied by the lack of financing.

In the boom years, the math was interesting. Guy sells a business for $20 million, pays $3 million to the US Treasury, puts $10 million in public equity and $7 million in munis or other bonds. P/E firm put up $7 million in equity, $13 million in debt. Result was more new debt issued than funded. Tody same biz might get $7 million in debt with same EBITDA, or less if cash flows down. Even with 50% equity, P/E firm has a better deal than last year if the growth resumes–same equity, less debt. This only works if current owner takes a haircut,and most of them can wait.

August 25, 2009

>Our Dallas presenter says MI Developments (NYSE:MIM) keeps rolling along. The stock is trading at a large discount to book value and near-term events could unlock significant value.

>we are looking to walk malls in New York, Boston and San Francisco early in the Christmas season. We are hearing very lukewarm back to school is making this an even more important tim ethis year.

>China and Banks

August 21, 2009

>Looks like shortly we are going to get a better handle on the China markets. Starting with alternative energy, health devices and consummables and environmental products we are going to be working with a Chinese partner to offer experts on both sides of the pond to talk in these spaces. On a side note I talked to a banker last night who said after all the smoke and mirrors his bank is literally out of the auto and bank business. They were #3 or #4 in the state prior to last summer in both spaces. He said year over year they are doing a fraction(less than 10%) of what they did last year at this time. He was not including refinances which as he said”really distorts” total loan #s.

>Decoupling may have finally arrived, a little too late for the believers of two years ago. The “this time its different” crowd argued that the emerging markets could stand alone without the US and Europe. It didn’t work that way, and emerging market equities were hit even worse than those in the developed markets. Lately the Asian emerging markets have been moving up faster than the US market, but it also seem the economies are as well. And, funny thing, the Eurozone is growing faster than the US–at least for now. There should be concern for the Chinese market after the big rally–lots of IPOs, bank loans up at high rates, and maybe some of that money flooding into stocks. Global banks are considering listing in Shanghai and floating stock there. Of course, hot foreign markets are always the last place Wall Street goes to sell junk, when they’ve run out of locals who haven’t heard the news. While playing the Chinese market in the short term given the current liquidity bubble is not for the faint of heart, especially with the government warning against speculation and bank loans finally slowing, continued economic decoupling may lead to returns exceeding those in the developed markets over a longer horizon.

>The SEC is increasing enforcement efforts due to the spate of Ponzi schemes. So effective August 11, SEC has made it easier for their staff attorneys to issue subpoenas. They will no longer need formal approvals, just an approval from their senior supervisor. This means investment managers might be more likely than in the past to get a subpoena. So while there might be less reason for alarm, still a good idea to bring in counsel before responding. This bodes well for commercial real estate, as those law firms will be hiring again…We need to get used to the new America, where it’s tougher to interrogate suspected terrorists and easier to question businesspeople.

The release authorizing this action can be found here: http://www.sec.gov/rules/final/2009/34-60448.pdf