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Old June 14th, 2018, 12:47 AM   #1
Uniquemind
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Default Private equity firms, and the darkside of “making a profit”

https://www.theatlantic.com/amp/article/561758/


The above is an article talking about why traditional retail is dying. It’s specifically mentions Toys “R” Us and babies R us but also talks about the bankruptcy of the store some of you might remember called Mervyns.


I bring this issue up to highlight a bigger point, about how capitalism has flaws and doesn’t always behave in patriotic ways in so far that it can harm the labor market, hasten company death in a way that is not totally a response due to non-profitability, or due to genuine customers leaving or shifting loyalties.

I thought it should merit a read and good discussion about society, family, politics, and the myths or vernacular everyone says about success and failure and who owns that, versus what might be a more holistic and truthful look at a chain of events that gets someone or some company from point A to point Z and the inbetween nuances, we tend to overlook.
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Old June 14th, 2018, 12:44 PM   #2
trackinglife
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Default Re: Private equity firms, and the darkside of “making a profit”

Toys r us is not an example of capitalism being bad it is quite the opposite. The company was mismanaged and paid the price. That is what should happen in a free market......would you prefer a company be mismanaged and what the government comes to bail them out which happened back in 2008?

Consider GM. They were led horribly for a while there (and likely still are being led badly honestly) and they were not selling enough cars as a result. So the government comes along and says "what? People are not buying enough of your cars? Well what we will do then is take their taxes (which they have virtually no choice but to pay) and then use that money to fill your coffers), so it is like they bought your cars but hey they get 0 cars in the deal).....and then when the company did start to make any kind of profit again I don't recall seeing a government check with profit dividends considering we as a society owned part of the company for a while there.....They went on and on about how these companies were too big to fail. So I ask well why not take the trillion you intend to use to bail them out and divide it up amongst consumers who can then CHOOSE which companies they want to see survive and which ones they want to see fail.

"Oh that would lead to inflation, due to so much money flooding the market" --they respond. And by they I mean any Democrat or person with liberal or anti-capitalist tendencies that I asked.

MY response. "the money floods into the market in both scenarios it is just in one scenario it is directed to a few large companies whereas in my scenario it is divided up amongst over 300 million Americans including those who pay no taxes whatsoever....." Inflation issues are the same either way.

In any case the bottom line is Capitalism is not perfect......it is just better than all the other economic systems that anyone has ever thought up especially with respect to an economy the likes of which the world has today. It is far larger and more global than ever before and while not all countries embrace capitalism the way we do the strongest economies of all the other kinds including Communist China for example are all ultimately benefiting from America's capitalism. They are building their economies on the foundation of ours. Well that and us protecting the international sea trade lanes.....and to some extent Air traffic too....
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Old June 14th, 2018, 12:46 PM   #3
trackinglife
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Default Re: Private equity firms, and the darkside of “making a profit”

Oh all that being said thanks for bringing up the discussion.
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Old June 14th, 2018, 01:04 PM   #4
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Default Re: Private equity firms, and the darkside of “making a profit”

This may be a bit off-topic but the idea that the Toys-R-Us bankruptcy lies at the feet of online retailers is really just a scrap-goat argument. The owners of the business made some fool-hardy and questionable financial decisions throughout the years prior to the bankruptcy. As the result of a buyout in the mid-2000s, Toys-R-Us was coupled with millions upon millions of debt. The new owners assumed the debt would disappear over the years, but it simply didn't. That same debt, accumulated years before Amazon became the power it is, is what ultimately drove the company to bankruptcy.

Additional factors have been the rise of the big-box store in the 2000s like Walmart and Target, which stole a decent amount of the toy market from dedicated toy-stores. As well as the general shift in the toy-market away from traditional toys and into more technological driven play-things.
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Old June 14th, 2018, 03:42 PM   #5
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Default Re: Private equity firms, and the darkside of “making a profit”

All valid points, but the article above still points to a broader trend of private-equity choking operational cash flows that could have allowed for them to reinnovate and change the model of the business entirely.

Bad management at the C-suite level, is obviously the biggest factor, and the 2006 hiccup to what would become the 08 Great Recession, was and should not have been a surprise to society.

We now know thanks to the movie and real life people in “The Big Short” that private equity firms should have calculated and seen the recession coming..firms such as these ARE from the same sector of society as the banks, just a cousin to banks really once they reach a certain size. You mean to say all the business consulting agents of these firms were incompetent and didn’t also advise stores like TRU/BRU to shrink first rather than carry a huge debt load before entering a recession.

Wall St’s problem is that it’s tone deaf to mainstreet, and it’s looks at algorithms and models that say well housing is going up, therefore families will go up.; 2008 that exact scenario happened and families are not going up, the high $ value on property creates a pyramid exclusivity market (think celebs offloading mansions, the market is smaller; except regular sized homes are the ones sold not mansions).


My point is, that firms don’t just pop up to replace voids left by stores as big as TRU, the vendors suffer and therefore jobs suffer and the national labor and cash spending suffer.

I think this is a flaw in capitalism, the inability to smooth over ripple effects, it would have been better for some program to consolidate the debt, oust C-level management who we all admit was bad, and protect the workers under them who hurt worst from decisions made by those in power.

From what I’ve read nonseverence, except C-level management who got some kind of “retention bonus; but framed under a different name of payout done only during the chapter 11 phase of bankruptcy, way before they transitioned to chapter 7, and handed over TRU to liquidation company”.




—-

The fianancial bailout of 2008, sucked, but it was necessary. The absence of a toy business hurts businesses but the effects of pain are isolated unlike the bankruptcy of financial firms that have roots in all other sectors of the economy to conflate these contextual differences in the model of capitalism allowing for retail businesses to go under versus a financial business does not equate.

But point seen and taken.

Last edited by Uniquemind; June 14th, 2018 at 03:45 PM.
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Old June 14th, 2018, 04:49 PM   #6
Dmaxd123
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Default Re: Private equity firms, and the darkside of “making a profit”

but were the bailouts really needed?

yes/no

I think the top tier of management can become too disconnected from the company's best interest because they hear and have been shown that "they are too big to fail"

but it should have been a 1 time deal, you pay back the government, government changes some regulations and walks away since the government shouldn't be running businesses or bailing them out.

if mom & pop corner store shuts down everyone says "aww thats too bad" if any of the big auto makers shut down those that own stock in the company via wallstreet are the real losers. Toyota/Nissan will say "hey GM isn't making a 3/4ton truck anymore, we will fill that void"


the banks that helped cause the housing problems are the same way, those at the top need to be held liable for the actions of those under them, that is why they make the big money that they do. they knew they were giving people loans when they shouldn't and luckily the government saved their butts when people started defaulting on loans
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Old June 15th, 2018, 02:55 PM   #7
Uniquemind
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Default Re: Private equity firms, and the darkside of “making a profit”

Quote:
Originally Posted by Dmaxd123 View Post
but were the bailouts really needed?

yes/no

I think the top tier of management can become too disconnected from the company's best interest because they hear and have been shown that "they are too big to fail"

but it should have been a 1 time deal, you pay back the government, government changes some regulations and walks away since the government shouldn't be running businesses or bailing them out.

if mom & pop corner store shuts down everyone says "aww thats too bad" if any of the big auto makers shut down those that own stock in the company via wallstreet are the real losers. Toyota/Nissan will say "hey GM isn't making a 3/4ton truck anymore, we will fill that void"


the banks that helped cause the housing problems are the same way, those at the top need to be held liable for the actions of those under them, that is why they make the big money that they do. they knew they were giving people loans when they shouldn't and luckily the government saved their butts when people started defaulting on loans
2 things:

1. Once things got bad in 2008, from my research it sounded like because of the time critical situation, yeah the bailout was needed.


But harbinger employees who saw the collapse coming before actually happened, should have been listened too, and a calmer plan should’ve been worked out before things came to a peak.


2. A horrible precedent was set, but which party keeps rolling back the protections set on the financial industry already. It’s not Democrats and Republicans equally rolling back consequences (remember the public is mindtricked into think governmental dysfunction is equal blame to both parties)


https://www.washingtonpost.com/ampht...9ef_story.html

It’s the Republican Party, when in power, rolling back various protections and safeguards meant to prevent the private banking and equity industry from exploiting the system and marking those exploits as consumer freedom of choice.


It goes beyond pro tax or anti- tax it is a really long game of memory required to be a smart voter.

I don’t encounter people to scale who remember the details of years past beyond 2 years of policy memory especially the more mundane they are.
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Old June 16th, 2018, 06:57 AM   #8
Dmaxd123
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Default Re: Private equity firms, and the darkside of “making a profit”

i agree the bailout was needed but it's just one of those things that should have been stopped long before it got that far
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