Quote of the day: Gordon Gekko – greed is good
With blood on the street and one flagging financial institution after another gasping for dear life, a quote from the Movie “Wall Street” bears remembering:
In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars. Thank you. I am not a destroyer of companies. I am a liberator of them! The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind.
-Gordon Gekko
Judging by the turmoil this weekend, apparently greed is not so good after all.
Ed,
In the last seven deals that I’ve been involved with, there were 2.5 million stockholders who have made a pretax profit of 12 billion dollars
WOW! That sounds great, but let’s take a closer look.
According to my math, that’s $686 per shareholder per deal. Woohoo!
After tax, it’s likely around $400 per sharholder per deal. And after the euphoria subsides, it’s likely $300 per shareholder per deal. And after inflation, it’s likely $350 per share holder per deal. And after the business cycle turns, it’s likely $0 per shareholder per deal.
Private equity (formerly known as leveraged buyouts) is generally a sham. It only works while interest rates are falling. Even then, little if any ecomomic benefit is realized by society.
I don’t know if I would make the sweeping statement that private equity is a sham. n would say that it experienced a massive bubble because interest rates were so low.
And I think as you probably do that we are going to see some seriously large leveraged buyout busts.
The days of Gordon Gekko are well and truly over.