Nick Clegg.

Darling of the Tory Party!

FFS!

With respect – he also branded trades unions communists.

How often are “good companies … destroyed by short-term investors looking for a speculative killing”?

how is it done? how often is it done? the only thing I can think of is chief executives doing ill-advised mergers for sake of personal pay-off, which can lead to bankruptcy if debt funded. But even then, “good companies” ought to kept going by the receivers, who after all will be looking to maximize resale value.

Does anybody have any idea whether Vince is referring to something that happens all the time or that happens barely at all?

Does anybody have any idea whether Vince is referring to something that happens all the time or that happens barely at all?

I suspect it’s all part of the widely-held belief that it was speculators, particularly hedge funds and more particularly short-sellers, which did for the banks… In this narrative, everything would have been fine as long as nobody had noticed that they were on the verge of insolvency. Also known as “shooting the messenger”.

I’d be more impressed if he’d had a go at the community-throttling low-wage supermarkets. Slating the bankers is like the Pope apologising for paedopriests – too little, too late, and pretty much just words.

Dunc

ah of course … the financial crisis has killed some good companies. I thought he was referring to something that happened even in the absence of banking crises.

“How often are “good companies … destroyed by short-term investors looking for a speculative killing”?”

Lets take one industry as an example, and it is a well known one so we can all understand. Football.

Man Utd – extremely profitable plc, regularly succesful. Gets taken over by investors who load the club with debt. Now relies on the continued careers of gigs, scholes and a few others to maintain champions league position as their rivals threaten to over-take them as the club’s vast revanue streams are used to pay interest.

Liverpool – profitable club, although with glory years behind them, taken over by Hicks and Gillet who load debt onto the club, fail to move it forward and turn them into a joke. With Gerrard and Torres they would be in a relegation fight. And still these idiots will only sell their stakes for a big profit less than a month before RBS could take over.

Portsmouth – the criminality there is so breathtaking that no summary could fully do it justice. That Gaydamark was able to transfer land from the club to himself is alone proof of what Cable was talking about.

Man City – without the middle-eastern takeover, Shinawatra would have bankrupted the club.

Outside the premiership there is a long list of similar tales of well run small clubs being bought out by new investors comming in, asset stripping the clubs before bailing out with the club heading for administration. The amount this has happened has pretty much given David Conn a career in journalism.

I think he means the hedge funds (or whatever, I can’t remember the term for them), that buy up companies doing OK, asset strip them, load them with debt, then flog them off and skip into the distance clutching wads of money. I can think of a few football teams that have been screwed like this, but I’ll see if I can find a few other examples and link to them.

Capitalism does not kill competition, big business in league with government does. Many large companies hate free markets just as much as your average leftie because they’re forced to compete to stay in business. If you ever see a large company proposing regulation you can bet it’s not because they have the public’s interest at heart, no matter what platitudes they might spout. Chances are they’re trying to make life harder for their smaller competitors.

OK, leveraged buyouts. But does anybody have any idea how often leveraged buyouts “destroy good companies”. Or is everybody just using their spider senses? Remember that if you buy a company, destroying it is not obviously the best way to go about maximizing your returns. If you “asset strip it” by selling off the good bits, you are not destroying the good bits are you. If a company’s assets in sense of things like land, machinery are worth more than the company as a going concern, it’s not obviously a “good” company. I’m not saying it doesn’t happen, I’m asking whether Vince is referring to something that happens all the time or that happens barely at all?

(I’m not going to accept the football industry as representative of anything other than the football industry).

ah sod it. the answer it that it happens “sometimes” and none of us know much more than that. I fully support Vince if he can design legislation that can prevent leveraged buyouts that wreck good companies whilst allowing debt-funded buyouts that do useful things like expand companies or find efficiencies.

“ah sod it”

Luis, you have to give us more time to skim read the journal articles we find on the first couple of pages of google scholar

He didn’t criticise ‘capitalism’ as a system, he criticised a particular feature of it. Real crriticism would have offered an alternative, which he didn’t. His attacks on the labour movement don’t suggest he’s considering worker buy-outs.

Hedge funds do not takeover firms. They spot an easy way to make money if a company is subject to a bid by buying shares and selling to the bidder. Private equity do takeover firms and some of their practices are questionable. They often load the balance sheet of the firm with the cost of the takeover. However, for them to be a buyer of shares they must find a seller. How is Cable going to stop shareholders selling to whoever they want to sell to?

Of course capitalists as opposed to capitalism are anti-competition. Outcompeting the opposition and putting them out of business is the whole point as that will lead to larger market share and profits. To state that is not anti-capitalist but is just a pretty obvious point. Everyone will claim they are a special case and should be protected from competition. The ‘ small shopkeeper ‘ will always say they should be protected from the supermarkets who have the audacity to charge lower prices. In contrast, he is a rent seeker who wishes to rip-off the public by charging higher prices. His gain is offset by the public loss. Protectionism whether it is caused by structural problems or through government favouritism always leaves the protected better off at the expensive of the public who are worse off. The solution is to favour none.

A quick scan of the computer press will identify many anti-competitive acquisitions. HP’s takeover of Compaq brought nothing to the table other than Compaq’s sales leads for a more or less similar product range. Everyone in IT also knows that when Symantec or Computer Associates acquire a product, it has little life ahead of it. In the UK, there are now about 20 white box PC manufacturers who hold a volume licence from Microsoft (ie the right to print Windows manuals and press their own DVDs); ten years ago, there would have been closer to 50 companies.

ARM provide an interesting model for resisting acquisition. ARM license their chip designs to anyone who can afford them, and the licence is held in perpetuity with a royalty paid per unit manufactured. Thus Apple, Microsoft and Samsung (and there are other big names who own ARM licences) have no interest in a takeover, given that they cannot revoke the rights of existing licence holders.

I think people have given you enough examples Luis but you obviously don’t agree with Vince so that’s that really.

“He didn’t criticise ‘capitalism’ as a system, he criticised a particular feature of it. Real crriticism would have offered an alternative, which he didn’t. His attacks on the labour movement don’t suggest he’s considering worker buy-outs.”

Mmm-hmm. Sorry for raising this site’s most overused word, but I’m surprised people are all buying into the *cough* narrative that Cable attacked capitalism. It’s simply not true. His criticism of trade unions was actually more inflammatory in terms of the words used.