The Private Equity Scam

These private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then, not long after, they often borrowed even more money, using the company’s assets as collateral — just like home buyers who took out home equity loans on top of their first mortgages. For the financiers, the rewards were enormous.

Twice after buying Simmons, THL borrowed more. It used $375 million of that money to pay itself a dividend, thus recouping all of the cash it put down, and then some.

A result: THL was guaranteed a profit regardless of how Simmons performed. It did not matter that the company was left owing far more than it was worth, just as many people profited from the mortgage business while many homeowners found themselves underwater.

Investors who bought that debt are getting virtually nothing in the new deal.

--Profits for Buyout Firms as Company Debt Soared via

Corporate raiders redux. Risk-free return!

Buy a company. Sack it by putting it deep into debt. Write big checks to yourself. Then sell it before the company dies. Rinse and repeat.

What a scam.

I'm not sure who is at fault -- the private equity firms that put the debt out there, or the money managers taking the other end of that deal, allowing the entire value-destructive cycle to even happen.

Private equity is supposed to create value. For decades, some firms have been buying companies and actually improving the companies they own. But in fast times like the past decade, it's hard to avoid the lure of writing checks to yourself... because there's nobody watching.

Palantir Finance releases public demo of its powerful market analysis platform

Years ago, I left a stable job at Microsoft to join some friends working on hardcore software problems in the finance space. From the ground up, it was created to be a fresh approach to the often stale and murky waters of financial software out there. Even today, the best market analysis software falls into one of the following three buckets: barely a step up from teletype terminals, an homage to the early days of Windows 2.0 dialog box hell, or homegrown one-off software mired by hopelessly bad UI.

We set out to create a v1, new-code-from-scratch product that we built and designed from the bottom up. Yesterday, Palantir released a public and usable demo of the basic elements of their advanced financial platform. You can play with it on your computer today for free.

Click here to get started or you can read more about it below.

Disclaimer: While no longer affiliated with the company, I am a shareholder. And a fan.

Starting from scratch, the most basic building block of the platform was the Chart Tool. Existing charting tools made it incredibly hard to zoom in and out, and view and compare time series all on one page.

We wanted something that could be easily added to and compared. Why was it that before this chart tool, you had to plot time series on your own in Excel in order to adjust and correct data? You couldn't look at a graph of 10 years of data at the minute-by-minute resolution. You could only zoom in and out by fixed orders of magnitude (one year, 3 years, etc). So the Chart tool was designed to be able to show all time series of any asset class over any resolution and any time period. With finance, it's all time series anyway, right? Value x at time t. Every time series should be a first-class comparable object.

From there, we realized the financial markets were so complex that there was actually a huge data exploration problem. Traders had to memorize hundreds if not thousands of ticker symbols. Isn't that what computers are for? Being able to instantly search millions of time series became a priority, so we built this -- an extremely simple instrument selector that let you search and find all financial time series of any asset class all in one time series selector.

Being programmers, we added a dot-notation concept that became really handy when trying to understand what was going on. For instance, most time series movement can be attributed to macro factors -- e.g. the whole of tech is going up or down. What if we just wanted to know when Google became anti-correlated with XLK, the Tech SPDR index. Easy. We just type GOOG.correl(XLK, 30) to get the 30 day correlation between the two time series. We could do the same for MSFT too and see it all on one subplot.

From there, it's a hop skip away from extracting time periods in which GOOG was highly correlated vs. not highly correlated. With time periods, you could start doing backtests on trading strategies. We used to joke that there should be a "Make Money" button. With tools like this, it's not that far off.

That was just a super abbreviated tour of just one or two of the hundreds of powerful features that make Palantir Finance the essential next wave in understanding the markets. Hundreds of thousands of man hours were poured into this tool, and it's awesome to see it functioning on my own computer once again -- though I'm certain only a rare few lines of my early prototype code are still in there. ;-)

For a much much more complete tour of the basics of the software, see also the Joyride Tour/Tutorial. If you have any interest in economics, finance, or what the markets are doing, you should check it out while it's online.

I consider myself incredibly lucky to have been there for the birth of this software, and I can't wait to see where the Palantir guys take it next.

Technology is not dead. It is exponential.

Electricity greatly improved our quality of life. But I'm not going to get excited about buying a basket of utility companies. Same for the Internet. Can't live without it, but can't live with it (in my portfolio).
--James Altucher via

James Altucher will eat his words. To count tech out at a local minima is absolutely absurd. Fred Wilson is right: Tech is alive and well. But there are deeper reasons than what Fred Wilson mentions.

Other than computing technology, what field can boast exponential gains? Green tech is much talked about of late, but what are the rates of improvement for battery power, photovoltaics, and clean energy? Miniscule, in the single digit percentages. We can only wish for exponential advancement in almost all fields of technology. It's just not a reality.

With computers, we are blessed by the exponential curve of Moore's Law. Ray Kurzweil plots this exponential curve:

Just look at the innovation that has happened in 40 years. Bill Gates is famed to have said in 1998: "If General Motors had kept up with technology like the computer industry has, we would all be driving twenty five dollar cars that got 1000 miles/gallon."

Instead, GM has gone bankrupt, and now we have one-inch-thick netbooks that we can buy for less than $300 that provide 300,000x the computing power of the ENIAC, which cost $500,000 and filled a very large room in 1946!

The exponential march of software begets the exponential march of software capability. Software has gone more and more high level. Instead of slinging machine-readable bits, we started writing assembly. Then C/C++. Then Java and Perl. Now, Ruby and Python -- each step is less efficient for the computer but more efficient for the human. In 1946 you needed a PhD to even get near a computer, and only now are we seeing the rise of the truly interconnected, paperback computer that costs next to nothing but is indispensible for everyday life -- not just for an educated elite but for every person on the planet.

The advent of the Gutenberg printing press and modern mass-produced book changed society at its core -- at its basic fabric, humanity as a whole became more educated, more equal, more enlightened, and far more human, rising out of the depths of ignorance. The rise of cheap, ubiquitous books formed the modern world. But now we have a book that is infinite in length and unbounded in capability to teach, share, educate, and think.

So we've got an exponential engine of innovation, and it is transforming society before our eyes. And we're at a such a local minima where the WSJ is calling the whole engine dead.

We're still only beginning this mad experiment of infinite and ubiquitous computing. The greatest, most earth shattering software has yet to be created. On the upslope of an exponential, you'd be insane not to go long.