Dog Days
Here we are in the early “dog days” of August & New York City is starting to empty for the month. We seem to have taken on the European approach of everyone heading out of town for the month. Prior to leaving though, Rupert Murdoch won his prize, The Wall Street Journal/Dow Jones, once the Bancroft family realized that there was no alternative to his “bear hug” premium and he agreed to pay their various fees, which had become substantial. Once this deal closes, the fascinating work of brand extension will begin!
The stock market remains volatile and those who “went away in May & will come back in September” are probably feeling very good about that decision. Liquidity concerns remain an issue, but deals continue to get done, although, the confidence level regarding the degree of leverage does not seem very strong, as the major banks sit with deals that they cannot syndicate and KKR refuses to re-negotiate. We will see what September brings forth, but I believe that the amount of leverage we saw in deals for the 1st half of ‘07, will be a distant memory in the fall. I for one sense that this will be healthy and although it will impact returns, it will keep the private equity business healthier for the long term.
As we pack-up to depart, Senator Schumer has stopped the “piling on”, with regards to how to “tax the carry”. With his powerful positions on the banking and finance committees & as the chief fund raiser for the Democrat’s Senate campaigns, everyone needed to listen when he raised the issue of treating everyone fairly and questioned real estate and energy interests. This has left the leading Democratic presidential contenders, Senators Clinton and Obama, in a somewhat uncomfortable position. Will we find a compromise in the fall, with the long term capital gains tax rising from 15% to 20%? Perhaps, we should also ban all fall birthday parties for PE moguls?
Well that’s it for the next several weeks…I am joining the exodus, out of the city. I have packed the car and we are off to Sea Pines, on Hilton Head Island, for the next several weeks. We have been spending August vacations in Sea Pines for almost 3o years and are looking forward to visiting with family and friends. The golf clubs are packed & I hope Harbour Town Golf Links will be kind!