Right-wing fund managers Steve Milloy and Tom Borelli are grabbing lots of attention for accusing companies of devoting resources to pet causes instead of maximizing profits. Last month they showed up at Goldman Sachs' annual meeting in New York to attack CEO Hank Paulson for, among other things, chairing the Nature Conservancy and authorizing Goldman's donation of land it owned in Chile to the Wildlife Conservation Society. But a look at the returns of the pair's grandly named Free Enterprise Action Fund suggests that their own bottom line could use some help. The $5.6 million fund gained just 2.32 percent from March 1, 2005, its first day in business, through the end of the year, net of expenses. That's well below the S&P 500's 4.72 percent gain during the same period -- and it doesn't hold a candle to the 18 percent appreciation of Goldman shares.
Sure enough, the partners hold their own venture to different standards. Their returns, they say, don't matter as much as their stated cause: counteracting the influence of so-called socially responsible investment firms, like Domini Social Investments and Calvert, on corporate behavior.
"We're not trying to be a high-performing mutual fund," Milloy, 47, tells Institutional Investor. "We are imitating the left. Left-wing social-political activists don't like capitalism. They hide behind human rights. We want to help oppose that."
The pair have plenty of experience standing up for corporate America's right to ignore do-gooders. In his spare time Milloy publishes JunkScience.com, a Web site devoted to debunking global warming as a "myth." He formerly ran the Free Enterprise Action Institute, which was funded in part by ExxonMobil. Borelli previously worked as a lobbyist for food and tobacco giant Altria Group. . . .
As Unknown Ideal points out, "I'm sure these self-professed champions of capitalism will attract a lot of investors with a fund philosophy like 'We're not trying to perform well.'"
It cracks me up that so much attention is being paid to Bush Pioneer and new Treasury secretary nominee Paulson as a global warming believer in direct contrast to the administration he loves so much. But the opinion of the Secretary of the Treasury on global warming is irrelevant — he wasn't nominated for Interior or Energy.
The grand irony, of course, is that so-called capitalists Milloy and Borelli are treating the stewardship of their investors' money as some sort of perverse attempt at advocacy. Talk about a dereliction of fiduciary duty. Now Republican madness has come full circle: capitalists who don't practice capitalism.
But Bush's failure to grow today's opaque economy, even with the nomination of his third pig-lipstick salesman as Treasury secretary, is beginning to appear more than a little ominous. You don't have to be a total market wonk to understand signals like James Turk's:
In “The 2005 Financial Report of the United States Government”, US Comptroller General David Walker reported that “the federal government’s fiscal exposures now total more than $46 trillion, up from $20 trillion in 2000.”
Yes, it’s insane. But it’s even more insane that people buy the US government’s T-Bonds and T-Bills thinking that they are a safe, low-risk investment. Maybe they used to be that, but things change. US government debt instruments are no longer a safe place to park your dollars.
So much for fixed-income investing. Don't tell Grandma — government debt is now as risky as a pump-and-dump penny stock.
The article is called "Economic Suicide," and Turk concludes: "It’s also monetary homicide. The dollar as we know it is being killed, poisoned by debt from the hand of the federal government with its accomplices in the Federal Reserve and the banking system. So far it’s been a slow death, with few people watching, but that’s about to change. With the horrific new amounts of debt being injected into the dollar’s weary remains, its death is not far off."
Turk was also the subject of an interview in Barron's in which he predicted gold at $8,000 an ounce, not exactly a sign of dollar strength.
The oddest thing to me is all this is that, in my old-fashioned view, Republicans are supposed to be all about country clubs and stockbrokers and finance and fiscal restraint and small government, not gay marriage or abortion or evangelical Christianity. At the very least, you suits are supposed to make money because your One True God is really The Market, and it used to be true that to old-school Republicans little else mattered.
But instead today's Bush-league Republicans waged a sham war that created the largest debts in human history, one that continues to depress the market, and therefore all investment in the broad swath of US businesses, signaling that you have moved on and no longer believe in the same market forces that worked so empirically and spectacularly well under Clinton. Instead of growing the economy Republicans have decided to loot it, starting with the US Treasury.
The market will not really rebound until "transparency" takes place, in which we collectively can imagine a future that most of us like. Then we'll buy some stocks, and wealth in the trillions will suddenly appear.
But that's not happening right now. Our worldwide reputation is at a historic low, our national debt is a malignancy out of control, a new salesman just arrived from Goldman Sachs to tell us how great it all is, and there's not a grown-up in sight.
Who is the loser? The so-called Ownership Society itself — the 401(k) accountholder, the pension fund, the entrepreneur, the homeowner, and most of all, the small taxpayer (there are no more big ones) who is paying off the balloon mortgage on the national insanity.
Until Bush is out of office the Invisible Hand of the market will do nothing but strangle the American taxpayer.
May 29 (Bloomberg) -- Richard Kinder, co-founder, chairman and chief executive officer of Kinder Morgan Inc., operator of about 43,000 miles of pipelines in the U.S. and Canada, is leading a group that wants to buy the company for $100 a share or about $13.4 billion.
The group includes a fund run by Goldman Sachs Group Inc., insurer American International Group Inc. and buyout firms Carlyle Group and Riverstone Holdings LLC, according to a May 28 letter to Houston-based Kinder Morgan's board released today by the company. [...]
Kinder Morgan's network of pipelines carries oil, petroleum products like gasoline, natural gas and carbon dioxide. The company operates more than 150 terminals that transfer products such as gasoline, oil and coal, and its utilities provide natural gas to about 1.1 million customers.
Kinder Morgan Inc. was formed in July 1999, when Kinder and his partners bought KN Energy, a Colorado-based pipeline company. Kinder and Bill Morgan, another former Enron executive, formed the company that would become Kinder Morgan Energy by buying Enron's stake in natural-gas liquids and carbon dioxide lines after Kinder left the company. [...]
Last month, Washington-based Carlyle and New York-based Riverstone raised $3.8 billion to purchase power, oil and energy companies. Carlyle and Riverstone have made 19 investments in energy companies since 2000 and their Carlyle/Riverstone Global Energy & Power Fund II generated annual returns of 78 percent as of Sept. 30.
Goldman Sachs raised an $8.5 billion buyout fund in April last year and put more than $2.5 billion of the firm's money into it. The new fund's aim is to double or triple its invested capital, Richard Friedman, head of Goldman's merchant banking division, said in an interview last year.
Going private may allow Kinder to buy assets out of favor with analysts and other investors, acquisitions that could cause a drop in the stock price of a public company, said Simmons, author of "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.''
Kinder has been successful buying assets shunned by other investors, said [investment banker Matthew] Simmons, 63. "It's just exactly the opposite strategy that Rich Kinder's old partner, Ken Lay, did,'' Simmons said. Lay sold assets such as pipelines to build energy trading and telecommunications businesses. [...]
According to an April filing, Kinder owns 24 million shares of Kinder Morgan Inc., or about 18 percent of the company.
Let's see how this works. To reprivatize his company, Ken Lay's former partner Rich Kinder has to buy back his own shares in the publicly held company. Kinder owns 24 million shares and, with the help of Goldman Sachs and the Carlyle Group, he's generously offering himself $100 a share.
I'll do the math for you: $2.4 billion with a capital "B."
Kenny Boy, you was set up but real good. Your $70 million in Enron loans (taken in cash, but repaid in crashing stock) in 2001 seem like cow chips next to Richard Kinder's windfall of $2,400 million. As fellow Texans and energy moguls and Bush Pioneers, looking at the two of you back in 2000 no one could have guessed whose star would rise and whose would set. You and Rich Kinder were probably running about neck and neck in your competition to see who could suck up to the Bush family the most extravagantly. You even got to secretly set US energy policy in 2001 with Dick Cheney. Pretty cool!
I always had Kenny Boy pegged as a plutocrat, but he was actually a patsy. Rich Kinder is the true plutocrat. Six years later, he pulled out ahead, doing what Kenny Boy only hoped to do. He made billions, a bloody fucking fortune, and Kenny Boy's probably going to jail.
Meanwhile, while the average 401(k) account has been flat or underwater for the five long years of Bush 2, "Carlyle and Riverstone have made 19 investments in energy companies since 2000 and their Carlyle/Riverstone Global Energy & Power Fund II generated annual returns of 78 percent as of Sept. 30." Did you think your privatized Social Security account would do as well as that? Guess again.
Other strikingly odd coincidences: Poppy's 80th birthday party was thrown by none other than Rich Kinder, who also happens to have been Dubya's top career patron in 2000. Poppy, of course, is part of the Carlyle Group, which famously also included Osama bin Laden's brother on 9-11-01, and Poppy's Secretary of State James Baker, who also headed Dubya's post-election campaign (i.e., Florida) in 2000. Naturally, Henry M. Paulson, the new Treasury Secretary [!] and former CEO of Goldman Sachs, is a Bush Pioneer. And Rich Kinder's wife Nancy, who also once worked at Enron, was in charge of the invitees who paid $100,000 and $250,000 (no kidding) to Dubya's second inaugural ball.
But let's get back to the original bit of news — the multibillion dollar privatization of 43,000 miles of pipelines in North America. Of all days, what an interesting bit of news to choose to release on Memorial Day, when we're supposed to be honoring those who so recently died for the USA's flagrant ability to waste energy!
(Actually, the sacrilege was probably just an oversight. I doubt that any of this group truly gives a shit about our troops, so much so that they didn't even notice the coincidence. They were probably just waiting for the moment when Enron would fall out of the news cycle — God knows our tonedeaf media can't handle anything more complex than the monotony of their single-minded "narratives." Now that Enron as a narrative told in CNN crawls is finished, Kinder is as anonymous to big media as this teeny-tiny blog.)
