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The article is definitely biased, but that doesn't necessarily mean it's wrong. It sounds pretty damning, but I admit I don't know a whole lot about that sort of investing. So is this as bad as it seems, or is does it blow things out of proportion.

Edit- I guess I should summarize. The gist of it is that Bain, the company Romney ran for quite some time, would buy up profitable companies, do things like firing workers and cutting maintenance on equipment to boost profits in the short term, and then resell them for many times what they paid. I'm not sure about all the details, but because of how they did it, they were apparently not liable for any debt the company rang up, and still got paid even if the company went under.
There's a lot more to it, but that was my take on the major points.
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Finance is weird.
Does he intend on running the US as if it were Bain?
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Complex Systems
Finance is weird.
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Words do not exist to express the deep and abiding hatred I harbor for the concept of "flipping" anything in the short term for high profit.
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Complex Systems
Finance is weird.
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Wendigo
Words do not exist to express the deep and abiding hatred I harbor for the concept of "flipping" anything in the short term for high profit.
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It's because buyers are idiots and can't imagine why fish refineries suddenly jump 200% in stock value even though their sales and raw material stays the same. If they ever actually arrive at the scene (usually if they bought a lot of shares and the company is in deep crisis) they finally recognize how unsustainable things really are, drop to their knees and bawl "BAAAAIIIIN!"

There was a time when people inspected things before they bought them.
Wow. What an article. I really like how they ignore the market at that time, and all their 'witnesses' are former employees, not one manager that was supposedly canned along the way.
You can't make a profit by buying a business and driving it in to the ground.
azulmagia
Does he intend on running the US as if it were Bain?
I hope not but considering the budget is the big issue these days, I'm pretty sure. Which means expect a worse recession than the bush one, and probably worse than the depression.

the good news is that if we do recover there's zero chance in hell anyone will attempt that crap again.
Yuki the Third
the good news is that if we do recover there's zero chance in hell anyone will attempt that crap again.


That's what they said during the Great Depression.

And look what happened.
azulmagia
Yuki the Third
the good news is that if we do recover there's zero chance in hell anyone will attempt that crap again.


That's what they said during the Great Depression.

And look what happened.
Well, let's hope there's smarter people this century.
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Quote:
While writing his book, Kosman conducted an interview with a Bain managing partner. The man told him that when Bain was about to buy a company, its partners would hold a meeting. "He said that about half the time, [they] would talk about cutting workers," says Kosman. "They would never talk about adding workers. He said that job growth was never part of the plan."
This here, quite probably true; employees add significantly to overhead. Turning around an unprofitable company would tend to require axing paying work for somebody.
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You can't make a profit by buying a business and driving it in to the ground.
Yeah, you can. You just probably shouldn't, because it makes you kind of a douchebag.
TheSilverNoble
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The article is definitely biased, but that doesn't necessarily mean it's wrong. It sounds pretty damning, but I admit I don't know a whole lot about that sort of investing. So is this as bad as it seems, or is does it blow things out of proportion.

No, it completely blows things out of proportion. It's hard to beginning defending it too, because you have to have the academic and business background to understand what Bain does what it does and for what purposes.

The best analogy I can think of is flipping a house. You buy an old, worn house for $100K with a leaky roof, broken plumbing and atrocious landscaping. You may be able to live in the house, but the living conditions are still terrible. What Romney does is take out a loan to buy the house, fix the roof, tear out the plumbing and re-do the landscaping. He then sells the house for $250K, because the condition of the house has been improved.

Business are like that house. A lot of people believe every single company that exists is actually a $2M McMansions. They aren't. Businesses may even be profitable (livable) but they still can have poor management, ineffective resource allocations, insensible capital structures, and etc. that is damaging the company and wasting time, resources and human capital. Flipping the house is "creative destruction" - by ripping out the roof or reforming the company's resource allocation, you are strengthening the company.

The disconnect comes from the workers, who do not have the insight into the larger business. No one tells them that their employer is a shitty broken company. Employees may not realize their division is the leaky sink or broken pipe that's dragging down the company. Unfortunate as it may be, that has to be fixed in order for the company to grow or become more prosperous. This article is the equivalent of a person hugging and sobbing over the broken sink and blaming Romney for fixing it.

Yeah. It's harsh. It's cruel. But on a large scale, we need to do it as a society. Economic and social progress will not occur if all of our resources are being ineffectually used and our companies are digging one hole to fill another. Yeah, you have to feel bad for the manufacturing plant that laid off it's employees, but it's killing economic development by wasting resources.

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