"'This is the greatest single financial coup in the history of Chicago.' That's how alderman Edward Burke of the city council's finance committee, described the 99-year lease of the Chicago Skyway, a 7.8-mile toll road, to a private operator for the stunning sum of $1.8 billion-almost $1 billion more than the next highest bid. ... The 'Macquarie model,' as both believers and skeptics call it, is now spreading around the world. ... And powerful firms from AIG to Goldman Sachs are following in its footsteps by raising multibillion-dollar infrastructure funds of their own. ... Chanos ... [said]: 'The Macquarie model is justly famous around the world. It is possibly the most efficient method of legally relieving investors of their money ever conceived.' ... 'Borrowing future growth to pay investors today bears the hallmarks of a Ponzi scheme,' said Chanos. ... Already Macquarie was shifting its business model, which Chanos saw as a sign it was trying to avoid disclosure. ... These days every smart young Australian who wants to work in finance wants to work at Macquarie Bank--and those who work there often think there's no place else worth working", Fortune, 1 October.
Did somebody call? Skeptic here. I first heard of Jim Chanos in about 1984 when he was a Duff & Phelps analyst in Chicago. A client asked me about an annuity which would yield 10.5% annually. I told him don't touch it. He asked why. Because AA corporates yield 12%. If it costs the insurance company even 1.5% per year to run the annuity, it can't pay off. The product can't work. The client was furious, "But the salesman said ... " I said, "Of course. He's got a commission on the table. What's he supposed to say"? Chanos went further and realized the company offering the product, Baldwin-United was insolvent. Had I only thought about the issuer instead of the product I could have made a beautiful short sale. I have followed Chanos' career ever since. I believe the "Macquarie model's" biggest risk is political: how long will localities let Macquarie raise fees to use its assets? This seems to be what lets Macquarie work: it gives politicians cover to raise user fees. Whenever you see a new financing "innovation" ask: what operational changes will the new owner make the old one couldn't?
I disagree with Chanos about one thing: inflation is a more efficient way to legally relieve investors of their money than Macquarie could ever hope to be. As a world renowned expert in relieving investors of their money said, "The way to crush the bourgeoise to to grind them between the millstones of taxation and inflation". Who was he? Lenin.
That "every smart young Australian" wants to work for Macquarie, I see as a very negative indicator. The kids are usually behind the curve.
Did somebody call? Skeptic here. I first heard of Jim Chanos in about 1984 when he was a Duff & Phelps analyst in Chicago. A client asked me about an annuity which would yield 10.5% annually. I told him don't touch it. He asked why. Because AA corporates yield 12%. If it costs the insurance company even 1.5% per year to run the annuity, it can't pay off. The product can't work. The client was furious, "But the salesman said ... " I said, "Of course. He's got a commission on the table. What's he supposed to say"? Chanos went further and realized the company offering the product, Baldwin-United was insolvent. Had I only thought about the issuer instead of the product I could have made a beautiful short sale. I have followed Chanos' career ever since. I believe the "Macquarie model's" biggest risk is political: how long will localities let Macquarie raise fees to use its assets? This seems to be what lets Macquarie work: it gives politicians cover to raise user fees. Whenever you see a new financing "innovation" ask: what operational changes will the new owner make the old one couldn't?
I disagree with Chanos about one thing: inflation is a more efficient way to legally relieve investors of their money than Macquarie could ever hope to be. As a world renowned expert in relieving investors of their money said, "The way to crush the bourgeoise to to grind them between the millstones of taxation and inflation". Who was he? Lenin.
That "every smart young Australian" wants to work for Macquarie, I see as a very negative indicator. The kids are usually behind the curve.
No comments:
Post a Comment