Sunday, August 26, 2012

Do you want to make money? There is proven way out there and your favorite candidate for President, Mitt Romney, has made a lot of money with his method of profiting from  companies’ failure to survive in this economy. His company has made money from every business he has taken over. He has in a way redefined capitalism. What is capitalism anyway?
He wants to take any discussion about his company Bain Capitol off the discussion table for the next few months till he is elected. How can you not discuss what he has been doing for most of his adult life and something that has given him a huge income? He got Enough money to say, hey, I can run for President of the United States kind of money. What a person does in life goes to the very heart of who he is, his character and his beliefs.
His company did leverage buyouts. One company he did a leverage buyout with is KB Toys. It was the second biggest toy company in America. Toys should be a very good business it is an essential in life like food or clothes. You need toys for your sanity if you got kids and kids are everywhere. Toys are made with plastic which is cheap to produce. They are made by practically slave labor in China and sold to children who are stupid and impulsive known to be very bad with money.
Leverage means you borrow money, Bain Capitol bought KB Toys for 305 Million Dollars In this case, he put into the company only 18 Million Dollars of his own. Wait. You can do this too on an extremely lower scale. The rest he borrowed against the value of the company. Then they restructured the business, you know, changed policies to hopefully make it more profitable.
Bain Capitol’s fee was 85 Million Dollars for services. It was kind of bad for KB Toys because I think they could have used that 85 Million to like make toys or sell toys. So, the company goes bankrupt as many many companies do these days. It is a rarity today that any company can boast years and years of being open for business. So, with bankruptcies, stores must close. 500 KB Toys stores closed . The result is that now he has contributed to many people loosing their jobs.
Bain Capitol walked away with a 370 % return on their investment. Who gets to do that?? He goes in with 18 makes 85. Is this capitalism and is this good for America? I call it greed and speculation. Profiting off of a misfortune not helping anyone but yourself. Why shouldn’t this be an issue with Mitt Romney? It is not just an issue of what his decisions were it is also an issue with the tax code which encourages these leverage buyouts by treating debt differently than other forms of investment or capital.
It encourages firms like Bain Capitol or any other gigantic private equity firms to buy a company with almost no money down and then to load it with even more debt by charging fees. You read about these deals so now the company has 200% more debt than they did before the private equity firm bought it. Then, if it doesn’t get out of that debt spiral it is in, the company just collapses, the debt disappears off the books and Bane gets all its consulting fees and Mitt takes a nice percentage of that . We are talking about Millions he makes on each deal. I can’t blame him because it is all legal. It is our laws that say the debt disappears when in bankruptcy.
The most confusing to me is that he comes along boasting about for the past year that he should become President because he knows a lot about business and that he knows how to create jobs. So, America listens to him and starts looking at how he did business and now he tells us not to scrutinize his business dealings. So, at what point should the conversation stop?
I say don’t blame Mitt for jumping on a way to make money quick even though the company he was supposed to help with his consulting didn’t end up with positive results. They all say here is our advice but there is no guarantee that it will turn you into profits again. Our fee must be paid regardless. Blame it on our government that created tax laws and little or no regulations that can make a company worth more dead than alive.

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