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How to Lose Money and Come Out OK Anyway

| Mon Apr. 14, 2014 8:37 AM PDT

TIAA-CREF is buying Nuveen Investments for $6.25 billion from Madison Dearborn, a private equity shop that bought Nuveen in 2007. Nuveen has performed poorly since then, but insiders say that the TIAA-CREF deal ensures that the Madison Dearborn will at least break even on its investment. Felix Salmon is gobsmacked after running through the numbers:

So here’s my back-of-the-envelope math: you buy a company for $2.7 billion in cash, plus debt which you refinance a few times. While you’re running the company, it loses a total of $2.4 billion. And then you sell the company for $1.75 billion in cash. Total going out the door: $5.1 billion. Total coming in, at exit: $1.75 billion. Net loss: some $3.35 billion, give or take.

All of which raises some big questions about the WSJ’s claim that Madison Dearborn “will have at least broken even on its Nuveen investment”. If that claim is even close to being true, then at the very least we can’t take Nuveen’s public filings at face value at all....This is worth remembering, when private-equity types (think Mitt Romney) claim that their interests are aligned with the interests of the companies they buy. That certainly doesn’t seem to have been the case here. Nuveen is being sold with about $1.5 billion more debt than it started with, and with cumulative losses under Madison Dearborn’s ownership of some $2.4 billion. That’s not a great legacy for TIAA-CREF to inherit. If Madison Dearborn really is breaking even on this deal, that only goes to show the enormous disconnect between the economics of private equity companies — the wealthy rentiers of society — versus the economics of the real-world companies they buy and sell.

Of course, one possibility is that Madison Dearborn is just putting a brave face on things and reporters are taking it at face value. More likely, though, there are tax games of some kind that allowed Madison Dearborn to strip a ton of value out of Nuveen over the past seven years. I suppose they're also benefiting from low interest rates, which means that Nuveen's refinanced debt is less onerous now than it was in 2007.

In any case Salmon's point is well taken. If you can break even after running a company as disastrously as Madison Dearborn has, there's something pretty badly rotten about the entire world of high finance. But then, you knew that already, didn't you?

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We're Still at War: Photo of the Day for April 14, 2014

Mon Apr. 14, 2014 6:48 AM PDT

FORT CAMPBELL, Ky. UH 60 Black Hawk helicopters from 5th Battalion, 101st Combat Aviation Brigade "Wings of Destiny" transport Soldiers from the 3rd Battalion, 187th Infantry Regiment, 3rd Brigade Combat Team "Rakkasans" 101st Airborne Division (Air Assault), on to Landing Zone Red Crow during Operation Golden Eagle here April 8, 2014. The four-day exercise was the first brigade-size air assault operation conducted by the 101st Abn. Div. in more than a decade and featured Soldiers from 3rd BCT and 101st CAB moving more than 1,100 Soldiers and sling-loading more than 20 pieces of equipment. (Photo by Staff Sgt. Joel Salgado, 3rd BCT Public Affairs)

Pop on Steroids and Blistering Punk in EMA's and Screaming Females' New Releases

| Mon Apr. 14, 2014 3:00 AM PDT
Screaming Females
Screaming Females Don Giovanni Records

EMA
The Future's Void
Matador

Screaming Females
Live at the Hideout
Don Giovanni

In pop music, there's plain old noise, which can be plenty of fun, and then there's smart noise, which can be even more fun. On The Future\'s Void, her stunning sequel to Past Life Martyred Saints, EMA (Erika M. Anderson) unleashes a thrilling sonic firestorm that defies simple categories. Think Kate Bush's luminous chamber pop on steroids, turned inside-out by a healthy dose of punk aggression and filtered through damaged electronic effects. Howling, snarling and sometimes singing, the South Dakota-bred Anderson rails against cultural norms ("So Blonde"), takes a cue from cyber-prophet William Gibson ("Neuromancer") and embraces the bizarre ("Cthulu"), with consistently riveting results.

Staking out more familiar turf, Screaming Females' blazing Live at the Hideout finds fleet-fingered guitar goddess Marissa Paternoster, the New Jersey band's only female member, in stellar form at a Chicago club. Screaming Females' furious attack suggests an old-fashioned power trio tempered by a less heavyhanded indie-rock sensibility, often recalling the late, great Sleater-Kinney. As a singer, Paternoster shouts with engaging flair, but when she rips off a series of blistering licks—check out "It All Means Nothing" or "Baby Jesus"—she's flat-out amazing.

Exclusive Video: Kithkin's Soundtrack for the Apocalypse:

| Mon Apr. 14, 2014 3:00 AM PDT

Civilization as we know it is going to collapse—someday at least. Judging by what climate scientists are saying—or what some are gleaning from the buffalo running around Yellowstone—it could be a lot sooner than we’d like.

The band Kithkin, hailing from the frigid (and fictitious), tree-worshiping Northwestern nation of Cascadia (consisting of Oregon, Washington, and British Columbia), plans to make the most of it by offering audiences the chance to go down dancing.

With their aptly named debut album, Rituals, Trances & Ecstasies for Humans in the Face of Collapse coming May 20, the (actually) Seattle band is hoping to highlight the role of humans in our own demise—and help us think about how we can prevent it.

Kithkin was inspired by Ishmael, a philosophical novel by Daniel Quinn that reframes civilization and its end by means of a Socratic dialogue between the narrator and a telepathic gorilla. "It talks about climate change, sustainability, resource distribution, food, and all these big, kind of hard-to-digest topics in a really engaging and streamlined way," explains Kelton Sears, one of the band's lead singers. 

by Hayley Young

Though Kithkin was founded on a mutual affinity for drums and rhythmic music shared by Sears (who also plays bass) and his fellow frontman Ian McCutcheon, Quinn's ideas shaped the band's identity and moved its members to make positive music about negative things. "It is a very apocalyptic book that's kind about how the way that humans live isn't working anymore, and that things are going to crumble," Sears says. "You don’t pay attention to because it is sort of hard to comprehend and think about."

At Seattle University, the two met up with Alex Barr (guitar) and Bob Martin (keys and theremin), and Kithkin was born. Every member plays the drums as well as their other instruments, which explains the complex layers of rhythms that give their charged lyrics an upbeat quality.

But the bandmates aren't all serious and earnest. They are self-proclaimed "fantasy nerds," and Sears says a lot of the tree-centric Cascadia imagery is just for fun. Still, Kithkin hopes to get listeners thinking. "Singing about that stuff just makes us as honest with ourselves as possible," Sears says. "You are naturally more passionate about it if it has that deeper meaning to you."

The exclusive video at the top of this post, titled "W (Upturned Moon)," is set to Kithkin's single "Altered Beast" and depicts a coven of women in a forest attacking a pile of trashed consumer goods—one metric ton of it, if you want to get specific.

"Thinking about the video, we were also interested in this idea of the witch," Sears explains. "This archetype is interesting to us, and this idea of women as agents of change, breaking all this stuff that is symbolic of all the stuff humans are doing that is contributing to the demise of civilization. And in a way, making it a celebratory thing instead of a scary thing."

Check out the video and catch the band on its first official tour this spring. Who knows when civilization will collapse? In the meantime Kithkin has created an album of great songs, laced with ideas all need to ponder. If the Apocalypse is coming, at least it won't sound that bad.

 

 

An Economist Answers Some of My Questions About "Capital in the 21st Century"

| Sun Apr. 13, 2014 9:40 AM PDT

On Thursday I posted a couple of very rudimentary comments regarding Thomas Piketty's blockbuster new book, Capital in the 21st Century. I had questions about Piketty's estimates of r (return on capital) and g (economic growth) in the past and—much more importantly—how they were likely to play out in the future. But all I had were amateur musings because I am, after all, only an amateur.

However, yesterday Brad DeLong tackled some of the questions I asked in a far more rigorous and disciplined way, teasing out a lot of unstated implications along the way—including the importance of various measures of r and how they relate to the probability of increasing future wealth concentration in the real world. It's a long post, and complex in places, but highly recommended. If you're willing to work your way through it, DeLong provides a framework for thinking about Piketty's model that helps you start to make sense of both the book and its conclusions.

POSTSCRIPT: I've gotten a couple of questions about why I seem unduly skeptical, or even harsh, about Piketty's book. It's obviously a landmark work, I don't really mean to be unfair. But it's a book with innovative and untested ideas that has obvious appeal to anyone left of center, and I think this is precisely the time to avoid unquestioning hosannas. Affinity bias makes us all sympathetic to Piketty's arguments, and that's why we should instead question it carefully and thoroughly.

White House Turned Down Request From Victims of First Fort Hood Attack for Meeting With Obama

| Sun Apr. 13, 2014 6:27 AM PDT
Retired Staff Sgt. Alonzo Lunsford describes being shot in the head during the 2009 Fort Hood shooting rampage.

During last week's memorial service for victims of April 2 Fort Hood shooting, President Barack Obama spoke about the lingering hurt from the previous attack on the base in 2009. "Part of what makes this so painful is that we've been here before," Obama said. "This tragedy tears at wounds still raw from five years ago. Once more soldiers who survived foreign war zones were struck down here at home, where they're supposed to be safe." Yet, when victims of the first Fort Hood shooting invited the president to see those wounds up close, he refused, without explaining why.

The morning of the memorial, retired Staff Sgt. Alonzo Lunsford, who was shot seven times during the 2009 Fort Hood rampage, requested that Obama meet briefly with victims and their families while he was on base. Lunsford's letter, which was addressed to the president's chief of staff, Denis McDonough, also described survivors' disappointment with how they had been treated:

As you may know, the President and high-ranking members of the military promised me, my family and the other Fort Hood terror attack survivors that the federal government would "make them whole." After more than four and one-half years, however, the government has yet to make good on this promise.

We believe that if the President could hear, first-hand, our plight and our mistreatment at the hands of his bureaucracy, that he would take the steps needed to set things right. Therefore, we ask for ten minutes of his time.

In the years since Major Nidal Hasan opened fire in a crowded Fort Hood medical center, killing 13 people and wounding another 32, victims have struggled to get medical care and financial benefits. This is largely because of how the incident has been labeled. Although Hasan is an avowed jihadist with ties to Al Qaeda, the Pentagon considers the attack to be workplace violence rather than terrorism or combat. Thus victims aren't eligible for many benefits and honors available to soldiers wounded or killed in action. (For more on this topic, see "The White House Broke Its Promise to the Victims of the First Fort Hood Shooting. Will History Repeat Itself?")

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It's Finally Time For a New Phone

| Sat Apr. 12, 2014 8:52 PM PDT

So I went out today to my local T-Mobile store to check out the new HTC One, and as far as I'm concerned they ruined it. It's now a gigantic slab, thanks to the 5-inch screen mania that's mowed down everything in its path over the past year. They should have kept the old size, even if it meant the screen might be a mere 4.8 or 4.9 inches.

So it's now off my radar, and I'm pretty much thinking I'll go ahead and get a Google Nexus 5 instead. Ironically, it also has a 5-inch screen, but it's nonetheless about the same size as the old HTC One. It's nowhere near as good looking, but it seems to be pretty functional and pretty reasonably priced. Anyone have any reason to warn me away from it?

Heartbleed is a Sucking Chest Wound in the NSA's Reputation

| Sat Apr. 12, 2014 8:01 AM PDT

On Friday, Bloomberg's Michael Riley reported that the NSA was aware of the Heartbleed bug from nearly the day it was introduced:

The U.S. National Security Agency knew for at least two years about a flaw in the way that many websites send sensitive information, now dubbed the Heartbleed bug, and regularly used it to gather critical intelligence, two people familiar with the matter said....Putting the Heartbleed bug in its arsenal, the NSA was able to obtain passwords and other basic data that are the building blocks of the sophisticated hacking operations at the core of its mission, but at a cost. Millions of ordinary users were left vulnerable to attack from other nations’ intelligence arms and criminal hackers.

Henry Farrell explains just how bad this is here. But later in the day, the NSA denied everything:

“NSA was not aware of the recently identified vulnerability in OpenSSL, the so-called Heartbleed vulnerability, until it was made public in a private-sector cybersecurity report," NSA spokesperson Vanee Vines told The Post. "Reports that say otherwise are wrong.”

The White House and the Office of the Director of National Intelligence echoed that statement Friday, saying neither the NSA nor any other part of the U.S. government knew about Heartbleed before April 2014....The denials are unusually forceful for an agency that has historically deployed evasive language when referring to its intelligence programs.

You know, I'm honestly not sure which would be worse. That the NSA knew about this massive bug that threatened havoc for millions of Americans and did nothing about it for two years. Or that the NSA's vaunted—and lavishly funded—cybersecurity team was completely in the dark about a gaping and highly-exploitable hole in the operational security of the internet for two years. It's frankly hard to see any way the NSA comes out of this episode looking good.

New Ad Hammers Gov. Andrew Cuomo For Abandoning His Pledge to Fight Corruption

| Fri Apr. 11, 2014 1:06 PM PDT

When Gov. Andrew Cuomo (D-N.Y.) signed his new $140 billion budget into law last week, he hailed it as a "grand slam." For New York State's ethics reformers and good government groups, however, the budget was an epic flop. And now one national pro-reform group is planning to hammer Cuomo on the airwaves for failing to make good on his pledge to overhaul the state's cash-fueled, noxious brand of politics.

The new ad—paid for by the Public Campaign Action Fund, a non-profit funded by individuals, labor unions, and foundations—blasts Cuomo for signing a budget that doesn't include a so-called fair elections system for all statewide races. (The budget instead features a pilot program that half-heartedly applies the fair elections model to only this year's state comptroller race.) The ad also hits Cuomo for eliminating a commission—created by the governor just last year—devoted to rooting out corruption in state government. Public Campaign Action Fund has bought nearly $300,000 worth of airtime to run the ad, starting Saturday, for nine days in the Syracuse and Buffalo media markets.

The ad's narrator says:

When Governor Cuomo introduced his ethics and reform plan, it was going to clean up Albany. But he let the rule limiting campaign contributions get cut. Then the commission that was supposed to investigate corruption in state government got cut. And the promise to reduce the influence of big money in all state races? All cut, except for one office. And now the governor says he’s proud of what’s been achieved? Gov. Cuomo, get back to work and deliver the reform you promised.

Reform groups had pressed especially hard this year for Cuomo and the New York State legislature to overhaul how state elections are funded by implementing so-called fair elections, a campaign funding system that rewards candidates who accept lots of small donations by matching those donations with public money. This type of system is already used in New York City, where it helped progressive Bill de Blasio become mayor.

Will Colbert Use "The Late Show" To Save the World?

| Fri Apr. 11, 2014 12:07 PM PDT
Bill O'Reilly on Stephen Colbert's Comedy Central show in 2007.

Jumping from his niche cable show on Comedy Central to a plum CBS slot will roughly triple Stephen Colbert's national television audience. So when he takes over David Letterman's late night show next year, we at Climate Desk be tracking one thing in particular with great interest: Will he bring his astute political satire about global warming to an even bigger audience?

None of the current late night barons—Kimmel, Fallon, Ferguson among them—are especially notable for speaking out about climate change, though they occasionally work it into the odd monologue or guest appearance. Colbert is different. In his role as right-wing Satirist-in-Chief, Colbert has regularly skewered climate deniers by pretending to be one of them. One of my favorites is this takedown of Fox and Friends (a frequent target of the show), whose hosts had accused Nickelodeon of pushing a sinister warmist agenda...via SpongeBob Square Pants:

 

And this year, he nailed Donald Trump:

 

But Colbert has not just mercilessly parodied the attacks on climate science, he has also delved into some of the more complex aspects of climate adaptation, including geoengineering. During an interview last year, Harvard University environmental scientist David Keith presented the case for pouring out sulfuric acid into the atmosphere to temporarily ameliorate the effects of warming. "It would be a totally imperfect technical fix," Keith said. "It would have risks. It wouldn't get us out of the long-run need to stop polluting. But it might actually save people and be useful."

But perhaps his best—most sobering, most blistering, most poignant—take on the subject was during this segment from January 2013, where he lampooned an emerging trend of commentators throwing up their hands in faux despair, and resigning themselves to the fate of a warming world. (In this case, he's going after Erick Erickson, who worked for CNN at the time):

COLBERT: Sure, I know: America beat Tojo, we crushed Hitler, we put a man on the moon, but incrementally reducing CO2 emissions? That sounds like a lot of work. And how can fight an enemy we can’t see? I mean, get out of here, get, get out of here, carbon! [Swats air]. Did I hit it? I don’t know. So it’s high-time we stop trying to solve the problem and resign ourselves to each day getting worse. Because ladies and gentlemen, when Erick Erickson says "get used to it", he means get used to city-swallowing storms, mass extinctions, deadly heat waves, crippling floods, and droughts that make a desert out of Oklahoma. And, that's just how it is now. Our problems are just too big to cure. So join me and Erick. Give up. Crawl into bed with a cheesecake and wait for death. And now, sure, the only thing worse than global warming itself might be knowing you're destroying the planet, and doing nothing, but if guys like me and Erick have our way, you'd better get used to it.