Blackstone: Trash or Gems?

// The name Blackstone comes to my attention as I  follow news of the Rio Tinto takeover.  Blackstone, according to the Telegraph, is on centre stage this time as a possible rival contender for a controlling stake in Rio Tinto. Rumour also says that Blackstone is acting with full financial backings from “a Chinese sovereign wealth fund”. I’m treating this piece of news with extreme caution, after witnessing how a seemingly firm expression of intention by Baosteel’s Chairman could be dismissed as “a fabrication of the media”. It is also interesting to watch how the mass media in the West have been dancing to the tune of speculators at China’s Stock Exchanges. The price of Baosteel shares had been in decline ever since the company posted a much worse-than-expected 50 percent slide in third-quarter profits late October. I am sure some smart cookies would have made the best of the rumour to ripe some quick profits from China’s largely self-regulated stock market.

When I was looking into how this so-called “US private equity giant” was linked to the “Chinese sovereign wealth fund”, I realised that the China Investment Corporation (CIC) had paid a hefty $3 billion in May this year for a 10% stake in Blackstone.   As of today, Blackstone’s share prices have plummeted by almost 36% since it went public in June this year. Some commentators predicted that CIC had learnt from its mistake and would adopt a more cautious approach to future overseas investment. They could not have been more mistaken. It makes one wonder how business decisions are made in a state-run Chinese business today. The trouble is, CIC is not the only state-run corporation that forms expensive but dubious partnerships with foreign companies in an attempt to acquire substantial holdings abroad. Citic Securities, a Chinese government-run investment bank, and Bear Stearns said they would take $1 billion stakes in each other and set up a joint venture in Hong Kong. Bear Stearns is one of those US funds that finds itself in serious trouble when the US real estate market starts to collapse recently. I agree with this commentator when he says, “The crisis at Bear is just another pin in a world of bubbles. There are plenty of others. Sooner or later (as we keep saying, and saying, and saying) bubbles and pins will come together in a dramatic display.”

No one can save Chinese state-run businesses from disasters until they learn how to separate gems from trash.  The trouble is: who will hold them accountable as long as the Chinese Communist Party is accountable to no one and holds itself above the law?

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1 Response to Blackstone: Trash or Gems?

  1. Either US based IBs and PE firms have suckered Chinese banks into buying up their CDOs to clear up book keeping or these US entities are gambling on being able to swap US real estate for improved potential access to China.

    Wouldn’t be the first time that business has sold out Americans for potential profit.

    Note: “improved potential access” has been the buzz phrase for 20 years and foreign companies are often still waiting for that promise to really come to fruition, despite giving away our best manufacturing and military technology and expertise.

    But thankfully, the US courts prevail (activist, leftist courts in the eyes of Wall St traitors) and a federal court in Ohio struck down a bankruptcy case involving 14 foreclosed properties that Deutsche Bank wanted to take possession of.
    The court’s opinion was that since Deutsche Bank was not the loan originator and only a holder of a basket of loans, it only “intended” to possess and did not actually possess the properties in question and therefore had no standing.

    Because in this country, only the loan originator actually owns the property and those are usually US banks and not entities simply shopping for “paper”.

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