February 27, 2025 • 13 mins
Chris reveals how private equity firms are bleeding companies dry, from restaurants like Red Lobster to other industries, using leveraged buyouts and sale-leasebacks. Comparing them to Gordon Gekko and Hollywood’s “Masters of the Universe,” he warns of their short-term, extractive tactics driving bankruptcies. Learn why 98% of private equity funds are “dog poop” and how to avoid being the “greater fool.” www.watchdogonwallstreet.com
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Episode Transcript
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Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact that we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst and trader Chris.
Speaker 2 (00:14):
Markowski Financial parasites versus our old friend Gordon Gecko. I
got to start off here again. This is another c
I told you some moment here for the program, but
a lot of good that does. What private equity is
doing to companies, and in particular the restaurant industry. Companies
(00:41):
that are owned by private equity companies are significantly more
likely to go bankrupt than those that aren't. Think about
that for a second circle. I thought, PRIVATEQ we do.
We're going to buy companies, and they want to make
money off those companies. Yeah, but there's more than one
(01:04):
way to preferbally skin a cat and make money off
of a company. And this has been happening for some time. Again.
I wrote about this in two thousand and six, and
we'll get into that in a bit, but this this
actually made its way towards the back of CNBC's website
(01:25):
this past week. I can't even believe I found it,
and I quote, there's a lot of incentives for the
private equity firm to take a short term extractive strategies
toward restaurants that oftentimes can lead to their harm or
in extreme cases, to their destruction. It's not just restaurants.
(01:46):
This is also coming to my industry. It's coming to
other industries that they are supposedly investing in. Let's take
a look at the tactics levered leverage, buyouts, leverage buyouts
(02:09):
and sale these backs when it comes to restaurant companies.
This is where a firm buys a company using debt
borrow cash. What they do is is the company puts
that debt. The buyout company puts the debt on the
(02:33):
company that they're acquirings balance sheet, now saale these backs. Again.
They do this in tandem. So what they do is
the company then sells the real estate that in this case,
the restaurant owns, and then leases it back from the
(02:55):
company leases it back from the company any that just
sold it. To think about that for a second. You
just sold your real estate and you're leasing back the
same restaurant at a higher price. Ah okay. Gretchen Morganson,
(03:16):
one of my favorite investigative reporters out there. When it
comes to finance, and EXCU doesn't get enough screen time anymore,
talks about this. When it comes to Red Lobster, not
only did it have debt that it had to repay,
it now had rents that it had to pay that
it had not had to pay before. And to add
(03:38):
insult to injury, the new owner of the properties increased
the rents to above market rates. Listen, this this is
nothing new. This has been happening for some time. And
I want to go back in time and to two
thousand and six when I really started warning about this.
(04:02):
In this trend, I'm thinking about Holy Craps twenty years ago,
and basically what I was talking about was the liberties
that oftentimes Hollywood would take with the various different Masters
of the Universe type characters, whether it be Gordon Gecko,
whether it be Richard Gear playing Edward Lewis and Pretty Woman.
(04:28):
And then you know, you also got was Tom Hanks
played Sherman McCoy and Bonfire, the Vanities, whatever it may
be in the movie Wall Street, Okay, and Gordon Gecko
was again He's insider trader. You know, he was a
crook without a doubt. It was trading on inside information
(04:50):
how I went about obtaining that. But he was also
a corporate raider as well. And again he gave one
of the great speeches monologues when he was at the
Tell Dar Paper shareholder meeting and the movie there, going
off on the company and all their wasteful spending and
everything that took place at that period of time within
(05:11):
that company and analyzing what the vice president are doing. Again,
he talked about himself not being a destroyer of companies,
a liberator and going through the various different companies and
shareholder value that he created for his investors over the years.
And this happened a lot back in the nineteen eighties.
(05:35):
You remember R Jr. And Nabisco takeover. They made a
movie with that one as well, that was called Barbarians
at the Gate. It was with James Garner and what
KKR did to turn that company around. They had a purpose,
but you know, again in the movie, they couldn't help
(05:56):
themselves either. You know, I remember Rich your gear because
of the hooker with the heart changed his mind, changed
his mind and decided he was going to build ships
in the end rather than break up the company. That
he was going into Gordon Gecko changed his mind, changed
(06:17):
his mind on Wall Street on one deal he's he
told re member, he's telling Bud Fox. I was reading
my son the story of Winnie Pooh and the Honeypot,
and Winnie the Pooh stuck his head in the honeypot
too many times and it got stuck, and he thought
about it. He said, Nah, now we could just take
(06:38):
this thing apart. I can sell off the real estate.
I can build condos, and it's got an overfunded pension
I can take care of. And you remember, Bud Fox
is all upset. Why did you have to wreck it?
Because it was wreckable people. This is how the sausage
(06:58):
is made. This is how the sausage is made. And
this is the reality of what takes place on Wall Street.
And unfortunately we're seeing more and more of this. I
go back to the column that I wrote back in
two thousand and six, and I forgot about some of
(07:18):
the deals I was talking about. Thomas H. Lee Partners
talking about this company agreed to buy an eighty percent
stake of Iowa Fall's ethanol producer, Hawkeye Holdings. They filed
a registration state with the SEC to go public. The
buyout deal haven't even closed yet. Thomas Lee was already
(07:39):
looking toward an initial public offering, was going to generate
a huge profit on its three hundred and twelve million
dollar investment. Took twenty million dollars some Hawkeye and an
advisory FAE negotiating the buyout, one million dollar management fee,
six million for its own tax obligations, and are going
to collect payments of twenty seven million dollars at the
end of the year, not including what was going to
(08:00):
be made in the I p O. What do you
think happened with that company bankrupt? And of course Thomas H.
Lee part of that. They knew it was going to
go bankrupt. There's a there's a sign of this that
it's you know, it's the destruction business. There's a lot
(08:22):
of money to be made destroying companies, sucking them dry,
call them parasites, vampires, whatever it may be. That was
Matt Tybee used that line where he's talking about Goldman Sachs.
It called it the giant vampire squid sucking on the
entire global economy. And I go through a myriad of
(08:44):
different deals here back in two thousand and six and
again I'm not going to I'm not going to go
through this all again. I know I've been warning people
about this for the past past several mester several months,
as a matter of fact, is what I'm seeing happening
in private equity and how again, they're trying right now
(09:07):
to create some liquidity for their portfolios, which means they're
looking to you, the greater fools that are out there,
and that's that's how they look at you. Okay, whether
you want to believe it or not, you you're a
You're a market that they're going after you. All I
(09:30):
need to do is to convince you, convince you that
they've got some wonderless wonderful alternative investment strategy that you
know you can only get through them, and it's a
grand opportunity, and they're going to use all pull out,
all the stops and the sales tactics to get you
to do that. And I'm witnessing it right now. I
did ah did an interview this past week. I'm starting
(09:54):
to change my uh my thought process when it comes
to my guest appearance, just you know ones I've been
doing for a very long period of time, and I'm
going to continue to do so in the traditional media,
but I'm really kind of changing my focus over to podcasts.
I just enjoy it. It's just it's a it's an
enjoyable experience compared to television or other things. You can
(10:18):
sit down and you can have a conversation for an
hour or so, great great stuff. I went on this
podcast that Jimmy Urrio and Bob It's you know do
It's called Future's Edge, and they're very well established, credible
Wall Street guys that I've had respect for, and they
started a podcast called Future's Edge and went on at
(10:39):
this past week and talking here asking me about, you know,
our success at Markowski Investments, how we built our business
and whatnot, and how I manage risk, talking about various
different areas of the market. And yet I made the
point to them about not allowing risk leading to ruin
and also saying, some of the best best investments I've
(11:04):
ever made are the investments I didn't make. We are
we're beating the bushes because we're always looking for opportunity
just as much as anybody else. And I want to
be clear last week I mentioned this on the show
that yeah, I'd say ninety nine percent of the private
(11:25):
equity funds that are being made available to the investing
public that they're putting together right now, fund of funds,
whatever it may be, our dog poop. It's're just not good.
They're not good. But there are some that we do like.
(11:48):
There are some that we do like. Again, they're not
for everyone's portfolio. Again, I'm already starting to see people
try and begging, clamoring to get into these things. And
there's there's some guardrails that have been put up. Okay,
they got the the This entire industry doesn't want to
have somebody saying, oh this you know, uh private equity
(12:10):
fund uh, you know, ripped off all of these little
old ladies and uh senior citizens in Florida. They can't
have that happen. So there are some guardrails that are
put up, but again there's ways around them, and I'm
already seeing people try to get around them. Don't. Okay,
if you have questions in regards to this sector, what
(12:34):
we're doing, how we're handling it for our clients, please
reach out. That's what we're here for, Okay, don't be
a greater fool. Get to our website at Watchdog on Wallstreet.
Dot com. Sign up for our personal CFO program and
we will take you through it. Watchdog on Wall Street
(12:59):
dot com
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact that we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst and trader Chris.
Speaker 2 (00:14):
Markowski Financial parasites versus our old friend Gordon Gecko. I
got to start off here again. This is another c
I told you some moment here for the program, but
a lot of good that does. What private equity is
doing to companies, and in particular the restaurant industry. Companies
(00:41):
that are owned by private equity companies are significantly more
likely to go bankrupt than those that aren't. Think about
that for a second circle. I thought, PRIVATEQ we do.
We're going to buy companies, and they want to make
money off those companies. Yeah, but there's more than one
(01:04):
way to preferbally skin a cat and make money off
of a company. And this has been happening for some time. Again.
I wrote about this in two thousand and six, and
we'll get into that in a bit, but this this
actually made its way towards the back of CNBC's website
(01:25):
this past week. I can't even believe I found it,
and I quote, there's a lot of incentives for the
private equity firm to take a short term extractive strategies
toward restaurants that oftentimes can lead to their harm or
in extreme cases, to their destruction. It's not just restaurants.
(01:46):
This is also coming to my industry. It's coming to
other industries that they are supposedly investing in. Let's take
a look at the tactics levered leverage, buyouts, leverage buyouts
(02:09):
and sale these backs when it comes to restaurant companies.
This is where a firm buys a company using debt
borrow cash. What they do is is the company puts
that debt. The buyout company puts the debt on the
(02:33):
company that they're acquirings balance sheet, now saale these backs. Again.
They do this in tandem. So what they do is
the company then sells the real estate that in this case,
the restaurant owns, and then leases it back from the
(02:55):
company leases it back from the company any that just
sold it. To think about that for a second. You
just sold your real estate and you're leasing back the
same restaurant at a higher price. Ah okay. Gretchen Morganson,
(03:16):
one of my favorite investigative reporters out there. When it
comes to finance, and EXCU doesn't get enough screen time anymore,
talks about this. When it comes to Red Lobster, not
only did it have debt that it had to repay,
it now had rents that it had to pay that
it had not had to pay before. And to add
(03:38):
insult to injury, the new owner of the properties increased
the rents to above market rates. Listen, this this is
nothing new. This has been happening for some time. And
I want to go back in time and to two
thousand and six when I really started warning about this.
(04:02):
In this trend, I'm thinking about Holy Craps twenty years ago,
and basically what I was talking about was the liberties
that oftentimes Hollywood would take with the various different Masters
of the Universe type characters, whether it be Gordon Gecko,
whether it be Richard Gear playing Edward Lewis and Pretty Woman.
(04:28):
And then you know, you also got was Tom Hanks
played Sherman McCoy and Bonfire, the Vanities, whatever it may
be in the movie Wall Street, Okay, and Gordon Gecko
was again He's insider trader. You know, he was a
crook without a doubt. It was trading on inside information
(04:50):
how I went about obtaining that. But he was also
a corporate raider as well. And again he gave one
of the great speeches monologues when he was at the
Tell Dar Paper shareholder meeting and the movie there, going
off on the company and all their wasteful spending and
everything that took place at that period of time within
(05:11):
that company and analyzing what the vice president are doing. Again,
he talked about himself not being a destroyer of companies,
a liberator and going through the various different companies and
shareholder value that he created for his investors over the years.
And this happened a lot back in the nineteen eighties.
(05:35):
You remember R Jr. And Nabisco takeover. They made a
movie with that one as well, that was called Barbarians
at the Gate. It was with James Garner and what
KKR did to turn that company around. They had a purpose,
but you know, again in the movie, they couldn't help
(05:56):
themselves either. You know, I remember Rich your gear because
of the hooker with the heart changed his mind, changed
his mind and decided he was going to build ships
in the end rather than break up the company. That
he was going into Gordon Gecko changed his mind, changed
(06:17):
his mind on Wall Street on one deal he's he
told re member, he's telling Bud Fox. I was reading
my son the story of Winnie Pooh and the Honeypot,
and Winnie the Pooh stuck his head in the honeypot
too many times and it got stuck, and he thought
about it. He said, Nah, now we could just take
(06:38):
this thing apart. I can sell off the real estate.
I can build condos, and it's got an overfunded pension
I can take care of. And you remember, Bud Fox
is all upset. Why did you have to wreck it?
Because it was wreckable people. This is how the sausage
(06:58):
is made. This is how the sausage is made. And
this is the reality of what takes place on Wall Street.
And unfortunately we're seeing more and more of this. I
go back to the column that I wrote back in
two thousand and six, and I forgot about some of
(07:18):
the deals I was talking about. Thomas H. Lee Partners
talking about this company agreed to buy an eighty percent
stake of Iowa Fall's ethanol producer, Hawkeye Holdings. They filed
a registration state with the SEC to go public. The
buyout deal haven't even closed yet. Thomas Lee was already
(07:39):
looking toward an initial public offering, was going to generate
a huge profit on its three hundred and twelve million
dollar investment. Took twenty million dollars some Hawkeye and an
advisory FAE negotiating the buyout, one million dollar management fee,
six million for its own tax obligations, and are going
to collect payments of twenty seven million dollars at the
end of the year, not including what was going to
(08:00):
be made in the I p O. What do you
think happened with that company bankrupt? And of course Thomas H.
Lee part of that. They knew it was going to
go bankrupt. There's a there's a sign of this that
it's you know, it's the destruction business. There's a lot
(08:22):
of money to be made destroying companies, sucking them dry,
call them parasites, vampires, whatever it may be. That was
Matt Tybee used that line where he's talking about Goldman Sachs.
It called it the giant vampire squid sucking on the
entire global economy. And I go through a myriad of
(08:44):
different deals here back in two thousand and six and
again I'm not going to I'm not going to go
through this all again. I know I've been warning people
about this for the past past several mester several months,
as a matter of fact, is what I'm seeing happening
in private equity and how again, they're trying right now
(09:07):
to create some liquidity for their portfolios, which means they're
looking to you, the greater fools that are out there,
and that's that's how they look at you. Okay, whether
you want to believe it or not, you you're a
You're a market that they're going after you. All I
(09:30):
need to do is to convince you, convince you that
they've got some wonderless wonderful alternative investment strategy that you
know you can only get through them, and it's a
grand opportunity, and they're going to use all pull out,
all the stops and the sales tactics to get you
to do that. And I'm witnessing it right now. I
did ah did an interview this past week. I'm starting
(09:54):
to change my uh my thought process when it comes
to my guest appearance, just you know ones I've been
doing for a very long period of time, and I'm
going to continue to do so in the traditional media,
but I'm really kind of changing my focus over to podcasts.
I just enjoy it. It's just it's a it's an
enjoyable experience compared to television or other things. You can
(10:18):
sit down and you can have a conversation for an
hour or so, great great stuff. I went on this
podcast that Jimmy Urrio and Bob It's you know do
It's called Future's Edge, and they're very well established, credible
Wall Street guys that I've had respect for, and they
started a podcast called Future's Edge and went on at
(10:39):
this past week and talking here asking me about, you know,
our success at Markowski Investments, how we built our business
and whatnot, and how I manage risk, talking about various
different areas of the market. And yet I made the
point to them about not allowing risk leading to ruin
and also saying, some of the best best investments I've
(11:04):
ever made are the investments I didn't make. We are
we're beating the bushes because we're always looking for opportunity
just as much as anybody else. And I want to
be clear last week I mentioned this on the show
that yeah, I'd say ninety nine percent of the private
(11:25):
equity funds that are being made available to the investing
public that they're putting together right now, fund of funds,
whatever it may be, our dog poop. It's're just not good.
They're not good. But there are some that we do like.
(11:48):
There are some that we do like. Again, they're not
for everyone's portfolio. Again, I'm already starting to see people
try and begging, clamoring to get into these things. And
there's there's some guardrails that have been put up. Okay,
they got the the This entire industry doesn't want to
have somebody saying, oh this you know, uh private equity
(12:10):
fund uh, you know, ripped off all of these little
old ladies and uh senior citizens in Florida. They can't
have that happen. So there are some guardrails that are
put up, but again there's ways around them, and I'm
already seeing people try to get around them. Don't. Okay,
if you have questions in regards to this sector, what
(12:34):
we're doing, how we're handling it for our clients, please
reach out. That's what we're here for, Okay, don't be
a greater fool. Get to our website at Watchdog on Wallstreet.
Dot com. Sign up for our personal CFO program and
we will take you through it. Watchdog on Wall Street
(12:59):
dot com
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