TheDeal.com has a video interview with Prof. Anil Gupta of the Smith School of Business who feels that, once the credit crisis eases, we are likely to see a wave of inbound deals into India and China driven by attractive valuations. He feels large companies which already have a presence on the ground are likely to lead the wave. The recent acquisition of Indo Tech Transformers by GE seems to

It's been a while since the Madoff news broke and it does sadden me to hear the news how a single person pulled off the largest Ponzi scheme known to mankind. I am tempted to say once again that it is all about trust - a money manager must trust his partners and partners must trust their money manager. However, the Madoff scheme appeared to have all the makings of lots of relationships built on solid trust. Perhaps too much trust.

Most of the investors that had money with Madoff had a personal connection to Mr. Madoff or someone who had this connection to allow access. Additionally, statements were produced backing up transactions and asset values. And people who wanted to get their money out were able to because there were so many other investors coming in. It is easy in hindsight to say that any vigilant investor should have seen the signs. However, all of these factors enabled the kind of trust that only a money manager could dream of - blind trust from investors.

Part of me is very distraught over Madoff because it paints a bad picture of the hedge fund industry. A picture of dishonesty and scandal. Another part of me is not distraught because the people that lost money with Madoff were either of the wealth that they can afford to lose money or they were stupid enough to put 100% of their net worth with a person that they did not know very well. With any financial investment there is risk and an investor must be willing to lose his entire investment. There was greed involved and this greed came in the form of investors willing to do anything for returns including trusting someone that they did not know well.

The silver lining to the Madoff scandal is that where there is carnage there is opportunity. When it is harder to start a hedge fund that means it is a better time to start one and to be in the business. There is less competition and only the very strong survive. These past few years have been a trying one for almost all of private equity - buyout funds getting bad press, venture capitalists with few exit opportunities, real estate values decreasing with tight credit, and hedge funds facing massive redemptions and loss of trust from investors.

But all things come in a cycle. These are the times when managers must dig deep and lean in and set things up for the next wave to come. And there is no doubt that another wave is coming - it may take a while. But, the economic policies being set forth to get us out of trouble will undoubtedly stoke a huge blaze in the other direction. Money flows to the best returns and right now the government is decreasing the rates of return on everything and driving money toward real estate and equity.

The recapitalization has taken place in the economy and the Madoff scandal just triggered the reset button for the hedge fund industry.

PE Hub is reporting that Jonathan Mandel, the managing director of Morgan Stanley's Hong Kong-based Asia Pacific private equity banking team, was "let go" as part of a round of layoffs...

Last year, just before the holidays, I wrote a short post "Holiday Break (and Happy New Year!)". At that time I was just going away for a 2 week vacation, and as I was leaving, I wished for a few things:

1. Great and happy year (That works.)
2. No recession (Oh well.)
3. Strong IPO Market (What is IPO?)
4. and wishing the Patriots will be the world champions (Lost at the Super bowl to the Giants).

This year I am not wishing for anything. Happy Holidays.

Tucson Entrepreneur Bill Acorn says his new venture, OakStreet Man, will offer “exceptional goods for the uncompromising man” via the Internet.

“Affluent males desire unique goods and services of exceptional quality and value,” says Acorn. “We’re creating an Internet shopping experience that will simplify their search and reward them with the best of the best. Our sophisticated website, which is in development at www.OakStreetMan.com, will offer an inviting ‘street’ full of shops, offering everything from selected jewelry and leather goods to the world’s finest cookware and sports gear; from fine art to custom motorcycles. We’ll also provide a wide range of intelligently organized lifestyle kits for the traveler, the newly divorced and the outdoorsman, for example, as well as global travel arrangements and full concierge services.”

The company’s full-blown retail site should be live in the Spring of 2009. Plans call for the first OakStreet Man brick-and-mortar store to follow in 2011 in a major luxury destination city.

As an accomplished businessman, Acorn knows first-hand there’s a need for a quality-assured site like the one he’s developing. “For business and pleasure,” he says, “I’ve traveled throughout the world, spending two months or more a year at destinations across Europe, Asia, the Caribbean and the Americas.” With his wife and five sons, Acorn indulges in a wide range of sports, including skiing on water and snow, scuba diving, hunting, hiking and weight lifting. He’s owned motorcycles all his adult life, and roams Tucson’s roads on either a BMW 1100 RS bike or a 2006 Corvette. His home is filled with fine art, wine and furnishings.

“OakStreet Man will reflect my personal taste, of course,” Acorn notes, “but we’ll also rely on the product recommendations of an impressive selection of named experts… a recognized chef who’ll select kitchen appliances, bar tools and cooking schools; an accomplished outdoorsman to pick the best camping gear, unique excursions and the best guides, and so on. Each of our experts will share their knowledge via text and video on our website.”

OakStreet Man is tapping into a particularly attractive market. The rich vastly prefer online shopping to in-store buying, according to an October 2008 study by Google. In a survey of 263 wealthy shoppers age 25 to 64, 95% said they made their last luxury purchase online. On average, they spend $211,267 on luxury goods annually.

Google defines millionaires as those earning at least $1 million a year, while ultra-affluents have net worths of $1 million+ and household incomes of $250,000+ a year for married couples and $175,000+ for singles.

“Wealthy shoppers today are more comfortable surfing the web and clearly appreciate the savings in valuable time that e-commerce provides, compared to in-store visits,” Acorn observes. “To this segment, time is more valuable than money.”

The Google study underscores an additional reason OakStreet Man will appeal to affluent shoppers: 91% of responding millionaires say they always or often look at reviews before buying luxury goods. “Our site will provide expert commentary on the reasons particular goods and services were selected for our collection,” says Acorn. “In video and text, a recognized chef will explain the merits of his picks for the perfect kitchen; a renowned outdoorsman will explain how he made his choice of the best fishing, hiking and boating gear; a master sommelier will show how she arrived at her selection of wine accessories. We’ll provide the best of the best, along with convincing reviews and gold-standard guarantees, assuring total satisfaction.”

The principal and founder of engineering firm Acorn Consulting Services, Acorn (59) has been involved for 35 years in the analysis and design of hundreds of projects, ranging from institutional laboratories to semiconductor cleanrooms. He’s been honored with numerous awards for technical excellence and is recognized for his achievements, innovation and foresight in the advanced technology industry. He’s an author, a sought-after industry lecturer, consultant on regulatory affairs, and frequent forensic engineering expert witness in courtroom settings. Acorn gives back to the community through academic appointments at Arizona State University in Phoenix and the University of Arizona in Tucson.

For information about OakStreet Man, submit an inquiry at www.OakStreetMan.com or call Bill Acorn at 866-99-OAKST.

Cybernaut Investment (China partner of VC fund New Enterprise Associates) just sat up two yuan denominated VC funds in China this month with a total value of 650 million yuan - or about $95.24...

Download the MP3.

Not to be called a one trick pony, Sam Wyly's turned himself into a billionaire by starting and growing companies in technology, oil, retail and even in the restaurant industry. Coming from a modest upbringing, Sam worked in sales at IBM and Honeywell before founding University Computing in 1963 at age 29 with just "$1,000 and an idea" as he puts it in his book of that title. The company IPOed and grew to over 5,000 people. Sam hired CEOs and stayed an entrepreneur. He's founded and acquired numerous companies including Bonanza Steakhouse (grew to 600 restaurants), Earth Resources Company, Sterling Software (sold for $3.3 billion), Sterling Commerce (sold for $4 billion), arts-and-crafts chain Michaels (sold for $6 billion), Maverick Capital (a hedge fund with over $10 billion under management) and clean-energy producer Green Mountain Energy. Despite being soft-spoken, Sam's fought and won several high profile proxy fights. Sam's been undeterred as several of his ventures have had visible failures over the years and he's lost audacious bids to take over Western Union and Computer Associates. On the whole, Sam's created a huge amount of value that's put him on the Forbes list of the 400 richest people. Hear how he does it.

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• Shop Amazon For Free w/ Firefox Add-on Linking to Pirate Bay
  Amazon, the world’s largest online retailer, is under attack by online pirates. An addon for the Firefox browser called ‘Pirates of the Amazon’ makes it possible to shop at the Amazon store but leave without paying a dime. Instead, on Amazon product pages the addon integrates links to ‘free’ copies on The Pirate Bay.

People still don't seem to believe or comprehend the depths and extent of the financial crisis. Here is my brief explanation. We have been in an economy built on leverage and that leverage is coming down like a house of cards. Banks and financial companies were levered 40:1 loaning monies out that far exceeded the capacity for defaults. It started with residential mortgages and sent the financial world reeling as banks packaged these loans and sold them to others. Due to recent changes in accounting rules, banks were forced to value these assets "marked to market". Thus when the market froze and there was no liquidity to trade debt, valuations declined. We saw the collapse of some venerable investment banks such as Bear Stearns and Lehman Brothers as well as thrifts such as Washington Mutual and Indy Mac and mortgage titans Freddie Mac & Fannie Mae and Countrywide - the list goes on and on. We also saw the swallowing of Merrill Lynch and Wachovia, and the near crumbling of Citigroup. Even Goldman Sachs and Morgan Stanley have not been spared.

For those of you who believe that the financial companies will be coming back anytime soon, please think again. The market no longer values any business model that relies on leverage. In order to deleverage, companies must sell assets both good and bad. This compounds the problem as these assets are worth less and less. To make matters worse, the entire industry is in trouble and there are no buyers to take on leverage (the only buyer is the Federal Government). Anybody that acquires or merges with another insitution is simply asking for trouble. How can an overleveraged bank imagine that it can purchase another weaker overleveraged bank without weakening its position? It can't. Thus, it must go back and raise funds such as Bank of America did after its Merrill acquisition. Dividends will be cut completely. Massive amounts of equity will need to be raised. And when the federal money runs out we will be in trouble.

Thus the economy is in a massive recession and is shrinking because of deleveraging. If we were levered 40:1 and we are going back to 10:1 leverage then you can imagine our economy will shrink that same amount. If you don't understand what I am talking about, think about the size of the economy as measured by credit card transactions. Imagine if your bank suddenly froze your credit cards and you could not buy anything on credit and you had to use cash. Transactional volume would come to a halt because most people use credit to pay for just about everything. Unfortunately, a freezing and cutting of credit extended to consumers may actually happen. You can imagine what this will do to retailers. It looks like we are going back to the age where cold cash is king.

Essentially, we have had a recapitalization of the entire economy. The stock market has lost trillions of dollars as reflected by the haircuts of stock prices. Open up your 401k statement and you will see what I am talking about. 99% of the population does not understand what "recapitalization" means. In the private equity world, recapitalizations are the re-valuing and re-valuation of a company's worth. When you hear "recap" it typically refers to loss of valuation to the downside - think "massive shrinkage of company's value". Sometimes a recap is to the upside but that is what we would call a "dividend recap" meaning that we are taking out money from the company at the time of recapitalization. Anyways, the key theme in a recap is this - previous investors typically get washed out unless they "pay to play."

One final thought - the entire world has been put on a "margin call". How? Well, the market has told us that any business model using leverage is no longer desirable. Thus anybody with leverage is forced to close out its leverage down to either zero or something more reasonable. This is why it is a treacherous downward spiral - the only assets to sell are those that are devalued and those companies that are publicly traded are thus in a bad position. They have margin calls on them and must sell devalued assets that are losing more value everyday.

Do you still think that the next shoe to drop is not the commercial real estate industry? Or the consumer credit industry? The market thinks leverage is evil - any business models with leverage must adapt or become the next victim of market evoluion.