Coffee Talk

Private equity in the doldrums, and that may be a good thing:

The mathematics of buyouts, for one, are not favorable. If a sponsor has to kick in 40% to 50% equity on a deal, it's going to be harder to earn huge returns. So financial sponsors have to be a lot more selective. In this climate, they have to make their money the old fashioned way -- improving a company's operations and growing it faster than its industry peers. That growth and the multiple paid when the sponsor sells will constitute the lion's share of the return. As one PE executive said on Friday, "In the '80s the value add was leverage; now the value add is really value add."

Why are people so resistant to persuasion about the death penalty, abortion, and affirmative action?

Finally, these three issues are ones on which it's hard to find a coherent compromise position. You can tell a persuasive story about why tax rates should be higher than conservatives say, yet lower than what liberals want. But it's hard to explain why we should adopt a policy that's somehow in between a strong pro-life position and a strong prochoice view. The same goes for affirmative action and the death penalty.

Annoying arguments about fiscal stimulus:

I'd like to nominate three more annoying pro-stimulus arguments. (4) Arguments failing to acknowledge that some level of debt is too much. What's the limit to further fiscal expansion? (5) Arguments that assume the bond market won't abruptly change its mind about the US cost of borrowing. I find it very annoying when liberals, of all people, tell me that the bond market is a wise forecaster. (6) Arguments that dismiss the tax consequences of ever-mounting debt. Yes, we will owe it mainly to ourselves, but eventually somebody's taxes will still have to rise to service the payments.

Hedging against euro collapse:

GlaxoSmithKline Plc, Britain's biggest drugmaker, has been sweeping cash on a daily basis from euro-zone banks in a bid to protect itself from potential problems in the single currency bloc, its chief executive said.

"We don't leave any cash in most European countries," Andrew Witty told reporters after presenting fourth-quarter results on Tuesday.

How to win a claw game:

It depends on the machine. Claw games can be adjusted to make the prizes either easier or harder to grab. The difficulty is controlled by setting the length of time allotted for each attempt and the number of attempts given for each quarter spent. Operators can also change the strength of the claw's grip. Given these variables, claw-game experts recommend spending a few minutes on the sideline while others play. Once you have a sense of the machine's idiosyncrasies, ask a partner to stand on one side of the machine to help you align your claw on the depth axis. If the prize is a plush toy or stuffed animal, aim for the chest, which allows for the firmest grip. If the claw has a weak grip, try knocking objects sideways into the prize chute. Experts differ as to whether it's easier to win with a three-pronged or a four-pronged claw.