Barron’s Is Bearish On Blackstone

Add to Google
This week’s Barron’s features a negative analysis of private equity and alternative asset management firm The Blackstone Group (BX). In “Do As I Say, Not as ….” Barron’s criticizes Blackstone co-founder, Chairman, and CEO Steve Schwarzman for writing an op-ed column in last week’s Wall Street Journal advocating “full transparency” of financial statements when “Blackstone is probably the most opaque of the major asset managers.” I wrote about Schwarzman’s op-ed piece in “Stephen Schwarzman’s Seven Principles For Financial Reform” because I agree with the principles Mr. Schwarzman outlined. Current and upcoming planetary energies reflect Barron’s bearish view of Blackstone.

At Friday’s $7.51 closing price, it’s a far cry from Blackstone’s June 22, 2007 debut as a publicly traded company, during the twilight of Wall Street’s halcyon days. There was a ton of hype leading up to Blackstone’s IPO. Dubbed the “king of Wall Street,” Schwarzman’s face was plastered on most of the business magazines. Indeed the fanfare leading up to Blackstone’s debut was so great that “Bonfire of the Vanities” author Tom Wolfe came to the NYSE to join CNBC’s anchors waiting for BX to begin trading. I thought it was a bit weird after BX opened at 9:52:40 AM that Tom Wolfe remarked to Mark Haines and Erin Burnett “this may be the end of capitalism as we know it.”

Anything considered weird or unusual relates to the planetary energy Uranus. Uranus was stationary that day, preparing to turn retrograde.* When a planet appears to be stationary from Earth’s vantage point, its energies are extra strong. In the stock market, Uranus energies relate to sharp and volatile price movements that can break through established support levels (in either direction). The most well known retrograde cycle is when Mercury, the energy of communication and movement, goes retrograde. As even CNBC understands, Mercury retrograde periods are not recommended for launching new endeavors. Mercury was retrograde in Cancer the day Blackstone went public.**

Blackstone’s IPO priced at $31, opened on the NYSE at $36.45 and closed that day at $35.06. The private equity party of the last few years was coming to an end, as Saturn in Leo was making its final opposition to Neptune in Aquarius at the time of Blackstone’s public debut. The days of E-Z credit (Neptune) that the rulers of Wall Street (Saturn in Leo) needed to facilitate their deal making was beginning to unravel.

Last week Blackstone reported a third quarter loss of 44 cents a share (-$509 million). Barron’s points out the loss is based on BX’s "preferred” profit measure that excludes certain non-cash costs. Perhaps you could make the case that in keeping with the strong Uranian energy in its stock chart, Blackstone wants the Street to view the firm differently than other public companies as Blackstone bases its valuations on projected future cash flows. (That’s Uranus again, always forward looking and futuristic!)

On the LBO side, Barron’s comments that Blackstone is not being transparent enough about the carrying values of its individual private equity and real estate investments. One of BX’s equity partners in the LBO of Freescale Semiconductor was the Carlyle Group who has written down its Freescale stake by 50%, while BX took average markdowns on its private equity funds of 8%. Neptune rules asset bubbles, and the real estate bubble began to burst after the Saturn/Neptune opposition as Neptune ruled-credit began to tighten (Saturn). (In general, real estate hit its price peak in July 2005 when Saturn concluded its transit in real estate-ruled Cancer that began in June 2003.) No matter, private equity ploughed full steam ahead, with BX taking a $6 billion equity interest in Hilton Hotels along with buying Equity Office Properties. If Bob Toll was selling his TOL stock in mid-2005 and Sam Zell was willing to sell his office empire, shouldn’t Wall Street haven taken a hint?! No, BX and other private equity partners loaded up the leverage to pay top dollar. Earlier this year BX, NBC (GE) and Bain Capital, ponied up $3.5 billion for The Weather Channel.

The potential planetary weather forecast for The Blackstone Group shows turbulent and volatile conditions ahead. The opposition of Saturn in Virgo and Uranus in Pisces between now and mid-2010 is affecting the stock chart’s Uranus which will return to its natal position when Uranus stations direct on the November 27, 2008 Full Moon. Transiting Neptune in Aquarius was exactly opposing BX’s natal Saturn in Leo when the Barron’s article was published, reflecting the paper’s view that BX is being too evasive and unrealistic (Neptune) regarding valuations. Neptune will continue to affect BX’s stock chart through mid-February 2009. Pluto in Capricorn will oppose BX’s stock chart Sun in Cancer and Moon in Libra next month and throughout 2009. The Moon and the sign Cancer rule real estate and particularly relate to hotels, reinforcing the bear case that the value of their real estate holdings are much lower than they’re making them out to be. Their luxury hotel holdings (expressed by the Moon in Venus-ruled Libra) will probably experience declining revenues.

Since Stephen Schwarzman is The Blackstone Group, looking at his chart shows he’s not likely to experience fair weather. The September 15 Full Moon that conjoined Uranus and elevated the financial crisis to panic proportions conjoined Schwarzman’s progressed*** Venus in Pisces, indicating the potential of financial loss. Further reinforcing this is Saturn in Virgo is now opposing progressed Venus and challenging natal Uranus in Gemini. In 2009 Neptune will conjoin his natal Aquarius Sun and challenge his Jupiter in Scorpio, emphasizing how crucially important it is that Schwarzman and Blackstone “walk the talk” regarding accurate financial reporting and disclosure. This is reinforced by Pluto in Capricorn challenging Schwarzman’s progressed Mercury in Aries. The influence of Pluto in Capricorn raises the possibility Blackstone might return to being a private company.

Looking back, it seems that Tom Wolfe’s remark about “the end of capitalism” was more prescient than weird. Who would have thought the most avowed "free market capitalists" would advocate the U.S. government taking over 79.9% of a publicly traded company and injecting taxpayer money into banks that don’t need it?

*Planets do not really move backwards, but appear to from Earth’s vantage point.

**Mercury retrograde in a stock chart is not a sure sign of failure; Microsoft (MSFT) went public on March 13, 1986 when Mercury was retrograde. However, I think Mercury being retrograde when a company first publicly trades has the tendency to diminish a stock’s performance potential. Microsoft is basically a utility. Outside of core software and Xbox, Microsoft’s ventures have not been profitable.

***A predictive method that mathematically calculates the planets forward in time.

Stephen Schwarzman: February 14, 1947 time unknown suburban Philadelphia, Pennsylvania

No Disclosure.

No comments: