What we’re reading (8/28)
“When Private Equity Takes Over A Nursing Home” (The New Yorker). “Within two weeks, management laid out plans to significantly cut back nurse staffing. Some mornings, there were only two nursing aides working at the seventy-two-bed facility. A nurse at the home, who spoke on condition of anonymity for fear of retribution, told me, ‘It takes two people just to take some residents to the bathroom.’ (When reached by e-mail, a Portopiccolo [Group] spokesperson said, ‘We never made any staffing cuts during the transition.’) The home was renamed Karolwood Gardens, and the new management filed for a license to admit higher-needs residents, who can be billed at higher rates through Medicare. The aquarium on the second floor disappeared. So, too, did the aviary. Residents’ crafts were removed from the gift shop. No longer did the kitchen serve an eclectic variety of main dishes: turkey tetrazzini, salmon with lobster sauce, or Reuben sandwiches. Now residents were commonly given an option of ground beef. Some days, the kitchen was so short-staffed that the dining hall wasn’t set up, and residents took meals alone in their rooms.”
“For Private Equity Firms, Buying New Companies And Laying Off Employees Isn’t Cutting It Anymore” (Institutional Investor). “One reason is that the M&A market is getting more competitive, with more capital chasing a shrinking pool of quality companies. ‘Prices are going up, and that’s putting pressure on returns,’ Mooney said. For this reason, PE firms have begun to contemplate generating cash flows by transforming businesses, instead of acquiring new ones.” [An observation: “transforming businesses” is a stunning, albeit seemingly accurate, euphemism for the nursing home story above, to the extent that is an example of what Institutional Investor is talking about.]
“Investors Ramp Up Bets Against Stock Market As Summer Rally Fizzles” (Wall Street Journal). “Net short positions against S&P 500 futures have grown in the past couple months, reaching levels not seen in two years. That means traders are increasing their bets that the index will fall, or at least hedging against that risk. Meanwhile, short interest has picked up in the fund tracking popular technology shares, whose recent declines have signaled that a strong summer rally is stalling out.”
“Why Investors Went Bananas Over AMC Stock” (Wall Street Journal). “Forget about EMH, or the efficient market hypothesis. What we need is SMH: the simian market hypothesis. Under the EMH, market prices of assets like stocks and bonds reflect all available information. Under the SMH, market prices reflect whatever homo mercans—the ape who trades—happens to feel like paying attention to.”
“Half Cows, Entire Pigs: Families Are Buying Meat In Bulk To Save Money” (Washington Post). “Inflation has been at or near 40-year highs since the spring, but families have been pinched by higher food prices for two years. Meat prices in particular have surged 17 percent since July 2020, spurring families around the country to change their purchasing patterns and eating habits.”
