You can now buy Delta on the N.Y. exchange

Iran is scared of us. What will Tony Blair do? The U.S. Navy puts on a show.
Bernacke is worried of inflation. Oil prices rise, home prices tank. Delta begins to
trade its stock on the New York Stock Exchange again.

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A First Look at Blackstone
By Matt Koppenheffer
March 23, 2007
Well, it's happening after all.
After talk of an IPO from the Blackstone Group made its rounds through the rumor mill, the firm and its underwriters made the plans official by filing an initial S-1 with the SEC. I took a look through Blackstone's 300-plus-page filing to give you Fools the skinny on what exactly the IPO is bringing to the market.
This is the initial filing, and Blackstone and its underwriting team still have the revision process with the SEC to look forward to, so a few segments are still just skeletons. Though the filing currently has Blackstone looking to raise $4 billion, the offering's price range is one obvious blank right now. The other areas left blank for now mostly relate to how the offering will be priced and what ownership stake the new shareholders will have in the company. Unfortunately, the compensation for CEO Stephen Schwarzman is another area that's still "to come."
And speaking of Schwarzman, I'm going to ignore for now the irony inherent in Blackstone's IPO. That a company responsible for taking multibillion-dollar companies out of the public markets would want to have the scrutiny and burden of being a publicly held company is a topic for another day. For now, let's take a look at some of the highlights.
The bizWho says there's no business like show business? I'd say there's no business like alternative asset management, but it doesn't sound nearly as snappy.
Blackstone's alternative asset management business is comprised of an assortment of funds that manage billions of dollars for pension funds, insurance companies, high-net-worth individuals, and endowments. In total, Blackstone manages $78.7 billion in capital as of March 1, and the funds break down as follows:
Corporate private equity. Blackstone is probably best known for its corporate private equity investing, not just because it has an obscene amount of capital at its disposal, but also because it's also been one of the key players in the recent private-equity assault on the public markets. Corporate private equity makes up roughly 40% of the money Blackstone manages, and these funds have put up a fee-adjusted internal rate of return (or IRR, a measure of aggregate annual returns) of 22.8% since 1987. Some of the notable investments these funds have made over the past few years include Freescale Semiconductor, The Nielson Company (formerly VNU), Michael's Stores, Deutsche Telekom, and SunGard Data Systems.
Real estate opportunity. While corporate private equity is definitely the headliner at Blackstone, it could easily be argued that the real estate fund has stolen the show lately. This has been thanks to the recent win over Vornado Realty (NYSE: VNO) to buy out Sam Zell's Equity Office Properties for $39 billion. At least for now, it is the largest take-private transaction ever. Since Blackstone started its real estate investing back in 1991, the funds have managed to return a 29.2% fee-adjusted IRR. Other recent real estate investments include LaQuinta Inns, Wyndham International, and Extended Stay America.
Funds of hedge funds. They're just like they sound -- a fund of hedge funds puts an extra layer between hedge fund investors by distributing investor money (and risk) over a number of different hedge funds. This adds another layer of fees on top of already high hedge fund fees, but Blackstone's fund-of-fund fees are about half that of the typical stand-alone hedge fund. These funds manage $17.1 billion of Blackstone's total assets under management, and have returned just shy of 12% per year since they started in 1990.
And the rest. The remaining $12.8 billion of Blackstone's AUM is distributed among a few other vehicles, including debt funds, hedge funds, and closed-end mutual funds. The hedge funds and mutual funds are new to the Blackstone family. Though it's had the fund of funds for 17 years now, the firm just started a distressed securities hedge fund in 2005 and an equity-focused hedge fund in 2006. Both closed-end mutual funds, India Fund (NYSE: IFN) and Asia Tigers Fund (NYSE: GRR), were started in 2005.
Blackstone brings in fee revenue through these funds via management fees, which range from 0.5% to 2% of AUM. The firm also takes overrides of 20% of the profits from the funds (past a certain threshold), and it benefits from investments it makes in its own funds.
In addition to its well-known asset management business, Blackstone also has a financial advisory arm that does M&A advisory, restructurings, and fund placement though Park Hill Group, which it formed in 2005. While it may not be as familiar a name in advisory as Goldman Sachs (NYSE: GS) or Morgan Stanley (NYSE: MS), Blackstone has a pretty impressive client list that includes the likes of Microsoft (Nasdaq: MSFT), Kinder Morgan, Procter & Gamble, W.R. Grace, and Winn-Dixie.
The maze of holdingsInvesting in Blackstone is not quite as straightforward as investing in, say, Apple, where you own shares that represent an equity position in the Apple operating company. Similar to fellow alternative investment IPO Fortress Investment Group (NYSE: FIG), Blackstone has been set up in a holding-company structure, so it's useful to know exactly what common shareholders will actually own.
The Blackstone Group L.P. (TBG for short) has been set up as a holding partnership that, in turn, holds 100% ownership of five separate holding companies (we'll call them Holdings I). Holdings I is the general partner to five other holding companies that are the actual Blackstone operations (we'll call these Holdings II). A general partner is the partner that actually manages the partnership, as opposed to the limited partner, which does not.
Holdings I will have a percentage ownership in Holdings II that will be determined later in the IPO process, while the rest of Holdings II will be owned directly by Blackstone's senior managers and other current owners. Economically speaking, TBG's primary assets will be its interests in Holdings I, which will be entitled to its pro rata share of the fees and investment income from Holdings II. Ipso facto, each TBG shareholder is basically a claimant to a portion of a portion of the income of Blackstone's operations.
Still with me? A separate entity called Blackstone Group Management (BGM) will be 100% owned by Blackstone's senior managing directors and will be the general partner of TBG. Though BGM will not have an economic interest in TBG, it will have exclusive say over just about all important governance issues.
The priceGiven Blackstone's past success, the size and firepower of the firm, and the current mania around alternative investments, I can't imagine that the offering won't be really well received. The question is what kind of valuation it will garner. The U.K.'s Man Group is probably a decent comparable firm, since it's an alternative asset manager with a captive brokerage arm. Man's stock trades at around 18 times trailing earnings, and has a total market cap equal to about one-third of its AUM.
Using Blackstone's FY2006 as a proxy for trailing earnings, these metrics would give Blackstone a total value of somewhere in the $30 billion to $40 billion range. Of course, that's assuming that you're comfortable using FY2006, which was a particularly good year for the firm and may not be indicative of the future.
More detail is sure to emerge soon enough, as the banking team feels out the market for Blackstone's shares. If the offering ends up being anything like the Fortress IPO, though, pricing thoughts might be a mostly academic question. Though Fortress went public at an arguably reasonable 24 times trailing earnings and 25% of AUM, it nearly doubled before it hit the market. Today it trades at $28, which is around 36 times trailing earnings and 37% of AUM.
Despite this price, a few freshly released Wall Street analyst reports are still calling Fortress a buy. Go figure.
I think one thing is for sure though: Viva la Blackstone!
Fool on:
Private Equity, Unveiled at Last?
The Fortress IPO: Opening the Drawbridge to Hedge Funds
Marching on the Fortress
Microsoft is an Inside Value recommendation. You can check out any of the Fool's newsletters with a 30-day free trial.
Fool contributor Matt Koppenheffer would love to party it up with Steve Schwarzman -- he can feel free to give a call anytime. Matt owns shares of Goldman Sachs but does not own shares of any of the other companies mentioned. The Fool's disclosure policy sees a red door and wants to paint it black.

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Google News Headlines

CNNMoney.comYouTube gets a rivalComputerworld - 2 hours agoMarch 22, 2007 (Computerworld) -- In a frontal assault on rival Google Inc. and its wildly popular online video division, YouTube Inc.
SabahOracle files lawsuit against rival SAPSan Jose Mercury News - 46 minutes agoBy Ryan Blitstein. Redwood City software maker Oracle filed a lawsuit today against arch-rival SAP, alleging "corporate theft on a grand scale" by the German software company.
ScotsmanEU ministers approve 'Open Skies' pactMoneyweb - 1 hour agoEU transport ministers backed a landmark accord on trans-Atlantic air travel that will widen opportunities for both European and US carriers, notably at London's Heathrow.

How do you define a McJob?

McDonald's is upset with how The Oxford English Dictionary defines McJob. They claim it
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Bank Merger talk causes spike in stock prices.

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The two Goliaths, Microsoft and Cisc0 appear headed for the ring. Who will win in the end?
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A whole lot of shaking going on

Walmart has it's eyes and mind on the banking business in a big way. Microsoft buys a speech
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Halliburton moves corporate office out of country

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The World's Billionaires

North state's Emmerson on Forbes list of billionaires
Jackie Farwell, Associated PressFriday, March 9, 2007
The richest of the rich
The ranking of the world's richest people as estimated by Forbes magazine includes wealth in billions of dollars and source of the money. The research for the rankings began in early 2006 and ended Feb. 9, 2007.
1. William Gates III, Washington, 51, $56, Microsoft
2. Warren Buffett, Nebraska, 76, $52, Berkshire Hathaway
3. Carlos Slim Helu, Mexico, 67, $49, telecom
4. Ingvar Kamprad and family, Sweden, 80, $33, Ikea
5. Lakshmi Mittal, India, 56, $32, steel
6. Sheldon Adelson, Nevada, 73, $26.5, casinos, hotels
7. Bernard Arnault, France, 58, $26, LVMH
8. Amancio Ortega, Spain, 71, $24, Zara
9. Li Ka-shing, Hong Kong, 78, $23, diversified
10. David Thomson and family, Canada, 49, $22, inheritance
11. Lawrence Ellison, California, 62, $21.5, Oracle
12. Liliane Bettencourt, France, 84, $20.7, L'Oreal
13. Prince Alwaleed Bin Talal Alsaud, Saudi Arabia, 50, $20.3, investments
14. Mukesh Ambani, India, 49, $20.1, petrochemicals
15. Karl Albrecht, Germany, 87, $20, Aldi
16. Roman Abramovich, Russia, 40, $18.7, oil
17. Stefan Persson, Sweden, 59, $18.4, Hennes & Mauritz
18. Anil Ambani, India, 47, $18.2, diversified
19. Paul Allen, Washington, 54, $18, Microsoft, investments
20. Theo Albrecht, Germany, 84, $17.5, Aldi, Trader Joe's
21. Azim Premji, India, 61, $17.1, software
22. Lee Shau Kee, Hong Kong, 79, $17, real estate
23. Jim Walton, Arkansas, 59, $16.8, Wal-Mart
24. Christy Walton and family, Wyoming, 52, $16.7, Wal-Mart inheritance
24. S. Robson Walton, Arkansas, 63, $16.7, Wal-Mart
26. Sergey Brin, California, 33, $16.6, Google
26. Larry Page, California, 34, $16.6, Google
26. Alice Walton, Texas, 57, $16.6, Wal-Mart
29. Helen Walton, Arkansas, 87, $16.4, Wal-Mart
30. Michael Dell, Texas, 42, $15.8, Dell
31. Steven Ballmer, Washington, 51, $15, Microsoft
31. Kirk Kerkorian, California, 89, $15, investments, casinos
31. Raymond, Thomas and Walter Kwok, Hong Kong, ages unknown, $15, real estate
34. Francois Pinault, France, 70, $14.5, retail
132. Steven Jobs, California, 52, $5.7, Apple Computer, Pixar
243. George Lucas, California, 62, $3.6, Star Wars
287. Steven Spielberg, California, 60, $3, movies
314. Donald Trump, New York, 60, $2.9, real estate
618. Archie Aldis (Red) Emmerson, California, 77, $1.6, timberland, lumber mills
664. Oprah Winfrey, Illinois, 53, $1.5, television
891. Joanne (J.K.) Rowling, Britain, 41, $1, Harry Potter


NEW YORK -- What could a Chinese dumpling maker and Mexican telecom mogul possibly have in common? They're among a record number of wealthy people who held the title of billionaire over the past year.
The tally of billionaires around the globe reached a high of 946, their combined wealth growing 35 percent to $3.5 trillion, according to Forbes magazine's 2007 rankings of the world's richest people. The north state's Archie Aldis "Red" Emmerson, 77, of Sierra Pacific Industries ranked 618th, with an estimated fortune of $1.6 billion, according to Forbes. Last year, he ranked higher on the list -- 512th -- with less wealth -- $1.5 billion.
The rich cashed in on strong equity markets, real estate and commodity prices worldwide, according to Forbes billionaires co-editor Luisa Kroll.

Credit Card rip-off

Congress is putting pressure on credit card companies for ripping off American and all.

Article from Money

.
Money 70: The best mutual funds you can buy
Unlike the target-retirement funds designed for investors still planning for retirement, the stocks-bonds mix in the retirement income funds stays pretty much the same. They're done morphing; they're as conservative as they're going to get.
As for which fund family's retirement income target fund you might buy, we at Money Magazine have included the target funds of both T. Rowe Price and Vanguard on the Money 70, our elite list of recommended funds. That's not to say other fund families' target funds won't work for you.
But we liked T. Rowe's and Vanguard's funds because they charge very reasonable fees, and because we think the stocks-bonds mix in their funds make sense for investors who want their money to last throughout retirement.
The Vanguard fund keeps about 30 percent of its assets stashed in stocks. That should be enough to give someone your age a decent amount of growth, but also provide some principal protection. The fact that some 70 percent of the portfolio's assets are in bonds and cash means the fund should also produce a good level of income.
The T. Rowe Price retirement income target fund, on the other hand, takes a slightly more aggressive stance, keeping about 40 percent of its assets in stocks. It has more growth potential, but it will also likely be a bit more volatile than the Vanguard fund, although with 60 percent of its assets in bonds and cash, it's not as if we're talking a banzai approach here. (And this fund isn't anywhere near as volatile as the 2040 fund you're currently in.)
I think either of these funds would work just fine for you. It's really more a matter of personal choice. If you're really concerned about security of principal, go with the Vanguard fund. If you're willing to tolerate a little bounciness in the value of your portfolio in return for a shot at higher returns (and possibly more income in the future), then go with the T. Rowe fund.
One final note: Target funds work best when you have all or nearly all of our retirement assets in such a fund. If you also own other funds or have other investments, you'll want to make sure that the stocks-bonds mix for your entire portfolio doesn't stray too far from the target fund's mix. You can figure out the asset allocation of your retirement portfolio overall by going to Portfolio X-Ray tool in the Investment Planning Tools section on T. Rowe Price's site. (You must register to use the tool, but there's no charge.)
So check out the target retirement income funds I mentioned and then make your switch. The next time the stock market takes a nosedive - like it did Tuesday, dropping 416.02 points - you'll be glad you did.
----------------------------------------

Imagine being trained by Warren Buffet

Stocks are going down, mortgage rates are falling, gas prices are falling in the market. Everyone
is talking about getting some good deals from falling stock prices. I read about price of a barrel of
oil falling, yet the price at the service station I buy gas in Selma overnight increased a dime a
gallon

Warren Buffet loads up on a lot of stock for Berkshire Hathaway. Also he is looking for people
to follow in his footsteps.