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8/9/2012 7:48 AM
Private Equity Shines while China Gets Taxpayer Spoils
"I am calling to congratulate A123 Systems on this tremendous milestone. Thanks to the recovery Act, you guys are the first American factory to start high-volume production of advanced vehicle batteries. I am looking forward to continuing to see the great work that you guys do in the years to come."
-President Obama, 2010
Governor Granholm said there would be 63,000 jobs, right now there are 1,900. President Obama talked of high-volume production, but the company has been beset with recalls and missteps that led to a 53% decrease in revenue in the second quarter and losses soaring to $82.9 million from $55.4 million a year earlier. As devastating as this situation has been, the crushing blow was yesterday's news. Remember we are on the verge of a major trade war with China to protect solar and wind companies. Now a huge Chinese company will have access to patents on technology mostly created at MIT that one day could revolutionize nano-technology and how cars are driven.
There is a natural curve for the growth and adoption of new technology that can't be altered and shouldn't be manipulated by the government. Cell phones took decades for full adoption and the Internet was like a hidden trail in a massive jungle until the private sector began paving the road. The leaders in China must be doubling over with laughter as they continue to run circles around the administration. This clean energy stuff is interesting to them and they understand its importance... in twenty years. The fact is they are pouring billions into fossil fuel supplies that will last for years.
I'm not sure what's going to happen to AONE, but I doubt their new investors care as long as they grab all the knowledge. On the other hand, management at BLMN will tell you that Bain Capital cares, putting their money and expertise in the pot, and it's come out a winner for all involved.
A Cooling Dragon
Economic data coming from the world's second largest economy continued to indicate slower growth for the region. According to the National Bureau of Statistics in Beijing, China's industrial production grew less than economists expected, by 9.2 percent year over year. Concurrently, consumer prices declined for the fourth consecutive month and producer prices dropped for the fifth consecutive month. This is clearly indicative of economic cooling as a result of not only internal demand but also worldwide demand. These data point do have one silver lining, if you will, and that is that Chinese economic leaders will very likely put the pedal to the metal in terms of monetary easing policies to spur growth, which in turn should bode well for equities, even here at home.
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