DC definitely holds the short term key to vastly improving the outlook for BX if they step away from changing the tax code… We were all joking around in the office saying BX could take itself private and pocket the difference between their offering price (31) and its current price (25). However there is no way the company would do this as it would reek of foul play. Washington would be all over that trade and the last thing BX needs right now is more scrutiny. I think this is more of a joke than a rumor.

All the best,

I like your analysis about Blackstone, it is well written. However, you forgot to mention about the team management, which is the core of Blackstone. It is composed of very smart people who just came out Billionaires after the IPO(for instance President Hamilton “Tony” James). The investment is very risky. Rumors says that Blackstone might take itself private again in a future as the stock continues to fluctuate. What do you say?
I have a long term position on BX, because they are diversified and the team is well managed. They make smart decisions. For example, they were betting against the subprime mortgage business. I am sure that BX will report record earnings again. But, will it make the stock price go higher? I do not think so! D.C has to clear out the air of the private equity market first.

1) I believe the majority of the problem was the taxation issue as this could take a significant chunk out of earnings. Its likely an issue that will affect earnings in 5 years but is still applicable to pricing today. Another key problem was the credit crunch which made leveraged buyouts nearly impossible for a couple of weeks. There appears to be more liquidity in the market now and the rate cut should have a significant effect.

2) Volatility is very difficult to determine. One way you might want to play it would be to buy the stock and sell November 25 calls for $1.55. This would cap your gains but would also add some degree of stability. Many would suggest buying a put option which is also a possibility but keep in mind you are paying for insurance and that premium can eat you up over time.

3) I will send you an email personally about the funds. I want to be careful about avoiding any appearance of soliciting investors on this site. This is a personal venture for me and I enjoy the blogging experience but it is not meant to attract investors for the fund in any way.

4) I haven’t seen the specifics on the new funds launched. I would assume they would each cover a different strategy within the broad hedge fund universe (macro, long/short, riskarb, convertable arb, etc). The key is that they will be pulling in a huge amount of assets and charging management fees (and incentive fees) on these new funds.

Hope this helps,
ZDS

Thank you very much.

Q.C.