CONTOS AMERICANOS : 2006 - GANHOS & PERDAS

If Equity Funds Saw It, They Bought It

Sunday, December 31, 2006; Page F02

History will remember 2006 as the Year of Private Equity. Acting alone and in groups, funds like Carlyle, Blackstone and Texas Pacific seemed to buy up everything in sight, from the country's biggest hospital chain to the biggest real estate firm. Their relentless dealmaking made for another record year for mergers and acquisitions, and for bonuses at the Wall Street firms that arranged and financed the highly leveraged deals. Just as the private equity firms were coming into their own, hedge funds struggled to maintain their reputation as the masters of the financial universe. Several went bust or were forced to close as a result of bad bets or outright fraud.

Energy was a big part of the story this year, knocking the wind out of economic growth as oil prices jumped to nearly $80 a barrel in the spring before falling back below $60. The gusher created record profits for oil giants, and brought out the worst in some oil-rich nations like Russia, which used the proceeds to renationalize much of its economy under control of President Vladimir Putin and his cronies. In politics, this will be remembered as the year the business community lost its sway over economic policy by allowing itself and its Republican allies to overplay their hand. Corporate America will spend the next two years, if not the next decade, playing defense.

Globalization suffered its worst year in memory as the Doha round of trade talks collapsed, public sentiment turned against immigration and Congress threw a hissy fit over a Dubai-based company running several U.S. ports.

We also learned that Alan Greenspan was neither indispensable nor infallible. Ben Bernanke proved to be a worthy successor as Fed chairman. And the housing bubble, which Greenspan doubted, finally burst, with more force and consequence than the old man would have thought.

After more than a decade of health-policy paralysis, Massachusetts stepped forward with a plan to require everyone to have insurance in an experiment closely watched in Washington and other state capitals. This was a year of reckoning for the Big Three automakers, their unions and their parts suppliers, which were finally forced to align wages, benefits and job security with competitive reality. It came too late to save the jobs of tens of thousands of autoworkers who reluctantly accepted buyout packages, or to stop Toyota from taking yet more market share from Ford and General Motors.

It took nearly five years, but the top executives of Enron were convicted of securities fraud. The big corporate scandal this year, however, involved backdating of stock options that forced the ouster of dozens of top executives.

The world of economic thought lost both Milton Friedman and Ken Galbraith this year. And in the biggest outsourcing deal in history, Warren Buffett donated his billions to the Bill & Melinda Gates Foundation.