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9:00 AM EST, Tuesday, August 18, 2009:. This recovery will be delayed because of the delayed effects of mountains and mountains of debt that are slowly, though dramatically, emerging, being systematically destroyed and hurting the institutions that loaned the money.

The biggest impact of deadbeat debt to come is in commercial real estate. Declining rent rolls are forcing buildings into default and dragging their heavy debt with them. But excessive debt is everywhere -- especially in private equity. This story from today's Wall Street Journal highlights private equity debt. It's massive. I'm fascinated by this stuff because I used to run a publishing company. Except for one small mortgage which we paid off in nine months, we never had any debt. Never.

Chapter 11 Is Next Page for Reader's Digest

The publisher of Reader's Digest magazine said Monday it will file for bankruptcy protection, becoming the latest in a series of debt-laden media companies felled by the recession and changing consumer tastes. The capitulation by Reader's Digest Association Inc. is another black eye for private-equity firms, which bet big during the boom years this decade that they could turn around media concerns and create outsize profits. The move also is a low point in the storied history of Reader's Digest, a onetime staple of coffee tables and doctors' offices that at its peak three decades ago sold 18 million copies a month. Circulation now is less than half that.

Under the plan, Reader's Digest Association will cut its debt to about $550 million from $2.2 billion. An investment group led by private-equity firm Ripplewood Holdings, which bought Reader's Digest in 2007 for $1.6 billion, will see its investment wiped out, and the publisher's lenders, led by J.P. Morgan Chase & Co., will take control of the company.

In headier days, media-company revenue was predictable, allowing investment firms to pile on debt and repay it with steady -- albeit slow-growing or slightly ebbing -- profits. Instead, revenue is dropping more quickly than almost anyone imagined, pushing owners of newspapers, magazines and broadcasters to seek protection from creditors.

Newspaper and TV company Tribune Co. tipped into bankruptcy in December, a year after real-estate mogul Samuel Zell led its $8.2 billion buyout. The private-equity firms that headed last year's buyout of Clear Channel Communications Inc. are now trying to rework the radio chain's $20 billion in debt.

Reader's Digest was founded in 1922 as a roundup of condensed articles from other publications. The pocket-sized monthly became a money-making giant, with dozens of versions published overseas. The Pleasantville, N.Y., company, which expanded into condensed books and other publications, generated enormous wealth for its founders, the Wallace family, who became prolific philanthropists.

But circulation slipped as more readers migrated to magazines that cater to special interests such as sports or entertainment. Reader's Digest reacted by making editorial changes, embracing articles aimed at women and celebrity news.

"They tried to modernize the magazine and to make it like every other magazine in the country," said Samir Husni, director of the magazine innovation center at the University of Mississippi. "They lost their DNA." ...

In 2006, Ripplewood agreed to buy Reader's Digest. The New York company believed it could boost revenue by expanding the publisher's Web operations and publications. Reader's Digest owns nearly 100 other titles and media properties, including the magazine Every Day with Rachael Ray and Web site

Ripplewood said it thought the company's revenue could grow by a single-digit percentage each year. Instead, revenue fell, albeit less steeply than at many other print-media firms, including a nearly 2% currency-adjusted slide for the fiscal year ended June 30. Reader's Digest also shut or sold underperforming businesses, cutting the annual revenue base to $2.2 billion from more than $2.7 billion.

The revenue declines mean the company's debt stands at 17 times annual earnings before interest, taxes, depreciation and amortization, compared with an expected four times under the proposed debt restructuring. ...

Through the bankruptcy, senior lenders will exchange a substantial portion of their $1.6 billion in debt for a 92.5% equity stake. Company management and board members will own 7.5%.

In addition, the company is allowing for the possibility of up to $100 million in new investment, either from existing bondholders or outside firms. Those investors can receive up to 20% of the reorganized company, a move that would dilute the senior lenders and management stakes.

Some of the lenders will provide a $150 million debtor-in-possession loan to carry Reader's Digest through reorganization and beyond. ...

The amazing power of prediction.
+ “The spring of 1930 marks the end of a period of grave concern…American business is steadily coming back to a normal level of prosperity.” – Julius Barnes, head of Hoover’s National Business Survey Conference, March 16, 1930

+ “While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us.” – Herbert Hoover, May 1, 1930

So which cable provider did your daughter bargain with? Reader Susan Traiman takes a guess:

You did not mention the name of the cable company. Comcast?

Comcast: if you order your service through Best Buy, you will be able to save at least 1/3 vs picking up the phone and negotiating with Comcast. ( I am a great negotiator too!)

Best Buy, even over the phone, as I did it, is able to offer the services for wayyyy less than Comcast is able to offer. Whatever it is that you want, just ask for it. They threw in HBO and SHO at no charge. Bumped up the download speed from 6 to 10 ( 16 when need the power boost) at no charge. Even got 50% off for an extra main box.

No one seems to know this little secret.

Genuine mistake made in Ireland: Poor Ainsley.

Business lessons from the selling of health-care:

1. Sell the need first.

2. Then sell the solution.

3. Listen to your customers.

4. If you customers object, maybe it's time to regroup and think of another approach.

5. Never ever do massive changes in haste.

6. Anything done in haste will usually turn out wrong -- viz. Iraq, Afghanistan, TARP, etc.

Perfect logic.
The ship's Captain inspected his sailors. He finds they smell bad. The Captain suggests to the Chief it would help if the sailors would change underwear occasionally.

The Chief responded, "Aye, aye sir, I'll see to it immediately!"

The Chief went straight to the sailors berth deck and announced, "The Captain thinks you guys smell bad and wants you to change your underwear. Pittman, you change with Jones; McCarthy, you change with Witkowski, and Brown, you change with Schultz. Now get to it!!!"

This column is about my personal search for the perfect investment. I don't give investment advice. For that you have to be registered with regulatory authorities, which I am not. I am a reporter and an investor. I make my daily column -- Monday through Friday -- freely available for three reasons: Writing is good for sorting things out in my brain. Second, the column is research for a book I'm writing called "In Search of the Perfect Investment." Third, I encourage my readers to send me their ideas, concerns and experiences. That way we can all learn together. My email address is . You can't click on my email address. You have to re-type it . This protects me from software scanning the Internet for email addresses to spam. I have no role in choosing the Google ads on this site. Thus I cannot endorse, though some look interesting. If you click on a link, Google may send me money. Please note I'm not suggesting you do. That money, if there is any, may help pay Michael's business school tuition. Read more about Google AdSense, click here and here.