Yesterday was a tough day in the markets, with the Dow falling 199 points. But, if you follow some of the legends of finance – such as Carl Icahn, T. Boone Pickens and The Blackstone Group's (NYSE: BX) Steven Schwarzman – you will notice that they are getting aggressive.

Keep in mind that these guys have been through multiple market cycles. And, if history is any worthy benchmark, it's during times of instability where the big money is made.

Pickens is focusing on the energy industry. He sees major demand/supply imbalances and is buying various stocks. He is also interested in natural gas and alternative fuels.

As for Icahn, he's doing what he does best – shareholder activism. He senses when companies are vulnerable and seems to relish an attack on corporate managements and boards. Of course, he's gearing up for a fight with Yahoo! (Nasdaq: YHOO). Interestingly enough, he persuaded Pickens to buy 10 million shares.

And, with Schwarzman, he's buying up the bank debt of companies that went private. Because Blackstone sees many deals, it has an extensive database of opportunities.

In other words, the legends of finance are confident in the long-term. They are making some big bets -- based on lots of experience and due diligence -- and not listening to the short-term noise. All in all, these are some valuable lessons for investors.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

So-called "trader talk" can be pretty rough. After all, Wall Street can be stressful (especially lately).

But, when you are the CEO of a major financial services company, you are expected to keep your language PG.

Well, Steve Schwarzman -- who is the CEO of The Blackstone Group, L.P. (NYSE: BX) -- perhaps didn't get the memo. Actually, maybe he thinks he still runs a private firm.

In a recent investor conference, Schwarzman was quite colorful in describing it's aborted $1.7 billion buyout of PHH Corp. (which got ensnared in the subprime mess).

As I posted last month, Blackstone Group's CEO Stephen Schwarzman gave an interview to the Wall Street Journal with a compelling theme -- Schwarzman is the Napoleon of private equity. Napoleon-watch tracks his moves on the business battleground.

The New York Times reports that Blackstone Group LP (NYSE: BX) is making things tough for itself and its peers in the eyes of Congress. That's because Blackstone used a loophole to avoid paying tax on $3.7 billion -- most of which was raised in its IPO last month.

Although they will initially pay $553 million in taxes, Blackstone's partners will get that back, and $200 million more, from the government over the long term. In a nutshell, the partners used the writeoff of goodwill -- the difference between the book value and market value of an asset -- to shield their gain from tax.

The details are rather complex but fiendishly clever:

• the Blackstone partners paid a 15% capital gains rate on the shares of Blackstone's management company they sold last month in the IPO
• Blackstone then arranged to get deductions for itself for the $3.7 billion worth of goodwill at a 35% rate. They taxed low and deducted high.
• The deductions must be spread out over 15 years. And the original Blackstone partners are getting just 85% of the tax savings, leaving the other 15% to outside investors. The deductions on the $3.7 billion to the partners are $1.1 billion over 15 years.
• If these tax savings were paid as a lump sum this year, the partners would get $751 million, which is $198 million more than the taxes the partners will pay on the $3.7 billion of goodwill.

These guys didn't get to be billionaires for nothing. Meanwhile my proposal for putting half their pay in escrow for 10 years to cover the costs of bad deals is gaining tiny amounts of support.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Blackstone.

It's finally here – the Blackstone Group LP (NYSE: BX) IPO. The stock is up about 15% even though the Dow is down 116 points. There are also serious concerns about some ailing hedge funds from Bear Stearns (NYSE: BSC).

I had a chance to interview Steven Howard, who is an attorney at Thacher Proffitt & Wood and an expert on private equity. His thoughts on the Blackstone IPO?

"It's of course difficult to predict the length of business cycles for sectors of the economy, but most commentators agree that the business cycle for private equity is mature, and that Blackstone is cashing out at the top. I believe that the top has not yet been reached, that Congress will not legislate any curtailments to the private equity/hedge fund business until at earliest the first quarter of 2008, so there is plenty of time for others in the IPO pipeline, like KKR, Apollo and others to explore the top. Nevertheless, Blackstone's IPO is very lucrative to Pete Peterson and Steve Schwarzman, and their senior managers. Just as Blackstone has wisely accelerated their IPO, so will the next group of IPO registrants in the rush to the market in the hope that they may get some 'grandfathering' benefits from any legislation, if in fact it is enacted in 2008.

"These private equity funds are notoriously difficult to value because of the nature of their investments which are illiquid and often require a sale to a third party before the private equity fund realizes any gains or losses from the investment. As a consequence of the difficulty to value the underlying investments, Blackstone may trade at a discount to its NAV (net asset value) over time, as closed-end funds typically trade at a discount to NAV in the aftermarket following their IPOs.

"Interestingly, investors in Blackstone will not be entitled to vote on who the managers of the Fund will be. Because the Fund is structured as a partnership, there is no equivalent of a Board of Directors. Peterson and Schwarzman will run the Fund until Peterson retires in December 2008 when Schwartzman will run it solo. Blackstone says in its Registration Statement that it did not want to change in any way its management since it's been so successful, so no shareholders' meetings ever, very limited corporate governance by public company standards and very little protection from conflicts of interest.

"A final note, it is a major mistake for anyone to underestimate the strength of the private equity/hedge fund lobbyists in Washington, DC, especially with a presidential election year in the very near future in which it is likely that THREE candidates will be from NYC (Clinton, Giuliani and Bloomberg), the home for many private equity and hedge funds, including, of course, Blackstone."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Investors who worry about tax increases, socialized medicine and Hillary Clinton picking out fabric swatches, should be petrified by the recent polling data showing how low President Bush's popularity has sunk.

A recent NBC/Wall Street Journal poll showed that by a margin of 52% to 31%, Americans want the Democrats to win the presidency next year. Politico.com is reporting that "Republicans across the country are warning that increasing public discontent toward President Bush, the Iraq war and the GOP brand in general threatens to send the party's 2008 campaign planning into a tailspin."

Even though the economy is fairly strong and the stock market continues to set record after record, Wall Street seems out of step with Main Street. People are fed up with high gas prices, the war in Iraq and the bursting of the real estate bubble.

They also don't like corporate fat cats either, so Blackstone Group LP CEO Steve Schwarzman, who stands to earn as much as $677 million from the private equity firm's upcoming IPO, might want to watch how he spends his money before the election. For instance, he should avoid lighting cigars with $100 bills.

Members of Congress are already grousing about the favorable tax treatment that hedge funds and private equity companies enjoy, which was underscored by the Blackstone IPO. There will be more and more complaining about private equity and hedge funds over the next few months.

In fact, there will be such noise about issues of interest to investors ranging from taxes to free trade that it will be difficult to figure out what to believe.

About the only thing that's for certain is that big changes are coming.

This morning's Wall Street Journal [subscription] scored a coup -- an exclusive interview with Blackstone Group's (prospective trading symbol BX) CEO Steve Schwarzman.

The interview's theme -- that Schwarzman is the private equity industry's answer to Napoleon -- did not delve into the question of whether it makes sense to invest in what Schwarzman is selling to the public. But it did include some fascinating personal details:

• At 5' 6" he is a "little man" who wants to "inflict pain" on and "kill off" his rivals;
• He noticed that one of the servants at his 11,000 square foot Palm Beach mansion wore squeaky rubber soled shoes;
• He ate $400 worth of stone crabs there during his 15 minute lunches; and
• He neglected to invite his rival -- KKR partner, Henry Kravis-- to his lavish 60th birthday celebration -- to which a huge portrait of Schwarzman, which usually hangs in his living room, was shipped -- because he had never been invited to Kravis's home.

Should you invest with him? Yes. However, the securities he's selling in this IPO will not enable you to do so. I have been plowing through its prospectus and have come to the conclusion that you should avoid these securities. Here's why:

This morning's Wall Street Journal [subscription] scored a coup -- an exclusive interview with Blackstone Group's (prospective trading symbol BX) CEO Steve Schwarzman.

The interview's theme -- that Schwarzman is the private equity industry's answer to Napoleon -- did not delve into the question of whether it makes sense to invest in what Schwarzman is selling to the public. But it did include some fascinating personal details:

• At 5' 6" he is a "little man" who wants to "inflict pain" on and "kill off" his rivals;
• He noticed that one of the servants at his 11,000 square foot Palm Beach mansion wore squeaky rubber soled shoes;
• He ate $400 worth of stone crabs there during his 15 minute lunches; and
• He neglected to invite his rival -- KKR partner, Henry Kravis-- to his lavish 60th birthday celebration -- to which a huge portrait of Schwarzman, which usually hangs in his living room, was shipped -- because he had never been invited to Kravis's home.

Should you invest with him? Yes. However, the securities he's selling in the Blackstone IPO will not enable you to do so. I have been plowing through its prospectus and have come to the conclusion that you should avoid these securities. Here's why:

Wow! That was my initial reaction when I read the Bloomberg News story about the pay accruing to Blackstone Group's top executives. And yet, compared to hedge funds, these guys are lightweights. When you look at their photos, though, you can only come to one conclusion -- it pays to be bald!

Blackstone Group LP co-founders Stephen Schwarzman and Peter G. Peterson will get $2.33 billion and keep 28% of the company after its planned initial public offering. That was interesting but what really got my attention is their pay -- Schwarzman made $398.3 million last year and will own Blackstone shares worth $7.7 billion while Peterson took in $212.9 million in 2006 and will own $1.31 billion worth of stock after the deal is done.

This seems like a nice payday but it depends on whose you compare it to. Schwarzman's pay is about 7.4 times that of Goldman Sachs Group Inc.'s (NYSE: GS) CEO Lloyd Blankfein -- who made only $54 million in 2006 and 6,638 times that of the average U.S. family which pulled in $60,000 last year.

Yet Schwarzman's $398 million is less than a quarter of the $1.7 billion that top hedge fund manager, James Simons, pulled in last year. Do you feel sorry for Schwarzman now?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Goldman Sachs.

Wow! That was my initial reaction when I read the Bloomberg News story about the pay accruing to Blackstone Group's top executives. And yet, compared to hedge funds, these guys are lightweights. When you look at their photos, though, you can only come to one conclusion -- it pays to be bald!

Blackstone Group LP co-founders Stephen Schwarzman and Peter G. Peterson will get $2.33 billion and keep 28% of the company after its planned initial public offering. That was interesting but what really got my attention is their pay -- Schwarzman made $398.3 million last year and will own Blackstone shares worth $7.7 billion while Peterson took in $212.9 million in 2006 and will own $1.31 billion worth of stock after the deal is done.

This seems like a nice payday but it depends on whose you compare it to. Schwarzman's pay is about 7.4 times that of Goldman Sachs Group Inc.'s (NYSE: GS) CEO Lloyd Blankfein -- who made only $54 million in 2006 and 6,638 times that of the average U.S. family which pulled in $60,000 last year.

Yet Schwarzman's $398 million is less than a quarter of the $1.7 billion that top hedge fund manager, James Simons, pulled in last year. Do you feel sorry for Schwarzman now?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Goldman Sachs.