Sam Zell's purchase of the Tribune Company, owner of the LA Times, the Chicago Cubs, and 25 TV stations, has piqued our interest. Zell made his money in real estate - by buying and selling wisely. When he unloaded his Equity Office Partners to Blackstone a few months ago, we figured the man knew what he was doing. It looked like a top in the property market; and it looked like the old pro had found it.

But now Zell proposes to do something even more remarkable. He is entering a business that appears to be a long-term, structural downturn - like the U.S. auto business. The Tribune Co. stock sells for only half what it did in 2000...and only 60% of what it did a few months ago. The Tribune Co. publishes old-fashioned newspapers, while readers are migrating to the Internet, with advertisers following them.

We pause here just to turn our heads to Detroit. Motown is leading the nation towards a slump, is our guess. Michigan has 350,000 people out of work - the highest unemployment rate in the nation. Not only its sub-prime mortgage payments are late, so are its prime payments. After Louisiana and Mississippi, Michigan its homeowners have the next highest overdue rate in the country.

And in Detroit, housing prices are off 5.8% over the last three years - a period in which they rose 14% in the other 49 states (based on data from the National Association of REALTORS). But the damage to property prices has barely registered yet. Many streets are forested with "For Sale" and "Foreclosure" signs. Many houses are vacant...some abandoned...waiting to be ground down by the millwheels of legal procedure and market prices. Lenders are getting reluctant to put more money into Detroit property; sub-prime and Alt-A mortgage offers are said to be disappearing. Surely, property prices have further to fall. And to see how much that fall will impact the U.S. economy (and you wallet).

So back to Sam Zell. Maybe he saw it coming. Maybe he didn't.

But what's he doing now?

"Whatever your weakness, the market will find it," says Richard Russell. And one weakness to which we are all prone is vanity. We say this from recent personal experience.

"Did you hear...[a prominent, prestigious publication in London] is for sale?" asked a friend who came in the office just yesterday.

"They want too much for it, of course. But I think we might be able to put together a group of investors to buy it. And I know we could make it much better. Like everything else in the publishing world, the Internet is hurting it. Ad revenue is down. Subscriptions are down. And the thing just seems to have lost its way editorially. But I think it could be rescued..."

For about two seconds, we were tempted. Yes, we could see our own name in the British press, followed by the hallowed words, 'publisher of the prestigious....' All of the sudden, we would go from being a lowly scribbler on the margins of polite society - to being at the very top of it. People would talk about us...and put our family into the society pages. Our telephone would start to ring. We'd be invited us to lunch...to soirees...to charity events and dinner parties. Our photo would soon be in "Country Life," with the caption: "Lord Griefbottom and publisher William Bonner greet guests at the annual Save Britain's Bats fundraiser at Havasham Hall."

It must have been at that moment that we awoke from our quick dream. Wait, we don't even like charity events and dinner parties - unless there are friends to make them amusing. Get our name in the paper? We might as well send the IRS a graven invitation - Audit Us... R.S.V.P.

No, we prefer to write to our small group of dear readers...and enjoy the meager fruits of our labors in well-deserved obscurity. Whatever other merits it may have, there is less temptation to take ourselves seriously.

*** There is nothing particularly glamorous or prestigious about being a real estate mogul. Traditionally, it's gritty work, better than running a string of dry cleaning shops, but not much. So it would not be surprising to find that a man like Zell wanted to spend some of his loot to acquire a little better place in society. At 65, he is still a young man. He can still enjoy it.

And we hear that his wife has gotten very interested in contemporary art. That is always a danger signal. Like a man who buys a convertible and has hair transplants, she must be looking for something more than money. The next thing you hear, she will be buying tracts of land the size of Delaware in Patagonia in order to protect nature from her fellow humans.

So what's the deal?

In the old days, private equity purchases really could increase shareholder value. Old companies often needed a shake-up. A corporate raider could buy a public company, fire the fossils in the executive suites, sell off non-performing units, pay down debt...and then, for his reward...he would have a better, more profitable company.

But the present fad for private equity is largely a swindle...and Sam Zell seems to have fallen for it. Management will stay where it is, he says. And instead of selling off the non-performing units, he's selling off the best ones - the Chicago Cubs and the TV stations. Plus, he's not paying down debt...he's adding to it. Seven billion dollars of new debt are to be added - while the old debt stays where it is. Since the market value of the entire company is only $8 billion, that leaves the company with very little actual equity. And like Robert Maxwell, before he drowned, Zell is drawing on the employees' pension funds to help finance the deal...and putting the remaining equity into an Employee Stock Ownership Plan for the tax breaks.

At least, that's how we see it - after the 10 minutes we gave to trying to understand it.

Zell wasn't born yesterday. He's got plenty of money from the Blackstone deal. But he's not fool enough to use his own money in this deal. Instead, he's putting up just a bit over $300 million. If the deal goes bad, he loses the money. But it represents only a small part of his fortune. If it goes well, on the other hand, he can make 10 times his money.

But here is the part that we find interesting...and telling. Thanks to the wonders of modern finance - the thing for which all the world envies the United States, and the thing credited with being the source of so much wealth generation around the world - a rich, experienced investor can now make 10 times his money while enjoying the prestige of newspaper publishing. Whether it works out or not, he will be able to enjoy his modernist art and his lifestyle of the rich and famous.

*** Meanwhile, the pensioners...the lumpen investors...the employees - what will they get?

Not much, according to Andy Martin. At a New York press conference where the Internet publisher, broadcaster and media critic made very clear that he will continue to oppose the Zell's takeover, and will shortly file a competing proposal with the Securities and Exchange Commission.

"I think it is ironic that on the day when New Century Financial filed for bankruptcy, the Tribune Company agreed to a takeover with a 2% down payment. That sure looks like a risky deal to the stock market, which has posted a tepid response in early trading," Martin said. "Talk about a subprime corporate deal. Mr. Zell knows nothing about newspapers, but he is expected to now 'know more' than the entire industry. It makes no sense. And who gets left holding the bag when Zell parachutes out? Why the employees, of course.

"Once again, the investment bankers and brokers will profit by all of the transaction fees, and the public will be the loser. The Tribune will be left weaker, and under the direction of a man with no commitment to journalism and very little financial commitment to the enterprise. Mr. Zell has little risk and some upside; the employees have virtually all the risk and all the down downside."

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.