Here is my take on the whole Carlyle Capital Fiasco.
How do things seem?
This month, Carlyle Capital Corporation, which was established in 2006 to make investments in U.S. mortgage-backed securities, defaulted on about US$ 16.6 billion of debt. Analyst say that this is directly related to the global credit crunch brought about by the subprime mortgage crisis. This Amsterdam based affiliate of Carlyle was very heavily lev-eraged, and it expects its creditors to seize its remaining assets
Reuters released an article this morning and the title is, “CCC’s Woes seen as Small Blemish for Carlyle Group”. That is an interesting choice of words. When you think of a small blemish you think of something that is barely noticeable. It is not like a zit on the tip of your nose that you can’t hide.
“They don’t lose much on a fund like this. It’s like when you drop an egg in your kitchen. You just clean it up and throw it away. It’s bad if you’re the egg, but your kitchen is going to be fine,” said Roy Smith, a professor at New York University’s Stern School of Business.
The Carlyle Group’s exposure to CCC is minimal from a financial standpoint, analysts said. The Carlyle Group said CCC is a separate legal and business entity, and CCC’s defaults did not trigger cross-defaults for any Carlyle borrowings. “The people who invest with private equity funds are savvy investors. They recognize that this was an experiment undertaken by Carlyle to get into the mortgage business and they have little other exposure,” Smith said.”
To see the entire article here is the link:
http://www.reuters.com/articlePrint?articleId=USN1361636620080314
According to the Wall Street Journal the parent company the Carlyle Group will not suffer much financially from the fall of Carlyle Capital.
Because you and I are not use to dealing in this kind of money, 16.6 Billion dollars lost seems like enough money to shut down the world’s economy. To the contrary, Carlyle Capital is just 1 of 50+ funds controlled by this powerful Washington firm.
What does this mean to the average person trying to build their net worth?
If you can afford to buy another house and rent it out to a good tenant at this time this might not be a bad idea. It is a buyers market in real estate.
Don’t try to conquer the world but keep your eyes open for opportunity. Once again let me say that I am not giving you investment advice but just my opinion. Take it or leave it.
16.6 Billion is not a small blemish to most of us. Keep your eyes on your own field and tend to it. Jesus told a parable about a good steward – you might want to read it.
I think it is time for people who value a relationship with God and who are sincere in their pursuit of Him to ask for wisdom.
Till next time, Jim
