Internal Carlyle Group Memo: Market Good For 12-24 Months

Bob Chapman
International Forcaster
Friday April 27, 2007

Now hear this! What we are about to tell you comes from deep within the bowels of the Illuminati. This information runs parallel with what we have been forecasting in our issues of the IF.

In February, via an internal memo, the Carlyle Group said they see another 12 to 24-months or more of “excess liquidity,” which will drive further profits and growth and that the current liquidity environment cannot go on forever; and, that the longer it lasts the more money our investors will make; but also that the longer it lasts, the worse it will be when it ends”

In the missive it was stated that Carlyle’s fabulous profits were not solely a function of their investment genius, but have resulted in large part from a great market and the availability of enormous amounts of cheap debt. In fact, there has been and is so much liquidity in the world financial system that lenders, even their own lenders, are making very risky credit decisions. This sea of money and credit has allowed deals to be done that could never have been done otherwise.

They do not expect the Fed to reduce interest rates anytime soon.

What could bring this global liquidity to an end? Just that business would diminish their borrowing or could it be higher interest rates? Could it be a terrorist attack; $100 per barrel oil; trade protectionism; the absorption of excess skilled labor into the global economy; the US elections; Russian energy policies; a multi-billion dollar bankruptcy; a tightening by the Bank of Japan or the Fed; an end to the yen carry trade as a result; or perhaps the collapse of several hedge funds or a derivative collapse? All are possible and at least one is probable.

The strategy should be to take lower risk deals and earn lower returns rather than higher risk deals at only small incrementally higher returns. We should redouble our focus on deals with downside protection, asset coverage, multiple and early exit paths, strategic partners, debt pay down, government protection, consumer needs, controllable capital expenditures, defensible market positions, etc.

Carlyle is being careful because they know what is coming, just as we have been telling you here in the IF. Carlyle is the insider. What we have been busy doing for years is figuring out what these elitists will do before they do it.

This is exactly what we have been forecasting. If we and Carlyle are correct, we can expect more than ample liquidity until February of 2009. During the year to 1-1/2 years that follow liquidity will decline and inflation will diminish. After three months of declining liquidity or declining use of liquidity we will know it is time to sell all assets except gold bullion coins, quality gold shares and for those of you who have to have some liquidity, Swiss francs.

Now that foreclosures are going wild lots of crooks are defrauding homeowners. Here are some tips. Don’t pay upfront fees to any person or organization promising help. Don’t sign anything without have an independent lawyer review it. Seek out accredited financial counselors, using lists such as those kept by the Department of Housing and Urban Development. Wild rescue offers that are too good to be true are just a scam.

This week the Supreme Court stepped into the subprime lending crisis with a potentially far-reaching ruling that limits the power of individual states to regulate mortgage lending. The elitists have to control everything in our lives.

The Supreme Court is allowing banks to offer new terms on mortgages in violation of the law.

This will have a big impact on the ability of states to act independently on predatory lending and throws the spotlight on federal authorities.

The Consumer federation of America said, “This is really disappointing news, it could work to the detriment of consumers.”

Applications for mortgages fell for the 5th straight week as ARMs fell to 18.1% of applications, the lowest since 7/03. A year ago they accounted for 30%. Refis were 2.5% lower wow, but they were up 10% yoy. Refi apps fell 0.3% and accounted for 44% of applications. The volume of loan applications to buy a home fell 4.2%, but purchase loans were down 3% yoy. US home sales are off 5.5% yoy. The average 30-year fixed rate mortgage rose from 6.16% to 6.22%, the highest in nine weeks. The 15’s rose 1 bps to 5.92% and the one-year ARMs rose 1 bps to 5.89%.

US foreclosure filings rose 47% in March yoy. That was 149,000 as California’s filings rose 31,434. Nevada and Colorado had the largest percentage gains. Those making late payments are at a four-year high and the failure of 55 subprime mortgage companies has tightened the supply of money for lending. Nevada’s foreclosures were triple yoy. That is one foreclosure for every 183 households, which is four times the national average. Colorado’s rate was one for every 292. Nationally it was one of every 775. California had 6 of the 10 metropolitan areas with the highest foreclosure rates, Stockton being the highest. The others were Vallejo-Fairfield, Modesto, Sacramento, Riverside-San Bernardino and Bakersfield. Greeley, Colorado and Detroit and Denver were also up near the top.