Friday, October 11, 2013

Carlyle Group: Hot on Street

The could barely contain their enthusiasm for The Carlyle Group's use of proxy measures to predict key economic outcomes.

Who wouldn't want to invest with such smart financial managers?

Smart?  Correlation is not causation.  Proxy measures can fail miserably when key causal factors behave erratically or break altogether with historical patterns.

It is positive that Carlyle Group, which indirectly employs hundreds of thousands of workers and invests billions on behalf of public pension funds, feels it can play a role in mitigating the deleterious impact of the federal government's partial shutdown. 

Carlyle's endless marketing machine is led by co-founder David Rubenstein.  PEU's like economic dislocation as it enables them to bring on new affiliates at discounted prices.  But there's a deeper issue for Carlyle in the shutdown. 

Numerous Carlyle affiliates do the government's work in many arenas.   Carlyle needs access to trillions in federal juice to keep flipping companies for major multiples.

The surface image is Carlyle is cute and smart.  The subsurface base of the iceberg has Carlyle's profit machine reliant on market dislocations, ongoing federal funding and continuation of private equity's preferred tax status.

Boy, those Carlyle yams are hot.  Who wouldn't want a piece of that?  WaPo, which will become PEUPo, agreed with The Street about Carlyle's greatness.  Fawning over The Carlyle Group is a near universal phenomenon.  Who wouldn't love such smart financial managers? Carlyle Capital Corporation investors.