A Woman's Perspective On The Times We Live In


October 26, 2013

From the Suburbs to the Trailer Parks

     I am no financial guru, but I ran across an interesting article on ZeroHedge that caught my eye.  Understandably, people (especially the retired) are edgy about their investment dollars.  There is no safe vehicle that guarantees a profitable return.  So consider the following strategy by the third largest private equity firm in the world, who just happens to be noted for its association with influential political figures, such as George H.W. Bush.
     That firm is the Carlyle Group, which is a very successful American-based global asset management firm, specializing in private equity, and based in Washington, D.C.  The Carlyle Group operates in four business areas: private equity, real assets, market strategies, and fund of funds.  OK, I'll admit that I don't really understand what all that means, so after a little research, I dumbed it down for myself, so I could try to explain it to you.
     Private equity - In finance, private equity is an asset class consisting of equity securities and debt in operating companies that are not publicly traded on a stock exchange.
     Real assets - This is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; in short, real estate.
     Market strategies - I believe this can be summed up by saying that asset management firms invest in a diverse range of markets and use a wide variety of investment styles and financial instruments to gain the most bang for their investor's buck.
     Fund of funds - This is an investment strategy of holding a portfolio of other investment funds rather than investing directly in stocks, bonds or other securities.  It makes sense that this would increase the diversity of investments.
     So why is any of this information important to us?  Because the Carlyle Group has decided it was time to exit the suddenly extremely crowded “buy-to rent” residential real estate market, and focus their investments in areas such as senior housing, self-storage units and manufactured homes.  Just this week, the Wall Street Journal reported that the investment firm has added "Trailer Parks" to its diverse portfolio.
     Are you reading between the lines here?  In fact, the Carlyle Group recently struck a $30.8 billion deal, in which they bought two trailer park communities in Florida.  Analysts said the deal is evidence that big investors are betting that the demand for low-cost manufactured housing, the latest generation of trailers or mobile homes, will rise as other housing alternatives become too expensive for a number of Americans, especially senior citizens.  The industry spin is that it is a good investment because landlords like the steady income stream—tenants tend to stay put, especially retirees—and the low maintenance costs are attractive.
     But perhaps the truth behind the Carlyle Group's move into this new investment market is that the Baby Boomer Generation, which is beginning to retire (some forcibly), can no longer afford their lifestyles of the past due to poor return on their investments.  When you consider increased medical costs (including health insurance), increased property taxes, and inflated food prices, it will become more difficult to make it on a retiree's income.  That means downsizing from their current homes to a less expensive residence.
     So do the investment "specialists" in D.C. anticipate that our seniors are going to experience a decline in their value of living?  Are they betting on it, with this new direction in investment strategy?  It sure doesn't give me much confidence that the future is going to be looking up.  I'd feel a whole lot better if Papa Bush thought the next trend was in free market venture capitalism.

Luke 14:28      "For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?"

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