CMBS

Ok-Salad9664

I’ve been researching it more, it looks like we need to find whoever is holding a lot of loans for non-owner occupied San Francisco, Austin, or Seattle office properties. I can’t find a way to research who holds the loans cheaply however. There’s a chance the risk has been diversified away in CMBS but I have a gut feeling there’s a regional bank that’s holding a bag in one of those markets.

redditmodsRrussians

I dunno...seems like CMBS is where its at in terms of crisis point. Too many buildings empty and not needed while they keep building more of these giant money tombs thinking somehow its all gonna work out somehow. Its just banks and commercial real estate investors bagholder version of "buying the dip" like retail bagholders on gambling stonks.

dogoodsilence1

Yes it’s foreseeable. You can consider more defaults on [Commercial Backed Mortgages](https://www.fitchratings.com/research/insurance/us-commercial-real-estate-deterioration-to-increase-in-2024-led-by-office-21-12-2023#:~:text=Fitch%20forecasts%20overall%20U.S.%20CMBS,June%202020%2C%20to%203.48%25) coming this summer. We will also see more [SPAC](https://www.ft.com/content/83f0feba-5168-44da-90d7-b0aa11030cf0) bubbles bursting. I’m thinking DJT and the SPAC that just merged with it are going to be the catalyst [Donald Trump](https://fortune.com/2024/01/09/donald-trump-herbert-hoover-wants-economy-crash/amp/) is trying to create with his corporate overlords.

Beautiful_Speech7689

Puts on the 1-year T-bill Equity depends on your timeframe, looking at 1-2 months out, gun to my head I say call. I think you get higher inflation readings over the Summer as transportation increases due to the following: Higher travel inflation entering Summer due to higher seasonal demand, reduced oil production from Russia (lots of this ends up in India/China, has to be replaced somewhere) and potentially Middle East. Also, Boeing/United issues point to a potentially reduced domestic air fleet which will apply upward pressure on airfares. Airspace remains closed over Russia, Suez/Panama canals are both operating at reduced capacity due to water levels or rebel attacks. Housing continues to inflate at a steady rate barring modification, open market operations impacting long-term MBS/CMBS rates. I think this is unlikely. Service and labor will continue to see pressure due to seasonal demand. Global food shortages due to war and climate change remain an issue. Restoration of Ukraine exports helps, but I don't see anything that moves the category below 2% annualized. TLDR: I see these rate cuts being priced back out around June/July.

Beautiful_Speech7689

If they want to attack housing specifically, they'd consider buying MBS and CMBS to bring down while allowing Treasurys to continue rolling off of the balance sheet. The spread between UST and MBS tightens, but who cares if it eases one of your primary inflation factors. It takes some guts to buy again while short-term rates are still elevated, but provides control over at least one of the key factors. It might make some people's heads explode, but there's a first time for everything and we're in uncharted territory.

Legitimate-Look6378

Its not the 117bn debt thats the issue, the question is how over leveraged are the CMBS market and if their are similar tranche bets going on in the background. Enjoy the rabbit hole.

MJinMN

You are overly hyped up about CRE. First, CRE is comprised of a ton of different asset classes, many of which are still doing fine. In a lot of cases, a bank makes a business loan and if they take the borrower’s building as collateral it gets classified as CRE. Non-owner occupied office is the worst, but average bank doesn’t make loans against skyscraper office buildings in Manhattan and the exposures as a percentage of loans is relatively modest. The most aggressive CRE lending was packaged into CMBS, so until you are seeing implosions there, you’re not going to see anything crazy in bank-land. That’s not to say that banks won’t take losses in CRE, as they will, but it will be spread out over the next several years and the loss content will be manageable in most cases - this isn’t the start of another financial crisis.

RichSir1938

Plus 10% of their deposits are escrows from loan servicers (CMBS and RMBS) and lenders, which require the deposit bank to be rated higher than junk. This article explains it: https://www.cnbc.com/2024/03/04/some-nycb-deposits-may-be-at-risk-after-another-moodys-downgrade.html

elefontius

I don't think that will help them long-term with their credit downgrade. Most counterparties require you to maintain an investment grade rating and it's really hard to function as a bank if no counterparties are willing to do business with you. I think BTFP expires on the 11th of this month and even that might just be a short-term fix for NYCB. Right now the bigger risk for them is their counterparty risk - NYCB packaged a lot of their commercial real estate portfolio into commercial real estate backed securities and sold them to counterparties. Those counterparties can now cancel those deals and request money back since NYCB got downgraded. Those CMBS will end up back on NYCB balance sheet and they are going to lose a ton of capital. My bet is those counterparties are working overtime right now to get out of any trades they have with NYCB and it's going to be a quick doom cycle because between this and capital flight from depositors, it's going to be hard for them to retain the capital requirements they need to stay open.

nateccs

this is more residential real estate exposure no? and CMBS doesn't move at all its been flat since december. i already have puts on KRE, NYCB carries 2% weight on it.

_Ghost_Void_

Beautiful work. Just remember that Michael Burry almost went broke because he was two years two early on the trade. And this time around everyone and their mother will be shorting CMBS. Plus these days it seems like the fed will bail out any one who stands to lose money and is already rich so with my luck if I tried to short CMBS the next day Powell would announce the largest purchase of CMBS in human history.

tachyonvelocity

If you want to actually know how overall Commercial real estate is doing instead of all the social media comments and major news media talking about the potential of a CRE collapse, I would look at [this Trepp data](https://www.trepp.com/trepptalk/cmbs-delinquency-rate-inches-up-in-february-driven-by-office). "The overall US CMBS delinquency rate rose to 4.71%, an increase of 5 basis points for the month. (The all-time high on this basis was 10.34% registered in July 2012. The COVID-19 high was 10.32% in June 2020.)" Office isn't doing well, I realize that, but a CRE crash leading to a banking crash, isn't going to happen unless Multifamily CRE delinquencies are going up. They aren't really going up, in fact they're pretty much the same as last year, obviously because both shelter rent inflation and employment have been high, people still have the ability to pay higher rents because real wages have risen.

confused_trout

Thank you so much what if I want to short CMBS? What would the vehicle

ajohns90

Vanguard is (still) projecting better growth in REITs over the long term than large caps. However, I think it’s more than just looking out for lower refinance rates. I do think at this point it’s a long term bet but after 4-6 years when the toxic components of CRE are burned off, and when banks, CMBS, etc are more highly regarded again, then REITs will rise to beat their average returns over the past few years.

Life-Industry-1131

Moodys says 80% of CMBS loans at risk of default/ workout But ya for sure AI AI AI look this way don’t look at that AI AI AI

Ngc2273

Didn't mean to imply the stock market is zero sum. However the question still remains in my mind, if there's a net of trillions still flowing in the stock market, where is it coming out of? It's a lot of money for some small cap failing companies to equal the balance. Is it big international money coming in, is it sidelined under the mattress money, or just more printing? If residential and commercial real estate is doing badly, which it would be in high interest and low occupancy environment post covid, then the big insurance and pension funds dealing with RMBS and CMBS should be fuked from both sides and crying losses no? Either they are hedged extremely well, will start failing at some point, or they've been bailed out already. Only the last situation lifts the markets. And to your last point, if that's the case inflation will remain high and if the fed is really about their word, interest rates will then remain high as well. The stock markets were high on pricing in cuts starting from March, atleast now we know that won't happen and the Markets went even more ripping. Anyhow I went long on some stuff now so can't complain. Just trying to make sense of it but can't lol.

imcamccoy

What are the chances of a liquidity trap caused by CMBS deterioration?

Puzzled-Raspberry-32

Is there a source for the $1.2 trillion? Any idea how large the total CMBS market is?

Miadas20

Liquidity from reverse repo getting drained. Well all have to find a chair when the music stops in March. Then everyone buys the dip Then '25 melts faces well after the fed had to cut and print this year from CMBS shit show coupled with Bitcoin Ath'ing 12 months after the halving. Yah it only goes up.

realmichaelklemme

Regional bank ETF: IAT Commercial mortgage back security ETF: CMBS do with this information as you will 

Sorry-Business-1152

A big part of their business is in CMBS

machyume

Economy is actually fine, but is everyone going to be fine? No. People's savings are melting, or melted. They will become future needs that the economy will have to support. But that is a later problem. More immediately, people will be forced to make hard choices, and they will have to adjust their way of life. This is as predicted. The rural areas either have to bootstrap themselves or further collapse into urban areas. Urban areas will also have to collapse into commune style living. Late-stage urban living has a model already, see Japan. Prices are expensive there too, but people will survive. Now about the "health" of the markets. First, value is whatever people value things to be, so PE is a useless metric if compared to absolutes. Relatively one another within their groups PE can be "useful". So let's throw the idea of valuation to the side for a bit. What are "surprised" that are coming down the line? Well, there's the elections, and CMBS time bombs. Lame duck will make for an unstable policy period, and commercial real estate is about to get a dramatic update (already happening). Right after tax month, all those new rate contracts will spike expire and commercial office space will have nowhere to go. So the pain of that and the raised interest rates will have to be divide up by all the layers, including the banks. Since businesses cannot move very fast, they will cut workers, and take a delayed hit on some of their top and bottom line due to labor disruption and increasing costs. Will take at least 1 quarter to absorb the impact. This would be the perfect reason to trigger the rate reduction, but timing here is going to be clutch. It will wobble a bit as each news get realized at different points of time. Rate changes are not nothing. So Powell has some options, if he wants to cut earlier to make the lower rate available or cut late to let some of the market take the pressure. Different choices cause different outcomes. The markets will be inefficient during this time as it has to reevaluate all these priorities. I expect volatility to increase. But it depends. If people grab puts right now for half a year it could prevent some of these outcomes, because the puts will act as insurance against if, but bears are going extinct. People would rather sit on cash. If people don't buy puts now, then MMs cannot sell any, and when an even does pop up, it'll absolutely cause a correction. Everyone here has choices. We define the future. By typing this out, I know that I am reducing my potential payout, but I also don't want a massive correction. I have a good system going now and I'd rather the market eases into soft landing so that I can continue to pick up nickels without getting crushed by the bulldozer.

ShittyPianist

I have been researching something to this effect for months. I have no training in finance - so take all this with a grain of salt, I merely worked at a financial advisor place for five years as a programmer until last year. Imo, your best bet is to honestly be in a position where you have a paid off house (or the liquidity to pay off a fixed rate mortgage asap) and no debts outstanding. Also, develop a marketable skill set. The dollar can't fall overnight imo. It would be death by a thousand cuts. The regulation created after the Great Depression that stopped commercial banks from doing investment banking activities got heavily rolled back in the 60s and then pretty much completely thrown out in the 90s. That is what led to the crisis in 2008. There have been regulations reintroduced since, but commercial banks can still do investment bank stuff. This has led to a "too big to fail" rush in the financial sector, imo. If a bank can become large enough that if it were to fall, the Fed bank steps in and will bail them out. We saw this last year with SVB and the creation of the BTFP. The BTFP was more easily utilized by larger banks, and I am very suspect that an arbitrage strat was used to let it be used as aoney printer for the largest banks. The US has gotten away with this for so long in part since we hold the predominant currency of trade via the IMF and since the US can simply sell its debt to other countries in the form of bonds. However, our bonds, both corporate and government have become less appealing, thanks to both political and economic reasons. Also thanks to politics and the neverending threat of shutdowns, Moody's downgraded the US credit. So it costs the government more to borrow money from other countries. So now the world is in a very weird spot. Many countries are holding onto US debt. Many countries' currencies are pegged to the US dollar. The US's spending is out of control. If US banks are sitting on millions of unrealized losses due to basis rate changes in a short time frame, I suspect the same goes for countries. The pandemic hit all countries hard, so less countries have the money to buy the current bonds. To further throw gasoline on this shit show, US CRE pre-pandemic was seen as a really safe investment. With 2019 CMBS coming due this year, the cracks of no one being in the office anymore are starting to show via NYCB and Aozora. Something happened with CMBS things and downgrades last week as well, tho I have a lot more reading to fully grok what. And the BTFP ends in March, whilst also, the gov needs to decide on a budget. I write all of this to say that there is no good answer and that it is unlikely that the dollar will fall far very rapidly. But we are definitely starting to test the bounds of the current system and the ride will be bumpy. So the less people (banks, really) who can lay a claim to your property and livelihood, the better.

ShittyPianist

American commercial real estate and CMBS are going to fuck banks right up the ass worldwide. It's already showing. NYCB and Aozora. Keeping my eyes on life insurance companies for the foreseeable future...

spinek1

Im buying!!! Puts on just about every bank that is over leveraged on CMBS in that country. (Also might not be a bad idea for some regional American Banks)

ArrdB

I found [this source, table 2](https://www.federalreserve.gov/releases/h8/current/), which paints a bleaker picture. 2.959T in commercial real estate loans, 23.209T in total assets or 12.751%. This doesn't include CMBS. Also that 2.959T is greater than the residual, equity, of 2.219T by 33%.

pynoob2

Yes I stay bullish by remembering that the economy is fake, the stock market is fake, the entire CMBS system is fake, and if the rich people in charge want the numbers to go up they can easily make them go up.

greedystockz

There would be a massive sell off for CLO & CMBS which would spill over into equities the same way 2008 happened.

Niiilllsss

CMBS values are not in the quadrillions jfc

NOT_MartinShkreli

You realize they have swaps on them and interest rate swaps that went the wrong way on them because they didn’t hedge appropriately right. CMBS + Airbnb + credit defaults in general is always a domino. Believe what you want but I’m telling you we just can kicked 2008 down the road to now

johnywhistle

No they wont. Banks have less than $2 trillion in exposure to CMBS. About ~7% of all balance sheet assets. Most of the risk is held by shadow banks like PE companies and Asset Managers.

NOT_MartinShkreli

Banks will fail just like 2007-08 because of CMBS and exposure to those shit securities + swaps on them

NOT_MartinShkreli

Also CMBS loan default + Airbnb bubble default

NOT_MartinShkreli

CMBS is with derivatives

NOT_MartinShkreli

Sometime between now and earnings reports for Q1 so March / April we should start seeing realized losses on defaulted CRE loans that would crumble CMBS and CRE valuations

Kind_Initiative_7567

Even if 70 down, it's still over weight, imo. Macro is quite bad. The CMBS shit storm been waiting months to explode, imo....

OG_Time_To_Kill

Extract from the latest release FOMC minutes for meeting held on 12-13 December 2023 ..... ​ *Credit quality remained broadly solid but deteriorated further for some sectors in recent months. Delinquency rates on nonfarm nonresidential CRE bank loans rose further in the third quarter, and delinquency rates for construction and land development as well as multifamily loans ticked up.* ***After increases over the first three quarters of the year, delinquency rates for loans in CMBS pools edged lower in October, but the large volume of loans scheduled to mature over the next few quarters suggested that delinquencies would likely surge again.*** *The delinquency rate for small business loans continued to tick up in September and was above levels observed just before the pandemic. Credit card delinquency rates also increased further, while delinquency rates on auto loans were little changed in the third quarter. The trailing default rates for investment- and speculative-grade corporate bonds were little changed on net, and the trailing default rate for leveraged loans increased a bit.*

redditmodsRrussians

Someone has big CMBS bags and it’s full of……

pynoob2

For US treasuries, who cares. For CMBS, yaaaa, that might be a problem...

MeMumsABear

Fellow CMBS trader 😎. Very “fun” to be in the industry right now

oxxblue1976

Agency, non-agency and even some CMBS. LDES is an amazing tool to use to analyze loan level data for CMBS

Realistic_Post_7511

HA ! HA last time I was laid off was during the Sub-prime mortgage crisis . I managed 3 levels of loan counselors up through short sale or foreclosure . I’m good on my ODT’s, CMBS, MBS, CDS…but hey have you paid attention to mortgage buybacks from Freddie and Fannie increasing ?

Realistic_Post_7511

All good things come to an end. I’m focused on all the layoffs and pending defaults . CMBS , Commercial Real Estate , wave of residential foreclosures , cc debt and delinquencies, auto loan debt and delinquencies , student loans repayments kicking in , new BASEL requirements , and this sneaky 10-12 ^ shedding of employees in all industries. Did you all catch Wells Fargo just laid off 50 investment bankers and staff ?

Romytens

Despite the increase in interest rates, there’s still an excess of liquidity in the market. It needs to be erased if we’re going to see the interest rate hikes do their job. The easiest way for the Fed to do this is to engineer a crash in commercial real estate. Commercial RE owners are likely to be the safest to drag that liquidity out of without major damage. That said, it could still create a systemic event if CMBS aren’t regulated as much as MBS are. I mean.. uh… no regard! Recession indicators aren’t real!

Beginning_Frame6132

When’s the CMBS party finna to kick off? I got my invite but didn’t RSVP

Funkshow

Dude, I do this everyday. I’m seeing 225-250 over the ten year on lifeco debt. Non-recourse CMBS is 350 over. I have no idea about residential.

Cashneto

All types of companies hold CMBS. The real issue with Commercial Real Estate is they are on variable interest rate loans and typically refinance every 5ish years. A lot of loans will have their rates skyrocket soon due to the variable rates and will need to refinance, but the rising interest rate environment makes it difficult for those real estate companies to afford it.

reercalium2

Who's holding CMBS? They'll run out of money

Cashneto

Yes, but in order to get a 2008 type of meltdown everthing needs to be tied to commercial real estate. In 2008 you gave companies holding mortgages, RMBS, CDOs with RMBS, Credit Default Swaps on RMBS, and basically bets on a bet on bets that people would make their mortgage payments. It was a house of cards. As far as I understand, Commerical Real Estate has securitization (CMBS), but not at the levels of RMBS, I'm sure some of the loans are held on their books by banks.

StankBallsClyde

Inflation is still coming in hot, layoffs are looming across the board, 30-year fixed just crossed 8%, stagflation is on the horizon, CMBS is going to be devalued out the ass in 24’ with higher refinancing rates PLUS at higher rates (potentially) than what we are currently seeing AND many of the regional banks are exposed here….. I really don’t see the bull market buddy.. it sounds/feels like everything is about to implode

Space-Booties

None of the banking issues have been resolved. CMBS hasn’t been resolved. Fed needs to continue with rate hikes. Two wars haven’t influenced the market much. Inflation is still hot. Oil seems to be headed higher. There’s always room to the downside. 😂

redditmodsRrussians

I don’t know how it is around you but most commercial properties I see in my daily life are ghost towns. Office complexes with so little occupancy where mail just piles up at the front of the doorways. Shopping complexes with nothing in them except a Subway that nobody wants to eat at or plastered over windows with fake images of people on them. CMBS market is fucked and everyone holding those bags are coping harder than towel regards.

Prestigious_Muffin99

And when you’re done w CMBS, start looking at ABS… more fun there :)

BBTB2

This is gonna blow your mind: **CMBS** That’s one of them at least, there are a few CMBS focused ETFs

Babymenace

There are different types of CMBS, conduit, single asset single borrower, and cre clo. In this case, you are talking about conduit but every single deal has a different breakdown so would have to look up exact vintage and deal to get the top 20 loans in each deal

PunsRTonsOfFun

Here’s Margot Robbie in a bubble bath to explain what a CMBS is…

solniger89

There’s a lot of stress in real estate because of liquidity, also rates are putting a lot of pressure on the CMBS market, secondary lenders etc. Also consider that at more institutional/HNW real estate funds they are “gating” their funds, I.e. you can’t liquidate your investments until they say you can. The nature of real estate investments these days is that their liquidity is being challenged which is creating a lot of problems

The_Basic_Concept

CMBS but that play would have been better over summer with LEAPs

ShankThatSnitch

Rental property returns if you have tenants that pay rent. Office real estate is not making returns. CMBS delinquencies for office are rapidly rising. From july 2022 to july 2023, they1.5% to almost 5%. Industrial and retaip CMBS have remained stable, though.

ShankThatSnitch

Rental property returns if you have tenants that pay rent. Office real estate is not making returns. CMBS delinquencies for office are rapidly rising. From july 2022 to july 2023, they1.5% to almost 5%. Industrial and retaip CMBS have remained stable, though.

Alec_NonServiam

Additional prediction: CMBS takes a giant GFC-sized shit, and domino-effects major lenders leading to credit crunch. Auto market loans become suddenly very hard to acquire, auto market dumps, Ally bank and other majority-auto lenders seek acquisition. I wouldn't be a dude looking to finance a new car right now, might be a fire sale soon.

NOT_MartinShkreli

They’re only tighter on home buyers that aren’t investment funds buying in cash So I again, agree to disagree. CMBS does not have more strict laws after 2008 either. That’s a joke

Raveen396

I think this is a more valid comparison, but regulations are significantly tighter in 2023 compared to pre-2008 with how MBS/CMBS are handled. Not saying that everything will be fine, but the reality of 2023 is very different from the conditions in 2008.

NOT_MartinShkreli

Ok try comparing MBS to current CMBS and then let’s talk numbers

NOT_MartinShkreli

Sounds like a MBS run back from 2006-2008 in a different, less regulated area… CMBS, auto loan backed securities, and student loan backed ones are going to destroy the financial markets soon thanks to tricky financial engineering to get over leveraged as hell betting on those markets.

GR33DYSTOCKS

No one is talking about it, but $1.4 Trillion is due by the end of 2023 for loans on CRE. You'd think that the writer of these loans are larger banks like JPMorgan, BMO, etc, but they aren't. It's regional banks largely financing these loans and extending them hoping to see a return. I don't think they'll get it and once this materlizes, we're going to see another massive banking crisis that manifests into a CMBS crisis. This kind of crisis will trigger a massive sell off from institutions in all sectors.

DesmondMilesDant

It's always a great pleasure to know your opinions sir. I too am a bit of conspiracy theorist myself like Black Rock taking heavy losses in China and covering it up with Nvidia. As for CMBS no one really knows how big the derivative exposure is in small banking space but considering its mostly regional banks involved I think it could be much larger but probably come into full effect in next sept-oct not this one. Fed has just one hike left to do just like Fed of Greenspan. So market can only go max 10% from last hike or chop sideways. Let's see what happens in December. Santa claus days as usual will determine whether we get the January effect or not. As for treasury don't forget next year they will kickoff their buyback program. "Buying back older securities and issuing more of the current" to bolster patchy liquidity in the Treasuries market.

azidesandamides

When you purchase a mutual fund stock, you are “purchasing” a “stock” in the fund itself. The “stock” isn’t really a stock in the normal sense; rather, it’s more like a share in a shell company. It’s not really a “shell corporation” though, because it’s not a corporation. A fund is just a pool of money. That is all it is. It owns nothing, it holds no assets, its not anything at all in the “corporate” (legal person) sense. It’s just an account. The fund itself does not own the stocks purchased by the money that was taken from the fund (pool of money), thus purchasers of "stock" in a mutual fund have no legal rights to the underlying stocks whatsoever: It symbolizes ownership in the underlying stocks, which is to say, it’s not in any way shape or form actual ownership in the stocks. The Fund Manager, which might be a Corporation (i.e. Vanguard, BlackRock, etc.) or Trust (TIAA e.g.), owns the stock. Whatever name is on the stock purchase order owns the stock. This name must be a “person,” though in this case a Corporation is a legal person (by definition). Having said that, the actual ownership (beneficiary and/or controller) ultimately falls to a Natural Person (Larry Fink e.g.), and not a legal person (company, trust, government, etc.), but I’ll get back to that later. The Company that created the fund has contracts they must follow as a legal corporation, but the fund itself (that which you are “buying”) is just a pool of money. The Fund Manager may have contractual obligations to purchasers of a funds "stock" (which may give you "voting rights" to influence the fund manager), but the fund itself is nothing. It’s not even a “shell corporation.” It's just a shell. That is what a "stock" in a mutual fund is; a piece of a shell (a portion of a money pool); where you don't actually own any of the money in the pool, you only have contractual withdrawal rights. The money you put into the pool belongs to the corporation that set up the fund to do with as they please (within the bounds of the contract that sets up the fund). From the SEC’s guide to mutual funds (page 8): You can think of “buying a share” of a mutual fund (or putting money into your retirement fund if it follows the same format) like depositing money into the bank. In the case of the bank, your deposit becomes their money. They can do with it as they please (within the bounds of your contract with them). Generally they take that money (which is theirs) and loan it out to other people, but it can under certain circumstances (depending on the contractual obligations of the account type), be used for anything the bank wants, like buying other real assets. It’s their money. What you have are contractual withdrawal rights and possibly contractual interest depending on the account type. (I will get back to this in more detail in Part 3.) In the same way, your “fund stock purchase” is you giving the fund managers your money, for them to use however they want, within the bounds of the contract. You have no say on what stocks (or other assets) they purchase, though there may be bounds in the fund definition. You also have no rights or privileges on the underlying stock. They belong to the fund manager (or the corporation, or whatever name is on the purchase). You are a depositor. You have the right to “sell your stock” in their fund (like withdrawal rights). You have the right to some contractually agreed upon amount of the gains of the underlying stocks (like contractual interest rights), but that is an agreement between you and the fund, and has absolutely nothing to do with ownership or control of the underlying company stock itself. For example, if BlackRock buys 8% of General Motors stock, and 30% of the money they used comes ultimately from a group of retirement funds (as a made up example), the original source of that pool of money (fund) is irrelevant to who owns the GM stock. The purchase of this stock, using money from the fund, gives ownership and control of the stock to BlackRock (or whoever’s name is on the stock purchase order). What happens when Mark to Market no longer works... and everyone pulls out for liquidity at the same time... or cuz finkle is einhorn all of CMBS and retail crash and everyone wants the money out of the system at the same time? Remember But.. In the GDP framework goods emerge because of people's desire to purchase goods. However, it is not enough to have demand for goods—one must have the means to accommodate purchases. The means are various final consumer goods that are required to sustain individuals in the various stages of production. The key source for the means of sustenance is individuals’ savings and the "Whole goal was to raise interest rates to prevent people to spend and instead save... but if interest rates are at 8-10% no-one wants a house or a car... Then want happens with a bank run... Oh IDK think 1929...

azidesandamides

>I personally hope it comes sooner rather than later. For all of our sake. Burry just went short... SO you know... they will can kick it another 3 years and lie about the rating agency like 08... and CMBS/CDO

ShankThatSnitch

Ok, and now he is calling for a new long-term bull cycle, all while: - We are sitting at the top of the terminal rate. - The yield curve effects have not fully had the time to affect the economy. - Nearly all areas of the economy are slowing or have reversed. - The money supply is contracting. - The fed continues its QT, which acts similar to more rate hikes, in terms of effects. - The number of banks tightening lending standards is at or near the same levels it was before the last 3 recessions. Tightening lending slows economic growth. - We had massive bank failures, with absolutely more to come. - Commercial real estate and the CMBS market is starting to break and will get crushed before too long. Delinquency rates have been rising for the past 6 months, and once refinances start to ramp up, that number will climb rapidly. - The UK guilt market broke. - China's economy is dumping. - We are at full employment, which is what happens *before* unemployment rises. We have already see initial and continuing unemployment claims rising for the past year. - Avg hours worked is going down, which is the precursor to unemployment going up. - Real wages have gone down, while debt has gone up, especially credit card debt is at record high levels with a record high interest rate. - Student loan repayments set to start back up, which will be about $250-300 billion liquidity drain from the economy. More, when you consider it, it will make people struggle even more with other debts. - Credit and auto loan delinquencies are rapidly rising, which, of course, is the precursor to defaults. Which will further tighten ledning standards. Which will further slow the economy. - Govt tax receipts have dropped over $200 billion, which directly contradicts any positive data we are seeing about growth GDP growth. The list goes on. Almost every bit of real, forward-looking economic signals says recession risk is virtually guaranteed. People just overestimate how fast these things happen, myself included. We are well within the normal timeframe leading up to recession.

ApenguinnamedRUA

CMBS

_logic_victim

Don't forget CMBS book cooking. We saw the natural consequence of MBS fraud in 2008.

possiblerussianbot69

CMBS

Takuma255

Huh??? Finanical professionals don't "deflect" downturns, they add fuel to them until the government bails them out. This time will be no different, they'll all drink the soft landing kool-aid until the absolute bitter end and then the government will come riding in to bail them out of whatever regarded ass bet they overleveraged themselves into this time.(My money is on CMBS and/or some regarded ass derivative no ones even heard of) The treasury market isn't a bunch of coke fueled degenerates, it doesn't invert just for the fuck of it... but sure, im idiotic 😂

lvanTheTerrible

Why are you investing in a bond fund now that holds CMBS and with at least one more rate hike on the horizon ?

Scary-Cattle-6244

If you want to short CMBS/bet on a negative outcome, hold cash. You won’t get burned nearly as much.

GoonHandz

it is true that i was considering the type of CRE loan that would exist on the balance sheet of large global banks or in CMBS transactions. tbh i’m not sure what you’d get on the balance sheet of small regional banks or their over all size of the whole CRE loan universe, but i do believe if you consider the leverage adjusted exposure to CRE assets, the loans will look more like what you would see in a conduit/fusion CMBS transaction. what we can agree on was my original point: the statement that 5/1 ARMs make up a significant portion of CRE loans made in the original post is misinformation.

awkrawrz

*APPL stock enters chat after recent earnings* Personally, a lot of companies are just starting to report bad earnings and poor outlooks as they see consumers are just starting to tighten their purse strings. Mix that with the CMBS crisis on standby... The top banks being forced to replenish the FDIC... Consumer debt insanely high.... We are IMO very close to an edge

Calebthe12B

Fitch downgrading the US from their highest rating to their second highest rating isn't going to have any real long term effects on the US. There's a lot of things that could create a turning point for the world economic order, but a Fitch downgrade certainly isn't one of them. As long as USD is the world reserve currency, rating agencies can do whatever they want and not have any real impact on the US. Remember this is the same group putting AAA ratings on junk CMBS prior to the financial crisis. No one trading Treasury debt is going to pay heed to it. While you're going to see some reaction to the headlines, this isn't going to change anything in any sort of measurable timeline. We've got lots of problems, but a Fitch rating ain't one!

SoManyThrowAwaysEven

Technically it's worse but it's tied to CMBS instead this time. Housing will not crash like 2008 but commercial will. It's why most places are demanding an end to telework.

NOT_MartinShkreli

Nice, I got 7/31 SPY $452 puts that I think will print when mega caps slide from said rebalancing the next 3-5 days. Once mid September hits I’m loading up puts for June 2024 and waiting for a “black swan” (aka CMBS going to shit, more bank failures / runs, consumer credit defaults, inflation on the rise again since rent is main factor and most leases turnover in July / August cuz of college kids and that shit will be higher)

NOT_MartinShkreli

Short term probably should be a bear cuz the settlement of the rebalancing to shed mega cap tech companies happens the next 3-5 days. Should see selling pressure and somewhat of a slide in the near term. I refuse to be full blown 🌈🐻 until mid September / October since ain’t shit gonna happen as a catalyst until this quarter winds down (like say CMBS defaults, banking issues resurface from when regionals fell, inflation back up, etc.)

ndwillia

Maybe, but CMBS aren’t going to be the proverbial straw that breaks the camels back. They will degrade but they are not going to be the source of market wide degradation. It’s well known that the cmbs market is teetering on the edge.

dumpsterfirestonk

Meanwhile, CMBS ratings surpass 2022 downgrades. PE defaulting on property because of rates. I’m def buying puts on MS for 2025.

GOVkilledJFK

>Backstop them? Not sure I've heard this term before. Care to elaborate? Sure... >By Masaki Kondo, and Alex Harris March 15, 2023 at 11:45 PM EDT Updated on March 16, 2023 at 9:51 AM EDT Market observers are on alert to find out just how much extra funding the Federal Reserve’s new bank backstop program will ultimately add into the system, with analysts at JPMorgan Chase & Co. positing that it could inject anywhere up to $2 trillion in liquidity. That’s their maximum estimate. The analysts’ prediction based on the amount of uninsured deposits at six US banks that have the highest ratio of uninsured deposits over total deposits is closer to $460 billion. That’s a smaller amount, but still enormous compared to historic usage of the so-called discount window, another Fed facility that is often seen to carry a stigma and has historically involved banks taking a haircut on the amount borrowed relative to collateral. "could" means will if necessary, everyone knows this....CMBS, corporate bonds, junk bonds etc will all be bought up by the fed to prevent an economic collapse affecting mega corps, the rate hikes are custom tailored to affect only the average american, their economic situation, their financial stability, their cost of living, their potential to feed inflation by purchasing more goods, their employment, perhaps their ability to hold onto their homes.

samuelj264

The Fed will backstop them, as in, if these companies you mention, Blackstone and Brookfield et. al., start to loose huge amounts of value it becomes a ripple effect across the economy, and the Federal Reserve will step in to try and stop it *see 2008 great financial crisis*. The Fed will come into the market like in 2020 and purchase CMBS from banks, lenders, and other holders to stabilize a potential waterfall selling that could throw the financial system into chaos and the world into another huge recession or even global depression. While some banks/lenders could fail in the meantime as these assets decline in price, it could get to a point where the Fed has to step in to stop armageddon.

msmith18385

I am curious: Are you considering shorting the CMBS market?

Any-Television-3394

you trading these? Bond market not stupid. The situation is being priced in. To answer your question. Many have sold out. Other have hedged. Also the CMBS market is full of buyers trading on a mandate. Think of a CMBS mutual fund. Their job is to buy CMBS, thats what the fund does. They cant just sell and go buy something else.

NOT_MartinShkreli

Best of luck. NVDA is topping out here and the bull market in general is going to begin to slow this week with fed rate hikes + come august / September there’s a 10/10 chance bank issues resurface and CMBS shits the bed Look out below come Q4 2023

NOT_MartinShkreli

Short term cash grab so the wealthy elite could cash out at the top once again. We re-enter a bear market starting this week, and it will accelerate downwards when CMBS and banking issues start to re-surface Q3 and into Q4 of this year. Then the dominos start falling into 2024

NOT_MartinShkreli

Fed chairman stepping down in August. Seems like ironic timing to some extent, especially as CMBS markers start dying near then when payments are due. I would say it’s possible. One of the BRICS countries could have their currency backed by gold and trade using that currency instead of USD. Then others would trade their currency for said gold backed currency. It would absolutely hurt the dollar and China dumping US debt would be a market wrecker. Buy 6/2024 puts if you think this will happen

NOT_MartinShkreli

Amazon started making more layoffs today. I suspect Q3-Q4 we see those banking issues resurface. You can only paper shit over for so long “to live another day” before the monster shows back up. CMBS is going to hell. Airbnb bubble near me is finally popping and rentals aren’t being filled. Some big bang is gonna die Q4 or early 2024 and then it’s Armageddon

7figurebetontesla

Ya I don’t ever have issue borrowing money. I typically borrow 50-75m a year for various projects. This year will be a little less as all of my developments are funded and I don’t have any loans coming due this year on hotels so no refinances. Biggest issue I have is I work with a few smaller banks and I’m always bumping up against their max lending limits imposed by the regulators. They would love to give me more money but that isn’t always possible so I have to supplement with CMBS or Lifecos. I hate borrowing from the big banks but they do try to take me to lunch a lot! Wells Fargo was in my office last week trying to get me to work with them. I’m a nobody to a big bank like that and I hate that I can’t actually talk to a real decision maker so I prefer smaller lenders where I can call the bank president and get answers directly. Ya know big fish small pond sort of thing.

7figurebetontesla

Nope it’s that easy. Unless you commit fraud when getting the loan and overstate income or a few other bad boy carve outs it’s as simple as saying I don’t want this anymore it’s yours. The lender knows that going in the door and that’s how it done. I’ve never personally done it but a lot of people do. It is a question that is asked when you apply for another CMBS loan but all the originators I talk to say it doesn’t impact your ability to get new loans unless there has been fraud Personally I don’t mind recourse as I’m not a high leverage guy and as I said before I maintain a high DSCR. I have maybe 150m in CMBS but as it rolls off over the next few years I don’t have any plans to renew it. I would rather work with relationship lenders just because it’s easier and my accounting department hates dealing with all of the reporting and other stuff CMBS requires. It was worth doing when I could get 4.5% debt fixed for 10 but right now regular banks have better pricing than CMBS so other than non recourse I have no reason to use them. But from 2012-2018 it was a great source of debt so I did a lot of it.

Rang_Dipkin

Bank earnings aren’t gonna be good guys Net interest margins are bad, they fucked up their duration hedges. Plus the big banks are gonna be forced to bail out regionals. Sector is kinda trash for now … wait until the CMBS blowup, because JPow will bail them out then

7figurebetontesla

Depends but typically 1.2 on a trailing 2 quarters. I run 2.5 globally so it’s not typically a factor except for my CMBS debt that is asset specific and those guys are hard asses. Drop below 1.2 and ya end up in cash management.

7figurebetontesla

Thanks! It’s been an up and down 3 years! Almost no one I know of is on interest only. I either do 10 year CMBS or 20 year with 5-10 year rate adjustments. This is why the commercial real estate fears are overblown. Other than office space in a few cities most commercial real estate is fine. While a 100 bps isn’t my favorite thing it’s not a big deal. All things equal it would impact cash flow by 3-4m which is under 10%. But like I said revenue gains are more than offsetting it. Honestly the wage increases have been a far bigger impact. I have over 1200 employees and I pay over 30% more in wages now than I did before Covid.

7figurebetontesla

Why throw good money after bad? These are non recourse CMBS loans. You can mail them the keys back anytime you want and walk. There are a few markets that have had severe changes in business and probably won’t recover for a long time. Doesn’t mean 99% of their properties are just fine.

Rang_Dipkin

Banks are the obvious short here …NIM are fucked, with each rate hike it gets worse. KRE earnings will be dogshit. Fed will buy their CMBS though and save em again though, which is bullshit

NOT_MartinShkreli

As a 🌈🐻 I still have no positions because I’m not a regarded 🌈🐻. There has to be some sort of catalyst and my guess is these banks passed stress tests recently…. So they issue dividends, buy back shares, hand out bonuses, etc … then end of Q3 / earnings for Q3 we see the banking issues resurface, student loan payments starting back will drop consumer spending, and CMBS finally goes into chaos mode since it’s somehow been propped up endlessly since Covid. These big companies pushing for return to office are doing so because their investors (banks) desperately need some more office space filled before their CMBS portfolio blows up like 2007-2009 MBS