SOFR

Lazy-Effect4222

I agree. The private credit market was going to crash in 2020(which is why SOFR was implemented in 2019) but got saved by government who used COVID as an excuse to print money without causing suspicions. Then it started to hit anyway in 2022 - then came ChatGPT which marked the bottom for indices - but it’s driven almost completely by the big tech, rest of the sp500 kept struggling. Under the hood it was still bubbling and the market started to be really illiquid. AI companies are using circular investing to make it seem the money is real but none of them are actually profitable. Nvidias profit comes from companies that are funded by nvidia investing in their customers using the supposed profits of their customers etc. Google inflated their profits by starting to subsiding their cost of hardware to 6 years instead of 3 despite the fact their GPUs will stay usable for AI for barely a year. Banks started to collapse(silver, svb, credit suisse..) but effects of that get prolonged by governments and other banks bailing them out. The credit suisse issue was resolved by Swiss banks doubling down on private credit leverage. Huge companies do not get this privilege and we started to get bankruptcies like First Brands. No one supposedly knows where the money went but it’s because the money was really never there. Now from 2025 private credit funds have started to block withdrawals because they are illiquid. The dominos keep falling in the background. These things can get pushed aside only for so long. Turns out longer than I expected though. Same for Burry.

tickerscout

Take this with a grain of salt, I wouldn't pretend to give investment advice. But this is the level of reading I would do before considering a particular stock. An Owner of Rooms, Not an Operator of Hotels Apple Hospitality REIT owns hotels and collects what they earn, but it does not run them. Its properties are rooms-focused select-service and extended-stay hotels in urban, high-end suburban and developing markets, flying Marriott and Hilton flags such as Hilton Garden Inn, Courtyard, Hampton, Residence Inn and Homewood Suites. The customer is a traveling salesperson, a project crew on assignment, a family visiting relatives. Because tax rules bar a REIT from operating hotels, every property is leased to a wholly owned taxable subsidiary and turned over to one of fifteen unaffiliated management companies that hire the staff and set the room rates. The company's own payroll is 64 people. What it actually does is allocate capital: buy hotels, sell hotels, renovate them, finance them, and pass the residual cash to shareholders every month. The scale is substantial and the mix deliberately plain. At March 31, 2026 there were 217 hotels and roughly 29,600 rooms across 37 states and the District of Columbia, producing $1.4 billion of revenue over the last twelve months, about 90% of it room revenue. Nothing in that portfolio is scarce or hard to replicate. The thesis follows: a competently run, conservatively financed and thoroughly commoditized collection of real estate whose profits track the American travel cycle with almost no idiosyncratic lever, priced at $16.77 for an occupancy-led recovery that has not yet produced a single dollar of pricing power. Diversification Is Not a Moat What protects the cash flow is real but shallow. Brand affiliation buys access to loyalty programs and reservation systems no independent owner could build. Scale across 217 properties removes single-market risk. Low leverage lowers the cost of capital and permits buying when leveraged owners cannot. The manager arrangement is better designed than the industry norm: roughly 81% of hotels pay a variable fee of 2.5% to 3.5% of gross revenues on short terms, terminable for missed performance thresholds, rather than the base-plus-incentive structure that pays operators regardless of outcome. Each of those advantages is rented. The brands belong to franchisors who charge fees on room revenue, set the standards that drive renovation spending and control renewal terms; concentration in two of them means the counterparties hold the stronger hand. Upscale select-service hotels are among the easiest lodging assets in the world to build, so any sustained excess return invites supply. Diversification does not deliver a return above the market for U.S. upscale lodging; it delivers that market's return, minus fees. The risks are the ordinary cyclical kind: demand tied to employment and corporate travel budgets, a cost base of labor, insurance, property taxes and utilities that does not fall when revenue does, 14 ground-leased properties, and catastrophe exposure in a repriced insurance market. One is already fading: the reduced government travel management blamed for much of 2025's softness, which persisted through an extended shutdown late in the year, is now a favorable comparison rather than a headwind. The live one is the 2026 maturity wall. Occupancy Is Back, Rate Is Not The March 2026 quarter is the inflection the market has seized on. Revenue rose 3.1% to $337.7 million, RevPAR rose 3.1% to $114.43 and Comparable Hotels RevPAR 2.2%, but the composition cools the enthusiasm. Occupancy went from 71.1% to 72.8% while ADR (Average Daily Rate) moved from $156.24 to $157.19, a gain of 0.6%. Essentially all of the improvement was volume, and volume in a hotel is bought with variable cost: labor and utilities scale with rooms sold, so hotel operating expense rose 3.5% against 3.1% revenue growth and Adjusted Hotel EBITDA rose exactly in line with revenue, to $108.5 million, leaving the margin unchanged at 32.1%. Rate, by contrast, drops to the bottom line nearly whole. The recovery so far has produced activity, not earnings power. The longer record sharpens the point. ADR (Average Daily Rate) was $155.76 in 2023, $158.01 in 2024 and $159.06 in 2025, a cumulative gain of about 2% while wages, insurance and property taxes rose considerably faster. Hotel operating expense consumed 58.1% of revenue in 2023, 60.0% in 2025 and 61.3% in the March quarter, and Adjusted Hotel EBITDA margin fell from 35.9% to 33.7%. Full-year 2025 revenue declined 1.3% to $1.4 billion and net income fell 18.1% to $175.4 million, or $0.74 per share, even though G&A fell 24.1% on a reduced executive incentive accrual that reversed in the March quarter. Comparable Hotels statistics for 2024 and 2023 are measured against the current 216-hotel set, so they describe the trend of today's portfolio rather than what was reported at the time, but the direction is not in question. For a lodging REIT, per-share earnings power reads better through FFO than through GAAP EPS. FFO was $363.3 million in 2023, $384.9 million in 2024, $357.6 million in 2025 and $359.2 million over the trailing twelve months; against the weighted average share counts of those periods that is roughly $1.58, $1.60, $1.50 and $1.52 per share. Three years, no progress. One wrinkle limits cross-period comparison: effective January 1, 2026 the company began excluding share-based compensation, about $7.7 million a year, from MFFO and Adjusted EBITDAre, and only the prior-year quarter was restated to match, so quarterly non-GAAP figures sit above the annual ones by roughly that amount annualized and cannot be chained to them; on that basis quarterly MFFO was $80.3 million against $78.8 million. Management raised full-year 2026 guidance to Adjusted EBITDAre of $436 million to $458 million from $424 million to $447 million, and Comparable Hotels RevPAR growth to 0.0% to 2.0% from negative 1.0% to positive 1.0%, a midpoint raise of about 2.6%. Cash After the Hotels Are Fed Operating cash flow was $369.9 million over the trailing twelve months against $95.9 million of capital improvements and $227.4 million of distributions, leaving roughly $47 million of annual surplus. That surplus, not the FFO payout ratio of about 63%, is the true measure of distribution safety. FFO adds real estate depreciation back in full, but hotels genuinely consume capital: brand standards mandate it, and about 21 properties are in comprehensive renovation during 2026 within capex guidance of $80 million to $90 million. Charge the actual spending against FFO and distributable cash is nearer $1.11 per share against a $0.96 distribution, a cushion of about 16%, and renovation costs twice over, since a hotel under construction sells fewer rooms while the work proceeds. Quality is otherwise clean: interest paid of $79.8 million in 2025 sat close to the $81.5 million expensed, and cash taxes of $1.0 million are trivial as REIT status implies. A $31.7 million seasonal build in the receivable from third-party managers held March quarter operating cash flow to $48.9 million against FFO of $76.5 million, and reverses as the year progresses. Low Leverage, a Crowded July Debt principal was $1.6 billion at March 31, 2026 at a weighted-average all-in rate of 4.65%, with 63% fixed or swap-fixed. That is roughly 3.5x Adjusted EBITDAre and about 36.5% of total capitalization, genuinely conservative for a cyclical lodging owner and the single best feature of the enterprise. Corporate cash is thin at $7.8 million, but revolver availability of $558.8 million more than covers it, and all covenants were met. The near-term schedule deserves attention. About $292.1 million of principal falls due between April and December 2026: a $19.5 million mortgage, a $51.0 million three-property mortgage, and the $89.1 million drawn revolver together with a $130 million term loan, both maturing July 25, 2026. The last two are extendable by up to a year subject to conditions, though management stated an intention to refinance instead. Whether that refinancing was completed, and at what spread against the existing SOFR plus 1.35% to 2.25% grid, is not established by anything available here, and the answer sets the interest run rate for the rest of the year. Two swaps covering $200 million also mature during 2026 with replacements expected at higher rates; a 100 basis point move shifts annual net income by about $5.8 million, or roughly $0.02 per share. Beyond that the ladder is manageable at $278.6 million in 2027, $334.1 million in 2028 and $460.0 million in 2030. Because REIT distribution rules prevent retaining earnings, maturities must be refinanced rather than repaid, making credit market access a structural dependency, and committed development at Anchorage and Las Vegas of about $209 million at fixed prices through 2028 will likewise be funded with debt or disposition proceeds against annual free cash near $47 million. A full balance sheet is not available for 2023, so the leverage path can be traced only from the 2024 year end forward; whether 36.5% is drift upward or a return to a longer-run norm cannot be answered from what is at hand.

tickerscout

Take this with a grain of salt, I wouldn't pretend to give investment advice. But this is the level of reading I would do before considering a particular stock. An Owner of Rooms, Not an Operator of Hotels Apple Hospitality REIT owns hotels and collects what they earn, but it does not run them. Its properties are rooms-focused select-service and extended-stay hotels in urban, high-end suburban and developing markets, flying Marriott and Hilton flags such as Hilton Garden Inn, Courtyard, Hampton, Residence Inn and Homewood Suites. The customer is a traveling salesperson, a project crew on assignment, a family visiting relatives. Because tax rules bar a REIT from operating hotels, every property is leased to a wholly owned taxable subsidiary and turned over to one of fifteen unaffiliated management companies that hire the staff and set the room rates. The company's own payroll is 64 people. What it actually does is allocate capital: buy hotels, sell hotels, renovate them, finance them, and pass the residual cash to shareholders every month. The scale is substantial and the mix deliberately plain. At March 31, 2026 there were 217 hotels and roughly 29,600 rooms across 37 states and the District of Columbia, producing $1.4 billion of revenue over the last twelve months, about 90% of it room revenue. Nothing in that portfolio is scarce or hard to replicate. The thesis follows: a competently run, conservatively financed and thoroughly commoditized collection of real estate whose profits track the American travel cycle with almost no idiosyncratic lever, priced at $16.77 for an occupancy-led recovery that has not yet produced a single dollar of pricing power. Diversification Is Not a Moat What protects the cash flow is real but shallow. Brand affiliation buys access to loyalty programs and reservation systems no independent owner could build. Scale across 217 properties removes single-market risk. Low leverage lowers the cost of capital and permits buying when leveraged owners cannot. The manager arrangement is better designed than the industry norm: roughly 81% of hotels pay a variable fee of 2.5% to 3.5% of gross revenues on short terms, terminable for missed performance thresholds, rather than the base-plus-incentive structure that pays operators regardless of outcome. Each of those advantages is rented. The brands belong to franchisors who charge fees on room revenue, set the standards that drive renovation spending and control renewal terms; concentration in two of them means the counterparties hold the stronger hand. Upscale select-service hotels are among the easiest lodging assets in the world to build, so any sustained excess return invites supply. Diversification does not deliver a return above the market for U.S. upscale lodging; it delivers that market's return, minus fees. The risks are the ordinary cyclical kind: demand tied to employment and corporate travel budgets, a cost base of labor, insurance, property taxes and utilities that does not fall when revenue does, 14 ground-leased properties, and catastrophe exposure in a repriced insurance market. One is already fading: the reduced government travel management blamed for much of 2025's softness, which persisted through an extended shutdown late in the year, is now a favorable comparison rather than a headwind. The live one is the 2026 maturity wall. Occupancy Is Back, Rate Is Not The March 2026 quarter is the inflection the market has seized on. Revenue rose 3.1% to $337.7 million, RevPAR rose 3.1% to $114.43 and Comparable Hotels RevPAR 2.2%, but the composition cools the enthusiasm. Occupancy went from 71.1% to 72.8% while ADR (Average Daily Rate) moved from $156.24 to $157.19, a gain of 0.6%. Essentially all of the improvement was volume, and volume in a hotel is bought with variable cost: labor and utilities scale with rooms sold, so hotel operating expense rose 3.5% against 3.1% revenue growth and Adjusted Hotel EBITDA rose exactly in line with revenue, to $108.5 million, leaving the margin unchanged at 32.1%. Rate, by contrast, drops to the bottom line nearly whole. The recovery so far has produced activity, not earnings power. The longer record sharpens the point. ADR (Average Daily Rate) was $155.76 in 2023, $158.01 in 2024 and $159.06 in 2025, a cumulative gain of about 2% while wages, insurance and property taxes rose considerably faster. Hotel operating expense consumed 58.1% of revenue in 2023, 60.0% in 2025 and 61.3% in the March quarter, and Adjusted Hotel EBITDA margin fell from 35.9% to 33.7%. Full-year 2025 revenue declined 1.3% to $1.4 billion and net income fell 18.1% to $175.4 million, or $0.74 per share, even though G&A fell 24.1% on a reduced executive incentive accrual that reversed in the March quarter. Comparable Hotels statistics for 2024 and 2023 are measured against the current 216-hotel set, so they describe the trend of today's portfolio rather than what was reported at the time, but the direction is not in question. For a lodging REIT, per-share earnings power reads better through FFO than through GAAP EPS. FFO was $363.3 million in 2023, $384.9 million in 2024, $357.6 million in 2025 and $359.2 million over the trailing twelve months; against the weighted average share counts of those periods that is roughly $1.58, $1.60, $1.50 and $1.52 per share. Three years, no progress. One wrinkle limits cross-period comparison: effective January 1, 2026 the company began excluding share-based compensation, about $7.7 million a year, from MFFO and Adjusted EBITDAre, and only the prior-year quarter was restated to match, so quarterly non-GAAP figures sit above the annual ones by roughly that amount annualized and cannot be chained to them; on that basis quarterly MFFO was $80.3 million against $78.8 million. Management raised full-year 2026 guidance to Adjusted EBITDAre of $436 million to $458 million from $424 million to $447 million, and Comparable Hotels RevPAR growth to 0.0% to 2.0% from negative 1.0% to positive 1.0%, a midpoint raise of about 2.6%. Cash After the Hotels Are Fed Operating cash flow was $369.9 million over the trailing twelve months against $95.9 million of capital improvements and $227.4 million of distributions, leaving roughly $47 million of annual surplus. That surplus, not the FFO payout ratio of about 63%, is the true measure of distribution safety. FFO adds real estate depreciation back in full, but hotels genuinely consume capital: brand standards mandate it, and about 21 properties are in comprehensive renovation during 2026 within capex guidance of $80 million to $90 million. Charge the actual spending against FFO and distributable cash is nearer $1.11 per share against a $0.96 distribution, a cushion of about 16%, and renovation costs twice over, since a hotel under construction sells fewer rooms while the work proceeds. Quality is otherwise clean: interest paid of $79.8 million in 2025 sat close to the $81.5 million expensed, and cash taxes of $1.0 million are trivial as REIT status implies. A $31.7 million seasonal build in the receivable from third-party managers held March quarter operating cash flow to $48.9 million against FFO of $76.5 million, and reverses as the year progresses. Low Leverage, a Crowded July Debt principal was $1.6 billion at March 31, 2026 at a weighted-average all-in rate of 4.65%, with 63% fixed or swap-fixed. That is roughly 3.5x Adjusted EBITDAre and about 36.5% of total capitalization, genuinely conservative for a cyclical lodging owner and the single best feature of the enterprise. Corporate cash is thin at $7.8 million, but revolver availability of $558.8 million more than covers it, and all covenants were met. The near-term schedule deserves attention. About $292.1 million of principal falls due between April and December 2026: a $19.5 million mortgage, a $51.0 million three-property mortgage, and the $89.1 million drawn revolver together with a $130 million term loan, both maturing July 25, 2026. The last two are extendable by up to a year subject to conditions, though management stated an intention to refinance instead. Whether that refinancing was completed, and at what spread against the existing SOFR plus 1.35% to 2.25% grid, is not established by anything available here, and the answer sets the interest run rate for the rest of the year. Two swaps covering $200 million also mature during 2026 with replacements expected at higher rates; a 100 basis point move shifts annual net income by about $5.8 million, or roughly $0.02 per share. Beyond that the ladder is manageable at $278.6 million in 2027, $334.1 million in 2028 and $460.0 million in 2030. Because REIT distribution rules prevent retaining earnings, maturities must be refinanced rather than repaid, making credit market access a structural dependency, and committed development at Anchorage and Las Vegas of about $209 million at fixed prices through 2028 will likewise be funded with debt or disposition proceeds against annual free cash near $47 million. A full balance sheet is not available for 2023, so the leverage path can be traced only from the 2024 year end forward; whether 36.5% is drift upward or a return to a longer-run norm cannot be answered from what is at hand.

TeleCasterTube

AI condensation but still factual. **It is Not a Dot-Com Bubble, but a 2008 Credit Crisis** # Core Thesis Based on price-to-earnings (P/E) multiples, the current AI boom appears reasonably priced, leading many investors to assume there is no bubble. However, looking at the structural mechanics reveals this is not a valuation bubble financed by equity (like the 2000 dot-com crash), but rather an earnings bubble (*denominator bubble*) financed by debt against rapidly depreciating collateral, mirroring the setup of the 2008 financial crisis. Reported corporate earnings are artificially inflated by aggressive accounting assumptions and circular revenue loops, while massive capital expenditures (capex) are increasingly funded via highly leveraged debt structures. # Numerical and Structural Breakdown **1. The Optical Illusion of "Cheap" Multiples** * **Current Multiples:** Nvidia trades in the low 30s on forward earnings, while hyperscalers (Microsoft, Alphabet, Amazon, Meta) sit in the low-to-high 20s. CoreWeave changes hands at roughly 9x sales while growing its top line at 112% a year. In contrast, the 2000 peak saw Cisco trading near 150x earnings and Microsoft near 70x. * **The 2007 Analogy:** In 2007, the most profitable and highly owned financial stocks looked cheap on reported earnings, with companies like Citigroup trading at single-digit P/Es (9x) just weeks before earnings collapsed. Moody’s traded in the mid-20s (exactly where hyperscalers sit today) before plunging more than 75%. **2. Three Mechanisms Inflating the Earnings ("E")** * **Under-Depreciation of GPUs (+22 on the earnings index):** Hyperscalers have collectively extended the assumed useful life of their servers from 3–4 years to 5–6 years, conjuring roughly $18 billion a year in additional reported pretax profit. However, rapid technological obsolescence means the actual economic life is much shorter. In the rental market, an H100 GPU that rented for \~$8 an hour in 2023 rents for closer to $2.35 today—shedding over 40% of its value annually while books mark it down at just 17% a year. Shortening these cycles to reality would erase an estimated $176 billion in industry profits from 2026 to 2028. * **Non-Cash Equity Markups (+18 on the earnings index):** Hyperscalers hold massive stakes in private model labs (e.g., Microsoft in OpenAI, Alphabet/Amazon in Anthropic). When these labs raise capital at higher private valuations, tech giants book massive, entirely non-cash mark-to-market gains directly into GAAP earnings. * **Circular / Round-Trip Revenue (+15 on the earnings index):** Suppliers are funding their own demand. Nvidia invests $2 billion of equity into the neocloud CoreWeave, which then buys chips from Nvidia. Microsoft and Google invest billions into OpenAI and Anthropic, who in turn sign multi-billion-dollar contracted commitments to spend that capital right back on their sponsors' cloud infrastructures. * **The Reality:** A tech stock that screens at an apparently safe **28x reported earnings** is actually trading closer to **43x normalized earnings** once these pro-cyclical accruals are stripped away. **3. The Shift from Equity to Debt (The Compute Risk Chain)** Rebuilding the *originate-to-distribute* securitization chain of 2006 link for link: * **Nvidia (The Originator):** Sells the GPU at a \~75% gross margin, books immediate profits, and acts like subprime lenders by providing vendor financing to its own buyers. * **Neoclouds / CoreWeave (The Warehouse Desk):** Pool these GPUs to raise debt against customer leases. In Q1 2026, CoreWeave reported $2.078 billion in revenue, a net loss of $740 million, $536 million in interest expenses, and a staggering $24.859 billion in total debt (a debt-to-equity ratio near 8.9x). * **Deteriorating Krediet Quality:** On March 31, 2026, CoreWeave closed its 'DDTL 4.0' loan ($8.5 billion, rated investment-grade A3/A-low, spread SOFR + 225 bps, backed by a Meta contract). Just seven weeks later on May 18, it closed 'DDTL 5.0' ($3.1 billion, rated junk at Ba2/BB+, spread doubled to SOFR + 450 bps, secured by lower-quality non-IG customer contracts). Just like 2006, as the supply of prime credit was exhausted, the system immediately migrated to subprime/Alt-A equivalents to keep volume up. * **Google/Alphabet (The Monoline Wrapper Desk):** Anthropic has committed to an approximate $50 billion compute partnership with Fluidstack (a private neocloud). Fluidstack is leasing data center footprints via long-dated triple-net terms from former bitcoin miners (Hut 8: $7B–$17.7B base rent; TeraWulf: 200+ MW; Cipher Mining: $9B deal). Because these entities lack investment-grade credit, Google steps in as a guarantor backstopping these multi-billion-dollar leases in exchange for equity warrants (\~8% in TeraWulf, \~5.4% in Cipher). This creates massive *wrong-way risk*: the guarantees will be triggered in the exact scenario where AI economics collapse and Google can least afford to honor them. * **Concentration Hidden in Backlogs:** Microsoft boasts $627 billion in commercial remaining performance obligations (RPO), yet roughly 45% of it ($281 billion) relies on a single, unprofitable counterparty: OpenAI. Oracle carries a similar $300 billion OpenAI commitment; Amazon holds a $38 billion one. **4. The ROI Wall** While the revenue end-customers can profitably pay is bounded by economic reality, physical infrastructure bottlenecks (power, grid interconnection, transformers, land) are driving up building costs. The cost to build a gigawatt of capacity has climbed from \~$42 billion in the 2023–24 vintage to **\~$62 billion per GW in 2026**. As a result, the marginal return on capital is falling straight through the \~10% cost of capital hurdle rate. Despite this, Microsoft alone plans to spend **$190 billion in capex** this year. # How it Unwinds Because this is an earnings bubble, the market will look reasonable right up until the load-bearing metrics give way. When end-AI return disappoints, the marginal circular dollar stops flowing. Non-cash GAAP earnings from private lab markups reverse, hyperscalers slash their capex budgets, and chip order books decelerate. As a result, GPU rental rates roll over, breaking the strict debt-service coverage ratio (DSCR) covenants on neocloud loans. This forces a cascade of liquidations where GPUs are dumped into a thin secondary market, destroying collateral values across the system and exposing multi-billion-dollar backlogs as fiction. Ultimately, these systemic risks are being offloaded off-balance sheet into data-center asset-backed bonds, where the senior tranches are being swallowed by life-insurance and annuity complexes—making them the unsuspecting systemic risk holders of this cycle.

Jealous_Bookkeeper20

Private credit or project finance for AI data centers isn't structured like a standard loan. Since GPUs depreciate in 3 to 5 years, lenders structure it as asset-backed debt or senior secured notes, usually priced at SOFR + 550 to SOFR + 750 bps. With SOFR around 5.3%, that puts the coupon around 10.8% to 12.8%. Lenders also demand equity warrants or rapid amortization because the collateral loses value so quickly. It's too expensive to scale long-term compute on debt alone.

worldspiney

From my understanding Private credit lenders typically charge SOFR + 500–700bps for senior secured deals, pushing all-in rates to \~10–13% in the current environment. Distressed can go up to 15 % and US private placement for safer Notes are usually start at \~ 100-200 bps above treasuries at 7-15 year tenures

Rare-ish_Birb

Yep. Exactly. Move the debt and assets, via sale and leaseback agreements into some some new REIT structure. The SPA deals they've done so far have interest rates at SOFR + 8%, which is insustainable in perpetuity. They'll transfer the assets off their b/s, take a little hit on the present value calc, and pay a lease fee that generates enough cashflow for the REIT to cover maintenance, depreciation and a slightly juiced divy to long term shareholders like insurance companies. It'll work, if the insurance companies stay solvent after the upcoming private credit implosion. 😂😂

Rare-ish_Birb

Financials will RISE under the threat of SOFR interest rate hike(s).... EXCEPT if someone says the 'R' word...and then they drill to the core of the earth, taking no hostages. It's a fine balance tbh.

keer-eh-saag

It’s illegal to do 0% for SBLOCs thanks to the good ol IRS but the more money, the lower the brokerage can negotiate the SOFR spread. If you have a million dollars at Schwab for example they can negotiate a 1-1.5% spread; for a $100 million account it can be as low as .25-.5%. That still tacks onto the SOFR rate itself that sits around 3.6% so whether it’s like4.6-5.10% for 1 million or 3.9-4.15% for 100, there’s interest. The rich stay rich via trusts, tax havens, offshore banks, and keeping their income at a loss to hit that 0% long term cap gain tax if they do need to liquidate and also basically living off dividends and interest whilst having talented financial tax attorneys good at creating losses in gray areas where they still aren’t breaking the law.

rvdsn

That doesn’t impact the strategy. It’s all about avoiding cap gains tax on his public and private businesses. He’s letting everything compound by not selling it and collateralizing it, borrowing against it which might be in perpetuity until death. Unless interest rates move higher than the 20+% cap gains rate, it’s a logical strategy. From a banks perspective. They are happy receiving the interest payments from him at whatever agreed upon spread above SOFR or 1 year treasury or whatever was agreed upon. Again this is obviously much kore complex than this in practice but this is the basic concept.

Ill_Station_6165

Cut SOFR sell MBS, long duration. Steepen the curve and crash the market, Warsh is going to be good for banks and depositors and crush equities

Not-Reformed

Except much like buying a house or a car what they look at is if you can actually pay off the loan. Ebay is ~45b, at the typical premium of 25% (can easily be closer to 45%) you're talking about 56 billion or more to acquire which mean they need at least 47 billion in financing. At current prime lending rates (neither are prime megacaps) it's SOFR + 250 which neither company can afford on their current cash flows.

Winter-Extension-366

1. In my experience we used the front month contract or SPY, depending on our specific SPY needs and what we thought of how rich/cheap the spread was. You don't want to be taking liquidity in a less liquid asset. The problem this creates downstream is that you are trading across the curve in a cash-settled product. This means you will have delta exposure accumulating long/short across many buckets of time and you need to hedge that concentration out as it builds. If you continue to sell 1y 40 delta calls and hedge with ESA, you get short a roll pretty quickly and while you can hedge out the rate component with SOFR you'll have to hedge out the div component and tolerate the inventory across all of this- or you can imply buy the roll or future spread to 'roll' your hedge delta to your option exposure and close the risk altogether. This game never stops as every trade impacts your net. 2. Yes our approach is useful- I tell people that every time I've spotted a meaningful top (which you can just search my X feed for "now, stop" or "50-100"+"300-500" (upside vs downside risk), my view is ENTIRELY born of my analysis of positioning AS IT IS PRESENTED IN VS3D. It's not as easy to represent one dimensionally with a Greek, as the set of conditions is like a series of cross-currents that present a real problem for the market when aligned. I disseminate this view when I have it in VS Pro meetings, but I take hours and hours teaching it in Mentorship because it takes a while for a non-MM to grasp the components intuitively- once you do, a light bulb goes on and it all becomes much easier to spot going forward. Main hint is that the 0DTE framework we use for daily setups and intraday commentary in VS Pro, and teach in Mentorship, is something you can extrapolate through time when you substitute deltas for strikes, substitute vega for gamma and tolerate that without a shot clock (expiration TODAY) you must account for both volatility changes and passage of time, and tolerate the implicit risk of either/or as you navigate the trade

GittingerFredl

I wait for the mangled Sagittarius formation under the SOFR 180-day avg before I join the rally.

k21k21k21

Hedgies have parked trillions worth of bonds in cayman accounts and levered them 50-100x, if the yields rise too much or too fast the spread gets squeezed and they have to rapidly delever. Watch the repo markets and SOFR rate for liquidity stress. BIS also published a couple years ago about the structural risk to markets if this trade breaks.

k21k21k21

Hedgies have parked trillions worth of bonds in cayman accounts and levered them 50-100x, if the yields rise too much or too fast the spread gets squeezed and they have to rapidly delever. Watch the repo markets and SOFR rate for liquidity stress. BIS also published a couple years ago about the structural risk to markets if this trade breaks.

gamjatang111

that is assuming warsh is going to lower rates significantly (which isnt what SOFR futures are saying).

Rich-Badger-7601

Friendly reminder that Mango managed to turn his 2017 tax cuts and 1% SOFR into a -7% S&P annualized return in 2018

Rich-Badger-7601

I love how everyone thinks Mango is gonna save the market when motherfucker piloted that shit to -7% in 2018 with SOFR at half what we have currently lmaoooo

D74248

Buy/borrow/die is a well-established strategy for the extremely wealthy that lets them access their wealth without paying taxes. It is very Google'able. It starts with having a lot of your net worth in stock. Think Musk/Bezo/Theil. Next, the fact that the extremely wealthy can borrow at much lower rates than us littles, sometimes even below SOFR. Next, upon death "step-up in basis" kicks in, and the stock's cost basis is reset, tax free, to the value on the day of death. So Mr. Big Bucks wants some money. Maybe the support ship for his yacht needs some work. Instead of selling stock he takes out a loan, using the stock as collateral. The interest cost is lower than his tax liability would be if he sold. Upon his death the cost basis resets, the stock gets sold with no taxes due and the loan is paid off. [Here is a detailed description](https://www.reddit.com/r/BuyBorrowDieExplained/comments/1f26rsf/buy_borrow_die_explained/) This is, IMO, an example of where people's ignorance of how taxes work benefits the wealthy who want to avoid paying them. We littles are in a tizzy about a "billionaires tax", which won't happen, when what we should be demanding is that asset backed loans beyond a certain amount should require payment of capital gains taxes on the assets, with the cost basis reset at that point.

NeverDeltaNeutral

Awesome seeing diligence like this. The CEO’s loan shows some conviction but the terms are super favorable for him. SOFR + 9.75%, conversion at 2 shares per $1, and warrants for an additional 5.5M shares at $2 per unit. I’d feel better about this self enriching show of faith if the company had better corporate governance. Not a CEO who also serves as chairman of the board even if he founded the company. I will likely throw some money into this but will continue doing my own diligence before committing.

Nice-Truck8806

Yeah these numbers aren't great but they're far from bad. Especially after the fed essentially signaled 3% inflation is the new target for the short term, and YoY GDP print is only 10 bps lower than the previous year. SOFR is historically low but there is plenty of room to move in both directions, so the fed is far from losing control.

BarbellPadawan

How does Sofi give an APY of 400 basis points on checking?? Pretty sure that’s above SOFR. There must be a catch.

Too_Big_to_Succeed

If you look at the lowest SOFR futures out the curve, it’s showing the market expects the Fed to cut to about 3%. If you look at the 10y1m fwd OIS swap rate, it’s showing about 4.25% as the implied neutral rate. Usually those trade in lockstep and are at most 25bps apart…. The market is expecting the Fed to do something incredibly dumb coming up here.

iiiiiiiiiijjjjjj

I've worked in private credit in my last job. So many PE firms buying businesses they have no right buying using insane debt. This was very prevalent in data centers and the energy sector mostly midstream and solar markets. Most of the deals will not default, they waive covenants,allow extensions, PIK, etc with restructuring debt with different terms if need be. Interest payments were insane. I've seen one as has high as 14.0% + libor before the switch to SOFR, PIK of course. That deal went to shit and heard people actually lost their jobs because of it.

Fickle-Necessary-438

GDP collapsing ,Trade deficit collapsing , 92k jobs lost , PCE %3 , CPI %2.5 , PPI %2.9, SOFR has been pushing beyond the Fed's upper bound for months now (NO LIQUDITY) , Private Credit going bust & blocking redemptions ( Blackrock, Blackstone, Blueowl ) oh and has anyone paid attention to Regional banks? WAL losing %15 in a single day last week? KRE losing its 50 , 100 and 200 SMA all within a week and half? Nearly %20 of global oil supply is being choked off, energy = growth. Global GDP is shrinking every minute those tanks sit parked along with Force Majeure now being declared by producers in the region, startups are long arduous processes, not to mention all the refineries that have been bombed. Even if the War "ended" today the price in Oil will not go back down meaningfully , the damage is already done and a global recession is all but certain. Oil touching $120 signaled the end, inflation will return with force and anybody who thought the Fed may cut or announce cuts at FOMC next week is going to be sadly disappointed. They can tweet , obfuscate the truth about the situation all they want but the fact is the economy is teetering , the financial system is running out of liquidity. Something needs to give .

steiner_math

Yeah, Fidelity allows it too but doing the math it doesn't seem to be worth it over just realizing the capital gains. Let's say you take out $10 million to live the rest of your life. You'll be paying 4% (let's say, with current SOFR rates), which means $400k, per year, plus the LTCG on those and that's just on the interest and not on the principle. If you had just bitten the bullet on the LTCG, you'd just pay it on what you spend, which is still pretty cheap.

yatruthordare

It would be interesting to see where they are in April then July and in Dec- the reason is that I think we’re moving toward a credit crisis so I’d like to see how they handle this - who wins etc -credit crises because- (HYG⬇️,VIX⬆️,^TNX ⬇️, BKLN ⬇️, unemployment ⬆️, IG spreads tightening to 71 bases, SOFR on a downward curve trend, large SOFR call sweeps for Sept/Dec, hedge fund NAVs dropping,financial news on defaults increasing etc)

Happy_Discussion_536

It's possible they may retire some debt but isn't that a good thing? This loan will be around 6%. The crushing expense you're complaining about is 10%. And this loan is tied to SOFR. When the printer ramps up and they slash rates that means expense will go down even more. Your entire thesis seems built on the idea that companies won't have access to more cash soon.

Complex-Note-5274

Looking at SOFR and HY spreads. Someone tell me how deep should my puts be

stockist420

I feel this **should** to be upvoted more, it is a great framework. Your SOFR vs IORB trigger is the one I'd watch closest, because the second-order effects can be pretty drastic. When SOFR breaks above IORB (which it just did at 3.66%), it doesn't just signal "private cash deficit" at the macro level it immediately hits every company carrying variable-rate debt benchmarked to SOFR. I ran some checks against the filings via my tool and there are: \- 1,172 public companies explicitly disclose a variable-rate spread in their filings . Their interest cost moves in *real-time* with SOFR. \- 933 companies disclose debt maturing within 12 months. They're about to refinance into this environment. \- 626 companies have **both** — variable-rate debt that's getting more expensive right now AND a maturity wall in the next 12 months. Double hit. \- Even worse, 547 companies are triple-exposed: variable rate + near-term maturities + active credit facility (meaning they're actively drawing on revolving debt that reprices with SOFR). The sectors most loaded with variable-rate exposure are exactly where you'd expect: REITs, regional banks, leveraged industrials, and PE-backed rollups. I think your SOFR trigger at 3.65% is **the** macro signal.

ICameSawAbstained

The RRP is nearly exhausted. The stress on backup systems is increasing - SRF and reserve bank balance sheets.  The SOFR-IORB is your forward private liquidity indicator.  The H.4.1. is the lagging confirmation.

Fauster

For me, at a more practical level, when does the market push back boils down to when does Japan's treasury market collapses. Money is fungible. All of these central bank offerings compete with one another. The carry trade is wired into the US hedge fund system. How much? Who knows. It is constant background risk. For some that means municipal bonds and proctor and gamble. For others, like me, I will buy ST treasuries sometimes but LT treasuries never. I'd rather have optionality to buy a company that sold off too much that still has a high ROIC. When does the US treasury market break? When the Japanese market breaks, and Europe's market breaks, and maybe the Swiss Franc is a hedge, other than cash, but nothing else is. Are corporate spreads blowing out? No. Are there SOFR liquidity problems? No. Wake me up when something is different today than yesterday.

D74248

They way they always get money -- [buy/borrow/die](https://smartasset.com/investing/buy-borrow-die-how-the-rich-avoid-taxes) And keep in mind that the get wealthy pay very, very low interest rates when they borrow, even below SOFR.

Reply_Stunning

https://preview.redd.it/66x9ydx0yhhg1.png?width=623&format=png&auto=webp&s=69f248730d21048b2044ab22d00ec78bbb7c5b31 it only rose ever so sharply when they PRINTED LIKE 4 TRILLION DOLLARS back in 2020 a few years ago. How the fuckk could the markets go higher even faster than the most gigantic monetary stimulation of all times, we are in a tightening cycle too. What the fuck. Where is this money coming from, there's nothing in SOFR either, there isn't a fed trick I don't know about.

SplitTrick3118

I agree with you on the SOFR/T-Bill definition. That is the only true cash equiv. Regarding the 'All Weather' portfolio: The issue is that it relies heavily on long-duration bonds to offset equity volatility. In a regime where stocks and bonds are positively correlated (inflation), the 'All Weather' portfolio stops working. It assumes the last 40 years of disinflation are the permanent state of the world. If we are entering a secular inflationary cycle, that weather is going to get very stormy

BuffersAndBeta

The only truly risk free rate is the SOFR to 30 day t-bills (and similar instruments), don't believe / accept anyone who tells you otherwise. However, like you pointed out, the 10 year is actually "as close to risk free as possible" on a NOMINAL basis. Developed countries usually pay their obligations even if it leads to inflation internally. If you need something for _nominal_ returns, I think the 10 year is perfectly fine to compare your portfolio to. Just not real returns. In the US, you have TIPS which could serve as a benchmark - but I'm one of those people who thinks TIPS are useful but cynical about the calculations they use. IMO, a better option _might_ actually be the "All Weather Portfolio" - or more generally - a basket of various asset classes around the globe.

yatruthordare

If there is a liquidity issue - if HY OAS widens and SOFR rises then it’s a systemic stress event similar to 2008. Gold crashed.

SongOfTheFates

SOFR - Secured Overnight Financing Rate

deepserket

I don't think it will happen under trump, the possibility of the fed being forced to buy Treasury bonds and to do yield curve control is way higher Position: long 96.5 March 2027 3m SOFR calls https://preview.redd.it/0hw23l4xnieg1.jpeg?width=989&format=pjpg&auto=webp&s=441a2fffe77d4bf5b54e88d749af6e6183c65853

anonkraken

bro, i had 35 march SPX calls when we hit 6965 on friday. it was fantastic. shit is still fucked, regardless. peep that SOFR spread lmao.

Happy_Discussion_536

Just listened to Cliff Asnes interview on Odd Lots. Brilliant quant guy and basically uses data and AI to find alpha. The topic of the show was essentially why do markets have more "stupidity". Meme stocks, wildly overvalued shitcos, SPACs etc. There's all sorts of theories like social media and gamification. ZIRP is another. But then they talk about how even after ZIRP when rates hiked, that behavior didn't really go away and came right back. What shocks me is that absolutely NO ONE on Wall Street considered respectable talks about how important the Fed balance sheet is when in public. The duration of bonds in its portfolio, what it buys, how much and when, etc. They don't talk about how Fed printed half trillion in 2023. They don't talk about the recent starting of QE again. There's definitely people writing articles, research notes on it to clients, or substacks. But no one ever mentions how important it is once they go on TV. Why is that? It's obvious how important and impactful it is. Like literally if they didn't start up QE again, SOFR would be going crazy. We all know this. It almost feels like people really *don't* want to talk about it. And that makes my autistic mind want to talk about it more. Especially because retail and the little guy gets left out of the rally.

Embarrassed_Crow_720

The confusion from the fed is reflecting the confusion in investors. Rates are being cut, but i feel like most people aren't convinced. I'd keep an eye out for SOFR and unemployment rates. Not to mention the GDP to debt ratio. Personally, if i am taking positions this year, it is strictly in companies with minimal debt and large amounts of cash. These will weather a recession if there is one. The rest will get crushed at these premium evaluations.

shewel_item

the only thing consistently making money is Micron and by taking their ram offline from retail they're contributing to the spike in ram prices if you're only looking at stocks then you're looking at the economy through a peephole big money is watching what's going around outside of the good profit taking room, and they're the partly opposite of what you're feeling the term you're looking for is exit liquidity and that's where the market or people investing right now are with layers of exits to go beneath the top in case other areas of the economy start to rupture, like the SOFR and FED repo - where big investors go when they're getting in trouble, or what gives the market signals before cascade events are triggered oil and energy are your safest assets to be investing in rn to placate your concerns if you're not addicted to your FOMO from datacenter monies and standard hype

topkgd

There are many factors going into the increase in money supply. On one hand inflation is still running hot (likely due to tariffs) but on the other hand we are starting to see many liquidity risks as have been seen by SOFR rising above the upper bound multiple times. The banks are requiring more liquidity so the fed is going to have to expand its balance sheet which is exactly what we are seeing with the end of QT and the beginning of non QE QE. In order to keep balance the fed must inject liquidity into the system which is exactly what we are beginning to see but I don’t feel it will last for long just enough so that banks stop feeling liquidity risks and then they will end it.

kiwimancy

Yes, several mainstream brokers offer access to SOFR futures, packs, and bundles

carl_salem

Most public analysis is reflexive—it reacts to the same lagging government data (CPI, NFP, GDP) using the same basic frameworks. Ignore this completely, its just noise and heavily controlled narratives. To develop a differentiated view, use the four pillars of "Macro Edge". * **Growth**: Analysis of economic expansion and key drivers such as AI-driven capital expenditure or policy shifts like tariffs. * **Inflation**: Assessment of inflationary pressures within the economy, considering factors such as policy shifts and the actions of central banks like the Federal Reserve. * **Risk Premia**: Evaluation of volatility and asset allocation in uncertain environments. * **Flows**: Examination of how major capital flows and corporate actions (e.g., buybacks) shape the direction of the market.  You'll want to monitor: **TGA & RRP:** Track the Treasury General Account and the Reverse Repo Facility. When the TGA drains, it injects liquidity into the system; when it refills, it sucks liquidity out. **Real-Time Liquidity Proxies:** Watch the **SOFR (Secured Overnight Financing Rate)** and credit spreads (like the **ICE BofA US High Yield Index Option-Adjusted Spread**). Divergence here often signals stress weeks before it shows up in official growth data. **The Eurodollar Market:** This is the "shadow" global banking system. Spreads in Eurodollar futures can indicate global dollar shortages that the Fed hasn't yet acknowledged. **Truflation** / **Turnleaf Analytics** for Real-Time Inflation data **LinkUp** / **Indeed Hiring Lab** for labor statistics **Freightos Baltic Index** Real-time container shipping rates. Monitor them for any sharp drop which often precedes a collapse in goods-based inflation. \--- Predictive markets and primary sources are surprisingly more accurate than bank analysts who are incentivized to stick to certain narratives. * **Prediction Markets:** Sites like **Kalshi** or **Polymarket** force participants to "put their money where their mouth is" regarding Fed moves or GDP prints. When these odds diverge significantly from "Expert Consensus," pay attention. * **Primary Source "Diffing":** Instead of reading a summary of the Fed Minutes, use an ai tool to "diff" (compare) the text of the new minutes against the previous ones. Changes in specific words (e.g., changing "substantial" to "moderate") are often the only signals that matter. * **The "Beige Book":** This is the Fed's own anecdotal evidence from 12 districts. It often captures a "vibe shift" in business sentiment that hasn't yet shown up in the hard math of the GDP reports. \--- summarized via gemini - re-spliced by me.

30PercentIRR

I don't think so, solely because he still needs an exit strat to bail out the investors in XAI that bailed out the investors in Twitter, and it's much harder to do that via SpaceX than Tesla. With SOFR at these lows XAI is at a bit less of an insolvency risk than it was prior, but they still have the fixed rate 13% debt and even the SOFR+750 isn't low by any stretch. At a burn rate of >1bn/mo the cash from equity issuance is used up quicker than one would think and they're maxed out on debt. Any downturn in hype on AI and Musk has to chose between using Tesla to bail-out investors or telling them he fucked up and they need to take negative returns or potentially even write the whole thing off. History shows he'll pick the former.

damn_dude7

SOFR? I barely know ‘er

lobsterbananas

Look up the differences between the fed funds rate and SOFR. That’s your answer

ThisKarmaLimitSucks

They are being reactive. SOFR started popping above the fed funds rate, which is *very* bad, because it means there is not enough demand for the govt's short-term bills at the Fed's targeted rate. Essentially, the govt just had a failed bond auction.

Happy_Discussion_536

>bankers and VC firms who all took out billions upon billions of cheap debt leveraged against their own wealth capitol. Do you have a source on #s and how it compares to VC leverage today? >We saw the beginning of the liquidity issues just before Thanksgiving. The only evidence I've seen is some use of the standing repo facility and modest use of the discount window. Very small jumps in SOFR. What I mean by crash is something that would take us into a bonafide recession (due to credit seizing up) without intervention soon had Fed not injected with RPM. Is that what you mean?

greytoc

Sorry about not being clear and causing more confusion. Whether a HYSA is right for you or not is dependent on what type of financial services you need from a FI (financial institution) and your personal financial situation. I personally have no use for a HYSA and they offer no value to me and my families situation. A HYSA is a bank savings account. That is very different than a brokerage account. Both serve different purposes. And they work very differently and they are regulated differently in the US. Brokerage accounts are for investing. And you can invest in anything from safe risk-free interest rate products like US treasuries and money market funds to highly speculative and leveraged derivative products like options and futures. Bank savings accounts are just what it means. It's a way to put cash into a bank for safety and savings. In some cases, you can get interest at the prevailing risk-free rate. The term "risk-free rate" refers to the rate that considered risk-free for some measure of time. The hypothetical proxy for the "risk-free rate" is considered US sovereign debt. Most often - the 3-month US treasury rate is used. As of today it's about 3.74% but will vary daily. Or sometimes the SOFR (secured overnight financing rate) which as of today is 3.93%. Since the Fed cut the Fed overnight rate today by 25 basis points. Short term rates will likely adjust down. It's called "risk-free" because because the interest rate markets consider US sovereign debt as having a smallest risk of default for US domiciled investments. As for brokerages that are considered well respected - the usual ones are the big ones like Schwab and Fidelity. Look through the subreddit. However - many major bank holding companies that offer bank services also have brokerage businesses which can be convenient like Bank of America/Merrill, Morgan Stanley/ETrade, PNC, Wells Fargo, etc. etc. Your choices really depend on the type of services that you need. If you are inexperience, I recommend you stick with FI's that have very good customer service with phone services. And ideally with a branch that you can go to if you have issues. Hope that makes more sense. You can scroll up - look at the Getting Started link for investing resources.

Fauster

QE was awesome post-covid. Now we get it at all-time highs! This is not crazy at all! /s But, I think we have learned that the Fed was super nervous about the clusters in spikes in SOFR rates, which was a genuine liquidity issue, possibly shutdown related, we'll never know. I took that as a signal that the Fed would surely cut, not that they would start buying treasuries. I'm not knocking gold, silver, and copper at all, I have exposure to all, but I think the vast majority of loan-created money will go to the place it has been reliably going the last three years: AI infra. Even Jamie D is blunting JPM earnings to invest in that vertical. For the bubble bears: If you've been bearish all along, you're bearish for the same reasons now that you were three years ago: the train might stop. But, your bias shouldn't be prove the train won't stop and I'll get on, but prove to me that it will stop and I'll start to disembark. The Fed has the back of the stock market, even though the stock market absolutely does not need it. Corporate bonds are fine, outside OAI-adjacent stuff. The dollar hasn't tanked. Inflation is not about 3%... yet. Monetization of AI is best measured by API calls. Companies pay for those. That is exploding for every player, except maybe OAI losing some share to GOOG. Inference is the monetization wave and is now most compute demand. ASICs are probably the future, but NVDA has some ASICs build into GB300s already for long context windows. Crucially, there is a memory shortage now. If models stay the same size, all those new API calls need more memory to run. Except models don't stay the same size. Sparse mixture of expert models still improve when they have a larger RAM footprint, and quantization of large models reliably increases halluncinations and degrades performance. That memory will come from MU, SK Hynix, and Samsung. EWY has an uber low PE and is 40% Hynix and Samsung. This is the safest Sharpe ratio bet in the world, but it won't pay out as much as MU. If you held memory stocks in past shortages, you know what a wild ride that can be. This is a secular shortage. Fabric (ethernet/NVlink/optics) and GPUs might still be the bottleneck for training, but probably not, but training was the the bottleneck pre-2025. The current and destination bottleneck is high-band RAM, and the fundamentals of these companies scream bottleneck. Anyway, crystal ball comment, not advice, yada yada. Feel free to come back and mock me if I am wrong.

zenwarrior01

Solid effort, but most target taking out 3-6%, not 10%. Also, interest rates are higher than 4% right now (I.e. I was recently offered 5.91% which is overnight SOFR + 2%). You're kinda on the right track, but reality is a bit different than this, because the idea you presented is way too risky with far too much debt down the road. I.e. what happens when the market drops significantly in later years (as debt to assets increases) and you then lack the securities backing for your debt? You get margin called and are totally screwed. Better method: use the dividends you're already getting (best to minimize these) and then simply sell long term gains for whatever else is needed (and even if you don't need the amount in (1) below, still sell that amount to increase your cost basis). Taxes? Nope: 1) There's zero tax on LTCG below $96,700 (married filing jointly). 2) You still have your standard/itemized deductions to work against dividends and other income. 3) If you need anything above that THEN you borrow money against securities (or get a mortgage loan) to buy rentals, commercial real estate, businesses, etc. Then you use things like cost segregation studies, bonus depreciation, section 179, etc. to deduct 25-100% of your newly purchased real estate, assets, business expenses, etc, which themselves will make money for you. This allows you to pull in an additional $313k (the EBL - "excess business loss" limit) tax free. Anything beyond that, well... there's still things you can do, but I'm thinking \~$450k/yr tax free in today's dollars is sufficient income for most people. ;)

Top-Currency

SOFR is higher than fed funds rate, what are you talking about?

PoopyisSmelly

For a secured line of credit, the interest rate is currently around 7%. Its the only way I can explain it. Sometimes a bit lower or higher depending on the size of the portfolio. A few years ago they were very low, but they are variable depending on either Prime or SOFR, which are high right now.

Top-Currency

I got news for you, the ultra wealthy can negotiate with any private bank and get rates of SOFR + 0.75% or even 0.50% on their asset backed loans.

Rare-ish_Birb

I mean, its not like a 25 bps cut will have any impact on the massive overspend on ai buildout. Although CRWV data center debt in their SPEs with Softbank is at SOFR + 8%, so a quarter point on $5 billion is $12.5 million savings. Still Not enough to make them profitable.

tripstermcgee808

Alerts set for USD/JPY if it breaks below 152 and hits 150 same day. Alerts set for VIX spike above 25 and 27. Alerts set for SOFR/3 month crossing over 4.15%. Liquidating half my positions to avoid a margin call based purely on panic only to watch us hit ATH right after? Now that’ll be priceless.

Funny_Arugula_6419

That's what I've been keeping an eye on. Things could get prickly if SOFR-EFFR spreads are high Monday morning. Volume's gonna tell a lot of stories as well especially after the CME issues on Friday.

CuckedbyZuck

i don’t think people realize how razor thin liquidity is atm CME being down for any extended period is terrible. Absorbing these trades could be tough If Treasury futures and SOFR rate spike when this opens back up it could spiral quickly perma bull, but we may finally get my repo crisis

Funny_Arugula_6419

NY fed has SOFR, EFFR, Repo numbers. It's all available online. DTCC has failed treasury rates, those need to stay below 50B per day as well.

Funny_Arugula_6419

Which is scary to think about. If we're already having this issue with repos flying out what's gonna happen if things change up? Especially if feds cut rates and BOJ still hikes, spreads are gonna be tough to work with. SOFR's hiking up more and more.

Funny_Arugula_6419

Carry trade is in short the borrowing of funds from the Japanese markets with low interest rates (currently 0.5%) to finance activity and trading in the US markets which have high interest rates (5% at a point). On the 19th of December there is a (good) chance the BOJ is going to hike rates due to the Japanese economy being in a less than favourable place with inflation and a weakening Yen. If they do that, a good source of liquidity (the margins they had at least) will be removed and that could tip something off in the basis trade side of things. The basis trade is hedge funds shorting treasury futures and paying back par value at the end (they make like 10c per trade). This trade is levered up to such a high degree(50-100x) that there is a concern regarding cost of borrowing and what would move the trade from even slightly profitable to being a loss. If this flips to a loss, the price of these bonds will drop as there are no more buyers (right now it's a huge amount of hedge funds and institutions trading with each other). Banks will hold liquidity with concerns of these hfs being able to pay back or not. The banks offering the leverage to these hfs are already increasing their cost of borrowing (see SOFR vs EFFR spreads). The worry is that if the treasuries drop in value, there will be a systemic issue since treasuries are the backbone of the US financial system. Here's the interesting part: if this happens, stock market (SPY for example) could drop by 15% within days. Good news is the fed is going to hop in when things are horrible and the market will rally hard after that.

Double_Suggestion385

No, because you can't price in improvements in liquidity. It's a structural change to the plumbing of the financial system. As liquidity improves and things like the SOFR settle down you should naturally see asset prices increase as a result.

EventHorizonbyGA

**Always best to know the scam before deciding it it's for you** "On November 7, 2025, the Company issued a Promissory Note (“Note”) with Streeterville Capital, LLC in the original principal amount of $7,025,000. From November 7, 2025, until December 31, 2025, interest will accrue on the outstanding balance of this Note at a per annum rate of interest equal to the daily Secured Overnight Financing Rate (SOFR) as quoted by the Federal Reserve Bank of New York. From January 1, 2026, until this Note is paid in full, interest will accrue at the rate of eight percent (8%) per annum. After original issuance fees of $25,000, the Company received cash of $7,000,000 for this agreement. If this Note is outstanding on January 1, 2026, a one-time additional interest fee of $1,050,000.00 will automatically be added to the outstanding balance. This Note matures eighteen (18) months from the issuance date with redemptions beginning at six (6) months from the issuance date. The Company intends to use the cash proceeds to complete potential acquisitions." "On November 13, 2025, Cemtrex, Inc. (the “Company”) entered into a Share Purchase Agreement (“Agreement”) with Karl F. Kiefer, an individual resident of Texas (the “Seller”), and Invocon, Inc., a Texas corporation (“Invocon”) for the purchase of Invocon. The Company expects to complete the transaction on or around January 1, 2026, and is contingent on customary closing conditions. The Agreement is for the purchase of 100% of the issued and outstanding shares of Invocon for the purchase price of $7,060,000." **Fun financial engineering there. Looks very... familiar.** [https://www.sec.gov/files/litigation/admin/2022/33-11114.pdf](https://www.sec.gov/files/litigation/admin/2022/33-11114.pdf) "7. Between approximately April 2016 and November 2017, Cemtrex engaged in three fraudulent primary securities offerings. 8. On two occasions in April 2016 and November 2017, Cemtrex sold a total of approximately $2.5 million in Cemtrex securities to an investor, which was wired to a Cemtrexbank account (the “Notes Offerings”)." And both the company and CEO ended up paying. "D. Respondent Cemtrex shall, within ten (10) days of the entry of this Order, pay a civil money penalty in the amount of $2,200,000 to the Securities and Exchange Commission. If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717. E. Respondent Saagar Govil shall, within ten (10) days of the entry of this Order, pay a civil money penalty in the amount of $350,000 to the Securities and Exchange Commission. If timely payment is not made, additional interest shall accrue pursuant to 31 U.S.C. §3717." **I don't have data prior to 2019 in my database for this stock but during the time period that SEC indictment covers various press releases $CETX did pump more than 100% twice.**

anonkraken

SPX only has a little bit of time to retake (and hold) 6670. Otherwise, this turns into a failed bounce really quick and we'll get the next leg down. 6600 is worrisome and a complete failure of the bounce is around 6585. MMs look like they'll support an early pop and a quick rejection (think Thursday, but less aggressive). I think we'll probably get near 6660... so short dated calls will print depending where we open. If we don't even clear 60, shit is tanking. 6675 and up starts to get some supportive greeks and could mean a reversal. Holding 6720 would likely mark the end of the correction. Sadly for my calls, I'm not seeing this play out as easily as the downside. We need buyers and vol sellers who are not currently there. Things get fucking nasty if we print anything under 6500 (JPM collar stuff). As of close on Friday, there are literally no bulls in this market. Every pop is straight mechanics and some retail. No whales are shorting VIX or buying huge call positions. Skew is up. Breadth is down. SOFR shit is still fucked. *(Not a bear. I'm currently holding calls on SPX, META, NFLX etc.)*

LarryStink

And those are improving. TGA has another 100 billion to sell, fed is resuming not qe/qe and buying bonds with the proceeds of MBS and expiring coupons. The SOFR/IORB spread also improved by 1bp today and I expect that continue. As did equity funding costs. 

Vlisa

Strong believer in the liquidity thesis since late OCT when the huge OI spy puts in the low 500s were placed. SOFR/OBFR/Repo have been indicative of such and statements about the DEC rate cut haven’t helped (even though I am confident they will cut by .25). Fed also has the huge stockpile in the TGA from the S/D. Holding puts for DEC. Planning to buy shares in Dec and LEAPS after Jan. Some calls for March.

1098duc_w_the_termi

The little wrinkle in the SOFR has already been dealt with lol. It was a nothing burger in the short term

Double_Suggestion385

SOFR, the Repo market, QT, and the TGA. All four point to tightened liquidity. QT being stopped in the future doesn't stop liquidity being tight in the present. The NY Fed even held an emergency meeting to discuss the liquidity stress: economictimes.com/news/international/us/ny-feds-secret-emergency-huddle-sparks-fears-of-brewing-liquidity-crisis-on-wall-street/amp_articleshow/125349281.cms

peoplearecool

SOFR isn’t rising though

spyputs1

They were panicking selling no doubt the Fed intervened to provide liquidity SOFR is the key here

DuckTalesOohOoh

True. But SOFR (the new LIBOR) is still elevated compared to the Fed Funds Rate.  When demand for overnight cash for banks exceeds its supply, the cost of borrowing, the SOFR rate, naturally rises. This means lenders would rather hold onto their cash than lend it out, even for short periods, unless handsomely compensated. This flight to quality is a classic sign of market anxiety.

Rare-ish_Birb

Prolly 80% of the AI-data center related debt disclosures I've read recently (maybe 50+) mention Softbank as lead or co-lead. Without any special juice, the debt is at floating SOFR + 8%, ~ 12%. That means Softbank sold NVDA to earn 12%. Ergo, NVDA has peaked.

Fun-Valuable-7355

Burry got short ..as SOFR was collapsing. Stooge trying to get people on the wrong side of the trade. Cheaper credit via sofr AND incoming rate cuts. Gold moon. Tech moon. Everything moon

Fun-Valuable-7355

Bruh ..SOFR cratered. Cheaper credit. GLD calls is free money at this point

SolomonKings7

SOFR down, bonds down, plus we won't have CPI reports due to shutdown. Of course Gold will pump

Big-Duty-2105

What rate did you get? I was a get. I was able to get my client SOFR +75 bps at Schwab but I really wanted 60 bps

exhibit304

There was an article somewhere which showed the shutdown is draining liquidity. I can't link it but I'd hate to pin the negative mood on the US shutdown but it might be playing some part perhaps but not quite on the sentiment front. It's arguably a more technical thing with the shutdown impacting market liquidity. One evidence of such strain is in the SOFR, which has been on the rise since the shutdown began: It indicates that borrowing costs have risen since the shutdown started, suggesting that banks might be facing shortage of funds amid the liquidity drain mentioned. That as the Treasury General Account (TGA) continues to siphon money in but is unable to release funds because most government departments are closed. Just some food for thought.

Fiveby21

Mortgage rates are influenced by the US10Y, not SOFR. Hell, lowering SOFR even further might cause the 10Y to raise in response. The market is going to demand higher rates on US debt if they believe there's an inflation crisis the fed isn't controlling.

Double_Suggestion385

It wasn't earnings, this earnings season has been one of the best ever. It's a liquidity issue. The repo market is getting tapped as liquidity tightens. It's normal for the DXY to increase and more speculative assets like crypto and tech stocks to drop. Look at the SOFR / BTC inverse correlation. The more liquidity in the system, the higher bitcoin goes. QT is being stopped because of tge liquidity issues being observed.

Double_Suggestion385

Liquidity is tightening, the Fed didn't print 30b, look at their reducing balance sheet, look at the increasing TGA, look at the repo market, and look at SOFR. Liquidity is objectively tightening.

luv2block

Gov is shut down. Taxes are coming into the gov, but not leaving like they usually would, hence removing liquidity from the market. One would expect this to reverse when the gov opens up as everyone will get back pay and the IRS will send out tax refunds, etc. Apparently, it also impacts banking liquidity significantly. It lowers bank reserves (some complex process involving the TGA, the banks and the fed). This tightened liquidity in the banking sector then causes SOFR rates (overnight bank to bank lending) yeilds to go up... causing even more tightening of liquidity becuase of higher interbank rates. Basically, my guess is this is mostly due to the gov shut down. When that process lifts and the TGA releases all that money it's hoarding right now... markets probably rocket. But let me emphasize, I could easily be wrong as I'm no government expert.

Senior-Vanilla-6756

I didn't expect this level of research to be on this sub. But yes as the SOFR rate rises about the Reverse repo and standing repo this will force the unwinding of this trade

LarryStink

It only takes one day of insolvency to crash the credit system and a cascade of defaults and liquidations. Theres a reason SOFR is blowing out and fed is resuming Q/E. Market plumbing is broken and the plumber (fed buying back treasuries (Q/E)) doesnt start up until december.  And from a traders perspective, purely looking at price, the risk/reward entering NEW longs here is well, shite. Ide entertain longs around 6700 om SPX if it coincides with vol contracting and signs of liquidity stress easing. Until then, mostly cash and a few small shorts and puts. 

LarryStink

It only takes one day of insolvency to crash the credit system and a cascade of defaults and liquidations. Theres a reason SOFR is blowing out and fed is resuming Q/E. Market plumbing is broken and the plumber (fed buying back treasuries (Q/E)) doesnt start up until december.  And from a traders perspective, purely looking at price, the risk/reward entering NEW longs here is well, shite. Ide entertain longs around 6700 om SPX if it coincides with vol contracting and signs of liquidity stress easing. Until then, mostly cash and a few small shorts and puts. 

putdownthekitten

Not the person you're replying to, but if you want to learn about and follow all this on a daily basis, definitely check out the Infranomics channel on youtube.  He covers the bond market, the repo situation, SOFR spreads, pretty much exactly this type of financial plumbing ShriteFatmsIntel is refering to, and more.  I have learned SO MUCH about the financial beckend from this channel and how it all works, and everything is just presented as "Here's what happened today, here are the numbers, here is how it usually works, here's what todays movement typically means, and here is how we interpret those movements and their downstream potential effects". It's one of the best macroeconomic resources I've found on Youtube.  Absolutely amazing teacher.  

Aggressive-Donkey-10

80% of americans work for small businesses, not using/deploying AI yet small business and Real Estate get loans of SOFR + a spread, so when the SOFR (almost exactly the FED funds rate) falls, then business/RE credit expands exponentially and GDP grows and more people get hired and economy overheats and we get inflation, then FED has to raise rates, and cycle reverses. Hence the Dual Mandate which are in direct opposition. low inflation / high employment

SolomonKings7

Bonds are dumping, even with rate cut. SOFR rates are also up. Quite interesting price action.

RealMcGonzo

They are stopping QT. He straight up said liquidity is a problem. They're letting MBSs roll off and buying short term Ts to replace them. If SOFR and EFF keep giving them grief, they'll inject some money.

Sryzon

To complicate matters, SOFR has been above EFFR ever since the last cut. An additional cut isn't going to be very effective without an injection of liquidity.

AICHEngineer

While i am serious that I do this, it was more jokingly put becuase LETFs are complicated and theres embedded costs to leverage. Imagine shorting SGOV, so youre paying 4% per year rather than getting 4%. Equity swaps cost ~SOFR+0.4% per year and an LETF thats 2x would need to hold ~1.1x swap exposure (90% stock, 10% cash used as collateral to buy 110% exposure to stock for 200% total, at a 110% short cash position). And the LETF rebalances daily to maintain 2x relative to each price at open each day. This both compounds upwards and downwards (effectively buying more swap exposure when prices rise and selling swap exposure when prices drop). This make the LETF perform superbly when volatility is low, but it makes it perform worse when volatility is high. So, you can

FarrisAT

There’s literally nothing wrong with the financial system. Use of SOFR is good. The addicts should use SOFR. It’s not an indication of tightness, it’s an indication that excess liquidity from COVID-era QE has finally drained. This is why the Reverse Repo Facility has drained from $1 trillion to $10bn. A drained RRP isn’t a bad thing. It represents a return to a healthy norm. No such facility existed outside 2008 or 2020.

tomsacies

The fly you are looking at might be cheap for a reason, as you are buying a very narrow range. The ATR on the ES is above 100 points for the last week, and you are betting that the ES will finish inside a 45 point range in exactly 7 days. Since most of the value comes from the last day of trading, you are betting on the probability of hitting a very tight price range at a very specific time. Also, it is practically impossible to open a fly for a credit, as arbitrage doesn't allow you getting paid for taking on no risk. A credit fly is something you might find by taking the mid-price on instruments with very tight bid/ask spreads, like SOFR futures. Where it's not possible to get a fill on all legs that is better than the bid or ask (example mid-price on all legs), so it is important to always take the correct price for calculating the fly, and it will always be for a debit.

nobody_898

I'm not assuming one, SOFR is approaching highest since repo crisis and regional banks are suffering right now

nobody_898

SOFR at all time highs -> liquidity crisis -> yields spike -> basis trading regards that own most of our debt get fucked by forced selling feedback loop like 2020

whunnderbug

Largest foreign creditors are a bunch of 100 to 1 levered hedge funds in the basis trade that has absorbed nearly half of US debt in the last 3 years. With SOFR spreads blowing out recently, this basis trade bomb could detonate again sending shockwaves through the market. Undercounted Cayman Islands exposure to US treasuries by $1.4 trillion, a country with a GDP of only $7-$8 billion dollars a year. Gross short of futures is $1.2 trillion dollars. [shit hitting the fan](https://youtu.be/SqltKQcQu1k?si=Fx_ujGH73JAvrH70)

LarryStink

Now is your time to scoop em up. Mag7 and big 2 crypto. Volatility is signaling this is over, as is credit spreads, SOFR, and SRF.