Yeah that makes sense, but where does the crisis come in? Do we really care if Silicon Valley can no longer fund robotcatlitterboxes.com with 1% money?
Where are such exotic instruments available to trade? Aren't these products only available to the Institutional category of traders? As retail, we don't have access to even view these products do we?
It's mostly contagion that I fear more than single players failing. The entire funding chain is linked.
No, we don't have direct access to the products. I wouldn't have tried to trade them anyway due to counterparty risk of the illiquid product. If the company went bankrupt then you couldn't close your position and you wouldn't get any of the profits. For me the best product to trade is the stock of the loan originators. I wouldn't short a stock, but instead I would buy puts on the stock. As defaults increase, the originators will have a harder time selling the loans to someone else and their capital will get tied up. In the movie Morgan Stanley admitted to holding 15 billion of cdo's. I'm sure their stock took a big hit. When I saw car delinquencies hit a post pandemic high I looked at the loan originators. Ally Financial is the largest car loan originator in the US. It has solid Financials now but it's margins are falling. As car delinquencies continue to rise I expect the losses will pile up along with hits due to resale problems of the repo'd vehicles. In the homeloan market, people that can't afford the 30 year loan rate will start buying adjustable rate mortgages with a 3 or 5 year lock. If these loans become more common keep an eye on loan delinquencies as the default rate could rise in the coming years.
Interesting strategy Originators don’t hold the underlying debt. They’ve made their money and maybe some are servicing the loan. On a default they repossess, auction for lion’s share and get a deficiency judgement. Other than reduced volume on originating loans, not sure where you are seeing the risk with these companies. Since mortgage apps at all time lows, what the market is telling us is that folks aren’t moving and letting go of low interest loans. The reduction in inventory plus AirBnB are keeping prices buoyant. Maybe it’s the calm before the storm but we seem to be in uncharted waters.
%% LOL I seldom look @ news or talking snake news during the day. ALLY may get some help from from the FED, more than a 200day moving average. They could rejoice [sarcasm LOL] in that they are beating TGT\DIS by a long shot[2023 YTD] Paul Tudor Jones noted> 20 years ago, 10 year car loans may not be the best idea. Chickens can+ do home to roost. Nothing like a good price chart