Before reading this, I highly recommend watching this video (only 13 minutes):
Ryan Grim And Wall St Whistleblower Claim Banks Engaged In SYSTEMIC FRAUD In Commercial Real Estate
So I was scrolling through the abyss of YouTube and came across this video that was posted on April 20th this year. After watching it I was both shocked but also JACKED TO THE TITS!
Basically, Ryan Grim and whistleblower John Flynn explain that banks have resorted to the same tactics used in the 2008 subprime mortgage crisis, but are doing it through the Commercial Mortgage-Backed Securities Market (CMBS).
From what I understand from the video, the lenders (banks) are massively inflating income from commercial properties (retailers) on their documentation, before selling the mortgages on the CMBS market at a higher price. This causes the buyers of these mortgages to think they are legitimate when in fact, the income from these properties can be nowhere near what the banks recorded on their documentation.
Grim says that this is great for everyone involved, AS LONG AS THE ECONOMY CONTINUES TO GROW AND REAL ESTATE PRICES CONTINUE TO RISE.
I think that is the most important statement of this entire video and also where I think $GME starts to come into play.
In the last couple of weeks, we have seen a huge increase in banks raising liquidity while at the same time the SEC is investigating naked short selling in hedge funds as related to the January $GME short squeeze. Why do banks need the liquidity you might ask? Because they know that overleveraged hedge funds are on the verge of being exposed and are likely to be margin-called in the near future.
"But the economy is at all-time highs, tech is booming", and that is exactly the problem.
If Citadel or other large hedge funds begin to fail, we are going to start seeing a massive sell-off in tech and the entire market in general. A massive market sell-off could cause investors to move to real estate, but wait, the CMBS mortgage prices are massively overinflated and nobody knows about it right now, then what happens? Well, I don't know for sure, but I think it would be pretty fucked.
I also believe that there is a possibility that banks may have been doing this for a while now, but the problem probably became much worse in the last year with COVID forcing almost all retailers to shut down, seizing income. In order to find buyers of these commercial mortgages for retailers that
... keep reading on reddit ➡https://www.reuters.com/business/fed-says-stock-market-boom-ebullient-investors-warrant-caution-2021-05-06/
decent article by Reuters today on the possible bubble worries but its much deeper. there is a host of issues.. the income of the commercial real estate holders has been inflated due to covid and the need to keep the mortgages afloat.
So as the income has gotten inflated and these properties were bought up during covid, real estate prices rose like crazy, Im sure you noticed. So all the mortgages come in with inflated incomes but there is a selection of mortgages which yield higher premiums as they carry more risk. As maybe you know these are bundled, rated, and sold. Called Commercial Mortgage Backed Securities and there are plenty of CMBS ETFs worth total of hundreds of billions, if not over a trillion, on the market. With very large institutional holdings, obviously, which have large holdings.
The FED released their Financial Stability Report today. Basically saying valuations are high. Equities more than doubled the avg annual growth (22.5 to 9%) last year, treasury securities have tripled avg annual growth (26 to 8.3%), high yield and unrated bonds have almost quadrupled it (25 to 7.1). Not to mention the risk premiums on high yield unrated bonds are to 2008 levels.
Here is a key paragraph from the report on the Commercial Mortgage Backed Securities market: "Other indicators continue to show strains in CRE markets. Vacancy rates continue to increase, and rent growth has declined fur-ther. Additionally, delinquency rates on com-mercial mortgage-backed securities (CMBS), which usually contain riskier loans, remain elevated. Finally, the January Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) indicated that banks, on net, reported weaker demand for most CRE loans and tighter lending standards in the fourth quarter of 2020 (figure 1-14)"
So basically, Commerial Real Estate is on an obvious bubble, about to come back down, and when it does, it is going to create a whole lot of turmoil. It will be reminiscent of 2008 as the bonds fail and tumble the house of cards.. again. Fuck.
Now Im sure if I know this, much smarter people do and have started hedging a market failure. So I have been paying attention to larger market options plays and noticed 60 million in puts bought on the S&P 500 today 7/16 strike 4000, 7/30 strike 3900,
... keep reading on reddit ➡
there is a lot of talk about some commercial mortgages being in real trouble. wondering where you see big problems/opportunities and how to gain exposure to this?
I'm considering expanding my newly formed long position in bank of America (BAC) on the grounds that any significant recovery will hinge on lncreased lending, and that the future by necessity will be characterized by increased rates (albeit not for some time). One of the obvious near-term risks is the the collapse of commerical real estate, and with it entities entangled in the scandalous inflating by borrowers of their financial qualifications for securing loans. I'm trying to gauge BoA's exposure, relative to other financial institutions, to commercial Mortgage-backed securities, as well as their involvement in facilitating that market. How does one go about doing this? Where can this information be found?
https://www.dtcc.com/-/media/Files/pdf/2021/5/5/MBS982-21.pdf
I was perusing the DTCC as one does and came across this important notice. To be clear I don't know much about IB but retiring from the MBS participation could be defensive if they believe a crash is coming. It also could be a forced closure. I'd love for anyone who has in-depth knowledge of IBK to comment.
Do they just have another name for their participant? Like a subsidiary or another LLC that's doing it on their behalf?
https://preview.redd.it/009ht32uzdx61.png?width=1552&format=png&auto=webp&s=92f2e9ef934df48e28a5aa6c4560d9269a129062
A retards version.
Simple smooth brain terms.
Steps
- Banks give loans
- these loans are pooled together
- converted into bonds with ratings
- labeled as senior, junior, etc bonds
- sold to investors
- rinse and repeat
Smooth brain chart (no those aren't sperm)
Why does this matter? Well, if you haven't noticed, the need for commercial property isn't very high right now. Office buildings are being abandoned, people working from home. Major retail business bankruptcies leading to vacant warehouses, department stores, etc.
Now, people will argue, "ThEsE BoNdages ArE SeCuRe HeEhEheE". Well, not with the laws of supply and demand. Let's say all of these companies are filing bankruptcy, or losing business which = less expansion. You may see companies consolidating from 300 stores to 150. Which would mean more supply and likely, higher interest rates or collateral requirements. That means your bond investment just took a big fat dirt nap next to the pile of dog shit in the garden.
I'm not going to go into too much detail because I really need a cigarette here in a few. But, I believe all these shorts will not only cause retail investors to become rich essentially overnight, but cause a major commercial real-estate crash. I also believe Citadel (and others) have their nasty fingers (like the hand from scary movie) in every turkeys butthole on the market.
Whoever holds these bonds, may be left holding big bags. I don't even want to get into mortgage forbearance and how that is going to bite us in the ass.
TLDR: GameStop = safe investment with long term growth, medium term growth, and exponential short term growth. Also, my opinion, not financial advice.
I'm just having a hard time understanding Glass-Steagal. I understand it put up a "wall" between investment and commercial banks by not letting them merge. (Well, they couldn't before GLBS.) But, could they still do business together?
Listen up, total return swaps can be described as a way of getting the return without actually holding the underying asset.
How?
It’s similar to Burrys agreement with the bank. The banks, the same ones that bought MBS’ sold total return swaps to HFs Melvin Capital, Archegos, and others
What does this mean?
They are at risk if the unreported shorts get dick/vagina slapped by an ape army. You notice the weird glitches and other things similar to what Michael Burry experienced back in 2008?
“The farther back you look, the farther forward you are likely to see”- Winston Churchill
Back in the day, the media(cough insert any Cramer roast) fucking told you to buy Bear Sterns before it fucking imploded.
Everything that is happening, has happened before, you just need to stay calm and read the situation and compare it.
GME is the the default swap because, if the dick slapping comes to light...
Tendie town
I have worked in commercial real estate lending for about 10 years but have little working knowledge of commercial mortgage backed securities. I have applied for a position dealing with CMBS and need to know important terms that an insider would use to describe their job responsibilities. I have read up on wiki's and various other websites. Is there anything reddit knows that could help me land this job? Thanks in advance.
Tl,dr: need to know insider terms about commercial mortgage backed securities.
More confirmation bias here about the issues we have all been reading about in the great DD by u/atobitt. This says to me that there continue to be stability issues in the bond market. Oh boy, I hope we make it out of this one intact it's going to be brutal.
Its amazing how many don't know this is the main reason driving the housing market. It's like a big ponzi scheme. The more the Bank of Canada buys, the higher house prices goes. Easy massive credit = massive house price increase. These people didn't just pull 300k out of their ass. The Bank of Canada printed money and gave it to the bank and the banks lend it out to people to buy houses.
But Friday was brutal Fed discontinued the SLR for banks which topped the 10 year at 1.75%. Hopefully that’s the new ceiling, and rates rally this week. Rates matter unfortunately even though UWM is a strong purchase lender.
I do about 10-20 loans a month at UWM and you can tell if they are at full capacity based upon turn times for underwriting. Sometimes they approve loans in 2-3 hours which means they have slack. Last deal took 2 days that hasn’t happened in a while. The broker ultimatum, sharpened pricing, and jumbo I think have them really busy.
Home prices have reached record highs despite depression era unemployment and huge uncertainty in every aspect of the economy.
I understand that low interest rates are somewhat to blame but also the government has made it abundantly clear that they'll do everything in their power to derisk housing speculation. In this environment it makes more sense to leverage everything you've got into housing and prices go higher. Is my interpretation correct?
Need Help Study For My Real Estate Finance & Mortgage Backed-Securities Exam Tomorrow Morning With Professor Morris Davis! Willing To Pay For Tutoring!
After reading this DD, feel free to call up the mortgage broker or originator in your family and get excited take this ride to riches, bitches.
Anyone who is familiar with MBS's might be thinking, that's a boomer play - "I want my money to pop!" Let me explain what has happened this last year and how that has affected specific stocks, ETF's and bonds (yes I said the thing boomers get off to).
If you are familiar with GSE's like Fannie Mae, Freddie Mac, Ginnie Mae, and so on, you know that rates have been suppressed by the feds for the last year and people have either gone into forbearance on existing mortgages or have been refinancing or buying homes like crazy to get these excessively low rates. Now those in forbearance are getting jobs and coming out to refinance before rates go back up because they inevitably will.
Now onto MBS's; if you find the right ones, you're looking at 10x returns over the next 2 years (slower than your GME but still a beautiful return). Which ones are the right ones? Let me share some of the ones I have been looking at and the ones I am loading up on and in what way, because these plays are very specific depending on your choice.
Ultimately you want an MBS that has been buying up lots of Ginnie Mae and they likely also have been buying up other GSE's as well. It's quite simple what happens now that democrats have control (traditionally rates are higher) as well as an inevitable stop to keeping rates down. Rates go up, so do these types of picks, as they are now collecting heavily on those increases.
If you look up IVR, you see that since rates have been low, so has this pick also. This actually isn't the best pick for this kind of play unless you're a gambling man but it's the one I am buying up because I guess I am. GIGB, GSST, MBB, and maybe RC are more logical plays only that these companies have not been down like other MBS picks. You can hunt your own down using the Mortgage-Back Securities criteria as it really doesn't matter because all will be up. If there is a play you think WSB should focus on then say so in the comments and we can get it upvoted. I personally like the potential gains on IVR and RC.
With IVR you get the advantage of buying options 3 years out and I have bought several for $138 with a .93 delta while the current trading price is ~$3 where it was ~15$ before the lowered rates. This means that in the next two years as rates go back up, this stock will naturally go back to it's plateau of ~$15 an
... keep reading on reddit ➡Author: u/juventinn1897(Karma: 112302, Created: Dec-2018).
https://www.reuters.com/business/fed-says-stock-market-boom-ebullient-investors-warrant-caution-2021-05-06/
decent article by Reuters today on the possible bubble worries but its much deeper. there is a host of issues.. the income of the commercial real estate holders has been inflated due to covid and the need to keep the mortgages afloat.
So as the income has gotten inflated and these properties were bought up during covid, real estate prices rose like crazy, Im sure you noticed. So all the mortgages come in with inflated incomes but there is a selection of mortgages which yield higher premiums as they carry more risk. As maybe you know these are bundled, rated, and sold. Called Commercial Mortgage Backed Securities and there are plenty of CMBS ETFs worth total of hundreds of billions, if not over a trillion, on the market. With very large institutional holdings, obviously, which have large holdings.
The FED released their Financial Stability Report today. Basically saying valuations are high. Equities more than doubled the avg annual growth (22.5 to 9%) last year, treasury securities have tripled avg annual growth (26 to 8.3%), high yield and unrated bonds have almost quadrupled it (25 to 7.1). Not to mention the risk premiums on high yield unrated bonds are to 2008 levels.
Here is a key paragraph from the report on the Commercial Mortgage Backed Securities market: "Other indicators continue to show strains in CRE markets. Vacancy rates continue to increase, and rent growth has declined fur-ther. Additionally, delinquency rates on com-mercial mortgage-backed securities (CMBS), which usually contain riskier loans, remain elevated. Finally, the January Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) indicated that banks, on net, reported weaker demand for most CRE loans and tighter lending standards in the fourth quarter of 2020 (figure 1-14)"
So basically, Commerial Real Estate is on an obvious bubble, about to come back down, and when it does, it is going to create a whole lot of turmoil. It will be r
... keep reading on reddit ➡https://www.dtcc.com/-/media/Files/pdf/2021/5/5/MBS982-21.pdf
This is making the rounds on yahoo right now. To be clear I don't know much about IB but retiring from the MBS participation could be defensive if they believe a crash is coming. It also could be a forced closure. I'd love for anyone who has in-depth knowledge of IBK to comment. This is relevant to us as whenever we invest with Trading 212, our equity is held in custody at Interactive Brokers.
https://preview.redd.it/5gmxegydhfx61.png?width=1552&format=png&auto=webp&s=e30502fb038a7ff4973f871ce76fe11406c0ba24
