When the Fed raises rates so aggressively, the "cap rates" on Commercial Real Estate (CRE) should rise in lockstep. But they haven't. The next big shoe to fall in CREDIT, (because of interest rate increases) is CRE exposure at Banks.... The loans are ALL mismarked, just like their UST #bond portfolio. Banks are walking wounded due to their #bond portfolios, and this is even before their CRE loss expectations.... DO THE #MATH. Bank stocks are waaaaay over-valued to their true ECONOMIC risks. GN. #btc
@FossGregfoss Love your posts, Foss. I learn a lot (and also laugh). Ran into a mathematician friend today and he said he did a deep dive into fiat. Same conclusions, of course! He suggested, “Buy Bitcoin, man!” I told I was way ahead of him on that.
@FossGregfoss Greg i am never going to doubt your expertise in credit or btc but CRE is different. Some asset classes are screwed and others are flying fine. Keep in mind smart operators locked in record low rates for 5-10 years in the glory years. Also there is a lot of equity ahead of debt.
This is completely true… I can verify. I work at a small conservative Bank as a Credit Analyst and we are becoming increasingly worried about our CRE loans made since 2018-2020 that are ballooning into these new/higher rates… Rates going up = collateral value (Appraisals) coming down… You can easily see how ugly this situation could get if payments start to be missed due to increased vacancies at these CRE properties. The banks can become upside down on these loans real quick. Words straight from our CLO, “This is what keeps me up at night.” We need rates to come down soon, and the FED knows this… The higher they raise rates the bigger the issue will become No one owns enough #Bitcoin for the coming decade… the amount of printing that will take place will be astronomical