The scariest bubble I see right now

I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
.

How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.
Tightening of purses always goes to far just as the loosening of purses. The problem is we go from giving to many loans to not enough. Cash flow certainly helps new buisness get off the groun d and helps existing buisnesses stay competative. It is a big deal in creating and maintaining jobs. While purses are to loose buisnesses that should not get loans get them and when the purse strings tighten buisnesses that should get them do not. Banking worked for centuries very well when risk was managed appropriately- IE 80/20 loans. We were able to manage risk well for centuries under these guidelines it is when we go out side of these guidelines that things go bad. Cash flow is still king and if we want a vibrant economy some risk must be taken. They just must be well managed risks. Pretty simple from a real conservatives view 80/20 loans worked for ever, changing that did not work. Seems like a simple solution go back to what worked.
 
How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.
Tightening of purses always goes to far just as the loosening of purses. The problem is we go from giving to many loans to not enough. Cash flow certainly helps new buisness get off the groun d and helps existing buisnesses stay competative. It is a big deal in creating and maintaining jobs. While purses are to loose buisnesses that should not get loans get them and when the purse strings tighten buisnesses that should get them do not. Banking worked for centuries very well when risk was managed appropriately- IE 80/20 loans. We were able to manage risk well for centuries under these guidelines it is when we go out side of these guidelines that things go bad. Cash flow is still king and if we want a vibrant economy some risk must be taken. They just must be well managed risks. Pretty simple from a real conservatives view 80/20 loans worked for ever, changing that did not work. Seems like a simple solution go back to what worked.
Sure, agreed. What concerns me about that is the fact that standards are so low for small businesses. These are loans that most likely should not be made.

Now, if this were a matter of massively increased liquidity for 80/20 type loans with higher standards, I wouldn't be concerned. But clearly there is so much liquidity out there (no doubt chasing yield) that the lenders have had to go bottom-fishing. It was inevitable.
.
 
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.
Tightening of purses always goes to far just as the loosening of purses. The problem is we go from giving to many loans to not enough. Cash flow certainly helps new buisness get off the groun d and helps existing buisnesses stay competative. It is a big deal in creating and maintaining jobs. While purses are to loose buisnesses that should not get loans get them and when the purse strings tighten buisnesses that should get them do not. Banking worked for centuries very well when risk was managed appropriately- IE 80/20 loans. We were able to manage risk well for centuries under these guidelines it is when we go out side of these guidelines that things go bad. Cash flow is still king and if we want a vibrant economy some risk must be taken. They just must be well managed risks. Pretty simple from a real conservatives view 80/20 loans worked for ever, changing that did not work. Seems like a simple solution go back to what worked.
Sure, agreed. What concerns me about that is the fact that standards are so low for small businesses. These are loans that most likely should not be made.

Now, if this were a matter of massively increased liquidity for 80/20 type loans with higher standards, I wouldn't be concerned. But clearly there is so much liquidity out there (no doubt chasing yield) that the lenders have had to go bottom-fishing. It was inevitable.
.
Again all solved with reasonable collateral requirements. You see it is the under writer where things go bad, they are the ones that determine what gets bought and what does not. It is their risk management we should be most concerned about. Dodd Frank was not right it punished the appraiser more than any body and they have the least to do with the out come. Simply go by reasonable collateral requirements and every thing is ok. Let them rush liquidity to the market and bad things will happen. Slow and steady wins the race long term. Not to mention consistancy makes the investor a lot less nervous. I should not have to be recalculating risk do to governmental influence every two weeks. Thje less this changes the more predicatable the market should be! Note these are very conservative philosophies that conservatives have recently abandoned.
 
Let them rush liquidity to the market and bad things will happen.
Well, that's exactly my concern, because that's exactly what they're doing. That's why I'm hearing that little echo of ten years ago.
.
I am not sure what we can do about it at this point. Hopefully some one will reign in on this parade but I doubt it. Save your cash and buy the shit out of land and houses when it goes down again. The good news is it will take time for the repurcussions to hit, like when that liquidity is gone. Maybe they will reverse it before or maybe we go right back into recession. Thinking congress will be responsive is a long shot they do not do their job.
 
Hey OP,

What do you know? The Merchant Capital Advance business is a bubble that will pop but it's not that big and not contagion-big for sure. They have growing default rates and I have heard bankruptcy judges opine about how they look forward to these cases because the MCA companies both claim they are not a lender - and are entitled to the protection of a lender. Their legal strategy will unravel in the coming years.

Bank Lenders, there is a softening but not much. The underwriting is still strong though pricing is low and there is softness on terms. I've got 9 ABL (asset based lending) term sheets right now for the purchase of a mfg business and no one has gone crazy. Our term sheets range from big national banks to scrappy finance companies so we see the full range of pricing, terms and underwriting. I'm not seeing a bubble. But you are, tell me how?

Thanks,
 
Hey OP,

What do you know? The Merchant Capital Advance business is a bubble that will pop but it's not that big and not contagion-big for sure. They have growing default rates and I have heard bankruptcy judges opine about how they look forward to these cases because the MCA companies both claim they are not a lender - and are entitled to the protection of a lender. Their legal strategy will unravel in the coming years.

Bank Lenders, there is a softening but not much. The underwriting is still strong though pricing is low and there is softness on terms. I've got 9 ABL (asset based lending) term sheets right now for the purchase of a mfg business and no one has gone crazy. Our term sheets range from big national banks to scrappy finance companies so we see the full range of pricing, terms and underwriting. I'm not seeing a bubble. But you are, tell me how?

Thanks,
As I said, I'm not predicting or "knowing" anything for sure - I'm just putting a couple of things together and wondering.

I first noticed this situation last year while doing research for a book on business owner financial matters. I requested information online from a few of these small lenders and they've been after me ever since (which is fine). The offers that I keep getting are not about asset-based lending or or bank loans or angel investing or traditionally-underwritten loans. They specifically say that they don't require collateral OR good credit. That just reminds me of pre-Meltdown sub-prime mortgage loans.

Then I think about some of the securities that are out there. I'm a CFP/financial advisor, and I get calls pretty much every day from non-traded REIT programs and (more to the point) non-traded BDCs (Business Development Companies) promising both high (6% to 8%) yields to consumers and high (7%) commissions. When I've met with a couple of these guys, I've asked them specifically about whether they're having to go bottom-fishing to stay competitive given the amount of competition they have out there, and they generally tend to evade and stammer. That doesn't give me a warm feeling in my tummy. I stay away from non-traded securities anyway due to their lack of liquidity, but yeah, that concerns me.

So, as my email inbox continues to be flooded with these offers of easy business loans, it just made me wonder. Too much liquidity CAN be dangerous, as we've seen. That's all.

Non-Traded BDCs: Worth the Risks?
.
 
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I agree with the OP, deregulations of the banks under the GOP. Nucor , the largest steel co. in the US bought many small companies here and in Canada. The economy is different than it was in the 80's, there is no going back. Automation is killing jobs. Easy money is at it again. First under Reagan , then Bush Jr and now Trump.

If I was in an ARM I'd get out quick, if you can.
 
I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
.

How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

If only the marginal businesses are dependent on these low standard loans, the impact on established, profitable businesses, with access to more traditional sources of funding might not be an issue.
 
I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
.
With the Dow at 26000...I am pretty sure that everything is a bubble at this point...12392 ten years ago on this day.

24946....Friday.
Up from 12392 ten years ago is only 7.25% compounded.
Not an unheard of annual return.
The market is overvalued...by a bunch.

"US Total Market Capitalization is at 144.2%, compared to 144.5% the previous market day and 131.2% last year. This is higher than the long term average of 80.68%"

US Total Market Capitalization (Market Daily, Percent of GDP)

The market is overvalued...by a bunch.

What have you shorted to profit from this overvaluation?
How leveraged are your short positions?
Do you prefer long puts, short equities or short futures?
 
I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
.

How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

If only the marginal businesses are dependent on these low standard loans, the impact on established, profitable businesses, with access to more traditional sources of funding might not be an issue.
They always get caught up in it anyway. Again back to the under writer when they get skiddish they apply the same rules to good and bad actors. It is thier job on the line and when one sees risk is common they see risk every where. Mean while we could control these modd swings by those making the actuall decision by not putting them in these situations and keep collateral reqirements steady. If you know an appraiser ask them what talking to an under writer is like and will understand this prcess a great deal more. Emotions do get in the way on both swings of the spectrum You go from get the money out and earnig quick to stop the flow. This is when emotions become involved.
 
I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
.

How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.

If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

For sure. Unsophisticated investors can get hurt buying low quality loans, but unless the lenders get stuck with a bunch of this crap on their books and default to their bank lenders, causing these banks to reduce other lending to the economy, I don't see it spreading very far.

You have any numbers on the amount of this "sub-prime business loan" securitization?
$10s of billions? $100s of billions? Who is securitizing this crap?
 
I agree with the OP, deregulations of the banks under the GOP. Nucor , the largest steel co. in the US bought many small companies here and in Canada. The economy is different than it was in the 80's, there is no going back. Automation is killing jobs. Easy money is at it again. First under Reagan , then Bush Jr and now Trump.

If I was in an ARM I'd get out quick, if you can.

I agree with the OP, deregulations of the banks under the GOP.

Real deregulation or imaginary deregulation you "read about"?
 
How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.

If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

For sure. Unsophisticated investors can get hurt buying low quality loans, but unless the lenders get stuck with a bunch of this crap on their books and default to their bank lenders, causing these banks to reduce other lending to the economy, I don't see it spreading very far.

You have any numbers on the amount of this "sub-prime business loan" securitization?
$10s of billions? $100s of billions? Who is securitizing this crap?
Really difficult to construct with all the papaer work involved and the industry is not exactly transparent.People can report numbers but the reality is we likely do not know. I hope it does not spread but the last time it happened it did. I see no reason why it would be different this time. I feel like just belivig that North American Rep and say keep it at 80/20 and we do not have to worry.
 
How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

If only the marginal businesses are dependent on these low standard loans, the impact on established, profitable businesses, with access to more traditional sources of funding might not be an issue.
They always get caught up in it anyway. Again back to the under writer when they get skiddish they apply the same rules to good and bad actors. It is thier job on the line and when one sees risk is common they see risk every where. Mean while we could control these modd swings by those making the actuall decision by not putting them in these situations and keep collateral reqirements steady. If you know an appraiser ask them what talking to an under writer is like and will understand this prcess a great deal more. Emotions do get in the way on both swings of the spectrum You go from get the money out and earnig quick to stop the flow. This is when emotions become involved.

Again back to the under writer when they get skiddish they apply the same rules to good and bad actors.

Sure, but if the good companies don't use these underwriters, how are they hurt?
Unless Bank of America, JP Morgan, Citicorp etc are the ones with the newer crappy underwriting?
I don't think that was the claim of the OP.
 
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.

If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

For sure. Unsophisticated investors can get hurt buying low quality loans, but unless the lenders get stuck with a bunch of this crap on their books and default to their bank lenders, causing these banks to reduce other lending to the economy, I don't see it spreading very far.

You have any numbers on the amount of this "sub-prime business loan" securitization?
$10s of billions? $100s of billions? Who is securitizing this crap?
Really difficult to construct with all the papaer work involved and the industry is not exactly transparent.People can report numbers but the reality is we likely do not know. I hope it does not spread but the last time it happened it did. I see no reason why it would be different this time. I feel like just belivig that North American Rep and say keep it at 80/20 and we do not have to worry.

I hope it does not spread but the last time it happened it did. I see no reason why it would be different this time.


Why is it different? Magnitude.
A tiny market, basically sub-prime securitized small business loans.....tiny market.
US residential loans.....biggest market in the world.
 
How many fewer business loans compared to home mortgages?
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.
I've thought about that, but I'm not sure. Because many of these loans probably shouldn't be made in the first place, their existence is only increasing risk. Just like sub-prime mortgages. Holy crap, the failure rate for small businesses is so high, I don't know how many of those loans would help. If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

I haven't really thought through this end of it. This might end up being an educational thread...
.

If the low-end lenders collapse, then, maybe the ripple effect wouldn't be too bad. Investors would be hurt, though.

For sure. Unsophisticated investors can get hurt buying low quality loans, but unless the lenders get stuck with a bunch of this crap on their books and default to their bank lenders, causing these banks to reduce other lending to the economy, I don't see it spreading very far.

You have any numbers on the amount of this "sub-prime business loan" securitization?
$10s of billions? $100s of billions? Who is securitizing this crap?
See the link at the bottom of Post 27.

I don't know what the total is, though. My guess is that, since we're seeing bottom-fishing, they've gone through a lot of the better borrowers.
.
 
I have no idea. Why?
.

Outstanding mortgages are currently about $14.7 trillion.
If people lose confidence in that market, start suffering defaults, that's a big deal.
If the small business loan market is $500 billion (I have no idea the actual size) and starts having problems
that could be an annoying hit to profits, without having any secondary effects.

I didn't find enough specifics below, maybe you can?

https://www.federalreserve.gov/releases/z1/20180308/z1.pdf
Wrong those of us that have dealt with under wrting in the past understand the swings they go through. They go from we will buy any thing to we wil buy next to nothing. Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

Take away small buisnesses ability to get investment cash or operating cash and it will have secondary effects.

If only the marginal businesses are dependent on these low standard loans, the impact on established, profitable businesses, with access to more traditional sources of funding might not be an issue.
They always get caught up in it anyway. Again back to the under writer when they get skiddish they apply the same rules to good and bad actors. It is thier job on the line and when one sees risk is common they see risk every where. Mean while we could control these modd swings by those making the actuall decision by not putting them in these situations and keep collateral reqirements steady. If you know an appraiser ask them what talking to an under writer is like and will understand this prcess a great deal more. Emotions do get in the way on both swings of the spectrum You go from get the money out and earnig quick to stop the flow. This is when emotions become involved.

Again back to the under writer when they get skiddish they apply the same rules to good and bad actors.

Sure, but if the good companies don't use these underwriters, how are they hurt?
Unless Bank of America, JP Morgan, Citicorp etc are the ones with the newer crappy underwriting?
I don't think that was the claim of the OP.
All under writers feel the heat when loans start going belly up no matter where they work. It happens quicker at hese monster companiesas more under writers are in close proximity to spread fear.Also please note that many of the lenders you named here took the worst bath of all during the great recesion. Bank of America,Chase,City Corp and Counrty wide took it harder than any body. I know I was doing RMV's for chase duriing that time. We were listing properties for regularly half what they were bought for. It was worse in florida and Las Vegas. We listed a penthouse that had just two years prior to the crisis had been bought for 4.2 mil for 920k. Chase was not immune and I never wanted to have 920k more in my life. If I had had it I would have recused myself from the valuation and made some offeres my self!
 
I won't go so far as to call this a prediction, but there's a massive bubble brewing right now and I haven't seen anyone talking about it.

Remember those radio and teevee commercials in the 2004-2008 years that advertised low-document and no-document home loans, 125% LTV loans, bad credit mortgages, all the horrific SHIT that would get layered into CDOs and CMOs, avoid regulation, get phony AAA ratings by the paid-off ratings companies, turn to shit and ultimately damn near bring down the entire global economy?

Well, imagine those same types of loans for small to mid-sized business owners instead of home buyers.

It's damn near deja vu. Lenders are both proliferating everywhere, and dropping lending standards to a point at which they could barely be considered "standards". Because it's not a front-page thing like mortgages, this massive stew of bad credit is flying totally under the radar - YET, a business is FAR more likely to fail than is a home owner likely to pay their mortgage. They're everywhere now, the loans are going into larger securities, and here we are again.

Just saying.
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With the Dow at 26000...I am pretty sure that everything is a bubble at this point...12392 ten years ago on this day.

24946....Friday.
Up from 12392 ten years ago is only 7.25% compounded.
Not an unheard of annual return.
The market is overvalued...by a bunch.

"US Total Market Capitalization is at 144.2%, compared to 144.5% the previous market day and 131.2% last year. This is higher than the long term average of 80.68%"

US Total Market Capitalization (Market Daily, Percent of GDP)

The market is overvalued...by a bunch.

What have you shorted to profit from this overvaluation?
How leveraged are your short positions?
Do you prefer long puts, short equities or short futures?
I am not old but I am old school.
I have stayed out of the casino since 2007. I own real estate (domestic US), outright. In Asia (business LLC 50/50 for legal/tax purposes & rental property/condos). Other various in hard assets (metals/gems)...no paper besides cash.
If you can't taste it/fuck it or touch it...you dont own it...even then...
 

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