The scariest bubble I see right now

[evenflow1969]

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.

The rules were rolled back for residential loans and we are now adding to it by applying this in the buisness market. I hope the great recession is not repeated. i will still be converting as much of my money to metals and taking possesion of them to hedge my bets. I sure as hell will not be looking for any McMansions soon! I hate to sound like a seventies or eighties conservative but they were right about the loans then and they are right about them now!

 

[Toddsterpatriot]

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?
.

Thanks for the link.

That changed around 2009, when interest in non-traded BDCs began to take off for the first time. By 2014 these companies were raising a record $5.9 billion per year in fresh capital, according Summit Investment Research.

$5.9 billion......too small to have much impact on the broader economy.


That makes it a lot harder to get out ahead of downturn in yield-debt instruments, which is exactly what has happened over the past several months. According to Summit data, the net asset value of BDC holdings fell 12.5% in 2015, exceeding the interest income those companies generated. The net result across the board was a 3.4% drop in their total return last year.

Sounds like the drop in value already will (should) stop it from inflating too much.
Of course unsophisticated investors could still get screwed.

 

[Toddsterpatriot]

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 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...

Sounds like you're covered.

 

[Toddsterpatriot]

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.

The rules were rolled back for residential loans and we are now adding to it by applying this in the buisness market. I hope the great recession is not repeated. i will still be converting as much of my money to metals and taking possesion of them to hedge my bets. I sure as hell will not be looking for any McMansions soon! I hate to sound like a seventies or eighties conservative but they were right about the loans then and they are right about them now!

The rules were rolled back for residential loans

Which rules? When?

 

[Penelope]

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.

The rules were rolled back for residential loans and we are now adding to it by applying this in the buisness market. I hope the great recession is not repeated. i will still be converting as much of my money to metals and taking possesion of them to hedge my bets. I sure as hell will not be looking for any McMansions soon! I hate to sound like a seventies or eighties conservative but they were right about the loans then and they are right about them now!

The rules were rolled back for residential loans

Which rules? When?

Senate passes deregulation bill scaling back Dodd-Frank

 

[Mac1958]

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?
.

Thanks for the link.

That changed around 2009, when interest in non-traded BDCs began to take off for the first time. By 2014 these companies were raising a record $5.9 billion per year in fresh capital, according Summit Investment Research.

$5.9 billion......too small to have much impact on the broader economy.


That makes it a lot harder to get out ahead of downturn in yield-debt instruments, which is exactly what has happened over the past several months. According to Summit data, the net asset value of BDC holdings fell 12.5% in 2015, exceeding the interest income those companies generated. The net result across the board was a 3.4% drop in their total return last year.

Sounds like the drop in value already will (should) stop it from inflating too much.
Of course unsophisticated investors could still get screwed.

Correct, but remember the non-traded BDCs are just a part of the picture. There's a ton of traded BDCs like Ares Capital: Business Development Company List | BDC Investor

I'm sniffing around right now to see if I can find out what's happening with these smaller lenders. I'd think that's where the problem would be, IF there's a problem. Where's the liquidity coming from? What I don't yet is how many of these loans are sold into CDOs or whatever.
.

 

[evenflow1969]

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?
.

Thanks for the link.

That changed around 2009, when interest in non-traded BDCs began to take off for the first time. By 2014 these companies were raising a record $5.9 billion per year in fresh capital, according Summit Investment Research.

$5.9 billion......too small to have much impact on the broader economy.


That makes it a lot harder to get out ahead of downturn in yield-debt instruments, which is exactly what has happened over the past several months. According to Summit data, the net asset value of BDC holdings fell 12.5% in 2015, exceeding the interest income those companies generated. The net result across the board was a 3.4% drop in their total return last year.

Sounds like the drop in value already will (should) stop it from inflating too much.
Of course unsophisticated investors could still get screwed.

Lets hope it does not inflate to much. I am ready for some good times for a change.

 

[Toddsterpatriot]

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.

The rules were rolled back for residential loans and we are now adding to it by applying this in the buisness market. I hope the great recession is not repeated. i will still be converting as much of my money to metals and taking possesion of them to hedge my bets. I sure as hell will not be looking for any McMansions soon! I hate to sound like a seventies or eighties conservative but they were right about the loans then and they are right about them now!

The rules were rolled back for residential loans

Which rules? When?

Senate passes deregulation bill scaling back Dodd-Frank

Yeah, too many stupid regulations under Obama led to his weakest recovery since WWII.

 

[Mac1958]

Holy crap, not business loans, but this is interesting: "Deep subprime auto loans": This is the next subprime fear worrying investors

 

[Mac1958]

Well, I guess I'm not the first on this thought:

Why Online Small Business Loans Are Being Compared To Subprime Mortgages

“The problems that we’re starting to see in the small business lending market, to me, are extremely troubling,” Michael Barr, former assistant secretary of the US Treasury, said at the August 10 launch of the Small Business Borrowers’ Bill of Rights, a list of fundamental small business financing rights created by a coalition of lenders, brokers, marketplaces and other small business advocates. “And they are, in some respects, reminiscent of some of the problems in the subprime mortgage sector that we saw in the leadup to 2008, though obviously on a smaller scale.”

"Goltz says, “It is so dishonest what they’re all doing. They figured something out and they are making gazillions of dollars." Indeed, this type of lending is so lucrative that institutional investors such as hedge funds and investments banks are clamoring to fund these loans. Earlier this year, CAN Capital raised $650 million in debt financing from a dozen banks, including Wells Fargo Capital Finance, Morgan Stanley, Barclays, UBS and J.P. Morgan. In October, Kabbage obtained more than $900 million in debt facility from a number of insurance companies, hedge funds, pension funds, and investment management companies. And OnDeck recently confirmed a strategic partnership with JPMorgan Chase."
.

 

[Toddsterpatriot]

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?
.

Thanks for the link.

That changed around 2009, when interest in non-traded BDCs began to take off for the first time. By 2014 these companies were raising a record $5.9 billion per year in fresh capital, according Summit Investment Research.

$5.9 billion......too small to have much impact on the broader economy.


That makes it a lot harder to get out ahead of downturn in yield-debt instruments, which is exactly what has happened over the past several months. According to Summit data, the net asset value of BDC holdings fell 12.5% in 2015, exceeding the interest income those companies generated. The net result across the board was a 3.4% drop in their total return last year.

Sounds like the drop in value already will (should) stop it from inflating too much.
Of course unsophisticated investors could still get screwed.

Correct, but remember the non-traded BDCs are just a part of the picture. There's a ton of traded BDCs like Ares Capital: Business Development Company List | BDC Investor

I'm sniffing around right now to see if I can find out what's happening with these smaller lenders. I'd think that's where the problem would be, IF there's a problem. Where's the liquidity coming from? What I don't yet is how many of these loans are sold into CDOs or whatever.
.

I had some Allied Capital Corp stock back in the early 2000s.
I think the yield was around 10%.
Luckily I unloaded it before it went bye-bye.

 

[Toddsterpatriot]

Holy crap, not business loans, but this is interesting: "Deep subprime auto loans": This is the next subprime fear worrying investors

"The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5 percent from 5.1 percent since 2010," ...............But data from TransUnion points out that subprime auto lending balances total $179 billion, which is 16 percent of all auto loans outstanding.

I wouldn't want to be in that business, but $179 billion is less than 1% of GDP.
And the securitized crap is off the banks books, so no contagion.

Obviously, buyer beware.
Friends don't let friends buy subprime crap in the chase for yield.

 

[Mac1958]

Holy crap, not business loans, but this is interesting: "Deep subprime auto loans": This is the next subprime fear worrying investors

"The percentage of subprime auto-loan securitizations considered deep subprime has risen to 32.5 percent from 5.1 percent since 2010," ...............But data from TransUnion points out that subprime auto lending balances total $179 billion, which is 16 percent of all auto loans outstanding.

I wouldn't want to be in that business, but $179 billion is less than 1% of GDP.
And the securitized crap is off the banks books, so no contagion.

Obviously, buyer beware.
Friends don't let friends buy subprime crap in the chase for yield.

Well, that's the problem, I'd think: Demand. With "normal" yields so low for so long, people have been willing to trade risk for yield.

Finding decent fixed income options for my clients has been a pain in the ass for 10 years.
.

 

[william the wie]

Playing devil's advocate here. The Fed hiked the 10 year treasury to 3% last month to combat wage push inflation. Since then the yield has sunk to 2.8% and the Fed is doing nothing to combat it. I strongly suspect that take home pay for the same salary is diverging rapidly across the nation and the macro view is increasingly useless due to ever greater divergence in state and local taxes.

 

[Toddsterpatriot]

Playing devil's advocate here. The Fed hiked the 10 year treasury to 3% last month to combat wage push inflation. Since then the yield has sunk to 2.8% and the Fed is doing nothing to combat it. I strongly suspect that take home pay for the same salary is diverging rapidly across the nation and the macro view is increasingly useless due to ever greater divergence in state and local taxes.

The Fed hiked the 10 year treasury to 3% last month

The Fed doesn't control the 10 year.

Since then the yield has sunk to 2.8%

And there is your proof.

 

[beagle9]

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!

What about predatory lending practices, and trying to ensnare borrowers by extending credit lines to levels that they know will never be paid back if the slightest mishap happens in a person's/borrower's life ??

Anyone making less than 40,000 a year in my opinion doesn't need a credit line of 20,000 dollars. More like 5,000 tops. I know people who had credit lines easily given to them, and they all went bad in the shakiest economy in the west. What do they gain by it these loan sharks ?

 

[evenflow1969]

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!

What about predatory lending practices, and trying to ensnare borrowers by extending credit lines to levels that they know will never be paid back if the slightest mishap happens in a person's/borrower's life ??

Anyone making less than 40,000 a year in my opinion doesn't need a credit line of 20,000 dollars. More like 5,000 tops. I know people who had credit lines easily given to them, and they all went bad in the shakiest economy in the west. What do they gain by it these loan sharks ?

They get the fees for closing the loan and then sell the loan. Also a problem, these things do need regulated.

 

[Mac1958]

They get the fees for closing the loan and then sell the loan. Also a problem, these things do need regulated.

That's where things can spin off into Derivative Land and Synthetic Derivative Land, just like before, and with little if any regulation.

Look at the banks listed in post 50. They're jumping in on this, just as they jumped in on shit mortgaged-based derivatives. It's like an addiction.

I can't imagine the scale of this would rival that of the Meltdown, but there could still be significant damage due to ripple effects.
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[william the wie]

Have any of you looked into the move towards market registration without an IPO? That trend has started in the Far East, mostly China, and if I am not mistaken the company in question can use this technique to get valuations in un or less controlled currencies to facilitate migration to Australia and New Zealand. I would suspect that this might have something to do with this discussion and how this bubble might grow but it is outside of my circle of competence.

 

[jillian]

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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you're the ones who want the banks deregulated. *shrug*