2022 Golden Turkeys

It’s Golden Turkey Awards Time, Folks!

Our Turkeys are a little late this year but hey, we’ve been busy worrying about the collapse of the world’s economy.  This is the 10th edition of our Turkeys and much thanks to our disorderly, often dysfunctional, regularly inscrutable and absurd government, polity and marketplace for continuing to provide us with materials for this annual compilation of that we find most silly, absurd and worthy of a Turkey.

Last year at this time, the market was on fire.  I was shocked that we actually found time to put out a Turkey.  This year, the market looks more like a smoldering ruin rather than a roaring bonfire, but hey, maybe that means we have an upside to look forward to.  So, with irrational exuberance and hope that sometime in 2023 it’s better than now, here are our 2022 Turkeys. Continue Reading

CREFC Capital Markets Conference Recap

On October 26, 2022, Dechert partners Laura Swihart and Stewart McQueen attended the CREFC Capital Markets Conference in New York City. Stewart gave opening remarks and Laura moderated a panel on the current housing market and its intersection with multi-family, single-family and build-to-rent properties. Laura and Stewart sat down with Law Clerks Jared Goldstein and Sarahan Moser to recap the conference. Continue Reading

Auto ABS: Uncertainty and Excitement Ahead

Recently, Dechert Partner Sarah Milam partook in an auto ABS panel discussion at ABS East in Miami, Florida.  Sarah and four distinguished panelists discussed the state of the ABS auto loan market, issuance, yields, collateral performance, ESG trends, and deal structures.  Sarah sat down with Associate Griffin Hamilton to recap the conference.

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Can We (Should We) Try to Fix the Conduit Before It’s Gone?

The conduit market does not absorb a lot of bandwidth in my day-to-day practice; I’m more of a CRE/CLO/warehouse/SASB/new products/innovation sort of guy.  But it’s painful to watch this marquee capital markets product wither away, a product that  transformed $200 billion of mortgage loans into securities in a single year.  That biz might limp over the finish line with a meager $25 billion this year.  What happened?  The demand for CRE leverage certainly hasn’t changed.  The CRE market has gotten significantly bigger since 2008 and consequently, the need for leverage has grown concomitantly.  The nature of the underlying real estate assets hasn’t changed all that much, nor the nature of the ownership structure, albeit it is probably a bit more institutional today than it was in 2008.  The product is no different, in large measure, today than it was back then and indeed in some minor, twiddling respects might even be better from the perspective of the borrower. Continue Reading

Life (and Opportunity) in the Time of Considerable Government Malfeasance

I wrote a week or two back about my expectation that significant economic dislocation awaits us.  I still think that.  The morning after I published, hordes (ok, maybe not hordes) of PhD Villeins were outside my house with pitchforks and burning torches, loudly asserting that I had wildly overstated the likelihood of material distress in the marketplace.  “No, no, no, the White House has assured us of a soft landing and a soft landing we’ll have.”  (The Council of Economic Advisers, not surprisingly, if professionally embarrassing, seem to think so, too.)  And, while inflation is bad, it’s not that bad.  (I don’t yet need a wheel barrel to buy bread!)  No recession, they perorate loudly and insistently.  We’ll be back to 2% inflation, sub 4% unemployment and 2% GNP growth by Q4 of 2023!

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Get Ready for the Distressed Debt Wave (HONEST!)

As I was saying in my last commentary, it’s time to stay calm and carry on in a market that is flashing green, red and yellow signals simultaneously.  These are market conditions in which nimbleness will be rewarded.  Whether the economy is going to continue to grow, albeit in a very low gear, or whether we’re going to have a recession of one species or another, things are not soon going to return to the BEFORE. Continue Reading

My Hair Is Not on Fire…Yet

I’m back from vacation in the English countryside, away from the hurly burly of life in our capital markets.  While I tried hard not to obsess on the news whilst away, bad news has a way of slithering into your peripheral vision, doesn’t it (I stuck to the English papers which are great fun, and are way better than ours… “Emergency biscuits flow into UK due to national shortages”)? Continue Reading

It’s Not Just a Flesh Wound

I’ve been back from CREFC’s and RER’s annual meetings for a week or so, mulling what those confabs meant.  There’s been plenty of reportage on the events, the panels, the parties, the to-ing and fro-ing, but what I want to do is step back and reflect on the gestalt; the subtext, the hidden codex.  What just happened?

It’s capitulation.

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Contagion

What I know about cryptocurrency can be inscribed on a head of pin with a jackhammer.  But I know it’s a thing; I know it’s a big thing and getting bigger.  So, these past few weeks I have been reading with interest (interest, to be clear in this context, is the emotion one experiences watching a NASCAR pileup, whilst not being in one of the cars) the breathtaking collapse of Terra’s stablecoin. Having previously been entirely bereft of any knowledge of the topic, I read with considerable interest that the Terra coin was pegged to the dollar and backed by “algorithms.”  Algorithms?  The Terra peg was protected, theoretically (let’s emphasize that theoretical part) by allowing Terra’s owners to “burn” coins and buy another cryptocurrency which was designed not as something pegged to the dollar but as a repository of value which would rise and fall on market sentiment (backed by those marvelous algorithms again).  A shock absorber to protect the peg.  The companion cryptocurrency in this case was called Luna.  As Terra lost its peg, you would burn Terra and buy Luna.  And if Luna went down, you would burn Luna and buy Terra.  Apparently, this all worked as long as everyone firmly believed it worked.  Now, apparently, they don’t and it doesn’t.  Terra tanked to fractions of pennies on the dollar, as did Luna.  How’s that for a hedge?  Ouch! Continue Reading

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