One of the good things about the 24/7 news cycle, perhaps one of its few positive externalities, is that it’s a boon for the pontification business. It enables all sorts of otherwise serious people to make fools of themselves day in and day out predicting generally gloomy stuff, as sunshine doesn’t sell.  As a card-carrying member of the chattering class, this empowers me to publish periodic outlooks about the future with little risk of any fundamental embarrassment.  It’s sort of a no risk undertaking, isn’t it?  If you happen to get something right (think blind cat finding dead mouse), you can claim to be a star.  If you get it wrong, well, everyone else got it wrong, too – and often on national television.

The other thing we’ve got going for us in the bloviating business is that we remain in fraught and friable times.  We are running short of good synonyms for shock and outrage and struggling to describe what might actually be viewed as extraordinary.  What really does extraordinary mean these days?  These make good times for the prediction biz.  It’s not much fun making predictions when not much changes.  Imagine that poor sod, talking to the Pharaoh during the Old Kingdom after reading many entrails,  I foresee…nothing really changing for 2000 years; more news at 11.

Unburdened by much of the way in data and little in the way of anxiety about getting it wrong, I’m ready to tell you all about 2020:Continue Reading 2020: An Outlook

As is our tradition here at Crunched Credit, each year, about this time, we award our Golden Turkey Awards.  Once again, I must say that we are utterly blessed with so many worthy candidates. The truly deserving have once again wrangled with vision and astounding persistence to earn a spot on our acclaimed list.  To

We have been writing off and on about the restoration to good graces of the commercial real estate CLO since the early days of this current recovery, and it’s important to keep the conversation going.  Hey, if Pete Rose can get into the Hall of Fame (and as MLB is embracing gambling, that cannot but happen, right?), the full restoration of the reputation of the CRE CLO cannot be far behind.

First, let’s just stop and get some definitional clarity here for those of you who actually have a life.  Fundamentally, the CRE CLO is a device that provides match-term leverage for a portfolio lender, though the technology can be used for other purposes.  Loans are pooled, investment-grade securities are sold to investors, and the loans are repaid from debt service payments.  Customarily, the sponsor retains all of the equity and junior debt, creating structural leverage to enhance returns on the dollars invested in the structure.

It’s really a warehouse funded by the capital markets. As such, it provides for an excellent alignment of interests between investors and the sponsor, who holds the bottom of the capital stack.  The sponsor is in it for the long haul, managing financial assets for its benefit and the benefit of the investors alike.
Continue Reading The CRE CLO Is Back…and That’s Good

As we are just inking one of the very first pre-risk retention effective date risk retention deals (Potemkin Village anyone?), we are also seeing an increased flow of what are generically referred to as CRE CLOs. It’s time to consider how the Risk Retention Rule (the “Rule”) will apply to this growing market technology.
Continue Reading Risk Retention and the CRE CLO