We certainly have an abundance of bad bits and bobs out there right now, don’t we? War, pestilence, chubby dictators with rockets, buff dictators without souls, miscellaneous threats to world peace. It’s everywhere. Nonetheless, my take remains (see my prior blog, Prognosticator’s Regret) that, at least for our economy, all that doesn’t matter so much (how stupid does that sound?). It’s only through the transmission mechanism of monetary change that our economy is really impacted and regrettably, we’ve got that in full right now in the form of rapid, material inflation.
Continue Reading It’s the Inflation, Stupid
The CRE CLO Unleashed
Our fine little CRE CLO business has exploded over the past couple of years, hasn’t it? Last year, around this time, I recklessly predicted for my friends at Commercial Mortgage Alert that we might hit $30 billion of issuance in 2021. I was the outlier…by a lot. Well, it looks like we’ll finish the year closer to $45 billion and it’s clear that in the first quarter of 2022 we will be on fire. Now, of course, I also thought that we’d have a fantastic year in early 2020 and then that pesky little bug changed our lives, so please consider my on-fire prediction subject to caveats, limitations and restrictions including, but not limited to, disease, dictators and the possibility that the Fed is making a colossal mistake.
All else being equal, the CRE CLO business will continue to grow and I don’t really see the appetite for this technology receding any time soon. Could it? Sure. Annoying black swans aside, if the curve radically changes shape and creates outsized demand for fixed rate product, the CRE CLO business, as it has grown up in the past couple of years, will see challenges. But more on this later.Continue Reading The CRE CLO Unleashed
Three Things You Should Know about Negative Interest Rates
The Federal Reserve announced last Wednesday that it is leaving the federal funds rate where it is, for now. While the United States is pondering interest rate hikes, other parts of the world are plunging further into negative territory. Last Thursday, in an attempt to bolster Europe’s weakening growth and spur inflation, the European Central Bank (the “ECB”) lowered its deposit rate by another 0.1%, pushing its deposit rate down to -0.4%.
With other central banks lowering rates into the negative, will the U.S. follow? Why is this happening? What could go wrong? How will this affect our banks? Click through for three things you should know about negative interest rates.Continue Reading Three Things You Should Know about Negative Interest Rates