3 ms·

It's not some big secret. If the market was going to spook it would have spooked.

7thaccount 3y ago
Not necessarily true I don't think. It's possible they will freak out over the upcoming years. There's a lot riding on commercial real estate. It isn't easy to convert to living space either.
baq 3y ago
Market is too busy buying NVDA and selling puts. Everybody knows about CRE but it isn't a problem for this quarter. Besides, if it ever becomes a problem, the FED will drop a dedicated CRE credit line over the next couple weekends. (If it doesn't, though...)
- graemep 3y ago
  The market can be blind for a long time. Bad mortgage lending was pretty obvious in the early 2000s. The dotcom boom and many other booms were obvious overvaluation. Greater fool and FOMO are powerful, especially if your incentives are short term.
candiddevmike 3y ago
I think the market assumes that since everyone is exposed, no one is exposed (there will be bailouts).
- toomuchtodo 3y ago
  FDIC bailouts or failure managements of smaller non GSIB banks who are overexposed. Haven't dived into which banks are most at risk, potential investment opportunity if their equity is publicly traded (not investing advice). https://www.fitchratings.com/research/banks/us-regional-small-banks-cre-exposure-could-pressure-ratings-24-05-2023 https://www.fitchratings.com/research/banks/us-regional-smal... https://www.fsb.org/2023/11/2023-list-of-global-systemically-important-banks-g-sibs/ https://www.fsb.org/2023/11/2023-list-of-global-systemically... Related: https://www.bloomberg.com/news/articles/2024-01-30/billionaire-sternlicht-sees-1-trillion-loss-in-office-values https://www.bloomberg.com/news/articles/2024-01-30/billionai... | https://archive.today/isGFU https://archive.today/isGFU ("Billionaire Barry Sternlicht sees more than $1 trillion of losses for office real estate, calling the properties “one asset class that never recovered” from the pandemic.")
  - toomuchtodo 3y ago
    Additional citation: https://www.bloomberg.com/news/articles/2024-01-31/new-york-community-bancorp-slumps-on-surprise-loss-dividend-cut https://www.bloomberg.com/news/articles/2024-01-31/new-york-...
AlexandrB 3y ago
Same thing could have been said in 2007. "Everyone" knew there were a bunch of junk bonds floating around. What's uncertain is who is exposed and how bad is it, so which bank do you bet against?
- ericmcer 3y ago
  In 2007 we didn't have a precedent for just printing money to cover everyone when things went down. If anything financial disasters are great for people who hold stock now. All the added money will settle there.
- CamperBob2 3y ago
  If you owe the bank $100K, you have a problem. If you owe the bank $100M, the bank has a problem. If you owe the bank $100B, nobody has a problem, because Uncle Sam will somehow magically take care of everything. So, yeah, I'm not sure we took the right lessons away from the last time this sort of thing happened. Taxpayer-funded bailout for the commercial real estate sector coming in 3...2...1...
  - s1artibartfast 3y ago
    Uncle Sam just spreads the problem around. Your 100B debt is now everybody else's problem and they get to pay interest on your debt.

Not necessarily true I don't think. It's possible they will freak out over the upcoming years. There's a lot riding on commercial real estate. It isn't easy to convert to living space either.

baq 3y ago

Market is too busy buying NVDA and selling puts. Everybody knows about CRE but it isn't a problem for this quarter. Besides, if it ever becomes a problem, the FED will drop a dedicated CRE credit line over the next couple weekends. (If it doesn't, though...)

graemep 3y ago
The market can be blind for a long time. Bad mortgage lending was pretty obvious in the early 2000s. The dotcom boom and many other booms were obvious overvaluation. Greater fool and FOMO are powerful, especially if your incentives are short term.

candiddevmike 3y ago

I think the market assumes that since everyone is exposed, no one is exposed (there will be bailouts).

toomuchtodo 3y ago
FDIC bailouts or failure managements of smaller non GSIB banks who are overexposed. Haven't dived into which banks are most at risk, potential investment opportunity if their equity is publicly traded (not investing advice). https://www.fitchratings.com/research/banks/us-regional-small-banks-cre-exposure-could-pressure-ratings-24-05-2023 https://www.fitchratings.com/research/banks/us-regional-smal... https://www.fsb.org/2023/11/2023-list-of-global-systemically-important-banks-g-sibs/ https://www.fsb.org/2023/11/2023-list-of-global-systemically... Related: https://www.bloomberg.com/news/articles/2024-01-30/billionaire-sternlicht-sees-1-trillion-loss-in-office-values https://www.bloomberg.com/news/articles/2024-01-30/billionai... | https://archive.today/isGFU https://archive.today/isGFU ("Billionaire Barry Sternlicht sees more than $1 trillion of losses for office real estate, calling the properties “one asset class that never recovered” from the pandemic.")
- toomuchtodo 3y ago
  Additional citation: https://www.bloomberg.com/news/articles/2024-01-31/new-york-community-bancorp-slumps-on-surprise-loss-dividend-cut https://www.bloomberg.com/news/articles/2024-01-31/new-york-...

AlexandrB 3y ago

Same thing could have been said in 2007. "Everyone" knew there were a bunch of junk bonds floating around. What's uncertain is who is exposed and how bad is it, so which bank do you bet against?

ericmcer 3y ago
In 2007 we didn't have a precedent for just printing money to cover everyone when things went down. If anything financial disasters are great for people who hold stock now. All the added money will settle there.
CamperBob2 3y ago
If you owe the bank $100K, you have a problem. If you owe the bank $100M, the bank has a problem. If you owe the bank $100B, nobody has a problem, because Uncle Sam will somehow magically take care of everything. So, yeah, I'm not sure we took the right lessons away from the last time this sort of thing happened. Taxpayer-funded bailout for the commercial real estate sector coming in 3...2...1...
- s1artibartfast 3y ago
  Uncle Sam just spreads the problem around. Your 100B debt is now everybody else's problem and they get to pay interest on your debt.