After the housing crisis, subprime CDOs naturally fell out of favor. Demand shifted to a similar—and similarly risky—instrument, one that even has a similar name: the CLO, or collateralized loan obligation. A CLO walks and talks like a CDO, but in place of loans made to home buyers are loans made to businesses—specifically, troubled businesses. CLOs bundle together so-called leveraged loans, the subprime mortgages of the corporate world. These are loans made to companies that have maxed out their borrowing and can no longer sell bonds directly to investors or qualify for a traditional bank loan. There are more than $1 trillion worth of leveraged loans currently outstanding. The majority are held in CLOs.
The Bank for International Settlements, which helps central banks pursue financial stability, has estimated the overall size of the CDO market in 2007 at $640 billion; it estimated the overall size of the CLO market in 2018 at $750 billion. More than $130 billion worth of CLOs have been created since then, some even in recent months. Just as easy mortgages fueled economic growth in the 2000s, cheap corporate debt has done so in the past decade, and many companies have binged on it.
NRZ is going to moon when this shit is over with. Can’t wait.
Justin Peterson
>march 23rd was the crash >june 11th was the crash where does the copium end? nothing has been fixed since 2008 and things are only going to get worse from here. we will not reach ATH for years.
Thomas Allen
It's a business in controversy. Why are you too retarded to understand that?
Jaxson Robinson
>Unironically the bears were the good guys in this movie
They still need to get their shit kick in next thing in the morning
NRZ will not exist in about 6 months time you fucking moron. >t. they own the mortgage on my house
Grayson Murphy
look at the fucking futures market you dumb bear
Eli Anderson
Yeah, I bought some at 940. Still up a bit. Tesla's trajectory is upwards in the long term, but it'll be a bumpy ride. May fortune favour you user.
Josiah Clark
thanks fren
plenty of time tomorrow. looking at LUV and SAVE for meself
Grayson Johnson
Delusional bulls are going to get fucked by the chinks and europoors lmao >Delusional bulls are going to get fucked by the chinks and europoors lmao Delusional bulls are going to get fucked by the chinks and europoors lmao >Delusional bulls are going to get fucked by the chinks and europoors lmao Delusional bulls are going to get fucked by the chinks and europoors lmao >Delusional bulls are going to get fucked by the chinks and europoors lmao Delusional bulls are going to get fucked by the chinks and europoors lmao >Delusional bulls are going to get fucked by the chinks and europoors lmao Delusional bulls are going to get fucked by the chinks and europoors lmao >Delusional bulls are going to get fucked by the chinks and europoors lmao
The Bank for International Settlements estimates that, across the globe, banks held at least $250 billion worth of CLOs at the end of 2018. Last July, one month after Powell declared in a press conference that “the risk isn’t in the banks,” two economists from the Federal Reserve reported that U.S. depository institutions and their holding companies owned more than $110 billion worth of CLOs issued out of the Cayman Islands alone. A more complete picture is hard to come by, in part because banks have been inconsistent about reporting their CLO holdings. The Financial Stability Board, which monitors the global financial system, warned in December that 14 percent of CLOs—more than $100 billion worth—are unaccounted for.
Since 2008, banks have kept more capital on hand to protect against a downturn, and their balance sheets are less leveraged now than they were in 2007. And not every bank has loaded up on CLOs. But in December, the Financial Stability Board estimated that, for the 30 “global systemically important banks,” the average exposure to leveraged loans and CLOs was roughly 60 percent of capital on hand. Citigroup reported $20 billion worth of CLOs as of March 31; JPMorgan Chase reported $35 billion (along with an unrealized loss on CLOs of $2 billion). A couple of midsize banks—Banc of California, Stifel Financial—have CLOs totaling more than 100 percent of their capital. If the leveraged-loan market imploded, their liabilities could quickly become greater than their assets.
How much do you have in the market right now? I hope you're all in and that you think of me right before you kick the chair out from under you, you absolute fucking faggot. :)
in real estate a lot of construction contracts are starting up again after being on pause for the corona. This means heavy equipment, labor, and materials. What stinks do you recommend for getting in on this shit
Cooper Bennett
Not him, but after 3 days of dropping you'd expect at least one day mildly up. Tomorrow being green doesn't confirm this isn't a further drop. Then again, this drop doesn't confirm that we won't be going back to 320. We'll have to see what the weekend holds.
Brody Morales
Futures just got crushed We were +220 on DOW Oil is now down -4%
All of my longs made huge recoveries in the afterhours
Julian White
neiss, my autistic fren this is how to properly track moves
Christopher Sullivan
The main reason CLOs have been so safe is the same reason CDOs seemed safe before 2008. Back then, the underlying loans were risky too, and everyone knew that some of them would default. But it seemed unlikely that many of them would default at the same time. The loans were spread across the entire country and among many lenders. Real-estate markets were thought to be local, not national, and the factors that typically lead people to default on their home loans—job loss, divorce, poor health—don’t all move in the same direction at the same time. Then housing prices fell 30 percent across the board and defaults skyrocketed.
For CLOs, the rating agencies determine the grades of the various layers by assessing both the risks of the leveraged loans and their default correlation. Even during a recession, different sectors of the economy, such as entertainment, health care, and retail, don’t necessarily move in lockstep. In theory, CLOs are constructed in such a way as to minimize the chances that all of the loans will be affected by a single event or chain of events. The rating agencies award high ratings to those layers that seem sufficiently diversified across industry and geography.
Banks do not publicly report which CLOs they hold, so we can’t know precisely which leveraged loans a given institution might be exposed to. But all you have to do is look at a list of leveraged borrowers to see the potential for trouble. Among the dozens of companies Fitch added to its list of “loans of concern” in April were AMC Entertainment, Bob’s Discount Furniture, California Pizza Kitchen, the Container Store, Lands’ End, Men’s Wearhouse, and Party City. These are all companies hard hit by the sort of belt-tightening that accompanies a conventional downturn.
Hold cash... The worst is yet to come. Systemic crash incoming, but there is no calling this market.
Dominic Kelly
>tesla >safe yikes
Levi Brown
Good luck to you as well user
David Bailey
After weeks of near parabolic upward movement you would expect a correction back to the up trendline. That's what we got. It's good to be a bear now and then but the bull rally is nowhere near over. In the grand scheme this little fall is a blip.
