The yield curve is wrong more than it is right. 📈 Yet many banks nowadays are requiring rate caps on loans which in this volatile market are incredibly expensive. 👇🏻
wsj.com/articles/risin…
wsj.com/articles/risin…
Important to note that the cap really only protects against a rate rise above the curve, which is even a lower probability event than the curve itself.
At some point investors need to underwrite risks in terms of probabilities and be prepared for swings.
At some point investors need to underwrite risks in terms of probabilities and be prepared for swings.
Swing can go multiple ways - huge profits or capital calls… however if you are buying at a cap rate lower than your interest rate, the swing for you can only really go one way.
That’s negative leverage.
That’s negative leverage.
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