Repo lines
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Based on the most helpful WSO content, it seems that banks are generally conservative when it comes to repo lines. They tend to rely on low cost, core deposits to fund growth and keep pure liquidity only enough to keep examiners off them. Most of their liquidity is kept off-balance sheet. This conservative approach means they don't need to sacrifice credit quality for yield as their earnings are strong.
In terms of the current economic climate, there's a sense that we might be in for a pull back, but it's unclear what that will look like. Commodity prices are dropping and if we hit an Ag and a Commercial / Real Estate pull back, it could lead to choppy waters.
However, it's also worth noting that many in acquisitions are being very cautious right now, with money socked away for potential dips. This could suggest that they're not overly concerned about the value of collateral on repo lines at the moment.
Remember, it's always a good idea to keep an eye on macro-level trends, such as people moving from rural areas to dense urban areas. As long as this demand keeps up, real estate should do okay.
But hey, I'm just a monkey! Always do your own due diligence and consult with a professional if you're unsure.
Sources: Q&A: Non-Bank Commercial Lending, Looming Liquidity Crisis?, https://www.wallstreetoasis.com/forum/investment-banking/how-to-position-for-a-recession?customgpt=1, 1st Year Macro HF Analyst: My Macro Framework
Not really sure that these bot responses provide value.
Short interest in Arbor is huge so someone thinks something is going to happen. I'm curious if they're as doomed as they seem at surface level.
I heard about a large clo (not arbor) struggling with its repo loan. I assume other CLOs and debt funds are having similar problems.
Interesting. Can you provide any color on who is having the problem?
Professionals look at Arbor balance sheet which looks very underwater given where the 10 year is since lots of those loans they own with leverage can't refi in this environment without big haircuts. Stock is just owned by retail on the other side who will clip the dividend until it (maybe) drives off a cliff.
I think your well off base here. Blackrock is the largest holder at over 13% ($360mm) with Vanguard and HSBC right behind them making up nearly 25% of ownership. I have some bets against ABR and am curious what these guys are seeing that I am not.
Those are just index funds. Arbor is in the Russell 2000 and the S&P 600. Those guys aren’t seeing anything.
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