The Next Wave!
As note investors we collect notes nationwide. As a boy my father taught me how to collect postage stamps.
When I would stay home sick from school, I would spread out my collection and look and read all of the stamps and see how much they were “worth” using a catalog, we needed something to reference value vs scarcity.
That catalog taught me a lot about portfolio values and market pricing but what’s more important, Market Enthusiasm. In every market there is supply and demand for sure, but Market Enthusiasm is truly the killer. You will see why in the next paragraph.
When a new investment fund is created, the 2nd order of business is the capital raising process after the Private Placement Memorandum creation . When capital is raised there is of course a cost to the money raised, and there is the time element to factor in. Raise the money and the interest clock starts ticking. That is the Enthusiasm of hurrying up and deploying the capital and working the loans to an exit as quickly as possible. That Enthusiasm creates false market pricing just because the investment fund NEEDS to win the bid! Hurry up and Win get that money out to work!
I would often ask the sellers what the winning bids were (how far I was off), I am almost always shocked at what someone was willing to pay for non performing notes. I mumble to myself, “good luck with that! We’ll see those notes resurface someday!” Well my friends Someday is Now!
All of the over leveraged investment funds and all the over priced bidding that went on when times were good are going to bleed out notes, now that we are coming on very hard times. They will need to liquidate notes to pay off investors and keep the lights on. Right now we are seeing these loans surface but our guess is “Realistic Pricing” is not yet in place. If anyone feels like we do, we are not ready to pull the trigger on any assets just quite yet.
Hope this helps!
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