They said “short duration” not “short term”. The real risk is from spread duration rather than simple interest rate duration, and assuming they don’t lever up, that should be minimal.
The beauty of MBS floaters is that you’re relatively insensitive to prepayments because to a first approximation they’re always priced at par.
From an investor standpoint, as they say, you’re making maybe SOFR + 1.5%. That’s not a very sext return. But let’s say your banks repo desk is willing to finance the purchase at 5% down. Then you can lever up your investment 20x and now you’re a big shot making SOFR+30%, which is very sexy. But what’s that, when your lever like that, a tiny decline in price wipes out your entire stake (Welcome to 2008).
Very well put. And yes, to your point, we don't lever up.
And yes, SOFR + 1.5% isn't very sexy, but we're competing against existing treasury product that use money market funds and pay SOFR (or less, after fees). So that 1.5% is meaningful.
It wasn't just an omelette on top of a waffle (and both of them the size of a medium pizza). As you strayed from the edges toward the center it became difficult to see where the waffle ended and the omelette began.
A bit of a tangent, but I just want to say how, as a Canadian, I'm getting a lot of joy reading about this restaurant. It's a hilarious facsimile of a Canadian restaurant for a couple reasons:
- There's nothing Canadian about a pancake house. We love pancakes but they aren't really ingrained with our identity. Maple syrup on the other hand, is EXTREMELY important to a lot of Canadians. Serving table syrup instead of real maple syrup is an affront. I found a Reddit thread[1] where a user espouses "tons of free syrup" you were given at RCPH. That's NOT a good thing if you ask me!
- In Canada (and I assume other British Commonwealth countries) you aren't legally allowed to have "Royal" in the name of your business without Royal consent from the Governor General of Canada[2]
Just a bit of Canadiana sparked by your comment I thought I'd share. I always get a kick of the small but conspicuous cultural differences between Canada and USA. They give me that Ingluorious Basterds "number 3" moment.
It sounds like you're kind of a little up and to the right of the Ugandan Rolex[1]. This sounds like some hideous method of gangland killing, but is in fact a tomato omelette rolled up in a big fresh chapati. Nothing to stop you using any other variety of omelette and indeed I've had excellent results with cheese ones.
The article you linked claims "any type of omelette", but the vast majority of omelettes[*] are semicircles, not circular, right? You'd have to cook the top and bottom separately or mostly separately to get a circular one. Hm.
[*] of course, here I mean proper omelettes, which are an egg shell around ingredients, not scrambled eggs with ingredients mixed in.
In my experience if they're semicircular it's because they're folded over on themselves. Not sure what that has to do with cooking (or not) both sides.
Your ingredient mixing distinction doesn't reflect what I've encountered. That seems to have more to do with the nature of a given ingredient or alternatively with presentation or other concerns specific to a given recipe.
Yeah if you wanted "cooked separately and also circular" you'd need to make a two omelette sandwich. I've yet to encounter that at a restaurant.
A firm can be capitalized by debt or equity. They can have a public offering to and sell share to retire debt. They can issue bonds and use the money to buy back shares. There shouldn't be a moral component to this.
That being said, it seems criminal to take an enormous management fee while sending a company into bankruptcy.
The beauty of MBS floaters is that you’re relatively insensitive to prepayments because to a first approximation they’re always priced at par.
From an investor standpoint, as they say, you’re making maybe SOFR + 1.5%. That’s not a very sext return. But let’s say your banks repo desk is willing to finance the purchase at 5% down. Then you can lever up your investment 20x and now you’re a big shot making SOFR+30%, which is very sexy. But what’s that, when your lever like that, a tiny decline in price wipes out your entire stake (Welcome to 2008).
reply