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Jake Wurzak

@JWurzak

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…

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.

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.

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