Illustration for article titled Commenter Of The Day: Commercial Mortgage Backed Securities Edition

Before landing a dream gig at Jalopnik, we used to hustle in the underground world of the Commercial Mortgage Backed Security. While residential mortgage-backed securities have taken the biggest hit lately, and garnered the most attention, the CMBS market (think office buildings, malls, shopping centers and hotels) is its own unique world of insanity. Though the idea of securitization itself isn't necessarily bad, the investment only works if the various commercial mortgages maintain their level of occupancy. This means in the event of an economic downtown, when people stay in hotels less and shop less, all of the real assets on the other, more confusing end of the securitization suffer and the individual investors, pensions funds, et cetera suffer in turn. This causes a cycle wherein, instead of risk being minimized as intended, everyone is put at a greater risk. Because of this we could see why a GNX as an investment seems relatively sound. But as Brownie points out, it's a bit underwhelming as an investment.


If they get that asking price, they will have made 5.5% annualized, before deducting whatever it cost to store and maintain the thing. Better than a sharp stick in the eye, but not exactly a home run, and awfully high risk for what it returned. I'm just saying.

Buy cars because you love them and want to drive them, not because you think they're a good investment. They're not



Share This Story

Get our newsletter