When you’re optimizing what exists you’re not creating new value. You’re more at risk and exposed than you think.
Capped ceiling, duration risk, spread expansion, leverage risk, over-optimization/underinvestment, inherent disruption risk.
Markets experience structural shifts due to:
1. Risk appetite changes
2. Capital volume flows
3. Volatility
Always ask, “Is this capital betting on growth or optimizing yield—and why?”
When people talk JVs. Most people obsess over the waterfall.
The real power in a JV often sits in:
🧨 Who controls the exit, when is it triggered, and at what price.
A waterfall only exists if liquidity happens.
Credit investing is the inverse of VC.
In VC, 99 losses can be offset by 1 massive winner.
In credit, 99 performing loans can be wiped out by 1 bad default.
Upside is capped at your coupon. Downside is your principal.
That’s why smart (old) lenders obsess over avoiding losers
When central banks suppress rates (near zero) and add QE, things break:
The price of capital is no longer real
Interest rates stop reflecting:
•Time value of money
•Risk of failure
•Opportunity cost
Capital becomes abundant and mispriced.
Artificially low interest rates and quantitative easing encourage financial engineering rather than true engineering. It hurts savers. It distorts the capital formation process.
@DietCoke82 Great simple summary - add pursuit/engineering cost per unit, impact fees for utilities (if any), soft costs, expected timing of cash inflows/outflows, and reversion estimate. Overlay that with relative risk factor and you got a deal!
If everyone’s waiting on rates to fall and deals to pencil again, then the real opportunity is in buying when they don’t. And if everyone’s chasing growth stories on a spreadsheet, you go find cash flow hiding in plain sight — stuff people need, not what they want.