Hedge Funds Start Piling Into “The Big Short 3.0”

A very evident sign that an economic collapse is coming is the happening of the Big Short. With hundreds of bankruptcies happening in the retail sector, malls are in jeopardy. But you might be wondering: How malls are going to interfere with the downfall of the economy, in the worst economic collapse the world has seen since the Great Depression? This is what we will discuss in this video.

On our previous video, titled “Planned Economic Collapse Of America: 60 Million Americans Lost Their Jobs, Retail Apocalypse (INSERT LINK, IF YOU WANT)”, we discussed how the global sanitary crisis has disrupted the functioning of several sectors of the economy, leading a colossal amount of businesses to file for bankruptcy up until now. The retail sector was particularly affected and many stores are closing their doors for good. That means, these empty spaces on malls may never be replaced, because most solutions for renting these vacant spots aren’t actually practicable, due to commercial and structural limitations. Therefore, it is expected for many malls to disappear within four to five years. If you haven’t checked that video yet, you should definitely give it a chance since it will make it clear to you how everything connects.

This video is going to analyze the signals that a next Big Short or, as people have been calling, a Big Short 3.0 is coming next. The new Big Short is betting on a mall meltdown, also known as a “Mall Short”, which has been creating monumental profits for many investors since 2019. Investor Carl Icahn’s had bet on the downfall of brick-and-mortar retailers and produced a $1.3 billion gain during the first half of the year. Now, his attention has shifted to the “Mall Short” when he bought credit default insurance using CMBX 6, an index highly exposed to shopping mall loans. From March up to this point, with the lockdowns and the current social-distancing regulations, consumption habits have changed. 60 million people were laid-off, which, of course, also contributes to the collapse of physical stores that depend on people circulating to maintain its activities.

That is to say, this crash not only contributed to the astronomical growth of online shopping, but also created a new bubble of debt because rental defaults in shopping malls around the country are going through the roofs. Furthermore, not only retailers and malls constitute this new bubble, but restaurants, hotels and multi-housing units are setting new record highs in rent delinquencies around the country. In that sense, the CMBX 9 – a synthetic index with a high susceptibility to the hotel rental defaults – is being seen as the next possible trigger to the Big Short 3.0. As reported on a very well-known economic website with CMBX 6 now done, we should keep a close eye on CMBX 9. With its outlier exposure to hotels that have quickly emerged as the most impacted sector from the health crisis, this may well be the next Big Short.

We are primarily funded by readers. Please subscribe and donate to support us!

The CMBX 9 has unique features that may influence its leverage as a bet. Additionally, renowned hedge fund investors have signaled that over the course of the past month “there has been more selling pressure on the CMBX 9 than any of the other CMBS indices. That’s because some hedge funds are actively looking to play the short side on the Series 9 index due to its significant hotel exposure”. Furthermore, the index has become the favorite option for many traders right now, who affirm that “funds have been coming out of the CMBX 6 and moving onto the CMBX 9. The CMBX 6 trade has gone a bit long in the tooth and is now more fairly priced given the likely outbreak-related effects.”

With all that said, the bet against the already weak commercial real state sector will only require some time until the CMBX 9 declines and investors start their harvest, once again, profiting billions of dollars during an apocalyptic economic scenario worldwide. In that direction, nearly 25% of hotel loans in CMBS are now delinquent compared to roughly 20% for anchored retail loans, and approximately 10% of hotel loans securitized in bonds are now more than 90 days overdue, compared to only 3.7% for retail loans.

Our intention here is to show you how everything is already set up for the system to fail no matter what. Only through such sharp failure, the 1% gets even richer while the ones who carry the economy on their backs are still helpless in the face of unemployment and social turbulence. The billionaires are making more billions with the unprecedented economic crash that led to the most critical unemployment rate of the century.
Epic Economist always tries to give distinct insights you will never see on mainstream media. Our biggest aim is to widen the perspectives of our subscribers to a much larger issue that is taking over the world right now.

 

Views:

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.