hodgesrm a day ago | next |

Scary article. Revenue-based financing (RRB) already exists but Blue Owl and others are making bets on a large scale and at interest rates that are decoupled from actual risk. The PluralSight story is instructive: it looks like an obvious interest rate trap and it's hard to see where the backstop is when things start to unravel. I don't see how you can keep the contagion limited if you can't see the scope of risk and don't price it in correctly from the beginning.

Anyone who had accounts at SVB or First Republic will appreciate how quickly interest rate traps can go bad. At least there was a backstop in that case.

Edit: typo

greesil 16 hours ago | root | parent |

My mental model is a small recession becomes a big one when the borrowers fail to meet their obligations. I'm not sure how this depends causally on interest rates unless the Fed raised rates to cause a recession.

EA-3167 a day ago | prev |

Oh I think I remember how this movie ends, everyone dies right?

Kidding aside, this seems like a ridiculous repeat of the events that led up to 2008, albeit in a slightly modified form. Why on Earth do we keep allowing this to happen?