In my last post I talked about the volatility in the debt markets.
The thing that really strikes me is that all of the increases in spreads are coming after the problems with the sub-prime loans and after lenders have tightened the underwriting criteria for conduit loans. It seems like the time for the bigger spreads was before the underwriting got more conservative, not after.
The spreads widening after is a function of the fear in the market. It has nothing to do with the underlying fundamentals of the loans or the assets behind them. Because of the changes in underwriting, the loans have become less risky, not more.
I bet the guys who are moving into the corporate bond and CMBS markets now are going to do great because they are taking advantage of a market swing caused by market forces that are not tied at all to the fundamentals of the investment.
I believe Splash & Dash Carwash is going to benefit from the same thing. Car washes are the redheaded stepchildren of commercial real estate. Retail developers are reticent to include them in their developments, and many lenders are reticent to loan on them. However, in my opinion, that's just the current market perception. If you look at the fundamentals, these are great deals.
Because Splash n' Dash and their investors are ignoring the market for the time being and focusing their attention on the fundamentals, I think they are poised to win big in the medium to long term.
You can make money on momentum and arbitrage, but most investors will make money by taking risks based on the fundamentals.
