The Big Short 2.0: BlackRock's Consumer Asset-Backed Securities ETF

Featured in Zero Hedge

Daniel Drew,  5/23/2017


Scanning the horizon for the next big short has become the ultimate pastime for doomsday investors who relish the twisted pleasure of profiting from others' losses. While some recent "big shorts" have worked out rather well, such as department store ABS, other big shorts have been downright disastrous, such as David Stockman's bubble call of Amazon in January 2016. Rightly so, he lamented Amazon's 985 P/E ratio, but nonetheless, here we are 18 months later with another $140 billion added to Amazon's market capitalization.

In the hunt for the next big score, where can the humble short seller turn next? Look no further. BlackRock has announced their intention to form the iShares Consumer Asset-Backed Securities ETF, which will invest in notes supported by consumer loans, such as student debt and credit cards. If approved, it will be the first ETF that holds asset-backed securities.

One chart shows exactly why BlackRock has decided now is the opportune time to start repackaging student loans into ETFs:

Nonrevolving Consumer Loans

From the collateralized debt obligations of 2008 to present day ETFs that track anthropology student loans, we have come full circle. In 2008, it was Lehman that blew up. In 2017, the toxic securities won't be confined to an investment bank. They will be inside the portfolios of all the passive indexers, coaxed on by the likes of Warren Buffett, reminding them that indexing is the key to a prosperous future, despite the fact that 96% of stocks lose.

Even more ironically, these passive indexers may unwittingly assume the role of "passive pimp," as the dividends from these student loan ETFs will most likely be funded from the only significant source of income college students have: sugar daddies. MTV brought us "Pimp My Ride," and now BlackRock presents "Pimp My ETF," complete with tricked out dividends from the sugar babies of the next generation.

Sugar Babies