Liz’s view
One way to understand today’s financial world is that everything is a cash flow.
There’s a $14 trillion market in which loans are sliced, packaged, and sold to investors, who collect the repayments. Most are mortgages, but recent deals have tapped into payment streams for home heat pumps, private jet leases, and IP addresses. It’s all “a bit spicy,” even for the Janus Henderson executive who does this for a living.
The partnership announced last week between DoorDash and Klarna to offer installment loans for food delivery is the latest effort to turn normal commerce into Wall Street-bound cash flows. Takeout bonds — say, Non-Amortizing Culinary Holdings Obligations (NACHOs) — will feed a growing appetite from private credit funds, which have raised billions of dollars and are running out of things to buy.
Buy-now-pay-later loans make sense for big purchases, where they are cheaper than credit-card balances that might be carried for months at huge interest cost. But people who need to spread their sushi dinner over a few paychecks might not be able to afford the sushi at all, and we’ve added another one-click option to obscure that fact.
Wall Street went wrong once by assuming that people would keep paying their mortgages. Instead, borrowers abandoned their most important assets — their homes — by the millions. If the economy cracks, how eager will consumers be to stay current on their burrito bonds?