Whalen: The Government Playing Around In The Bond Market Is Not The Solution To Affordability
Summary
AI: The guest argues the AI trade has cooled, highlighting valuation risks and marketing-driven hype despite prior gains.
Key Tickers: Nvidia (NVDA) is framed as a hot semiconductor maker likely to see slowing growth; Oracle (ORCL) is criticized for heavy leverage tied to AI data center build-outs.
Semiconductors: Expect normalization as growth rates decelerate and investors shift from hype to earnings and profitability focus.
Financials: He is selectively buying cheap financials and expects banks to prepare for consumer credit deterioration, with capital returns benefiting from regulatory easing.
Regional Banks: Deregulation should enhance flexibility for mid-size/community banks, though lending demand remains uneven.
US Housing: Affordability issues won’t be solved by government bond-market intervention; supply, zoning changes, and clearing builder inventory are emphasized.
Precious Metals: Bullish stance on gold and silver persists; copper supported by commercial demand and recent Chinese buying.
Market Outlook: Anticipates a more boring U.S. equity market, focus on bond market risks, and politics as a major driver of sentiment.
Transcript
It's populist politics. That's all this is. He's playing to the crowd. And I understand that's what politicians do. And I think that, you know, getting the government to start playing around the bond market is not the solution to affordability. Welcome back to another episode of The Rap with Chris Whan, where we break down what's happening in markets and the economy every single week. Chris, great to see you as always. >> Good morning, Julia. >> Good morning. And happy belated birthday to you, Chris. I hope you had a wonderful birthday. >> Of course. Of course. Appreciate it. >> And it was also producer Matt's birthday as well. Some January babies here on the show. All right, Chris, >> we love doing this with you. The audience is just giving the most amazing feedback week after week. So, gosh, you know what? This week was massive. Um, so I'm just thrilled to have you to discuss everything. Maybe we'll just start with uh the labor side of things since we got the non-farm payrolls report this morning. What's your read into it? >> Well, there was weakness. You had the revision uh where we actually uh created fewer jobs than we thought the previous month. All of this will help uh those who've been arguing in favor of lower interest rates. The president obviously wants the Fed to reduce short-term rates. We'll see what that does for the economy as far as housing and long-term rates, which are not the same thing. Uh but overall I think for those who've been arguing that the economy is weak, the the numbers uh certainly support that. >> Wait, so the numbers are they're actually starting to support those who've been saying the economy is weak. >> Yeah, to some degree. It it's hard to take a lot away from the monthly numbers. You always have to, I think, look at them over a period of time in part because of the revisions and other factors, but it certainly doesn't hurt if you've been pounding the table saying that you want to see a rate cut sooner rather than later. >> So, bottom line here, we're likely to see some rate cuts this year. >> The short-term rates, you know, long-term rates have not been going down. >> This is the thing. Even though the Fed has reduced their target for Fed funds several times in the past year, uh the markets, I think, are worried about a weaker dollar, they're worried about the fact that nobody in the Trump administration or the Congress talks about the federal budget deficit. So, these are things that are weighing on people's minds, especially if you're an investor and you've got to think about where to put your client's money. uh there's a big rotation out of US stocks into other foreign markets because uh managers believe that they're going to perform better. So there are a lot of interesting factors right now that we didn't have last year. Uh things have changed to a degree. The whole tech trade with Nvidia and AI has cooled down a lot. We talked about that in the blog post this morning. >> Yeah. All right. You mentioned housing. There were some truth social posts this week from President Trump. A couple of them hitting on the topic of housing. So maybe we'll just start with this one. Um President Trump floated the idea of a of the government buying 200 billion in mortgage bonds to push down rates. You call this an idiotic idea on X. Um, what do you see as the real risks here, especially with the GSC's needing to hedge and potentially offsetting any benefits? >> Well, as we saw over the last couple years, the Fed doesn't hedge their book. And this is one reason why uh central banks typically invest their cash in very short-term securities because they don't want to take a lot of market risk. uh Janet Yellen and Jerome Powell decided that they were going to try and stimulate the economy, which is basically what President Trump is saying. So, they went out and bought a bunch of 30-year mortgages during CO when interest rates were very low. And then when rates went up, uh the Fed took massive losses on these positions, both in terms of the price of the security and also the cash flow. They were paying people almost 5% on reserves when they were earning 2% on their mortgage back securities. So that's obviously not a good trade. Um what President Trump is doing is just I think election year politics. There's no net benefit to having Fanny May and Freddy Mack uh buy $200 billion worth of their own debt. Remember they issued those bonds. So what the president is saying is he wants them to buy them back and somehow create scarcity that will force uh interest rates uh lower. But you know the government's not really positioned to do that. Also remember they don't have the cash. So in order to go out and buy a lot of their mortgage securities they'd have to borrow money and the net net of that would probably be negative uh in terms of long-term interest rates. So it's not a very good idea. You mentioned just the midterms. Um, do you think that's going to be like the main theme to watch this year? Like everything that President Trump >> Sure. >> Okay. >> because this is really important. This >> this is could be like like I think you and I had said >> a few weeks ago in our conversation, >> you thought he was pretty much cooked on the midterms. I do believe that sentiment has changed in our more recent conversations, but if he doesn't win, it's the risk of, you know, impeachment, probably maybe all that lawfare coming back, maybe. I don't know. But >> yeah, it seems like the midterms are going to be extremely consequential. >> Well, he had a a speech to uh the Republican lawmakers recently where he talked about this. He said, "I'm going to be impeached if we don't hold the House." So, I think everything you hear from him between now and November is going to be about trying to position the Republicans to have enough good things to say to voters so that they have at least a decent chance of holding the House. There's some interesting factors in play here. The Supreme Court's going to be hearing a case uh regarding redistricting, which could be uh very uh fortuitous for the Republicans. But there's negatives, too. The the one big thing, of course, is that uh Trump's approval numbers are still pretty strong, even after his uh intervention in Venezuela earlier this week, which we haven't talked about yet. >> Yeah, I was Yeah, we we'll get into that, too. But I I think they're looking for anything and everything they can grasp onto to give them a positive story to take to the voters. So that's why we're talking about housing. There's not many things that the federal government can do when it comes to housing. We already have, you know, the FHA and the other government insured programs for firsttime home buyers, lowincome buyers. So that's already there. But the relative price of homes is the problem. How do you fix that? Well, you you need some deflation. But the Fed and the other uh government agencies have been kind of afraid of letting prices fall dramatically. But you know what? We have a housing correction already building now, Julia, in different parts of the country. We don't have a national market in real estate. Markets are local. So, in some of the weaker markets, you're already starting to see prices come down. >> And you and I have talked about this. There are home builders with inventory out there. We're trying to clear that out right now. How do you do that? You drop your prices. >> Yep. All right. Um I think what you're also getting at is the buzzword of late, affordability. That's been the big issue. And I want to bring this one up. This was another Trump Truth Social Post. And for a very long time, buying and owning a home was considered the pinnacle of the American dream. It was the reward for working hard and doing the right thing. But now, because of the record high inflation caused by Joe Biden and the Democrats in Congress, the American dream is increasingly out of reach for far too many people, especially younger Americans. It is for that reason and much more that I am immediately taking steps to ban large institutional investors from buying more single family homes, and I will be calling on Congress to codify it. People live in homes, not corporations. I will discuss this topic including further housing and affordability proposals and more at my speech in Davos in two weeks. I mean what do you think? >> Institutional investors have not caused home prices to go up. Uh they kind of operate on the margins. They normally buy new construction housing and then rent them. And many of them actually have rentto own schemes that are quite attractive. So I don't think institutional investors are the problem. The problem is the Federal Reserve Board when Janet Yellen decided, hey, let's go out and buy a bunch of 30-year mortgage securities and drove home prices up 50% in 5 years. Uh, that's really the problem. And it's ironic that the Fed has got a legal mandate from Congress to try and keep prices stable uh and then they go off and do something like this. So, you know, it's it's part of the hubris, I think, that infects the central banking community when they think that they can go out and wave the magic wand and play God and get whatever outcome they think they're going to get, and they don't. This was the irony of Van's uh uh proposal. And then, of course, you've seen the losses at the Fed, Julia. They've been losing tens of billions of dollars because of these uh these transactions. What Trump ought to do, frankly, is have the Fed swap all of their mortgage securities to the Treasury and have the Treasury give them T bills. Uh Doug Cass suggested that in a note he did earlier this week. And I think it's a it's a very good idea. It would get the central bank back to where they want. Um if Trump appoints Kevin Worsh, by the way, as the next chairman, I think you'll see him talking about this. Um, and the Treasury, you know, and the GSC's, they can hang on to those mortgage securities. That's their business. But the key thing is that they don't have the cash to go out and buy $200 billion worth of securities right now. So, the best thing we could do is clean up the Fed's balance sheet, get them out of the hedge fund business, let Fanny and Freddy hang on to the mortgages until they prepay, and uh, and that would be a positive outcome, I think. >> Interesting. So, wait, do you think the Fed's just been operating like a hedge fund then? Well, when they think that they can manipulate long-term interest rates by purchasing mortgages, yes, >> they could they committed the same error as long-term capital management and many other firms because they buy these mortgage securities which have variable maturities. If rates are low, the mortgage bond pays off quick. Everybody goes out and buys another house or they refinance. So, the mortgage security disappears in a year or two. Now, the average life of those mortgage bonds that are owned by the Fed is over 10 years. You and I, you know, we we may not be here by the time those bonds pay off. >> I hope I am and I hope you are too, Chris. >> Well, I hope so, too. But you know what I'm saying? They they are very dangerous securities because they have variable duration as we call it on Wall Street. And that says, how long do they stick around? And so right now those bonds are barely prepaying. >> Do you think again if they could clean up that balance sheet, would that help with um rates and subsequently the housing market? Like what do you think would help there? Because I do think with Trump's tweets or truth social posts, whatever you want to call them, >> there is a cohort, a large cohort of the population, at least a bunch of us think that. I mean, I kind of thought I thought it too, like I was like, "Oh, you know, we all know the names have been buying up all the single family homes." I think there's this perception. I mean, you're saying maybe it's not the case, but >> he's kind of tapping into something. So, what do you think would really help it? >> It it it's populist politics. That's all this is. He's playing to the crowd. And I understand that's what politicians do. But you should always remember that part of the hypocratic oath, first do no harm. Uh and I think that, you know, getting the government to start playing around the bond market is not the solution to affordability. >> There you we need to build more houses in the right place. We need to change zoning in the big cities so you can have greater density. You turn those single family homes into multif family sort of schemes, that kind of thing. And that works, by the way. It's already been proven in a number of different markets. So, you know, the the government's ability to just, as I said before, wave the magic wand and go out and buy a bunch of securities and make everything okay is really, I think, very dubious. >> Yeah. All right. Before we move completely off this topic, can I just get your reaction to um what's going on in New York City and this mayor's office to protect tenants, Seia Weaver. >> Yeah, that was uh kind of a bit of a misstep. She has some very radical views on housing. and she says it's a uh evidence of white supremacy if people own their own home. Uh which I think is uh a really unfortunate comment. You know, there's some very radical, very misguided people around Mr. Mandami and you know, I I understand some of these people work for Bill Delasio, by the way. They're retreads and I think they are not going to be helpful. The more interesting thing I thought was when um the new mayor tried to intervene in the sale of some rent stabilized apartments that's going on in uh bankruptcy court here in New York and the judge said no. >> Okay. >> Now, in the filing, they came out and said that this rent stabilized uh rents in these buildings are so low that the building can't possibly work. So that was quite an admission by Mayor Mandami to say that you know rent stabilization is slowly turning these assets uh into morabon properties that just can't possibly pay their expenses. So you know the unfortunately the Marxist Leninist coloration of this regime in New York City I think is going to start to generate a lot of opposition. I think you're going to see Kathy Hokll, the Democratic governor, eventually have to go head-to-head with this guy because he is so far out of the mainstream. You know, the Republicans, by the way, are going to turn him into a poster child. He's going to be everywhere. Uh and and this young >> Well, listen, you know, this young lady's rhetoric about white uh supremacy is not helpful. >> Yeah. You're going to see more Democrats bailing out of their party and becoming Republicans in the next year simply because the rhetoric coming from the left, people like AOC and the rest of them is just toxic. You're not going to win any national elections talking like that. >> Yeah, it's just absolute idiocy, too. And like, yeah, you look at you're like, I don't want that. That's >> Well, how do people in the Carolinas feel about that? I I think it'd be interesting to go down. >> I love living in North Carolina. I love New York City. New York City will always be in New Well, I love visiting New York City. I'll say that I'll come up there and do interviews, but would I live there? No way. Absolutely not. I also saw I saw this other thing this morning. I guess make I feel like my social media feeds are feeding me this stuff these days, but this came up on Instagram, so take it with a grain of salt. But have you heard of this thing called Community Opportunity to Purchase Act thing in New York City? Have you heard of this? >> No. We'll look into it and talk about it another time, but it looked like it was some sort of I don't want to give like fake news or anything around like who would get the right to purchase it first. >> Listen, the left tries to use notfor-profit community organizations to come in and buy apartment buildings. >> That's it. It was for nonprofits. Mhm. >> That's right. and they think, well, we'll cut out the capitalist, you know, the evil capitalist uh developer and therefore the building will be okay. But that's nonsense because eventually you have to raise money to renovate the building, maintain it, do all the things you have to do. So whether you have a not for profofit or not doesn't matter. It it only gives you some marginal relief in a very short-term sense if you have a not for-p profofit buy this building. And look at New York City. Look at the half million units that they own already that they can't take care of. >> The city of New York is the biggest slum lord in the United States. And it's because they cannot possibly take care of buildings when people are renting them for less than the cost of of actually maintaining the apartment. That's the problem with the progressive model. It does not do well in times of high inflation. And inflation is the backdrop of all of these conversations. Julia, >> does it really matter? Whether it's affordability or jobs or AI, doesn't matter. Inflation is in the background. >> That's so true. Like this, all of this is the product of inflation. >> Well, it doesn't help. I mean, think about the workers who lose their jobs in a company that decides to automate customer service. So, there's nobody to talk to. I had that experience with UPS. There are people at UPS you can actually talk to, but you have to find them first. Mhm. >> You have to get past the AI. >> Yeah. Um, okay. I'm sure we also get angry at the AI too, waiting for it. Um, >> let's talk let's talk geopolitics because this week um >> the day after our conversation, we had the Venezuela news um with the Trump administration um capturing Maduro and his wife. Uh, it kind of feels like, maybe it's too early to say this, but the world's changed. How do you kind of What's your big picture? >> Well, this is the conversation I've been having. Um, it feels like the world's changed because we haven't seen something like that in a long, long time. And >> I don't know, maybe I'm read maybe it's just this was a conversation I had today that's well airing today with David Woo. So curious like how do you think about >> I think it should have happened a long time ago. You know the Iranians, the Russians, the Cubans are all in Venezuela. They've been using that country as a base for operations. Uh the Venezuelans obviously subsidize the Cubans through oil. The Mexicans have now decided to help the Cubans. Um Trump has done what we should have done years ago and the military has been ready to do this for years. It's interesting that Joe Biden and the Democrats were willing to turn a blind eye to the fact that the Iranians have offensive missiles in Venezuela that can strike the United States. >> Remember what Jack Kennedy said, you know, 13 days. Why didn't anybody in Washington do this before Donald Trump? That's what I want to know. >> I think it's amazing like how it was so incredibly executed, too. Yeah, they've been planning it for years. >> Okay. >> You You think this all got put together in a couple months? No. No. No. >> Definitely not. No. But it was And we've had people on the ground in Venezuela for a while. You know, Venezuela is a large, you know, very uh rural country with very difficult terrain. So you can get in and out of there quietly uh if you want to insert intelligence operatives and other uh forces quite easily. The Venezuelan military is nothing to to be terribly impressed with. They've decimated the oil sector and um Mr. Maduro and his predecessor Hugo Chavez destroyed the military because they wanted to make sure they were safe. the Cubans were actually providing security for Maduro and you you heard President Trump talk about the number of Cuban soldiers that were killed. But you know, as I say, it's intolerable to allow Iran and these other uh states to operate in a country so close to the United States. >> This should have happened a long long time ago. So yes, things have changed, Julia. I think for the better. >> Yes, for the better. Do you That's That's I agree. For the better. Do you think what do you think will be some of the knock-on effects as well? Cuz I I also imagine Chris, I imagine this probably bodess well for the midterms. It definitely shows like strength >> well among Republicans. Yes. I think when the president exercises um you know power and does so in a way that doesn't end up killing a lot of American soldiers. Yeah. you know, it was a relatively clean operation and here here >> uh but I do think that, you know, this is not over. Uh we need to be very focused on what's going on in Venezuela and other countries in the region because these people do not mean us well. >> Iran is looking for ways to attack the United States and we got to be very vigilant. >> How are you thinking about it though? >> Well, I'm thinking I'm thinking yeha. you know what what else can you say? I mean, I I have been reading for years uh about what's going on in Venezuela. I've actually been there a number of times. I used to do work there >> uh years ago and I was astounded that the US would tolerate the presence of the Iranians and the Russians and everybody else in this country. You know, you'll laugh, but when I worked for the Heritage Foundation a long time ago, I wrote a monograph called Soviet weapons in Cuba. By the same criteria that Jack Kennedy used for his blockade, we should have been blockading Venezuela 10 years ago. Where where was the uh American government, both Republican and Democrat, by the way, so bravo to President Trump that he finally did something about this. >> Yeah, I I would say so, too. Um, how about from what do you think will be some of the positive knock-on effects from this? Because like what I guess what it says about the US on the on the world stage um I imagine too around energy there'll be some positive effects maybe um lower you know >> oil prices, gas prices, I don't know. Yeah, >> oil prices are so low right now, Julia. There's not a lot of incentive for oil companies to go into Venezuela and start to fix it because, you know, Venezuelan crude is very sour and very heavy. There's only a couple of facilities in the US it can actually refine it. It's similar to some of the crude that's produced in southern Mexico. So, you know, I I think what it is going to tell other nations and remind other nations is that the US is the only global power in the world that has the capability to do things like this. If you look at the Russians, you look at the Chinese, they have large military organizations, but they're not very efficient. And they certainly couldn't carry off something like this because it's not like the Venezuelans didn't know we were coming. You know, we've got dozens of ships sitting in the Caribbean. We've had a lot of activity in that area. Obviously, Trump blowing up, you know, narco boats that he claimed were, you know, carrying contraband to the United States. So, they knew we were coming, but uh they couldn't do anything about it. >> Mhm. Um, anything else on the topic that's on your mind? >> Well, I I think it it is an interesting reset. What we got to do is continue to pressure the Venezuelan government to get the Russians and the Iranians out of there. >> Mhm. >> Uh I also think long-term, medium to long term, it's going to put a lot of pressure on Cuba, which is already a basket case as an economy. Uh but if they don't have active support from Venezuela, then I think Cuba is going to be in trouble. The Mexicans will support Cuba short term, but we'll have to see how that pans out as things, you know, as time goes on. >> Hey there. I just want to take a quick moment to thank you for watching this video and I would really love for you to subscribe to this channel if you like this content. Over 70% of our viewers are not yet subscribed and we are on a mission to hit 100,000 subscribers. So, if you could just take a quick moment, hit subscribe. Thank you so much for your support. We appreciate you. And back to the video. Okay. Um, let's go on to another area you've been writing about, which is AI. Oh, my favorite. >> I know. >> Wonderful interview with uh Yan Le. >> He is a smart boy and he's honest, you know. He's an intellectually honest scientist who won't pander to the marketing folks and I think that is a very precious thing. >> I guess at what point do you think that the hype becomes maybe more of a systemic risk to tech valuations? I think we're there now. I I think the bloom's off the rose on Nvidia, which I made a lot of money on. Um, when you look at companies like Oracle, which I love. I followed Oracle for 30 years as a tech banker and I love their products. But when I saw them jump into the AI thing, I thought, "Oh my god." because the amount of leverage that people have put on their businesses in the hope of some benefit down the road, Julia, I think is really quite striking. Uh the fact that Larry Ellison would risk his company to chase the crowd uh around AI, which is clearly driven by marketing hype uh and obviously the stock market. You know, we always have to remember that we live in a commercial society. So when somebody tells you something, you have to ask yourself, why are they telling me this? And that was the case with AI. I mean, I got into Nvidia because of Jimmy Kramer back during COVID in 2020. It was a great trade. Thank you, Jimmy. >> Um, but it's still just a company that makes really hot semiconductors. And after a while, I think, uh, you know, people are going to calm down. the growth rates are going to fall and these stocks are going to become much more commonplace than they have been in the past couple years. So, we'll have to move on to something else. That's really the question, Julia. What is the next big hype from Wall Street after AI? >> What do you think it means for the broader markets? Because we know like the handful of names that have been really driving everything. Is that another thing? Because I think you and I talked about taking some of your acorns off the table. like where are you today as it relates to like the markets exposure that you want to have to markets? >> I have been buying financials that are cheap. >> So, you know, for example, the only bank stock I own right now is Flagstar, >> okay? >> Because I got in well below book. I know the team. I think they're going to turn the bank around. But am I out buying JP Morgan or, you know, American Express over seven times book value? No. Um, I think you're going to see the banks give up a little ground because they're going to have to start getting ready for an eventual recession on the consumer side. So, credit expenses are going to go up. And, you know, the you you hit the nail on the head, Julia, which is that a lot of the market gains of the past year were concentrated in half a dozen stocks. You know, so Apple's been taking their lumps recently. Um, there are a number of tech stocks that I think could give up ground as people wake up from the AI slumber and realize that a lot of this was just kind of a pleasant dream. Uh, but then, you know, when we start talking about earnings and revenue and numbers, that's when the conversation changes. When it was all pie in the sky and people were just chasing this, you know, kind of amorphous uh thing called AI, it was really easy to let the stocks run. But when you start talking about profitability or you know how many hundreds of billions of dollars Larry Ellison has committed to spend on real estate to build his data centers it's mindboggling >> that that company I think is going to be hamstrung by the amount of leverage and expense that they've taken on. >> You just also mentioned like the banks are going to have to start thinking about like that weakening consumer. I know in our gosh we've been doing this for you and I have been chatting for probably a couple years now and I it's interesting to see like the evolution too in the conversation of like >> a while ago the consumer was okay but now we are seeing that deterioration. >> Yeah. Well 2025 is going to be remembered as kind of a magical year >> when there was no apparent cost for risk. So whether you were talking about tech companies and AI or banks, you know, banks have had almost no credit expenses from consumers going back to 2020 and 25 in particular was remarkable. You had JP Morgan at almost three times book value which is you know a pretty heavy valuation even though they are the best large bank in the country. No question. So now if we actually start to worry about earnings and expenses and credit and defaults that's going to be a different conversation and I think 26 27 we're going to see a lot of these factors come to the four and then as you and I have talked about before I think by the time we get into late 27 28 we're going to be looking at a housing market reset and then you can go out and buy your house Julie >> misery on the eights Chris um all right >> misery on the eights we have to get Stan Middleman on here and let him talk about this for a few minutes. >> Yeah. Um All right. I do have that book here, too. I I have I look I have the one of your one of your books is on my bookshelf, but I do have the Stan Middleman one as well. All right. So, we're going to talk bank earnings next week, I believe. Yes. Or we're going to get into it. So, I will hold that for now. But let's do some viewer mail. >> Okay. Oh, please. >> Yeah. Ready? All right. This is from viewer Claire and she would like to know how is the current deregulation wave impacting the capital requirements and operational flexibility of tier 1 versus regional banks. Are banks likely to deploy this upcoming unlocked lending capacity into the market immediately? What are the projected spillover effects of this regulatory easing on the 2026 real estate inventory and equity market valuations? >> Well, that's a lot of questions. Yeah. >> Um, I think the short answer is banks are going to use the lower capital requirements primarily to return uh capital to their shareholders. The banks are still kind of underutilized when it comes to demand for credit, but it will certainly help. Um, I think the flexibility for kind of midsize and community banks is going to be particularly important because, you know, if you're a private citizen and you have a small and midsize business, you go to a smaller bank for credit. You're not going to go talk to Jamie Diamond. You're going to go to your local bank or maybe a regional bank and talk to them about credit and it will help. Uh, on the real estate side, the banks are not that heavily involved in real estate. They provide wholesale finance to non-bank lenders. You know, one of the things I remind people of is that probably 3/4ers of the mortgages in this country are originated by brokers. The broker fills out the application, gets you to sign it, and then they will take it to different lenders, banks, non-banks, and that's how they get it funded. So if you think about pennymac for example, which is one of the leading non-bank lenders in the conventional market, 90% of the mortgages that they quote unquote originate, they buy from somebody else. They don't have somebody sitting in a call center making that loan. So most of the market in in is really run by independents, small business people who originate mortgages in their market and that's where you get uh relief in terms of rates. But you know, your your listener is quite right. The changes that Mickey Bowman is making at the Fed, she's the vice chairman for bank supervision at the Fed and the other agencies are going to definitely have a positive effect on US banks, but mostly to give back capital to shareholders. We're going to have record capital return in 2026. >> All right, final viewer question. This comes from Mike. Um, this is after last week's episode. So, if Chris is calling for a serious correction, wouldn't that also be in metals, especially copper and silver? They're tied to the economy. So, how would there be a crash and they still do well? >> Well, I'm not calling for a crash. Whenever you see something move a lot in a short period of time, you know, it's going to correct. You saw silver correct a little bit, but when the new year started, it took off again. Um, with both copper and silver, you have commercial demand, Julia. It's not just speculators out there, you know, trying to bet on whether the price is going up or down. You actually have people using it. The Chinese have been big buyers of copper in the past couple of months in the spot market. So, that's driving prices up. You've also had a number of uh investment houses increasing their estimates for copper prices this year. But, let's face it, copper is an industrial metal. That's where it's used. It's used in many different industries. So, it's not the kind of thing that most investors would buy pallets of to speculate on the price. I remember I have a good friend down in Texas, a very famous hedge fund guy you probably know who was buying pallets of nickels. >> Oh, I know who you're talking about. He's >> You know who I'm talking about. That's right. >> And so, you know, I I I don't think that the bull market in gold or silver is done by any means. I do think the US stock market is going to be a lot more boring this year than it was last year. You know, you're you're not going to see a a precipitous decline in US stocks because that's where everybody hides from inflation. The big question is what happens in the bond market. If we see long-term interest rates go up because there's a perception of confusion or policy weakness in Washington, then that becomes a problem. That's a different matter. pay attention to what's happening there. >> Good question, Mike. >> I love these questions and um to our viewers, we love hearing from you. So, shoot me an email, julia juliar ro.com. We do not share these with Chris ahead of time so we get the most authentic response. And um you can also leave them in the comments. And Chris, I have to say the audience just loves you and they love having you on every single week. I do too. I hope you've had an amazing birthday. And before we let let you go, I want everyone who watches this show to go subscribe to Chris's institutional risk analyst blog. Um, do that as a birthday present for him. I will plug it for you, Chris. But any parting thoughts before we let you go here? >> Uh, no. I think uh 2026 is going to be an interesting year. It is going to be different than last year. It's going to be a lot of politics. So, filter everything you hear in the news or from President Trump through that lens. Um, if any of your viewers uh want to ask me questions, they can come find me on X under RC Whan. And obviously, we're really pleased with the, you know, how the show has been going and your support, Julia. So, thank you very much. >> Oh, thank you, Chris. Chris Whan, chairman of Whailing Global Advisors, author of the institutional risk analyst blog, the very best independent analyst you'll find on Wall Street. I really, really appreciate you and hope you have a wonderful weekend and I will see you next week. Yes, ma'am.
Whalen: The Government Playing Around In The Bond Market Is Not The Solution To Affordability
Summary
Transcript
It's populist politics. That's all this is. He's playing to the crowd. And I understand that's what politicians do. And I think that, you know, getting the government to start playing around the bond market is not the solution to affordability. Welcome back to another episode of The Rap with Chris Whan, where we break down what's happening in markets and the economy every single week. Chris, great to see you as always. >> Good morning, Julia. >> Good morning. And happy belated birthday to you, Chris. I hope you had a wonderful birthday. >> Of course. Of course. Appreciate it. >> And it was also producer Matt's birthday as well. Some January babies here on the show. All right, Chris, >> we love doing this with you. The audience is just giving the most amazing feedback week after week. So, gosh, you know what? This week was massive. Um, so I'm just thrilled to have you to discuss everything. Maybe we'll just start with uh the labor side of things since we got the non-farm payrolls report this morning. What's your read into it? >> Well, there was weakness. You had the revision uh where we actually uh created fewer jobs than we thought the previous month. All of this will help uh those who've been arguing in favor of lower interest rates. The president obviously wants the Fed to reduce short-term rates. We'll see what that does for the economy as far as housing and long-term rates, which are not the same thing. Uh but overall I think for those who've been arguing that the economy is weak, the the numbers uh certainly support that. >> Wait, so the numbers are they're actually starting to support those who've been saying the economy is weak. >> Yeah, to some degree. It it's hard to take a lot away from the monthly numbers. You always have to, I think, look at them over a period of time in part because of the revisions and other factors, but it certainly doesn't hurt if you've been pounding the table saying that you want to see a rate cut sooner rather than later. >> So, bottom line here, we're likely to see some rate cuts this year. >> The short-term rates, you know, long-term rates have not been going down. >> This is the thing. Even though the Fed has reduced their target for Fed funds several times in the past year, uh the markets, I think, are worried about a weaker dollar, they're worried about the fact that nobody in the Trump administration or the Congress talks about the federal budget deficit. So, these are things that are weighing on people's minds, especially if you're an investor and you've got to think about where to put your client's money. uh there's a big rotation out of US stocks into other foreign markets because uh managers believe that they're going to perform better. So there are a lot of interesting factors right now that we didn't have last year. Uh things have changed to a degree. The whole tech trade with Nvidia and AI has cooled down a lot. We talked about that in the blog post this morning. >> Yeah. All right. You mentioned housing. There were some truth social posts this week from President Trump. A couple of them hitting on the topic of housing. So maybe we'll just start with this one. Um President Trump floated the idea of a of the government buying 200 billion in mortgage bonds to push down rates. You call this an idiotic idea on X. Um, what do you see as the real risks here, especially with the GSC's needing to hedge and potentially offsetting any benefits? >> Well, as we saw over the last couple years, the Fed doesn't hedge their book. And this is one reason why uh central banks typically invest their cash in very short-term securities because they don't want to take a lot of market risk. uh Janet Yellen and Jerome Powell decided that they were going to try and stimulate the economy, which is basically what President Trump is saying. So, they went out and bought a bunch of 30-year mortgages during CO when interest rates were very low. And then when rates went up, uh the Fed took massive losses on these positions, both in terms of the price of the security and also the cash flow. They were paying people almost 5% on reserves when they were earning 2% on their mortgage back securities. So that's obviously not a good trade. Um what President Trump is doing is just I think election year politics. There's no net benefit to having Fanny May and Freddy Mack uh buy $200 billion worth of their own debt. Remember they issued those bonds. So what the president is saying is he wants them to buy them back and somehow create scarcity that will force uh interest rates uh lower. But you know the government's not really positioned to do that. Also remember they don't have the cash. So in order to go out and buy a lot of their mortgage securities they'd have to borrow money and the net net of that would probably be negative uh in terms of long-term interest rates. So it's not a very good idea. You mentioned just the midterms. Um, do you think that's going to be like the main theme to watch this year? Like everything that President Trump >> Sure. >> Okay. >> because this is really important. This >> this is could be like like I think you and I had said >> a few weeks ago in our conversation, >> you thought he was pretty much cooked on the midterms. I do believe that sentiment has changed in our more recent conversations, but if he doesn't win, it's the risk of, you know, impeachment, probably maybe all that lawfare coming back, maybe. I don't know. But >> yeah, it seems like the midterms are going to be extremely consequential. >> Well, he had a a speech to uh the Republican lawmakers recently where he talked about this. He said, "I'm going to be impeached if we don't hold the House." So, I think everything you hear from him between now and November is going to be about trying to position the Republicans to have enough good things to say to voters so that they have at least a decent chance of holding the House. There's some interesting factors in play here. The Supreme Court's going to be hearing a case uh regarding redistricting, which could be uh very uh fortuitous for the Republicans. But there's negatives, too. The the one big thing, of course, is that uh Trump's approval numbers are still pretty strong, even after his uh intervention in Venezuela earlier this week, which we haven't talked about yet. >> Yeah, I was Yeah, we we'll get into that, too. But I I think they're looking for anything and everything they can grasp onto to give them a positive story to take to the voters. So that's why we're talking about housing. There's not many things that the federal government can do when it comes to housing. We already have, you know, the FHA and the other government insured programs for firsttime home buyers, lowincome buyers. So that's already there. But the relative price of homes is the problem. How do you fix that? Well, you you need some deflation. But the Fed and the other uh government agencies have been kind of afraid of letting prices fall dramatically. But you know what? We have a housing correction already building now, Julia, in different parts of the country. We don't have a national market in real estate. Markets are local. So, in some of the weaker markets, you're already starting to see prices come down. >> And you and I have talked about this. There are home builders with inventory out there. We're trying to clear that out right now. How do you do that? You drop your prices. >> Yep. All right. Um I think what you're also getting at is the buzzword of late, affordability. That's been the big issue. And I want to bring this one up. This was another Trump Truth Social Post. And for a very long time, buying and owning a home was considered the pinnacle of the American dream. It was the reward for working hard and doing the right thing. But now, because of the record high inflation caused by Joe Biden and the Democrats in Congress, the American dream is increasingly out of reach for far too many people, especially younger Americans. It is for that reason and much more that I am immediately taking steps to ban large institutional investors from buying more single family homes, and I will be calling on Congress to codify it. People live in homes, not corporations. I will discuss this topic including further housing and affordability proposals and more at my speech in Davos in two weeks. I mean what do you think? >> Institutional investors have not caused home prices to go up. Uh they kind of operate on the margins. They normally buy new construction housing and then rent them. And many of them actually have rentto own schemes that are quite attractive. So I don't think institutional investors are the problem. The problem is the Federal Reserve Board when Janet Yellen decided, hey, let's go out and buy a bunch of 30-year mortgage securities and drove home prices up 50% in 5 years. Uh, that's really the problem. And it's ironic that the Fed has got a legal mandate from Congress to try and keep prices stable uh and then they go off and do something like this. So, you know, it's it's part of the hubris, I think, that infects the central banking community when they think that they can go out and wave the magic wand and play God and get whatever outcome they think they're going to get, and they don't. This was the irony of Van's uh uh proposal. And then, of course, you've seen the losses at the Fed, Julia. They've been losing tens of billions of dollars because of these uh these transactions. What Trump ought to do, frankly, is have the Fed swap all of their mortgage securities to the Treasury and have the Treasury give them T bills. Uh Doug Cass suggested that in a note he did earlier this week. And I think it's a it's a very good idea. It would get the central bank back to where they want. Um if Trump appoints Kevin Worsh, by the way, as the next chairman, I think you'll see him talking about this. Um, and the Treasury, you know, and the GSC's, they can hang on to those mortgage securities. That's their business. But the key thing is that they don't have the cash to go out and buy $200 billion worth of securities right now. So, the best thing we could do is clean up the Fed's balance sheet, get them out of the hedge fund business, let Fanny and Freddy hang on to the mortgages until they prepay, and uh, and that would be a positive outcome, I think. >> Interesting. So, wait, do you think the Fed's just been operating like a hedge fund then? Well, when they think that they can manipulate long-term interest rates by purchasing mortgages, yes, >> they could they committed the same error as long-term capital management and many other firms because they buy these mortgage securities which have variable maturities. If rates are low, the mortgage bond pays off quick. Everybody goes out and buys another house or they refinance. So, the mortgage security disappears in a year or two. Now, the average life of those mortgage bonds that are owned by the Fed is over 10 years. You and I, you know, we we may not be here by the time those bonds pay off. >> I hope I am and I hope you are too, Chris. >> Well, I hope so, too. But you know what I'm saying? They they are very dangerous securities because they have variable duration as we call it on Wall Street. And that says, how long do they stick around? And so right now those bonds are barely prepaying. >> Do you think again if they could clean up that balance sheet, would that help with um rates and subsequently the housing market? Like what do you think would help there? Because I do think with Trump's tweets or truth social posts, whatever you want to call them, >> there is a cohort, a large cohort of the population, at least a bunch of us think that. I mean, I kind of thought I thought it too, like I was like, "Oh, you know, we all know the names have been buying up all the single family homes." I think there's this perception. I mean, you're saying maybe it's not the case, but >> he's kind of tapping into something. So, what do you think would really help it? >> It it it's populist politics. That's all this is. He's playing to the crowd. And I understand that's what politicians do. But you should always remember that part of the hypocratic oath, first do no harm. Uh and I think that, you know, getting the government to start playing around the bond market is not the solution to affordability. >> There you we need to build more houses in the right place. We need to change zoning in the big cities so you can have greater density. You turn those single family homes into multif family sort of schemes, that kind of thing. And that works, by the way. It's already been proven in a number of different markets. So, you know, the the government's ability to just, as I said before, wave the magic wand and go out and buy a bunch of securities and make everything okay is really, I think, very dubious. >> Yeah. All right. Before we move completely off this topic, can I just get your reaction to um what's going on in New York City and this mayor's office to protect tenants, Seia Weaver. >> Yeah, that was uh kind of a bit of a misstep. She has some very radical views on housing. and she says it's a uh evidence of white supremacy if people own their own home. Uh which I think is uh a really unfortunate comment. You know, there's some very radical, very misguided people around Mr. Mandami and you know, I I understand some of these people work for Bill Delasio, by the way. They're retreads and I think they are not going to be helpful. The more interesting thing I thought was when um the new mayor tried to intervene in the sale of some rent stabilized apartments that's going on in uh bankruptcy court here in New York and the judge said no. >> Okay. >> Now, in the filing, they came out and said that this rent stabilized uh rents in these buildings are so low that the building can't possibly work. So that was quite an admission by Mayor Mandami to say that you know rent stabilization is slowly turning these assets uh into morabon properties that just can't possibly pay their expenses. So you know the unfortunately the Marxist Leninist coloration of this regime in New York City I think is going to start to generate a lot of opposition. I think you're going to see Kathy Hokll, the Democratic governor, eventually have to go head-to-head with this guy because he is so far out of the mainstream. You know, the Republicans, by the way, are going to turn him into a poster child. He's going to be everywhere. Uh and and this young >> Well, listen, you know, this young lady's rhetoric about white uh supremacy is not helpful. >> Yeah. You're going to see more Democrats bailing out of their party and becoming Republicans in the next year simply because the rhetoric coming from the left, people like AOC and the rest of them is just toxic. You're not going to win any national elections talking like that. >> Yeah, it's just absolute idiocy, too. And like, yeah, you look at you're like, I don't want that. That's >> Well, how do people in the Carolinas feel about that? I I think it'd be interesting to go down. >> I love living in North Carolina. I love New York City. New York City will always be in New Well, I love visiting New York City. I'll say that I'll come up there and do interviews, but would I live there? No way. Absolutely not. I also saw I saw this other thing this morning. I guess make I feel like my social media feeds are feeding me this stuff these days, but this came up on Instagram, so take it with a grain of salt. But have you heard of this thing called Community Opportunity to Purchase Act thing in New York City? Have you heard of this? >> No. We'll look into it and talk about it another time, but it looked like it was some sort of I don't want to give like fake news or anything around like who would get the right to purchase it first. >> Listen, the left tries to use notfor-profit community organizations to come in and buy apartment buildings. >> That's it. It was for nonprofits. Mhm. >> That's right. and they think, well, we'll cut out the capitalist, you know, the evil capitalist uh developer and therefore the building will be okay. But that's nonsense because eventually you have to raise money to renovate the building, maintain it, do all the things you have to do. So whether you have a not for profofit or not doesn't matter. It it only gives you some marginal relief in a very short-term sense if you have a not for-p profofit buy this building. And look at New York City. Look at the half million units that they own already that they can't take care of. >> The city of New York is the biggest slum lord in the United States. And it's because they cannot possibly take care of buildings when people are renting them for less than the cost of of actually maintaining the apartment. That's the problem with the progressive model. It does not do well in times of high inflation. And inflation is the backdrop of all of these conversations. Julia, >> does it really matter? Whether it's affordability or jobs or AI, doesn't matter. Inflation is in the background. >> That's so true. Like this, all of this is the product of inflation. >> Well, it doesn't help. I mean, think about the workers who lose their jobs in a company that decides to automate customer service. So, there's nobody to talk to. I had that experience with UPS. There are people at UPS you can actually talk to, but you have to find them first. Mhm. >> You have to get past the AI. >> Yeah. Um, okay. I'm sure we also get angry at the AI too, waiting for it. Um, >> let's talk let's talk geopolitics because this week um >> the day after our conversation, we had the Venezuela news um with the Trump administration um capturing Maduro and his wife. Uh, it kind of feels like, maybe it's too early to say this, but the world's changed. How do you kind of What's your big picture? >> Well, this is the conversation I've been having. Um, it feels like the world's changed because we haven't seen something like that in a long, long time. And >> I don't know, maybe I'm read maybe it's just this was a conversation I had today that's well airing today with David Woo. So curious like how do you think about >> I think it should have happened a long time ago. You know the Iranians, the Russians, the Cubans are all in Venezuela. They've been using that country as a base for operations. Uh the Venezuelans obviously subsidize the Cubans through oil. The Mexicans have now decided to help the Cubans. Um Trump has done what we should have done years ago and the military has been ready to do this for years. It's interesting that Joe Biden and the Democrats were willing to turn a blind eye to the fact that the Iranians have offensive missiles in Venezuela that can strike the United States. >> Remember what Jack Kennedy said, you know, 13 days. Why didn't anybody in Washington do this before Donald Trump? That's what I want to know. >> I think it's amazing like how it was so incredibly executed, too. Yeah, they've been planning it for years. >> Okay. >> You You think this all got put together in a couple months? No. No. No. >> Definitely not. No. But it was And we've had people on the ground in Venezuela for a while. You know, Venezuela is a large, you know, very uh rural country with very difficult terrain. So you can get in and out of there quietly uh if you want to insert intelligence operatives and other uh forces quite easily. The Venezuelan military is nothing to to be terribly impressed with. They've decimated the oil sector and um Mr. Maduro and his predecessor Hugo Chavez destroyed the military because they wanted to make sure they were safe. the Cubans were actually providing security for Maduro and you you heard President Trump talk about the number of Cuban soldiers that were killed. But you know, as I say, it's intolerable to allow Iran and these other uh states to operate in a country so close to the United States. >> This should have happened a long long time ago. So yes, things have changed, Julia. I think for the better. >> Yes, for the better. Do you That's That's I agree. For the better. Do you think what do you think will be some of the knock-on effects as well? Cuz I I also imagine Chris, I imagine this probably bodess well for the midterms. It definitely shows like strength >> well among Republicans. Yes. I think when the president exercises um you know power and does so in a way that doesn't end up killing a lot of American soldiers. Yeah. you know, it was a relatively clean operation and here here >> uh but I do think that, you know, this is not over. Uh we need to be very focused on what's going on in Venezuela and other countries in the region because these people do not mean us well. >> Iran is looking for ways to attack the United States and we got to be very vigilant. >> How are you thinking about it though? >> Well, I'm thinking I'm thinking yeha. you know what what else can you say? I mean, I I have been reading for years uh about what's going on in Venezuela. I've actually been there a number of times. I used to do work there >> uh years ago and I was astounded that the US would tolerate the presence of the Iranians and the Russians and everybody else in this country. You know, you'll laugh, but when I worked for the Heritage Foundation a long time ago, I wrote a monograph called Soviet weapons in Cuba. By the same criteria that Jack Kennedy used for his blockade, we should have been blockading Venezuela 10 years ago. Where where was the uh American government, both Republican and Democrat, by the way, so bravo to President Trump that he finally did something about this. >> Yeah, I I would say so, too. Um, how about from what do you think will be some of the positive knock-on effects from this? Because like what I guess what it says about the US on the on the world stage um I imagine too around energy there'll be some positive effects maybe um lower you know >> oil prices, gas prices, I don't know. Yeah, >> oil prices are so low right now, Julia. There's not a lot of incentive for oil companies to go into Venezuela and start to fix it because, you know, Venezuelan crude is very sour and very heavy. There's only a couple of facilities in the US it can actually refine it. It's similar to some of the crude that's produced in southern Mexico. So, you know, I I think what it is going to tell other nations and remind other nations is that the US is the only global power in the world that has the capability to do things like this. If you look at the Russians, you look at the Chinese, they have large military organizations, but they're not very efficient. And they certainly couldn't carry off something like this because it's not like the Venezuelans didn't know we were coming. You know, we've got dozens of ships sitting in the Caribbean. We've had a lot of activity in that area. Obviously, Trump blowing up, you know, narco boats that he claimed were, you know, carrying contraband to the United States. So, they knew we were coming, but uh they couldn't do anything about it. >> Mhm. Um, anything else on the topic that's on your mind? >> Well, I I think it it is an interesting reset. What we got to do is continue to pressure the Venezuelan government to get the Russians and the Iranians out of there. >> Mhm. >> Uh I also think long-term, medium to long term, it's going to put a lot of pressure on Cuba, which is already a basket case as an economy. Uh but if they don't have active support from Venezuela, then I think Cuba is going to be in trouble. The Mexicans will support Cuba short term, but we'll have to see how that pans out as things, you know, as time goes on. >> Hey there. I just want to take a quick moment to thank you for watching this video and I would really love for you to subscribe to this channel if you like this content. Over 70% of our viewers are not yet subscribed and we are on a mission to hit 100,000 subscribers. So, if you could just take a quick moment, hit subscribe. Thank you so much for your support. We appreciate you. And back to the video. Okay. Um, let's go on to another area you've been writing about, which is AI. Oh, my favorite. >> I know. >> Wonderful interview with uh Yan Le. >> He is a smart boy and he's honest, you know. He's an intellectually honest scientist who won't pander to the marketing folks and I think that is a very precious thing. >> I guess at what point do you think that the hype becomes maybe more of a systemic risk to tech valuations? I think we're there now. I I think the bloom's off the rose on Nvidia, which I made a lot of money on. Um, when you look at companies like Oracle, which I love. I followed Oracle for 30 years as a tech banker and I love their products. But when I saw them jump into the AI thing, I thought, "Oh my god." because the amount of leverage that people have put on their businesses in the hope of some benefit down the road, Julia, I think is really quite striking. Uh the fact that Larry Ellison would risk his company to chase the crowd uh around AI, which is clearly driven by marketing hype uh and obviously the stock market. You know, we always have to remember that we live in a commercial society. So when somebody tells you something, you have to ask yourself, why are they telling me this? And that was the case with AI. I mean, I got into Nvidia because of Jimmy Kramer back during COVID in 2020. It was a great trade. Thank you, Jimmy. >> Um, but it's still just a company that makes really hot semiconductors. And after a while, I think, uh, you know, people are going to calm down. the growth rates are going to fall and these stocks are going to become much more commonplace than they have been in the past couple years. So, we'll have to move on to something else. That's really the question, Julia. What is the next big hype from Wall Street after AI? >> What do you think it means for the broader markets? Because we know like the handful of names that have been really driving everything. Is that another thing? Because I think you and I talked about taking some of your acorns off the table. like where are you today as it relates to like the markets exposure that you want to have to markets? >> I have been buying financials that are cheap. >> So, you know, for example, the only bank stock I own right now is Flagstar, >> okay? >> Because I got in well below book. I know the team. I think they're going to turn the bank around. But am I out buying JP Morgan or, you know, American Express over seven times book value? No. Um, I think you're going to see the banks give up a little ground because they're going to have to start getting ready for an eventual recession on the consumer side. So, credit expenses are going to go up. And, you know, the you you hit the nail on the head, Julia, which is that a lot of the market gains of the past year were concentrated in half a dozen stocks. You know, so Apple's been taking their lumps recently. Um, there are a number of tech stocks that I think could give up ground as people wake up from the AI slumber and realize that a lot of this was just kind of a pleasant dream. Uh, but then, you know, when we start talking about earnings and revenue and numbers, that's when the conversation changes. When it was all pie in the sky and people were just chasing this, you know, kind of amorphous uh thing called AI, it was really easy to let the stocks run. But when you start talking about profitability or you know how many hundreds of billions of dollars Larry Ellison has committed to spend on real estate to build his data centers it's mindboggling >> that that company I think is going to be hamstrung by the amount of leverage and expense that they've taken on. >> You just also mentioned like the banks are going to have to start thinking about like that weakening consumer. I know in our gosh we've been doing this for you and I have been chatting for probably a couple years now and I it's interesting to see like the evolution too in the conversation of like >> a while ago the consumer was okay but now we are seeing that deterioration. >> Yeah. Well 2025 is going to be remembered as kind of a magical year >> when there was no apparent cost for risk. So whether you were talking about tech companies and AI or banks, you know, banks have had almost no credit expenses from consumers going back to 2020 and 25 in particular was remarkable. You had JP Morgan at almost three times book value which is you know a pretty heavy valuation even though they are the best large bank in the country. No question. So now if we actually start to worry about earnings and expenses and credit and defaults that's going to be a different conversation and I think 26 27 we're going to see a lot of these factors come to the four and then as you and I have talked about before I think by the time we get into late 27 28 we're going to be looking at a housing market reset and then you can go out and buy your house Julie >> misery on the eights Chris um all right >> misery on the eights we have to get Stan Middleman on here and let him talk about this for a few minutes. >> Yeah. Um All right. I do have that book here, too. I I have I look I have the one of your one of your books is on my bookshelf, but I do have the Stan Middleman one as well. All right. So, we're going to talk bank earnings next week, I believe. Yes. Or we're going to get into it. So, I will hold that for now. But let's do some viewer mail. >> Okay. Oh, please. >> Yeah. Ready? All right. This is from viewer Claire and she would like to know how is the current deregulation wave impacting the capital requirements and operational flexibility of tier 1 versus regional banks. Are banks likely to deploy this upcoming unlocked lending capacity into the market immediately? What are the projected spillover effects of this regulatory easing on the 2026 real estate inventory and equity market valuations? >> Well, that's a lot of questions. Yeah. >> Um, I think the short answer is banks are going to use the lower capital requirements primarily to return uh capital to their shareholders. The banks are still kind of underutilized when it comes to demand for credit, but it will certainly help. Um, I think the flexibility for kind of midsize and community banks is going to be particularly important because, you know, if you're a private citizen and you have a small and midsize business, you go to a smaller bank for credit. You're not going to go talk to Jamie Diamond. You're going to go to your local bank or maybe a regional bank and talk to them about credit and it will help. Uh, on the real estate side, the banks are not that heavily involved in real estate. They provide wholesale finance to non-bank lenders. You know, one of the things I remind people of is that probably 3/4ers of the mortgages in this country are originated by brokers. The broker fills out the application, gets you to sign it, and then they will take it to different lenders, banks, non-banks, and that's how they get it funded. So if you think about pennymac for example, which is one of the leading non-bank lenders in the conventional market, 90% of the mortgages that they quote unquote originate, they buy from somebody else. They don't have somebody sitting in a call center making that loan. So most of the market in in is really run by independents, small business people who originate mortgages in their market and that's where you get uh relief in terms of rates. But you know, your your listener is quite right. The changes that Mickey Bowman is making at the Fed, she's the vice chairman for bank supervision at the Fed and the other agencies are going to definitely have a positive effect on US banks, but mostly to give back capital to shareholders. We're going to have record capital return in 2026. >> All right, final viewer question. This comes from Mike. Um, this is after last week's episode. So, if Chris is calling for a serious correction, wouldn't that also be in metals, especially copper and silver? They're tied to the economy. So, how would there be a crash and they still do well? >> Well, I'm not calling for a crash. Whenever you see something move a lot in a short period of time, you know, it's going to correct. You saw silver correct a little bit, but when the new year started, it took off again. Um, with both copper and silver, you have commercial demand, Julia. It's not just speculators out there, you know, trying to bet on whether the price is going up or down. You actually have people using it. The Chinese have been big buyers of copper in the past couple of months in the spot market. So, that's driving prices up. You've also had a number of uh investment houses increasing their estimates for copper prices this year. But, let's face it, copper is an industrial metal. That's where it's used. It's used in many different industries. So, it's not the kind of thing that most investors would buy pallets of to speculate on the price. I remember I have a good friend down in Texas, a very famous hedge fund guy you probably know who was buying pallets of nickels. >> Oh, I know who you're talking about. He's >> You know who I'm talking about. That's right. >> And so, you know, I I I don't think that the bull market in gold or silver is done by any means. I do think the US stock market is going to be a lot more boring this year than it was last year. You know, you're you're not going to see a a precipitous decline in US stocks because that's where everybody hides from inflation. The big question is what happens in the bond market. If we see long-term interest rates go up because there's a perception of confusion or policy weakness in Washington, then that becomes a problem. That's a different matter. pay attention to what's happening there. >> Good question, Mike. >> I love these questions and um to our viewers, we love hearing from you. So, shoot me an email, julia juliar ro.com. We do not share these with Chris ahead of time so we get the most authentic response. And um you can also leave them in the comments. And Chris, I have to say the audience just loves you and they love having you on every single week. I do too. I hope you've had an amazing birthday. And before we let let you go, I want everyone who watches this show to go subscribe to Chris's institutional risk analyst blog. Um, do that as a birthday present for him. I will plug it for you, Chris. But any parting thoughts before we let you go here? >> Uh, no. I think uh 2026 is going to be an interesting year. It is going to be different than last year. It's going to be a lot of politics. So, filter everything you hear in the news or from President Trump through that lens. Um, if any of your viewers uh want to ask me questions, they can come find me on X under RC Whan. And obviously, we're really pleased with the, you know, how the show has been going and your support, Julia. So, thank you very much. >> Oh, thank you, Chris. Chris Whan, chairman of Whailing Global Advisors, author of the institutional risk analyst blog, the very best independent analyst you'll find on Wall Street. I really, really appreciate you and hope you have a wonderful weekend and I will see you next week. Yes, ma'am.