Chris Whalen: Maxi Market Correction Ahead – Will Be In Textbooks Alongside 2008
Summary
Precious Metals: Bullish outlook on gold and silver driven by central bank buying, tight deliverable supply, dollar weakness, and the Shanghai market’s growing price leadership.
Annaly (NLY): Guest actively owns NLY common for mid-teens yield, prefers common over preferred, and highlights its MBS/MSR model while noting leverage and yield-curve risks.
Private Equity: Expects 2026 “carnage” with illiquid portfolio companies, self-dealing GP transactions, PIK maneuvers to avoid bankruptcy, and likely migration back to public markets.
AI: Skeptical on near-term monetization as benefits may accrue to consumers; worries about heavy capex/debt at big tech and revenue generation at firms like Oracle.
Cryptocurrencies: Notes substantial investor losses and cautions that crypto remains too risky for most individuals despite prior media enthusiasm.
Housing & Fraud: Mortgage rates remain sticky as deficits keep long rates elevated; lender fraud risk is rising (AI-aided document tampering), increasing repurchase and underwriting costs.
Monetary Policy: Fed politics loom with limited 2026 cuts expected; Powell may stay as governor, and deficits sustain higher long-term yields and uncertainty.
Credit Cycle: Defaults fell through 2025 but likely plateau then rise; non-bank lenders will be tested as banks turn more cautious on provisioning.
Transcript
We've been going for a decade and a half really fueled by monetary policy intervention by our central bank and it's caused stocks to go up. It's called caused home prices to go up. The story that's going to be I think one of the central themes in 2026 is the absolute carnage going on in private equity. You have literally hundreds and hundreds of private equity companies that cannot be sold. [music] Chris [music] Whan, chairman of Whan Global Advisors, author of The Institutional Risk Analyst, author of multiple books, investment banker, and the very best independent analyst you will find on Wall Street. Welcome back to another episode of the rap. I'm so pleased to see you. I hope you had a wonderful holiday. Really great to have you back, Chris. >> Yeah, you as well, Julia. Happy New Year. >> Happy New Year indeed. And Chris, people have just been absolutely loving the rap um this weekly segment that we've been doing. And we took a little bit of a break over the holidays. So, we got to talk about 2026. But maybe before we even go there, let's do a little bit of a retro for 2025 and then we'll get into your prognostications for 2026. >> Well, what does one say about 2025? It was all about Donald Trump obviously in the political realm. Uh a lot of changes that people reacted to or thought that they had to react to. Markets in the US were very strong. Uh obviously carried by tech and a couple of other themes. But I think it's also interesting Julia that a number of managers uh were rotating out of US stocks into emerging markets back into China other markets where they see greater opportunities at least in the short term. So I think that theme of allocation out of US stocks and into global stocks is going to be uh continuing in 2026. The financials did okay. they kind of sold off at the end of the year after a pretty good run. Uh you know we had the Trump Independence Day uh selloff and then a lot of sectors came back after that. Um I think the big story in terms of the markets was gold and silver on the one hand really outperforming most people's expectations. You know, silver is always the poor man's metal versus gold. And yet, it came galloping along in the fourth quarter and had just a remarkable run. And then you saw the the cryptocurrency world uh sell off rather dramatically with Bitcoin and and a lot of others. I think it's it's something we should mention, Julia, that a lot of people have lost a lot of money on cryptocurrencies. It's such a shame. Uh I I get so uh despondent sometimes thinking about some of my friends in the media. You know, CNBC, for example, went all in on crypto. And I think, you know, you this is something consenting adults can do, but we shouldn't have people in the media out encouraging it. Uh it's just too risky, I think, for most individuals to play with. >> Chris, there's so many areas I'd love to dive in um further with you. And as you were mentioning some of the themes heading into 2026 rotating out of US markets that trend likely to continue. What do what do you think is going to be maybe maybe a couple things. What do you think will be the big stories headed into as we well we're already in 2026 but what do you think will be the big stories of 2026 for folks to be paying attention to? I [snorts] think one of the interesting ones is if you look at President Trump, his approval ratings are higher than they were in in the first term. Um, with the incoming uh Marxist mayor in New York City, with the disaster in Minnesota, with uh all sorts of fraud related to government programs, I think the Republicans have a decent chance of holding on the House in the midterm elections, which would be remarkable. But the negatives on the Democrat side, I think, are going to be a big theme this year because if you're a Republican, you're going to be hammering away at this. Um, the other key theme I think is the Fed. What's going to happen here? We talked about that in in the rap yesterday. And, you know, to to me that's going to be a continuing story. Bill Py started uh sounding off again on X saying that Powell has to resign. No, he doesn't. Jerome Powell can stay right where he is until 2028 as a governor. And that may be what happens because if he holds on to that seat, it [snorts] means that Trump uh President Trump will only have one open seat on the Fed board for a new uh chairman appointment and then he's got to live with the board for the rest of his term. So uh the politics of the Fed, I think, is going to be a big story in 2026. Julia, >> all right, let's um dive in a bit on some of these. All right. The last couple of times you and I had met was probably two episodes ago, we did talk about the midterms. And at the time, I thought like the Republicans were teed up to lose the midterms. But it seems like maybe the the daycare fraud that we've seen uncovered in Minnesota, that could be >> Yeah. You can't make this stuff up. >> Yeah. And also I feel like [laughter] Chris, a lot of the folks who watch the show would say they are rugged individualists. >> Well, so are we up here in New York where we have to shovel snow. Um, but you know, it's not about rugged individualism versus collectivism even though you have Mr. Mandami talking about the the soft wonderful world of Marxist Leninism. Uh, but I I do think it's about who we would like to see leading the country over the next couple of years. And that's a big question mark I think in the minds of many voters cuz they don't have a lot of great choices. Trump is clearly the best and he's taken the air out of the room for the past year. He's just dominated the conversation. Uh the Democrats have had almost nothing to say and they don't have a national figure that can engage with Trump. So I think this is going to be a fascinating process, Julie. They really do because most people would expect that the party in power would do worse in the midterm elections. But what happens if the Republicans hold the House, maybe pick up a seat or two in the Senate? That's going to change the political calculus rather dramatically. >> And that matters a lot for investors too. >> It does. But as I said before, I think you know market oriented investors, people who are looking for alpha, looking for appreciation over the next 12 months, they're rotating into foreign stocks because US has had such a strong run on AI and other uh you know themes that they're I think thinking that they're going to do better elsewhere. One of the interesting uh examples of this, Julia, is you see that Tesla has now been pushed out of first place in electric vehicles by the Chinese uh BYD. You know, these are themes that I think people can't ignore. And even though the the narrative behind artificial intelligence is still pretty strong, I think it has kind of taken a bit of a beating in the last 6 months and people are worried about Oracle. they are worried about some of these other companies that have spent just vast amounts of money and borrowed lots of money because they have to ultimately generate some revenue. I still think AI is incremental. I think most of the benefits are going to go to consumers and how do you get them to pay for it? That's really the issue. If it's not going to be a tool for business that can be monetized easily by these big uh technology companies, then ultimately it becomes a throwaway, you know, to attract consumers and people like Amazon and Walmart and others will use it. But my clients in the financial sector, big consumer lenders, they're still trying to figure out how to use these tools in a way that's not going to create risk for them. That's the interesting thing. >> Yeah. All right. um you're you're you put out in the institutional risk analyst um your latest piece um on 2026 the rap um and it wasn't necessarily all that rosy of a picture ahead. And I know we were just talking about the Trump administration, but you were talking about the problems in credit. Uh the impetus and impulsive regime led by Donald Trump is careening headlong into a generational reset of credit metrics and asset valuations. A maxi market correction that may be memorialized in textbooks alongside the great financial crisis of 2008. Elaborate more on that, the risk that you are seeing there. Well, since 2008, Julia, we've had a remarkable run. We've had the Fed using quantitative easing to just pour liquidity into markets. They ramped that up dramatically in 2020 with co and it's been a big uh point of debate within the monetary policy community whether the Fed did too much. Most of the individuals that Donald Trump is thinking about appointing as the next chairman of the Fed, whether you talk about Kevin Hassid or Kevin Worsh, they're all interested in really changing the way the Fed operates, smaller balance sheet, a lot of other changes that are not necessarily going to be positive for the markets. But the thing I I focus on is not so much Trump. This has nothing to do with Donald Trump. It's the fact that we've been going for a decade and a half really fueled by monetary policy intervention by our central bank and it's caused stocks to go up. It's called caused home prices to go up. But I still think we are facing a a reset in terms of home prices in the next couple of years. And in the meantime, the story that's going to be I think one of the central themes in 2026 is the absolute carnage going on in private equity. you have literally hundreds and hundreds of private equity companies that cannot be sold. Um, so I think that what you're going to see is a lot of losses taking place in the private equity space and two years ago people were singing the praises of private equity. They were telling us that they were better than public markets. So, I think that's going to be a big theme for Wall Street and it's going to be a source of continuing distraction and financial losses for these companies because there's no way to avoid it. If you're a big pension fund and you invested in private equity and now you're looking at a portfolio that's illquid where the sponsor has to literally sell it to themselves in order to help you get out, that's not a great advertisement for that sector. So, I think you're going to see people try and migrate back to public markets because there's more liquidity and more certainty there. Uh, and the private equity trade, I think, is going to suffer rather dramatically this year. >> Okay. Do you think that the White House is aware of this and >> No, no. They [clears throat] watch Newsmax. The The White House is in another realm. They're focused on politics. They are largely not focused on financial markets. They they give that to Scott Besson over at the Treasury by default. So most of the people in the White House are really just focused on politics. And that's why I think it's a source of risk for Donald Trump because the things that are going on and will go on this year going through until the end of his term were already set in place long before he won. even in the first term. You know, you've had over a decade of the Fed pumping up the US markets because they're afraid of the alternative. The last thing the Fed wants to see is a debt crisis. So, they continue to heir on the side of big and that has caused the numbers to go up rather dramatically. Uh, and people in the economic policy community look at this and say, do we really need a balance sheet this big? Uh, the answer may be yes. when you have as much debt as the United States uh has. And nobody wants to talk about the dword, do they, Julia? The last thing anybody in DC wants to talk about is federal budget deficit, all the rest of it. So, you know, we have another potential shutdown coming in a couple weeks. We'll have to see how that goes. Um, but there isn't a lot of focus on the financial markets or risks coming from the financial markets. That's really the point of the piece. Do you think part of it too is like we hit a number of all-time highs last year in uh the equity markets as well that maybe no one wants to like talk about this impending danger like how I guess I want to just hear more of your thoughts there because uh I know in our prior conversations like at least when we had talked about the economy it was okay it was okay but like sounds like you're seeing some real risks on the horizon that just aren't getting the attention. >> I'll give you a great example. Uh there's a firm called Walker and Dunlop that's very big in multif family real estate. They just got whacked with a couple hundred million dollar fraud uh problem uh related to loans from Fanny May and Freddy Mack. They may have to buy those loans back because fraud was involved. That's the death for a lender when they have to do a a loan repurchase. Fraud is one of the biggest single threats in the housing market today. And you tell people this and they're like they can't even believe it. But I work with a number of firms that do uh income verification for for loans and the amount of fraud that they see every day is just dramatically increased largely because of AI. You can take AI and alter a bank statement, move a couple of decimal points around, and all of a sudden that lender has to do a manual underwrite of that loan. they've got to go verify every single data point in that loan. That's very expensive. So, the the the difficulty I see is that lenders in the credit space, whether we're talking about commercial lenders or people dealing with uh residential mortgages, are seeing just enormous problems when it comes to fraud. And I think that's going to be a big theme in 2026. >> 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. [music] 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. Chris, we should also talk about um the Fed, especially as we are already into January. And the question for you is pal. Um, do you think he will retire or remain on the board through the end of his term? >> I have a feeling he's going to remain on the board for the rest of his term. The Trump administration has mishandled Powell. They should have been a little uh less aggressive uh particularly with Bill Py in demanding his resignation. He doesn't have to go anywhere. he can literally stay on the board and just hand a baton to the next chairman. So, you know, to me, the politics of this are fascinating because if you're Powell, like most chairman, you want to protect the institution. And this goes for whoever Trump picks, by the way. Whoever Trump picks as the next chairman of the Fed will betray him on day one because when you walk through that door, Julia, and you've been confirmed by the Senate, something changes. And this is going back a hundred years with the central bank. Almost every Fed chairman has shown this tendency to protect the institution. So how does Powell protect the institution? He keeps his seat. [snorts] He sits there and you know performs as a governor and he follows the uh the lead of the chairman. So I think that is a very interesting possibility that people have not talked about a lot. The assumption is Powell's just going to retire and leave. And I'm not sure that's the case. >> Do you think >> he has refused to talk about this, by the way? >> Powell has Yeah. Do you think we'll see a more hawkish Fed next year or this year? Yeah. >> I think the people on the committee who are voting in 2026 are much less prone to reduce interest rates further. Um, most people are expecting only one cut in 2026, which is fascinating. Think about that. Uh, if you had asked everyone a year ago what they were expecting, they would have said that rates would be much lower than where they are today. So, you know, the reason Congress gave Fed governors 14-year terms is so that a president or a Congress would not be able to necessarily make short-term changes in policy. and we're seeing that play out. >> Um, one of the other, I guess, consequences too from the Fed is, as you put it in your piece, QE enabled some very stupid and foolish behavior by investors and lenders. So it also makes me wonder as we were saying earlier the defaults the risk that we'll see defaults I think didn't we see record another record or at least higher bankruptcies in 2025 from 2024 and 2024 was already a big year for bankruptcies since the crisis >> it's it was higher it's since 2008 bankruptcy has been very low and credit in general whether consumer or business credit has also alo been very low. Any banker you talk to will tell you this. So the question is where do we go from here? And my sense is we're going to continue to normalize the cost of credit for banks, other lenders. You've seen an enormous number of new non-bank lenders enter these markets and they're going to be tested now. We're going to see how they do. Uh one of the best performing banks in our portfolio, Lending Club. They've been rocketed along non-bank lender that's kind of sort of a bank. They don't really have a huge deposit base, but they are going to be tested along with many of these other newer names who have kind of pushed the big banks out of the way in a sense. Uh and you know, we may see that really start to come to the foreground in 2026. My sense is that default rates generally are going to kind of plateau in the fourth quarter when we get earnings in about two weeks and then from there we'll probably go higher. >> Wait, why do you think they'll plateau? >> Well, they've been falling for a year. >> Remember, we were expecting a recession in 2024 and by the end of that year they had kind of gone up a little bit and then they spent the entire year of 2025 falling, >> especially on the consumer side. So banks have been able to report higher earnings because they haven't had to put aside money for loan defaults. That I think is going to start to change. And again, you know, if you look at the conference call transcripts from JP Morgan, some of the other big banks, it's fascinating to see how these people talk about credit today and [snorts] what they expect to see in the next year. Most of them are taken a fairly cautious position. So, you know, 25 I think is going to be remembered as a year when a lot of deals got done, a lot of money got borrowed for good or for ill, right? And then 26, 27, 28 is going to be about dealing with that. >> Mhm. Yeah. I guess also especially as we were saying earlier like in private equity um because you were talking about in your piece like there's been I I thought this was interesting. You said there's been a lot of like using payment in kind or other means to avoid bankruptcy too. So it does make me wonder like what's really going on. >> Well, not only that, Julia, but think about the private equity sponsors that are selling companies to themselves. They create a new fund to buy an existing portfolio company that they can't sell. They let some of the investors get out somehow or another. They have new investors coming in. Uh this is a indication of a serious problem. They get fees, too, by the way. This is a nice way to generate fees for the sponsor. But many of these private equity firms are never going to be able to really raise new money because their their investments have been so unsuccessful. That to me is is really the issue. But, you know, there are a lot of well-run companies out there that are going to profit, I think, by being able to offer alternatives to investors. And, uh, you know, we'll have to see how that goes. What's interesting if you look at the housing sector right now is even though the Fed's been cutting rates through 2025. Long-term rates for treasuries have been going up. 30-year mortgage rates are kind of stuck. They're not moving up or down. Uh and you would have thought by now with a couple of Fed fund rate cuts from the Fed that housing prices would have already uh started to benefit from lower mortgage rates, but they're not. >> So, what do you think happens in housing? Like I know people are starting to put out their outlooks there. What do you think is uh in the cards for housing? >> I think you know residential mortgage rates kind of stay where they are, maybe get a little bit lower if we have another Fed funds cut. But the big issue that's weighing on the markets when it comes to long-term treasuries like the 10-year Treasury is the bellweather for housing is the budget deficit. They want to see some kind of leadership from Washington on this issue and you don't hear anybody talking about it, do you? [snorts] >> You don't hear anyone talking about it. Um, another area in your piece that I found interesting, you were saying veterans of emerging markets are familiar with the syndrome of central banks buying short-term government debt. Of course, the United States is the oldest emerging economy in the world, but the current regime I like that. [snorts] But the current regime shows strong historical anticedants of cronyism and patronage politics that extend back to before the guilded age, the most corrupt period in American politics. So are you kind of drawing a parallel to the guilded age like where we are right now? >> Oh, I think so. Washington is on autopilot. Um, you have an awful lot of people in this administration who were appointed, you know, for patronage purposes rather than because they have subject matter expertise. Housing is a great example of this. You know, we have a a very strong team at HUD and Jinny May, but if you look at Bill Py at the FHFA, you know, he he's been basically doing anything else but his job. And they keep talking about taking Fanny May and Freddy Mack out of conservatorship. I don't think that's going to happen. Uh there's just too many pieces that you have to deal with before they'd be ready to do that. But you know, the thing is anything is possible in Washington today, Julia. Anything. And that I think again is why long-term interest rates, mortgage rates have not come down because you have a lot of uncertainty. People are thinking about another government shutdown, what that would entail. And so none of these data points helps investors get more comfortable with the idea of lower rates. And in fact, it makes them want higher rates to compensate them for the risk. >> What is that like? What what does that tell you about where we are right now? If that's the case, >> it tells you we're in a democracy where uh marketing and short-term profits are the two major factors for most decisions. And this is, you know, historically this goes back to long beforeh even Andrew Jackson was president. He was the first democratically elected president who wasn't uh a family member of one of the founders. And ever since then, it's been a commercial enterprise. It goes to the highest bidder. And that's really, I think, what people ultimately worry about with the United States is that they love the free market economy. They love the growth that we're able to generate because we are a free society. But at the same time, they look at Washington and all they see is people making short-term decisions and refusing to uh to do anything that's remotely difficult. If you were in a position to advise, what would you do differently or what do you think we should do differently? >> Well, they they need to engage with Congress on spending if we don't figure out a way to generate more revenue uh to balance off the uh the budget deficits. I think we're going to be in a very difficult situation. I was ruminating the other day uh about this, thinking, you know, how would you deal with it? Maybe we'll do debt equity swaps. We'll have everybody take equity in the United States and and try and reduce the interest expense because the numbers are getting very big, Julia. And at some point, you can't ignore them anymore. Uh when I referred to emerging markets, I was talking about my experience in Mexico long before that country became stable and really largely an appendage of the United States and Canada within North America. There were times when they had to keep short-term uh T billill rates, what they call ses, well over 20%. To defend the currency. So when you think about a a central bank and a treasury in a defensive position, it forces them to have high short-term interest rates, short interest rates that are much higher than long-term rates. The US isn't quite there yet, but that's where we're headed. And everybody assumes that because we are the largest economy in the world and because we have, you know, the dollar and everything else that that's going to be different. But the dollar is probably going to lose more value in 20126. It was already weak uh in the past year. I think you're going to see more of that. >> And then that makes me bring the conversation back to gold and silver. What >> y going to be another good year for gold and silver. That's true. This is an area you have been spending a lot of time. You've been focused on the precious metals writing about it. Would love to get more of your big picture thoughts there. We can even separate the two, but um what what do you think they've been signaling? And obviously I'm just hearing you say like you think there's another good year ahead for the the precious metals as well. >> I think you know we wrote a piece earlier in the year about the asymmetrical uh trade with gold and silver. What does that mean? It means there's two big factors. One is you have central banks and other uh large investors purchasing the metal largely to diversify away from dollars. The other thing is you have a supply problem. This is part of why silver took off in the fourth quarter. There's simply not a lot of deliverable supply in the market. And remember people use silver in industry too. They use it in technology. They use it in many other areas of industry. So when you have a large speculative component buying the metal and they are competing with uh other buyers who need it for commercial purposes, it creates a situation that we saw in the end of uh 2025. I think gold will continue to appreciate for the same reasons. There's not a lot of deliverable supply. It's not so much of a commercial conversation as it is global central banks diversifying out of dollars. And again, very clearly as we saw last year, perhaps one of the biggest stories of last year, Julia, was the fact that gold is now the largest monetary asset in the world at surpass dollars. So, you're going to see that prices continue to increase. Remember, the rate of change is smaller as we go higher. M >> uh we talked about that in that interview I did with Jim Records. It's very easy for people to kind of miss that, but it's a lot easier to go from 3,000 to 4,000 4,000 to $5,000 per ounce of gold because the rate of change is actually smaller. So I think you're going to see gold continue to rise. >> So in other words, it's almost easier to even go higher then. >> Yes. Yes. >> Fascinating. Um Chris, as someone who's been following the space closely, what are the narratives out there that you are seeing that people are just getting absolutely wrong when it comes to this space? >> I No, I think people understand slowly what's happening with gold. It's not a natural conversation for Americans for a couple reasons. Most investment advisors have not had a lot of allocation to gold. uh you've had the crypto guys out trying to convince everybody to sell gold and buy, you know, Bitcoin and other uh tokens, but that hasn't really panned out very well. In fact, just the opposite. Um so, I think that, you know, to me, Americans get uncomfortable when you start talking to them about gold because it implies that the dollar is going to lose value. Everyone in this conversation was raised listening to the Roosevelt era propaganda that said that the goldbased world was inferior and that somehow the paper dollar is going to solve all of our problems. Well, yeah, the fiat dollar was a remarkable invention and it has enabled the United States to fuel enormous growth, but the trouble is is that it's hard to get members of Congress to discipline their spending. They don't like raising taxes for obvious reasons. If they raise taxes, they lose elections. So, that tied to a fiat currency is really, I think, a a long-term problem because it it it destroys that franchise. The world was happy to use paper dollars at full faith and and and credit, right? as long as we were printing too much money on the side. But Americans suddenly, you know, going back to the 1970s, it's been 50 years, uh, realized that they could go out and spend more money. They just borrow it. And that is, I think, the big flaw in the system right now that's going to cause a number of problems as we go forward. [snorts] >> Yeah. >> And it will help gold. I mean it this is a recipe for another bull year in precious metals. Copper uh a number of other metals that are in relatively short supply I think are going to do very well this year. And at the very least, Julia, in dollar terms, they're going to go up. They may not go up as much in other currencies, which is something to ponder. >> That's interesting. Why? Why? because other countries uh have markets too. China is now the dominant player in gold. The Shanghai gold market sets the price globally now. It's not in Chicago. It's not in London. It's in Shanghai. And this is part of a long-term change led, you know, by China and also Russia that said, "No, we're not willing to trust the dollar. We want alternatives." and other central banks are following that uh that line of thinking as well. China has already signaled that they are going to be comfortable with a stronger currency in 2026. So you actually may see the price of gold going up faster in dollars than it is in in Chinese yuan. You know, currency markets are not bilateral, they're multilateral, and you always have to think of it that way. That's why they're so interesting. >> Yeah. Um the you know I got to say like the folks who watch this channel just based on what I see in the comment section they are probably very pleased right now with the the way uh gold and silver have both performed. >> Yeah we you know the portfolio we put together for our readers has done very well. Uh not just the metals names but also some of the smaller minors who are all going to get bought as the majors come back in and start trying to rebuild their productive capacity. the junior miners are going to get acquired. It's just the way that these things work. >> All right, Chris, we do have a viewer question. Um >> Oh, good. >> Okay. And we don't share the questions with Chris ahead of time, so we just get the we don't we just don't. But this comes from viewer Samuel and his question is um on a recent podcast you mentioned that you own NLY. I think that's Annalie. Is that right, Chris? >> Analy. Yes, >> Annalie. and you owned it for the yield and didn't concern yourself with the share price. Would you own the preferred stock of various mortgage REITs such as I don't know if you know these but AGNC, RIITM, CIM, etc. Since their yield are lower but competitive with the mortgage rate common and higher in the capital stack what makes you invest in the mortgage rate common shares? Is it just the yield? what different rate/mackro environments are good or bad for the common versus prefer versus preferred. Thanks and I enjoy your weekly input. >> Well, let me start off. Uh I I've owned Analy for a long time on and off. Uh I got back into the stock over a year ago mostly for yield. Uh my basis in the stock is well below uh book value and you know for that reason I accumulate it. Whenever I have extra cash in the portfolio, I'll always add to the position largely because I know the management team. I have great confidence in what they're doing. And let me just elaborate a little bit. They invest on mortgage back securities. They also own mortgage servicing rights where which is an interesting hedge for the mortgage back securities and they are catering to a retail audience who either owns the common shares or the preferred. The preferred in theory are going to be more stable than the common. But to me, just as a mortgage geek, I'm happy to own the common shares. The yields have been in the mid- teens. And again, of all the players in the sector, I tend to like Annalie the most because I think they're the best run of the REITs. Uh they all have issues with leverage. They all have issues with the shape of the yield curve which you do have to keep your eye on. But I basically have it as a surrogate uh for things like treasuries and other uh investments for yield because again it throws off mid- teens uh dividend yields on the common. So I kind of like that. Uh I also own city prefers the uh the old trucks which have very high cash flow. And again it's the same thing. I understand what I own and I'm comfortable with the risk. City has been one of the best performing banks in the country over the past year. So, you know what I would say to all of you though is be careful with preferred because they can go down. I had a position in US Bank. You know, there's nothing wrong with US Bank. I actually like the name, but the preferred sold off uh rather considerably and I finally uh just sold the entire position and got out. Uh the only bank common I own right now is Flagstar because I got in at, you know, a very uh cheap level and I think the management team there led by Joe Auding is going to turn things around. But I haven't been a big buyer of other financials simply because I didn't care for the valuations. When I started buying analy, you know, trading about 085 times book now it's well over book. Most reads don't tend to trade over book. they kind of normally trade around asset value or a little below. So, you know, that's my story on Analy. I I think it's a fascinating way to get exposure to the US mortgage markets. They mostly own government guaranteed securities and they lever them up. That's how they make money. >> And as a a reminder, you all can send questions anytime. We have Chris every single week, so you can shoot me an email. Um I always leave my email in the comment section or even leave your question in the comment section cuz Chris, this is so fun. I I love doing this with you. This audience has been amazing. You've been amazing. Before I let you go, um what are you going to be paying attention to uh in markets next week? I know we have bank earnings in a like two weeks, so I know that's going to be a Super Bowl for you, but yeah, just what's going to be on your mind or your radar next week. [snorts] >> Well, we're working on a piece for um Monday on the big investment banks, Goldman Sachs, Morgan Stanley, the rest of them. They are, I think, going to have a good year. there's a lot of people anticipating a continued flow of deals. They also do well with market volatility. So, those are both areas where I think they're going to benefit. Um, we're also going to be looking at our banks trying to tell our uh readers which ones we like in the coming year. not necessarily the leaders today because I do think you're going to see uh some of the names with exposure to consumers sell off and you're going to see other names come to the four. Last year basically we had some of the biggest consumer lenders in the country outperforming the rest of the group. Uh City is the only one in the top uh four banks that's been really performing well. The rest of them have been way back in the pack. Uh even names like TD Bank, God help us, have actually performed pretty well, our friends in Canada. So, you know, we're going to be trying to give some guidance to our readers about what sectors we like and what we don't like, but we are going to definitely continue to pay attention to precious metals uh and maybe mortgages. You know, we've got to see mortgage rates get down into the fives before you're going to see a little bit more activity, I think, in mortgages. Mhm. Chris, uh, where can we send them to find you, support your work, subscribe to your work? [snorts] >> Uh, well, we publish the institutional risk analysts blog. We have a premium service that actually talks about a lot of specific ideas that we have. And I also like to talk about my portfolio. I always love getting questions from people. [snorts] And uh, I uh, I'm very active on X and LinkedIn under RC Whan. You can always ask a question about the blog on on X. That's where we like to put our our responses so everybody sees them. And then I publish a column for National Mortgage News which is always fun. I uh did a piece which was kind of written for Bill Py. We'll see if we get any response back from Bill >> on X. [laughter] Yeah. Um >> No, it's okay. He look all of these people in Washington are mostly focused on politics. Yeah. >> The Trump people would love to find a way to help housing before [clears throat] the midterm elections, but it's not easy to do. It's it's a it's a fairly complicated sector and you don't want to tip things over. So I always look forward to hearing from our readers. >> Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst. So wonderful to see you as always. Look forward to our next conversation and again happy new year Chris. Happy new year, Julia.
Chris Whalen: Maxi Market Correction Ahead – Will Be In Textbooks Alongside 2008
Summary
Transcript
We've been going for a decade and a half really fueled by monetary policy intervention by our central bank and it's caused stocks to go up. It's called caused home prices to go up. The story that's going to be I think one of the central themes in 2026 is the absolute carnage going on in private equity. You have literally hundreds and hundreds of private equity companies that cannot be sold. [music] Chris [music] Whan, chairman of Whan Global Advisors, author of The Institutional Risk Analyst, author of multiple books, investment banker, and the very best independent analyst you will find on Wall Street. Welcome back to another episode of the rap. I'm so pleased to see you. I hope you had a wonderful holiday. Really great to have you back, Chris. >> Yeah, you as well, Julia. Happy New Year. >> Happy New Year indeed. And Chris, people have just been absolutely loving the rap um this weekly segment that we've been doing. And we took a little bit of a break over the holidays. So, we got to talk about 2026. But maybe before we even go there, let's do a little bit of a retro for 2025 and then we'll get into your prognostications for 2026. >> Well, what does one say about 2025? It was all about Donald Trump obviously in the political realm. Uh a lot of changes that people reacted to or thought that they had to react to. Markets in the US were very strong. Uh obviously carried by tech and a couple of other themes. But I think it's also interesting Julia that a number of managers uh were rotating out of US stocks into emerging markets back into China other markets where they see greater opportunities at least in the short term. So I think that theme of allocation out of US stocks and into global stocks is going to be uh continuing in 2026. The financials did okay. they kind of sold off at the end of the year after a pretty good run. Uh you know we had the Trump Independence Day uh selloff and then a lot of sectors came back after that. Um I think the big story in terms of the markets was gold and silver on the one hand really outperforming most people's expectations. You know, silver is always the poor man's metal versus gold. And yet, it came galloping along in the fourth quarter and had just a remarkable run. And then you saw the the cryptocurrency world uh sell off rather dramatically with Bitcoin and and a lot of others. I think it's it's something we should mention, Julia, that a lot of people have lost a lot of money on cryptocurrencies. It's such a shame. Uh I I get so uh despondent sometimes thinking about some of my friends in the media. You know, CNBC, for example, went all in on crypto. And I think, you know, you this is something consenting adults can do, but we shouldn't have people in the media out encouraging it. Uh it's just too risky, I think, for most individuals to play with. >> Chris, there's so many areas I'd love to dive in um further with you. And as you were mentioning some of the themes heading into 2026 rotating out of US markets that trend likely to continue. What do what do you think is going to be maybe maybe a couple things. What do you think will be the big stories headed into as we well we're already in 2026 but what do you think will be the big stories of 2026 for folks to be paying attention to? I [snorts] think one of the interesting ones is if you look at President Trump, his approval ratings are higher than they were in in the first term. Um, with the incoming uh Marxist mayor in New York City, with the disaster in Minnesota, with uh all sorts of fraud related to government programs, I think the Republicans have a decent chance of holding on the House in the midterm elections, which would be remarkable. But the negatives on the Democrat side, I think, are going to be a big theme this year because if you're a Republican, you're going to be hammering away at this. Um, the other key theme I think is the Fed. What's going to happen here? We talked about that in in the rap yesterday. And, you know, to to me that's going to be a continuing story. Bill Py started uh sounding off again on X saying that Powell has to resign. No, he doesn't. Jerome Powell can stay right where he is until 2028 as a governor. And that may be what happens because if he holds on to that seat, it [snorts] means that Trump uh President Trump will only have one open seat on the Fed board for a new uh chairman appointment and then he's got to live with the board for the rest of his term. So uh the politics of the Fed, I think, is going to be a big story in 2026. Julia, >> all right, let's um dive in a bit on some of these. All right. The last couple of times you and I had met was probably two episodes ago, we did talk about the midterms. And at the time, I thought like the Republicans were teed up to lose the midterms. But it seems like maybe the the daycare fraud that we've seen uncovered in Minnesota, that could be >> Yeah. You can't make this stuff up. >> Yeah. And also I feel like [laughter] Chris, a lot of the folks who watch the show would say they are rugged individualists. >> Well, so are we up here in New York where we have to shovel snow. Um, but you know, it's not about rugged individualism versus collectivism even though you have Mr. Mandami talking about the the soft wonderful world of Marxist Leninism. Uh, but I I do think it's about who we would like to see leading the country over the next couple of years. And that's a big question mark I think in the minds of many voters cuz they don't have a lot of great choices. Trump is clearly the best and he's taken the air out of the room for the past year. He's just dominated the conversation. Uh the Democrats have had almost nothing to say and they don't have a national figure that can engage with Trump. So I think this is going to be a fascinating process, Julie. They really do because most people would expect that the party in power would do worse in the midterm elections. But what happens if the Republicans hold the House, maybe pick up a seat or two in the Senate? That's going to change the political calculus rather dramatically. >> And that matters a lot for investors too. >> It does. But as I said before, I think you know market oriented investors, people who are looking for alpha, looking for appreciation over the next 12 months, they're rotating into foreign stocks because US has had such a strong run on AI and other uh you know themes that they're I think thinking that they're going to do better elsewhere. One of the interesting uh examples of this, Julia, is you see that Tesla has now been pushed out of first place in electric vehicles by the Chinese uh BYD. You know, these are themes that I think people can't ignore. And even though the the narrative behind artificial intelligence is still pretty strong, I think it has kind of taken a bit of a beating in the last 6 months and people are worried about Oracle. they are worried about some of these other companies that have spent just vast amounts of money and borrowed lots of money because they have to ultimately generate some revenue. I still think AI is incremental. I think most of the benefits are going to go to consumers and how do you get them to pay for it? That's really the issue. If it's not going to be a tool for business that can be monetized easily by these big uh technology companies, then ultimately it becomes a throwaway, you know, to attract consumers and people like Amazon and Walmart and others will use it. But my clients in the financial sector, big consumer lenders, they're still trying to figure out how to use these tools in a way that's not going to create risk for them. That's the interesting thing. >> Yeah. All right. um you're you're you put out in the institutional risk analyst um your latest piece um on 2026 the rap um and it wasn't necessarily all that rosy of a picture ahead. And I know we were just talking about the Trump administration, but you were talking about the problems in credit. Uh the impetus and impulsive regime led by Donald Trump is careening headlong into a generational reset of credit metrics and asset valuations. A maxi market correction that may be memorialized in textbooks alongside the great financial crisis of 2008. Elaborate more on that, the risk that you are seeing there. Well, since 2008, Julia, we've had a remarkable run. We've had the Fed using quantitative easing to just pour liquidity into markets. They ramped that up dramatically in 2020 with co and it's been a big uh point of debate within the monetary policy community whether the Fed did too much. Most of the individuals that Donald Trump is thinking about appointing as the next chairman of the Fed, whether you talk about Kevin Hassid or Kevin Worsh, they're all interested in really changing the way the Fed operates, smaller balance sheet, a lot of other changes that are not necessarily going to be positive for the markets. But the thing I I focus on is not so much Trump. This has nothing to do with Donald Trump. It's the fact that we've been going for a decade and a half really fueled by monetary policy intervention by our central bank and it's caused stocks to go up. It's called caused home prices to go up. But I still think we are facing a a reset in terms of home prices in the next couple of years. And in the meantime, the story that's going to be I think one of the central themes in 2026 is the absolute carnage going on in private equity. you have literally hundreds and hundreds of private equity companies that cannot be sold. Um, so I think that what you're going to see is a lot of losses taking place in the private equity space and two years ago people were singing the praises of private equity. They were telling us that they were better than public markets. So, I think that's going to be a big theme for Wall Street and it's going to be a source of continuing distraction and financial losses for these companies because there's no way to avoid it. If you're a big pension fund and you invested in private equity and now you're looking at a portfolio that's illquid where the sponsor has to literally sell it to themselves in order to help you get out, that's not a great advertisement for that sector. So, I think you're going to see people try and migrate back to public markets because there's more liquidity and more certainty there. Uh, and the private equity trade, I think, is going to suffer rather dramatically this year. >> Okay. Do you think that the White House is aware of this and >> No, no. They [clears throat] watch Newsmax. The The White House is in another realm. They're focused on politics. They are largely not focused on financial markets. They they give that to Scott Besson over at the Treasury by default. So most of the people in the White House are really just focused on politics. And that's why I think it's a source of risk for Donald Trump because the things that are going on and will go on this year going through until the end of his term were already set in place long before he won. even in the first term. You know, you've had over a decade of the Fed pumping up the US markets because they're afraid of the alternative. The last thing the Fed wants to see is a debt crisis. So, they continue to heir on the side of big and that has caused the numbers to go up rather dramatically. Uh, and people in the economic policy community look at this and say, do we really need a balance sheet this big? Uh, the answer may be yes. when you have as much debt as the United States uh has. And nobody wants to talk about the dword, do they, Julia? The last thing anybody in DC wants to talk about is federal budget deficit, all the rest of it. So, you know, we have another potential shutdown coming in a couple weeks. We'll have to see how that goes. Um, but there isn't a lot of focus on the financial markets or risks coming from the financial markets. That's really the point of the piece. Do you think part of it too is like we hit a number of all-time highs last year in uh the equity markets as well that maybe no one wants to like talk about this impending danger like how I guess I want to just hear more of your thoughts there because uh I know in our prior conversations like at least when we had talked about the economy it was okay it was okay but like sounds like you're seeing some real risks on the horizon that just aren't getting the attention. >> I'll give you a great example. Uh there's a firm called Walker and Dunlop that's very big in multif family real estate. They just got whacked with a couple hundred million dollar fraud uh problem uh related to loans from Fanny May and Freddy Mack. They may have to buy those loans back because fraud was involved. That's the death for a lender when they have to do a a loan repurchase. Fraud is one of the biggest single threats in the housing market today. And you tell people this and they're like they can't even believe it. But I work with a number of firms that do uh income verification for for loans and the amount of fraud that they see every day is just dramatically increased largely because of AI. You can take AI and alter a bank statement, move a couple of decimal points around, and all of a sudden that lender has to do a manual underwrite of that loan. they've got to go verify every single data point in that loan. That's very expensive. So, the the the difficulty I see is that lenders in the credit space, whether we're talking about commercial lenders or people dealing with uh residential mortgages, are seeing just enormous problems when it comes to fraud. And I think that's going to be a big theme in 2026. >> 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. [music] 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. Chris, we should also talk about um the Fed, especially as we are already into January. And the question for you is pal. Um, do you think he will retire or remain on the board through the end of his term? >> I have a feeling he's going to remain on the board for the rest of his term. The Trump administration has mishandled Powell. They should have been a little uh less aggressive uh particularly with Bill Py in demanding his resignation. He doesn't have to go anywhere. he can literally stay on the board and just hand a baton to the next chairman. So, you know, to me, the politics of this are fascinating because if you're Powell, like most chairman, you want to protect the institution. And this goes for whoever Trump picks, by the way. Whoever Trump picks as the next chairman of the Fed will betray him on day one because when you walk through that door, Julia, and you've been confirmed by the Senate, something changes. And this is going back a hundred years with the central bank. Almost every Fed chairman has shown this tendency to protect the institution. So how does Powell protect the institution? He keeps his seat. [snorts] He sits there and you know performs as a governor and he follows the uh the lead of the chairman. So I think that is a very interesting possibility that people have not talked about a lot. The assumption is Powell's just going to retire and leave. And I'm not sure that's the case. >> Do you think >> he has refused to talk about this, by the way? >> Powell has Yeah. Do you think we'll see a more hawkish Fed next year or this year? Yeah. >> I think the people on the committee who are voting in 2026 are much less prone to reduce interest rates further. Um, most people are expecting only one cut in 2026, which is fascinating. Think about that. Uh, if you had asked everyone a year ago what they were expecting, they would have said that rates would be much lower than where they are today. So, you know, the reason Congress gave Fed governors 14-year terms is so that a president or a Congress would not be able to necessarily make short-term changes in policy. and we're seeing that play out. >> Um, one of the other, I guess, consequences too from the Fed is, as you put it in your piece, QE enabled some very stupid and foolish behavior by investors and lenders. So it also makes me wonder as we were saying earlier the defaults the risk that we'll see defaults I think didn't we see record another record or at least higher bankruptcies in 2025 from 2024 and 2024 was already a big year for bankruptcies since the crisis >> it's it was higher it's since 2008 bankruptcy has been very low and credit in general whether consumer or business credit has also alo been very low. Any banker you talk to will tell you this. So the question is where do we go from here? And my sense is we're going to continue to normalize the cost of credit for banks, other lenders. You've seen an enormous number of new non-bank lenders enter these markets and they're going to be tested now. We're going to see how they do. Uh one of the best performing banks in our portfolio, Lending Club. They've been rocketed along non-bank lender that's kind of sort of a bank. They don't really have a huge deposit base, but they are going to be tested along with many of these other newer names who have kind of pushed the big banks out of the way in a sense. Uh and you know, we may see that really start to come to the foreground in 2026. My sense is that default rates generally are going to kind of plateau in the fourth quarter when we get earnings in about two weeks and then from there we'll probably go higher. >> Wait, why do you think they'll plateau? >> Well, they've been falling for a year. >> Remember, we were expecting a recession in 2024 and by the end of that year they had kind of gone up a little bit and then they spent the entire year of 2025 falling, >> especially on the consumer side. So banks have been able to report higher earnings because they haven't had to put aside money for loan defaults. That I think is going to start to change. And again, you know, if you look at the conference call transcripts from JP Morgan, some of the other big banks, it's fascinating to see how these people talk about credit today and [snorts] what they expect to see in the next year. Most of them are taken a fairly cautious position. So, you know, 25 I think is going to be remembered as a year when a lot of deals got done, a lot of money got borrowed for good or for ill, right? And then 26, 27, 28 is going to be about dealing with that. >> Mhm. Yeah. I guess also especially as we were saying earlier like in private equity um because you were talking about in your piece like there's been I I thought this was interesting. You said there's been a lot of like using payment in kind or other means to avoid bankruptcy too. So it does make me wonder like what's really going on. >> Well, not only that, Julia, but think about the private equity sponsors that are selling companies to themselves. They create a new fund to buy an existing portfolio company that they can't sell. They let some of the investors get out somehow or another. They have new investors coming in. Uh this is a indication of a serious problem. They get fees, too, by the way. This is a nice way to generate fees for the sponsor. But many of these private equity firms are never going to be able to really raise new money because their their investments have been so unsuccessful. That to me is is really the issue. But, you know, there are a lot of well-run companies out there that are going to profit, I think, by being able to offer alternatives to investors. And, uh, you know, we'll have to see how that goes. What's interesting if you look at the housing sector right now is even though the Fed's been cutting rates through 2025. Long-term rates for treasuries have been going up. 30-year mortgage rates are kind of stuck. They're not moving up or down. Uh and you would have thought by now with a couple of Fed fund rate cuts from the Fed that housing prices would have already uh started to benefit from lower mortgage rates, but they're not. >> So, what do you think happens in housing? Like I know people are starting to put out their outlooks there. What do you think is uh in the cards for housing? >> I think you know residential mortgage rates kind of stay where they are, maybe get a little bit lower if we have another Fed funds cut. But the big issue that's weighing on the markets when it comes to long-term treasuries like the 10-year Treasury is the bellweather for housing is the budget deficit. They want to see some kind of leadership from Washington on this issue and you don't hear anybody talking about it, do you? [snorts] >> You don't hear anyone talking about it. Um, another area in your piece that I found interesting, you were saying veterans of emerging markets are familiar with the syndrome of central banks buying short-term government debt. Of course, the United States is the oldest emerging economy in the world, but the current regime I like that. [snorts] But the current regime shows strong historical anticedants of cronyism and patronage politics that extend back to before the guilded age, the most corrupt period in American politics. So are you kind of drawing a parallel to the guilded age like where we are right now? >> Oh, I think so. Washington is on autopilot. Um, you have an awful lot of people in this administration who were appointed, you know, for patronage purposes rather than because they have subject matter expertise. Housing is a great example of this. You know, we have a a very strong team at HUD and Jinny May, but if you look at Bill Py at the FHFA, you know, he he's been basically doing anything else but his job. And they keep talking about taking Fanny May and Freddy Mack out of conservatorship. I don't think that's going to happen. Uh there's just too many pieces that you have to deal with before they'd be ready to do that. But you know, the thing is anything is possible in Washington today, Julia. Anything. And that I think again is why long-term interest rates, mortgage rates have not come down because you have a lot of uncertainty. People are thinking about another government shutdown, what that would entail. And so none of these data points helps investors get more comfortable with the idea of lower rates. And in fact, it makes them want higher rates to compensate them for the risk. >> What is that like? What what does that tell you about where we are right now? If that's the case, >> it tells you we're in a democracy where uh marketing and short-term profits are the two major factors for most decisions. And this is, you know, historically this goes back to long beforeh even Andrew Jackson was president. He was the first democratically elected president who wasn't uh a family member of one of the founders. And ever since then, it's been a commercial enterprise. It goes to the highest bidder. And that's really, I think, what people ultimately worry about with the United States is that they love the free market economy. They love the growth that we're able to generate because we are a free society. But at the same time, they look at Washington and all they see is people making short-term decisions and refusing to uh to do anything that's remotely difficult. If you were in a position to advise, what would you do differently or what do you think we should do differently? >> Well, they they need to engage with Congress on spending if we don't figure out a way to generate more revenue uh to balance off the uh the budget deficits. I think we're going to be in a very difficult situation. I was ruminating the other day uh about this, thinking, you know, how would you deal with it? Maybe we'll do debt equity swaps. We'll have everybody take equity in the United States and and try and reduce the interest expense because the numbers are getting very big, Julia. And at some point, you can't ignore them anymore. Uh when I referred to emerging markets, I was talking about my experience in Mexico long before that country became stable and really largely an appendage of the United States and Canada within North America. There were times when they had to keep short-term uh T billill rates, what they call ses, well over 20%. To defend the currency. So when you think about a a central bank and a treasury in a defensive position, it forces them to have high short-term interest rates, short interest rates that are much higher than long-term rates. The US isn't quite there yet, but that's where we're headed. And everybody assumes that because we are the largest economy in the world and because we have, you know, the dollar and everything else that that's going to be different. But the dollar is probably going to lose more value in 20126. It was already weak uh in the past year. I think you're going to see more of that. >> And then that makes me bring the conversation back to gold and silver. What >> y going to be another good year for gold and silver. That's true. This is an area you have been spending a lot of time. You've been focused on the precious metals writing about it. Would love to get more of your big picture thoughts there. We can even separate the two, but um what what do you think they've been signaling? And obviously I'm just hearing you say like you think there's another good year ahead for the the precious metals as well. >> I think you know we wrote a piece earlier in the year about the asymmetrical uh trade with gold and silver. What does that mean? It means there's two big factors. One is you have central banks and other uh large investors purchasing the metal largely to diversify away from dollars. The other thing is you have a supply problem. This is part of why silver took off in the fourth quarter. There's simply not a lot of deliverable supply in the market. And remember people use silver in industry too. They use it in technology. They use it in many other areas of industry. So when you have a large speculative component buying the metal and they are competing with uh other buyers who need it for commercial purposes, it creates a situation that we saw in the end of uh 2025. I think gold will continue to appreciate for the same reasons. There's not a lot of deliverable supply. It's not so much of a commercial conversation as it is global central banks diversifying out of dollars. And again, very clearly as we saw last year, perhaps one of the biggest stories of last year, Julia, was the fact that gold is now the largest monetary asset in the world at surpass dollars. So, you're going to see that prices continue to increase. Remember, the rate of change is smaller as we go higher. M >> uh we talked about that in that interview I did with Jim Records. It's very easy for people to kind of miss that, but it's a lot easier to go from 3,000 to 4,000 4,000 to $5,000 per ounce of gold because the rate of change is actually smaller. So I think you're going to see gold continue to rise. >> So in other words, it's almost easier to even go higher then. >> Yes. Yes. >> Fascinating. Um Chris, as someone who's been following the space closely, what are the narratives out there that you are seeing that people are just getting absolutely wrong when it comes to this space? >> I No, I think people understand slowly what's happening with gold. It's not a natural conversation for Americans for a couple reasons. Most investment advisors have not had a lot of allocation to gold. uh you've had the crypto guys out trying to convince everybody to sell gold and buy, you know, Bitcoin and other uh tokens, but that hasn't really panned out very well. In fact, just the opposite. Um so, I think that, you know, to me, Americans get uncomfortable when you start talking to them about gold because it implies that the dollar is going to lose value. Everyone in this conversation was raised listening to the Roosevelt era propaganda that said that the goldbased world was inferior and that somehow the paper dollar is going to solve all of our problems. Well, yeah, the fiat dollar was a remarkable invention and it has enabled the United States to fuel enormous growth, but the trouble is is that it's hard to get members of Congress to discipline their spending. They don't like raising taxes for obvious reasons. If they raise taxes, they lose elections. So, that tied to a fiat currency is really, I think, a a long-term problem because it it it destroys that franchise. The world was happy to use paper dollars at full faith and and and credit, right? as long as we were printing too much money on the side. But Americans suddenly, you know, going back to the 1970s, it's been 50 years, uh, realized that they could go out and spend more money. They just borrow it. And that is, I think, the big flaw in the system right now that's going to cause a number of problems as we go forward. [snorts] >> Yeah. >> And it will help gold. I mean it this is a recipe for another bull year in precious metals. Copper uh a number of other metals that are in relatively short supply I think are going to do very well this year. And at the very least, Julia, in dollar terms, they're going to go up. They may not go up as much in other currencies, which is something to ponder. >> That's interesting. Why? Why? because other countries uh have markets too. China is now the dominant player in gold. The Shanghai gold market sets the price globally now. It's not in Chicago. It's not in London. It's in Shanghai. And this is part of a long-term change led, you know, by China and also Russia that said, "No, we're not willing to trust the dollar. We want alternatives." and other central banks are following that uh that line of thinking as well. China has already signaled that they are going to be comfortable with a stronger currency in 2026. So you actually may see the price of gold going up faster in dollars than it is in in Chinese yuan. You know, currency markets are not bilateral, they're multilateral, and you always have to think of it that way. That's why they're so interesting. >> Yeah. Um the you know I got to say like the folks who watch this channel just based on what I see in the comment section they are probably very pleased right now with the the way uh gold and silver have both performed. >> Yeah we you know the portfolio we put together for our readers has done very well. Uh not just the metals names but also some of the smaller minors who are all going to get bought as the majors come back in and start trying to rebuild their productive capacity. the junior miners are going to get acquired. It's just the way that these things work. >> All right, Chris, we do have a viewer question. Um >> Oh, good. >> Okay. And we don't share the questions with Chris ahead of time, so we just get the we don't we just don't. But this comes from viewer Samuel and his question is um on a recent podcast you mentioned that you own NLY. I think that's Annalie. Is that right, Chris? >> Analy. Yes, >> Annalie. and you owned it for the yield and didn't concern yourself with the share price. Would you own the preferred stock of various mortgage REITs such as I don't know if you know these but AGNC, RIITM, CIM, etc. Since their yield are lower but competitive with the mortgage rate common and higher in the capital stack what makes you invest in the mortgage rate common shares? Is it just the yield? what different rate/mackro environments are good or bad for the common versus prefer versus preferred. Thanks and I enjoy your weekly input. >> Well, let me start off. Uh I I've owned Analy for a long time on and off. Uh I got back into the stock over a year ago mostly for yield. Uh my basis in the stock is well below uh book value and you know for that reason I accumulate it. Whenever I have extra cash in the portfolio, I'll always add to the position largely because I know the management team. I have great confidence in what they're doing. And let me just elaborate a little bit. They invest on mortgage back securities. They also own mortgage servicing rights where which is an interesting hedge for the mortgage back securities and they are catering to a retail audience who either owns the common shares or the preferred. The preferred in theory are going to be more stable than the common. But to me, just as a mortgage geek, I'm happy to own the common shares. The yields have been in the mid- teens. And again, of all the players in the sector, I tend to like Annalie the most because I think they're the best run of the REITs. Uh they all have issues with leverage. They all have issues with the shape of the yield curve which you do have to keep your eye on. But I basically have it as a surrogate uh for things like treasuries and other uh investments for yield because again it throws off mid- teens uh dividend yields on the common. So I kind of like that. Uh I also own city prefers the uh the old trucks which have very high cash flow. And again it's the same thing. I understand what I own and I'm comfortable with the risk. City has been one of the best performing banks in the country over the past year. So, you know what I would say to all of you though is be careful with preferred because they can go down. I had a position in US Bank. You know, there's nothing wrong with US Bank. I actually like the name, but the preferred sold off uh rather considerably and I finally uh just sold the entire position and got out. Uh the only bank common I own right now is Flagstar because I got in at, you know, a very uh cheap level and I think the management team there led by Joe Auding is going to turn things around. But I haven't been a big buyer of other financials simply because I didn't care for the valuations. When I started buying analy, you know, trading about 085 times book now it's well over book. Most reads don't tend to trade over book. they kind of normally trade around asset value or a little below. So, you know, that's my story on Analy. I I think it's a fascinating way to get exposure to the US mortgage markets. They mostly own government guaranteed securities and they lever them up. That's how they make money. >> And as a a reminder, you all can send questions anytime. We have Chris every single week, so you can shoot me an email. Um I always leave my email in the comment section or even leave your question in the comment section cuz Chris, this is so fun. I I love doing this with you. This audience has been amazing. You've been amazing. Before I let you go, um what are you going to be paying attention to uh in markets next week? I know we have bank earnings in a like two weeks, so I know that's going to be a Super Bowl for you, but yeah, just what's going to be on your mind or your radar next week. [snorts] >> Well, we're working on a piece for um Monday on the big investment banks, Goldman Sachs, Morgan Stanley, the rest of them. They are, I think, going to have a good year. there's a lot of people anticipating a continued flow of deals. They also do well with market volatility. So, those are both areas where I think they're going to benefit. Um, we're also going to be looking at our banks trying to tell our uh readers which ones we like in the coming year. not necessarily the leaders today because I do think you're going to see uh some of the names with exposure to consumers sell off and you're going to see other names come to the four. Last year basically we had some of the biggest consumer lenders in the country outperforming the rest of the group. Uh City is the only one in the top uh four banks that's been really performing well. The rest of them have been way back in the pack. Uh even names like TD Bank, God help us, have actually performed pretty well, our friends in Canada. So, you know, we're going to be trying to give some guidance to our readers about what sectors we like and what we don't like, but we are going to definitely continue to pay attention to precious metals uh and maybe mortgages. You know, we've got to see mortgage rates get down into the fives before you're going to see a little bit more activity, I think, in mortgages. Mhm. Chris, uh, where can we send them to find you, support your work, subscribe to your work? [snorts] >> Uh, well, we publish the institutional risk analysts blog. We have a premium service that actually talks about a lot of specific ideas that we have. And I also like to talk about my portfolio. I always love getting questions from people. [snorts] And uh, I uh, I'm very active on X and LinkedIn under RC Whan. You can always ask a question about the blog on on X. That's where we like to put our our responses so everybody sees them. And then I publish a column for National Mortgage News which is always fun. I uh did a piece which was kind of written for Bill Py. We'll see if we get any response back from Bill >> on X. [laughter] Yeah. Um >> No, it's okay. He look all of these people in Washington are mostly focused on politics. Yeah. >> The Trump people would love to find a way to help housing before [clears throat] the midterm elections, but it's not easy to do. It's it's a it's a fairly complicated sector and you don't want to tip things over. So I always look forward to hearing from our readers. >> Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst. So wonderful to see you as always. Look forward to our next conversation and again happy new year Chris. Happy new year, Julia.