Chris Whalen: A Manic, Momentum-Driven Market Meets Reality
Summary
Market Rotation: The guest sees a sustained move from momentum tech and crypto into safer, income-oriented assets as last year’s outsized gains reverse.
AI and Crypto Skepticism: The AI narrative is stalling and linked speculative trades like crypto, especially Bitcoin, are weakening due to poor market structure and profitability concerns.
AI Infrastructure: Data-center buildout faces power, grid-connection, financing, and political hurdles, raising doubts about long-run returns for the AI trade.
Semiconductors (AMD): The guest owns AMD and is adding on weakness despite a broad tech selloff, citing its low-power chip positioning amid indiscriminate sector selling.
Banks and Financials: JPM has meaningfully lagged after leading last year; credit and rate uncertainty keep the guest cautious near term, though efficiency argues for selective re-entry.
Mortgage REITs & Income: Annaly (NLY) is highlighted for government-backed MBS yield as an income play, while ARI’s loan book sale to an insurance affiliate underscores stress in commercial mortgages.
Mortgage/Housing: Fannie and Freddie earnings are refi-driven; purchase activity is constrained by high prices and the “shut-in” effect, with calls to restructure MBS and lower rates to unlock housing supply.
Company Watch: Concerns around PennyMac (PFSI) acquiring Cenlar and prior earnings volatility suggest caution in mortgage stocks until updates from Rocket and UWM.
Transcript
This is kind of a manic momentum-driven market, Julia, but it's really extraordinary how extended some of the gains got last year and now people are running out. You see this with crypto, too. Crypto is suffering because the AI narrative has broken down. I guess emotions and intuitions on the part of managers are driving the selling in all of these sectors. Hey everyone, welcome back to this week's episode of the rap. Chris, great to see you as always. Really appreciate you. >> Good morning, Julia. >> Good morning. Loving doing this with you every single week. Um, >> I want to start with markets again. uh just because you wrote in this week's edition of the rap that the AI narrative is stalling and large cap tech just had its worst week since November. So question for you is is this just a healthy correction or is it the beginning beginning of something bigger? Well, I think it's bigger because of last year, Julia. You know, last year was a year of magical aspiration, crypto, uh we had banks running at doubledigit rates of return. Uh and then of course tech led the way. The top tech firms were the majority gainers in last year's market and now they're giving back uh much of those gains. What's fascinating uh that we mentioned in the blog is that some of the large cap banks have retreated dramatically. Uh if you look at the top 100 or so banks that we uh follow closely and publish every quarter, uh JP Morgan's now 87th in terms of market returns. That bank was at the top 6 months ago. So what's happened I think is that you have a lot of equity managers going risk off and they're taking money out of sectors that are now considered to be essentially down on their luck and they're going into safer consumer and and other sectors that have income and that are going to be less vulnerable if we continue to see more selling. >> Wow. Yeah. So, um I think you probably got it in there, but what are you watching to determine that this becomes a sustained rotation then? >> Oh, I think it is. I think people are rotating into quote unquote safer stocks simply because they have to. Uh when you see, you know, for example, I have a position in AMD. I followed that company for a long time. They make low power chips for a lot of applications. That stock's now down at the 52- week low. Uh I have been slowly buying more because I do like the company but everything tech is being painted with the roller and I think now that you know the supernormal returns we saw last year are turning into losses. Uh one of the more interesting things we talked about in the blog is our fintech portfolio. There's only three stocks that are still up in that whole group and it's an interesting group of credit shops. people like Apollo and and Aries and the rest of them, but they've all sold off dramatically, and that's because they were up so much last year. This is kind of a manic momentum driven market. Julia, you and I have seen this before, but it's really extraordinary how extended some of the gains got last year and now people are running out. You see this with crypto, too. Crypto is suffering because the AI narrative has broken down. Um it's not to say that there's a you know a really cement kind of connection between the two but clearly the same sort of you know I I guess emotions and intuitions on the part of managers are driving the selling in all of these sectors. >> Chris, you are someone I know as a bit of a financial historian. That's why I love reading your works. Um you said something interesting there. This is the way you describe this market is a manic momentumdriven market. Have we seen anything like this? And are we headed for the big breakdown? We're not there yet. No, I think since 2008 because we've had so much central bank intervention and open market activity driving markets, people kind of got used to things going up and they didn't have to worry about a lot of downside risk. Whenever you have that, you tend to have people get a little bit overextended and particularly the whole AI narrative, which still makes no sense if you try and figure out how are we going to make money on many of these investments. Um, I think that's really what is has started to to trouble people. You know, I noticed that Anthropic has just risen uh raised money on a ridiculous value valuation. you know, are people going to continue to support transactions like this? I don't know. I really don't. I I think this year is going to be a much more difficult year for most of the sectors we follow. And I particularly think financials, I'm not encouraging anybody to go long financials at this point simply because there's a big question mark about interest rates. And there's also I think a a tendency of people to take gains that they had from last year if if they were able to take them. Uh because honestly the bank started selling off in September October >> and that selling has continued right through to today >> and you know you know you as um a bank analyst like banking that sector is a that's bread and butter for you like you know that sector and uh I want to go back to something you said at the top about JP Morgan. Um JP Morgan now ranks 87th in your group. Um >> that tells us >> just in terms of >> 200 day moving average. >> But that's interesting though because like yeah JP Morgan, right? What does that tell you? Um if folks won't I take is that does that mean folks won't I mean when I think of JP Morgan that's the that's the cream of the crop. That is like >> the bank. So what does that tell you? >> They have huge advantages over other banks. say are much more efficient than other banks and they're still trading at two and a half times book I don't want you to shed any tears for Jamie Diamond okay uh but they have given back a lot of ground and when you look at our rankings today just based on total market returns the top 25 are nothing but smaller names the small caps rule right now uh the only bank in the top 50 that you you know would recognize as a large cap is city >> so think about that all the rest of those have kind of given ground. The smaller banks have taken up some of the ground and managers clearly are not as comfortable holding those positions as they were 6 months ago. >> Yeah. I guess my question is what does that tell you if the managers won't own like arguably the best run bank in America? We're not >> I think it's partly concerned that credit is finally going to become an issue this year after years where it didn't show up. Remember, we've been talking about this for 2 years. No recession in 24, no real peak in terms of losses on the consumer side. So I I think people are a little more cautious this year than last. Last was a year of exuberance, a year of crypto, a year of, you know, the President Trump uh narrative dominating the news really. This year, not so much. I think there's a lot of people who have moved offshore into different markets. There's been a big rotation into foreign markets really since last year and I think a lot of people are looking for safety now instead of uh easy gains because they're not sure that those gains are still there. Julia. >> Yeah. All right, let's touch a couple third rails here. Um cuz we're going to get some spicy comments and I love it. All right, we have to talk about crypto because you mentioned crypto and the link between crypto, the crypto trade and AI. What is that link? Well, it's it's aspirational. In other words, the the thing that drove crypto in the triple digits in terms of the the dollar value of things like Bitcoin uh and that drove some of these tech stocks up are really the same sorts of narratives. They don't particularly worry about whether or not there's a firm base underneath these investments. They certainly don't worry about profitability when we talk about AI. Uh, and I think that those concerns are starting to come to the four because, you know, for example, uh, Google uh, has just put down a hundred-year debt to try and finance their AI ambitions. If that's what we have to do to finance these things, I really wonder if they're ever going to make money. You know what I'm saying? Uh when Elon Musk said that he had to put his AI engine up in space in order to power it with solar power, what he's telling you is that there's big political opposition to all of the data centers that people want to build around the country because if they result in higher electricity costs for consumers, it's not going to happen. Congress is already going to hold hearings on this. And in other nations around the world, you see similar concerns, which is that people think that electricity is kind of a free good that they can use to develop new products, but it's not. Uh, one of the interesting things I saw, there was a piece on Substack last week talking about how long it takes to make changes in the electric grid to actually connect up to some of these data centers. Takes years. You you don't just snap your fingers and say, "Give me enough power to run my data center." uh it takes a long time and a lot of capital investment. So I think we're we're looking at some of these narratives and we're asking questions and the more people focus on the fundamentals on cost on potential profitability I think the more people are going to kind of be cautious about the AI trade going forward. >> Um you wrote that Bitcoin and other speculative vehicles are being routed in a way not seen since before co. So, I guess the question for you is >> on Bitcoin specifically, you've been predicting this unwind. Um, let me see. Where are we today? Where are we today? Let's see. I think we Oh, 67,000 right now. Okay. Um, well below the highs that we've seen. What's the endgame? Like what do you do you think this goes to zero? Like what where do you see this thing ultimately headed? >> I I think it could go lower because the market for Bitcoin is so weak. In other words, you don't have a really welltraded long short market around the spot market for Bitcoin. So when someone wants to sell, it causes the whole complex to drop. And that I think has flushed out a lot of the public companies that were involved with Bitcoin. You know, obviously people have been watching Micro Strategies, but when you when you use dollar debt to finance a speculative position in any cryptocurrency, you're essentially asking for trouble. Uh if you're playing with cash, that's another matter. But I think the whole weakness in the crypto trade because let's say we're at half of where we were versus the peak. Uh and I think that tells you that there's not a lot of staying power in this market. if any number of players decide they want to exit. That to me is a speculative market and I think people are realizing that. >> So you're skeptical of both the AI narrative and also the crypto crypto narrative. Um maybe more >> well they're driven by Wall Street hype. You know the way this works. People come up with an idea and they go out and sell it. That's the uh the great strength of America. It's all about sales. >> Well, let me ask you this. Um, what do you think is the next legitimate growth story then for the US economy? What do you think that is? >> That's a very good question because you know the AI tech narrative has been driving the bus for a long time, well over a decade. You go back to 2008 really tech has been kind of the the default narrative for a lot of the investment world regardless of whether it was software, hardware, combination thereof. The fact that people have taken so many hickeys on software stocks, for example, Julia, I think is fascinating. So to me, I think it's safety right now. People are looking for income. Income means that the asset is going to be less volatile. You know, we've written about this a lot in the blog recently. Uh Bill Py has been out buying mortgage back securities to try to lower interest rates. Well, the interest rates on your typical Treasury bond today, the 10 years are in a four and a half, four and 58 kind of coupon, but that's pretty stable. If you look at the uh debt that was issued during COVID that has twos and 1% coupons, they're very volatile. And that's I think the real story here. So, people are looking for income generating assets simply because they know they're going to be safer in the short term. Mhm. Um, you've also talked about um, private equity. We talked a about it a lot here on this show. What about just the percentage of private equity deals in the last, you know, several years I have been in the tech space even? Um, >> it's a big number. It's like a quarter. >> Yeah. And then the question for me then is um, what happens to like all that trapped capital then? Well, it tries to get out one way and another, but you know, if you can't IPO the companies in the private equity world, then the manager has to sit with it and the investors have to sit with it unless they can sell the company. Uh the lack of liquidity in the private markets, whether you're talking about credit or private equity, was always the big negative. And a lot of the sponsors said, "Oh, well, you know, private markets are better than public markets." Now, public markets are always better because you have a crowd of people looking at the asset and they are determining what the value is. When you have private markets, you basically have to take the word of the manager for the private equity deal on what the company's worth. I don't think that's a very stable and and sustainable model. So, I think private equity, frankly, is going to get smaller over the next couple of years. There's still money flowing in, don't get me wrong, but a lot of managers have losing positions that they're going to have to sit with and work out, and that's going to be a very interesting process to watch. >> Hey guys, thank you so much for watching this video. If you can just take a quick moment and hit that subscribe button, we are trying to hit our next goal of 100,000 subscribers. Really appreciate you. And back to the video. Okay. Um, let's shift topics. Um, all right. But you have to go to another area that's bread and butter for you, which is the mortgage market and housing. Because you wrote also in the wrap around Fanny and Freddy, >> reporting earnings profitable, but where's that growth coming from? That's the issue. >> It's coming mostly from people refinancing existing mortgages. you're not seeing growth in purchase mortgages, which is what President Trump and members of his administration have been trying to encourage this whole uh issue of affordability. I think the reality, Julia, is that, you know, home prices are still a big obstacle for people. And even if we lower interest rates, what's happened initially at least is that people take that lower rate and they go out and refinance the mortgage on an existing home. I think to get real action in the mortgage market in terms of purchases, you'd have to get mortgage rates down another point. Now, that's not unreasonable because we're still up. You know, if you think of where mortgages were during CO, which was, you know, down in the 3s, I have a 3% mortgage on our house here in New York. Um, that is a long way to go. But what's interesting is the demographics of this. I was talking to one of the smarter modelers in the industry yesterday. When you get up to larger mortgages above half a million dollars, regardless of the market you're in, they don't move. These homes are not selling even as rates come down. So, in order to get those people incentivized to sell their house and make that house available to another family, you're going to really have to get interest rates down a lot. and we're going to write about what uh what uh Scott Bessant and Kevin Worsh need to do to make this happen next week. >> Okay. Well, maybe you can give us a little bit of a sneak peek like what need what do they need to do to like make that purchase activity return? >> Well, partly you're going to have to let home prices correct a little bit and it's going to happen anyway. Policy makers can't prevent that. It's a long-term trend. I still think we're going to have a home price correction probably 2728 time frame. But also, I think you're going to have to restructure the market. The Fed needs to get out of their investment in mortgage back securities, which is still about $2 trillion. And I think they could work with the Treasury and with Bill Py at the FHFA, the regulator for Fanny and Freddy, to make some of this happen because, you know, it's kind of counterintuitive. People scratch their head when I say this, but it's the low coupon securities out there that keep interest rates up. You would think, well, hey, that coup, you know, that loan has a very low coupon. Yeah, but the problem is it's a dead weight in the market. It doesn't trade. And the homes that were financed with that asset aren't going to trade. They're going to just sit there. So, until we unlock, this is what we call the shutin effect in housing, until we unlock some of those homes and get them back into the market, it's going to be very hard for people to find a house. >> So, I guess who needs to work together? You said Besset. Is it Besset and Worsh are going to have to work on this together? Like what is >> Yes. >> Okay, >> that's right. Well, you know, Kevin Worsh has said many times that he wants to see the Fed's balance sheet smaller. >> How do you do that? >> You call the Treasury and say, "Hey, I'm going to swap you my mortgage backs for some Treasury bonds." That immediately gets the Fed where they need to be, which is their whole portfolio should only have Treasury securities in it. They should never have bought those mortgages. Then you could restructure that whole block of assets, work with Fanny May and Freddy Mack to get it done and bury some of that duration, those low coupon securities in the insurance sector. They would love it by the way. >> You you restructure them into different uh tres of uh of bonds and the insurance guys would love it and you would never see them again. They don't trade once they get done. So I think that's the solution. We have to restructure the treasury market and also the mortgage back securities market to kind of undo what was done during co you know Janet Yellen Jerome Powell they all thought they were being helpful but they weren't and the things that they did during that period they did too much number one and they also created a big obstacle for getting rates down in in the medium to long term. >> They did too much but okay let me ask you this about the Fed. Um, should the Fed engage in fiscal issues? I take it they probably do, right? But like is there a way to do it appropriately or how what is the dynamic? Like what is the dynamic? >> I think that's going to happen. I think Kevin Worsh is going to job on the Congress about working on the budget deficit. We haven't had a Fed chairman in a long time that was willing to talk about that in public really back before Ben Bernani. So to me that's I expect that from Worsh because he's a very good conservative and he understands that this is part of his job. Uh Jerome Powell has refused to talk about fiscal issues unless people put him on the spot during a press conference. >> I take it that's been a disappointment then >> I think so. The Fed chairman is the banker to the Treasury. It's his job to talk about fiscal issues. He has to because ultimately the number one job of the Fed is keeping the Treasury market open. The only way we do that is if we try and get Congress to do their job. And I know that may seem fanciful, but it's going to happen. >> Well, let me ask you just another hypothetical. Um, let's say Worsh does that and he's jawbone in Congress on fiscal issues. Would President Trump be happy about that? >> Uh, I think so. I think so, cuz ultimately that's the conservative agenda. Trump is more of a populist than a conservative, but he still needs to leave uh at the end of his four-year term with things better than they were when he came in. And I think having Kevin Walsh at the Fed is going to change the behavior of the central bank and it will change the narrative that the central bank has as far as the public and the Congress goes and that to me is a positive. >> Okay. So Wars has talked about wanting to shrink the balance sheet. >> Yep. >> What happens if he changes his mind on that? >> Well, he's got to be creative. That's one of the reasons we've been writing about this issue. I think any Fed chairman when they walk into that big room and they sit at the big table, Julia, the first thing they have to worry about is making sure that the Treasury has access to the markets. Anything else is secondary. So when you talk about job creation, when you talk about inflation, that's great. But ultimately his first job, the one that's not been articulated in the law, is to keep the Treasury able to issue debt and fund the operations that they need to fund. >> Is that like the It's like the mandate, but it's like not the spoken mandate. >> It is the It is the real mandate. >> The real mandate. Yeah. >> Yes. >> Um probably the most important one, too. Okay. Well, that's what 2020 was all about. When the Fed came in in March of 2020 and bought a couple trillion dollars worth of securities, they weren't there responding to COVID. They were responding to the fact that the Treasury market had stopped and investors had run out of the room. So, they had to restart things. That's what that was all about. >> Yeah. Um, you've been critical of the MBS on the balance sheet. >> Yes. >> What What should Worsh do with it again? like what what would be the mo what would be the move and what would be the impact on the market? >> I think they should swap it to the Treasury and take Treasury debt and then uh Scott Besson should call up Bill Py and say, "Hey, we need to issue some collateralized mortgage obligations and bury those securities, those low coupon securities in the uh balance sheets of insurance companies who and they would love it. By the way, you know, there's still such a der of paper out there, Julia. There's a remarkable demand for all sorts of assets coming out of the insurance sector. There was a fascinating piece in Bloomberg last week about how the insurance sector was eating the world because they have such an appetite for assets that they just cannot find enough. So, let's go make some assets for them and make them happy. >> Oh, meaning they're looking for places to allocate then. They're just looking for yield. Is that >> No, they're looking for investment assets to fund the obligations that they're taking. >> Oh, okay. Okay, >> got it. >> That's right. So, let's say you have an annuity for your retirement. They need to go invest in something to generate income for you. >> Fascinating. >> And they are scouring the earth. It is fascinating how aggressive some of these insurance companies have been in a number of different markets. >> Okay. Are they having trouble finding opportunities or they just like need Yes. Okay. >> Yes. Cuz they compete with everyone else. They compete with banks. They compete with sovereign wealth funds and private equity funds. The competition for assets is intense and it's largely driven by inflation. Okay? >> Every time the Fed has done a big operation in the markets, what happens? The banking sector gets bigger. >> When the banking sector gets bigger, they have to go out and buy more assets. >> The same effect is seen with insurance companies. >> Does that just kind of just give an underlying continuous bid then? >> Yes. That's the funny thing that the the desire on the part of all of these institutions to find investment assets is one of the reasons the markets don't trade off dramatically. When they go down five or 10%, people come in and buy it. >> Okay, that's interesting because just going back to the top when you you kind of described this as like what was it a momentum? Oh, what was the mania? It was a momentum. Let me see what I wrote down. It was a good way of describing the market. >> A manic momentum driven market. a manic momentum driven market. Is that why we haven't seen like a typical crash cycle like if it go okay >> yes >> fascinating >> that's the thing and you and you have people have learned this and they have kind of incorporated it in their market strategy. So when the markets do trade off 5 or 10% people come in and start buying it. Now at tech, these assets had gone up so much last year that there's a lot of air underneath and that's why they've sold off so dramatically. But are we going to see this continue? No. I think at some point uh there's going to be enough buying to stabilize many of these names and they're going to go back up. >> Mhm. >> But this is all about inflation, Julia. That's what this is really about. >> Which again, that's the area that's another area of expertise for you. And you wrote the second edition of inflated. Um okay. So just when I was hearing >> inflation is the national pastime of America. >> I love that line from you. >> You know the the fiat currency is the greatest invention ever, right? >> And we see a product of that, you know, everywhere when we have these convers you see the product of inflation um throughout our lives. Okay. So going back just big picture with markets, you were talking about this kind of um people looking for safety. Consumer staples was one area we've talked about. um when you look across your portfolio and you're someone again you track banks, >> mortgages, fintexs, metals even we've talked a lot about metals. Um >> what's kind of the theme like if you had to sum it up what's the common thread the theme for you that what's the trade for 2026? I guess >> I think initially people are going to look for safety and income and then they're going to have to selectively figure out when they go back into sectors like banks. Banks have traded awful a lot. Is there a case to be made to go out and buy JP Morgan at 2 and a half times book? I think there is because that bank is so much more efficient than everybody else. There's other names in the group too that deserve interest. Uh I think it's interesting that one of the stocks we've talked about with our readers and with with your viewers is Annalie. Mhm. >> Analy is a big REIT that invests in mortgage back securities that are guaranteed by the US government and they generate, you know, low to mid- teens returns uh in terms of yield. That stock's doing very well. And as I've told your uh your viewers, it's not a stock I own for capital appreciation. It's a stock I own for income and I've owned it for a long time. So I think you want to look for opportunities that give you income immediately and also some stability. But you know as I say that I'm 65 70% in stocks and I'm not going to change that. I'm still long gold. Uh I haven't really changed any of my silver positions even though they traded off dramatically. They're all still up. >> The the ETFs I own for silver exposure are still up 40 50%. even after they've sold off so dramatically. So there's a manic kind of very highly volatile quality to this market today and I think it's difficult for people to get a sense for what they want to do because they are dealing with a lot of volatility. >> Yeah. Um you stay calm during those the volatile times too. Um >> well >> let me ask you about a maybe it's a bit more of a wonkier topic but you write about it and we've talked about it on the show. You've been educating us on what's going on at Pennymack and it sounds like they made another mistake in your view. What did they do this time? >> Well, they bought a company called Senlar, which is an old thrift that got to be one of the largest subservices in the mortgage business. I think the transaction was a mistake because a lot of Senlar's business is going to go out the door. Um, they were a company that didn't compete with their customers. They didn't try and get the borrowers in their portfolio to refinance. They didn't do a lot of things that other firms naturally do as part of their operations. So now that it's being sold to Pennymac, if I own the servicing that Senlar has been taken care of for me, do I want Penny to to run it? No. I'm probably going to move it to another firm that is a little less threatening in terms of what we call recapture in the mortgage industry. And I'm a little concerned about this whole transaction. I had always assumed I followed Semlar for 20 years. Uh going back to when they were uh really, you know, a much smaller company. At one point they were over a trillion dollars in subservicing. Uh City had sold their mortgage portfolio to them uh for servicing. But I think recently, you know, they've been suffering from a lot of negatives. And I always assumed that business was not salailable, Julia. So when I saw Pennymia announce this acquisition, I I kind of rocked back in my chair and most of the people I know in the industry have a very similar view to mine. >> Um I guess like the question here is if you're a shareholder, what would be your question to management on this one? Well, look, when when pennymax sold off after that disastrous earnings release they had a couple weeks ago, I initially said, "Look, this stock is cheap. It's a great company. They're one of the leaders in the market." But then they announced this purchase of Senlar, which I think they could lose money on to be frank. Uh, and I got I'm just a go. I really don't know what to make of it because it doesn't make a lot of sense. The industry right now has volumes that are kind of mediocre and so everybody's out there competing very aggressively for loans. That's the kind of market we're seeing. One of the interesting things we mentioned in the blog is that the market uh for big mortgages that you can't finance from fanny May and Freddy Mack. They're just too large. the jumbo market it's called or what we call a nonQM non-qualified mortgage uh has been booming because all these firms have excess capacity. So they're throwing their loan officers into that market. That's an interesting market but it's got a lot of liquidity problems. If suddenly people wake up in the morning and they don't like the risk that market can disappear in a heartbeat. So I think that you know there's a lot of risk in the mortgage sector as I mentioned on our call yesterday for our view uh readers and I'm a little bit cautious on mortgage stocks right now. We still have to hear from Rocket. We still have to hear from United Wholesale Mortgage the end of this month. And I think everybody in the industry is kind of holding their breath on that one. They want to see what those two companies report. All right, we have um one viewer um we have one viewer who has a question this week and folks send your questions in. Um viewer Ryan would like to know last month Apollo Global's commercial mortgage rate ticker ARI announced a landmark deal to sell its entire $9 billion loan book at 99.7% of par and might just liquidate the REIT entirely. Do you have any thoughts about this transaction? Does this suggest that in 2026 the only way to win in mortgage lending is to stop doing it entirely? >> No. I think what you see there, and it's a good question, by the way, um Apollo sold that mortgage portfolio, commercial mortgages to an affiliate called Athen. Athen's a publicly traded insurance company that has served as a balance sheet for Apollo. They have put all sorts of assets in there and I think the driver here is that commercial mortgages are still having a hard time Julia. So by putting it inside of insurance company which is book value remember they don't mark to market their assets. Insurers always run their assets at book value. I it it's a way for them to kind of mask some of the volatility that's flowing through the commercial mortgage sector right now. And as you said they may wind up the rate and just get rid of it. So putting it inside an insurance company is uh a relatively attractive trade. Is it good for the insurance company? We'll see. You know, the insurance sector has been buying a lot of private credit, private equity assets like this, commercial mortgages, and it raises some questions and concerns, I think, for the future because ultimately insurance companies need to be liquid. They need to have assets that are high quality. And when you start putting things like commercial mortgages inside, you know, you kind of wonder how it's going to do over time. >> All right, Chris, um this has been another fun episode of the rap. Before I let you go, um let folks know where they can find you and support your work and subscribe to the institutional risk analyst because I I got to go to your quarterly call which was a lot of fun to see you in action. That was really cool this week. And um the viewers also wanted to know what you're looking at as we head into next week. Um the floor is all yours. >> Well, thank you, Julia. Uh I published the institutional risk analyst. We just put up our gold and silver portfolio for our readers. Uh we've been assembling this group of about three dozen different stocks, ETFs, uh simply because people kept asking, "How do I get exposure to metals?" And this is kind of our way of putting out a little research list for everybody to do some homework on. Some of them are in the US, some of them are offshore, many of them are in Europe, interestingly enough, and some of them have performed just remarkably. But the one thing I would say is that gold and silver is a sector nobody's invested in for over a decade. Some of these stocks are very small and some of them have increased two and 300% versus last year. So, I think you're going to see volatility there, but you're also going to see a lot of opportunity. Uh, I'm active on X and LinkedIn under RC Whan, and I, uh, you know, love to get questions from people. We usually put our answers up on X because it's easy for people to find them. And, uh, I love having these conversations with you, Julia. Thank you. >> I do too. Chris Whan, chairman of Whan Global Advisors, author of The Institutional Risk Analyst, the very best independent analyst that you will find on Wall Street, friend of the show. Really appreciate you and I look forward to seeing you again next week and I hope you have a wonderful weekend. >> Thank you, Julia. Thank you so much.
Chris Whalen: A Manic, Momentum-Driven Market Meets Reality
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This is kind of a manic momentum-driven market, Julia, but it's really extraordinary how extended some of the gains got last year and now people are running out. You see this with crypto, too. Crypto is suffering because the AI narrative has broken down. I guess emotions and intuitions on the part of managers are driving the selling in all of these sectors. Hey everyone, welcome back to this week's episode of the rap. Chris, great to see you as always. Really appreciate you. >> Good morning, Julia. >> Good morning. Loving doing this with you every single week. Um, >> I want to start with markets again. uh just because you wrote in this week's edition of the rap that the AI narrative is stalling and large cap tech just had its worst week since November. So question for you is is this just a healthy correction or is it the beginning beginning of something bigger? Well, I think it's bigger because of last year, Julia. You know, last year was a year of magical aspiration, crypto, uh we had banks running at doubledigit rates of return. Uh and then of course tech led the way. The top tech firms were the majority gainers in last year's market and now they're giving back uh much of those gains. What's fascinating uh that we mentioned in the blog is that some of the large cap banks have retreated dramatically. Uh if you look at the top 100 or so banks that we uh follow closely and publish every quarter, uh JP Morgan's now 87th in terms of market returns. That bank was at the top 6 months ago. So what's happened I think is that you have a lot of equity managers going risk off and they're taking money out of sectors that are now considered to be essentially down on their luck and they're going into safer consumer and and other sectors that have income and that are going to be less vulnerable if we continue to see more selling. >> Wow. Yeah. So, um I think you probably got it in there, but what are you watching to determine that this becomes a sustained rotation then? >> Oh, I think it is. I think people are rotating into quote unquote safer stocks simply because they have to. Uh when you see, you know, for example, I have a position in AMD. I followed that company for a long time. They make low power chips for a lot of applications. That stock's now down at the 52- week low. Uh I have been slowly buying more because I do like the company but everything tech is being painted with the roller and I think now that you know the supernormal returns we saw last year are turning into losses. Uh one of the more interesting things we talked about in the blog is our fintech portfolio. There's only three stocks that are still up in that whole group and it's an interesting group of credit shops. people like Apollo and and Aries and the rest of them, but they've all sold off dramatically, and that's because they were up so much last year. This is kind of a manic momentum driven market. Julia, you and I have seen this before, but it's really extraordinary how extended some of the gains got last year and now people are running out. You see this with crypto, too. Crypto is suffering because the AI narrative has broken down. Um it's not to say that there's a you know a really cement kind of connection between the two but clearly the same sort of you know I I guess emotions and intuitions on the part of managers are driving the selling in all of these sectors. >> Chris, you are someone I know as a bit of a financial historian. That's why I love reading your works. Um you said something interesting there. This is the way you describe this market is a manic momentumdriven market. Have we seen anything like this? And are we headed for the big breakdown? We're not there yet. No, I think since 2008 because we've had so much central bank intervention and open market activity driving markets, people kind of got used to things going up and they didn't have to worry about a lot of downside risk. Whenever you have that, you tend to have people get a little bit overextended and particularly the whole AI narrative, which still makes no sense if you try and figure out how are we going to make money on many of these investments. Um, I think that's really what is has started to to trouble people. You know, I noticed that Anthropic has just risen uh raised money on a ridiculous value valuation. you know, are people going to continue to support transactions like this? I don't know. I really don't. I I think this year is going to be a much more difficult year for most of the sectors we follow. And I particularly think financials, I'm not encouraging anybody to go long financials at this point simply because there's a big question mark about interest rates. And there's also I think a a tendency of people to take gains that they had from last year if if they were able to take them. Uh because honestly the bank started selling off in September October >> and that selling has continued right through to today >> and you know you know you as um a bank analyst like banking that sector is a that's bread and butter for you like you know that sector and uh I want to go back to something you said at the top about JP Morgan. Um JP Morgan now ranks 87th in your group. Um >> that tells us >> just in terms of >> 200 day moving average. >> But that's interesting though because like yeah JP Morgan, right? What does that tell you? Um if folks won't I take is that does that mean folks won't I mean when I think of JP Morgan that's the that's the cream of the crop. That is like >> the bank. So what does that tell you? >> They have huge advantages over other banks. say are much more efficient than other banks and they're still trading at two and a half times book I don't want you to shed any tears for Jamie Diamond okay uh but they have given back a lot of ground and when you look at our rankings today just based on total market returns the top 25 are nothing but smaller names the small caps rule right now uh the only bank in the top 50 that you you know would recognize as a large cap is city >> so think about that all the rest of those have kind of given ground. The smaller banks have taken up some of the ground and managers clearly are not as comfortable holding those positions as they were 6 months ago. >> Yeah. I guess my question is what does that tell you if the managers won't own like arguably the best run bank in America? We're not >> I think it's partly concerned that credit is finally going to become an issue this year after years where it didn't show up. Remember, we've been talking about this for 2 years. No recession in 24, no real peak in terms of losses on the consumer side. So I I think people are a little more cautious this year than last. Last was a year of exuberance, a year of crypto, a year of, you know, the President Trump uh narrative dominating the news really. This year, not so much. I think there's a lot of people who have moved offshore into different markets. There's been a big rotation into foreign markets really since last year and I think a lot of people are looking for safety now instead of uh easy gains because they're not sure that those gains are still there. Julia. >> Yeah. All right, let's touch a couple third rails here. Um cuz we're going to get some spicy comments and I love it. All right, we have to talk about crypto because you mentioned crypto and the link between crypto, the crypto trade and AI. What is that link? Well, it's it's aspirational. In other words, the the thing that drove crypto in the triple digits in terms of the the dollar value of things like Bitcoin uh and that drove some of these tech stocks up are really the same sorts of narratives. They don't particularly worry about whether or not there's a firm base underneath these investments. They certainly don't worry about profitability when we talk about AI. Uh, and I think that those concerns are starting to come to the four because, you know, for example, uh, Google uh, has just put down a hundred-year debt to try and finance their AI ambitions. If that's what we have to do to finance these things, I really wonder if they're ever going to make money. You know what I'm saying? Uh when Elon Musk said that he had to put his AI engine up in space in order to power it with solar power, what he's telling you is that there's big political opposition to all of the data centers that people want to build around the country because if they result in higher electricity costs for consumers, it's not going to happen. Congress is already going to hold hearings on this. And in other nations around the world, you see similar concerns, which is that people think that electricity is kind of a free good that they can use to develop new products, but it's not. Uh, one of the interesting things I saw, there was a piece on Substack last week talking about how long it takes to make changes in the electric grid to actually connect up to some of these data centers. Takes years. You you don't just snap your fingers and say, "Give me enough power to run my data center." uh it takes a long time and a lot of capital investment. So I think we're we're looking at some of these narratives and we're asking questions and the more people focus on the fundamentals on cost on potential profitability I think the more people are going to kind of be cautious about the AI trade going forward. >> Um you wrote that Bitcoin and other speculative vehicles are being routed in a way not seen since before co. So, I guess the question for you is >> on Bitcoin specifically, you've been predicting this unwind. Um, let me see. Where are we today? Where are we today? Let's see. I think we Oh, 67,000 right now. Okay. Um, well below the highs that we've seen. What's the endgame? Like what do you do you think this goes to zero? Like what where do you see this thing ultimately headed? >> I I think it could go lower because the market for Bitcoin is so weak. In other words, you don't have a really welltraded long short market around the spot market for Bitcoin. So when someone wants to sell, it causes the whole complex to drop. And that I think has flushed out a lot of the public companies that were involved with Bitcoin. You know, obviously people have been watching Micro Strategies, but when you when you use dollar debt to finance a speculative position in any cryptocurrency, you're essentially asking for trouble. Uh if you're playing with cash, that's another matter. But I think the whole weakness in the crypto trade because let's say we're at half of where we were versus the peak. Uh and I think that tells you that there's not a lot of staying power in this market. if any number of players decide they want to exit. That to me is a speculative market and I think people are realizing that. >> So you're skeptical of both the AI narrative and also the crypto crypto narrative. Um maybe more >> well they're driven by Wall Street hype. You know the way this works. People come up with an idea and they go out and sell it. That's the uh the great strength of America. It's all about sales. >> Well, let me ask you this. Um, what do you think is the next legitimate growth story then for the US economy? What do you think that is? >> That's a very good question because you know the AI tech narrative has been driving the bus for a long time, well over a decade. You go back to 2008 really tech has been kind of the the default narrative for a lot of the investment world regardless of whether it was software, hardware, combination thereof. The fact that people have taken so many hickeys on software stocks, for example, Julia, I think is fascinating. So to me, I think it's safety right now. People are looking for income. Income means that the asset is going to be less volatile. You know, we've written about this a lot in the blog recently. Uh Bill Py has been out buying mortgage back securities to try to lower interest rates. Well, the interest rates on your typical Treasury bond today, the 10 years are in a four and a half, four and 58 kind of coupon, but that's pretty stable. If you look at the uh debt that was issued during COVID that has twos and 1% coupons, they're very volatile. And that's I think the real story here. So, people are looking for income generating assets simply because they know they're going to be safer in the short term. Mhm. Um, you've also talked about um, private equity. We talked a about it a lot here on this show. What about just the percentage of private equity deals in the last, you know, several years I have been in the tech space even? Um, >> it's a big number. It's like a quarter. >> Yeah. And then the question for me then is um, what happens to like all that trapped capital then? Well, it tries to get out one way and another, but you know, if you can't IPO the companies in the private equity world, then the manager has to sit with it and the investors have to sit with it unless they can sell the company. Uh the lack of liquidity in the private markets, whether you're talking about credit or private equity, was always the big negative. And a lot of the sponsors said, "Oh, well, you know, private markets are better than public markets." Now, public markets are always better because you have a crowd of people looking at the asset and they are determining what the value is. When you have private markets, you basically have to take the word of the manager for the private equity deal on what the company's worth. I don't think that's a very stable and and sustainable model. So, I think private equity, frankly, is going to get smaller over the next couple of years. There's still money flowing in, don't get me wrong, but a lot of managers have losing positions that they're going to have to sit with and work out, and that's going to be a very interesting process to watch. >> Hey guys, thank you so much for watching this video. If you can just take a quick moment and hit that subscribe button, we are trying to hit our next goal of 100,000 subscribers. Really appreciate you. And back to the video. Okay. Um, let's shift topics. Um, all right. But you have to go to another area that's bread and butter for you, which is the mortgage market and housing. Because you wrote also in the wrap around Fanny and Freddy, >> reporting earnings profitable, but where's that growth coming from? That's the issue. >> It's coming mostly from people refinancing existing mortgages. you're not seeing growth in purchase mortgages, which is what President Trump and members of his administration have been trying to encourage this whole uh issue of affordability. I think the reality, Julia, is that, you know, home prices are still a big obstacle for people. And even if we lower interest rates, what's happened initially at least is that people take that lower rate and they go out and refinance the mortgage on an existing home. I think to get real action in the mortgage market in terms of purchases, you'd have to get mortgage rates down another point. Now, that's not unreasonable because we're still up. You know, if you think of where mortgages were during CO, which was, you know, down in the 3s, I have a 3% mortgage on our house here in New York. Um, that is a long way to go. But what's interesting is the demographics of this. I was talking to one of the smarter modelers in the industry yesterday. When you get up to larger mortgages above half a million dollars, regardless of the market you're in, they don't move. These homes are not selling even as rates come down. So, in order to get those people incentivized to sell their house and make that house available to another family, you're going to really have to get interest rates down a lot. and we're going to write about what uh what uh Scott Bessant and Kevin Worsh need to do to make this happen next week. >> Okay. Well, maybe you can give us a little bit of a sneak peek like what need what do they need to do to like make that purchase activity return? >> Well, partly you're going to have to let home prices correct a little bit and it's going to happen anyway. Policy makers can't prevent that. It's a long-term trend. I still think we're going to have a home price correction probably 2728 time frame. But also, I think you're going to have to restructure the market. The Fed needs to get out of their investment in mortgage back securities, which is still about $2 trillion. And I think they could work with the Treasury and with Bill Py at the FHFA, the regulator for Fanny and Freddy, to make some of this happen because, you know, it's kind of counterintuitive. People scratch their head when I say this, but it's the low coupon securities out there that keep interest rates up. You would think, well, hey, that coup, you know, that loan has a very low coupon. Yeah, but the problem is it's a dead weight in the market. It doesn't trade. And the homes that were financed with that asset aren't going to trade. They're going to just sit there. So, until we unlock, this is what we call the shutin effect in housing, until we unlock some of those homes and get them back into the market, it's going to be very hard for people to find a house. >> So, I guess who needs to work together? You said Besset. Is it Besset and Worsh are going to have to work on this together? Like what is >> Yes. >> Okay, >> that's right. Well, you know, Kevin Worsh has said many times that he wants to see the Fed's balance sheet smaller. >> How do you do that? >> You call the Treasury and say, "Hey, I'm going to swap you my mortgage backs for some Treasury bonds." That immediately gets the Fed where they need to be, which is their whole portfolio should only have Treasury securities in it. They should never have bought those mortgages. Then you could restructure that whole block of assets, work with Fanny May and Freddy Mack to get it done and bury some of that duration, those low coupon securities in the insurance sector. They would love it by the way. >> You you restructure them into different uh tres of uh of bonds and the insurance guys would love it and you would never see them again. They don't trade once they get done. So I think that's the solution. We have to restructure the treasury market and also the mortgage back securities market to kind of undo what was done during co you know Janet Yellen Jerome Powell they all thought they were being helpful but they weren't and the things that they did during that period they did too much number one and they also created a big obstacle for getting rates down in in the medium to long term. >> They did too much but okay let me ask you this about the Fed. Um, should the Fed engage in fiscal issues? I take it they probably do, right? But like is there a way to do it appropriately or how what is the dynamic? Like what is the dynamic? >> I think that's going to happen. I think Kevin Worsh is going to job on the Congress about working on the budget deficit. We haven't had a Fed chairman in a long time that was willing to talk about that in public really back before Ben Bernani. So to me that's I expect that from Worsh because he's a very good conservative and he understands that this is part of his job. Uh Jerome Powell has refused to talk about fiscal issues unless people put him on the spot during a press conference. >> I take it that's been a disappointment then >> I think so. The Fed chairman is the banker to the Treasury. It's his job to talk about fiscal issues. He has to because ultimately the number one job of the Fed is keeping the Treasury market open. The only way we do that is if we try and get Congress to do their job. And I know that may seem fanciful, but it's going to happen. >> Well, let me ask you just another hypothetical. Um, let's say Worsh does that and he's jawbone in Congress on fiscal issues. Would President Trump be happy about that? >> Uh, I think so. I think so, cuz ultimately that's the conservative agenda. Trump is more of a populist than a conservative, but he still needs to leave uh at the end of his four-year term with things better than they were when he came in. And I think having Kevin Walsh at the Fed is going to change the behavior of the central bank and it will change the narrative that the central bank has as far as the public and the Congress goes and that to me is a positive. >> Okay. So Wars has talked about wanting to shrink the balance sheet. >> Yep. >> What happens if he changes his mind on that? >> Well, he's got to be creative. That's one of the reasons we've been writing about this issue. I think any Fed chairman when they walk into that big room and they sit at the big table, Julia, the first thing they have to worry about is making sure that the Treasury has access to the markets. Anything else is secondary. So when you talk about job creation, when you talk about inflation, that's great. But ultimately his first job, the one that's not been articulated in the law, is to keep the Treasury able to issue debt and fund the operations that they need to fund. >> Is that like the It's like the mandate, but it's like not the spoken mandate. >> It is the It is the real mandate. >> The real mandate. Yeah. >> Yes. >> Um probably the most important one, too. Okay. Well, that's what 2020 was all about. When the Fed came in in March of 2020 and bought a couple trillion dollars worth of securities, they weren't there responding to COVID. They were responding to the fact that the Treasury market had stopped and investors had run out of the room. So, they had to restart things. That's what that was all about. >> Yeah. Um, you've been critical of the MBS on the balance sheet. >> Yes. >> What What should Worsh do with it again? like what what would be the mo what would be the move and what would be the impact on the market? >> I think they should swap it to the Treasury and take Treasury debt and then uh Scott Besson should call up Bill Py and say, "Hey, we need to issue some collateralized mortgage obligations and bury those securities, those low coupon securities in the uh balance sheets of insurance companies who and they would love it. By the way, you know, there's still such a der of paper out there, Julia. There's a remarkable demand for all sorts of assets coming out of the insurance sector. There was a fascinating piece in Bloomberg last week about how the insurance sector was eating the world because they have such an appetite for assets that they just cannot find enough. So, let's go make some assets for them and make them happy. >> Oh, meaning they're looking for places to allocate then. They're just looking for yield. Is that >> No, they're looking for investment assets to fund the obligations that they're taking. >> Oh, okay. Okay, >> got it. >> That's right. So, let's say you have an annuity for your retirement. They need to go invest in something to generate income for you. >> Fascinating. >> And they are scouring the earth. It is fascinating how aggressive some of these insurance companies have been in a number of different markets. >> Okay. Are they having trouble finding opportunities or they just like need Yes. Okay. >> Yes. Cuz they compete with everyone else. They compete with banks. They compete with sovereign wealth funds and private equity funds. The competition for assets is intense and it's largely driven by inflation. Okay? >> Every time the Fed has done a big operation in the markets, what happens? The banking sector gets bigger. >> When the banking sector gets bigger, they have to go out and buy more assets. >> The same effect is seen with insurance companies. >> Does that just kind of just give an underlying continuous bid then? >> Yes. That's the funny thing that the the desire on the part of all of these institutions to find investment assets is one of the reasons the markets don't trade off dramatically. When they go down five or 10%, people come in and buy it. >> Okay, that's interesting because just going back to the top when you you kind of described this as like what was it a momentum? Oh, what was the mania? It was a momentum. Let me see what I wrote down. It was a good way of describing the market. >> A manic momentum driven market. a manic momentum driven market. Is that why we haven't seen like a typical crash cycle like if it go okay >> yes >> fascinating >> that's the thing and you and you have people have learned this and they have kind of incorporated it in their market strategy. So when the markets do trade off 5 or 10% people come in and start buying it. Now at tech, these assets had gone up so much last year that there's a lot of air underneath and that's why they've sold off so dramatically. But are we going to see this continue? No. I think at some point uh there's going to be enough buying to stabilize many of these names and they're going to go back up. >> Mhm. >> But this is all about inflation, Julia. That's what this is really about. >> Which again, that's the area that's another area of expertise for you. And you wrote the second edition of inflated. Um okay. So just when I was hearing >> inflation is the national pastime of America. >> I love that line from you. >> You know the the fiat currency is the greatest invention ever, right? >> And we see a product of that, you know, everywhere when we have these convers you see the product of inflation um throughout our lives. Okay. So going back just big picture with markets, you were talking about this kind of um people looking for safety. Consumer staples was one area we've talked about. um when you look across your portfolio and you're someone again you track banks, >> mortgages, fintexs, metals even we've talked a lot about metals. Um >> what's kind of the theme like if you had to sum it up what's the common thread the theme for you that what's the trade for 2026? I guess >> I think initially people are going to look for safety and income and then they're going to have to selectively figure out when they go back into sectors like banks. Banks have traded awful a lot. Is there a case to be made to go out and buy JP Morgan at 2 and a half times book? I think there is because that bank is so much more efficient than everybody else. There's other names in the group too that deserve interest. Uh I think it's interesting that one of the stocks we've talked about with our readers and with with your viewers is Annalie. Mhm. >> Analy is a big REIT that invests in mortgage back securities that are guaranteed by the US government and they generate, you know, low to mid- teens returns uh in terms of yield. That stock's doing very well. And as I've told your uh your viewers, it's not a stock I own for capital appreciation. It's a stock I own for income and I've owned it for a long time. So I think you want to look for opportunities that give you income immediately and also some stability. But you know as I say that I'm 65 70% in stocks and I'm not going to change that. I'm still long gold. Uh I haven't really changed any of my silver positions even though they traded off dramatically. They're all still up. >> The the ETFs I own for silver exposure are still up 40 50%. even after they've sold off so dramatically. So there's a manic kind of very highly volatile quality to this market today and I think it's difficult for people to get a sense for what they want to do because they are dealing with a lot of volatility. >> Yeah. Um you stay calm during those the volatile times too. Um >> well >> let me ask you about a maybe it's a bit more of a wonkier topic but you write about it and we've talked about it on the show. You've been educating us on what's going on at Pennymack and it sounds like they made another mistake in your view. What did they do this time? >> Well, they bought a company called Senlar, which is an old thrift that got to be one of the largest subservices in the mortgage business. I think the transaction was a mistake because a lot of Senlar's business is going to go out the door. Um, they were a company that didn't compete with their customers. They didn't try and get the borrowers in their portfolio to refinance. They didn't do a lot of things that other firms naturally do as part of their operations. So now that it's being sold to Pennymac, if I own the servicing that Senlar has been taken care of for me, do I want Penny to to run it? No. I'm probably going to move it to another firm that is a little less threatening in terms of what we call recapture in the mortgage industry. And I'm a little concerned about this whole transaction. I had always assumed I followed Semlar for 20 years. Uh going back to when they were uh really, you know, a much smaller company. At one point they were over a trillion dollars in subservicing. Uh City had sold their mortgage portfolio to them uh for servicing. But I think recently, you know, they've been suffering from a lot of negatives. And I always assumed that business was not salailable, Julia. So when I saw Pennymia announce this acquisition, I I kind of rocked back in my chair and most of the people I know in the industry have a very similar view to mine. >> Um I guess like the question here is if you're a shareholder, what would be your question to management on this one? Well, look, when when pennymax sold off after that disastrous earnings release they had a couple weeks ago, I initially said, "Look, this stock is cheap. It's a great company. They're one of the leaders in the market." But then they announced this purchase of Senlar, which I think they could lose money on to be frank. Uh, and I got I'm just a go. I really don't know what to make of it because it doesn't make a lot of sense. The industry right now has volumes that are kind of mediocre and so everybody's out there competing very aggressively for loans. That's the kind of market we're seeing. One of the interesting things we mentioned in the blog is that the market uh for big mortgages that you can't finance from fanny May and Freddy Mack. They're just too large. the jumbo market it's called or what we call a nonQM non-qualified mortgage uh has been booming because all these firms have excess capacity. So they're throwing their loan officers into that market. That's an interesting market but it's got a lot of liquidity problems. If suddenly people wake up in the morning and they don't like the risk that market can disappear in a heartbeat. So I think that you know there's a lot of risk in the mortgage sector as I mentioned on our call yesterday for our view uh readers and I'm a little bit cautious on mortgage stocks right now. We still have to hear from Rocket. We still have to hear from United Wholesale Mortgage the end of this month. And I think everybody in the industry is kind of holding their breath on that one. They want to see what those two companies report. All right, we have um one viewer um we have one viewer who has a question this week and folks send your questions in. Um viewer Ryan would like to know last month Apollo Global's commercial mortgage rate ticker ARI announced a landmark deal to sell its entire $9 billion loan book at 99.7% of par and might just liquidate the REIT entirely. Do you have any thoughts about this transaction? Does this suggest that in 2026 the only way to win in mortgage lending is to stop doing it entirely? >> No. I think what you see there, and it's a good question, by the way, um Apollo sold that mortgage portfolio, commercial mortgages to an affiliate called Athen. Athen's a publicly traded insurance company that has served as a balance sheet for Apollo. They have put all sorts of assets in there and I think the driver here is that commercial mortgages are still having a hard time Julia. So by putting it inside of insurance company which is book value remember they don't mark to market their assets. Insurers always run their assets at book value. I it it's a way for them to kind of mask some of the volatility that's flowing through the commercial mortgage sector right now. And as you said they may wind up the rate and just get rid of it. So putting it inside an insurance company is uh a relatively attractive trade. Is it good for the insurance company? We'll see. You know, the insurance sector has been buying a lot of private credit, private equity assets like this, commercial mortgages, and it raises some questions and concerns, I think, for the future because ultimately insurance companies need to be liquid. They need to have assets that are high quality. And when you start putting things like commercial mortgages inside, you know, you kind of wonder how it's going to do over time. >> All right, Chris, um this has been another fun episode of the rap. Before I let you go, um let folks know where they can find you and support your work and subscribe to the institutional risk analyst because I I got to go to your quarterly call which was a lot of fun to see you in action. That was really cool this week. And um the viewers also wanted to know what you're looking at as we head into next week. Um the floor is all yours. >> Well, thank you, Julia. Uh I published the institutional risk analyst. We just put up our gold and silver portfolio for our readers. Uh we've been assembling this group of about three dozen different stocks, ETFs, uh simply because people kept asking, "How do I get exposure to metals?" And this is kind of our way of putting out a little research list for everybody to do some homework on. Some of them are in the US, some of them are offshore, many of them are in Europe, interestingly enough, and some of them have performed just remarkably. But the one thing I would say is that gold and silver is a sector nobody's invested in for over a decade. Some of these stocks are very small and some of them have increased two and 300% versus last year. So, I think you're going to see volatility there, but you're also going to see a lot of opportunity. Uh, I'm active on X and LinkedIn under RC Whan, and I, uh, you know, love to get questions from people. We usually put our answers up on X because it's easy for people to find them. And, uh, I love having these conversations with you, Julia. Thank you. >> I do too. Chris Whan, chairman of Whan Global Advisors, author of The Institutional Risk Analyst, the very best independent analyst that you will find on Wall Street, friend of the show. Really appreciate you and I look forward to seeing you again next week and I hope you have a wonderful weekend. >> Thank you, Julia. Thank you so much.