Market Update

In the words of one of my favorite 90s songs: “Don’t call it a comeback!” So, the banking crisis wasn’t over?!?! Who knew? Ooohhhh, this newsletter, that’s who! Stick with me, and we will get you through this coming downturn in the markets together. Nope, no financial advice, as I am not a financial advisor. But first? Football!

Jackson had his first flag football game and yes, I am one of two coaches. This is my first-time coaching football since 2010 when I coached 9-10 year-olds. This time? 4–6 year-olds. Oh my God. I pray for a lot for wisdom, discernment, and patience. Patience is a big one for this sport. Love these kids, but man, I thought having one 4-year-old was tough. I watched kids running the wrong direction, forget about the flag and just run straight into the runner (which I secretly loved), and start dancing while the football was snapped. Good times. But it was better than watching DC as usual!

Back to the real chaos…the Fed did raise rates 25bps as we expected…even while the banking crisis continued. But here is a literal headline while Powell was speaking today. This literally quotes our Fed Chief saying that the banking system has BROADLY improved. This is a pic I took of CNBC earlier today (Wednesday).

But another regional bank just dropped 40% after trading ended today. Why keep lying to us? Here is that headline. This stock traded at $30 in Feb. After hours puts it at $2.73 as I type this newsletter.

But the media and DC would have you believe…

My concern in the mortgage world is that there might be tightening of guidelines because of money problems. We’ve already seen some loosening of rates for lower FICO borrowers compared to higher FICO borrowers. I don’t think we need to make it easier to not pay larger bills, do we?

But back to banking…JP Morgan purchased First Republic which was the 2^nd largest bank failure in US History. Let me repeat that last part…the 2^nd LARGEST bank failure in our history. But that’s not news? By allowing JP Morgan to purchase those assets (with the FDIC loaning and covering billions of losses…i.e. YOUR tax money), it gives JPM more than the normal max of 10% of the assets in our country. That’s important because no bank is allowed to have greater than 10%. Oops! Well, I guess you bend the rules when there is a crisis. (I mean no crisis, if I’m Powell.) Guys, we are in trouble. Big trouble. Some people think we are in a bull market (stocks will rally up). When have multiple banks failed in a bull market? Never. I’m not even going to research it. I’m guessing this has never happened.

Will there be more banks? If so, here are the some candidates I’m watching based on drops in stock value the past 2 days: Western Alliance, Metropolitan Bank, HomeStreet, Zions Bank, KeyCorp, HarborOne, and Citizens Financial. Again, not stock advice…and I’m not saying short or sell. Call your FA before doing anything. I’m just letting you know this is going to get ugly.

It’s not just the banking sector, how about commercial property? If you don’t think this skyrocketing office space vacancy rate in San Fran is concerning, then let me tell you that a massive amount of these office loans are covered by regional banks discussed above. Yikes!

10yr yield: Once again, we are sitting at the 3.36%. This has happened all year. I’ve drawn the arrow for the line we need to get below. If we can get below this…and continue to move down, we will see better interest rates. This could be the final straw with the banking crisis. I hate to hope for it, but the Fed needs to stop lying to us. Long term interest rates would be a market correction in our favor. Let’s go!

MBS: Big move in our favor the past 2 days. Cautiously floating! Banking crisis in full swing. We are pushing up off the 200 day moving average. That should be support to help keep us moving up.

Theme all year? Stop beleiving what you are being told. I guess it’s a theme from March 2020 (think covid). I research and double/triple check. Things are not healthy in several sectors right now. There will be a recession larger than they are trying to make us believe. Don’t do it! Believe your own eyes. George Orwell quote: "The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command.” Don’t let it be.

Tim

Tim Lindsey

Originating Branch Manager

The Bear Mortgage Team at Barrett Financial Group