On Wednesday the Federal Reserve raised interest rates by 50 bps, or 1/2%.  Initially the market reacted favorably to this with a strong rally on Wednesday, only to be reversed with the biggest down day since 2020 on Thursday.  Tech/glamour stocks have simply been getting obliterated.  Tesla dropped 8.3% on the day, while Amazon dropped...Read More

2022 is shaping up to be quite the crazy year.  While this horrible war in Ukraine dominates media headlines, I can’t help but feeling like inflation might be the dominant theme of the next decade.  Using “government” numbers, inflation is running at about 7.9%.  Shelter is the single biggest component of CPI at 33% of...Read More

Well that was one heck of a week.  While I certainly was not smart enough to predict the results of the election, it has had a profound impact on my expectations for us as investors.  For the last 7 years, I’ve been one of the most vocal advocates of financial stocks that I am aware...Read More

July 29th, the Federal Reserve announced the results of the CCAR process including the requested capital return actions for the big banks. Unsurprisingly to those that have been reading this newsletter, the results were very good and we have seen an influx of dramatic dividend increases and stock buybacks. Below I’ll outline a few of...Read More

It has been an interesting few weeks. While Federal Reserve officials have been hyping up the possibility of raising interest rates in June or July, Friday’s incredibly poor jobs report seems likely to delay any hike until September at the earliest. For many short-term oriented traders, bank stocks have become a trading tool to speculate...Read More

This week the Federal Reserve will make a decision on interest rate policy where is it expected to raise by 25 bps.  This would be the first raise in nearly a decade, which is stifling to begin with.  There has been a great deal of volatility of late, which is not uncommon before a rate...Read More

One of my favorite fund managers, Steven Romick of FPA wrote a compelling letter about the Federal Reserve, and the risks of current policies.  I agree with everything that he says in terms of Ben Bernanke and the huge risks that he is taking.  The only thing that I don’t believe Romick adequately covered was...Read More

This WSJ article seems to not really understand bank business models or the current environment.  Right now banks are overloaded with huge litigation and regulatory costs which are effecting profitability.  In addition net interest margins are artificially low due to actions from the Federal Reserve.  As these issues reside, bank profits should grow.  In addition...Read More

As if there wasn’t enough evidence of how ridiculous the regulatory environment has gotten, the below WSJ article describes how the Federal Reserve won’t share their formulas for the stress tests.  This process is so complicated and there is so much information that it is virtually impossible for any one formula to be right, but...Read More

This was an excellent interview with Richard Perry of Perry Capital where he comments on how recapitalizing Fannie Mae and Freddie Mac could contribute to an economic recovery.  He rightly points out how there has been no effort to recoup taxpayer money on these entities while the Treasury’s other investments have actually worked out quite...Read More