Christopher Whalen

Maybe No Rate Cut in July?

Avalon | We caused a bit of a fuss last week on CNBC by suggesting that the Federal Open Market Committee will not cut the target for Fed funds this month. We suggested instead that the Federal Reserve Board will first end the runoff of the System Open Market Account (SOMA) and then “wait and see” about any change in the rate target. Readers of The Institutional Risk Analyst know that we tend not to follow the crowd, especially when the data suggests that the narrative is at odds with actual

Entropy, Volatility and Deflation

New York | This week in The Institutional Risk Analyst, we return to the activities of funds operating in the world of distressed real estate and corporate debt. We noted a few months back that some of the biggest players in the distressed debt industry were preparing for a comeuppance in the market for collateralized loan obligations or “CLOs.” New funds were be created to absorb and profit by busted CLOs and distressed financial institutions such as Deutsche Bank AG (DB).But the anticipated

Deutsche Bank, GSEs & Systemic Risk

New York | In this issue of The Institutional Risk Analyst, we ponder how the actions or inaction of policy makers can create systemic events. In the next issue, we’ll dive into Q2 2019 earnings for banks and non-banks. Of interest, the Q2 edition of The IRA Bank Book is now on sale at our online store. News last week that the leadership of Deutsche Bank AG (DB) is planning to cut one out of six jobs at the bank, this in an effort to regain financial health, drew some positive attention from

Mortgage Prepayments Vex Ginnie Mae

New York | Last week The Institutional Risk Analyst participated the Ginnie Mae Summit in Washington. The event was packed and featured some important discussions about the state of the residential mortgage market. We received applause from the audience for suggesting that FHA resolution costs for defaulted loans should be the same as the GSEs. But hold that thought. And there were lighter moments. Federal Housing Finance Administration head Mark Calabria continued to backpedal skillfully

What if No Rate Cuts in 2019??

New York | This week we announce the publication of The IRA Bank Book for Q2 2019, a publication of The Institutional Risk Analyst. In this issue we ask some important questions, including:** Why is Capital One Financial (COF) a better comp for Citigroup (C) than JPMorganChase (JPM)? ** Why are loss rates for real estate exposures of US banks moving back into positive territory? ** Will funding costs for banks continue to rise even as long-term Treasury yields fall dramatically? ** And just when

Aftermath: Interview with James Rickards

New York | Last week in The Institutional Risk Analyst, we gave you a taste of today’s interview with author and consultant Jim Rickards to talk about his latest book, “Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos.” As usual, Jim has a commanding view of the ebb and flow of the global political economy. His first chapter in which he describes the fateful role of former Fed Chairman Ben Bernanke in choosing the current monetary policy mix sets the stage for an important

Bank Margins Squeezed by Unsafe Fed Policies

New York | A year ago in The Institutional Risk Analyst, we predicted that net interest income for the US banking industry would flatten out and decline around Q1 2019. Sure enough, that is precisely what has happened. We wrote in The IRA Bank Book for Q1 2019:”The cost of funds for US banks continues to grow at four times the rate of interest income, suggesting that the net-interest margin earned by banks may start to decline in 2019. Rising funding costs are being felt the most by smaller