The Institutional Risk Analyst

Most public companies are so invested in the false gospel of AI that they dare not even hint at the truth, namely that the vast majority of AI projects will never be profitable or even relevant. As LeCun notes, consumers will benefit from more robust search tools, but the AI that emerges in the next decade will be too feeble and too fallible to be deployed by business. Recall the costly fiasco of the early AI charade called "Watson" from IBM.

If we were to select one characteristic that describes the financial markets today it would be confirmation bias. The human tendency to interpret new evidence as confirmation of one's existing beliefs or theories is among the most powerful and dangerous trends in financial markets, especially when the predominant passive investment strategies favor a net-long position. Nowhere is confirmation bias more apparent than the market for private-equity backed IPOs. 

SOFI is up almost 300% while the Bitcoin futures traded on the Chicago Mercantile Exchange are up less than 100%.  Below we provide some thoughts on the banking group as we head into September. 

The intriguing thing about private coin empires is that they are obviously not a positive for existing payment systems, yet neither are they dependent upon crypto. Larger sponsors may be able to create exclusive coin ecosystems without actually touching crypto assets at all. Fiat to AMZN coin, “ZON,” is really all that the sponsor needs.

The proliferation of low- or no-cost coin systems is ultimately negative for established players in nonbank finance and payments, including the major card issuers, as we discuss below.  Still worried about interchange fees?

At one point last year, HOOD was up several hundred percent, but has given back much of those gains. Yet the leaders of our finance group have outperformed the broad market.

TD was up about 6% over the past three months, the only name in our test group with a positive three-month market return, of note.

When President Donald Trump says the Fed should cut interest rates, he is probably right – at least speaking from the perspective of the real estate markets.

The Trump budget package is priority number one on Capitol Hill, but odds of the big tax bill passing are falling every day. The White House still needs 25 votes in the House and May is upon us.

President Trump will not try to fire Chairman Powell. Why not? First, because Powell cannot be removed save for malfeasance. Second, because firing Powell would seriously piss off Senate Republicans, killing Trump's hopes for tax legislation this year.

Some of the largest banks by assets have dropped from the top quartile into the bottom half of the distribution for the top 100 banks

Many voices in the media and elsewhere have been predicting an economic slump since 2023. Didn’t happen, but 2025 is very different.

A more efficient mortgage backed securities market benefits everyone by lowering mortgage rates and making home ownership more affordable.

Like 2023 and 2024, the year 2025 may end up being relatively stable, yet investors remain worried about stealth externalities.

If Thomas Edison were alive today, would he tell Elon Musk to make electric cars with batteries?

And just why do financial firms like HOOD, SoFi Technologies (SOFI) and Block (XYZ) talk about EBITDA in their investor materials?

The real threat of tariffs announced by Trump is not inflation, but rather a LT decline in the dollar as the global reserve currency

We think it is notable that AMP has underperformed the other members of the group other than SCHW over the past year.

Like many names in the fintech space, growing profits and earnings are usually an indication that a stock is exiting max upside period

Private equity portfolio companies are about 10 times as likely to go bankrupt as non-PE-owned companies.