The Institutional Risk Analyst

When the Fed took net loan loss rates for banks down to ~ 50% of par in 2021 vs 95% after 2008, they enabled some very stupid and foolish behavior by investors and lenders. These behaviors are only partly described by the nominal level of interest rates because, of course, we must account for leverage in calculating the full scope of the prospectives losses. Lend More Upon Default (LMUD) has concealed the scope of the disaster and even pushed down reported loan default rates.

Does the Trump White House understand that the professional staff of the GSEs are preparing to roll out yet another capital increase for the residential housing market in 2025? Does Director Pulte understand that the changes are being advanced by the staffs of the GSEs in his name and with his apparent support? We suspect that the answer is no.

Many in the Buy Side chorus are looking forward to lower interest rates, but we are concerned that next year could really be about solvency

Since 2008, dollar swap spreads have traded below Treasury yields, suggesting a persistent demand for dollars coming from offshore.

As a result of the adoption of "artificial intelligence," the 21st Century investor is mostly a victim in waiting.